Over the years the Beyond Budgeting movement has made it much more obvious that businesses should rethink budgeting; how the process works and how it should be utilised. Nonetheless, this new management model is not for everyone despite its advantages. Here are 5 things you should consider before adopting beyond budgeting.
Read more: Budgeting tips for your business
What you need to know before adopting Beyond Budgeting
1. You must be willing to change
You are constantly altering your business so your management system cannot be rigid or you risk lagging behind. You are constantly fixing, adjusting and finding ways to do things better. It is, therefore, necessary to plan, lead, and manage more effectively to get better results.
You have to be really thoughtful about what you are replacing the budget with; something that is more active, more suitable for your company as well as its markets building upon more productive plan, control and support for the company.
2. There is no one single solution to your budgeting issues
You frequently ask; what should I do when I don’t have budgets? You will find answers in our next blog posts. However, not all solutions fit all types of problems. You should figure out which of those solutions you would implement.
3. Executive sponsorship is important
It is useful to have a CFO (Chief Financial Officer) who can easily observe and understand what your next steps are. It’s recommended to have somebody who is willing to sponsor and who has out of the box ideas. If you do not have clear alignment at executive level on how you are going to operate the organisation with, you are going to be really in trouble.
4. Empowerment must go hand in hand with accountability
On one hand, Beyond Budgeting advocates that you push your decision-making process as close to the front-line as you can. This requires managers to be able to trust their employees, and to be transparent about not just how they make decisions but also how they observe people and processes.
On the other hand, you need to ensure your organisation is actively promoting transparency and accountability. This requires a completely different mindset, especially for those executives who have had a stable career and have done things in a certain way for the entire time.
One of the biggest issues organisations face is that everybody is always screaming that they want to be empowered. However, that comes hand in hand with accountability.
Read More: What is Beyond Budgeting?
5. You need to figure out what to do with your budgets
Budgeting serves various purposes, so finding which objectives it serves in your organisation can be the first stage to enhance the involved processes.
One of the most essential things you can do with a budget is forecasting. You should look ahead for more than a year. Another thing which a budget strives to do is to set targets. What can you do now to help the organisation effectively set targets?
In addition to financial captial, your budgets should also deal with human capital. How much human capital do you need for this specific line of business, this specific project? How can you do that in an effective way which is more dynamic, more adaptive, and more real-time?