Buddhism and Gender
(Old and New): Cultural Concerns; Islam and Gender;
Judaism; Judaism and Gender; Protestantism and
Gender; Religion and Gender; Religion: Family and
Kinship; Religion: Mobilization and Power; Religion:
Morality and Social Control; Women’s Religiosity
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R. M. Gross
Budgeting and Anticipatory Management
All organizations must:
(a) coordinate the way resources will be used by the
various (often specialized) decision makers; and
(b) learn from the observed deviations between in-
tended and actual.
They need these two activities in order to create
value for their stockholders by increasing the prob-
ability of satisfying their key stakeholders such as
1390
customers, employees, suppliers, and any outside
agency granting the organization the right to continue
to operate.
For the past 75 years or more, budgets have been the
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
achievement, combined with ex post evaluation of
variances or deviations from plan (‘control’ to bring
conformance).
A budget is generally defined as a formal document
that quantifies an organization’s plan for achieving its
goal (Jiambalvo 2001). A budget, in other words, is a
description of the financial implications of a sequence
of coordinated actions and specialized targets that will
allow an organization to achieve its objectives in a
changing environment. Most budgets, until recently,
assumed implicitly, once the budget had been de-
fined—i.e., the actions and targets selected—that
uncertainty about the environment could be essentially
‘ignored’ for a period of implementation (and the
managers were expected to manage to the budget and
not necessarily to pay attention to the competitive
environment). Frequently, such a period used to be
about 12 months and has recently frequently been
reduced to six and, in certain cases, three or four
months, given the turbulence of the competitive
environment. However, many behavioral habits about
managing to the budget have been kept alive, and
many still try to ‘achieve the budget,’ thus still
assuming the estimate made some 6 to 18 months
before is still valid. A budget is in itself a fundamental
document and budgeting an essential process in the
operation of any organization.
How the budget has been used in practice has led to
many abuses and negative effects. This short article
will define the principles of budgeting and ‘budgets’
before showing the limitations of current practice and
will explore how the ‘concept’ (i.e., a tool to support
ongoing adaptive anticipation or anticipatory man-
agement) ought to be used today to meet current
economic and competitive challenges.
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
resources in the organization continuously to adapt to
and exploit new opportunities that appear. This means
the path to ‘success’ cannot be completely defined
before hand.
Despite such an observation, ‘command and con-
trol’ are still the most commonly used form of
management, essentially in contradiction to the
reactivity and agility required for success in a com-
petitive world. It seems odd that command-and-
control-type budgets still occupy such an important

role in the ways of coordinating the behavior of
decision makers. The whole organization, and espe-
cially its management team collectively, must con-
tinuously update the best way to create value for
stakeholders in continuously changing competitive
environments.
Budgets and the budgeting activity (process of
establishing and validating action plans) are processes
and procedures that aim at contributing to the creation
of value. A budget is a statement—a declaration—of
actions intended to be carried out by several organi-
zational decision makers in a coordinated way. Action
plans are needed in both ‘for profit’ and ‘not for profit’
organizations. A budget reflects the answers the
organization and its leadership give at one point in
time (and it may possibly be a valid answer only for a
short period of time) to one key question: how are we
going to go from where we are to where we want to be?
A budget and budgeting process are one of the key
ways through which energies are mobilized and
channeled for the successful implementation of the
business strategic intent.
We will first identify the purposes and the process of
creation of the budget, then the key requirements for
the budget to be an effective tool that fulfills its
promises, before elaborating on the criticisms that
have been formulated about budgets and their current
use.
2. Purposes of Budgets and of Budgeting
Processes
The budgeting process and budgets contribute to the
process of anticipation in that they:
(a) Provide a forum in which the various orga-
nizational members (who do not have identical skills,
experience, and expertise) can identify and share their
views of opportunities and threats to the value creation
process of the business or organization.
(b) Provide a locus for the construction of a shared
business model (identify the key success factors and
how they interact in creating the success of the firm).
(c) Allow management to discuss, select, and com-
municate values (to guide behavior), intent (defining
what value creation or success means), and plans
(coordinated sequence of interlocked actions and
identification of resources created and consumed).
(d) Create a forum for coordinated decision making
between actors that may otherwise act in a dis-
connected fashion that would result from their referring
to different business models. For example, the sales
manager might consider developing sales at a rate that
might not be compatible with the action plan imagined
by the manufacturing manager (who foresees dif-
ficulties in bringing the required new technology on
line) or with the action plan of the financial manager
Budgeting and Anticipatory Management
(who would rather increase the dividends than finance
the increase in working capital that the increased sales
might create).
(e) Provide for the development of transfunctional
action plans describing how to achieve continuous
alignment of the firm or organization ‘behavior’ with
competitive pressures.
(f) Identify what resources are needed at what time.
Resources ought not be limited to tangible or fi-
nancially measurable resources: know-how, intellec-
tual capital, customer, supplier or employee loyalty,
morale, image and style, etc. are resources that must
be used appropriately to create and maintain long
term success.
(g) Allow for the identification and allocation of the
business’ scarce resources required to carry out the
action plan effectively and efficiently.
(h) Reinforce a structure of delegation, devolution
and, ‘subsidiarity’ in co-locating ‘rights to make
decisions’ (on the use of resources) and knowledge and
in supporting initiative and autonomy while main-
taining coordination. The term subsidiarity is not in
the dictionaries we have consulted. It is, however, a
commonly used term in the context of the partition of
rights between States and the leadership—executive
and legislative—of the European Union (EU). We use
it here in the same logic to refer to the fundamental
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
and runs the risk of creating a solution which is
maladapted to the need.
(i) Help build commitment by individuals or groups
of individuals to achieving time-based results that
move the organization in the desired direction. Note
that the principle is to obtain commitment to a result
and not necessarily to the way through which this
result is to be achieved. This aspect is the source
of great misuse of budgets in that many organizations
confuse ‘commitment to the use of resources as agreed
upon’ for ‘commitment to results.’ Often the source of
confusion is due to a combination of lack of trust on
the part of the supervisor and lack of self-confidence
on the part of the subordinate.
(j) Contribute to establishing benchmarks for per-
formance measurement and evaluation (for both
business units and individuals). Here again it is
important to draw attention to the fact that the
benchmarks need not be limited to financial measures
of results or resource consumption.
(k) Provide a basis for learning from deviations. This
aspect has often been misunderstood to mean that
conformance to the plan is expected. Since, by defini-
tion, no plan can be perfect, conformance for its own
sake can be a source of non-competitiveness.
(l) Create a context for the deliberate management of
performance improvement.
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Budgeting and Anticipatory Management
(m) Allow for the forecasting of cash flow needs on
the basis of the action plans that have been retained
(cash is an essential scarce resource in any organization
and must be monitored at all times).
(n) Offer a process for an ongoing estimation of year-
end financial results and more specifically EPS & ROE
for commercial organizations.
This whole array of purposes cannot be broken
down and each aspect dealt with separately. They are
all to be pursued simultaneously.
3. The Budgeting Cycle
Generally, the budgeting process follows a pre-
established sequence but many iterations are
possible with today’s simulation instruments:
(a) Identify and communicate estimated future
demand and markets conditions and business envi-
ronment evolution to establish for every participant
the hypotheses that all should assume in researching
their contribution to the action plans. Such a task
should, most of the time, originate with upper mana-
gement that holds a bird’s eye view of the whole
business.
(b) Jointly identify threats, opportunities, weak-
nesses, and strengths of the organization in the
perceived (or declared) future environment.
(c) Identify and evaluate the various possible action
plans (sales, production, sourcing, human resources,
innovation and investments, R&D, etc.) and verify
their compatibility with both intent or goals and
resources.
(d) Repeat the process until compatibility is ob-
tained and acceptance by everyone in the organization
has been secured (this step may require the superior to
act as a binding arbitrator to avoid subordinates
wasting time in useless battles). An arbitrator listens to
all parties, reflects on the best collective solution, and
selects a preferred course of action that is both
explained and justified to all parties who must adhere
to it.
(e) Once the budget or action plan is established,
results are matched against expected (intermediate or
final) results and the analysis of differences (or
deviations) leads to learning and thus a reevaluation of
the appropriateness of the action plan and its possible
updating.
4. Components of an Action Plan
An action plan reflects the answers of the concerned
persons to at least the following questions:
(a) Where are we and why do we need to do
‘something’ (understand the cause of the action plan
by identifying a possible gap between where we are
and where we are headed, and where we think we
ought to be, given the intent or goals of the firm or
organization)?
1392
(b) What is the ‘intention’ behind doing something?
(c) How does whatever will be done relate to the
achievement of the firm’s mission?
(d) Who are the various actors who need to be
involved (basis for both the richness of analysis and
delegation in the implementation process)? An action
plan is always teamwork, even though each person on
the team is personally responsible for one ‘component’
of the plan, often overlapping with someone else’s.
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,
for example, the cooperation of such specialized
managers as: sales manager, sales people, marketing
manager, production scheduling, assembly manager,
legal department, sourcing manager, management
accountant, etc. If the plan were not the result of an
agreement between all these required skill holders, it
would have little chance of success.
(e) What causal model (also known as business
model) do the ‘team members’ agree on to help them
identify the ‘action variables’ they will activate
through their decisions and behavior?
(f ) What possible actions can be envisioned? (it is
important to review several possible alternatives criti-
cally).
(g) Which one will we choose, and why? What will
we actually do in this action plan?
(h) How will we do it? What process? What
resources will be consumed and created and when?
What delegation structure will be developed, etc.?
(i) Are the required and generated resources co-
herent with the availability and needs of the organiza-
tion? If the answer is negative, there must be a return
for adjustment to any or all questions (a) through (h).
( j) Why will we do it this way? What were the
alternatives’ pros and cons? How realistic is the
alternative selected and how realistic were the other
ones? What are the risks attached to each alternative
and especially the one selected?
(k) Coherence with strategic intent, strategy, and
other action plans.
(l) Expected impact of the selected actions (several
may apply simultaneously):
(i) development of a competitive advantage;
(ii) ambitious yet realistic: placing the organization
under tension;
(iii) challenging the ways of thinking; and
(iv) all of the above or other.
(m) When will these actions be carried out (cal-
endar of actions)?
(n) How often will these action need to be carried
out (if it is a recurring action plan)? This is an
important point as a multistage action plan allows for
better learning and continuous adjustment.
(o) To what do each of the actors actually commit
(intermediate or final results, non-financial indicators,
relationships, dates, intensity, etc.)?
(p) How will the achievement of the commitments

be measured? There are at least three domains for
which measures should be agreed upon beforehand by
all parties involved in the action plan. These measures
will serve as a basis for learning from deviations and
for continuously updating the action plan so that it
remains aligned with the intention selected, if it is still
the right one):
(i) Process, i.e., the way the action plan should and
does unfold during implementation (the equivalent
aerospace term would be ‘trajectory’):
evolution of the conditions that created the need for
the action;
resource productivity and effectiveness;
resources consumed and created;
organization and relationships between actors;
mastery over risks identified in step (j);
efficiency of use of resources; etc.
(ii) Progress (against the time scale selected by the
actors in the plan to state by which date the target will
be achieved):
timing: date of start, selection of milestones, date of
expected completion;
positioning of progress on a PERT diagram;
validation of the critical path;
definition of the method of calculation of the
percentage achievement; etc.
(iii) Impact:
effect of actions on objectives and key performance
indicators (KPIs) for both short and long term; and
evaluation of the continued relevance of the intent.
(q) What priority should be given to this action
plan and how much of the firm will be involved (if
applicable)?
Traditional budgeting seems to have focused es-
sentially on steps (h) and (i) and therefore has led to a
very partial view of what is meant by an action plan.
Essential to the effectiveness of the budgeting process
is the measurement system evoked in step (p). The
measures should be balanced between areas of ex-
pertise, perspectives, and time horizons and allow
simultaneously both effective implementation and
continuous validation of the relevance of the whole
action plan given the evolution of the competitive
environment. Budgeting and processes of anticipation
link, therefore, directly to the area of management now
commonly described as the Balanced Score Card or
Tableau de Bord.
5. Budget Process Requirements
5.1 A Sense of Direction
There must be goals that preexist the beginning of the
budgeting process. Each goal must have a time frame
and be a milestone towards achieving the organiza-
tion’s mission or intent. In specifying its goals, the
organization states who the stakeholders are that are
taken into consideration.
Budgeting and Anticipatory Management
5.2 A Continuously Updated Shared Causal Model
Decision makers and personnel must be able to
understand some key ‘cause and effect’ relationships
that affect the organization’s output or performance.
The budget rests on the identification of a causal
model that helps understand what consequences might
obtain from what actions in the perceived competitive
environment. Much time is needed in a business to
identify and maintain the model(s) or causal repre-
sentations that will help understand how we could go
from point X to point Y in the map of opportunities.
5.3 A Monitoring System
The monitoring system must be able to tell managers
how well they are ‘getting there’ from ‘here.’ Some of
the measures must be anticipatory or leading in the
sense that they allow the managers to anticipate
inappropriate or unacceptable results and therefore
head off the undesired trend through appropriate
corrective actions, while other measures are more
historical and serve to keep track of what has been
achieved.
5.4 A Set of Criteria for Trade-off between Goal
Achie
ement and Resource Consumption and Creation
Whether the trade-off will be carried out in economic
terms only or using other criteria such as market share,
employee satisfaction, or citizenship of the firm, the
firm needs to have some kind of preference ordering
system that will allow for the identification of a
preferred way each time a choice is to be made. It is,
however, very difficult in any multi-person setting to
come to an agreement on criteria for preference
ordering. This difficulty should not prevent the man-
agers from encouraging participation and expression
on the part of everyone in the organization since that
is the only way to open dialogue and communicate
values and orientations.
5.5 Abo
e All, a Budget Requires Trust Between
Participants
A budget is grounded in delegation. Each person holds
responsibility for a ‘piece of the action’ and must be
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
or of a result, know as early as feasible (through
shared leading indicators) the actual changes in the
probability to fulfill commitments. Budgets therefore
require trust between participants (both vertically and
laterally) and self-confidence combined with a reason-
able willingness to take risks and not adhere to a
prewritten script.
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Budgeting and Anticipatory Management
6. Budgets, ‘Opportunity Gap,’ and ‘Performance
Gap’
In projecting itself into the future, any organization
faces two simultaneous challenges:
(a) Improve the ‘productivity’ (effectiveness and
efficiency) of resources consumed in carrying out
currently retained action plans.
(b) Identify new opportunities for continued
growth that will require modification of current action
plans and possibly the development of entirely new
ones. Opportunities have a limited lifespan. If no new
opportunities are identified and addressed, the organi-
zation will cease to grow and will decline into oblivion.
Single-purpose organizations such as the March of
Dimes or the Tennessee Valley Authority in the US
have had to reorganize their mission completely to
continue existing. A long-lasting organization such as
the Kirin Beer Brewery in Japan is always reinventing
itself because product attractiveness has a time limit
and customers tend to be fickle unless the producer
changes with the evolution of customer tastes.
We define the first challenge as that of managing the
‘performance gap’ while we will call the second one
that of managing the ‘opportunity gap.’ As business
environments grow turbulent, the continued relevance
of any given action plan is less and less likely.
Simultaneously, the need for continuous identification
of new opportunities grows greater.
Figure 1 shows that, at any point in the continuum
of turbulence, the required anticipation effort of an
organization is always broken into two parts: man-
aging the performance gap (increasing effectiveness
and efficiency) and managing the opportunity gap
(preparing the organization for the future). At each
Figure 1
The tools of anticipation change with the level of
turbulence
1394
point on such a continuum, managers need to be able
to hold two very different mental maps simul-
taneously, in differing proportions, as shown in the
two ‘wedges’ at the top of Fig. 1. The coexistence of
such differing relations to time and to uncertainty is
not an easy task and the budgeting process offers a
forum where these two mental maps can coexist.
The effectiveness of the system requires that at each
level of turbulence (competitive environment) the
manager and the supporting processes take into
account the appropriate mix of attention paid to the
performance gap and to the opportunity gap. At each
level of turbulence, different tools (including the ones
relevant at the previous level of turbulence) meet the
requirements of management. If the world is very
stable, a simple scorecard about past results will suffice
as the next action plan is a mere extrapolation or
adaptation of the previous one. As the world becomes
less stable, ‘budgets’ answering the question ‘what will
we do?’ suffice to help the firm project itself into the
future in a coherent way. The critical issue is to limit
the action to have a balance between the resources
available (increased by the resources created by the
action plan) and the resources needed by the action
plan. That vision of ‘budgets’ is still quite prevalent, as
mentioned previously, despite the fact that turbulence
conditions make it appropriate no longer.
When the world becomes really very turbulent, a
business requires two simultaneous tools: contingent
planning (answering the question ‘what will we do if?’)
and ‘surprise management’ which seeks an answer to
the question ‘how can we organize ourselves now to be
reactive, innovative, and able to operate under future
conditions we cannot even imagine right now’? Con-
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
is, the more her or his anticipation efforts should be
addressing the ‘opportunity gap.’ As Fig. 2 shows,
even at the top of the organization, although the effort

TOP
BOTTOM
Figure 2
The effort is applied differently depending on the level
of the individual in the hierarchy
of the individual is dedicated essentially to the mana-
gement of the opportunity gap, there is still a part of
the effort that is addressing the performance gap
(effectiveness and efficiency).
As individual N moves from the bottom to the top
of the organization, her or his preoccupation is more
and more with the efficiency and effectiveness of the
organization, but there is always a non-negligible
preoccupation with some form of attention paid to the
opportunity gap, recognizing that new opportunities
can be identified at all levels of the organization.
7. Current Budgeting Practice is not Always
Aligned with the Principles
As mentioned previously, it is a challenge to build a
budgeting process that considers the issue of competi-
tiveness not only from the point of view of the
performance gap (efficiency and effectiveness, cost
control, etc.) but also from that of the opportunity
gap. The causes for such a difficulty can be traced to
the following elements:
Objectives and processes to get to the target are
often defined only in and on financial terms.
Partition of the process to achieve the target tends
to be only hierarchical and functionally defined instead
of being developed along the lines of transfunctional
business processes.
The processes of alignment, dialogue, and team
building through the budget construction are fre-
quently ignored and the exercise is too often reduced
to a scarce resource allocation leading to competitive
behavior between organizational entities that ought to
cooperate to serve the stakeholders best.
Value creation is mostly defined in terms of financial
profit.
The time horizon of an action plan should be linked
to the business cycle but is based, too often, on fiscal
Budgeting and Anticipatory Management
year constraints (which are defined by reporting needs
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
all in the organization.
Many times the budget has been highjacked as a
substitute for an anticipatory form of financial ac-
counting used in estimating year-end accounting
results of the firm so that management can comfort
stockholders about forecasted profit.
Focus is more on cost reduction than cost man-
agement (the ‘right’ cost is not always the least cost:
costs are driven by product and process design, and by
people eliminating non-value-adding activities).
Most action plans assume, usually erroneously, that
costs are driven by the volume of sales and that costs
are best controlled at the point where they can be
measured (Lebas 1996). This leads to conformance
budget (focused on resource allocation) thus limiting
initiative and customer satisfaction.
Many budget processes merge and confuse an-
ticipating and defining benchmarks for reward systems
(especially if the latter are based on conformance with
resource consumption) thus creating gaming behavior
and budget slack which immobilize resources uselessly.
Budget slack occurs when managers overestimate
resource consumption or required effort and under-
estimate value created with the customers. Managers
indulge in such behavior because most of the time they
do not trust the leadership either to allocate resources
or support action plans that are compatible with the
manager’s perception. Such behaviors immobilize
resources and prevent the exploitation of oppor-
tunities. A performance management tool called ‘flex-
ible budgeting’ consists in identifying clearly, before
the fact, the areas of uncertainty each manager is
responsible for (and which ones are not under her or
his control) and in recalculating, after the facts are
known, the elements of the action plan (consumption
of resources as well as outcome or output) that would
have been determined had the ‘uncontrollable’ ele-
ments been forecasted with pinpoint accuracy. Such
an approach allows for total freedom in really an-
ticipating because the manager knows she or he does
not have to take precautions (through the building of
budget slack) to cover risks she or he cannot control.
Often, the budgeting process does not implicate
everyone and thus a frequent reaction is to consider
that ‘spending’ resources allocated in the context of an
1395
Budgeting and Anticipatory Management

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

1396

See also: Budgeting: Political Science Aspects; Organ-
ization: Overview; Organizational Decision Making;
Organizations and the Law; Organizations, Sociology
of
Bibliography
CAM-I Europe 1994 A Journey to Ad
anced Management
Systems: A Report on the Research and Findings of the CAM-I
Ad
anced Budgeting Study Group. R-94-AMS-0.1.1 Poole,
UK
Hope J, Fraser R 1999 Beyond budgeting. Management Ac-
counting (UK) January
Jiambalvo J 2001 Managerial Accounting. John Wiley and Sons,
New York
Lebas M 1996 Budget control. In: Warner M (ed.) International
Encyclopedia of Business and Management. International
Thomson Business Press, London; Routledge, New York
Lebas M 1999 Which ABC? Accounting based on causality
rather than activity-based costing. European Management
Journal 17(5): 501–11
M. Lebas
Copyright # 2001 Elsevier Science Ltd.
All rights reserved.
Budgeting: Political Science Aspects
Budgeting is a process by which governments allocate
public resources to bureaucracies and client groups.
This process usually takes place on an annual basis,
involves procedural rules and institutional arrange-
ments, often invokes intense political conflict, and,
together with taxation, forms the basis for fiscal and
macroeconomic policy. Because it fundamentally
determines political winners and losers through its
allocative function, budgetary processes and outcomes
serve as distinct guide to a political state’s philosophy
of government. The act of budgeting, therefore, lies at
the heart of politics and government.
1. The Study of Budgeting
Budgeting may be studied from several perspectives.
From the vantage point of professional schools of
public administration, the practical elements of
budgeting include the actual drafting and formatting
of budget documents, the application of cost-benefit
and other tools of program analysis, the projection of
revenues and expenditures, the division of spending
into its operational and capital components, and the
management and implementation of programs funded
by the budget. Economists principally focus on the
macroeconomic consequences of budgeting, such as
the effects of deficit spending on interest rates, infla-
tion, the crowding out of private investment, foreign
International Encyclopedia of the Social & Behavioral Sciences
Budgeting: Political Science Aspects
exchange rates, and national debt management. At a
more microeconomic level, economists may also con-
sider the effectiveness of specific programs funded in
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
research looks at budgeting as a guide to a broader
analysis of politics, relations between institutions, the
behavior of political actors within those institutions
and specific public policies.
2. Budgeting as Incrementalism
Modern theoretical understandings of budgeting begin
with the idea of ‘incrementalism.’ Formulated in the
late 1960s, incrementalism attempts to explain how
budgetary decisions are made, how budgetary actors
carry out their roles, and what the consequences are
for politics by structuring budgetary decisions in one
form as compared to alternative ones (Wildavsky
1964, Fenno 1966). Incrementalism is grounded in
certain assumptions about human nature, that people
are inherently limited by cognitive, time and resource
constraints from being truly rational and synoptic in
their ability to make budgetary decisions. Budgetary
actors ‘muddle through’ and ‘satisfice’ rather than
‘optimize.’ They are constrained from making deci-
sions in the way that microeconomically rational
consumers might, where all information sources and
alternatives are weighed before a decision is reached.
To compensate, these actors rely on ‘aids to cal-
culation’. In particular, instead of reviewing the entire
budget to determine what is funded, the focus of
analytical and political decision making is on the
annual change, or increment, in spending. The budget
base, or last year’s spending, is taken as a given, and
the politics of budgeting revolve around determining
the size of incremental ‘fair shares’ allocated to
budgetary claimants.
Incrementalism takes into account the role of
institutions and actors within those institutions.
Budgeting is regarded as a decentralized, ‘bottom-up
process,’ where budget proposals emerge from within
executive branch agencies. These agencies in turn act
as ‘advocates’ for larger increments before the Appro-
priations Committees in the House of Representatives
and the Senate. Committee members evaluate these
funding claims and act according to a set of behavioral
norms. The House Appropriations Committee, for
example, operates as the ‘guardian of the purse,’ while
the Senate committee acts as a ‘court of appeals.’ The
overarching norm is that budgets should be balanced.
Incrementalism views budgeting above all else as a
political activity, and it gives limited consideration to
notions of administrative efficiency or economic
rationality in the determination of budgetary out-
1397
ISBN: 0-08-043076-7