Budgeting in the information age: a fresh approach

For hospitality organizations to compete successfully in the emerging information age, with its emphasis on innovation, quality and speed, it is suggested that they must adopt more flexible, responsive and empowered management structures. However, if such developments are to prove effective, it is essential that hospitality organizations also overhaul their accounting systems, most of which were designed to support the previous industrial era’s focus on volume and productivity. Indeed, there is a concern that traditional budgeting systems – with their typical bureaucratic encouragement of internally-focused, department-centred cost minimization – may present a significant barrier to effective change. It is proposed instead that a fresh approach to the objectives of budgeting is needed, involving “alternative steering mechanisms” that promote empowerment, flexibility and knowledge-sharing. This suggestion is supported by evidence from an American hotel where such a fresh approach to budgeting has been developing, “matching” its more progressive management structure.