Budget- a perfect management tool? A case study of AstraZeneca
Abstract: Background and discussion of the problem: It can be argued that, today, traditional budgeting has come under criticism for being overly time consuming, rigid and to an extent, encouraging of number games to fit the demands of the present high-paced business environment. Lately, a variety of optional management control systems have emerged, notably among them the system labelled Beyond Budgeting. However, even though there exist strong disparagement with regard to the classical budgeting approach, the system is still used to a great extent in business management. Are organisations moving towards using the Beyond Budgeting approach or are the classical budgeting methods still the preferred technique?Questions: What purpose does the budget fulfil in a complex organization? What are the concerns with using the budget as a management control system? To what extent are the principles of Beyond Budgeting adopted?Purpose: The purpose of this study is to examine the reasons why a complex organization uses the budget and what the concerns are with using the budget as a management control system. Furthermore, analysing if the principles of Beyond Budgeting concept are implemented in a complex organization.Delimitations: The study analyses several departments (SET Areas) but only one company, AstraZeneca. The results are not aimed for generalizing as the authors have chosen to examine just one organization. The focus lies with the limitations associated with the budget.Method: A qualitative case study, based on interviews with respondents that are responsible for and involved in the budget process in the departments, have been made.Results: The study shows that budgeting fulfils several purposes; resource allocation, planning, communication, awareness and performance evaluation in a complex organization such as the one studied, although results differ among departments. A majority of criticism towards the budget can be seen to be proved valid. Four out of six principles of the Beyond Budgeting concept (advocated by the founders to the concept) are, to a large extent, adopted and utilised by the organization studied. Furthermore, the trend of improvements in management corresponds to the Beyond Budgeting concept and methods in many ways.Suggestions for further research: Examine if the purposes and concerns with the budget are the same in other complex organizations. Further, if the Beyond Budgeting principles areadopted in the same extent in other organizations, in order to make generalizations about the management control system. Are the additional management tools, such as the scorecard and forecast, enough to replace the budget in other complex organizations, or does the budget still fulfil an irreplaceable purpose?
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