=Paper=
{{Paper
|id=Vol-2581/aesp2020paper4
|storemode=property
|title=A Framework to Combine Corporate Budgeting with Agile Project Management
|pdfUrl=https://ceur-ws.org/Vol-2581/aesp2020paper4.pdf
|volume=Vol-2581
|authors=Christian Ploder,Thomas Dilger,Reinhard Bernsteiner
|dblpUrl=https://dblp.org/rec/conf/se/PloderDB20
}}
==A Framework to Combine Corporate Budgeting with Agile Project Management==
https://ceur-ws.org/Vol-2581/aesp2020paper4.pdf
A Framework to combine Corporate Budgeting with
Agile Project Management
Christian Ploder Thomas Dilger Reinhard Bernsteiner
Management, Communication and IT Management, Communication and IT Management, Communication and IT
MCI Entrepreneurial School MCI Entrepreneurial School MCI Entrepreneurial School
Innsbruck, Austria Innsbruck, Austria Innsbruck, Austria
christian.ploder@mci.edu thomas.dilger@mci.edu reinhrad.bernsteiner@mci.edu
Abstract—Companies in all different sizes and industries have (e.g., the logic of patient safety was paramount due to the
to deal with fast-changing environments and therefore run into health service context)
troubles to keep the same pace in their internal governance • Appreciating the temporal nature of ERP implementation
processes supported in most cases by Enterprise Resource Plan-
ning systems (ERP). One dedicated situation lots of companies requires a life-cycle-based approach to ERP evaluation that
have to deal with is the challenge to fit fast, agile project goes beyond the immediate evaluation and incorporates
management ideas into a relatively slow and classical budgeting outcomes from different phases of the life cycle.
model for monitoring reasons. There are several budgeting
models described in theory, like activity-based budgeting, zero- Not only the project management organization (PMO) and
based budgeting, value-based management, profit planning, and the information technology department (IT) has to drive a
the very often applied rolling budgets and forecasting model. In successful implementation - almost all company areas have
this paper, the authors will elaborate on the troubles occurring by to get involved. It is about supporting the existing business
the combination of the agile and classical oriented concepts and
will introduce a combined framework for better integration of processes, checking the requirements, and accurately determine
the financial planning aspects into the agile project management the new ERP system and the fulfillment of the project goal
ideology. The paper has to be seen as the starting point for a to gain efficiency in the long run. Besides the challenges in
discussion of the elaborated situation. ERP project planning, the second important aspect lies in
Index Terms—agile project management, budgeting, corporate the management of the financial situation of the company
governance, ERP system implementation
as a whole and especially the budgeting situation regarding
I. I NTRODUCTION all necessary tasks in the PMO. Lots of companies rely
Enterprise Resource Planning (ERP) implementation projects on their budgeting processes and stick to them for a long
can be managed and deployed with different project manage- period neglecting a need for adaption regarding faster-moving
ment (PM) methods. In addition to classic, waterfall driven company structures and support of innovations. Budgeting is
approaches that are most often used by ERP implementation sometimes politically influenced, and the following downsides
partners, the usage of agile project methods is increasing [1]. can be named [4]:
The challenge in the method selection is based on the culture • budgets are rarely strategically focused and are often
of the implementation partner and the companies culture itself. contradictory
A lack of knowledge and missing environmental factors leads • budgets concentrate on cost reduction and not on value
to troubles in the use of agile concepts [2]. The following creation
overview in section II should give an orientation. • budgets constrain responsiveness and flexibility and are
Hardly any company project presents a similar overwhelming often a barrier to change
challenge, as the introduction of an ERP system and there are • budgets add little value - they tend to be bureaucratic and
no other system implementations combined with such high discourage creative thinking
failure rates than ERP system implementations ranging from 50 • budgets are time-consuming and costly to put together
to 70 percent - therefore the authors name different reasons [3]: • budgets are developed and updated too infrequently -
• Most of the failure rates are based on project manage- usually annually
ment conceptions by measuring the success in terms of • budgets are based on unsupported assumptions and guess-
completion time and costs work
• Even though the implementation project may be construed • budgets encourage gaming and perverse (dysfunctional)
as a failure upon immediate completion based on project behavior
management criteria, the project may be considered a • budgets strengthen vertical command and control
success during the larger life cycle of the ERP system • budgets do not reflect the emerging network structures
• The implementation context has a bearing on the ERP that organizations are adopting
evaluation, and it may privilege certain measures other • budgets reinforce departmental barriers rather than encour-
than project management effort to define ERP success age knowledge sharing
Copyright © 2020 for this paper by its authors. Use permitted under Creative Commons License Attribution 4.0 International (CC BY 4.0).
AESP20: 1st Workshop on Requirement Management in Enterprise Systems Projects @ SE20, Innsbruck, Austria 19
• budgets make people feel undervalued
Overall, the predominant theme in the literature is that
planning and budgeting processes traditionally used in many
organizations are failing to deliver results. Fundamentally, the
problem is that they add limited value to the management
of businesses and can be seen as an obstacle for agility and
innovation [4].
Thinking about ERP implementation projects, the following
situations have to be taken into consideration: (1) initial
ERP implementation, (2) roll-out of an existing system to
different subsidiaries or branches, (3) ERP upgrading as well
as (4) external maintenance and system support to assist post-
implementation monitoring [5]. These mentioned types of
situations combined with the project factors like risk tolerance
of the stakeholder, geographic distribution, organizational Figure 1: Classic Project Management - Amount of open
structure, and quality standards can give a good indicator for Requirements.
the selection of the right project management methodology.
Moreover, if it is not clear if to go for classic or agile
project management concepts, the hybrid methodologies try A variety of tasks, such as configuration, data migration,
to overcome the cons of both to use the benefits of them, as the realization of interfaces, customization, the creation of
explained in the next section. forms, lists, and evaluations, are performed to finally reach a
well-integrated system. After successful integration tests, a test
The authors used the methodology of literature research [6]
operation time frame will start, and the training of employees
to gain knowledge about the current state of discussion and
has to be finished. The Go-Live date starts the real work in
enriched the findings with a design thinking workshop [7], [8]
the new system, which is normally the end of the project.
to develop the framework and to answer the given research
The responsibility of the system can then be transferred. After
question: How could a framework look like to combine agile
the first months of the life system used, further business unit
project management with budgeting approaches?
roll-outs can be performed. As shown in figure 1, the amount
II. P ROJECT M ANAGEMENT AND B UDGETING of open requirements is defined at the start of the project and
later on implemented with a shrinking backlog except some
This section gives an overview of project management meth- additional requirements coming into the project by change
ods and explains the principles of budgeting. The developed request (shown with the arrow) over the time.
framework is a synergy of the explained concepts to overcome
the challenges which are described in section I. B. Agile Project Management Methods
The agile project methodology is based on a cyclical
A. Classical Project Management Methods procedure and was developed in the 1990s based on four
Classical project methodology based on a waterfall approach values and 12 agile principles [9] as a consequence of the not
defines different phases, which can be distinguished by striking satisfactory situation of classical project management methods.
"milestones". These milestones offer the advantage of having The enormous time lag between blueprints (requirement
binding phase results, which can be easily verified and specifications) and the delivery of the finished product led
documented in a project schedule, which is a binding set to many unfinished projects. Business process requirements
of tasks to estimate the economic volume of the upcoming and customer requisites are changing over this lag time, and
project. As in the classical project management approach, the final product did not meet the expectations of the users
well-founded planning is required, such a project starts with defined in the blueprints. Waterfall based software development
the contracting phase, because. Central contract components models were not meeting the demand for speed and did not
are the descriptions of the scope of the project in the form take advantage of how quickly software could be altered.
of a specification document, a binding project timetable, Well documented agile methods like Scrum can also be used
and corresponding budgets of time and financial volumes. for stringent tasks like ERP implementation [10]. Therefore the
These contract details build the base for all upcoming project whole set of requirements is implemented in cycles (sprints)
activities. lasting two to four weeks, and each sprint becomes a sub-
After the project initialization and the creation of technical project fully realized. A reliable and well-educated team is
concepts based on the specifications, the implementation phase essential to handle the daily challenges and manage the project
starts. Within the implementation phase, the main work is to with all dynamics. Every sprint has to be tracked and finished
implement the concepts of the specialists to support the given by the customer‘s signature of the requirement specification.
business processes best in the new ERP system. The external Based on this cyclical procedure, the scope of the project
implementation partner mostly drives this phase. remains dynamic: setbacks and additional work in dedicated
AESP20: 1st Workshop on Requirement Management in Enterprise Systems Projects @ SE20, Innsbruck, Austria 20
cycles may or may not be necessarily compensated by quick The realization of the requirements will be done during
results in others. the sprints for all defined requirements (backlog) and further
As shown in figure 2, the amount of open requirements is on tested on a functional level. In the final stages, such as
defined by the sprint cycles, and only the first requirement integration and system testing, project management comes back
set would be a higher amount. The following sprint amounts to the phase-oriented methods of classical project management.
can be seen as flexible. Many ERP project contracts are not Selecting the right mix of methods can be seen as an absolute
up to this dynamic, and when thinking about the budgeting challenge for every company and one possible way is explained
procedure in such a situation, it gets tricky, especially in big by the paper of Binder, Aillaud and Schilli [11], which
companies [1]. In some cases, the application of agile methods combines the ISO 21500 with the agile idea.
can lead to a one-sided postponement of the project risk to the
client, this under the circumstances with higher expenses and D. Budgeting Methods - Beyond Budgeting
not planable budgeting situation. One of the classic methods used for budgeting is the rolling
budgeting, which is highly integrated into the strategic view of
a company [12]. The principal idea is to combine the upcoming
year with the planned financial perspective and then within the
next year reveal and improve the picture by doing under-yearly
reviews in the form of forecasts (FC). This is the current way
lots of companies are dealing with their budgeting situations
[13]. This way of budgeting is shown in figure 3.
Figure 2: Agile Project Management - Amount of Open
Requirements.
In science, lots of different studies can be found about
the selection of the right approach for every particular project
situation. As an example, the paper from Vasileva and Berezkina
[5] determines that the combination of project factors and Figure 3: Basics of Rolling Budgeting.
project types has to be taken into consideration to select the
corresponding methodology which is in case of agile methods
There is a long discussion in science and practice about the
Scrum as the by far most often used one.
improvement of budgeting concepts. Historically, budgeting
plays an essential role in companies based on the control aspect
C. Hybrid Project Management Methods
of the used tools [14]. However, Gurton [15] claimed budgeting
The disadvantages of agile project methods can be overcome "a thing of the past". There exist several techniques which
by compensating for a hybrid ERP implementation methodol- have a particular influence on budgeting constraints. Taken
ogy. It will be on the upper levels and, therefore, also in the first into consideration that income influences budgets, one example
project phases (mostly pre-project, requirement analysis, ERP is earnings management [16]. Different surveys, especially
selection, and technical concept) the classical, phase-oriented in Europe, report an unsatisfactory budgeting situation in
methods can be applied. That helps to establish the project companies [4]. They mostly have implemented a rolling
contracts with the needed information about a binding time budgeting process, as shown in figure 3. Hope and Fraser [17]
and performance frame. It can help to create a more or less developed the Beyond Budgeting Roundtable (BBRT) which
possible complete and consistent requirement description. is a conglomerate of individuals and companies which trust
ERP systems do not only offer an unusually high-level range in management without budgets. Their less radical idea is
of functions, but additionally, these functions are still highly not about improving existing budgeting methods but the total
integrated. The result is a strong dependence of functions elimination of budgeting with the classical approaches [17],
among each other. At the end of the technical concept phase, [18]. For this development three different arguments can
the translation to a binding requirement specification fixes the be named: (1) the missing link of the view of academic
needs within the project. research and practically useful methods [19], (2) there is low
AESP20: 1st Workshop on Requirement Management in Enterprise Systems Projects @ SE20, Innsbruck, Austria 21
evidence on how companies implement different budgeting inflexible to support agile project management methods. One
methods or overcome them totally [20] and (3) there is an possible solution could be the implementation of the beyond
antithetical correlation between budgeting and a fast-moving budgeting method to use it for the PMO related monitoring.
environment that needs adoptions and changes combined with Therefore a general set of rules has to be defined to implement
uncertainty [21]. the given principles. The following section will present the
Based on the work by Libby and Lindsay [13] they are model and explain it based on the principles and their concrete
not suggesting a company to take a decision for or against implementation.
traditional or beyond budgeting - they suggest to deeper III. C ONTINUOUS F ORECASTING F RAMEWORK FOR AGILE
analyse the different situations found in companies to find P ROJECT M ANAGEMENT
out more fruitful use-cases. This is the starting point for the
framework developed by the authors of this paper, focusing By combining the needs for a more flexible, innovation-
on the particular situation of budgeting dissatisfaction in friendly, and flexible ERP implementation tool-set (maybe a
a company: agile managed ERP implementation projects. hybrid one) with the idea of an appropriate budgeting method,
Therefore in the following paragraph, the principles of the authors developed the Continuous Forecasting Framework
beyond budgeting are explained, and later on in section III, shown in figure 4. The financial truth can be reached over
all the principles are integrated into the framework, and time by assessing the current situation based on the given
implementation scenarios are suggested. The BBRT published 12 principles in subsection II-D and therefore some concrete
12 principles which are divided into two groups: Leadership implementation aspects are given by the authors based on their
Principles and Management Processes [17]. experience in ERP implementation and budgeting scenarios.
Leadership Principles: Leadership principles for Agile Projects:
• Purpose - Establishing Engagement for a project by
• Purpose - Engage and inspire people around bold and
transparent communication and good choices of project
noble causes NOT around short-term financial causes
members
• Values - Govern through shared values and sound judg-
• Values - Setup a base set of "rules of the game" but be free
ment NOT through detailed rules and regulations
to change and develop these over time and also externals
• Transparency - Make information open for self-regulation,
have to comply with these rules
innovation, learning and control NOT restricting it
• Transparency - Not only go for project newsletter, open
• Organization - Establish a strong sense of belonging
all activities regarding the projects (open PMO meetings,
and organize around accountable teams NOT going for
open strategic information)
hierarchical control and bureaucracy
• Organization - Establish a strong sense of belonging in
• Autonomy - Trust people with the freedom to act NOT
the project team by team events and team training - give
punishing everyone if someone should abuse it
support to go for the new work paradigm
• Customers - Connect everyone‘s work with customer
• Autonomy - Trust people within the project based on their
needs NOT going for conflicts of interest
selection and knowledge - Train them in agile methods
Management Processes: and budgeting methods
• Rhythm - Organize management processes dynamically • Customers - Define the clear and realistic responsibility
around business rhythms and events NOT around the of the customers in the sprint cycles
calendar or planning cycles only
• Targets - Set directional, ambitious and relative goals NOT Management processes for Agile Projects:
go for fixed and cascaded targets • Rhythm - Organize all the management processes around
• Plans and forecasts - Do planning and forecasting of lean the sprint ideas of the agile method and do not base it on
and unbiased processes NOT rigid and political exercises timelines
• Resource allocation - Foster a cost-conscious mindset and • Targets - Decide on relative targets with coupling them
make resources available as needed NOT through detailed to sprint intervals for observation and control
annual budget allocations • Plans and forecasts - Try to support the planning and
• Performance evaluation - Evaluate performance holistically forecasting on existing project data with a support software
and with peer feedback for learning and development NOT solution to keep traction
based on measurement only and NOT for rewards only • Resource allocation - Communicate clearly if there are
• Rewards - Reward shared success against competition wastes recognized and foster a cost-conscious mindset at
NOT against fixed performance contracts all project members - also communicate it to the external
partners
E. Problem Statement • Performance evaluation - Evaluate performance holistically
Based on the given models for project management and ongoing and based on sprint cycles at least four times
budgeting, the challenge which the authors will focus on can be a year - not once at the end of the year for the project
described as follows. The traditional budgeting models are too manager bonus
AESP20: 1st Workshop on Requirement Management in Enterprise Systems Projects @ SE20, Innsbruck, Austria 22
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