The following is a copy and paste from this discussion with Pierre 303: Let us take an example where I believe that it is clear that there are no reasons for budget. Imagine a company, which has virtually limitless capacity to produce (for example if they have infrastucture which can serve 1 million or 10 million customer by just buying a couple more servers and having a few more support staff). Such a company is exclusively concerned with getting dollars out of their infrastructure (to cover their fixed costs). I believe, then that it is meaningless to say to a sales team that they need to watch their cost. It does not matter what expenses they have as long as they make a profit and are aware of the cash-flow of the whole company. If that sales manager knows that he/she can sell for 10 million by investing an additional 100.000 dollars, then it is a no-brainer, no more senior management needs to consider this, he should be allowed to do it as soon as possible. There, of course, needs to be limit to how much unexperiensed managers can spend in their first year or so.
My question: Do you know any examples of large companies where many departments and functions are managed without traditional cost/revenue budgets, but where departments are measured on exclusively on the profits they deliver? There also needs to be a method to see to that the company does not run into cash-flow problems, by setting some dynamic limits on the amount of liquidity that can be used. Strategic business-units (SBU) is a way to do this, but a company is usually just split in a few SBUs (like General Motors) and I am talking about splitting up in like a hundred units, which are measured on profits.
If no examples are provided, I will ask a separate question on how such a thing could be implemented and the implications it might have.