Most companies that try Beyond Budgeting approach it the way they would a new expense-reporting tool. The finance team is told to stop producing the annual budget, a memo goes out, and everyone waits for the promised agility. Then very little changes, or things get worse, and the conclusion is that the idea does not work. The diagnosis is backwards. Beyond Budgeting does not fail because the concept is flawed. It fails because it is implemented as a finance trick when it is, in substance, a redesign of how authority and accountability move through a company.
Removing the budget is the smallest part
The clearest evidence that this is a systems change, not an accounting one, comes from watching what happens after the budget goes. Ostergren and Stensaker (2011) studied a large oil and energy company at the corporate level and in two business units after it abandoned budgets. Removing the budget did not remove control. New control mechanisms emerged, the relationship between corporate management and division management shifted, and fresh lines of dependence formed between divisions. The budget had been holding a whole web of relationships in place, and pulling it out rearranged the web. A firm that treats abandonment as a finance task will be blindsided by every one of those second-order effects, because it never planned for them.
This is why the practitioner Bjarte Bogsnes has long framed Beyond Budgeting as a leadership philosophy rather than a budgeting technique. The budget is simply the most visible thread. Pull it and you are, whether you intended to or not, changing who decides, who is trusted, and how performance is judged.
Adoption is institutional, not instantaneous
If Beyond Budgeting were a finance trick, you could switch it on. Because it is a management system, you cannot. Henttu-Aho and Jarvinen (2013) studied the emerging practice across industrial firms through an institutional lens and found adoption to be gradual and institutionally mediated, a sequence of hybrid states rather than a clean break. Organizations do not flip from budgeted to budget-free. They carry old and new practices side by side for years while norms, roles, and expectations slowly re-form around the new logic. A change program scoped as an accounting update will run out of patience and budget long before that institutional shift completes.
The behavioral core of the change is where the leadership content lives. Bourmistrov and Kaarboe (2013), studying two multinationals applying the ideas, showed that swapping fixed budget targets for relative, outside-in ones moved managers from a comfort zone into a stretch zone, increasing their interaction with the environment and their appetite for negotiation and learning. That is not an accounting outcome. It is a change in how people spend their attention and hold themselves to account, and it only appears if the surrounding system, authority, information, incentives, moves with the number.
Why the half-measure is worse than nothing
The trap is the partial attempt. Delete the budget but keep centralized decision rights, keep judging people on fixed internal targets, keep resource requests flowing up a rigid hierarchy, and you have removed a coordinating device while retaining every constraint that made it necessary. Ostergren and Stensaker's finding, that abandonment breeds new dependencies, is a warning here: those dependencies need to be managed deliberately, and a finance-only project will leave them to form by accident, often badly.
For a leadership team, the honest test is one of scope and sponsorship. Beyond Budgeting is a decision about whether to push real authority to the front line, whether to trust relative measures over negotiated ones, and whether to tolerate years of hybrid awkwardness while the institution re-learns its habits. If the answer to those is yes, the budget can go and something stronger will grow in its place. If the change is owned by the finance function and scoped as a process improvement, the budget should stay, because the organization is not actually attempting the reform. It is only removing a tool while keeping the machine that required it.
Sources
- Ostergren, K. & Stensaker, I. (2011). Management control without budgets: a field study of Beyond Budgeting in practice. Finds abandoning the budget reshapes corporate-division relationships and creates new dependencies, showing the change is systemic, not a finance task. https://www.tandfonline.com/doi/abs/10.1080/09638180903487842
- Henttu-Aho, T. & Jarvinen, J. (2013). A Field Study of the Emerging Practice of Beyond Budgeting in Industrial Companies: An Institutional Perspective. Shows adoption is gradual and institutionally mediated through hybrid states, confirming it cannot be switched on like an accounting change. https://doi.org/10.1080/09638180.2012.758596
- Bourmistrov, A. & Kaarboe, K. (2013). From comfort to stretch zones: A field study of two multinational companies applying beyond budgeting ideas. Shows relative targets change how managers direct attention and hold themselves accountable, the leadership content of the reform. https://doi.org/10.1016/j.mar.2013.04.001