Essay On Beyond Budgeting

Literature Review:

‘Beyond Budgeting is the set of guiding principles that, if followed, will enable an organization to manage its performance and decentralize its decision making process without the need for traditional budgets. Its purpose is to enable the organization to meet the success factors of the information economy (e.g. being adaptive in unpredictable conditions).’

Quantitative plans are called budgets. Budgets are prepared to impose cost controls on the activities of an organization (Chenhall, 1986).Budgets are then used to evaluate the performance of the management and budget itself is considered as a standard to evaluate the performance Solomon, 1956). The purpose of the budget is also to implement the strategy of the organization and communicate it to the employees of the organization Rickards (2006). The change in the external environment has led to the change in the budgeting approaches from the initial cash based budgets to the zerio based budgets (Bovaird, 2007).

Traditional Budgeting is still a very popular technique and is widely used by the organizations across the globe.(Dugdale & Lyne, 2006).Environment is changing and hence the budgets should promote the innovations and keeping key employee need rather than restricting them (Daum, 2002).

III. Criticisms of Traditional Budgeting

The traditional budgeting approached consumed a lot of the time of the companies and still are unresponsive any change in external environment (Neely et.al, 2003).

In this era of high competition, traditional budgeting approaches doesn’t encourage innovation among the employees instead are focused on reduction in costs.(Player, 2003).

Other criticisms on thetraditional budgeting approaches are:

• There is no way an entity with ...

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...ng plays a big role in management accounting in future (Daum & Hope, 2003). For big organization it is not easy to switch from traditional technique so easily they can implement this technique in phases. Traditional techniques are absolute and they are not working in current environment this article support this argument.

However, in a stable environment traditional budgeting can be used without losing any advantage in the industry.

Future Research Directions:

The study performed restricted to the culture of Pakistan. Similar studies can be conducted in other geographical contexts to add the applicability of beyond budgeting in such cultures.

Furthermore, the study conducted was restricted to the Oil industry, Hospital Industry and the Hotel Industry. Other industries can specifically be studied to observe the responses of similar study in other industries.