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Can’t see? Try looking forwards

Their predicament is often made worse by the tendency to look backwards at what the budget says, rather than forwards at what is possible and what the key drivers would be. Traditional budgets create all kinds of problems, not least their motivational impact on managers who feel they are being beaten over the head with yesterday’s yardstick. The Beyond Budgeting Round Table, an international research consortium (have a look at, believes that budgeting should be abolished – hurrah! We first wrote about the BBRT about five years ago, since when the idea that companies can manage without the annual horse-trading farce has been further developed and more widely adopted. In tough times, innovative managers look for new solutions – so this seems an ideal opportunity for FDs to tear up their ageing charts and start using navigation tools that allow them to take proper account of changing conditions. Robin Fraser, a director of the BBRT, says that the budget is nothing other than a “performance contract”: managers who perform below agreed limits get into trouble; managers who exceed their targets – well, it all depends on whether or not they’re being rewarded for doing so. One effect of scrapping the budget is you look more closely at your performance compared with your industry peers. This isn’t an entirely satisfactory state of affairs: there’s not much kudos to be had in outperforming a declining industry sector. But then again, you don’t have to run faster than the tiger that’s chasing you, you just have to run faster than your competitor.

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