Budgeting Basics and Beyond

22.11. Budgeting and the New Management Model

Even with targets and initiatives clearly set in the BSC, there were still some divergences: the Budgeting defined targets for the departments (margin and expenses) whereas the BSC defined global targets and that was an obstacle for the alignment of the two management tools. Also, the department managers still had part of their variable pay linked to Budgeting, which generated in satisfaction.

Aiming to align the organization's targets to strategy, from 2003 on, Budgeting was changed into Rolling Financial Forecast, to reflect the fast market dynamics. This new approach has transformed Budgeting into a reference in terms of opportunities for the company and it is no longer a management tool that defines targets and operations. The company's high management determined the variable pay to be entirely linked to the BSC thus eliminating the departments' targets. The Rolling Financial Forecast allows Oxiteno to make monthly reviews and to forecast the three coming months and it has become a tool that supports the strategic decision making.

The "new" Budgeting, therefore, is not a management tool out of alignment with Oxiteno's strategy anymore; it has integrated the Balanced Scorecard since it plays a role in the operational management cycle, providing information about the relationship between resources and sales, feeding the strategy management and continuous learning cycle.

Oxiteno's challenges today, as a whole, are the people and their ...