On 20 March, we had an interesting Beyond Budgeting debate at the fifth FP&A Board in Amsterdam. 32 senior finance members estimated their average budget pain rate at 6.7 level (where 0- Not painful; 10- Extremely painful). They represented leading companies in different industries, namely:
- and many others.
- What is Beyond Budgeting (BB)?
- Why does it work and what are the key benefits of this management system?
- Some examples and case studies
- Small groups discussion on Beyond Budgeting Philosophy. "Are we ready to abandon the budget and what does it require?"
- Conclusions and recommendations.
During the meeting, the Board members identified some of the key problems of the traditional budget:
- While Forecasts and Targets are the same, compensation targets are fixed.
- The budget for the year is also fixed. This is the finance department’s annual allowance.
- The capital budget is set during the budgeting process.
The participants also discussed steps which could be taken in order to transform the traditional budget into a flexible planning process. First of all, the FP&A department needs to get support from the top. After the go-ahead, the change should be constantly managed. It is a good idea to concentrate on resource allocation, performance management, and bonus pool.
The whole process should not be solely on Finance shoulders. Although the finance department manages the changes, it is necessary to involve the key stakeholders as well because participation is the key.
Besides the above-mentioned, the Board mentioned the following steps which can also contribute to the successful transformation:
- The entrepreneurial culture should be encouraged;
- After identifying key drivers, a driver-based model needs to be created;
- A flexible planning system requires investments;
- Success should be measured.
Our Speakers and Sponsors
Many thanks to Marcin Miskiewicz, Finance director at Danone, who shared his Beyond Budgeting experience and insights with the Board.