Who Needs Budgets

Prior to beginning work on this discussion, please read the articles “Who Needs Budgets?     (Links to an external site.)  in the Financial Planning page of the CFO Edge website, and Traditional Budgeting Versus Beyond Budgeting: A Literature Review  (Links to an external site.) . In the words of GE’s legendary ex-CEO Jack Welch, Jack Welch, “The budgeting process at most companies has to be the most ineffective practice in management. It sucks the energy, time, fun, and big dreams out of an organization (…) [and] brings out the most unproductive behaviors (…)” (Welch & Welch, 2005, p. 189). Some argue that the purposes of budgeting can be achieved without the conventional budgeting process. These companies espouse an idea called beyond budgeting that proposes to replace annual budgets with rolling forecasts of key performance indicators (Hope & Fraser, 2003). Others disagree, pointing out that the work of continuous planning is costlier than budgeting and that doing something continuously tends to make the process superficial. So, the jury is still out. But so far, GE still prepares budgets! Discuss in 200 words whether the controversial concept of beyond budgeting is a better approach for financial planning and analysis (FP&A) than traditional budgeting.

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