Foreword

Beyond Budgeting may be a provocative title for a book. But do not be misled. This book focuses on the whole general management model, not just the replacement of time-worn, badly managed budgeting processes. Beyond budgeting is not merely a negative idea that trashes budgeting. Instead, it is a positive idea that uses the abandonment of budgeting as a trigger for improving the entire management control process. Budget abandonment forces deeper and broader examination of how organizations should be managed.

Budgeting is at the heart of how nearly all large corporations in the world are managed today. Managers are deeply dissatisfied with it, but few have really challenged budgeting. This book does. It describes an alternative coherent management model tailored to today’s business conditions. It overcomes many of the limitations of the traditional management model. This is not a cookbook. There is no package solution. However, this book provides a guiding framework for how organizations should be managed in the twenty-first century.

How should we view this in the United States? Our way of managing organizations has been the dominant model throughout the past century. It has been copied around the world. As conditions have changed, we have recognized its weaknesses. And we have developed useful tools and techniques such as activity-based costing and the Balanced Scorecard to deal with them. But have they really worked? Have they fundamentally changed anything? Could they have worked better within a different management model? Is there really such an alternative model? Or is it just more hype?

This book addresses these questions. Be clear that beyond budgeting is not just another tool. This book offers an alternative general management model. It will make many managers uneasy because it takes us beyond our functional comfort zones. It forces us to recognize the interdependence of the whole management process. This means changing not only how goals are set but also how reward systems must be realigned. It also forces us to think about whether management processes and the behavior they spur produce the outcomes we want. This resonates with many in the aftermath of a number of high-profile cases of inadequate corporate governance and unethical accounting practices.

The authors base their thesis on a rich variety of cases. But implementing it will not be easy—especially in the United States. Our culture celebrates winners and admires heroic leaders. We foster individualism. We believe in tough targets and high rewards. We bind managers to aggressive performance contracts. And we are control oriented. But are these cultural ingredients right for these times?

Recent events have shown that there has never been a better time for a radical reassessment of how we manage organizations. We face rapid change despite having more limited sight than at any time since the 1940s. A climate of international terrorism and volatile stock markets does not encourage planning beyond weeks and months, never mind months and years. We need more adaptive processes and a culture that supports them. Instead, too often we have fixed targets and fixed plans. They no longer make sense. Beyond budgeting is a provoking alternative we should take seriously.

Who will benefit from reading this book? The word budgeting in its title might suggest that it aims at finance staff. But this would be a mistake. The authors address much more than financial management processes. Finance managers can be key in transforming the general management model. They are the guardians of most of its processes. They can be persuasive advocates for change and can be critical to the change project. But they cannot do it alone. To implement the model successfully, the CEO and his or her top team must understand it, buy into it, truly believe in it, and actively lead and support it.

Managers in all organizations should get value from reading this book. Management consultants will gain a broader perspective of the context within which particular initiatives may be introduced. Consultants will see more clearly how the coherence of the management model as a whole can support or conflict with their favorite ideas and tools. IT vendors will see how the effectiveness of their software solutions can be increased. Accounting professors may see in this book many areas for new research. They may also wish to use the book to help their students to think about the implications of beyond budgeting for their future careers as finance professionals.

Most of the solutions generally proposed for management problems involve putting something new into the organization. In this regard, beyond budgeting is very different. Perhaps uniquely, it proposes taking something powerful out to make room for something new and even more powerful. We have all the tools and techniques we need. What we lack is the right overall context for them to work effectively. This book provides a vision for that context.