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

Tessen Group operates in a volatile sector. It is replacing its annual budget with a Beyond Budgeting model. Senior managers are concerned that without fixed budgets, divisional managers will lose financial discipline. Which design feature best addresses that concern while remaining consistent with the model?

The best feature is flexible resource provision combined with accountability through relative performance against peers, key ratios and board-reviewed rolling forecasts. This preserves discipline without fixed annual budgets, whereas hidden budgets or annual central allocation would contradict Beyond Budgeting.

  1. ARetain fixed annual cost budgets as a hidden control so that divisions are monitored against them
  2. BGive divisions resources on request through a flexible process, with accountability based on relative performance against peers and key ratios, plus rolling forecasts reviewed by the boardCorrect
  3. CRemove all performance measurement and rely on managers' own judgement
  4. DAllocate all resources centrally once a year based on prior-year spend

Explanation

Beyond Budgeting keeps discipline through relative performance measures, transparent information, rolling forecasts and a strong shared governance, while resources are made available as needed. Retaining hidden fixed budgets or annual central allocation defeats the model. Removing measurement abandons control altogether, which the model does not advocate.

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