In his article published in 1999, ‘Budgeting — an Unnecessary Evil’, Jan Walland

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In
his article published in 1999, ‘Budgeting — an Unnecessary Evil’, Jan
Walland

In
his article published in 1999, ‘Budgeting — an Unnecessary Evil’, Jan
Wallander makes a concluding remark about traditional budgeting,
labeling it ‘an outmoded way of controlling and steering a company’ and
‘a cumbersome method of reaching conclusions, which are either
commonplace or wrong.’ This statement encapsulates the growing critique
of traditional budgeting methods, often perceived as rigid, inflexible,
and unable to adapt to the dynamic nature of modern businesses.
Wallander argues that traditional budgeting is an outdated and
ineffective practice, overly focused on control, and limiting
innovation, risk-taking, agility, and effective decision-making.
Despite
its assistance to managers, traditional budgeting, measured strictly in
financial terms and reliant on historical data, seems to falter in
adapting to the dynamic and ever-evolving business landscape and
aligning with strategic objectives (McLaney, 2023). By imposing rigid
financial constraints and fostering a culture of compliance rather than
innovation, it stifles creativity and entrepreneurial spirit, hindering
the development of new products, services, and business models. In their
conventional form, these budgeting practices can be considered time and
resource-consuming, potentially sacrificing the big picture—meaning
long-term goals—in the pursuit of short-term targets.
In
response to the limitations of traditional budgeting, the concept of
‘beyond budgeting’ marks a paradigm shift in financial management,
addressing the shortcomings and ushering in a new era of agility and
responsiveness by creating ‘more agile and human organizations’ (Réka et
al., 2014). It emphasizes value creation, financial planning
adaptability to business objectives, and empowering employees to make
informed decisions at all levels.
Wallander’s
critique of traditional budgeting can serve as a wake-up call, urging
organizations to reevaluate their financial management practices.
‘Beyond budgeting’ offers a promising path forward, embracing the
usefulness of budgeting while promoting continuous adaptation. While
adopting ‘beyond budgeting’ may present challenges, the potential
rewards are undeniable. As organizations navigate the complexities of
the 21st century, beyond budgeting stands as a transformative approach
to financial management, empowering businesses to thrive in an
ever-changing environment.
Question
How can organizations effectively transition from traditional budgeting to beyond budgeting practices?

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