Beyond budgeting in Jotun : a case study on substituting the budget with separate forecasting and targeting tools in a global, industrial corporation
Year: 2016
Type: dissertation
Abstract: The following thesis is a qualitative study aimed at contributing to the Beyond Budgeting\nliterature on unbundling the traditional budget by answering the question:\n“Why may global, industrial corporations attempting to go Beyond Budgeting struggle to\neffectively substitute the budget with separate forecasting and targeting functions?”\nWe find this research problem interesting, as there are no case studies today documenting\npotential struggles of separating the forecasting and targeting functions. The aim is to fill this\ngap in this literature by providing insight into the process and struggles inherent in this\nseparation process.\nAs the basis to answer this question, we have performed a case study on Jotun, a global\nchemicals company originally from Norway. Jotun introduced a targeting tool called Strategic\nTarget Planning (STP) in 2007, and have in parallel attempted to make what they call cost\nbudget into a forecasting tool.\nBeyond Budgeting literature proposes several reasons for separating the traditional budget into\nindividual processes, such as decreased resource use due to less negotiation, more flexibility\nbecause of more autonomy, and less gaming as there are fewer conflicting purposes.\nIn this case study we found that Jotun has only partially managed to remedy these issues by\nsubstituting the budget with separate forecasting and targeting tools. One interesting finding\nthat has not been addressed in previous literature is the paradox of autonomy. If an\norganization already has a culture based on the decentralization and trust that is necessary for\nBeyond Budgeting to function well, this culture can be counter-productive to the\nimplementation of Beyond Budgeting in the first place. We also found evidence that\nseparating the forecasting and targeting function from the traditional budget could still lead\nto skewed incentives and gaming, as these new tools can still be misinterpreted or involve\nconflicting purposes, such as resource allocation, benchmarking and bonus schemes. A third\nfinding was that the substitution of the budget with separate forecasting and targeting tools\nmay lead to more flexibility in terms of upwards spending, but not as much downwards. This\nimplies that spending in excess of the forecast is possible as long as the business case is\ngood, but that there is less flexibility in reducing costs when actual needs turn out to be less\nthan forecasted as employees perceive the funds to be allocated already.
Source: BIBSYS Brage (BIBSYS (Norway))
Authors: Peder Engesæth, Jonas Marthinussen
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2542810046