Organizations are Beyond Budgets Assignment Example | Topics and Well Written Essays - 3000 words

Organizations are Beyond Budgets - Assignment Example A survey of European enterprises conducted by Boeson (2000) showed managers agreeing that their planning and budgeting processes were inefficient and ineffective in controlling financial resources. Several respondents believed the budgeting process resulted to small benefits relative to the large amounts of resources at their disposal. This led to firms changing the budgeting process or abandoning it all together. Controllers think of new ideas such as balanced scorecards, operational performance measurement, and investment risk portfolios and so forth. These aspects make the budgetary processes complex and make business management a complex process. This complexity is evident in the fixed, costly, detailed, and unnecessary annual budgets of organizations. The changing business environment created by computers and standardized software has a lot of information that makes managers overburdened with the business processes. According to Cokins (2001) current managers are less informed a bout the company’s operations than managers operating 30 years ago. The beyond budgeting concept has been introduced in several organizations as a replacement for the traditional budget-making process. One significant contributor to this shift is the transition in the internal processes that have shifted from the seller’s market in the industrial period to the buyer’s market of the high-tech age (Welch and Byrne, 2003). Organizational processes involving purchase, production, and sales involving division of labor in the industrial age have shifted to processing chains that link supplies to customers. The linear relationships between input and output have led to dynamic customer-oriented business combinations facilitated by technological inventions. This has limited the applicability of traditional budgets in the high-tech age since they are products of the industrial society. Post-industrial business managers require controlling instruments that are flexible so as to compete in the dynamic business environment. The concept of Beyond Budgeting focuses on greater flexibility in the transition of transitional management model of production and sales to a model of market preview and production. The new model of management is based on customer demand. Self-optimization in the new financial management model is attainable by decentralizing responsibility and decision making to empowered and motivated employees. The budgeting process was based on a hierarchical management system that relied on decisions from top management levels. In this regard, executives used the budget as a foundation for outmoded and fixed performance in the organization (Boeson, 2002). The performance of an organization was gauged by budgetary allocations and stipulations achieved within a specified time. This made managers and employees do anything to reach budget goals (Jensen, 2001).