All of the organizations involved in this research were actively seeking to improve their budgeting and planning systems, but for different reasons.Organizations are adopting and evolving new processes for planning and budgeting 12 Budgets make people feel under-valued. 11 Budgets reinforce departmental barriers rather than encourage knowledge sharing. Managing market expectations is strengthened by better communication with analysts (due to improved accuracy of management information) and increased management credibility.īetter company performance is underpinned by actual financial performance, performance against expectations and expected future performance.ġ0 Budgets are based on unsupported assumptions and guess-work. Improved management is underpinned by better company forecasting, better strategy formulation and execution, and more cost efficient planning and budgeting. Underpinning each of these factors are inter-linked sub-factors: –.The link between shareholder value and planning and budgeting can be demonstrated through a theoretical model, which involves 3 broad sets of factors – improved management, managing market expectations and improved performance.There is a link between planning and budgeting, and shareholder value 9 Budgets are developed and updated too infrequently, usually annually. 8 Budgets encourage ‘gaming’ and perverse behaviors. 7 Budgets do not reflect the emerging network structures that organizations are adopting. 6 Budgets strengthen vertical command and control. 5 Budgets concentrate on cost reduction and not on value creation. 1Ĥ Budgets add little value, especially given the time required to prepare them. 3 Budgets are rarely strategically focused and are often contradictory. 2 Budgets constrain responsiveness and flexibility and are often a barrier to change. This research identifies the 12 main criticisms as: 1 Budgets are time consuming and costly to put together. The traditional approaches to planning and budgeting are widely criticized. Significant weaknesses exist in the traditional approaches to planning and budgeting Based on this comprehensive review of the academic and practitioner literature and on the data we have gathered from executives in more than 40 firms we have concluded: InterG, JP Morgan, Kaiser Permanente, Microsoft, Nat West (UK), Novartis, Phillip Morris, Safeco, Schlumberger, Sprint Canada, Sun Microsystems and Wellpoint. The study also built on an earlier piece of research, completed by Accenture and Charles Schwab, which explored the planning and budgeting practices in 28 additional firms, including Ameren, AOL Time Warner, Aon Corp, Bank One, Chrysler Corp, Commonwealth Edison, Dell, Delta Airlines, Detroit Edison, Duke Power, Firemen’s, H&R Block, Highmark, Hewlett Packard, Intel, These interviews were supplemented by discussions with more than 30 senior analysts from 6 different houses – Deutsche Bank, Morgan Stanley Dean Witter, Merrill Lynch, Prudential Securities, Standard & Poor’s and William de Broë. To achieve these goals, the research team reviewed some 100 academic and practitioner books and papers on the subject of planning and budgeting, and completed face-to-face interviews with executives from 15 different firms, including ABB, Bank of Scotland, Belron, Borealis, BP, Cisco Systems, Credit Lyonnais, DHL, Electrolux, Ford, SAS, Shell, Skandia, Svenska Handelsbanken and Volvo. The goals of this review were to establish what are considered as best practices in planning and budgeting and to identify any evidence of improving shareholder returns with enhanced planning and budgeting. Driving Value Through Strategic Planning and Budgeting A Research Report from Cranfield School of Management and AccentureĪ substantial review of worldwide planning and budgeting practices.Įxecutive Summary In the first quarter of 2001, a team from the Centre for Business Performance at Cranfield School of Management and Accenture’s Finance & Performance Management Service Line undertook a substantial review of worldwide planning and budgeting practices.
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