Solution
Robert answered on
Dec 23 2021
Introduction
In 1997, according to Ozigi, budget is defined as the estimated total profit and expenditure in
yearly basis of an organization based on the expected income accruing to the unit of
organization. It is a proper written statement of management’s strategy for the coming future,
which is expressed in terms of finance. A budget prepares the course of actions to be taken in
future for management of knowledge in an organization. In 1980, Kooniz et al. find a different
meaning of budgeting that it is nothing but the preparation of plans in financial and non-financial
terms for a given period of time in future, where financial includes expenditure and revenue
where as non-financial includes materials, labor-hours. The concept of budget came into
existence in the early 1920s when these were used as tools for cost management and cash flows
y large industrial organizations. Budget has different meaning in different field like researchers
in literature management see budget in terms of a board organizational plan which refers it as
management of coordination, planning and control.
As a rational model budget includes the following: 1) clear definition of objectives and goals, 2)
inputs are to be chosen and combined in a way so as to make the goal attainment maximum, 3)
efore making a decision that is to be implemented in a given procedure various alternatives are
acknowledged and compared, 4) for the enhancement of making decision information systems
are used, and 5) a rational pattern with an importance on a long-term plan.
Characteristics of a good budget plan for Management of knowledge in an Organizations are: 1)
for the management of knowledge in organization a financial plan is needed containing various
projects and programs, 2) a permanent period of one year usually, 3) both expected expenditure
and incomes of materials, KM personal and equipment, 4) after approval an authority to gather
and incur expenditure, and 5) every financial activities to be included around the management of
knowledge in the organization given.
The objective of this paper is to evaluate that whether budget is important in the cu
ent
organization, if important what are the changes that is required to make it more dynamic and as
per the need of the cu
ent organization.
Beyond Budgeting system and problem
Traditional budgeting is called as beyond budgeting where the model of management is
considered first. For changing the situation that was rarely met by various organization this was
developed, when the process of management was associated with budgeting, just like the way of
establishing goals and strategies, allocation of resources, etc. were not neutral in terms of
management behavior and thoughts. Therefore, ten reasons were defined why budgeting caused
significant problems and should be replaced:
1. Being very bureaucratic is expensive resulting in taking up about 20 percent of manager’s
time.
2. It hides innovation and initiative, because it supports management of authority.
3. Unethical behavior is encouraged and reputational risk is increased, as it presumes
violent targets and inducements that need to be met at any cost.
4. People are demotivated, because instead of performance maximization budgeting mostly
entails going with the flow. And as the consequence of these people do minimum work.
5. It is outdated in very short time periods, because its key notions normally become out-of-
date rather frequently, and additional time is required for their mastering.
6. It does not deal with plan, because budgeting is originated on departments and functions.
7. It is out-of-killer with the environment so competitive outside, as quick response and
nonstop innovations are the main concern of today’s managers apart from the actual
udget management and people.
8. It protects costs that is not important and will not add value, because they are mostly
compiled on the basis of outcomes of the previous year.
9. It prevents quick response which is not considered as the objective of budgeting, but for
successful work it is necessary.
10. It strengthens control and command.
Therefore, it is obvious that the budgeting in this manner was obviously not designed for
working on various tasks with main stress on rapidity and self-rule but rather for big companies
with high hierarchies.
Hence, to summarize of traditional management model can be done in this way:
It becomes very expensive in putting budgets and targets, implementing instruments,
udget management and people from distant locations.
There is a very few involvement of people in making decisions and plans, which is
considered as top-down process.
There are a lot of adjustments made among the need for temporary outcomes and creation
of long-term value, which cause the development of micro-management.
Transparency is not maintained in this model while making decisions.
The gifted people usually want to leave it because of the structure which is too rigid.
The main aim of Accountability is convincing only the management, and not the
customer (BBRT, 2011).
How to make Change to Cu
ent Budgeting system?
In order to achieve the kind of style of management mentioned above, it is very important to
econsider the traditional vertical organization and to translate it into such a way so as to tackle
the customer. The origin of the Beyond Budgeting model is based on reconsidering team-based
accountability (Bogsnes, 2009). There are three types of teams in beyond budgeting and they are:
executive team, which helps for fixing goals and purpose and maximizing the performance of
other unit; support services teams, which is responsible for supporting and serving the value
centers; value center teams, which is responsible for building strategy, providing values and
investing capital (Hope, Fraser, 2003). Moreover, there are only project teams are formed, but
they are specific on project and are established in a short-term basis.
Twelve principles of Beyond Budget approach which altogether are the most best practices of
leading organization of the world, were build up on the basis of various proofs gathered in 12
years, so by combining these principles the best budgeting model can be defined. The list of 12
principles is as follows:
Governance and Transparency
1. Values –a general cause is there instead of a central plan.
2. Governance – sensible judgment and common values are there instead of fully described
ules, laws and regulation.
3. Transparency –understandable and unrestricted data are there instead of...