Controlling practice

Planning and Budgeting are the core instruments of enterprise management. Yet, the discussion about their appropriate design is ceaseless. Although the problems of enterprises are ongoing and known, the attempts of finding solutions have been unsatisfactory so far. In this way, Beyond Budgeting, although heavily “advertised“, could hardly pave its way in practice. To the contrary, Better Budgeting is not a closed concept but just a generic term for a variety of improvement ideas and instruments. The result: we are still missing a common bracket, a concept which would address the problem in an adequate manner and be applicable in practice.

Seeing this situation as unsatisfactory for Controllers and Managers, ICV took this opportunity to work out a concept which would be based on a scientific approach, consistent and capable of being put into practice. For this reason, in November 2007 ICV established a professional work group “Modern Budgeting” in cooperation with Strascheg Institute for Innovation and Entrepreneurship (SIIE) of the European Business School (EBS). The ca. 40 members include scientists, advisers and practicians from various sectors and business sizes. The FAK leadership has been taken over by Prof. Dr. Ronald Gleich of SIIE, his deputies are Dr. Uwe Michel, Senior Partner at Horváth & Partners and Udo Kraus, Head of Controlling/Accounting in Hansgrohe AG.

The FAK’s objective is to develop a concept of modernising the Budgeting; this is composed of the following elements:

• Integration of strong points of the existing budgeting objectives and addressing the improvement potential
• Combining theory-based concepts, empirically validated insights and knowledge acquired from business practice and
• Provision of a discussion platform for versatile exchanges on Planning and Budgeting.

Development of Modern Budgeting

A lot of management concepts can be blamed for not being either scientifically substantiated or successfully tested in practice. Modern Budgeting offers a substantially different approach: on one hand, all statements are theoretically proven and supported by empirical evidence; on the other, suggestions and ideas taken from theory and practice are being continuously incorporated – which is understood as an ongoing improvement process. In order to introduce a variety of aspects, ideas and points of view from the very beginning, the core, affected groups of interest have been engaged already at the development stage: scientists, future business users as well as advisers. In this way it was possible to combine experience and demands from many sectors and business sizes.

The Modern Budgeting concept

There is no one universal planning solution suitable for each company, they are always peculiar to each business. They can and must differ from business to business also when two companies are active in the same sector and are of a similar size or organizational structure. However, there are certain policies and principles which should apply to all enterprises.

Of the many theoretically justified and practical requirements pertaining to Planning and Budgeting, there have been six essential recommendations worked out recently and divided into two groups (processes/structures and contents): “simple“, “flexible“, “integrated“ on one hand, “Organisation Description“, “Added Value Illustration”, “Objectives’ Clarifying“ on the other. A detailed description can be found in vol. 3 (2009) of the Controlling Manuals.

The following is to think about: The individual principles are not free from the conflict of objectives. For instance, a tighter integration can often lead to less flexibility and vice versa. Ultimately, all recommendations interact with one another and therefore they must be adjusted.

The FAK members continuously publish their work results. These include the ICV White Paper “Modern Budgeting“ (Moderne Budgetierung) of May 2009, a book under the same name of the Controlling Manual (Controlling Berater) series, vol. 3, 2009, and an array of contributions in books and magazines.

Unless we are very much mistaken, then we have reached the bottom of a global downturn. It ca not get any worse. We are still going to feel the afterpains of the crisis in the real economy for some time, but if we draw the right moral from it, then we are going to arise from it stronger than we were at its beginning.

We seem to have opened our eyes and finally understand one thing: in the future we must cooperate much more and more intensive as we did before. There is evidence that it is precisely those enterprises which place emphasis on sustainability and internal as well as external cooperation that can obviously better cope with adverse circumstances: Management 2.0 - the ability to cooperate and the sustainable profitability arising from it have become decisive competitive factors heralding a new cycle in the global economics. On this basis there could start a new long-lasting upturn. 

In his presentation, Herwig Friedag is attempting to point out the quintessence of Management 2.0.:

Management 2.0 - Cooperation for the sustainable development of companies - by Dr. Herwig R. Friedag

The presentation was hold on the 3^rd International Controllers' Congress in Poznan, Poland (June 18/19^th 2009).