by Jeremy Hope, Robin Fraser
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Product Description
The annual budgeting process is a trap. Pressured by fixed targets and performance incentives, managers focus on making the numbers instead of making a difference, meeting set goals instead of maximizing potential. With their compensation at stake, managers often resort to deceitful-even unethical-behavior. In the end, everybody loses-the employee, the company, and ultimately the customer. Now, finance experts Jeremy Hope and Robin Fraser reveal the results of an intensive study aimed at fixing the broken budgeting process. They argue that companies must abandon traditional budgeting contracts in favor of a radical new model that links performance measurement to evolving competitive benchmarks-and shifts the firm's focus from controlling employee behavior to delivering customer value.The "Beyond Budgeting" model is built on the best practices of companies that have successfully revised their centralized planning and budgeting processes. It combines a leadership vision that devolves more authority to operating managers and a finance vision that enables fast decision making through appropriate tools and accessible information. Through vivid examples, Hope and Fraser illustrate how companies can implement these shared visions-and the long-term benefits that accrue from embracing them. Offering a compelling case for breaking free from the budgeting trap, this book paves the way toward making organizations better places to work for, invest in, and do business with.
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Average Customer Review:
0 of 0 people found the following review helpful:
 Must read for corporate managers, 2007-08-20
It's time to review some standard practices in all corporations. Most haven't come out of industrial age views on how to manage and run organizations. Today's risk and opportunity environment needs some fresh thoughts and views on how to solve common problems and improve standard processes. This book takes a new approach on one of the most damaging and least critized processes - read it.
2 of 3 people found the following review helpful:
How to avoid or escape from "the annual performance trap", 2006-11-17
Given what Hope and Fraser perceive to be an obsolete core management model driven by the annual budgeting process, they offer an alternative to that model. It is based on "the decision-making needs of front-line managers [as well as] a coherent set of alternative processes that support relative targets and rewards, continuous planning, resources on demand, dynamic cross-company coordination, and a rich array of multilevel controls." In Part I, they explain how to break free from the annual "performance trap" and how this trap is sprung whenever managers are pressured to meet fixed targets by fixed dates. They provide an overview of two opportunities to think and act "beyond budgeting." In Part II, they examine the first opportunity and explain how a number of organizations have used beyond budgeting principles to implement more adaptive processes. Then in Part III, they examine the second opportunity and explain how and why abandoning the traditional (and ineffective) budgeting process can help to achieve what they characterize as "radical decentralization." In the last Part, Hope and Fraser examine how and why the adaptive and decentralized organization (as opposed to one with a traditional budgeting process) "meets the vision of business leaders in the 21st century."
Of special interest to me is what Hope and Fraser have to say about the differences between the fixed performance contract (FPC) and the relative improvement contract (RIC). For example, here are two of the six cited:
In terms of targets,
FPC: "Your [sales/profit] target is fixed at [$]"
RIC: "We trust you to maximize your profit potential to continuously improve against the agreed-upon benchmarked KPIs [key performance indicators] and to remain in the top [quartile] of your peer group."
In terms of resources,
FPC: "The agreed resources to support the capital and operating budgets are set out in the attached budget statements."
RIC: "You trust us to provide the resources you need when you need them. We trust you to keep within agreed KPI boundaries."
Note the references to "trust." Hope and Fraser insist (and I wholly agree) that there must be mutual trust between and among everyone involved when making a commitment to beyond budgeting principles. It is important to emphasize that Hope and Fraser did not write this book solely for CFOs. On the contrary, what they propose requires that all senior-level executives in a given organization understand and actively support the beyond budgeting principles. Although CFOs and heads of HR have responsibility for the implementation of strategy, more often than not, they are not centrally involved in the formulation of strategy. That is a serious mistake. Beyond budgeting initiatives will succeed only if a CFO can be trusted to make prudent and effective use of resources provided, and only if she or he trusts the given organization to make sufficient provision of them.
Otherwise....
7 of 7 people found the following review helpful:
 Excelent real life cases, 2004-07-01
This book does capture the findings from the work of Beyond Budgeting Roundtable in a excellent way. The cases in the book are real and are brilliant proofs of the fact that it is possible to run even a large corporation with out traditional budget models. I'm really looking forward to the follow up.
10 of 10 people found the following review helpful:
Good Book on Relatively New Topic, 2003-12-29
As a business consultant with many years experience in budgeting, I found this a very useful overview of a relatively new topic in finance. The authors clearly show the limitations of the traditional budgeting process and present a comprehensive alternative.
However, while the book brings many examples from real companies, many of the ideas still seem a little conceptual and difficult to imagine how they would actually work in practise.This book will certainly interest anyone seriously involved in budgeting.
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