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Related Experiment Videos

Who needs budgets?

Jeremy Hope1, Robin Fraser

  • 1jeremyhope@bbrt.org

Harvard Business Review
|February 13, 2003
PubMed
Summary
This summary is machine-generated.

Abolishing traditional budgeting enables companies to become agile networks. Replacing budgets with rolling forecasts and competitor-based performance measures fosters adaptability and empowers decentralized organizations.

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Area of Science:

  • Business Management
  • Organizational Behavior
  • Financial Strategy

Background:

  • Traditional budgeting processes often create inflexible structures and a command-and-control culture.
  • Companies struggle to adapt to market dynamics due to rigid financial planning.
  • Existing management tools are underutilized in traditional corporate environments.

Purpose of the Study:

  • To advocate for the abolition of traditional corporate budgeting.
  • To explore alternative performance measurement and forecasting methods.
  • To demonstrate how rejecting budgets can enhance organizational agility and decentralization.

Main Methods:

  • Analysis of companies that have moved beyond traditional budgeting.
  • Examination of alternative performance metrics (financial and non-financial).

Related Experiment Videos

  • Case studies of Svenska Handelsbanken and Ahlsell regarding their forecasting practices.

    • Main Results:

    • Companies rejecting budgets adopt alternative goals and measures, focusing on competitor and peer performance.
    • Rolling forecasts, revised quarterly, enable continuous adaptation to market changes.
    • Decentralized organizations utilizing these methods unleash greater potential.

    Conclusions:

    • Abandoning rigid budgeting is crucial for developing agile, responsive business networks.
    • Alternative performance metrics and rolling forecasts are key to successful budget-free management.
    • The 'beyond budgeting' approach empowers organizations for greater adaptability and decentralized decision-making.