Tenability of beyond budgeting for Sri Lankan corporates
As pressure mounts for better corporate performances, with
shareholders demanding firms to be among the top of their industry peer
group, renowned Prof. of Management Accounting, Prof. Danture
Wickramasinghe of the University of Hull, UK recently explored the
tenability on how Sri Lankan corporates can move out of conventional
budgeting and focus on a more productive mechanism which will bring
long-term success for companies.
 Addressing a CPD seminar titled 'Beyond Budgeting: Can this be
Tenable in Sri Lanka?,' organised by the Institute of Chartered
Accountants of Sri Lanka (CA Sri Lanka), Prof. Wickramasinghe emphasised
that the old command-and-control management style is out of tune with
the new need for agile and adaptive leadership and the need to transfer
more power and authority to people closer to the customer.
He said that today budgeting is out of kilter with the competitive
environment and no longer meets the needs of either executives or
operating managers.
"Budgets are rarely strategically focused and often contradictory,
Budgets concentrate on cost reduction and not on value and Budgets
constrain responsiveness and flexibility and are often a barrier to
change; among much other negativity," Prof. Wickramasinghe said.
The principles of Beyond Budgeting offer a new coherent management
model.
It assumes that front-line managers are able to regulate their own
performance.
Senior executives provide a supportive role. They challenge and
coach, but decisions are taken locally within a clear governance
framework based on principles, values and boundaries. In the new
coherence, relative improvement contracts, strategic models, rolling
forecasts and service-level agreements make sense.
As an alternative he proposed that companies should, instead of
setting a fixed sales/profit target, should trust everyone to maximise
profit potential by continuously improving against an agreed upon
benchmark and remaining in the top of the industry peer group.
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