Management Accounting Research 24 (2013) 196–211

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Management Accounting Research

journal homepage: www.elsevier.com/locate/mar

From comfort to stretch zones: A field study of two

multinational companies applying “beyond budgeting” ideas
Anatoli Bourmistrov a,∗ , Katarina Kaarbøe b
a
Bodø Graduate School of Business, University of Nordland, N-8049 Bodø, Norway
b
NHH Norwegian School of Economics, Helleveien 30, 5045 Bergen, Norway

a r t i c l e i n f o a b s t r a c t

This paper explores how change in the design principles of management control systems
Keywords:
(MCSs) based on implementing the beyond budgeting (BB) ideas has influenced the transi-
Beyond budgeting
Budgeting
tion of decision-makers from “comfort” to “stretch” zones and how this transition changed
Comfort zones the supply of and demand for managerial information. This paper’s starting point is based
Case study on the research evidence showing that there are many organizational problems associated
Management control systems with using budgets. Thus, this paper puts forth a previously neglected research context
of companies that claim to have abandoned budgeting. In two cases, we illustrate how
changes in the design of the MCS can create new management practices based on new
ideas of information needed for decision-making. In particular, this paper illustrates how
the use of new information provided by the MCS design, which is based on new princi-
ples, move decision-makers into the “stretch zone” characterized by new characteristics
of decision-makers’ mindset and behavior. We also demonstrate how unbundling target
setting, forecasting, and dynamic resource allocation enables better forward-looking and
strategy-oriented decisions in situations requiring negotiation and learning.
© 2013 Elsevier Ltd. All rights reserved.

1. Introduction on the one hand, and the pursuit of strategic adapta-

“Budgeting is [an] unnecessary evil” – this is how
Wallander (1999) emphasized the management control
problem in modern organizations, and therefore identi-
fied the need for rethinking the way management control
systems (MCSs) based on budgeting are designed and func-
tion. Today, with increasing environmental turbulence and
organizational dynamics, many organizations confront a
seemingly difficult challenge: how to manage the ten-
sion between the need for predictable goal achievement
Abbreviations: A2A, Ambition to Action; IT, information technology;
KPI, key performance indicator; MIS, management information system;
MC, Market Council; MCS, management control system; BB, beyond bud-
geting.
∗ Corresponding author. Tel.: +47 755 17 673; fax: +47 755 17 268.
E-mail addresses: Anatoli.Bourmistrov@uin.no (A. Bourmistrov),
Katarina.Kaarboe@nhh.no (K. Kaarbøe).
tion and change on the other (Simons, 1995a,b, 2005).
The traditional budget-coupled MCS is claimed to be inca-
pable of providing the type of information individual
decision-makers need to handle increasingly complicated
organizational dynamics (e.g., Hope and Fraser, 1997). One
solution to this problem is to widen the scope of the MCS
(Chenhall and Euske, 2007; Ferreira and Otley, 2009; Otley
et al., 1995) so that the dysfunctional effects of budget-
ing can be repaired (e.g., Frow et al., 2010). The multiple
facets of budgeting and diversity of purposes that the bud-
get serves can also explain why budgets are still being
widely used in most organizations (Hansen and Van der
Stede, 2004).
Nevertheless, budgets are heavily criticized for being
too internally oriented, an obstacle to creativity and
innovation, and incapable of providing the dynamics nec-
essary to organizations to compete in the new information
age (Hope and Fraser, 1997). It is argued that the new

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 A. Bourmistrov, K. Kaarbøe / Management Accounting Research 24 (2013) 196–211
management techniques, which have been developed in
response to the changing organizational environment,
cannot be successfully implemented when management
behavior is “snapped back” into its old shape by the invisi-
ble power of the budget. Despite the fact that budgeting
is probably the most studied phenomenon in business
administration research (Covaleski et al., 2003), little has
been done to find solutions to this problem in practice
(Østergren and Stensaker, 2011). Thus, it is not surprising
that many companies have experimented with a radical
solution – to replace budgeting with other MCS, or the trend
referred to today as beyond budgeting (BB) (Bogsnes, 2009;
Hansen et al., 2003; Hope and Fraser, 1997).
Despite the fact that many years have passed since the
pioneering introduction of BB in Svenska Handelsbanken in
the 70s (Wallander, 1999), we still know very little about
how BB concepts function in practice and especially how
replacement of the annual budget with other informa-
tion tools has improved the abilities of decision-makers
in facing increasing environmental uncertainty. However,
research on the topic is normative, e.g., explaining the
logic behind the BB paradigm (Hope and Fraser, 2003a;
Waal, 2005), or descriptive, with the focus on a search for
why BB is not widespread in management practice (e.g.,
Becker, 2011; Ekholm and Wallin, 2000; Libby and Lindsay,
2009), or on how organizations are coping with nega-
tive aspects/consequences of budgeting (e.g., Frow et al.,
2010), or even on defending the use of budgets in particu-
lar circumstances (e.g., Greenberg and Greendberg, 2006).
However, little attention has been given to in-depth stud-
ies of organizations that claim to have implemented BB
practices and for which BB is a reality. Even though there
are some publications about experiences and models for
how BB is implemented in some organizations (see e.g.,
Wallander, 1999; Bogsnes, 2009), there is little research
done regarding how introduction of BB has changed the
way information is produced and used by managers in the
organization in new and maybe different ways.
This especially concerns the companies that perceived
budgeting to be such a problematic practice that they made
a formal decision to abandon an annual budget and replace
it with a new MCS. There is relatively little known about
how these organizations are managed, e.g., in terms of how
the flexibility of resource allocation is provided, what per-
formance criteria are used in evaluations, how potential
self-interest behavior is minimized in the system without
budgets, etc. (see e.g., Frow et al., 2010). We also know little
about whether and how articulated benefits of “budget-
less MCS” are achieved in these organizations and whether
and how these may result in superior organizational per-
formance. This study seeks to contribute to filling this
knowledge gap by analyzing the experience of two large
multinational companies (hereafter, OilCo and TelCo) that
have applied the ideas of BB in management practices. In
doing this, we aim to develop a more nuanced view of
the change process from the perspectives of the managers
involved.
The point of departure for our study is that the
most important problem of budgeting is establishment
and maintenance of “comfort zones” of decision-makers
(Bogsnes, 2009). Even though Bogsnes (2009) does not
197
explicitly define “comfort zone”, he discusses it in rela-
tion to the necessity of organizations to introduce stretch
targets, which suppose to result in decision-makers leav-
ing their comfort zones. Accordingly, the “comfort zone” is
a mental state characterized by a decision-maker operat-
ing with a sense of comfort and security. Introduction of
new MCS without budgets is expected to change the struc-
ture and nature of the information flow in the organization
so that decision-makers are moved to “stretch zones”. A
“stretch zone” is supposed to be a new and different men-
tal state where a decision-maker can experience a new
and different type of behavior. Therefore, we should expect
changes in the ways information is used. Based on this
expectation, the aim of this paper is to study the following
questions: How has change in the design principles of MCS
based on implementing the ideas of BB influenced transi-
tion of decision-makers from “comfort” to “stretch” zones?
How has this transition changed the supply of and demand
for managerial information?
This paper’s starting point is based on research evi-
dence that shows that many organizational problems are
associated with using budgets. In those companies that
abandoned budgeting practices and introduced new man-
agement control practices, the budget was no longer
considered applicable and desirable, especially when try-
ing to accomplish both predictable goal achievements and
the pursuit of strategic initiatives. Thus, this paper puts
forth a previously neglected research context of compa-
nies that claim to have abandoned budgeting. We analyze
the consequences of departing from a budget-based MCS
through the prism of establishing, maintaining, and chang-
ing the “comfort zones” of decision-makers.
In two cases, we illustrate how changes in the design
of the MCS can create new management practices. In
particular, this paper illustrates how use of new infor-
mation provided by the MCS design, which is based on
new principles, move decision-makers into the “stretch
zone” characterized by new characteristics of decision-
makers’ mindset and behavior. We also show how this
transition improves managerial decision-making abilities
as well as why and how use of the supply of and demand for
information is different from the previous budget-coupled
practices. In the “budgetless” organization, information
in the “stretch zone” is supposed to be used in order to
be proactive, more forward-looking, and externally and
strategically oriented; but how is it done in practice, in
what way, and with what consequences for individual
decision-makers and their previously established “com-
fort” zones?
First, this paper suggests that abandoning the budget is a
result of “discomfort” with the “comfort” role of budgeting
where the business-driven and entrepreneurial mindset of
decision-makers collides with the ritualistic and gaming
behavior induced by budgets. Transition toward a “stretch”
zone manifests the intention to remove previously estab-
lished decision-maker “comfort” zones that characterized
the use of information in the budgeting regime. Sec-
ond, based on empirical evidence from two companies,
this paper argues that moving decision-makers out of
their previously established “comfort” zones required
a new information supply. Unbundling target setting,
198 A. Bourmistrov, K. Kaarbøe / Management Accounting Research 24 (2013) 196–211
forecasting, and dynamic resource allocation into three
separate processes constitutes a significant move toward
creating different tools to facilitate different decision-
making purposes required by the “stretch” zone. Third,
new information supply enabled better forward-looking
and strategy-oriented decisions in situations requiring
negotiation and learning, which facilitates the move of
decision-makers into the performance “stretch zone”.
This paper is organized as follows. First, we provide
a literature review where we discuss the transition from
“comfort” to “stretch” zones and its effects on supply and
use of managerial information. This is followed by Sec-
tion 3, which explains the methodological choices of the
research design and validity. In Section 4, the relationship
between the changes in the MCS design, and information
supply and use is illustrated on the basis of evidence from
the two companies. Finally, we discuss the findings as well
as outline the paper’s limitations and suggest avenues for
further research.
2. Beyond budgeting as a transition from “comfort”
to “stretch” zones: implications for information
supply and demand
In this section, we provide a literature review focusing
on how change in the design principles of an MCS based on
implementing the ideas of BB can be related to the transi-
tion of decision-makers from “comfort” to “stretch” zones
as well as changes in the supply of and demand for man-
agerial information inside the company.
2.1. Motives for moving to BB: from “comfort” to
“stretch” zones
In the BB literature, the MCS based on budgets is pre-
sented as a rigid, detailed, and annually focused practice,
promoting rules-based micromanagement and favoring
centralized command and control (Hope and Fraser,
2003b). One of the main problems of budgets is estab-
lishment of a “comfort” zone and its dysfunctional effects
on management of human resources, especially for orga-
nizations operating in turbulent business environments
(Bogsnes, 2009). The BB literature, as a new management
philosophy, suggests that by abandoning budgets, it is pos-
sible to move decision-makers to so-called “stretch” zones.
To do so, the MCS centered on annual budgeting should be
replaced with an MCS guided by the 12 principles of BB
(Hope et al., 2011): six leadership and six process princi-
ples. On the process side, the goals/targets should be more
relative, directional, and “stretched”; planning, forecasting,
and resource allocation should become more dynamic; and
performance evaluation should become more holistic. On
the human resource/leadership side, management should
be based more on trust, transparency, and internal motiva-
tion, leading to more value-based behavior, empowerment,
and increased autonomy of units and employees. In this
sense, the BB literature implicitly argues that substitution
of budgets through the introduction of new management
principles should help organizational actors to depart
from the “comfort” zones and move toward “stretch”
zones. There are two interesting questions in this respect,
however: What constitutes a “stretch” zone and how is it
different to a “comfort” zone? How does the introduction
of BB ideas and principles move the decision-makers from
“comfort” to “stretch” zones?
2.2. “Comfort”, “discomfort”, and “stretch” zones defined
in terms of alignment between mindset and behavior of
decision-makers
In the organizational sociology and psychology litera-
ture, the concepts of “comfort”, “discomfort”, and “stretch”
zones are used to describe individual work situations. Inter-
preting Kira and Korpelainen (2012), these concepts are
related to decision-makers having a positive or negative
interpretation of a work/decision situation as a result of
a correspondence or lack of correspondence between the
mindset (e.g., attitudes and assumptions about how the
world works, work identities) and actual behavior at work
(e.g., facing what is done/should be done in a concrete work
situation). In a “comfort” zone, the work situation has a
positive appraisal by a decision-maker stemming from an
anxiety-neutral mindset related for instance to a routine-
based behavior when an individual is using a limited set
of previously learned behaviors to deliver a steady level of
performance, usually without a sense of risk (Kahn, 1990;
White, 2009).
However, the “comfort” zone can be characterized by a
completely different combination of mindset and behavior,
e.g., the mindset when a decision-maker appraises pos-
itively continuous challenges, varieties, and diversity of
work tasks faced, which goes well with nonroutine behav-
ior at work. In both cases, decision-makers are in “comfort”
zones with a positive meaning of work where very different
types of mindsets (e.g., stability vs. continuous challenge
at work) and behaviors (e.g., routine-based vs. nonroutine-
based) can be aligned.
In this sense, a “stretch” zone can be conceptualized as
a transition between different kinds of “comfort” zones.
Reaching a “stretch” zone means putting a decision-maker
into a situation where they are forced to change their mind-
set and to experiment with new and different behaviors
(White, 2009). Thus, moving to a “stretch” zone means
placing decision-makers in a work situations where they
will be able to learn something new during interactions
with the environment (McKenna, 1994) by developing nec-
essary competencies and skills to deal with being in the
“stretch” zone (Kahn, 1990).
When moving from a “comfort” to a “stretch” zone,
there is always a danger of “stretching” too far, resulting
in a “discomfort” zone being reached (also termed “dan-
ger” or “panic” zone). A “panic” zone is characterized by a
higher level of anxiety, discomfort, and lower performance
– situations that usually frighten and panic people (White,
2009) – or can be characterized by negative work situa-
tion appraisals stemming from a misalignment between
established mindset and behavior (Kira and Korpelainen,
2012). Thus, when moving toward a “stretch” zone, there
is a need to find a proper balance between behavioral cer-
tainties and uncertainties in terms of reaching an optimal
performance zone for decision-makers (Zaretskii, 2009).
This balance can be achieved by matching the level of
 A. Bourmistrov, K. Kaarbøe / Management Accounting Research 24 (2013) 196–211
competencies of decision-makers with the level of chal-
lenge at work (Csikszentmihalyi, 2008). We ask: when
moving decision-makers from “comfort” to “stretch” zones,
how are changes in mindset and behavior addressed in
organizations that abandon annual budgets and what does
that mean?
2.3. From “comfort” to “stretch” zones: effects on changes
in information supply and demand
A number of studies show that change in MCS and
information supply may be related to changes in decision-
maker mindset and behavior. For instance, changing
decision-makers’ behavior toward more experimentation
and more dynamic interaction with the business envi-
ronment requires more dynamic information supply in
terms of improved selection and presentation of cost infor-
mation (scope) as well as presentation of information
more frequently (time) (e.g., Bjørnenak and Kaarbøe, 2011).
Similarly, improvement of decision-makers’ mindset and
mental abilities to learn and acquire new knowledge and
skill requires other types of targets to be developed and
communicated in terms of developing abilities to improve
routine task performance (Jensen, 2003; Seijts and Lathem,
2005). However, the effects of these systems on moving
decision-makers into the “stretch” zones are not well stud-
ied. For instance, use of more dynamic forecasts does in
general improve accuracy of information, but does not nec-
essarily improve decision-makers’ abilities to make better
decisions (Tanlu, 2009).
The effects on demand and use of information when
being in the “comfort” zone are relatively well studied.
For instance, the existence of decision-makers’ “comfort”
zones may prevent organizational learning (Burdett, 1994)
and may make loosening central control over departments
and increased decentralization impossible (McCarthy and
Lane, 2009). It may also hamper changes in MCS (Howcroft,
2006) as well as in management style (Gunn, 1995).
When being in a “comfort” zone, managers may lose
interest in abilities associated with using information as
entrepreneurs who explore, manage, and minimize orga-
nizational risks (Giraud et al., 2008). In such situations,
managers may instead use information to maintain the
notion of stability, structure, and certainty in decision-
making situations that in reality are characterized by
significant ambiguity and uncertainty (e.g., Blenko et al.,
2010; Marginson and Ogden, 2005a,b). In such decision-
making situations, the decision becomes routine and
information is used to provide the manager with a quick
and easy answer (Burchell et al., 1980).
It is considerably less well known how the transition
from “comfort” to “stretch” zones is related to the use
of information, especially at the individual level and in
relation to different decision-making situations. There are
many different ways of using information and some of
them may be more important in a “stretch” zone than in
a “comfort” zone. Burchell et al. (1980) argued that moving
decision-makers away from structured decision-making
situations that may characterize a “comfort” zone may
improve the use of information for the purpose of learn-
ing and improved judgment, discussions, and search for
199
compromise through negotiations as well as rational-
ization of decisions based on managerial visions and
inspirations.
Information use can have purposes other than decision-
making, e.g., legitimation, preparation, scorekeeping,
improving understanding (e.g., Grønhaug and Mellemvik,
1998; Vandenbosch, 1999), and decision-confirmation
purposes (Bruns and McKinnon, 1993). As Hall (2010)
demonstrated, managers may use accounting informa-
tion not only in terms of well-defined decision scenarios,
but also for improving knowledge regarding work envi-
ronments, as well as improving interaction, debate, and
discussions around meanings and implications of informa-
tion, e.g., signaling the need to investigate important issues
further.
Similarly, Ocasio (1997) demonstrated that the actions
of decision-makers are not necessarily dependent on infor-
mation per se, but also on what issues and answers
managers focus their attention on through selectively
choosing some aspects of the organization while ignor-
ing others, i.e., distributing attention through the firms’
social, economic, and cultural structures. In this sense,
although being an important prerequisite, the supply of
new information and details on its uses will not necessarily
be enough to activate organizational change as such infor-
mation must be acted upon through summoning attention,
resources, and strategies (Catasùs et al., 2007).
In sum, when it comes to changes in information sup-
ply and use, has, and if so how has, the introduction of
BB principles and moving decision-makers from “comfort”
to “stretch” zones contributed to changes in the supply of
and demand for information? In what particular ways have
these changes improved decision-making in the “stretch”
zone?
3. Methods
In order to answer our main research question, we
study companies that had been experimenting with an MCS
based on the ideas of BB. A multiple case study method is
used to study the complex social processes within orga-
nizations (see e.g., Scapens, 1990). Theoretically informed
case studies offer a way of examining the cumulative char-
acteristics of organizational change and the changes in
accounting processes that the organization has been sub-
ject to (see e.g., Burns and Baldvinsdottir, 2005). In this
sense, multiple case studies facilitate comparison and can
be used to highlight similarities and contrasts in how
accounting interacts with organizational change.
The organizations we studied are two multinational
companies – OilCo and TelCo1 – one operates within the
oil and energy industry and the other in a telecom indus-
try. We have used a convenience sample: this paper reports
the results from the larger research program where the
introduction of BB concepts is studied. Thus, we have good
access to informants, data, and companies. The research
program entailed extensive interactions with top managers
and managerial staff at different levels in two companies.
1
The real names of these two companies will remain anonymous.
200 A. Bourmistrov, K. Kaarbøe / Management Accounting Research 24 (2013) 196–211
The research program involved researchers, PhD students,
and Masters students who contributed to the analysis
within the program.2 We have previously completed sev-
eral other studies on the two companies explored in this
paper. Thus, a combination of archival data sources (pre-
sentations, guidelines, strategy documents, etc.) and prior
empirical research provides a deep contextual understand-
ing of the companies and the MCS in place.
The companies are similar in the way they implement
BB concepts. The decisions to abolish traditional annual
budgets completely were executed in 20083 (OilCo) and
in 2009 (TelCo). Both companies were exposed to alterna-
tive ways of organizational management without budgets
related to BB. Both companies are active members in
the Beyond Budgeting Round Table,4 an organization for
practitioners wanting to learn more about and exchange
experiences in using BB principles. Moreover, the project
managers in both companies are in close contact with each
other.
By focusing on the different empirical settings of these
two MCS, the objective is to study companies that have
been exposed to similar sources of the conceptual ideas of
BB. Some similarity in the design of their new MCS and
information supply should be expected, and it should be
possible to determine whether the new system created the
same type of use of information. We exclude the effect of
changes in the corporate/business strategies of the com-
panies on the MCS design because in both cases changes
in the MCS were mainly motivated by the need to change
the managerial philosophy. This improves our ability to
conduct analysis on whether and how new ideas of MCS
design and information supply have different implications
for information use in different industries.
Although the experiments have been occurring in both
companies for some time, not all departments had similar
experiences in using the new MCS. In this study, we are
not interested in examining and explaining the variation
in implementation of the new MCS; instead, we want to
explore the links between changes in the MCS and informa-
tion supply and use after the new system was introduced.
Thus, we collect data from the departments that had made
the most significant changes and the most progress in using
the new system.
For OilCo, we focus on the Exploration department
of the company, while for TelCo, we select the Market
Outlet Business department. There may be a danger that
choosing these departments could create a bias where our
respondents are more positive toward these new ideas
than other departments in general. However, for the aim
of our study, we do not consider this a problem because we
are interested not in finding out whether the respondents
understood and supported the ideas of the new MCS, but
in the information about the changes they could provide.
2
In this study, six Masters students participated in data collection and
analysis.
3
Trials within the company commenced in 2005 with the change to
MCS occurring in 2008.
4
See http://www.bbrt.org.
For this study, data collection was undertaken in 2008
and 2009. As there are many limitations to examining
“comfort” and “stretch” zones in an empirical setting,
especially from the perspective of mindset and behavior
changes as well as changes in supply of and demand for
information, we have to rely on interviews as the main data
collection method. We conducted 13 semistructured inter-
views (nine interviews in OilCo and four in TelCo), each
taking around 1 h (see Table A.1 in Appendix A). All inter-
viewees had a role in the development and use of the new
systems. We asked open-ended questions to allow inter-
viewees to explain linked events.
The focus in each interview was on the following major
themes: (1) the reasons for and extent of change in the
MCS (description before and after); (2) how and what infor-
mation was collected and used (how often, what type of
use related to decisions, control of employees, control of
the respondent); and (3) challenges with information use
before and after introduction of the new MCS. For details of
the interview process, see Table B.1 in Appendix B. All inter-
views were transcribed by the interviewer shortly after
they were completed. As a means of validation, we returned
typed interviews to the informants for feedback. They com-
mented on some statements and provided us with more
background information on some issues discussed during
the interviews.
Throughout the research process, we had numerous
opportunities to communicate with key informants. For
instance, we had several meetings (at least once a month)
and discussions with the project managers responsible for
the implementation of BB in OilCo; however, there was less
frequent contact with project managers in TelCo. In addi-
tion, we attended workshops at OilCo where we presented
our results to enable feedback. These meetings provided
an understanding of how the respondents operated before
and after the introduction of BB. We also used secondary
data, such as a description of BB, the so called OilCo book
and the so called the TelCo Way manual (describing OilCo’s
and TelCo’s business management models).
In methodological terms, our investigation can be clas-
sified as an explorative case study to develop emergent
theory (Scapens, 1990): in our case, to understand MCS
change and its implications for supply and use of informa-
tion as a consequence of the transition by decision-makers
from “comfort” to “stretch” zones. Thus, a better under-
standing rather than prediction is the aim of this study.
Use of certain theoretical structures to describe social situ-
ations is always appealing, but these will not fully capture
the diversity and details of empirical settings (Laughlin,
2004). Therefore, in our case, the theory was used to focus
the research on specific issues of interest (Laughlin, 1995)
as there were many aspects of the introduction of BB that
we could examine.
Systematic triangulation of interviews, meetings, and
workshops enabled us to go beyond the mere accumulation
of personal opinions to reconstruct how the new systems
created new mindsets and behaviors. From a cross-reading
of the interview transcripts and notes from meetings and
workshops, the different descriptions of the mindsets,
behavior consequences, and decision-making strategies
were analyzed.
 A. Bourmistrov, K. Kaarbøe / Management Accounting Research 24 (2013) 196–211
No formal coding program was used for the data anal-
ysis. Instead, the data from interviews, meetings, and
workshops were repeatedly reviewed, categorized, and
studied for content and meaning until some patterns
emerged. The data analysis was guided by the theoreti-
cal framework of the study, in that we tried to position
attitudes, mindset, behavior, and use of information in dif-
ferent decision-making situations, and examine how these
changed after the introduction of BB. In addition, we held
discussions with other researchers when the earlier drafts
of this paper were presented at several research seminars.
At these seminars, we had the opportunity to test whether
our interpretations of the data made sense. Thus, in this
study, we contrast the first-hand accounts from the inter-
views, meetings with project managers, and workshops
with the theoretical framework that help us interpret the
data.
The result is a narrative account and accompanying the-
oretical analysis that together provide insights into how
BB promotes transition from “comfort” to “stretch” zones
and its effects on supply of and demand for managerial
information.
4. Two companies applying the ideas of BB
This section describes the effects of introducing an MCS
based on the ideas of BB, which are illustrated using evi-
dence from two companies: TelCo and OilCo. TelCo is
a telecommunications industry company and is one of
the largest mobile operators in the world, focusing on
telephony and broadcast services. It has around 38,000
employees in 13 countries in Asia and western and eastern
Europe. OilCo is one of the largest oil and energy com-
panies in the world. It has around 30,000 employees in
40 countries. Thus, we selected two significantly differ-
ent companies, which was taken into account when the
data were analyzed. OilCo is a company in the oil and
energy industry (divisions tend to have a cost focus with a
great deal of orientation on project management and high
investment budgets), while TelCo is a telecommunications
company (divisions tend to be revenue centers with bud-
gets that focus on operations).
We start by describing the context of the cases and ideas
of the transition to new management models, which is fol-
lowed by a description of changes in information supply.
Finally, we present the decision-makers’ experience with
the new system.
4.1. Transition to a new MCS in OilCo and TelCo
4.1.1. Ambition to Action (A2A) in OilCo
The change process began in OilCo at least 18 years ago,
but was formally implemented in 2008. The change process
to the present system can be described in three phases:
introduction of “more dynamic budgets”, “fragmentation
stage”, and “implementation of new principles of BB”. Many
of the managers described OilCo as very rigid and bureau-
cratic prior to the change. The first steps had already been
taken in 1995 and respondents described how the bud-
get system was loosening up and became less detailed and
inflexible. The Human Resources director was one of the
201
pioneers in OilCo in creating a new culture and chang-
ing competence processes and systems in order to create a
more dynamic MCS.
One of the important steps was to redefine the controller
role into the more active role of a business partner. In 1997,
OilCo installed a new information technology (IT) system,
but this has not resulted in fully developed performance
measurement systems. The challenge of that time was not
a lack of measures, but rather too many measures in several
different control systems. New business-driven projects
attempted to improve the top-down performance man-
agement system, but there were also bottom-up processes
by departments that were requesting that information be
improved for local decision-making. With the new OilCo IT
system in place, the link between strategy and operational
activities was supposed to become more aligned, but dif-
ferent departments and managers used different tools and
techniques to follow up their activities. It can be described
as a fragmented phase with regard to management control.
Finally, on May 9, 2005, OilCo’s Executive Committee for-
mally decided to abolish traditional budgeting and replace
it with a new philosophy backed by new processes.
The motivation behind this change was twofold. First,
one of the prioritized areas of the company was to increase
productivity. As long as OilCo had an annual budget, it
was only possible to start up projects within that resource
frame. In that sense, the budget becomes a restriction
for starting more projects. As long as the annual budget
existed, it was used as an excuse for not starting projects
that were not budgeted for.
The second prioritized area of the company was to
avoid accidents or other severe risks such as corruption
that could damage the company image enormously. Before,
the managers had been accountable for their depart-
ment and reported on deviations. With the new solution,
the managers were not only accountable, but also made
responsible. This meant that the focus was moved away
from deviations toward decisions and the consequences of
the decisions. As one respondent explained:
“[The new system] . . . means that people who are respon-
sible for an asset feel that they are actually responsible, so
that they can say yes or no there and then in the meeting
and don’t need to run home all the time and ask what they
should do. The authority the manager has been given by
the company is positive and I noticed from my coworkers
that they feel themselves empowered and responsible.”
In other words, in the new system, it was not possible to
hide behind a lack of resources in the budget. If resources
were needed for security, they should always be allocated
to security and the budget could no longer prevent this
from happening. Both of these prioritized areas were part
of the reason why the company decided to introduce the
BB solution.
Departments could volunteer as a test pilot for the use
of the new principles and be part of a new system called
“From Ambition to Action” (A2A). The final and formal turn-
ing point in terms of completely abolishing the traditional
annual budgets was when it was announced on October
1, 2007, that the year 2008 would be the first budgetless
year for the company. Thus, beginning in 2008, the whole
202 A. Bourmistrov, K. Kaarbøe / Management Accounting Research 24 (2013) 196–211

company formally applied BB principles and the period Table 1

Motivation factors for introduction of the new MCS based on ideas of BB.
since 2005 can be seen as a systematic attempt to establish
a more homogeneous MCS. OilCo TelCo

Adoption of BB ideas Earlier adopter Late adopter

4.1.2. “Going Dynamic” and the “TelCo Way” in TelCo Process of development Model evolution Model
Compared with OilCo, TelCo was a late adopter of the through gradual development
new ideas related to BB. The idea came from communica- experimentation through learning
from others and
tion with representatives from OilCo, which helped them
repair
in forming the new design of the MCS. Until 2006 when the Motivation factors for Budget is a possible Budget creates
idea of BB was introduced to TelCo, the annual budget was introducing BB excuse for not situations of
the main tool for management control purposes in TelCo, starting projects assurance and
despite the fact that the balanced scorecard was intro- safety for
decision-makers
duced into managerial practices several years before that. Budget does not Budget is not
Top management, however, recognized that there were create a decision strategically
some major limitations associated with using this manage- responsibility at relevant in
ment model in practice. In particular, budget information lower level – only fast-changing
accountability markets
was mainly used for achieving budget goals and explain-
ing budget deviations, but it was used to a lesser degree
to bring activities in line with the strategic goals of the
business. and visible information. Here are some quotations from
Another characteristic of the system was a strong bud- respondents in OilCo focusing on the important differences
get culture where all employees had learned and were between the old and the new systems:
dependent upon budget functioning. Respondents in the
“The feeling of comfort is still a problem for many man-
company stressed that employees and middle managers
agers. This is a barrier to BB . . . [which] represents a
had established feelings of assurance, safety, clear-cut
freedom for the individual to do what is right in each situ-
responsibilities for spending financial resources within
ation. This degree of freedom can be perceived as scary for
budget limits, and goals of receiving bonuses in the case
someone, but right and stimulating for others.”
of positive budget variations. Although the budget seemed
“[Some managers] . . . would still like to get a bag of money
to be functioning well for budgetary cost control, there
from a CEO and clear directions of what and how one
was a growing recognition that the necessary information
should operate in a coming period, and not all this flexibil-
for making relevant decisions in the context of continu-
ity . . . This is about management: this is about developing
ously changing markets was not provided by the budget.
managers and making them mature; to professionalize.”
Information supply was not up-to-date and did not allow
“The most important thing for me is . . . the principle you
follow-up of immediate business opportunities and new
manage the organization by . . . [having] dynamic man-
developments in the markets.
agement that operates continuously and the requirements
Thus, the introduction of the new management control
it puts on managers. I think this is a brilliant and important
model was deemed necessary. The new model of man-
way to go.”
agement consisted of two components: the first one was
called “Going Dynamic” (GD) and the second one was called The reason for the change was a need for a new type
“the TelCo Way (TW)”. Both systems were meant to be of management mentality, one that improves decision-
an improved forward-looking information management making by having dynamically updated information.
model in TelCo. The idea of an MCS change did not seem Despite the fact that one company was an earlier adopter
to be a radical change, but rather to “repair” the existing of BB ideas with a longer experience of experimenting
MCS. The decision was triggered by the experience of senior with this new type of MCS, and the other is a rather
management that there was a mismatch: growth in cer- late adopter with less experience, both companies’ moti-
tain markets in reality was much higher than anticipated vation for introducing a new MCS based on the ideas of
by the traditional management model based on the annual BB was closely related to eliminating the comfort role of
budget. The rhetoric about a need for change therefore budgets.
emphasized the improved ability for TelCo to react faster to
customer requirements in times of increasing competition,
to be more responsive to strategy implementation and for- 4.2. A new MCS and changing information supply in
mulation, and to become able to initiate necessary action OilCo and TelCo
when needed and not only when planned.
Before the implementation of a new MCS, the annual
4.1.3. Summary budget process aggregated information flow into one set of
Table 1 summarizes the motivating factors and charac- data that was used for three different purposes: resource
teristics of the BB introduction process. Despite the fact that allocation, forecasting, and target setting. The rhetoric of
the companies differ in the way the models were devel- change in the MCS design in both companies was in line
oped, the main reason for the two companies changing the with the theoretical premises of BB and emphasized a need
MCS was the need for changing the mindset and behav- for separating these three tasks and thus the information
ior of decision-makers through provision of more dynamic provision for each of the tasks.
 A. Bourmistrov, K. Kaarbøe / Management Accounting Research 24 (2013) 196–211
4.2.1. Changes in target-setting procedures: some new
KPIs and ambitious targets
In both companies, there were some changes related
to strategic goals, targets, and key performance indicators
(KPIs). “Good performance” was no longer a positive budget
deviation. The meaning of good performance became more
nuanced. In the new system, the target-setting process
should make it clearer where the company was heading. It
is argued that this process should be ambitious and linked
to what was expected from the organization by exter-
nal stakeholders (e.g., stock exchange, banks) and should
be related to competitor performance. As one respondent
explained:
“We want a model and mentality where people stick their
heads out, dare to be ambitious, and . . . one thing is clear
that you never become a world champion in jumping if you
are unable to think in this way and say to yourself that this
is who you would like to become.”
In the old system, ambitious targets were not possible
because the budget number was the same for the tar-
get (where the company was hopefully heading) and the
forecast (what they believed was realistic). Because the
focus was on avoiding deviations from budgets, the realistic
number was emphasized. In this sense, the target-setting
process would be separated from the planning process and
instead only focus on developing targets and not on how
to reach them or whether there is access to the necessary
resources in order to do so.
In OilCo, the target-setting process was claimed to be
an “outside-in process” and not top-down, because the top
managers argued that the target was set not by them, but
by the market. The company aims to be among the 10
best companies in the world as a strategic goal. In having
this goal, the financial target was determined based on the
results of competitor firms.
This benchmarking idea was also used internally in the
company. Therefore, one difference noted with the new
system was that many targets and performance measures
had gone from absolute to relative, which created oppor-
tunities to compare the measures between departments
and other organizations. As a consequence, the focus was
much more on the relation between inputs and outputs,
e.g., productivity. For example, instead of using “market
share percentage” as a KPI, the company used “market
share rankings”. The focus and motivation should be on
stretching the target on the ranking list and not on reach-
ing a specific number set by the board. Stretching targets is
something that is now expected. As two of our respondents
explained:
“To get a performance improvement that is above the aver-
age, you should deliver more than expected. You do a good
job but this is expected!”
“EXP [department] is going to create a target review
now during the spring/summer because on the volume
side, we had two major successes that made the related
KPI very green. It means that the volume that is set is
too low in the sense that we don’t have anything to
stretch ourselves further on so it will be a target review.
Upwards!”
203
The main target is translated into targets for each
department. These targets are developed based on the
introduction of new KPIs. For example, in the oil explo-
ration department, these are “a unit cost” (US$/new barrel
found), “a volume target on new petroleum resources
to be discovered” or “new licenses” to be received. The
basis for the target setting in these cases might be license
commitments, the requirements for the company, histor-
ical trends, and rule of thumb. It is also important to
note that the target-setting process and communication
of targets should become digitalized in contrast to pre-
vious practice, when written reports were much more
common.
A similar approach was used in TelCo, even though they
called it a top-down process instead of an outside-in pro-
cess. Targets for business units were still generated at the
top level of the company. The argument was that these fig-
ures should still be related to what is expected by capital
markets in terms of turnover/margins from a company in
the telecommunications industry. Based on this informa-
tion, the annual business plan was developed and TelCo’s
targets for all business units were set. These targets were
mostly cost targets, which were becoming fixed annually
(without major review processes). These measures were
allocated to each sales unit in a top-down process, which to
some degree is reminiscent of the setting of a cost budget.
4.2.2. Changes in planning and forecasting: more
detailed future-oriented information
After the target-setting process is over, the planning
process would commence, addressing how to reach the
ambitious targets. The process is reminiscent of target cost-
ing, where the target is first set and then one determines
how to reach the target instead of the other way around,
such as in traditional budgeting. Plans were developed
based on the business unit’s (or divisional) plans and the
goal was to be action-oriented. In realizing the plans, realis-
tic forecasts should be produced. As one of our respondents
noted:
“. . . when we talk about forecasts . . . [it is important] that
we in the organization produce brutally honest forecasts,
but in such a way that the reporter will not be punished.
That is why these are decoupled from target setting.”
Thus, the idea is to predict the key developments in the
organizational environment and estimate their effects for
the organization and its ability to execute the original plan
and deliver the initial target. Forecasting, therefore, is dif-
ferent from target setting as it replaces “ambitions” with
“intelligent guesses” related to possible future states. The
aim of the forecast is to discover the gaps between the tar-
get, the plan, and the actual situation in a timely manner,
so that there is enough information about how actions can
be adjusted to achieve targets, or, in some extreme cases,
to decide whether the targets need adjustment. These tar-
get and planning processes create many opportunities for
discussions and debates about where the company is going
and how to get there.
Once target setting and planning have been completed,
it is possible to get an overview of all strategic goals and
actions as well as who in the organization is responsible
204 A. Bourmistrov, K. Kaarbøe / Management Accounting Research 24 (2013) 196–211
for each action. This is performed to follow the trans-
parency principle introduced in the new system when most
of the information in the company is accessible to every-
one through the management information system (MIS).
This transparency is believed to create increased learning
between departments in the business unit. In addition, it
should work as a control mechanism by creating peer pres-
sure.
In TelCo, few substantial changes have occurred with
regard to how forecasts are made, especially on the revenue
side. This is a very important tool for a telecommunications
company, and it is a technical exercise that uses different
types of databases (e.g., market trend analysis, macroeco-
nomic analysis, model building, prognosis generation, and
scenario building). However, these analyses are now con-
ducted more frequently and the degree of detail with which
forecasts are prepared has increased. The major change
was that the target-setting and forecasting processes are
no longer a part of the budget-preparation process. One of
the respondents expressed it in this way:
“Through the business plan discussions each year we
develop targets . . . The targets are ambitious . . . The fore-
casts are there to reveal gaps [in comparison with targets].
It is important [when making forecasts] . . . to avoid creat-
ing numbers we think a general manager wants to see”.
4.2.3. Changes in resource-allocation procedures: Better
dynamics and transparency
In OilCo, the resource-allocation procedure has changed
to create a more dynamic process. Resource allocation
was described previously as a long and time-consuming
process occurring once a year in the budgeting process.
However, this has changed gradually during the last 10
years and is now described as a more dynamic process. Cap-
ital resources are no longer allocated to the business units
or divisions on an annual basis, but are rather continuously
and dynamically based on new specific criteria.
The overall financing issue was previously handled by
detailed preallocations in annual budgets. This has changed
to a more dynamic, continuous, and self-regulating process.
New mechanisms include: (1) reliance on unit cost targets
(either a specific unit cost target or a targeted “league-table
cost position”); (2) dynamic project approvals in a con-
tinuous approval process based on common criteria; (3)
overall cost frames where the mechanisms mentioned are
less applicable; and finally (4) monitoring of actual project
cost trends, with intervention only where and when nec-
essary.
According to the respondents in OilCo, there are two
benefits of dynamic resource allocation. First, the man-
agerial attention has changed toward continuous focus on
finding profitable projects. As long as the overall financial
capacity was in place (determined by the group’s latest
financial forecast), a project would not be turned down
because of budgetary constraints, which had traditionally
been a common reason for turning down project proposals.
The second benefit was that the resource-allocation pro-
cess directed the financial resources to the best projects
within the entire organization, rather than to the best
projects within each department or business unit.
In TelCo, the department studied was not responsible
for investment decisions, so the major resource-allocation
decisions were related to operational expenditures where
the majority of costs were related to salaries. The budget
was the main document that guided resource alloca-
tion, indicating detailed annual costs in relation to 30–40
smaller budgets of units, branches, and subunits. The cost
categories were standardized and streamlined to achieve
consolidation between budgets at different levels. After
implementing the new system, the method of provision of
cost information was no longer related to the annual bud-
gets, but rather to internal needs for cost monitoring and
resource-allocation decisions at the level of the department
and its units. For instance, one of the respondents said:
“[Some] people are confused and don’t fully understand the
system yet [as it is sometimes] difficult to make decisions
through the organization when no limits exist. How do you
know whether your expenses are too high?”
The answer was to create accounting reports that were
flexibly designed with respect to the cost categories to
be highlighted (e.g., no formal centrally provided guide-
lines were available). Costs could then be grouped within
departments into more meaningful activity categories.
Information has also been more transparent in terms of
its availability for internal benchmarking between the dif-
ferent units to show comparative costs at the level of the
business unit, an initiative that was introduced at the busi-
ness unit level.
4.2.4. Summary
In summary, Table 2 presents changes in information
supply reported by the two companies. For OilCo, three
factors changed. First, the structure and organization of
information was improved after the introduction of the
new computer system (MIS). The system was evaluated by
respondents as a good system for describing KPIs, activ-
ities, and forecasts in relation to business results. Some
respondents also mentioned the benefits of benchmark-
ing and KPIs for OilCo values, which was communicated in
the “OilCo book”. Another important difference regarding
information supply was that some of the managers argued
that the new information system made more time avail-
able to do more informal information collection, e.g., to call
the different plants to discuss their problems and progress.
In that sense, the communication between actors becomes
more closely based on subjective and interactive proce-
dures and less on objective mechanical procedures. Third,
the access to information was improved. This is based on
a better MIS system, but also on the discussions that were
emphasized in the A2A processes (target reviews, resource-
allocation meetings, reflecting over different decisions).
In the case of TelCo, there were two major changes with
regard to the new principles implemented with GD. The
frequency of information supplied has changed. The intro-
duction of the new system resulted in the provision of
forecasts and reports on a more regular basis, enabling cor-
rective actions in relation to revenues and costs to occur
more frequently than before. The degree of freedom in how
information should be presented within the unit has also
changed. Managers now have more discretion to set up
 A. Bourmistrov, K. Kaarbøe / Management Accounting Research 24 (2013) 196–211
Table 2
Changes in information supply in OilCo and Telco.
Budgeting
Target setting Hierarchical (top-down)/negotiations
Planning/forecasts Closely linked to target setting,
forecasts are plans
Resource allocation Time-consuming, once a year
standardized processes
more meaningful (to them) cost categories, enabling com-
parison of subunits and their cost performance.
4.3. Decision-making experience: change in information
use in OilCo and TelCo
Respondents in both OilCo and TelCo reported that
information provided by the new system enabled them
to face decision-making situations in new ways. This is a
considerable change from before, whereby the companies’
objectives were to achieve the financial goals set in the
annual budgets.
4.3.1. Changes in information use in OilCo
The use of information related to targets was described
as much more important after the introduction of the new
system. For instance, previously it was unclear to the indi-
vidual what the actual target was and what responsibility
he/she had at the individual level besides spending the bud-
get. In addition to the focus on targets, the respondents also
experienced better control in major decision-making situa-
tions. Even if there were voices that disagreed about better
control, most of the managers agreed about it. Two of the
managers expressed it in these ways:
“I think it has been easier [with the new system] to make
the targets visible and that is better . . . we have through
this been more secure in that we are doing the right thing.”
“I would say that we have better control than before,
because we actively follow up the forecasts every month,
and have to explain the changes. It is helpful to be hands-
on.”
The feeling of better control seems to be based on
increased involvement in the activities, increased use of
controllers to get updated information, and that the con-
trollers could challenge the managers on their decisions.
This indicates that there was an increased interaction
between controllers and business managers after A2A was
implemented.
For instance, after the introduction of A2A, the fore-
casts became more realistic. The forecasts were now used
for revealing gaps between the effects of actions taken
and targets. However, this is still understood as making
excuses for why targets are not met, but the consequences
differ. Before, deviations were an indication of something
bad, while today they are an indication of changes in the
environment (which often cannot be influenced by the
manager). As a consequence, the new “deviations” create
increased learning in order to understand from a more
205
New MCS OilCo New MCS TelCo
Outside-in process, ambitious targets, Outside-in process, annual business
relative and new KPIs plan, mainly cost targets
Focus on gaps between targets and More frequent forecasts decoupled
forecasts, adjustments of targets is from target setting
possible, transparency
More dynamic systems in terms of Freedom in setting up cost categories,
project initiation, self-regulating internal benchmarking
process
comprehensive perspective why targets were not met.
Before, the deviations were a sign of failure that needed
to be corrected and avoided in the future, while in the
new system, the deviations are a positive learning opportu-
nity. The ambitious targets and the realistic forecasts were
supposed to differ and this started creative processes of
analyzing why there was a difference between where they
wanted to be and where they believed they would be. This
creative process was important for the organization, as one
of our respondents noted:
“Having stretch targets has consequences for building up
energy in the organization. Managing competition and
power relations is like in physics—you need an energy
driver.”
After the last step of the implementation of the A2A
system, resource allocation has been less bureaucratic and
much more dynamic, according to the respondents. In
OilCo, this was done by having meetings as soon as any
manager had ideas for a new project. A project can be com-
menced as soon as it is considered a good project. The
definition of a good project can change depending upon
current business conditions and the funding available to
the company. Several criteria have to be fulfilled in order
for the project to be considered “good”. The control of the
project portfolio takes place through a continuous overall
optimization based on criteria such as financial capacity,
strategic fit, and long-term profitability. Individual projects
are then processed through what is called the “capital
value process”, which has clear decision criteria as projects
are matured through different decision gates. A project is
finally approved and financial resources released at a deci-
sion gate. Hence, A2A has not greatly changed the ways
ongoing projects are controlled; it is much more about
how to select new “good” projects. However, for the selec-
tion of good projects, there are more negotiations involved,
because there are more objective criteria (such as strategic
fit and risk assessment) involved.
The managers at OilCo also described how the routine
decisions made on a daily basis have changed. Managers
have received more flexibility, as one of the respondents
explained:
“Managers are hired as managers because they are good
and proficient people and have abilities to evaluate the
correct course of action in each situation.”
For instance, this can be related to evaluation of the enti-
ties’ project development and decisions regarding whether
there have to be any specific actions taken. Many of these
206 A. Bourmistrov, K. Kaarbøe / Management Accounting Research 24 (2013) 196–211
decisions are made on a regular basis, and managers are
conscious about what information they need to complete
the job. For instance, managers at the production fields
need production numbers from the platforms to be able to
evaluate if the work is being completed on time. Depending
on what areas they work in, they also need informa-
tion about human resources, finance, marketing, and other
operations. With the new system, it is possible to make
these decisions automatically because the information pro-
cess has been made easier by creating KPIs, forecasts,
and actions in the A2A system. In addition, the KPIs are
marked red, yellow, and green so they will be easy to pri-
oritize. In practice, this means that A2A has taken over
many of the decisions for the managers in these types of
situations.
However, sometimes the manager has to make a deci-
sion with very little knowledge about the results. For
example, if something happened on a platform and the
managers have to make a quick decision (because an
unexpected work stoppage at a platform has a very high
alternative cost), they do not always use A2A, but instead
could use their own previous experience. Because of the
license agreements with partners, the managers need legit-
imacy for their decision. Therefore, right after the decision,
managers look for the information needed to back up their
initial decisions. Then, the information is used to rationalize
their previous decision.
4.3.2. Changes in information use in TelCo
We have also identified changes in TelCo in informa-
tion use as well as some paradoxes after the introduction
of GD. Respondents in TelCo reported that information use
has generally changed, enabling more dynamic decision-
making as a result of the introduction of the new MCS.
Information produced today is used to enable monthly dis-
cussions around deviations between the results of actions
and expectations. Problems can be pursued right away to
ensure that both revenue and cost targets are achieved. This
provides an opportunity to obtain quicker signals about
what has happened in the business environment since
the last forecast was made, e.g., “an earlier warning”. For
instance, if a local cost forecast deviated from the centrally
provided cost target, actions could be taken to reorganize
activities in the department in such a way that the fore-
casted cost would be in line with the cost target.
After the cost benchmark was introduced, respondents
in the department studied at TelCo reported falling costs.
It seems that increased transparency of the costs incurred
in different subunits represents a kind of self-regulating
mechanism, providing specific signals to decision-makers
about what decisions to make. Thus, a senior administrative
decision about how to reduce costs was no longer neces-
sary.
It seems that more frequent and regular informa-
tion supply has enabled a more frequent dialog between
controllers and mangers, a dialog that focuses on the under-
standing of costs and revenues. For instance, forecasts
prepared by controllers on the revenue side are validated
by managers in business units. Therefore, the effects of
planned marketing activities on revenues may be pre-
sented in a better way (e.g., in terms of getting new vs.
losing present customers, changing prices, possible effects
of marketing campaigns). In this sense, if there is a gap
between a revenue target and the local forecast, the group
discussion can start with what actions are needed to fill the
gap.
Before GD was introduced in TelCo, respondents
claimed that mathematics, which was built into the budget,
decided resource allocation. GD made resource allocation
within the department much less “automatic” and more
closely based on real needs for activities and use of capac-
ity, which introduced the necessity of internal negotiations
and dialog between managers. One example is the estab-
lishment of the Market Council (MC), which is a new way
to organize decision-making and allocate department sales
costs, the largest portion of department expenses. These
types of costs were predetermined in many ways at budget
time. Today, financial and labor resources in the depart-
ment related to sales activities are allocated in cooperation
between the managers of business units in the department
and in accordance with managerial consensus on business
priorities. Within the MC, four managers form four units
(three sales units, responsible for outlets for small enter-
prises, large enterprises, and the region, and the marketing
unit, responsible for e.g., pricing and product promotions)
that conduct negotiations and allocate resources based on
the agreement regarding what kind of customer-related
arrangements should be prioritized in a given period and
what kind of good should be supplied given present mar-
ket conditions. The idea is that priorities will be given to
those activities that in the management’s opinion provide
the highest revenue–cost ratio and allow the achievement
of both cost and revenue targets in the most efficient way.
Thus, information supplied by the new system is used to
conduct, negotiate, and allocate resources based on a con-
sensus about priorities. The difference from OilCo is that
the allocation decisions are constrained by a clearer cost
ceiling.
However, there are also some challenges reported
regarding the abilities of employees in subunits to take
advantage of the new system and make individual deci-
sions by relying on new information. As one manager
explained:
“Some . . . people became reluctant to make decisions. Ini-
tially, we believed that the expenses would become out
of control when the budget was removed. On the con-
trary, it showed that people did not dare to make decisions.
They were unsure whether they had the “budget” for it
and whether they had the authority to make such a deci-
sion. The decision escalates and ends up on the desk of the
financial director of each unit, who then has to make these
decisions. . . The objective of GD was to enable decision-
making further down in the hierarchy. Today the opposite
is happening.”
In summary, both organizations reported that the use
of information changed after the introduction of BB. Infor-
mation use changed not only regarding information for
strategic purposes, but also for the daily use of informa-
tion by the individual. To ensure that the managers had
good enough information, interaction on a day-to-day basis
between employees increased.
 A. Bourmistrov, K. Kaarbøe / Management Accounting Research 24 (2013) 196–211
5. Discussion
In the previous section, we described changes that
occurred in the organizations studied in relation to infor-
mation supply and information use under the new MCS.
In this section, we provide a theoretical understanding of
these changes.
5.1. “Discomfort” with decision-maker “comfort” zones
established by use of budgets motivates the introduction
of BB
BB was introduced in both companies because of dis-
satisfaction with the fact that budgeting practices were
associated with the establishment and maintenance of
decision-maker “comfort zones”. Those managers who
argued for a move toward BB seemed to have operated in
their “discomfort” zones for a long time during budgeting
(Kira and Korpelainen, 2012). On the one hand, they expe-
rienced a lack of meaningfulness and negative attitudes
toward their work as a result of the misalignment between
ritualistic and gaming behavior instituted by the use of
budgets, and the managerial mindset required to manage
contemporary organizations in the turbulent and compet-
itive business environments on the other. These managers
recognized that budgets created and maintained “comfort”
zones for the majority of decision-makers in their organi-
zations when they were using a limited set of previously
learned behaviors to deliver a steady level of performance
without a sense of risk and work challenge. The “comfort”
zones that budget use had created were also increas-
ingly perceived as becoming more and more dangerous
in the attempt to pursue strategic initiatives in OilCo and
TelCo.
This “discomfort” with the “comfort” role of budgets led
to changes in the MCS based on ideas of BB. The princi-
ples behind the new MCS design were not based on the
introduction of new technical accounting changes; instead,
the techniques were supposed to be used differently, mak-
ing this more a mindset and behavior change. The mindset
change consisted of improving the decision-makers’ degree
of interaction with the business environment by appreci-
ating their forward-looking abilities and ability to stretch
beyond their own capacity as well as to provide “intelligent
guesses”, revealing ambitions and thus a more proactive
and challenge-seeking mindset. On the behavior side, man-
agerial decisions and actions were supposed to be more
flexible, interactive, business-needs driven, and learning-
oriented to stimulate the use of resources more effectively
by avoiding previous gaming behavior.
In both companies, the new MCS stimulated change in
behaviors and mindsets by introducing ambitious targets
and at the same time realistic forecasts and dynamic resource
allocation. This sometimes created a gap that had to be
closed in dialog and close integrations between the dif-
ferent actors. There are different types of dialog involved
now, e.g., MC in TelCo and “target reviews” in OilCo. In
both organizations, the realistic forecasts were updated
continuously, which resulted in better opportunities to
learn from changes in the environment and thereby seize
new business opportunities. The mindset and behavior
207
change was also supposed to create a dynamic resource-
allocation process in order to be more efficient in the use
of resources. In both organizations, the resource-allocation
process consisted of an interaction and dialog between the
business unit managers to decide which projects to under-
take (OilCo) or what operational activities should have
priority in the next period (TelCo). As a result, employ-
ees experienced increased empowerment as they were
included in more discussions, debates, and learning pro-
cesses.
Abandoning the annual budget and introducing the new
MCS based on the ideas of BB can thus be understood as
an attempt to move managers outside the previous “com-
fort” zones embedded in their use of budgets and move
them to new “comfort” zones characterized by reestablish-
ing realism in handling management situations. In realizing
this ambition, changes in the MCS can be understood in
terms of putting decision-makers into a transitional stage
– a “stretch” zone, i.e., creating conditions where they have
to think in a new way and be able to experiment with new
and different behaviors (White, 2009). This conceptualiza-
tion of the problem required reconsideration as to what
kind of information the budget, as a control and informa-
tion tool, had conveyed to decision-makers and what kind
of new alternative information supply could facilitate the
decision-makers’ transition toward the “stretch” zone.
5.2. Moving decision-makers toward a “stretch” zone
through unbundling information previously compressed
in budgets
When it comes to supply of information, budgets are
criticized as providing biased images of the organizational
business environment because they are heavily influenced
by past budget behavior and previous expectations (e.g.,
Grønhaug and Ims, 1988). In this reality, controllers func-
tion more as “managerial playmates” in their budgeting
games, rather than “information partners” for decision-
making (Bogsnes, 2009). For managers, the use of budgets
seemed to hamper their most important ability, the devel-
opment of better knowledge of their external business
environment (Hall, 2010). The “comfort” zone of bud-
gets displaced the abilities of managers to react faster
to changes in the business environment. Both OilCo and
TelCo handled the need to move decision-makers into a
“stretch” zone by improving the supply of information
through unbundling information compressed into budgets.
The previous system was replaced with new planning, fore-
casting, and resource-allocation processes.
This, however, would not be enough on its own to
move decision-makers into the “stretch” zone. Extreme
decentralization, loss of coordination, reaching the “dan-
ger/panic” zone, and even organizational collapse were all
possible scenarios when such a central mechanism as an
annual budget is taken away and when new information
supply mechanisms are not in place. This is a plausible sce-
nario as confirmed in some instances in our companies:
when abandoning manager dependence on the budget and
increasing empowerment produced a reaction in terms
of reluctance to take authority for decisions or increase
the incentive to re-introduce the older practice, i.e., what
208 A. Bourmistrov, K. Kaarbøe / Management Accounting Research 24 (2013) 196–211

Marginson and Ogden (2005b) called the “design-behavior” Table 3

New use of information in OilCo and TelCo in unstructured decision-
paradox. Thus, moving toward BB required learning about
making situations.
how to move the decision-maker into the “stretch” zone,
thus avoiding new “discomfort” or “danger” zones and Changes in OilCo TelCo
developing an information supply to facilitate the transi- information use

tion in mindset and behavior. Improved answer Applied only to Applied to

OilCo and TelCo have both experimented with an infor-
mation supply solution distinguished by unbundling the
information “welded” into the budgets into three distinct
information tools for different purposes. From an aca-
demic point of view, BB does not introduce new accounting
techniques; instead, it introduces new ways of using and
improving the use of existing techniques. Although the
idea of solving the problem of the dysfunctional effects
of budgeting by information unbundling is not new (e.g.,
Jensen, 2003), the separation of budgets into three dis-
tinct mechanisms, i.e., (1) rolling forecasts, (2) ambitious
target setting, and (3) new ways of allocating resources,
can be seen as an important information supply innova-
tion to move decision-makers into the “stretch” zone. Thus,
finding new ways of coordinating a new information sup-
ply to managers seemed to reestablish the importance of
individual perceptions in the “stretch zone”. In doing that,
new opportunities were also created for more decentral-
ized decision behavior based on reflective thinking and
critical questioning. This implies the importance of a focus
on individual behavior.
5.3. New information supply provides more appropriate
information for decision-making in the “stretch” zone
Our analysis demonstrates that new information
streaming from the unbundled information supply sys-
tem was found to be important and useful. This illustrates
that demand for new information and its use was an
indispensable part of the transition in the mindset and
behavior of employees in our case organizations. For man-
agers who were in the “discomfort” zone during the annual
budgeting regime, it was easier to start using new infor-
mation. They seemed to have an appropriate mindset from
before the MCS, and by displacing budgets with new and
more dynamic information of new qualities, it was pos-
sible to change behavior and move decision-makers into
the stretch zone. For other managers, this transition to a
“stretch” zone was far more difficult as it also required
a mindset change and corresponding learning by doing,
experimentation, and acquisition of new competencies and
skills in relation to use of new information (Kaarbøe et al.,
2013).
In a “stretch” zone, managers have to face different
decision-making situations in a new way and therefore
are needed to be more selective in distinguishing between
what information is needed to handle these situations.
In terms of Burchell et al. (1980), the new system has
improved the handling of typical structured decision-
making situations (for summary of new use of information
in OilCo and TelCo in unstructured decision-making sit-
uations see Table 3). When information was needed to
give answers to decision-makers related to standard oper-
ating procedures in platform operations in OilCo and the
marketing campaign implementation in TelCo, the new
machine routine, automatic cost-framed
computer-based decisions
decisions
Improved learning Stimulating dialog Benchmarking
machine controllers vs. based on increased
managers Better transparency
learning about the Revenue/cost-
environment related group
discussions
Ammunition Priorities in times MC’s negotiations
machine of financial
crisis/translation of
KPIs
Rationalization Quick decisions in situations of high
machine alternative/operation costs
information system provided better and timelier access to
information through the IT system. This has improved the
speed of decisions and allowed “better informed” answers
and, in some situations, even the “automatization of deci-
sions”.
However, this has also saved time for managers as
they are less engaged in routine work and therefore can
spend more time on other more important managerial
issues associated with being in the “stretch” zone. For
instance, in the “stretch” zone, decision-makers seem to
have enhanced their mental abilities to interact with and
learn from the business environment through access to
and use of more transparent information, benchmarking,
and sensitivity/trend analysis. Equally importantly, man-
agers have demanded and used information to support the
new type of behavior in terms of negotiations and dis-
cussions (e.g., MC and capital project assessment). In this
sense, being in the “stretch” zone strengthens other impor-
tant aspects of the use of managerial information such
as attention-summoning, signaling that some issues need
to be further investigated. Thus, changes in mindset and
behavior in the “stretch” zone supported by changes in
information supply and use have facilitated organizational
change.
6. Conclusions and suggestions for further research
The aim of this paper was to study how changes in
the MCS design principles based on implementing the
ideas of BB in a research context of two multinational
companies have influenced the transition of decision-
makers from “comfort” to “stretch” zones, and how this
transition changed the supply of and demand for manage-
rial information. We conclude that “discomfort” with the
establishment and maintenance of the “comfort” zones for
decision-makers by annual budgeting forced the organiza-
tions to experiment with the new MCS. Implementing BB
was meant to change information supply, i.e., to unbundle
the information compressed into budgets related to target
setting, forecasts, and resource-allocation processes. In two
 A. Bourmistrov, K. Kaarbøe / Management Accounting Research 24 (2013) 196–211
reasonably similar organizational contexts, this paper illus-
trates how new information from an MCS based on the new
design principles facilitated transition in the mindset and
behavior of decision-makers in various situations as well
as why and how information use in these situations has
become different from previous budget-focused practices.
Thus, on the basis of empirical evidence from two com-
panies, we conclude that BB practices help design a new
type of MCS and information supply with the aim of mov-
ing decision-makers into the “stretch” zone. BB is thus a
search for new and more nuanced “comfort” zones, where
decision-makers will be, to an increasing degree, able to
positively appreciate the entrepreneurial and challenging
nature of managerial work and also be able to use new
information for increasing interaction with the internal and
external business environment, as well as for negotiations
and learning.
This paper is only the first step in exploring BB practices
and further studies are needed to follow up on these two
companies and other organizations experimenting with BB
in order to comprehend the nature and implications of
changes in their managerial practices. Compared with pre-
vious studies of BB practices (e.g., Hansen et al., 2003; Libby
and Lindsay, 2009), this study contributes to a better under-
standing about how organizations that perceive budgeting
as a problematic practice change their MCS and informa-
tion supply and how individuals in organizations change
ways of using information.
Furthermore, instead of focusing on BB as a small opera-
tional change where the main change is to switch employee
compensation from budget-based to relative performance
contracts (Hansen et al., 2003; Hansen, 2011) or only the
diffusion of the label “beyond budgeting” (Becker, 2011;
Libby and Lindsay, 2009), we build on Østergren and
Stensaker (2011) in focusing on BB as a change in mind-
set when budget functions are unbundled. We developed
these ideas following Burchell et al. (1980), who focus on
different decision-making situations and how information
is used in different situations.
What is particularly important is that this transforma-
tion seems to be not only a matter of changes in accounting
techniques (e.g., in terms of supply and use of information),
but also a matter of change in the mindset of man-
agers/controllers and in their ways of behaving around and
communicating about core business, external and internal
environment, role of people and organizations in society,
etc. This has implications for the MCS design theories: the
question of MCS design should address the effects it creates
for individual decision-makers and, e.g., how it influences
their “comfort”, “discomfort”, and “stretch” zones.
These new theoretical artifacts of BB can be studied as
a new “accounting regime”,5 depicting the importance of
5 ful for funding from Statoil. The funding has been provided
According to Jones and Dugdale (2001), an accounting regime is “a sys-
tem that operates: at a macro level of national and international society,
polity, and economy, at the micro level of organizations, and permeates
the personal level where accounting constitutes both rules and resources
for action. It encompasses an economic dimension (calculation of the pro-
duction, distribution and consumption of value), a political dimension
(regulation and accountability), and an ideological dimension (forms of
accounting reflexivity)” (p. 58).
209
understanding its effects on economic, political, and ide-
ological dimensions. We have shown that changes in the
accounting dimension are very much based on the appli-
cation of well-known accounting practices (e.g., rolling
forecasts, target setting, etc.). What is new and worth fur-
ther study is how these “hard” accounting techniques are
coordinated and mobilized, and especially balanced with
more “soft” performance measures using words instead of
numbers. If we look at the organizations from a dimen-
sion of power and politics, what are the implications of BB
on the changes in the accountability relations in the sys-
tem, especially when the accountability focus has shifted
from limiting costs to sound managerial judgment? In that
case, how has the substitution of hierarchy with individ-
ual reflexivity, where the individual is supposed to be able
to judge if the decision is right, improved the ability of
individuals and organizations to learn?
Many organizations have joined the BB movement over
time and many more will join it in the future, which
will provide an interesting setting for research. Thus,
researchers can study how and under what circumstances
these management practices work in order to build better
theories that are useful for accounting practice (see e.g.,
Malmi and Granlund, 2009). Further studies are needed
(as also suggested by Jones and Dugdale, 2001) to track
regimes to observe their waxing and waning over time
and geography to see their movement from organization to
organization and from country to country. Furthermore, it
is interesting to identify different variations in accounting
regimes, their differences in the degree of internal inte-
gration, their relationships with other systems, and their
influence on forms of governance. The final step would
be to draw from all these studies in order to develop a
comparative view of the ways in which accounting and
MCS influence the social structures of modern society, the
agency of human beings, and the relationship between the
two.
The more practical implication of our study demon-
strates that it is important that top managers in
organizations have the ability to recognize and evaluate
the limits of their MCS. As design is never perfect, there
needs to be continuous mobilization of the design and
changes to the organizations around the new information
systems (Mouritsen, 2005). Organizations that experiment
with their MCS should be prepared to discover that aban-
doning budgets and introducing a new MCS should never
be seen as a “destination”, but rather as a “journey”.
Acknowledgments
We gratefully acknowledge all the OilCo and TelCo
employees and managers who aided this research. We
would also like to thank the BB research group and the
33rd EAA Congress (Istanbul, Turkey). We are also grate-
on an unconditional basis and without any specification
regarding how the funds should be used. Our gratitude
goes to Online English for providing us with language help.
Finally, we are very thankful to two anonymous reviewers
as well as a journal editor for their valuable and important
comments, which improved the quality of the manuscript.
210 A. Bourmistrov, K. Kaarbøe / Management Accounting Research 24 (2013) 196–211

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