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Management Control without Budgets: A Field Study of 'Beyond Budgeting' in Practice

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  • Katarina Østergren
  • Inger Stensaker

Abstract

Budgets have long been the dominant instrument for management control. In recent years however, alternative approaches to management control such as the Balanced Scorecard have been launched. It has even been suggested that organizations should drop the budget and move 'Beyond Budgeting' (Hope and Fraser, Strategic Finance, 82(4), pp. 30-35, 2000). New approaches to management control attempt to respond to the shortcomings of budgets, such as being time consuming and focused on cost reduction rather than value creation. While the Balanced Scorecard and Beyond Budgeting appear to be more closely connected to firm strategy, we know little about how such alternative management control systems function in practice and potential challenges of these new systems. This study is a first step in that direction. We examine 'Beyond Budgeting' in practice by focusing on how corporate level in a large multidivisional oil and energy company adopted this new approach to management control and how it was implemented in two business units. Specifically we investigate: (a) the rules of action that are developed in the absence of budgets; and (b) how the new management control system is expected to influence interaction patterns. Drawing on agency and resource dependency theory in our analysis, our findings indicate that the means of control that are exercised in the absence of budgets alter the relationship between corporate management and division management and new lines of dependency are created between divisions.

Suggested Citation

  • Katarina Østergren & Inger Stensaker, 2011. "Management Control without Budgets: A Field Study of 'Beyond Budgeting' in Practice," European Accounting Review, Taylor & Francis Journals, vol. 20(1), pages 149-181.
  • Handle: RePEc:taf:euract:v:20:y:2011:i:1:p:149-181
    DOI: 10.1080/09638180903487842
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    Citations

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    Cited by:

    1. Jana Fibírová, 2013. "The Concept of Budgeting in the non stable market environment [Koncepce rozpočetnictví v nestabilním tržním prostředí]," Český finanční a účetní časopis, Prague University of Economics and Business, vol. 2013(3), pages 99-109.
    2. Staci A. Kenno & Michelle C. Lau & Barbara J. Sainty, 2018. "In Search of a Theory of Budgeting: A Literature Review," Accounting Perspectives, John Wiley & Sons, vol. 17(4), pages 507-553, December.
    3. Rikhardsson, Pall & Yigitbasioglu, Ogan, 2018. "Business intelligence & analytics in management accounting research: Status and future focus," International Journal of Accounting Information Systems, Elsevier, vol. 29(C), pages 37-58.
    4. Thomas Borup Kristensen & Henrik Nielsen, 2020. "Configuring a profile-deviation-analysis to statistical test complementarity effects from balanced management control systems in a configurational fit approach," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 30(4), pages 439-475, February.
    5. Tiina Henttu-Aho, 2018. "The role of rolling forecasting in budgetary control systems: reactive and proactive types of planning," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 29(3), pages 327-360, December.
    6. Mareike Bergmann & Christian Brück & Thorsten Knauer & Anja Schwering, 2020. "Digitization of the budgeting process: determinants of the use of business analytics and its effect on satisfaction with the budgeting process," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 31(1), pages 25-54, April.
    7. Sebastian D. Becker & Martin Messner & Utz Schäffer, 2020. "The Interplay of Core and Peripheral Actors in the Trajectory of an Accounting Innovation: Insights from beyond Budgeting," Contemporary Accounting Research, John Wiley & Sons, vol. 37(4), pages 2224-2256, December.
    8. Tiina Henttu-Aho & Janne J�rvinen, 2013. "A Field Study of the Emerging Practice of Beyond Budgeting in Industrial Companies: An Institutional Perspective," European Accounting Review, Taylor & Francis Journals, vol. 22(4), pages 765-785, December.
    9. Dileepa N. Samudrage & Hansinee S. Beddage, 2018. "Status and Challenges in Implementing Beyond Budgeting: Evidence from Sri Lanka," International Business Research, Canadian Center of Science and Education, vol. 11(12), pages 113-126, December.
    10. Bhimani, Alnoor & Sivabalan, Prabhu & Soonawalla, Kazbi, 2018. "A study of the linkages between rolling budget forms, uncertainty and strategy," The British Accounting Review, Elsevier, vol. 50(3), pages 306-323.
    11. Goretzki, Lukas & Reuter, Marek & Sandberg, Joanna & Thulin, Gabriella, 2022. "Making sense of employee satisfaction measurement – A technological frames of reference perspective," The British Accounting Review, Elsevier, vol. 54(1).
    12. Chaturika Seneviratne & Zahirul Hoque, 2024. "The interplay of episodic power in enabling and coercive budgetary designs in universities: A case study," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(1), pages 1011-1036, March.
    13. Jean‐François Henri & Steeve Massicotte & Dominique Arbour, 2020. "Exploring the Consequences of Competing Uses of Budgets," Australian Accounting Review, CPA Australia, vol. 30(4), pages 257-268, December.
    14. Bartlomiej Juras & Malgorzata Czerny, 2016. "Budgeting as a Method of Cost Management Using a Residential Community as an Example (Budzetowanie jako metoda zarzadzania kosztami na przykladzie wspolnoty mieszkaniowej)," Research Reports, University of Warsaw, Faculty of Management, vol. 2(21), pages 42-59.
    15. Habib Mahama & Zhichao (Alex) Wang, 2023. "Impact of the interactive and diagnostic uses of performance measurement systems on procedural fairness perception, cooperation and performance in supply alliances," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(3), pages 3253-3296, September.
    16. Bruno De Rosa, 2022. "Il controllo nelle "agile organizations": new wine or just new bottles?," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2022(1), pages 121-148.

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