On 22 October, we held a great open conference about Beyond Budgeting in connection with the BBRT Members’ Meeting in London. The conference, which was organised in cooperation with Happy Ltd., was a great success.
During the day, the delegates gained valuable insight into the Beyond Budgeting management model through interesting case stories and viewpoints presented by leading practitioners from Statoil and Handelsbanken, as well as Julian Birkinshaw from London Business School.
Below, you can read more about the 10 big lessons learned from the conference in pursuit of enabling organisations to build lean, adaptive and ethical enterprises written by Adrian Trenholm from Happy Ltd.:
You have already lost control
The purpose of traditional management tools is to help senior managers gain control. However, do not be fooled. Between the unintended consequences of budgets and targets, and the dynamics of the market, you have already lost control.
The default is not neutral
Unintended consequences are everywhere… and dangerous. Budgeting leads people to game the system. We low ball our sales forecasts and inflate our cost estimates “just in case”. Static targets become irrelevant and disempowering. Traditional management tools do not have a neutral impact. They actively work against what we really want to achieve.
Work with human nature, not against it
It is human nature to want to do well. Handelbanken’s, for example, has branch staff make decisions. Time after time, staff prove worthy of that trust. To get rid of command and control, you start with belief that your staff can be trusted, because they really want to do well.
Set one clear goal
One clear inspiring goal works better than a hatful of KPIs. It is simple to understand and everyone can test their plans and actions against it. Multiple goals make it harder to focus and harder to decide the correct course of action. KPIs are useful measures of progress, but remember: they are Indicators, not the Truth – let measurement be your servant, not your master.
Make targets relative and directional
We can be smarter than SMART (Specific, Measurable, Assignable, Realistic, Time-related). Instead of deciding an arbitrary number and sticking to it, we can set relative goals such as “outperform the market in activity X” – then measure progress dynamically. The arbitrary number quickly loses meaning and becomes disempowering; the relative goal adapts to circumstances and stays meaningful.
How you achieve a result is as important as the result itself. Have the courage to say “no” to short-term opportunities, which are inconsistent with your values. Be like Handelsbanken, which places the highest value on customer relationships at the branch level. By staying true to that value, Handelsbanken sidestepped the sovereign debt crisis. Because Portugal cannot walk into a local branch, and you cannot have a cup of coffee with Greece.
Stop trying to steer behaviour
Mechanisms to steer behaviour – targets, bonuses and so on – short circuit people’s capacity for decision-making. Behaviours become skewed towards hitting arbitrary targets, instead of working towards true goals. Let the human desire to do well – and your shared values – govern behaviour.
Change process and management in tandem
Beyond Budgeting requires an almost simultaneous move from static to dynamic processes and from theory X to theory Y management. You cannot do one without the other.
Act with conviction
We have too much information and a deficit of attention – and we keep looking for more. We need to replace or at least augment data-driven decision-making with emotional conviction and decisive action. At Statoil, teams do not make plans; they set “Ambitions to Action.”
You do not need to go all in
Evolution is slower than revolution, but it is better than no change at all. The board member who says, “We need to keep doing budgets this way” can derail your revolution in an instant. Do not get into conflict. Keep making changes in both leadership and process until momentum makes change inevitable.
Please, click HERE if you are interested in watching some of the presentations online in order to learn more about the principles of Beyond Budgeting.