Flexibility on Multiple Dimensions: A Typology of Beyond Budgeting Practices

Abstract

It has been argued that beyond budgeting (BB) requires organizations to become radically decentralized so that they can respond more flexibly to turbulent operating environments. Through an analysis of the BB principles, comprising leadership and process principles, we examine organizational structure, control processes and management culture to develop of a typology of BB approaches based on the extent to which organizations decentralize and change their management and budgeting practices. We then analyze the management control systems of an organization along these three dimensions to show how it can be applied. Our analysis shows that our case company designed their control processes to avoid any form of budgeting. This includes radically decentralizing its decision making and accountability systems which were linked to its management culture. This type of organization structure depends on trusting managers to act in the best interests of the company which gives them the freedom to carry out the activities necessary to compete. This research contributes to the debate about what moving from budgeting to BB actually means. By focusing on the BB principles we aim to better understand how they can be applied in practice through identifying three dimensions through which budgeting can be enacted, namely structure, control processes and management culture. We show that mutually reinforcing changes along all three dimensions can significantly enhance an organizations’ ability to respond flexibly in uncertain environments.

Keywords: Beyond budgeting, Flexibility, Structure, Control processes, Organizational culture

JEL Classification: M40; M14