Borealis Case Study Solution
Management Control Issues faced before implementing Beyond Budgeting Plan
The management control issues faced by Borealis before implementing Beyond Budgeting Plan are that the company used traditional budgeting system for projecting the forecast and meeting the targets. The issue with the traditional method was that the forecast and target setting were not realistic. The new traditional method has been hindering between the decentralization of decision and responsibility. This was becoming a barrier for the customer response as the traditional budgeting system did not respond to the changing marketing trends, industry overview and customers’ preferences.
The industry of petrochemical has been significantly changing over the years, the traditional budgeting plan was outdated and planning through this budgeting plan for forecasting was meaningless. The traditional budgeting system would result in absorbing significant resources of the company resulting in high cost and expenses. Due to the significant industry change because of advanced technology, competition and changing customer preferences, the old traditional budgeting plan would not meet the requirements for bringing the change to the company.
Problems resolved through implementing Beyond Budgeting
The new budgeting method designed by the re engineering team and Bjarte Bognses was that the focus of the budgeting would be the two primary functions which are financial planning and performance management. This new budgeting plan consisted of 4 management tools which are rolling financials forecasts, balanced scorecard, activity based costing and investment management. The rolling financial forecasts had helped the company on creating on-going cycle for planning, evaluating and continuously updating over the changes on the market trends and conditions.
The balanced score card was the strategic planning and management system which helped the company in measuring and monitoring the performance in determining whether the company had achieved its goals and objective or whether it is underperforming. Another management tool was the activity based costing which assisted in identifying the activity and its costs enabling the company to control the cost for maximum impact. . Lastly, investment management helped in creating a decentralized company in which more control was given to the employees to improve the performance and productivity of the company. However, the investment management was the least effective tool among the other 3 tools................
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