Agile Strategy Management in the Digital Age by David Wiraeus & James Creelman

Author:David Wiraeus & James Creelman
Language: eng
Format: epub
ISBN: 9783319763095
Publisher: Springer International Publishing

Killing the Budget

Many advisors have long argued that the most obvious way to solve the budgeting problem is to stop doing it, as in the case of Statoil. Simply asking, and without the shackles of ingrained thinking, “why do we budget?” can lead to interesting insights.

Interestingly, over many years, research by firms such as the US-headquartered The Hackett Group have found that most organizations (including the leaders of the finance function) are very (oftentimes painfully) aware of the shortcomings of the budget, and while many plan to replace it with something more useful and agile, few actually do. The dance continues.

Oftentimes, this is because although dysfunctional, managers are well rehearsed in the moves of the dance (and many do it very well to their advantage) and there is an absence of a generally accepted alternative model. Organizations such as the Beyond Budgeting Institute have been working for several decades to provide other options, with Statoil being a leading example.

However, for many organizations, jettisoning the budget would be a fearful step. However, this in and of itself is not a showstopper to becoming more agile. Even with the annual budget left in place, organizations can become more agile by de-emphasizing the budget and emphasizing rolling forecasts.

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