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Beyond Budgeting: How Managers Can Break Free from the Annual Performance Trap Hardcover – 1 Mar 2003


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Product details

  • Hardcover: 254 pages
  • Publisher: Harvard Business School Press (1 Mar 2003)
  • Language: English
  • ISBN-10: 1578518660
  • ISBN-13: 978-1578518661
  • Product Dimensions: 1.9 x 17.1 x 23.5 cm
  • Average Customer Review: 4.8 out of 5 stars  See all reviews (4 customer reviews)
  • Amazon Bestsellers Rank: 121,901 in Books (See Top 100 in Books)
  • See Complete Table of Contents

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Product Description

Review

"Beyond Budgeting is a must-read for anyone interested in seeing the future of performance management." -- Planning Perpectives, Issue #29, September 23, 2003

About the Author

Jeremy Hope is a Director of the Beyond Budgeting Roundtable, a not-for-profit collaborative that designs new performance management processes. He is a chartered accountant and a co-author of Transforming the Bottom Line and Competing in the Third Wave. He is a former venture capitalist and founder of several businesses. He lives in West Yorkshire, England.

Robin Fraser is a Principal at the Beyond Budgeting Roundtable. Formerly a management consulting partner in PricewaterhouseCoopers, Fraser has 30 years experience in business planning, performance improvement, and cost reduction. He lives in Surrey, England.


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16 of 17 people found the following review helpful By A Customer on 23 May 2003
Format: Hardcover
This book does not describe how to budget better, but instead asks the fundamental questions: “Why is so much time wasted on such an unproductive process as budgeting and why do it at all?”. Because we have all grown up with budgets, we have not questioned the basic tenets of how businesses are run. Each argument that you can propose in favour of budgeting is systematically demolished by this book. After much detailed research after many years, the authors have concluded that the culture of most organisations is fundamentally flawed and budgeting is a symptom. Starting from the CEO, businesses must be open, honest, not driven only by short term goals and allow people to use their initiative. If all you knew about this book was its title, you might conclude, incorrectly, that it is aimed at the number-crunchers. Look beyond the title, behind it is one of the most significant business books of the decade. I have read many business books. This is one of the few that I have read to the end, because it is clearly written and consistently interesting. Excellent
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3 of 3 people found the following review helpful By Robert Morris TOP 500 REVIEWER on 16 Nov 2006
Format: Hardcover
Given what Hope and Fraser perceive to be an obsolete core management model driven by the annual budgeting process, they offer an alternative to that model. It is based on "the decision-making needs of front-line managers [as well as] a coherent set of alternative processes that support relative targets and rewards, continuous planning, resources on demand, dynamic cross-company coordination, and a rich array of multilevel controls." In Part I, they explain how to break free from the annual "performance trap" and how this trap is sprung whenever managers are pressured to meet fixed targets by fixed dates. They provide an overview of two opportunities to think and act "beyond budgeting." In Part II, they examine the first opportunity and explain how a number of organizations have used beyond budgeting principles to implement more adaptive processes. Then in Part III, they examine the second opportunity and explain how and why abandoning the traditional (and ineffective) budgeting process can help to achieve what they characterize as "radical decentralization." In the last Part, Hope and Fraser examine how and why the adaptive and decentralized organization (as opposed to one with a traditional budgeting process) "meets the vision of business leaders in the 21st century."

Of special interest to me is what Hope and Fraser have to say about the differences between the fixed performance contract (FPC) and the relative improvement contract (RIC).
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1 of 1 people found the following review helpful By Stephen Parry on 25 May 2008
Format: Hardcover
This book and its associated Harvard Business Review articles (by Hope and Fraser) from 2003 has not attracted the attention it deserves.

When this was written it was seen as the antidote to the endless budgeting cycle based on the 'prediction' fallacy and the ensuing corporate gaming they create.

All of us have said at one time or another this process (budgeting negotiation etc.) is a joke, but we all continue to play our part in maintaining the joke, playing the game, fighting for survival in a world created by the madness of the corporate budgeting processes.

Hope and Fraser have clearly demonstrated that the current process is not only wasteful in terms of human effort but downright detrimental the the enterprise, employees and customers. They go further and show us all a way out of the trap.

There is an alternative, but it needs study and it needs more companies other than the ones illustrated in the book to lead the way. Only then can we change the current paradigm where 'Accepted ideas are no longer competent and competent ideas are not yet acceptable'
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Format: Hardcover Verified Purchase
This book makes a strong case for decentralization in business. One of the examples in the book is Svenska Handelsbanken (SHB) which moved beyond budgeting and the fixed performance trap thirty years ago! The change was initiated by SHB's CEO at the time Jan Wallander. I have subsequently found out that he has written several books. One is in english and is about "Decentralization - Why and How to Make it Work". Another is in swedish and has the title "Med den mänskliga naturen - inte mot!" (in english, With the Human Nature - not against!). This book is about how to organize and lead companies. I have put Jan Wallander on my reading list.
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Most Helpful Customer Reviews on Amazon.com (beta)

Amazon.com: 10 reviews
9 of 10 people found the following review helpful
No more budgets 20 Feb 2010
By Bas Vodde - Published on Amazon.com
Format: Hardcover Verified Purchase
"Beyond Budgetting" describes a new way of managing your organization and its performance, a way without having budgets. Not having budgets does not mean chaos, it does not mean no control or visibility, it means using different organizational structures to manage the performance and resource distribution within your organization.

The book consists of four parts. The first part describes budgeting and the problems that are inherent to the budgeting process. It introduces an alternative based on what several companies have done, with the prime example being the Swedish Handelbanken. It splits the beyond budgeting concept it two adaptive process for managing performance and radical decentralization. These are covered in the next two parts.

The second and third part describe the two legs of beyond budgeting. The structure of the chapters is similar. The first chapter describes three cases of organizations that implemented these and similar concepts. The second chapter covers the principles while the last chapter in each part covers hints for implementation.

The adaptive process for managing performance suggests to set relative targets, decouple rewards from target setting, provide resources on request, and provide up to date and transparent information to everyone within the organization. Radical decentralization is build on top of this and recommends to empower people close to customers to make the decisions, work within teams and create an open and transparent information system that supports these people to make local decisions.

The last part of the book contains two chapters. The first one describes tools (and could have been left out from my perspective, didn't added much to the rest of the book). The second chapter described an overall vision for management in the 21th century and how Beyond Budgeting fits in that.

I liked the book, it challenges a whole lot of management assumptions and demonstrates an alternative not based on speculation but based on real cases. My only objection to the book was exactly that. Beyond budgeting is created based on what a couple of real companies do... but these companies all did slightly different things at different degrees. This variance makes the book sometimes hard to read as it makes it hard to fix the concept "beyond budgeting." Perhaps this was the authors intention... though from the readers perspective it would probably be easier to first describe the concepts and then move to case studies and show how different companies implemented the beyond budgeting concepts. Because of this, I considered a 3 star review... but as this book really provides a new concept, I feel that wouldn't be fair. So, four stars and a definitive recommendation for people who are tired of budgeting hell (aren't we all?) and like to know if there is an alternative. There is... it is called: Beyond budgeting!
9 of 10 people found the following review helpful
Excelent real life cases 1 July 2004
By Johan Løvlie - Published on Amazon.com
Format: Hardcover
This book does capture the findings from the work of Beyond Budgeting Roundtable in a excellent way. The cases in the book are real and are brilliant proofs of the fact that it is possible to run even a large corporation with out traditional budget models. I'm really looking forward to the follow up.
5 of 5 people found the following review helpful
Accepted ideas are no longer competent and competent ideas are not yet acceptable 11 Jan 2009
By Stephen Parry - Published on Amazon.com
Format: Hardcover
This book and its associated Harvard Business Review articles (by Hope and Fraser) from 2003 has not attracted the attention it deserves.

When this was written it was seen as the antidote to the endless budgeting cycle based on the 'prediction' fallacy and the ensuing corporate gaming they create.

All of us have said at one time or another this process (budgeting negotiation etc.) is a joke, but we all continue to play our part in maintaining the joke, playing the game, fighting for survival in a world created by the madness of the corporate budgeting processes.

Hope and Fraser have clearly demonstrated that the current process is not only wasteful in terms of human effort but downright detrimental the the enterprise, employees and customers. They go further and show us all a way out of the trap.

There is an alternative, but it needs study and it needs more companies other than the ones illustrated in the book to lead the way. Only then can we change the current paradigm where 'Accepted ideas are no longer competent and competent ideas are not yet acceptable'
13 of 16 people found the following review helpful
Good Book on Relatively New Topic 29 Dec 2003
By "moshe_gfkl" - Published on Amazon.com
Format: Hardcover
As a business consultant with many years experience in budgeting, I found this a very useful overview of a relatively new topic in finance. The authors clearly show the limitations of the traditional budgeting process and present a comprehensive alternative.
However, while the book brings many examples from real companies, many of the ideas still seem a little conceptual and difficult to imagine how they would actually work in practise.
This book will certainly interest anyone seriously involved in budgeting.
5 of 6 people found the following review helpful
How to avoid or escape from "the annual performance trap" 16 Nov 2006
By Robert Morris - Published on Amazon.com
Format: Hardcover
Given what Hope and Fraser perceive to be an obsolete core management model driven by the annual budgeting process, they offer an alternative to that model. It is based on "the decision-making needs of front-line managers [as well as] a coherent set of alternative processes that support relative targets and rewards, continuous planning, resources on demand, dynamic cross-company coordination, and a rich array of multilevel controls." In Part I, they explain how to break free from the annual "performance trap" and how this trap is sprung whenever managers are pressured to meet fixed targets by fixed dates. They provide an overview of two opportunities to think and act "beyond budgeting." In Part II, they examine the first opportunity and explain how a number of organizations have used beyond budgeting principles to implement more adaptive processes. Then in Part III, they examine the second opportunity and explain how and why abandoning the traditional (and ineffective) budgeting process can help to achieve what they characterize as "radical decentralization." In the last Part, Hope and Fraser examine how and why the adaptive and decentralized organization (as opposed to one with a traditional budgeting process) "meets the vision of business leaders in the 21st century."

Of special interest to me is what Hope and Fraser have to say about the differences between the fixed performance contract (FPC) and the relative improvement contract (RIC). For example, here are two of the six cited:

In terms of targets,

FPC: "Your [sales/profit] target is fixed at [$]"

RIC: "We trust you to maximize your profit potential to continuously improve against the agreed-upon benchmarked KPIs [key performance indicators] and to remain in the top [quartile] of your peer group."

In terms of resources,

FPC: "The agreed resources to support the capital and operating budgets are set out in the attached budget statements."

RIC: "You trust us to provide the resources you need when you need them. We trust you to keep within agreed KPI boundaries."

Note the references to "trust." Hope and Fraser insist (and I wholly agree) that there must be mutual trust between and among everyone involved when making a commitment to beyond budgeting principles. It is important to emphasize that Hope and Fraser did not write this book solely for CFOs. On the contrary, what they propose requires that all senior-level executives in a given organization understand and actively support the beyond budgeting principles. Although CFOs and heads of HR have responsibility for the implementation of strategy, more often than not, they are not centrally involved in the formulation of strategy. That is a serious mistake. Beyond budgeting initiatives will succeed only if a CFO can be trusted to make prudent and effective use of resources provided, and only if she or he trusts the given organization to make sufficient provision of them.

Otherwise....
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