Chapter 7

Innovations in Target Setting

If you find it difficult to accept failure then you simply won’t get any innovation because employees will be too frightened.

—Sir Terry Leahy (former CEO of Tesco)


“Budgets are time consuming and irrelevant to the strategic management of my business.” “Budgets are out of date in a rapidly changing environment and are just a game for accountants to play.” These views are common and valid as often a budget is just last year’s numbers tinkered with so that managers can get on with the real business of generating value.

We examine two recent innovations in target setting: activity-based budgeting and the Beyond Budgeting approach. Activity-based budgeting advocates argue that budgets should ...

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