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Jan 2006

Budgeting practice and organisational structure

This report summarises an investigation into budgeting practices in UK companies. The research stemmed from debates generated by the ‘beyond budgeting’ movement that emerged in the 1990s.

Key findings:                                                              

 •  The ‘beyond budgeting’ movement, which emerged in the 1990s, advocates that companies could improve their performance by abandoning budgeting altogether.

•  The findings of this research are very different from the assertions of those who favour ‘beyond budgeting’ and who claim that managers are very dissatisfied with budgeting systems.

•  Analysis of the survey data supported the long-held view that managers are likely to be more satisfied with budgets in relatively stable environments, especially those with a high degree of task certainty.

•  Decentralisation might be attractive and it is essential for the ‘beyond budgeting’ theory to work in practice.

About 95% of financial managers thought that budgets are fairly, very or extremely important, especially for performance evaluation, control and planning.

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Budgeting practice and organisational structure