Question

Evaluate the applicability and practical implications of "Beyond Budgeting" as an alternative budgeting model to correct negative consequences of traditional annual budgets.

Answer 1

The "Beyond Budgeting" is a modern management technique that focuses on abolishing the negative results of the traditional budgeting process. The companies try to make a highly productive, proactive, and decentralized environment within the organization to achieve the overall organizational objectives. It focuses on making management control more effective. It is based on various principles.

Applicability of "Beyond Budgeting"

• It is applicable to various private and public sector industries, where is a frequent change in the business opportunities and environment, in such industries traditional budgeting will come obstacle for the change.
• The organizations following the modern management techniques, such as total quality management and continuous improvement can be benefitted by applying this budgeting technique.
• The various business organizations that are undergoing the process of radical change may face a difficulty in meeting the traditional budgets.

Practical implications of "Beyond budgeting"

Applying the "Beyond Budgeting" will bring the following organizational changes:

• The organization will become decentralized.
• A competitive environment is created within the organization where every individual work for achieving the organizational objectives.
• Motivated manpower due to a continuous delegation of authority and responsibility.
• Faster and efficient information and communication systems.
• Preparation of the flexible monthly or quarterly budgets rather than the static annual budgets.
• Establishing the objectives and measuring the performances of the operations managers based on the key performance indicators.

On the basis of the above discussion, it is clear that "Beyond budgeting" is an important alternative to the traditional budgeting techniques due to its negative consequences.