Beyond Budgeting: In every crisis lies the
seed of opportunity
To what extent is Beyond Budgeting a more effective control measure than
Traditional Budgeting for companies that focus on agility in times of crisis?
Name and student number: Thirza Olijve, 13480383
Class: WG03
Place and year: Oene, 2020
Module: Academic Project
Teacher: Albena Sotirova
,Table of Contents
1 Introduction ....................................................................................................................... 2
2 Theoretical Framework .................................................................................................... 3
3 Criteria ............................................................................................................................... 5
4 Evaluation .......................................................................................................................... 6
4.1 Flexibility .................................................................................................................................. 6
4.2 Employee involvement ................................................................................................................ 6
4.3 Complexity ................................................................................................................................ 7
5 Conclusion .............................................................................................................................. 9
Reference list ........................................................................................................................... 10
Appendices .............................................................................................................................. 13
Appendix I. Limitations of Traditional Budgeting .................................................................................... 13
Appendix II. Degree of flexibility: Beyond Budgeting vs. Traditional Budgeting ......................................... 14
Appendix III. Employee Involvement: Beyond Budgeting vs. Traditional Budgeting.................................... 14
1
, 1 Introduction
Budgeting has historically played a central role in most organizations’ management control
system but in the current market condition budgeting represents a controversial issue (Libby &
Lindsay, 2010; Henttu-Aho & Järvinen, 2013; Lidia, 2014; Lorain, Domonte, & Peláez, 2014;
Radonić, 2018). Nowadays, many find limitations in traditional budgeting, e.g. inflexibility and
obsolescence1. However, now more than ever companies need to respond quickly to emerging
challenges, precarious situations and requirements of today’s business world as a result of
COVID-19 (Andrew, Baker, Guthrie, & Martin-Sardesai, 2020), encouraging a focus on
organizational agility (Nijssen and Paauwe, 2012). According to Collings, Holzmann and
Mendoze (in Becker, Mahlendorf, Schäffer, & Thaten, 2016) crises reduce the usefulness of
traditional budgeting, making it inadequate while others consider budgeting as indispensable
(Rickards, 2008; Lorain et al., 2014). Ekholm and Wallin (2011), Lidia (2014) and Lorain et al.
(2014) even believe that traditional budgeting is effective during crises as it provides a buffer
against uncertainty. Libby & Lindsay (2010) conclude that “while problems exist with budgets,
organizations are adapting their use to account for these problems rather than abandoning
budgets” (p. 56). Researchers disagree whether traditional budgets should remain the same,
change or be eliminated altogether. The limitations of traditional budgeting in connection with
the remaining importance of budgeting results in an incremental move towards Beyond
Budgeting: a concept with flexible and adaptive budgeting techniques that improves
management control.2 Main improvements are continuous planning and the ability to respond
to environmental changes. However, despite the criticism of traditional budgeting, successful
examples and positive impacts of Beyond Budgeting, utilization of Beyond Budgeting remains
limited (Cardoş, 2014; Popesko et al., 2016; Radonić, 2018).
It can be concluded that the budgeting situation is paradoxical: many find budgeting
indispensable but complain simultaneously about the drawbacks of traditional budgeting: they
agree that it requires a reform, but are not ready to move away from traditional budgeting
(Cardoş, 2014; Lorain et al., 2014). The purpose of this paper is therefore to ascertain the
following: to what extent is Beyond Budgeting a more effective control measure than
Traditional Budgeting for companies that focus on agility in times of crisis?
A literature review is used to answer this question. The literature consists of academic
articles on traditional and Beyond Budgeting, complemented with data on agility related to
budgeting. By combining these findings this paper offers a more nuanced perspective on what
budgeting method is best suited for organizations that focus on agility in times of crisis.
The second section, the Theoretical Framework, defines the budgeting methods and
relevant relationships. Section 3 describes the criteria on which the budgeting methods are being
evaluated. Section 4 shows whether the criteria are met. Finally, section 5 discusses the
implications and the limitations of this study.
1
Several critics claim that it is time-consuming, inflexible, obsolescent, has no value-creation focus and is inefficient in
controlling and running businesses in unpredictable environments (Rickards, 2008; Libby & Lindsay, 2010; Ekholm &
Wallin, 2011; Henttu-Aho & Järvinen, 2013; Lidia, 2014; Lorain et al., 2014; Cardoş, 2014; Popesko, Ključnikov,
Hrabec, & Dokulil, 2016; Radonić, 2018).
2
Rickards, 2008; Libby & Lindsay, 2010; Henttu-Aho & Järvinen, 2013; Popesko et al., 2016; Radonić, 2018.
2
