Deviations from the theory

Theory cannot always be applied in practice exactly the way how theory explains the guidelines to perform a particular practice. Deviations can be occurred when the theory is completely or partly different from application of those theoretical concepts in practice.

• Encouraging rigid planning and incremental thinking

Roll forward budgeting leads MMM toward rigid planning because they mainly focus on short term perspective and the management of MMM makes assumption regarding forecasting on incremental basis. Therefore within the organization incremental thinking is motivated.

• Being time-consuming
• Producing inadequate variance reports leaving the 'how' and 'why' questions unanswered
• Ignoring key drivers of shareholder value by focusing too much attention on short-term financial numbers

Roll forward budgeting system may ignore the goal of increasing shareholders long term value since it pays too much attention on short term goals & objectives.

• Being a yearly rigid ritual
• Tying the company to a 12-month commitment, which is risky since it is based on uncertain forecasts

The company cannot make forecasts with 100% certainty since it’s a service sector company. It cannot be recommended to tie the goals of the company into an annual commitment. It must pay a greater attention in setting the targets for more than one year and consider the variances in long term perspective.

• Meeting only the lowest targets and not attempting to beat the targets
• Spending what is in the budget even if it is not necessary in order to guard against next year's budget being reduced
• Achieving the budget even if this results in undesirable actions.