Advanced budgeting: a journey to advanced management systems

Abstract

This paper summarizes a journey that has taken the CAM-I advanced management systems (AMS) program's Advanced Budgeting study group from an initial interest in better budgeting towards a recognition that a wider framework is needed to meet wider objectives (Woodcock, 1994). The work in advanced budgeting started from two different approaches. The first evolved from CAM-I's research into the application of activity-based costing (ABC) to product costing, during which the group became convinced that it could be applied with benefit to activity planning and budgeting. The second approach came from a recognition that the ultimate purpose of a management system is to link strategies and operations in the most effective way. As strategies are changing in response to many competitive and structural pressures, it seems evident that new management systems are needed to reflect these new realities. An initial conceptual framework for advanced budgeting was developed and tested with field visits. As a result, it was concluded that traditional budgeting is dysfunctional, but the solution is not better budgeting nor stand-alone advanced budgeting systems. Rather, the advanced budgeting key goals can only be achieved through an advanced management system which has a business process orientation and integrates a number of different management functions and initiatives within an on-going system. This will require significant changes in systems and culture. The work can be seen in retrospect as an accumulation of knowledge about the advanced management systems that will be needed to meet the challenges and opportunities of a new and volatile market place. With that broader objective now in focus, it can be seen that an important staging has been reached, but that the journey continue.