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Beyond Budgeting: How Managers Can Break Free from the Annual Performance Trap by Robin Fraser, Jeremy Hope

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Chapter One

The Annual Performance Trap

Uncertainty—in the economy, society, politics—has become so great as to render futile, if not counterproductive, the kind of planning most companies still practice: forecasting based on probabilities.1

—PETER DRUCKER

Like them or loathe them, everyone has a view about budgets. CEOs like the warm feeling they get when they see the year-end profit forecasts. But they might be anxious about the reliability of the assumptions and the firm’s ability to respond to change. CFOs like the way they are able to tie operating managers to fixed performance contracts (fixed targets reinforced by incentives). But they also know that the process takes too long and adds too little value. Operating managers like “knowing ...

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