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ACCA Strategic Professional · Advanced Performance Management · Budgetary planning and control

Norvik Services is considering moving to a Beyond Budgeting model. Which of the following changes is most consistent with that philosophy?

Replacing fixed annual targets with relative performance targets and rolling forecasts fits Beyond Budgeting. The model favours adaptive, benchmarked targets and decentralised decisions rather than fixed annual contracts, tight central approval or frozen budgets.

  1. ASetting stretch targets for each manager at the start of the year and linking bonuses to meeting the fixed targets
  2. BReplacing fixed annual targets with relative performance targets, such as ranking against peers and prior periods, and using rolling forecasts for planningCorrect
  3. CIncreasing the number of budget approval layers so that spending is tightly authorised by head office
  4. DPreparing detailed annual budgets for each department and then freezing them for twelve months

Explanation

Beyond Budgeting separates planning, target setting and resource allocation from the annual cycle: it uses relative, adaptive targets and rolling forecasts, and devolves decisions to front-line managers. The fixed targets, extra approval layers and frozen budgets in the other options are all features of traditional command-and-control budgeting.

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