Jeremy Hope's beyond budgeting approach to performance management

¶ … Beyond Budgeting" by Jeremy Hope

The Significance of Budgeting on Effective Management: Analysis of "Beyond Budgeting" by Jeremy Hope

In the book "Beyond Budgeting," author Jeremy Hope gave an altogether different conceptualization of the significance of budgeting on effective management. In it, he emphasized the need for better and well-thought out budgeting plans in order not to sacrifice the management decisions and ultimately, the efficient performance of a company or organization. The author aimed to create a strong argument illustrating this objective -- that is, the relationship of budgeting with management -- and successfully achieved this by centering his attention to the rudimentary, yet essential, details of budgeting in a more comprehensible manner. The book, in effect, was organized into three parts: firstly, an analysis of budgeting; secondly, on management; and finally, the role that budgeting plays on effective management.

One of the revolutionary ways in which budgeting was transformed in the book was by assigning the term "performance management process," which connotes a more interactive and holistic approach to budgeting. Thus, by changing the terminology commonly known as "budgeting" for "performance management process," budgeting has ceased being a financial process and concept. Another objective that the change in terminology achieved was that it was able to weaken, if not altogether eliminate, the negative associations given to budgeting, such as its being "too cumbersome and expensive," 'not meeting the needs of either executives or operating managers,' and the propensity for budgeting to become unrealistic and "unacceptable" for the organization's or company's actual operations.

The field of management is strongly affected by budgeting, according to Hope. He cites instances wherein budgets become "fixed performance contracts," which need to be accomplished without much thought about its eventual effects on the company's performance. Indeed, the author elucidated his point clearly when he stated that "... budgets have since been hijacked by a generation of financial engineers that have used them as remote control devices to 'manage by the numbers'." In this statement, Hope expresses his disapproval on the seemingly simplistic and generalized manner in which budgeting is accomplished nowadays. Evidently, budgeting has become computerized, losing the "human element" that makes it more logical and in touch with the organization/company's operations and performance. A reinstatement of the active involvement of managers and executives in budgeting is need, the author asserted, in order to eliminate problems such as 'failing to address current competitive imperatives' and incompatibility of the budget with the organization's daily operations.