Rolling Budgeting Approach for Multinational Organization

ROLLING BUDGETING APPROACH FOR MULTINATIONAL ORGANIZATION
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Rolling Budgeting Approach for Multinational Organization
1 Introduction
Since their introduction in the 1920s, budgets have played a pivotal role in management control, but the subject has recently gained considerable interest, criticism, and heated debates focusing on management efficiency (Goode and Malik, 2011). Varying approaches to budgeting, including conventional methods and better and beyond budgeting, have appeared in increasing amounts of literature and employed in different organizations around the world. While some scholars argue that budgeting problems often stem from how budgets are used, others are of the idea that the processes of budgeting are fundamentally flawed (Libby and Lindsay, 2010). An important observation among these budgeting systems is the dynamic nature of the market environment, which makes traditional budgeting approaches quickly becoming obsolete. This has prompted organizations, especially decentralized multinational organizations (MNCs), to adopt alternatives to budgeting processes suitable for existing market environments. In terms of the approaches used in many organizations, firms now recognize that the traditional static budgeting typically prepared toward the end of the fiscal year is out of date. Therefore, companies have turned to rolling budgeting in management control systems with the capacity to update forecasts every after few months and reassess their outlooks several times annually (Henttu-Aho, 2018). The introduction of the rolling budget model followed the realization of the Beyond Budgeting idea that was seen to have the potential of reinvigorating the contribution of management accounting in business processes and performance. Goode and Malik (2011) note that the traditional model of budgeting has lost jurisdiction in the fast-changing business environment. Recommending for rolling budgeting approach for decentralized multinational organizations, this paper provides a critical evaluation of the approach, an example of use case and results, and further recommendations for future research in budgeting processes.
2 Critical Evaluation of Rolling Budgeting Approach
During the 1990s, managers in many MNCs gained control with diagnostic control systems such as budgets, which did not demand much attention from senior managers apart from their contributions in setting annual targets and checking if the goals were met (Simons, 1995). With the changing business environment, budgeting has become an important aspect of efficient planning and management of activities and resources in many economic entities (Lidia, 2014). Noting the importance of budgeting, different models have been designed to improve traditional budgeting and resolve challenges that managers have grappled with for a long time. In the “Good-Bye Traditional Budgeting” article, Zeller and Metzger (2013) have presented the rolling forecast or rolling budgeting approach as a new model of budgeting. This model provides the needed navigational insight that conventional annual static budgets d...