Budgeting and alternative solutions in Archer - the well company

Abstract

This thesis is based on criticism against traditional budgeting and explores an alternative solution within the oil service company Archer. It is limited to theory from Beyond Budgeting and covers the Norwegian legal entities Archer Norge AS, Archer AS and Archer OilTools AS. The thesis is based on an explorative design through the method of collecting qualitative data using a cost analysis of the current budget process within the company, as well as interviews of a selection of leaders. The cost analysis is centered on the cost controller level, but is extended using estimates from leaders and associates giving input to the cost controllers. Thereby all directly involved personnel in Norway are included in the analysis. The interviews seek to find if the criticism against the budget is valid in within Archer and whether the implementation of an alternative solution could be beneficial. The interviews are of four Norwegian leaders, at different levels in the organization. The budget process was identified to be too slow to follow the current market situation of the company, creating a dependency on revised forecasts to be able to act in time on the rapidly changing conditions. A potential benefit from discarding the current budget process was preliminary confirmed, conditioned by further internal research including involved personnel, stakeholders and an evaluation of identified benefits versus drawbacks. Negative incentives of setting bonus targets on fixed budget figures was identified to be present in the company, and setting targets with alternative parameters were suggested to be beneficial, regardless of whether the company choose to keep the current budget process or not.