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Buddhism and Gender

(Old and New): Cultural Concerns; Islam and Gender; customers, employees, suppliers, and any outside
Judaism; Judaism and Gender; Protestantism and agency granting the organization the right to continue
Gender; Religion and Gender; Religion: Family and to operate.
Kinship; Religion: Mobilization and Power; Religion: For the past 75 years or more, budgets have been the
Morality and Social Control; Women’s Religiosity prime instrument in providing such a process of ex
ante coordination and ex post analysis. They did so by
defining, often from ‘above’ (the leadership sends a
‘command’), the actions that are likely to lead to goal
Bibliography achievement, combined with ex post evaluation of
variances or deviations from plan (‘control’ to bring
Allione T 1984 Women of Wisdom. Routledge and Kegan Paul, conformance).
Cabezon J I (ed.) 1992 Buddhism, Sexuality, and Gender. State
A budget is generally defined as a formal document
University of New York Press, Albany, NY that quantifies an organization’s plan for achieving its
Dresser M (ed.) 1996 Buddhist Women on the Edge: Con- goal (Jiambalvo 2001). A budget, in other words, is a
temporary Perspecties from the Western Frontier. North description of the financial implications of a sequence
Atlantic Books, Berkeley, CA of coordinated actions and specialized targets that will
Friedman L, Moon S (eds.) 1997 Being Bodies: Buddhist Women allow an organization to achieve its objectives in a
on the Paradox of Embodiment. 1st edn. Shambhala, Boston changing environment. Most budgets, until recently,
Gross R M 1993 Buddhism After Patriarchy: A Feminist History, assumed implicitly, once the budget had been de-
Analysis, and Reconstruction of Buddhism. State University of fined—i.e., the actions and targets selected—that
New York Press, Albany NY uncertainty about the environment could be essentially
Gross R M 1998 Soaring and Settling: Buddhist Perspecties on
‘ignored’ for a period of implementation (and the
Contemporary Social and Religious Issues. Continuum, New
York, NY managers were expected to manage to the budget and
Horner I B 1930 Women Under Primitie Buddhism. Routledge, not necessarily to pay attention to the competitive
London environment). Frequently, such a period used to be
Klein A C 1995 Meeting the Great Bliss Queen: Buddhists, about 12 months and has recently frequently been
Feminists, and the Art of the Self. Beacon Press, Boston reduced to six and, in certain cases, three or four
Layland W 1998 Queer Dharma: Voices of Gay Liberation. Gay months, given the turbulence of the competitive
Sunshine Press, San Francisco environment. However, many behavioral habits about
Paul D Y 1979 Women in Buddhism: Images of the Feminine in managing to the budget have been kept alive, and
Mahayana Tradition. Asian Humanities Press, Berkeley, CA many still try to ‘achieve the budget,’ thus still
Rhys-Davids C A F, Norman K R (trans.) 1989 Poems of the
assuming the estimate made some 6 to 18 months
Early Buddhist Nuns: (Therigatha). Pali Text Society, Oxford,
UK before is still valid. A budget is in itself a fundamental
Shaw M 1994 Passionate Enlightenment: Women in Tantric document and budgeting an essential process in the
Buddhism. Princeton University Press, Princeton, NJ operation of any organization.
Tsomo K L 1988 Sakyadhita: Daughters of the Buddha. Snow How the budget has been used in practice has led to
Lion Press, Ithica, NY many abuses and negative effects. This short article
Tsomo K L (ed.) 1999 Buddhist Women Across Cultures: will define the principles of budgeting and ‘budgets’
Realizations. State University of New York Press, Albany, before showing the limitations of current practice and
NY will explore how the ‘concept’ (i.e., a tool to support
Willis J D (ed.) 1987 Feminine Ground: Essays on Women and ongoing adaptive anticipation or anticipatory man-
Tibet. 1st edn. Snow Lion, Ithica, NY
agement) ought to be used today to meet current
economic and competitive challenges.
R. M. Gross

1. A Philosophy of Anticipation
‘As for the future, your task is not to forsee it, but to
enable it’ (Antoine de Saint Exupery in Le Petit
Prince) and, to do so means to be able to mobilize all
Budgeting and Anticipatory Management resources in the organization continuously to adapt to
and exploit new opportunities that appear. This means
All organizations must: the path to ‘success’ cannot be completely defined
(a) coordinate the way resources will be used by the before hand.
various (often specialized) decision makers; and Despite such an observation, ‘command and con-
(b) learn from the observed deviations between in- trol’ are still the most commonly used form of
tended and actual. management, essentially in contradiction to the
They need these two activities in order to create reactivity and agility required for success in a com-
value for their stockholders by increasing the prob- petitive world. It seems odd that command-and-
ability of satisfying their key stakeholders such as control-type budgets still occupy such an important

Budgeting and Anticipatory Management

role in the ways of coordinating the behavior of (who would rather increase the dividends than finance
decision makers. The whole organization, and espe- the increase in working capital that the increased sales
cially its management team collectively, must con- might create).
tinuously update the best way to create value for (e) Provide for the development of transfunctional
stakeholders in continuously changing competitive action plans describing how to achieve continuous
environments. alignment of the firm or organization ‘behavior’ with
Budgets and the budgeting activity (process of competitive pressures.
establishing and validating action plans) are processes (f) Identify what resources are needed at what time.
and procedures that aim at contributing to the creation Resources ought not be limited to tangible or fi-
of value. A budget is a statement—a declaration—of nancially measurable resources: know-how, intellec-
actions intended to be carried out by several organi- tual capital, customer, supplier or employee loyalty,
zational decision makers in a coordinated way. Action morale, image and style, etc. are resources that must
plans are needed in both ‘for profit’ and ‘not for profit’ be used appropriately to create and maintain long
organizations. A budget reflects the answers the term success.
organization and its leadership give at one point in (g) Allow for the identification and allocation of the
time (and it may possibly be a valid answer only for a business’ scarce resources required to carry out the
short period of time) to one key question: how are we action plan effectively and efficiently.
going to go from where we are to where we want to be? (h) Reinforce a structure of delegation, devolution
A budget and budgeting process are one of the key and, ‘subsidiarity’ in co-locating ‘rights to make
ways through which energies are mobilized and decisions’ (on the use of resources) and knowledge and
channeled for the successful implementation of the in supporting initiative and autonomy while main-
business strategic intent. taining coordination. The term subsidiarity is not in
We will first identify the purposes and the process of the dictionaries we have consulted. It is, however, a
creation of the budget, then the key requirements for commonly used term in the context of the partition of
the budget to be an effective tool that fulfills its rights between States and the leadership—executive
promises, before elaborating on the criticisms that and legislative—of the European Union (EU). We use
have been formulated about budgets and their current it here in the same logic to refer to the fundamental
use. idea behind the word as it is used in the EU dialogues:
decision making should be as close as possible to the
‘customer’ or to the market, i.e., any unnecessary
attempt at going up in the delegation chain to reach
a decision is slowing down the organization’s reaction
2. Purposes of Budgets and of Budgeting and runs the risk of creating a solution which is
Processes maladapted to the need.
(i) Help build commitment by individuals or groups
The budgeting process and budgets contribute to the of individuals to achieving time-based results that
process of anticipation in that they: move the organization in the desired direction. Note
(a) Provide a forum in which the various orga- that the principle is to obtain commitment to a result
nizational members (who do not have identical skills, and not necessarily to the way through which this
experience, and expertise) can identify and share their result is to be achieved. This aspect is the source
views of opportunities and threats to the value creation of great misuse of budgets in that many organizations
process of the business or organization. confuse ‘commitment to the use of resources as agreed
(b) Provide a locus for the construction of a shared upon’ for ‘commitment to results.’ Often the source of
business model (identify the key success factors and confusion is due to a combination of lack of trust on
how they interact in creating the success of the firm). the part of the supervisor and lack of self-confidence
(c) Allow management to discuss, select, and com- on the part of the subordinate.
municate values (to guide behavior), intent (defining (j) Contribute to establishing benchmarks for per-
what value creation or success means), and plans formance measurement and evaluation (for both
(coordinated sequence of interlocked actions and business units and individuals). Here again it is
identification of resources created and consumed). important to draw attention to the fact that the
(d) Create a forum for coordinated decision making benchmarks need not be limited to financial measures
between actors that may otherwise act in a dis- of results or resource consumption.
connected fashion that would result from their referring (k) Provide a basis for learning from deviations. This
to different business models. For example, the sales aspect has often been misunderstood to mean that
manager might consider developing sales at a rate that conformance to the plan is expected. Since, by defini-
might not be compatible with the action plan imagined tion, no plan can be perfect, conformance for its own
by the manufacturing manager (who foresees dif- sake can be a source of non-competitiveness.
ficulties in bringing the required new technology on (l) Create a context for the deliberate management of
line) or with the action plan of the financial manager performance improvement.

Budgeting and Anticipatory Management

(m) Allow for the forecasting of cash flow needs on (b) What is the ‘intention’ behind doing something?
the basis of the action plans that have been retained (c) How does whatever will be done relate to the
(cash is an essential scarce resource in any organization achievement of the firm’s mission?
and must be monitored at all times). (d) Who are the various actors who need to be
(n) Offer a process for an ongoing estimation of year- involved (basis for both the richness of analysis and
end financial results and more specifically EPS & ROE delegation in the implementation process)? An action
for commercial organizations. plan is always teamwork, even though each person on
This whole array of purposes cannot be broken the team is personally responsible for one ‘component’
down and each aspect dealt with separately. They are of the plan, often overlapping with someone else’s.
all to be pursued simultaneously. For example, an action plan aimed at ‘generating
orders that the firm can deliver to the customer’s
satisfaction and that help the firm grow’ will require,
3. The Budgeting Cycle for example, the cooperation of such specialized
managers as: sales manager, sales people, marketing
Generally, the budgeting process follows a pre-
manager, production scheduling, assembly manager,
established sequence but many iterations are
legal department, sourcing manager, management
possible with today’s simulation instruments:
accountant, etc. If the plan were not the result of an
(a) Identify and communicate estimated future
agreement between all these required skill holders, it
demand and markets conditions and business envi-
would have little chance of success.
ronment evolution to establish for every participant
(e) What causal model (also known as business
the hypotheses that all should assume in researching
model) do the ‘team members’ agree on to help them
their contribution to the action plans. Such a task
identify the ‘action variables’ they will activate
should, most of the time, originate with upper mana-
through their decisions and behavior?
gement that holds a bird’s eye view of the whole
(f ) What possible actions can be envisioned? (it is
important to review several possible alternatives criti-
(b) Jointly identify threats, opportunities, weak-
nesses, and strengths of the organization in the
(g) Which one will we choose, and why? What will
perceived (or declared) future environment.
we actually do in this action plan?
(c) Identify and evaluate the various possible action
(h) How will we do it? What process? What
plans (sales, production, sourcing, human resources,
resources will be consumed and created and when?
innovation and investments, R&D, etc.) and verify
What delegation structure will be developed, etc.?
their compatibility with both intent or goals and
(i) Are the required and generated resources co-
herent with the availability and needs of the organiza-
(d) Repeat the process until compatibility is ob-
tion? If the answer is negative, there must be a return
tained and acceptance by everyone in the organization
for adjustment to any or all questions (a) through (h).
has been secured (this step may require the superior to
( j) Why will we do it this way? What were the
act as a binding arbitrator to avoid subordinates
alternatives’ pros and cons? How realistic is the
wasting time in useless battles). An arbitrator listens to
alternative selected and how realistic were the other
all parties, reflects on the best collective solution, and
ones? What are the risks attached to each alternative
selects a preferred course of action that is both
and especially the one selected?
explained and justified to all parties who must adhere
(k) Coherence with strategic intent, strategy, and
to it.
other action plans.
(e) Once the budget or action plan is established,
(l) Expected impact of the selected actions (several
results are matched against expected (intermediate or
may apply simultaneously):
final) results and the analysis of differences (or
(i) development of a competitive advantage;
deviations) leads to learning and thus a reevaluation of
(ii) ambitious yet realistic: placing the organization
the appropriateness of the action plan and its possible
under tension;
(iii) challenging the ways of thinking; and
(iv) all of the above or other.
4. Components of an Action Plan (m) When will these actions be carried out (cal-
endar of actions)?
An action plan reflects the answers of the concerned (n) How often will these action need to be carried
persons to at least the following questions: out (if it is a recurring action plan)? This is an
(a) Where are we and why do we need to do important point as a multistage action plan allows for
‘something’ (understand the cause of the action plan better learning and continuous adjustment.
by identifying a possible gap between where we are (o) To what do each of the actors actually commit
and where we are headed, and where we think we (intermediate or final results, non-financial indicators,
ought to be, given the intent or goals of the firm or relationships, dates, intensity, etc.)?
organization)? (p) How will the achievement of the commitments

Budgeting and Anticipatory Management

be measured? There are at least three domains for 5.2 A Continuously Updated Shared Causal Model
which measures should be agreed upon beforehand by
Decision makers and personnel must be able to
all parties involved in the action plan. These measures
understand some key ‘cause and effect’ relationships
will serve as a basis for learning from deviations and
that affect the organization’s output or performance.
for continuously updating the action plan so that it
The budget rests on the identification of a causal
remains aligned with the intention selected, if it is still
model that helps understand what consequences might
the right one):
obtain from what actions in the perceived competitive
(i) Process, i.e., the way the action plan should and
environment. Much time is needed in a business to
does unfold during implementation (the equivalent
identify and maintain the model(s) or causal repre-
aerospace term would be ‘trajectory’):
sentations that will help understand how we could go
evolution of the conditions that created the need for
from point X to point Y in the map of opportunities.
the action;
resource productivity and effectiveness;
resources consumed and created;
organization and relationships between actors; 5.3 A Monitoring System
mastery over risks identified in step (j); The monitoring system must be able to tell managers
efficiency of use of resources; etc. how well they are ‘getting there’ from ‘here.’ Some of
(ii) Progress (against the time scale selected by the the measures must be anticipatory or leading in the
actors in the plan to state by which date the target will sense that they allow the managers to anticipate
be achieved): inappropriate or unacceptable results and therefore
timing: date of start, selection of milestones, date of head off the undesired trend through appropriate
expected completion; corrective actions, while other measures are more
positioning of progress on a PERT diagram; historical and serve to keep track of what has been
validation of the critical path; achieved.
definition of the method of calculation of the
percentage achievement; etc.
(iii) Impact:
effect of actions on objectives and key performance 5.4 A Set of Criteria for Trade-off between Goal
indicators (KPIs) for both short and long term; and Achieement and Resource Consumption and Creation
evaluation of the continued relevance of the intent. Whether the trade-off will be carried out in economic
(q) What priority should be given to this action terms only or using other criteria such as market share,
plan and how much of the firm will be involved (if employee satisfaction, or citizenship of the firm, the
applicable)? firm needs to have some kind of preference ordering
Traditional budgeting seems to have focused es- system that will allow for the identification of a
sentially on steps (h) and (i) and therefore has led to a preferred way each time a choice is to be made. It is,
very partial view of what is meant by an action plan. however, very difficult in any multi-person setting to
Essential to the effectiveness of the budgeting process come to an agreement on criteria for preference
is the measurement system evoked in step (p). The ordering. This difficulty should not prevent the man-
measures should be balanced between areas of ex- agers from encouraging participation and expression
pertise, perspectives, and time horizons and allow on the part of everyone in the organization since that
simultaneously both effective implementation and is the only way to open dialogue and communicate
continuous validation of the relevance of the whole values and orientations.
action plan given the evolution of the competitive
environment. Budgeting and processes of anticipation
link, therefore, directly to the area of management now
5.5 Aboe All, a Budget Requires Trust Between
commonly described as the Balanced Score Card or
Tableau de Bord.
A budget is grounded in delegation. Each person holds
responsibility for a ‘piece of the action’ and must be
5. Budget Process Requirements able to count on the others doing what they promised
to do. That promise includes a very crucial element: let
others, who depend on the achievement of a milestone
5.1 A Sense of Direction
or of a result, know as early as feasible (through
There must be goals that preexist the beginning of the shared leading indicators) the actual changes in the
budgeting process. Each goal must have a time frame probability to fulfill commitments. Budgets therefore
and be a milestone towards achieving the organiza- require trust between participants (both vertically and
tion’s mission or intent. In specifying its goals, the laterally) and self-confidence combined with a reason-
organization states who the stakeholders are that are able willingness to take risks and not adhere to a
taken into consideration. prewritten script.

Budgeting and Anticipatory Management

6. Budgets, ‘Opportunity Gap,’ and ‘Performance point on such a continuum, managers need to be able
Gap’ to hold two very different mental maps simul-
taneously, in differing proportions, as shown in the
In projecting itself into the future, any organization two ‘wedges’ at the top of Fig. 1. The coexistence of
faces two simultaneous challenges: such differing relations to time and to uncertainty is
(a) Improve the ‘productivity’ (effectiveness and not an easy task and the budgeting process offers a
efficiency) of resources consumed in carrying out forum where these two mental maps can coexist.
currently retained action plans. The effectiveness of the system requires that at each
(b) Identify new opportunities for continued level of turbulence (competitive environment) the
growth that will require modification of current action manager and the supporting processes take into
plans and possibly the development of entirely new account the appropriate mix of attention paid to the
ones. Opportunities have a limited lifespan. If no new performance gap and to the opportunity gap. At each
opportunities are identified and addressed, the organi- level of turbulence, different tools (including the ones
zation will cease to grow and will decline into oblivion. relevant at the previous level of turbulence) meet the
Single-purpose organizations such as the March of requirements of management. If the world is very
Dimes or the Tennessee Valley Authority in the US stable, a simple scorecard about past results will suffice
have had to reorganize their mission completely to as the next action plan is a mere extrapolation or
continue existing. A long-lasting organization such as adaptation of the previous one. As the world becomes
the Kirin Beer Brewery in Japan is always reinventing less stable, ‘budgets’ answering the question ‘what will
itself because product attractiveness has a time limit we do?’ suffice to help the firm project itself into the
and customers tend to be fickle unless the producer future in a coherent way. The critical issue is to limit
changes with the evolution of customer tastes. the action to have a balance between the resources
We define the first challenge as that of managing the available (increased by the resources created by the
‘performance gap’ while we will call the second one action plan) and the resources needed by the action
that of managing the ‘opportunity gap.’ As business plan. That vision of ‘budgets’ is still quite prevalent, as
environments grow turbulent, the continued relevance mentioned previously, despite the fact that turbulence
of any given action plan is less and less likely. conditions make it appropriate no longer.
Simultaneously, the need for continuous identification When the world becomes really very turbulent, a
of new opportunities grows greater. business requires two simultaneous tools: contingent
Figure 1 shows that, at any point in the continuum planning (answering the question ‘what will we do if?’)
of turbulence, the required anticipation effort of an and ‘surprise management’ which seeks an answer to
organization is always broken into two parts: man- the question ‘how can we organize ourselves now to be
aging the performance gap (increasing effectiveness reactive, innovative, and able to operate under future
and efficiency) and managing the opportunity gap conditions we cannot even imagine right now’? Con-
(preparing the organization for the future). At each tingent planning is largely about understanding the
relationships between possibilities in the world in
which the organization operates and lining up possible
‘baskets of competence’ for each identified discrete
possibility, while surprise management is essentially
about understanding relationships between internal
capabilities and how they can be mobilized.
If we go from a less turbulent to a most turbulent
environment, the first three phases described in Fig. 1
refer to various degrees of extrapolation (the past is
full of information relevant for the future), while the
last phase, once again, completely changes the mode
of thinking. It also forces management to hold
simultaneously two mental maps because the future
cannot be forecasted.
Turbulence affects each level of responsibility differ-
ently in the organization. To a large extent, it is the
responsibility of a superior to ‘filter’ some of the
uncertainties and turbulence she or he faces for his or
her subordinate. The higher the person is in an
organization, the higher the degree of uncertainty she
or he has to deal with. Therefore, the higher the person
Figure 1 is, the more her or his anticipation efforts should be
The tools of anticipation change with the level of addressing the ‘opportunity gap.’ As Fig. 2 shows,
turbulence even at the top of the organization, although the effort

Budgeting and Anticipatory Management

year constraints (which are defined by reporting needs

TOP and have little link with the need to have visibility of
the future). Budgeting should be carried out almost as
an ongoing process, provided information technology
makes it economically feasible. Budgeting is a state of
mind. The budget construction should be reengineered
in most firms to take as little time as is possible (for
example, by concentrating on the relationships in the
causal model and on leading descriptors of the status
of these relationships). If the budget were an ongoing
process, frequent debates would take place that would
continuously replace the firm on the most appropriate
trajectory or path to its objectives and targets, thus
developing confidence and commitment on the part of
BOTTOM all in the organization.
Many times the budget has been highjacked as a
substitute for an anticipatory form of financial ac-
Figure 2 counting used in estimating year-end accounting
The effort is applied differently depending on the level results of the firm so that management can comfort
of the individual in the hierarchy stockholders about forecasted profit.
Focus is more on cost reduction than cost man-
of the individual is dedicated essentially to the mana-
agement (the ‘right’ cost is not always the least cost:
gement of the opportunity gap, there is still a part of
costs are driven by product and process design, and by
the effort that is addressing the performance gap
people eliminating non-value-adding activities).
(effectiveness and efficiency).
Most action plans assume, usually erroneously, that
As individual N moves from the bottom to the top
costs are driven by the volume of sales and that costs
of the organization, her or his preoccupation is more
are best controlled at the point where they can be
and more with the efficiency and effectiveness of the
measured (Lebas 1996). This leads to conformance
organization, but there is always a non-negligible
budget (focused on resource allocation) thus limiting
preoccupation with some form of attention paid to the
initiative and customer satisfaction.
opportunity gap, recognizing that new opportunities
Many budget processes merge and confuse an-
can be identified at all levels of the organization.
ticipating and defining benchmarks for reward systems
(especially if the latter are based on conformance with
7. Current Budgeting Practice is not Always resource consumption) thus creating gaming behavior
Aligned with the Principles and budget slack which immobilize resources uselessly.
Budget slack occurs when managers overestimate
As mentioned previously, it is a challenge to build a resource consumption or required effort and under-
budgeting process that considers the issue of competi- estimate value created with the customers. Managers
tiveness not only from the point of view of the indulge in such behavior because most of the time they
performance gap (efficiency and effectiveness, cost do not trust the leadership either to allocate resources
control, etc.) but also from that of the opportunity or support action plans that are compatible with the
gap. The causes for such a difficulty can be traced to manager’s perception. Such behaviors immobilize
the following elements: resources and prevent the exploitation of oppor-
Objectives and processes to get to the target are tunities. A performance management tool called ‘flex-
often defined only in and on financial terms. ible budgeting’ consists in identifying clearly, before
Partition of the process to achieve the target tends the fact, the areas of uncertainty each manager is
to be only hierarchical and functionally defined instead responsible for (and which ones are not under her or
of being developed along the lines of transfunctional his control) and in recalculating, after the facts are
business processes. known, the elements of the action plan (consumption
The processes of alignment, dialogue, and team of resources as well as outcome or output) that would
building through the budget construction are fre- have been determined had the ‘uncontrollable’ ele-
quently ignored and the exercise is too often reduced ments been forecasted with pinpoint accuracy. Such
to a scarce resource allocation leading to competitive an approach allows for total freedom in really an-
behavior between organizational entities that ought to ticipating because the manager knows she or he does
cooperate to serve the stakeholders best. not have to take precautions (through the building of
Value creation is mostly defined in terms of financial budget slack) to cover risks she or he cannot control.
profit. Often, the budgeting process does not implicate
The time horizon of an action plan should be linked everyone and thus a frequent reaction is to consider
to the business cycle but is based, too often, on fiscal that ‘spending’ resources allocated in the context of an

Budgeting and Anticipatory Management

action plan becomes the objective rather than con- Table 1 summarizes the main characteristics of the
tinuously validating the alignment with the intent of traditional and the ‘new budgeting’ approaches in a
the plan of the actions that led to the original synthetic format. Budgets and budgeting processes, as
allocation. they have been used in supporting the development of
The main weaknesses of many budget processes businesses since the end of World War I and mainly
currently in place in organizations is that they are not since the post World War II economic boom, seem to
built on a well thought-out system of: have reached their limit. New ways are emerging in
(a) shared representations; coordinating energies in the firm to exploit oppor-
(b) subsidiarity and delegation which would rest on tunities. We have described their common denomi-
trust in people’s ability to make the right decision at nator by outlining what is required to fulfill that
the right time, as close to the point of need as possible; purpose. What we have called new budgeting is far
(c) representation of the firm as a network of from being settled and probably never will be.
business processes; and Businesses are experimenting in many parts of the
(d) customer orientation. world; no solution seems, to date, to be vastly superior
to any other, however. Firms like Svenska
Handelbanken, Volvo Cars, or Skandia in Sweden,
8. In Conclusion Schlumberger, Air Liquide, or Bull Computers in
France, Borealis in Denmark, Boots the Chemist in
Anticipatory tools today are not constrained by the the United Kingdom, or Sprint in the US have
fiscal time-horizon; they are rolling and cover a period abandoned or are abandoning the ‘old budget’ ap-
often closely related to product lifecycles. Antici- proaches and inventing the ‘new budgeting’ (Hope
patory practices recognize the preeminence of the and Fraser 1999). The real revolution is that we are
human aspect in the success of business processes. entering an era of continuous adaptation and learning.
Choosing the right people and motivating them in Businesses need to adapt the tools too, and the
well- thought-out processes make for satisfied cust- ‘budget’ is not spared here. Because they have to be
omers who, in the end, drive the financials of the firm. completely reinvented, budget processes should be
Such a sequence requires flexibility and continuous even more fascinating to students, management re-
adaptation. searchers, and managers alike than they were before.

Table 1
Comparison of traditional and new budgeting (adapted from CAM-I Europe 1994, Lebas 1996)
Traditional budgeting ‘New’ budgeting
Purpose Financial performance forecast Create and protect value
Structure Multiple cost centers Business processes
Resources measured Costs only Cost, quality, time, motivation,
intellectual capital, loyalty, etc.
Resources view Scarce, need to be partitioned Can be obtained if creates value
Classification General ledger items Activity resource needs
Approach Top-down command and control Emerging and adaptive business
process options
Objective Control and minimize resource Create customer value through
consumption coordinated transverse activities
Mechanism Historic costs extrapolation Activity relationships and causality
Cost drivers Single: output volume Volume, product design, customer
value offering, etc.
Data quality Internal: implied accounting precision Internal and external: ok to have
approximation and non financial
Cost focus Cost center spending Hidden costs consumption
Logic Simple and mechanical Complex and dynamic
Reporting and time frame Periodic and ex post analytical Continuous, flexible, and explanatory
Responsibility Budget holders Process team
Deviation\variance Return to conformance Understand, learn, and adapt
Behavior induced Competition Cooperation
Rewards Linked to conformance to budget Linked to outcome long term
coherence with strategic intent
Status Entrenched and well known Rare and still experimental
Vision Incremental and bureaucratic Radical and creative

Budgeting: Political Science Aspects

See also: Budgeting: Political Science Aspects; Organ- exchange rates, and national debt management. At a
ization: Overview; Organizational Decision Making; more microeconomic level, economists may also con-
Organizations and the Law; Organizations, Sociology sider the effectiveness of specific programs funded in
of the budget, such as determining the influence of public
jobs programs on the labor market. These questions
may also be of interest to and directly addressed by
political scientists, but the centrality of political science
Bibliography research looks at budgeting as a guide to a broader
CAM-I Europe 1994 A Journey to Adanced Management analysis of politics, relations between institutions, the
Systems: A Report on the Research and Findings of the CAM-I behavior of political actors within those institutions
Adanced Budgeting Study Group. R-94-AMS-0.1.1 Poole, and specific public policies.
Hope J, Fraser R 1999 Beyond budgeting. Management Ac-
counting (UK) January
Jiambalvo J 2001 Managerial Accounting. John Wiley and Sons,
New York 2. Budgeting as Incrementalism
Lebas M 1996 Budget control. In: Warner M (ed.) International
Encyclopedia of Business and Management. International Modern theoretical understandings of budgeting begin
Thomson Business Press, London; Routledge, New York with the idea of ‘incrementalism.’ Formulated in the
Lebas M 1999 Which ABC? Accounting based on causality late 1960s, incrementalism attempts to explain how
rather than activity-based costing. European Management budgetary decisions are made, how budgetary actors
Journal 17(5): 501–11 carry out their roles, and what the consequences are
for politics by structuring budgetary decisions in one
M. Lebas form as compared to alternative ones (Wildavsky
1964, Fenno 1966). Incrementalism is grounded in
Copyright # 2001 Elsevier Science Ltd. certain assumptions about human nature, that people
All rights reserved. are inherently limited by cognitive, time and resource
constraints from being truly rational and synoptic in
their ability to make budgetary decisions. Budgetary
Budgeting: Political Science Aspects actors ‘muddle through’ and ‘satisfice’ rather than
‘optimize.’ They are constrained from making deci-
Budgeting is a process by which governments allocate sions in the way that microeconomically rational
public resources to bureaucracies and client groups. consumers might, where all information sources and
This process usually takes place on an annual basis, alternatives are weighed before a decision is reached.
involves procedural rules and institutional arrange- To compensate, these actors rely on ‘aids to cal-
ments, often invokes intense political conflict, and, culation’. In particular, instead of reviewing the entire
together with taxation, forms the basis for fiscal and budget to determine what is funded, the focus of
macroeconomic policy. Because it fundamentally analytical and political decision making is on the
determines political winners and losers through its annual change, or increment, in spending. The budget
allocative function, budgetary processes and outcomes base, or last year’s spending, is taken as a given, and
serve as distinct guide to a political state’s philosophy the politics of budgeting revolve around determining
of government. The act of budgeting, therefore, lies at the size of incremental ‘fair shares’ allocated to
the heart of politics and government. budgetary claimants.
Incrementalism takes into account the role of
institutions and actors within those institutions.
1. The Study of Budgeting Budgeting is regarded as a decentralized, ‘bottom-up
process,’ where budget proposals emerge from within
Budgeting may be studied from several perspectives. executive branch agencies. These agencies in turn act
From the vantage point of professional schools of as ‘advocates’ for larger increments before the Appro-
public administration, the practical elements of priations Committees in the House of Representatives
budgeting include the actual drafting and formatting and the Senate. Committee members evaluate these
of budget documents, the application of cost-benefit funding claims and act according to a set of behavioral
and other tools of program analysis, the projection of norms. The House Appropriations Committee, for
revenues and expenditures, the division of spending example, operates as the ‘guardian of the purse,’ while
into its operational and capital components, and the the Senate committee acts as a ‘court of appeals.’ The
management and implementation of programs funded overarching norm is that budgets should be balanced.
by the budget. Economists principally focus on the Incrementalism views budgeting above all else as a
macroeconomic consequences of budgeting, such as political activity, and it gives limited consideration to
the effects of deficit spending on interest rates, infla- notions of administrative efficiency or economic
tion, the crowding out of private investment, foreign rationality in the determination of budgetary out-


International Encyclopedia of the Social & Behavioral Sciences ISBN: 0-08-043076-7