Content area
Full Text
Abstract There is massive interest within the financial community in ways of improving and shortcutting the arduous process of planning and budgeting. Sponsored by Accenture, researchers at Cranfield School of Management's Centre for Business Performance reviewed the literature and interviewed 15 leading companies to obtain insights into the best practices organizations are actually adopting. While some companies have simply exorcised the term budgeting from their corporate vocabularies, a group of pioneering Scandinavian companies have dispensed with budgeting altogether.
Keywords Management planning, Budgets
Introduction
In a recent economist intelligence unit survey financial directors ranked budgetary reform as their top priority. Other research suggests that 80 percent of companies are dissatisfied with their planning and budgeting processes. There is a phenomenal amount of interest in re-engineering these archaic practices too. Yet, a survey published by CFO Magazine revealed that, even when firms claim they have re-engineered them, most respondents were still dissatisfied with their current planning and budgeting processes.
Traditional budgeting methods are too time consuming and costly. They are also too unresponsive to today's competitive and turbulent environment. Furthermore, they are counterproductive in that they are usually affected by gaming, corporate politics and horsetrading tactics. Some estimates suggest that planning and budgeting processes use up to 20 percent of all management time. The Hackett Group assesses that a mean of 25,000 person days are used per billion dollars of sales on planning and budgeting. To state then that there is an opportunity for significant improvement in most organizations has to be an understatement.
What does the academic literature indicate should be done to improve the situation? What are leading edge practitioners actually putting into place in their organizations? In 2001, Cranfield School of Management's Centre for Business Performance in the UK was commissioned by Accenture's finance and performance management service line to investigate what exactly represents best practice in planning and budgeting. The following describes our findings.
Weaknesses of planning and budgeting practices
Cranfield's Centre for Business Performance research team conducted an extensive academic and practitioner literature review (over 100 sources). It then interviewed a selection of 15 companies regarded as among the "best practitioners" in this aspect of performance management in order to identify the differences between theory and practice.
The initial literature...