The purpose of this paper is to critically evaluate the two approaches to managing business, which are called Beyond Budgeting and Better Budgeting.
It is too expensive and detailed, being highly bureaucratic, which results in its absorbing of 20 percent of the manager’s time. It increases reputational risk and encourages unethical behavior, as it presupposes aggressive targets and incentives that usually have to be met at any cost. It demotivates people, as budgeting usually entails going with the flow, instead of maximizing performance. It is out-of-date within short periods of time, as its key assumptions usually become outdated rather frequently, and their mastering requires additional time spent.
It is out-of-killer with competitive environment, as today mangers are more concerned with continuous innovation and fast response, than with the actual management of budgets and people. It protects costs that do not add value, as they are usually compiled on the basis of previous year outcomes. It prevents rapid response, as it is not the purpose of budgeting, but is required for successful work.
So, it is obvious that the budgeting in this way was designed not for working on several tasks with an emphasis on speed and autonomy, but instead for large companies with deep hierarchies (Beinhocker, 2006).
There are too many costs incurred in setting budgets and targets, implementing tools and managing budgets and people from remote locations. There are too few people involved in decision-making and strategy, which is top-down process. There are many trade-offs made between the demand for short-term results and long-term value creation, which results in micro-management development. The Beyond Budgeting model offers an effective alternative to the existing traditional model. In order to reach such a style of management, it is necessary to rethink the traditional vertical organization and change it into the one to face the customer.
There are 12 principles of Beyond Budgeting approach that were developed on the basis of evidence collected during 12 years (CIMA, 2004).
Governance – there are no detailed rules and regulations; instead – sound judgment and shared values. Transparency – no restriction an control of information; instead – transparent and open data. Teams – there are no centralized functions of departments; instead – network of accountable firms.
Trust –no micro-management of firms; instead – trust to regulate their performance on their own. Accountability – there are no hierarchical relationships; instead – accountability basis on peer reviews and holistic criteria. Goals – no turning of goals into fixed contracts; instead – facilitation of ambitious goals setting by the teams. Coordination – interactions are coordinated not through budgets that are defined on annual basis, but instead – dynamically. Establishing of a guiding coalition – it should be a team of 10-12 people who can create the vision for change and guide the process of its implementation. Thinking like a revolutionary – leaders have to apply their creative thinking to the management processes, apart from the business models, products and processes.
Establishing several design teams – they will implement the Beyond Budgeting principles so as to design an effective management model and implement it into reality. Building an urgent case for change and convincing the board – the executives should understand why Beyond Budgeting principles are necessary for your particular organization. Looking for quick wins – leaders should identify quick wins to maintain momentum and build credibility. Education and training – all the newly-established teams should be properly trained and educated so as to be aware of all the peculiarities of the new model.
Consolidating the gains and maintaining the momentum – it is necessary to constantly create value centers and reduce operating process and support services teams. Value-based management – it is dedicated to managing the shareholder value’s creation over time. Activity-based budgeting – it involves controlling and planning along value-adding processes and activities. Profit planning – it is dedicated to planning financial cash flows of profit centers so as to assess whether a unit or organization creates economic value, generates sufficient cash, and attracts sufficient financial resources for investment.


Zero-base budgeting – it presupposes that expenditures are rejustified during each of the budgeting cycles, which helps to avoid building on the inaccuracies and inefficiencies or previous history.
Rolling forecasts and budgets – it solves issues related to infrequent budgeting and, thus, results in more accurate forecasts. In order to improve the accuracy and focus of budget outputs, it is reasonable to use zero-base and activity-based budgeting techniques. Rolling forecasts and budgets has the most potential as a better regular budgeting approach. Now let us consider the motivational theories and the use of empirical evidence in them, so as to define the best of them for accountant management purposes. The first theory we are going to analyze is the content theory of motivation, which is focused on the specific factors motivating an individual.
According to Abraham Maslow, need is a psychological or physiological deficiency that a person feels the compulsion to satisfy. Progression principle: he identified five needs that exist in a hierarchy, which means that a need of any level starts influencing a person when a lower-level need is satisfied.
Deficit principle: satisfied need doesn’t motivate people’s behavior, because they act to satisfy only deprived needs. Self-actualization needs – the person needs challenging and creative work, as well as participation in decision-making and job flexibility and autonomy. Social needs – it is necessary to have interaction with customers, pleasant supervisor and friendly coworkers. Safety needs – person needs job security, compensation and benefits, as well as safe conditions of work. Physiological needs – person should feel physical comfort at job; reasonable working hours and rest and refreshment breaks. Frederick Herzberg developed another framework for understanding the motivational implications of work environments (Lundberg, Gudmundson, Andersson, 2009). Motivators or satisfiers involve such things as achievement, responsibility, growth opportunities, and feelings of recognition.
Hygiene factors are job security, salary, organizational policies, working conditions and technical quality of supervision. According to Herzberg’s two-factor theory, managers should ensure that hygiene factors are adequate and only then build satisfiers into jobs.
According to this theory, unsatisfied needs motivate behavior, and when lower level needs are satisfied, they become less important.
David McClelland developed a theory, according to which everyone prioritizes needs in a different way (1987).
Need for power – deals with the desire to make others behave in a way that they would not have behaved otherwise.
Need for affiliation – deals with the desire for close, friendly interpersonal relationships and conflict avoidance.
Each need is associated with a distinct set of work preferences, which can help managers tailor the environment to meet these needs. Those who have a high need of power are likely to follow a path of continued promotion over time.
People with the highest need for affiliation seek social approval, companionship, and satisfying interpersonal relationships.
It is not reasonable to make use of the traditional model that involves budgeting, as it brings many implications on the way of successful company management and achieving of goals. It is necessary to change the traditional strategy into the one presupposed by the Beyond Budgeting approach, as it was proven that it positively influences the overall efficiency of the company’s management and brings numerous benefits.
In order to successfully base the manager’s work, it’s necessary to take into account the empirical evidence of the workers, and in particular the needs derived by this evidence. Get this FREE whitepaper on "How to Write an Essay" right away and sign up for our special offers. I believe that your work is exceptional and I highly appreciate your assistance in writing my essay.
Furthermore, the empirical evidence use and various motivational theories will be discussed so as to define the best way of budget setting for accounting manager.
It was developed as a means to change the situation that was often met by different organizations, when the management process related to budgeting, such as the way of setting goals and strategies, allocating resources, actions coordination, etc. The basis of the Beyond Budgeting model is rethinking team-based accountability (Bogsnes, 2009).


Besides, there are usually project teams formed, but they are project-specific and temporarily established.
They combine the best of the best practices of world leading organizations so as to define the best budgeting model. All the expenditure plans are assessed in terms of the shareholder value they will create and evaluated as project appraisals. Organization’s activities, as well as business processes are structured so that they better meet external and customers’ needs. When preparing its financial plans, it ensures consolidation of an organization’s long- and short -term prospects. It overcomes problems with budgeting at a fixed point in time and the often dubious practices that encourage such cut-offs. But in this case, there is a problem – they involve even more work than the traditional budgets. Many organizations have already introduced it successfully to overcome the traditional budgeting time-lag problem and improve the accuracy of their forecast.
It is hard to evaluate their efficiency, as very few examples of implementation techniques and practical applications exist.
Among them it is possible to single out the primary needs, such as ones for sleep, food, and water. As distinct from the first group, these needs are of psychological nature and are learned through experience. It can create certain tensions that influence a person’s work behaviors and attitudes. They are strongly motivated by job situations with feedback, personal responsibility, and an intermediate degree of risk. They usually enjoy being in charge and prefer being placed in competitive and status-oriented situations.
They usually are more interested in work that provides social approval and companionship; they strive for friendship and prefer cooperative situations.
It was already chosen by many companies, such as Google, Toyota, American Express and success of these companies is another evidence of the model’s edge over the traditional one. In order to do it, it is recommended to make use of the motivational theories based on the individual needs of employers. It’s also more responsive to changing circumstances, but at the same time requires permanent resources to administer.
On the whole, there is no universal approach to better budgeting that can solve all the problems at once (Bunce, Fraser, Woodcock, 1995). The scientists formed a theory on the basis of his definition of need, which presupposes that people are motivated by various needs, which exist in a hierarchical order. If they are not met, a person may move down the hierarchy, which is called the frustration-regression principle. All my questions were answered in a timely manner and now I know what to do if any problems with academic writing arise - ask you for help! His premise is that a satisfied need is not a motivator, and so, only an unsatisfied need can influence behavior (Simons, Irwin, Drinnien, 1987).
It means that already satisfied lower level need can become activated again and will influence behavior when a higher level need cannot be satisfied. The influences they have on people’s behavior are obvious and, thus, are easy to be identified.
These needs consist of internal states, such as the desire for achievement, power, and love.
Interpreting and identifying these needs is more difficult, as they are demonstrated in a variety of ways.
At the same time, they are responsible for exactly the kind of behavior managers are concerned with and for the rewards a person seeks in an organization. We will consider the theories that explain needs as motivation that were developed by several theorists, including Frederick Herzberg, Abraham Maslow, Clayton Alderfer, and David McClelland.



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