ACCA Strategic Professional · Advanced Performance Management · Budgetary planning and control
Quorra Software develops products in a fast-changing, innovative sector. Its CEO is considering replacing the traditional annual budget with a 'beyond budgeting' model, using relative performance targets, rolling forecasts and devolved resource decisions. Which of the following is the MOST significant condition for this model to succeed?
Beyond budgeting works best with a decentralised, trust-based culture where managers are empowered and supported by reliable, timely information systems. Tight central control, fixed annual targets linked to bonuses and incremental resource allocation are features of traditional budgeting that the approach is designed to move away from.
- AA centralised command-and-control culture with tight line-item approvals
- BA decentralised, trust-based culture with empowered managers and reliable information systemsCorrect
- CFixed annual targets linked directly to individual bonuses
- DIncremental allocation of resources to each department based on prior-year spend
Explanation
Beyond budgeting relies on empowerment, adaptive management, relative targets and good real-time information. Tight central control, fixed targets tied to bonuses and incremental allocation are features of traditional budgeting that the model seeks to replace.
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