Beyond Budgeting

The Origins of Beyond Budgeting and of the Beyond Budgeting Round Table (BBRT) – an Interview with Jeremy Hope
The following interview is a shortened version of an interview for Juergen H. Daum’s new book on “Beyond Budgeting” (to be published soon). This interveiw has been published in this form in: ControllerNews – Zeitschrift für Controlling und Unternehmensführung, issue 5/03, Vienna,November 2003, p.168-171.

Juergen Daum: What was your initial motivation to start to work on “Beyond Budgeting”? Jeremy Hope: Robin Fraser and I we both sensed independently from each other a growing dissatisfaction across the whole business community with the traditional general management approach, which is based on and much influenced by traditional budgeting as well as the pervasive budgetingculture with all its negative implications for successful enterprise management. Robin, then a management consulting partner with Coopers & Lybrand, participated in the Advanced Budgeting Program run by international research organization CAM-I in the mid 1990s that did some of the groundwork for what became known as

Beyond Budgeting. That was the starting point of his Beyond Budgeting journey. We metat CAM-I’s25th anniversary meeting in 1997 after both speaking on the problems of budgeting and it was this meeting that led to the BBRT. Juergen Daum: And how did your own Beyond Budgeting journey begin? Jeremy Hope: In addition to my experiences as a finance person and controller in several UK companies in which I had first hand experience of ‘managing with the numbers’, a major foundation formy Beyond Budgeting journey was the research work I did for two earlier books1, which I wrote together with my brother, Tony Hope, a visiting Professor of Accounting at INSEAD. We both recognized that traditional accounting was no longer able to provide managers with relevant information for decision making in today’s information and knowledge economy. So we first tried to develop new concepts tomeasure and manage the performance of an organization. With our second book “Competing in the Third Wave” we developed this theme further – that we need a new approach to management. The mission of our second book was to create the case for this transformation and to show how it might be realized. Juergen Daum: Why did you end up with this emphasis on budgeting or, should I say, Beyond Budgeting?Jeremy Hope: What we found was that most of the new tools and techniques that companies were trying to develop and implement were not fully working. Take the Balanced Scorecard as an example. The Balanced Scorecard was designed to enable managers to map and describe their strategy, to balance short- and long-term goals, initiatives and measures, to align the actions of the ‘top floor’ and the ‘shopfloor’, and to focus on the real drivers of financial performance. This has created in many organizations a framework for a more flexible strategy management process geared much more to value creation. But if the budgeting system and culture remains in place, there is no way that the strategic management process will really change the operational manager’s day-to-day behaviour. Juergen Daum: Why?Jeremy Hope: The budgeting system influences the behaviour of managers and employees in a way that is counter productive to strategic management. The budget ties managers and people to the old management system and its paradigms. This is the reason why many change management projects are failing. The budgeting system is acting as a barrier to fundamental change. Many well-planned changes and manyattempts to shift the culture from one of compliance and control to enterprise and learning have foundered when management behaviour has been “snapped back” into its old shape by the invisible power of the budgeting system. If the new management model for the 21st century organization is to focus on strategic performance, value-adding processes and knowledge management, it is crucial that the...