Question: “From a company of your own choosing, explain and illustrate the particular budgeting challenges it might face. Make sure that you take account of market circumstances in your response.”
Introduction
Generally, budgeting is a plan for corporation for the next year based on forecast of development trend of demand, supply, prices, costs and so on (Wallander, 1999). These assumptions are usually made by the government or relevant experts, head office of company would formulate more specific goals according to these information and the market circumstance as well as their own features.
After hot discussions in many academic works, traditional budgeting is normally believed to be time-consuming, cumbersome, useless and expensive. However, …show more content…
Age of Beyond Budgeting
Handelsbanken was continuously losing customers, at that time, Dr. Jan Wallander was hired to be the executive director in 1970 to help the bank get over the crisis. He has changed the management style of Handelsbanken totally, the bank was transformed to be radically decentralised, furthermore, budgeting process was abandoned (Libby and Lindsay, 2006).
It is not an easy task to convince others that the management mechanism should be changed. He has received a strong resistance to his new management style which is without budgeting and centralised operations, he called this resistance the “budget bureaucratic complex” (Wallander, 1999). The resistance from different areas made up the complex. Firstly, it is from those who feel their positions are connected with budgeting, they are afraid to lose their job once budgeting system is abolished. Secondly, professors, scholars and experts who work on budgeting research, write books and give lectures about it also resist this idea. Thirdly, the board of directors would not like to give up the right to make up decisions. CEOs enjoy the feeling when they see the benefit forecast for the following year. They also like the way to tie managers and workers with fixed targets, although it adds little value. Even if there were countless difficulties lying before the new management style - beyond budgeting, Wallander was still succeeded. Instructions were delivered to operating managers that budgeting is no longer needed, managers could continue doing budgeting, but officials are not interested in it. The performance of corporation would only be judged by figures which are needed to the control system. In the following tens of years, the successful management of Volvo, SKF and IKEA without budgeting also proves that Wallander’s idea is advanced and
Introduction
Generally, budgeting is a plan for corporation for the next year based on forecast of development trend of demand, supply, prices, costs and so on (Wallander, 1999). These assumptions are usually made by the government or relevant experts, head office of company would formulate more specific goals according to these information and the market circumstance as well as their own features.
After hot discussions in many academic works, traditional budgeting is normally believed to be time-consuming, cumbersome, useless and expensive. However, …show more content…
Age of Beyond Budgeting
Handelsbanken was continuously losing customers, at that time, Dr. Jan Wallander was hired to be the executive director in 1970 to help the bank get over the crisis. He has changed the management style of Handelsbanken totally, the bank was transformed to be radically decentralised, furthermore, budgeting process was abandoned (Libby and Lindsay, 2006).
It is not an easy task to convince others that the management mechanism should be changed. He has received a strong resistance to his new management style which is without budgeting and centralised operations, he called this resistance the “budget bureaucratic complex” (Wallander, 1999). The resistance from different areas made up the complex. Firstly, it is from those who feel their positions are connected with budgeting, they are afraid to lose their job once budgeting system is abolished. Secondly, professors, scholars and experts who work on budgeting research, write books and give lectures about it also resist this idea. Thirdly, the board of directors would not like to give up the right to make up decisions. CEOs enjoy the feeling when they see the benefit forecast for the following year. They also like the way to tie managers and workers with fixed targets, although it adds little value. Even if there were countless difficulties lying before the new management style - beyond budgeting, Wallander was still succeeded. Instructions were delivered to operating managers that budgeting is no longer needed, managers could continue doing budgeting, but officials are not interested in it. The performance of corporation would only be judged by figures which are needed to the control system. In the following tens of years, the successful management of Volvo, SKF and IKEA without budgeting also proves that Wallander’s idea is advanced and