Beyond Budgeting organizations operate with speed and simplicity. Simplicity comes from reducing complexity in the management process. This can best be achieved by giving front line people the scope to act immediately and decisively within clear principles, values and strategic boundaries. Operating within a flexible network is also important to enable people to respond quickly to customized requests by reconfiguring processes. Making strategy an open, continuous and adaptive process is the key element in a fast response organization. It enables an organization to react to emerging threats and opportunities as they arise rather than being constrained by a fixed and outdated plan. Underlying all these approaches is the shredding of bureaucracy that still plagues most organizations.
In Beyond Budgeting organizations, people work within an open and self-managed environment. Clear governance principles set the right climate and build the mutual trust needed to share knowledge and best practices. This is encouraged by moving away from individual incentives based on fixed performance targets locked into the budget (a barrier to sharing and cooperation) to team rewards based on performance relative to peers.
Only by seeing process as supplier-customer relationships will people respond to demands for improvement in quality and cost. And only by eradicating the mentality surrounding traditional budgets (which fix a floor and ceiling on costs) will people be motivated to question fixed costs and seek sustainable long term cost reductions. Operating managers and front line people are able to base requests on resources as needed rather than viewing them as ‘entitlements’. Just asking the question, “does it add value to the customer?” often ensures that unnecessary work is eliminated.
More loyal customers
Beyond Budgeting organizations place customer value needs at the centre of their strategy and adapt their processes to satisfying and even delighting them. Fast response to customer requests is vital. Thus front line people must have the authority to make quick decisions and manage their own bit of the business such that the overall organization becomes much more competitive than its competitors.