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5 Common Free Agent Myths
5 Common Free Agent Myths Copyright 2002 Paul Bednar There are numerous myths about free agents. On the surface, they appear not to be myths but facts. However, get below the surface and these misconceptions quickly crumble. This article will not...
Learn the Art of Dynamic Leadership
Leadership is art of leading a group of people to attain a certain goal. Without leadership qualities it is very difficult to write a big success story either in business or in politics. Progress of a country or success of a business depends on its...
Madeline Hill; Senior Community Pioneer
Madeline Hill may be unique among senior community developers. She created her multi-million dollar “city,” – an upscale, yet affordable group of single-family homes, condo’s and apartments -- not so she could become a rich and powerful CEO, but so...
Tax Reform, My Way
We need real tax reform and we need it now. Previous attempts have been made at tax reform, but they have only provided band-aid solutions that have still left us with too many quirks, complication, and read tape. There are several things...
Uncovering Soul in the Workplace
Learn about a growing trend in spiritual revival in the workplace.
The San Francisco Chronicle recently reported “soul is in”. In a headline calling it “the buzzword of the ‘90s” a front-page story reported that some 322 citations for the word...
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Beyond Budgeting: A New Approach to Annual Budgets
In their book, Beyond Budgeting, Jeremy Hope and Robin Fraser
highlight the inadequacy of traditional annual based budgeting
and argue passionately for a new management model that can cope
with the volatility of today's business environment. Their model
embraces much more than just budgeting, it is more a philosophy
of decentralization and a way of encouraging managers at all
levels to become accountable for their performance without tying
them to an annual budget straitjacket.
Hope and Fraser analysed many companies of various types that
have abandoned traditional annual budgeting in favour of their
new model and found that management gained a new sense of
empowerment and a "can do" attitude. In addition, they benefited
from faster and more adaptive decision-making, reduced
bureaucracy and lower costs. The companies became more
competitive and customer satisfaction improved along with many
of the company's' KPI's (Key Performance Indicators).
The new model replaces annual budgeting and centralized control
systems with multilevel controls that include effective
governance, fast financial actuals, trend analysis, rolling
forecasts, key performance indicators, performance ranking, and
management by exception.
Its probably no surprise that annual budgeting is expensive and
time consuming, but just how much time companies are spending on
the process and how useful are the results, should be of concern
to all senior executives. Hope and Fraser found that the budget
process typically starts at least four months prior to the year
to which it relates and grinds its way through countless
meetings where managers negotiate targets and resources. An
estimate of 20 to 30 percent of senior executives' and financial
managers' time is absorbed in the process, while the Ford Motor
Company concluded that they spend $1.2 billion per year on
forecasting and budgeting.
Quite apart from the cost, the
budgets this process produces are
often meaningless. The forecast numbers are out of date before
the budgeting round has finished. Even the numbers themselves
are suspect. Having been agreed upon during countless
negotiations, they are based more on politics than strategy. A
manager's performance is often related to achieving targets set
out in the annual budget, which inevitably leads to a conflict
of interest. Managers will attempt to negotiate the lowest
possible targets and avoid taking risks.
Without going into the whole management philosophy, which is
covered in commendable detail in their book, the control systems
clearly needed in today's volatile world must be fast and
flexible to be relevant. In the companies that successfully
implemented their model, Hope and Fraser say: "All our case
examples use rolling forecasts in one form or another to provide
a fast, high-level view of future performance".
Our budgeting software product, Budget
Controller was design to do just that. We believe it's the
ideal tool to help managers move from the cumbersome traditional
budgeting process to one of fast rolling forecasts based on
business modelling techniques that can help mangers to
continually adapt their strategy in an unpredictable world.
For more information on budgeting and to purchase Jeremy Hope's
and Robin Fraser's excellent book, Beyond Budgeting, visit www.markitquest.com.
About the author:
Mark Ritsema is the founder of Markitquest, developers of the the
Controller Series; a set of Excel based financial modelling
software tools for business. Mark has over 20 years experience
in financial management, having worked in various industries as
Controller and Financial Director for companies both large and
small.
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