Beyond Budgeting is an attempt to free managers from the constraints of pre-set budgets and targets that are often arbitrary, outdated and limiting. The result is more freedom for executives to allocate resources flexibly and in response to real-time developments in the market. Goals and plans are constantly reviewed, and decision-making authority can be delegated to the person most capable of making an operational decision.
Beyond Budgeting also separates planning (management by objectives, annual budgets) from performance assessment. Beyond Budgeting recommends executives receive relative performance targets, like those supplied by Obermatt's Operating Alpha Bonus Targets. Managers are not rewarded based on achievement of pre-set goals, but with a share of profits or based on relative performance assessment. Control is still maintained because transparency is significantly increased, and as more executives are remunerated with profit and equity participation, their financial interests are focused on a group level, leading to additional peer review and control processes.
Beyond Budgeting is not only about budgets, or even about performance appraisal and incentive pay. The most important message is to decentralize and delegate responsibility. While only a few Value Based management authors discuss organizational issues such as delegation and decentralization, the most important principle of Value Based management is value creation. From this perspective, Value Based management includes a strong decentralized organizational component and shares much in common with Beyond Budgeting.