管理会计 Lecture 13betterbudgeting

BU5004ManagerialAccountingSession12BetterBudgetingorBeyondBudgetingBudgetingorbeyondbudgetingTraditionalbudgeting•introducedin1920’s•inefficient/ineffectiveresourceallocationpracticeBetterbudgetingmovement•improvetraditionalbudgetingpractices(Bourne,2000)Beyondbudgetingmovement•managewithoutbudgets(HopeandFraser,2000)2Thebudgetingmodel3VisionStrategicplanAnnualbudget‘Keepingontrack’Control(vs.budget)Incentives(vs.budget)Culture:‘Contract,complianceandcontrol’Fixedperformancecontracts4TraditionalbudgetingTRADITIONALBUDGETINGISBEINGBY-PASSEDBSCTQMITABC/MEVABENCH-TARGETCHANGEMARKINGCOSTINGMANAGEMENTBUDGETING_____________________________Largelytop-downFinanciallyorientatedOrganizationallybasedRecentsurveyfindingsaboutbudgetingCompaniestake4½monthstodevelopfinancialplanBudgetingeatsup20-30%ofseniorexecutives’time85%ofmanagementteamsspendlessthanonehouramonthdiscussingstrategyCompaniescouldsave£4mayeariftheyabandonedbudgeting5WeaknesseswithtraditionalbudgetingTootimeconsumingRushedprocessBudgetsout-of-datebeforeyearbeginsDoesnotmotivateyoutosetyourselfambitioustargetsOut-of-touchwithcompetitiveenvironment‘Gaming’thenumberstooprevalentBudgetsarerarelystrategicallyfocused6BetterbudgetingpracticesAnumberofinnovationsinbudgetingpracticehavebeendevelopedinrecentyearstoovercomesomeoftheproblemswithtraditionalbudgeting•Activitybasedbudgeting•Zero-basebudgeting•Continuous/rollingbudgets•ITinitiatives7ActivitybasedbudgetingConventionalbudgetsprovidelittlerelevantinformationformanagingthecostsofsupportactivitiesABBinvolvesplanningandcontrollingalongthelinesofvalue-addedactivitiesandprocessesTheaimofABBistoauthoriseonlythoseresourcesneededtoperformactivities8Zero-basedbudgetingExpendituresarere-justifiedeachbudgetingcycle•ratherthanbasingbudgetsonpreviousyearAvoidsbuildingoninefficienciesEachitemofexpenditurestartsatzeroandhastobejustifiedbythebudgetholderZBBisappliedtodiscretionarycostsandsupportactivities9ContinuousbudgetingContinuousbudgetingisbeneficialwhereconditionsarevolatileandwherefinancialdataislikelytochangeregularlyAbudgetispreparedindetailforsay3monthswithlessdetailfortheremainderoftheyearAseachmonthpassesafurthermonth’sdetailisaddedsothatthereisalwaysadetailedbudgetforthenext3months10BeyondbudgetingIstheimprovementofbudgetingenough?Fundamentalproblemswithbudgeting:--rapidpaceofchange-rushedprocessdoesnotgiveadequatetimetoreviewdiscretionarycosts-budgetrevisionleadstolossofcontrol-internalratherthanexternalstandardsCanwemanagebetterwithoutbudgets?11BeyondbudgetinginpracticeVeryfewcompanieshaveeliminatedbudgetsaltogether•mostofthosethathaveareScandinaviancompaniesincludingSvenskaHandelsbanken,BorealisandSkandiaCompaniessuchasShell,BP,AstraZenecaandtheFordMotorCompanyarebeginningtomoveawayfromtraditionalbudgetingandreviewprocesses1213AdaptiveprocessesThebeyondbudgetingmodelStrategicobjectivesTwinpeaksofbeyondbudgeting14TraditionalorganisationsAdaptiveorganisationsAdaptiveandDecentralisedOrganisations(1)(2)PerformanceDegreetowhichorganisationisAdaptiveandDecentralisedHope&Fraser,2003BeyondbudgetingapproachSomecompanieshaveadoptedadaptivemanagementprocesses•relativeperformancecontractsusedratherthanfixedperformancecontracts(budgets)Radicallyde-centralisedorganisationsneededratherthancentralisedorganisations15AdaptiveprocessesMakeactionplanningcontinuousandinclusiveMakeresourcesavailableasrequiredCo-ordinateaccordingtocustomerdemandSetstretchgoalsbasedonrelativestandardsBasecontrolsoneffectivegovernanceandrelativeKPI’sBaserewardsonevaluationwithhindsightHopeandFraser,200316Resultsof‘fixed’performancecontractsAlwaysnegotiatethelowesttargetAlwaysmakethebonuswhateverittakesNeverputcustomercareabovethesalestargetNevershareanythingwithotherteamsAlwaysaskformoreresourcesthanyouneed17Resultsof‘fixed’performancecontractsAlwaysspendwhat’sinthebudgetAlwaysbeabletoexplainadversevariancesNeverprovideaccurateforecastsAlwaysmeetthenumbers–neverbeatthemNevertakerisks18Resultsof‘fixed’performancecontracts“Byremovingthebudgetingprocessandfixedperformancecontract,firmsareabletochangetheattitudesandbehavioursofpeopleateverylevelintheorganisation.Inparticular,theyarelikelytoeradicatetheundesirablebehavioursthatresultfromsettingafixedtargetthatmustbemeteventhoughtheoutcomeishighlyuncertain.”JeremyHopeandRobinFraser–”BeyondBudgeting-HowManagersCanBreakFreefromtheAnnualPerformanceTrap”HarvardBusinessSchoolPress200319RelativeperformancecontractsContinuouslyimproveagainstagreedbench-markedKPI’sRewardsbasedonrelativeperformanceChangeyourplanswhennecessaryProvideaccurateforecastsTopmanagementwillonlyinterferewhentrendsmoveout-of-bounds20Radicalde-centralisationProvideagovernanceframeworkbasedonclearprinciplesandboundariesCreateahigh-performanceclimatebasedonrelativesuccessGivepeoplefreedomtomakelocaldecisionsPlaceresponsibilityforvalue-creationonfront-lineteamsMakepeopleresponsibleforcustomeroutcomesSupportopeninformationsystems21Radicalde-centralisation22Borealis–beyondbudgetingWeha