| Who needs budgets? | |
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MedLine Citation:
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PMID: 12577658 Owner: NLM Status: MEDLINE |
Abstract/OtherAbstract:
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Budgeting, as most corporations practice it, should be abolished. That may sound radical, but doing so would further companies' long-running efforts to transform themselves into developed networks that can nimbly adjust to market conditions. Most other building blocks are in place, but companies continue to restrict themselves by relying on inflexible budget processes and the command-and-control culture that budgeting entails. A number of companies have rejected the foregone conclusions embedded in budgets, and they've given up the self-interested wrangling over what the data indicate. In the absence of budgets, alternative goals and measures--some financial, such as cost-to-income ratios, and some nonfinancial, such as time to market-move to the foreground. Companies that have rejected budgets require employees to measure themselves against the performance of competitors and against internal peer groups. Because employees don't know whether they've succeeded until they can look back on the results of a given period, they must use every ounce of energy to ensure that they beat the competition. A key feature of many companies that have rejected budgets is the use of rolling forecasts, which are created every few months and typically cover five to eight quarters. Because the forecasts are regularly revised, they allow companies to continuously adapt to market conditions. The forecasting practices of two such companies, both based in Sweden, are examined in detail: the bank Svenska Handelsbanken and the wholesaler Ahlsell. Though the first companies to reject budgets were located in Northern Europe, organizations that have gone beyond budgeting can be found in a range of countries and industries. Their practices allow them to unleash the power of today's management tools and realize the potential of a fully decentralized organization. |
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Authors:
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Jeremy Hope; Robin Fraser |
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Publication Detail:
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Type: Journal Article |
Journal Detail:
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Title: Harvard business review Volume: 81 ISSN: 0017-8012 ISO Abbreviation: Harv Bus Rev Publication Date: 2003 Feb |
Date Detail:
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Created Date: 2003-02-11 Completed Date: 2003-03-12 Revised Date: - |
Medline Journal Info:
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Nlm Unique ID: 9875796 Medline TA: Harv Bus Rev Country: United States |
Other Details:
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Languages: eng Pagination: 108-15,126 Citation Subset: H |
Affiliation:
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jeremyhope@bbrt.org |
Export Citation:
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APA/MLA Format Download EndNote Download BibTex |
| MeSH Terms | |
Descriptor/Qualifier:
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Budgets
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organization & administration* Commerce / economics*, organization & administration Efficiency, Organizational / economics Forecasting Marketing Organizational Culture Personnel Management Planning Techniques Sweden United States |
From MEDLINE®/PubMed®, a database of the U.S. National Library of Medicine
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