Corporate budgeting In practice : driving strategic focus and performance

Abstract

This paper identifies insights and methods used in practice to address two weaknesses in the traditional corporate budgeting process. One point of failure is the weak linkage between organizational strategy and budgeting - resulting in the proliferation of activities that do not support strategic priorities. The second point of failure is a strong linkage between budgeting and performance evaluation and incentives that leads to behavioral dysfunctions among employees. Together, these challenges create significant barriers to successful strategy execution in organizations. This paper defines the intended role of budgeting, details the challenges that resulted from the two points of failure, and offers a sample of thought-provoking approaches to support practitioners' use of corporate budgeting to help execute organizational strategies more effectively.