Corporate Rebels is an interesting network on a mission to learn from the world’s most progressive organizations how best to design organisations and work in order to fully unleash the potential of employees.
Beyond Budgeting is of course also relevant to development organisations, charity’s and NGO’s. Just like for-profit companies, they have to lead, plan and navigate in uncertain and volatile environments, and they have to make sure their limited funds are put to optimal use.
Anders Olesen is speaking at Bond’s annual conference in London, which is the biggest development event in Europe, attracting over a thousand diverse professionals from across the international development and humanitarian sectors.
As part of the preparations, Anders wrote this blog.
We look very much forward to welcoming you to Stockholm where we will celebrate our 20th anniversary, and explore where leadership is heading.
Corporate Members are also encouraged to participate in the Implementers’ Meeting on the 13th, where Aviva will share learnings from their implementation journey.
Newcomers to Beyond Budgeting are recommended to attend the introductory session (also on the 13th) which is headed by Bjarte Bogsnes.
Remember to sign-up!
It is with great pleasure, that we have noticed an increasing interest for Beyond Budgeting in India.
Anders Olesen was recently invited to do a two-day master class for CFO’s in Mumbai which was held in December 2017. And next month, Bjarte Bogsnes is speaking at #AgileIndia2018 in Bengalore.
The other day, Anders met Wharton professor Peter Cappelli who co-authored the highly recommended book: “The India Way”. We discussed how Performance Management is developing also internationally, and Peter made a general but important point about Indian companies being more holistically oriented and purpose driven than their western counterparts (not least in the US). “The India Way” illustrates what leaders can learn from innovative management practices emerging in India; practices which are closely related to the Beyond Budgeting management philosophy.
Reliance Industries is one of the great cases in the book: They have for example established Reliance Innovation Council, which “sets an agenda to actively nurture innovation within Reliance in order to safeguard its standing as a unique corporate entity and one of the most innovative companies in the world.” One of our good friends, Gary Hamel, is part of this council.
We are very happy and proud that Reliance Jio recently joined our network as a Corporate BBRT Member.
Reliance Jio (or: Jio) is a mobile network operator in India and it has been (and still is) on an amazing growth journey: Their services were first beta-launched in December 2015; they were commercially launched in September 2016, and only 5 months later they had 100 million subscribers. Jio is a subsidiary of Reliance Industries which has businesses across India within energy, petrochemicals, textiles, natural resources, retail, and telecommunications. Reliance Industries is the second largest company in India as measured by revenue.
Last month, the French CFO and controller organization (DFCG) awarded the title as CFO of the Year 2017 to Cécile Canabis of Danone. The main reason for awarding her with this prestigious award was the successful implementation of Beyond Budgeting in the Danone group.
Wavestone, our consulting partner in France, has acted as advisor to Danone on their Beyond Budgeting journey. This was presented at the October 2016 BBRT meeting in London.
Here is a link to the press releases from DFCG (in French)
We would like to congratulate Cécile Canabis, her team and Wavestone with this recognition.
Vanguard, our partner in the UK, has recently launched a new initiative: the Beyond Command and Control Network. As we are equally eager to eradicate Command-and-Control management, we encourage you to join this network. For BBRT members and followers this is a great supplement to our activities. To join send an email to firstname.lastname@example.org or contact Maria on +44 1280 822255.
People find it valuable to share their journey and learning with others. Accordingly and in response to demand, Vanguard will support a range of local and profession/practice-based networks across the UK in 2018.
Already planned is a local meeting for people who live or work in the South West. This will take place on 21st February at the Coaver Club, Exeter. For more information about this event, click here.
BBRT Norway has held its 7th meeting, hosted by Statkraft. The theme of the meeting was incentives. Professor Bård Kuvaas from the Norwegian business school BI shared years of thorough research showing how dysfunctional individual bonus is when used for motivating knowledge work. Mari Christensen from the Nordic insurance giant If then presented why and how the company has abolished their sales bonuses. The effects were impressive; more satisfied employees and customers, and better business results.
Bjarte Bogsnes shared the latest developments at Statoil. Risk management has now been integrated in the company’s management model Ambition to Action. Statoil has also made significant changes to their HR process. Performance rating is terminated. The biannual appraisal process is replaced with more continuous, strength based and development oriented feedback. Goal setting is made more dynamic and less calendar based.
The next BBRT Norway meeting will take place on June 13, hosted by SpareBank 1 Gruppen.
An introduction to our new framework
In order to help organisations on their Beyond Budgeting journey, we have developed an Implementation Framework, which was revealed at the latest BBRT meeting in London. The framework is the result of the experiences and knowledge that we have gathered since our network started almost 20 years ago. The purpose of the framework is to help organisations move further and faster on the journey.
We are very happy and proud to note that organisations that decide to start on a Beyond Budgeting journey, they stay on it and do not return to the ways of the past. Of course there have been a few exceptions (usually due to a change of control), but this is the general picture. This said we are convinced that our new Implementation Framework can significantly increase the chances of organisations reaching their full potential.
The theme of the latest BBRT meeting was: Implementation. Accordingly, the focus was on how to make Beyond Budgeting happen, and not what it is.
Key messages and take-away’s from the meeting:
- Management is a thinking issue
- Beyond Budgeting (BB) represents a management philosophy that is different from traditional ‘command & control’
- Accordingly, to implement and achieve the full potential of BB, a change of management thinking is required.
- The change of mind-set should take place at the outset of a BB journey – before new processes and systems are developed and implemented.
- The Beyond Budgeting Institute presented a newly developed framework for implementing BB. This includes a number of stepping stones, one of which is a study phase, which addresses the required mind-set change – see below.
- We recommend that companies seek advice from one of our BB Partners to ensure that this framework is properly applied right from the beginning of the journey
Are you considering how to get started on your Beyond Budgeting journey, and want to know how the framework can help you? Then please do not hesitate to contact Director Anders Olesen.
We are often confronted with the belief that Beyond Budgeting cannot work in listed companies because of the requirement of quarterly guidance to the market.
Accordingly, we are addressing this issue at the next local workshop for BBRT members in Denmark. The topic of the workshop is: Beyond Budgeting in listed companies, and it will address issues that are of particular relevance to such companies. This includes communication with the market, and how being listed reinforces “budget management” (i.e. budgets, targets, forecasting, incentives, etc.), and thus gets in the way of implementing Beyond Budgeting.
At this event, Head of Investor Relations at Handelsbanken, Lars Höglund, will explain how they balance the requirements of being listed with their Beyond Budgeting management model.
Anders Olesen of the BBRT Core Team will facilitate the workshop, which is held at Basico’s office on 20 February. Basico is our official partner in Denmark.
In order to sign up, click here.
On March the 13th , we have the Implementers’ Meeting in the afternoon. This is a recurring event where Corporate BBRT Members can exchange experiences from their individual Beyond Budgeting journeys.
Also on the 13th, we are organising a parallel session: “Introduction to Beyond Budgeting”. This open event is a great opportunity to learn about the Beyond Budgeting management model. This session is a stand-alone event in itself. However, it is also a great introduction if you wish to attend the BBRT meeting on the 14th.
The BBRT Members’ Meeting itself is a full-day event on the 14th. The agenda for this day is still work-in-progress. This said there is no doubt that the day will be marked by the BBRT movement’s 20th anniversary in 2018. As a tribute to Handelsbanken, this event is held in Stockholm where Jan Wallander started Handelsbanken’s successful and inspiring journey more than 45 years ago. The event is held at Handelsbanken’s premises in central Stockholm, and CEO Anders Bouvin is among the speakers.
We look forward to seeing you in Stockholm.
In order to learn more about the event or to sign up, please click here.
The Norwegian energy company Statoil, a veteran member of the BBRT community, has just announced major changes to its HR process People@Statoil. The changes include elimination of the performance rating scale as well as the annual goal setting and appraisal stunts.
The new expectation setting and feedback process will be much more continuous and dynamic, and more forward and development-oriented, focusing on people’s strengths. There will be no deadlines, and employees will be expected to more actively seek out peer feedback and drive their own development.
The equal weighting between how you deliver and what you deliver, a key principle in Statoil’s model, will remain unchanged. An even stronger integration with Statoil’s business management model “Ambition to Action” is also being explored. To support these changes, the label “Performance Management” is being abandoned in favour of ”Enabling and developing performance”.
With a record attendance of almost 90 participants, last week’s BBRT meeting no. 60 in London was a great success.
The theme of the meeting was: Implementation. Accordingly, the focus was more on how to make Beyond Budgeting happen, and less on what it is.
Key messages from the meeting:
- Management is a thinking issue
- Beyond Budgeting (BB) represents a management philosophy that is different from traditional ‘command & control’
- Accordingly, to implement and achieve the full potential of BB, a change of management thinking is required.
- The change of mind-set should take place at the outset of a BB journey; before new processes and systems are developed and implemented.
- The Beyond Budgeting Institute presented a newly developed framework for implementing BB. This includes a number of stepping stones, one of which is a study phase which addresses the required mind-set change.
- We recommend that companies seek advice from one of our BB Partners, to ensure that this framework is properly applied right from the beginning of the journey
We were very fortunate to have great speakers with us at this event. From each of their perspectives, they shared their views on how to make management change happen. Despite the very different backgrounds and perspectives, they all pointed in the same direction: management is a thinking issue, so this must be addressed from the outset of the change process.
Toby Rubbra from Vanguard Consulting (our BB Partner in the UK)
Based on two recent client cases, Toby demonstrated how they helped leaders overcome one of the most critical problems of implementation; namely the management thinking. This was done through a phase of study, which provided leaders with an understanding of how the existing management processes and measures negatively impacted behaviour and lead to sub-optimal performance.
John Timpson, chairman of the Timpson Group
With almost 2,000 shoe repair and key-cutting shops, the Timpson Group is one of UK’s leading retail service providers. John presented his “Upside Down Management” model and how it was successfully implemented. He provided many great examples of how they continuously improve and nurture the company’s unique culture. This is a great example of “less is more”: they have achieved sustainable and profitable growth with no head office, no marketing, no centralised ERP, no budgets (other than an annual one-pager to the bank), only limited high-level financial projections, minimal HR and Finance teams, and only 2 rules.
Dawna Jones is a global change-agent and the Canadian founder of frominsighttoaction.com. She presented her perspectives on how to make difficult changes happen in large organisations; not least in VUCA environments (i.e. under Volatility, Uncertainty, Complexity, Ambiguity). She made the argument and explained why linear thinking (and traditional methods for decision making and change) cannot lead to the desired results when dealing with making change happen in organisations in the 21st century.
Anders Olesen from the BBRT Core Team started the meeting by challenging the participants to think about how suitable the usual change management processes (such as Kotter’s) are for implementing BB. This session, in combination with all of the above-mentioned contributions, all supported the need for new methodology to implement BB.
Accordingly, at the end of the meeting, we presented the new BB Implementation Framework which is designed to meet the specific needs of a BB journey. We are convinced that this can vastly increase the success of your Beyond Budgeting journey.
Members who could not make it to London last week can access the videos and presentations on the Knowledge Base.
The next European BBRT meeting is held in the spring of 2018 when we celebrate our 20 years’ anniversary!
On 27 September, the conference “Business transformation in the digital age” took place in Zurich, Switzerland. Over 800 participants, large part of them representing C-level positions, participated.
Besides interesting presentations delivered by CEO’s from sustainable and successful Swiss companies, the American thought leader in Agile Leadership, Steve Denning, was keynote speaker. Franz Röösli, core team member at the Beyond Budgeting Round Table, was also one of speakers at the conference, introducing the audience to Beyond Budgeting companies like Handelsbanken, Trisa and Hilti. The presentation was well received and raised several interesting questions.
At the Beyond Budgeting Institute, we are experiencing an increased interest for Beyond Budgeting in the agile community as a holistic management model that fits the agile mindset.
On Tuesday the 24th, we have the Implementers’ meeting in the afternoon (BBRT members only). The theme of this meeting is: Building the case for change.
The Beyond Budgeting journey involves several critical phases. One of these is the period from understanding that ‘something should be done’ and until new ways of working (i.e. new processes and structures) are designed and implemented. At this meeting, members will share experiences and learnings and thus help each other on their respective journeys.
Also on the 24th, we are organising a parallel session: “Introduction to Beyond Budgeting”. This is open for non-members and is a great opportunity to learn about the Beyond Budgeting management model. This session is a stand-alone event in itself. However, it is also a great introduction if you wish to attend the BBRT meeting on the 25th.
The main full-day BBRT meeting is on Wednesday the 25th. At the meeting, we will present and discuss the particular difficulties related to implementation of Beyond Budgeting. Through a combination of presentations, lots of group work and a couple of practical cases, you will learn about change management in the context of Beyond Budgeting.
Two years ago, Trizma embarked the Beyond Budgeting journey. We knew what we wanted to achieve & why it was of critical importance to make the change. However, we did not have the slightest clue how to implement it. At that time, I was reading Bjarte Bogsnes’ book: Implementing Beyond Budgeting: Unlocking the Performance Potential.
Last week’s local BBRT workshop in Denmark was well attended and the participants actively discussed different perspectives on Cost Management.
A few learnings from the workshop:
- Of the 12 Beyond Budgeting principles, only one directly addresses cost management (or: resource allocation). But this doesn’t mean that costs are not important, on the contrary: They are far too important to be dealt with in the traditional fashion with annual pre-allocated detailed budgets.
- Organisations have to find new and better ways of ‘controlling costs’, or as we prefer to phrase it: organisations must find the best way to make use of its scarce resources.
- Accordingly, the recent and well attended BBRT workshop in Denmark focused on Cost Management; both variable and fixed costs
The next local BBRT workshop will focus on Beyond Budgeting in listed companies. At this event, we will address the issues that are of particular relevance to companies listed on the stock exchange; such as communication with the market, and how being listed influences target setting, forecasting, incentives, etc.
We encourage all members to participate.
The workshop is likely to be held in November. Further information will follow in August.
The interest and appetite for Beyond Budgeting continues to increase in Norway: at the last meeting we saw a record turnout.
The meeting was generously hosted by Miles whose CEO (or rather: chief servant) talked about trust as a concept.
Storebrand presented how they have made elements such as purpose and self-management a key component of how they operate… and how they have kicked out variable pay.
The meeting also included a presentation by CFO Vibekke Hellesund who explained how they implemented Beyond Budgeting at BBRT member Hennig Olsen – and the many benefits this has led to.
BBRT Chairman Bjarte Bogsnes returned from a very exciting visit to Haier in China. Haier Group is the world leading brand of major household appliances, and is transforming from a traditional household appliance manufacturer into an open platform for entrepreneurship.
As we have heard at the latest BBRT meetings, Haier has an extremely interesting management model based on decentralisation. Bjarte met with a range of people in the organisation, including CEO Zhang Ruimin.
When we have digested all the information and impressions received, we will translate this into learnings for our members.
Going beyond command and control requires no plan. Who would put increases in sales of 40% or halving operating costs in a plan? Who would throw away their Net-Promoter scores in favour of designing services that knock their customers out? Who would plan for radical improvement in social care, helping everyone who needs it, while cutting costs by dramatic amounts?
Join the Masterclass on Tuesday 20th June, where John Seddon and several of his Vanguard colleagues will explain how big organisations (Aviva, Standard Bank Group, Topdanmark), small ones (Fareham Council, Fiscal Engineers), among many others, have gone beyond command and control. You will be astonished at the profound consequences for revenue, efficiency, customer service and morale.
For more information and to sign up, see here
Vanguard is the official Beyond Budgeting representative in UK & Ireland.
Judging from the feedback received, our events in London were a huge success.
Members who could not make it to London last week now have access to the videos and presentations on the Knowledge Base.
Please reserve these dates for the autumn events in London: 24-25 October.
Last week in London, Steve Morlidge presented his new book with the above mentioned title. The ‘little’ refers to the format of the book; it is ideal for reading on the go. This small but serious handbook fills in these gaps in awareness and understanding by answering the question what is Beyond Budgeting? in a clear and succinct way to help managers make informed choices about the way that you run their business, as an alternative to blindly copying their predecessors.
For more information and to buy the book, see here.
It is with great pleasure we inform that Steve Morlidge has joined the BBRT Core Team.
Steve has spent most of his professional career in designing and running performance management systems in Unilever. Through his work at Unilever, he got involved with the BBRT in its early days, and from 2000 to 2006, he was BBRT chairman.
Following some years where he has pursued other opportunities, Steve has in recent years become increasingly involved in our activities. Last year, for example, he authored a number of working papers about Variance Analysis, which we published.
Steve co-authored ’Future Ready: Mastering business forecasting’ (John Wiley, 2010) and has written many papers on business forecasting. He also has a PhD on the application of systems method to financial performance management systems.
Most lately, Steve has been working on a new book about Beyond Budgeting, which will be out very soon. Participants at next month’s BBRT meeting in London will all receive a complimentary copy.
The BBRT Core Team members are now: Bjarte Bogsnes (chairman), Anders Olesen, Dag Larsson, Franz Röösli, Steve Morlidge and Steve Player.
On Tuesday the 21st, we have the implementers’ meeting in the afternoon (BBRT members only). The topic of this meeting is how to get started, and how to maintain momentum on a Beyond Budgeting journey. Accordingly, participants will learn how to convince key stakeholders to get started, and how to overcome the predictable resistance and hurdles on the way.
Also on the 21st, we are organising a parallel session: “Introduction to Beyond Budgeting”. This is open for non-members and is a great opportunity to learn about the Beyond Budgeting management model. This session is a stand-alone event in itself. However, it is also a great introduction if you wish to attend the BBRT meeting on the 22nd.
The main full-day BBRT meeting is on Wednesday the 22nd. As always, the program includes thought leaders and Beyond Budgeting practitioners. This year, the former is represented by Julian Birkinshaw (London Business School) and Yuri van Geest (Singularity University).
Attend and experience how the Beyond Budgeting management model can work in very different industries: Buurtzorg (home care), Consilium (marine industry) and SpareBank 1 Gruppen (banking).
Competitive advantage and high performance can be achieved with the right strategy and business model. However, the right management model (i.e. how things get done) is equally important for an organisation’s enduring success. And this is what Beyond Budgeting is all about: Helping organisations develop their management model, thus increasing effectiveness and enabling them to reach their full performance potential.
A key feature of an effective management model is the alignment between leadership principles and management processes.
This being the case, we were very happy to read a great article that has just been published in Harvard Business Review: “How Aligned Is Your Organization?” In this article, Jonathan Trevor and Barry Varcoe from Oxford University’s Saïd Business School explain why such alignment is needed for any organisation to be efficient and deliver sustainable results in line with its purpose.
BBRT chairman Bjarte Bogsnes posted this great piece about target setting on LinkedIn: read it here
Target setting is one of the important processes that have to be properly addressed in order for any organisation to reach its full potential.
On 29 November 2016, Vanguard Consulting – our partner in the UK and Ireland – held a great event which demonstrated how the Vanguard Method call help organisations avoid the significant problems that come with budget management.
John Seddon – Vanguard’s founder – opened the event: “One hundred years ago James McKinsey of the eponymous consulting firm invented budget management. It solved a problem for Alfred Sloan in that it created a form of order in the amorphous mass that was General Motors but at the same time, it introduced an insidious disease. The disease has spread. This day is designed to expose the nature of the disease and chart a route to its eradication.”
Hereafter, Anders Olesen – from Beyond Budgeting Institute – reviewed the typical problems associated with budget management. Not only are organisations spending a lot of time on something with limited value. Even worse: the typical annual budget process leads to undesired behaviour, poor service, wrong decisions, and higher costs. Anders concluded that budgeting is more than just an irritating itch; it is a symptom of a much bigger problem (ref. John Seddon’s comments above).
During the day, Vanguard presented four cases from private and public sector service organisations: Service Centres, Insurance Claims, People-centred-services, and Housing Repairs. In all cases, Vanguard had taken managers on a journey of discovery in their own organisations. This opened their eyes to the problems caused by conventional management thinking, including budget management and other system conditions. By addressing these issues and introducing new measures, they all achieved massive performance improvement. All of the cases showed:
- how budget management and traditional financial controls are at the heart of sub-optimal performance, and how better control is achieved with new measures.
- how to re-design services to become more effective: much better service at much lower cost.
- how new measures lead to improved performance, and how they can be used to predict performance and resources needed.
In all cases, the problems had been invisible to management and therefore not addressed. One of the main reasons is that measures derived from budgeting are largely disconnected from what matters to customers, and from what is relevant for operational performance. Since conventional management reporting systems are preoccupied with functional activity measures, top management does not see the systemic impact on service, efficiency, costs and morale.
One of the solutions presented by Vanguard was ‘Knowledge-Based Budgeting’. In short, this is very much about:
- replacing the traditional budget with processes that – based on knowledge – leads to better decision making – both on group and operational level
- abandoning the cascading of targets and measures from top to bottom
- allowing each part of the organisation to apply those measures that make sense for them. For those directly serving customers, this means measures derived from what matters to customers
- moving from a static to dynamic use of measures
- understanding that using appropriate leading measures gives us knowledge of a) what is happening in an organisation now and b) gives us the ability to predict performance going forward. As a consequence, there is better control over lagging measures such as cost/revenue.
- resource planning based on knowledge of capacity
This event demonstrated that by combining the Vanguard Method with the Beyond Budgeting management model, it is possible to achieve massive and lasting performance improvements.
If this sounds interesting and if you would like to get started in your organisation, please feel free to contact Anders Olesen
Prior to last month’s BBRT Meeting in London, we invited BBRT members to take a short survey to understand how pervasive bureaucracy is within your organization. The survey was developed by Gary Hamel and Michele Zanini at Management Lab as part of their research on the costs of bureaucracy.
Over 80 respondents from the BBRT community participated in the survey, and the results were shared at the BBRT meeting in London. Please find attached a summary of the interesting takeaways.
You can review answers to all the questions by downloading this document.
Understanding how costly bureaucracy is, and the negative behavior it leads to, is an eye-opener to the significant performance potential of most traditionally managed organizations.
Variance analysis (‘how are we doing against plan?’) is a cornerstone of traditional management and budgeting. It is one of the reasons why budgeting is so hard to eradicate and why we need to find alternatives. If the only tool we have to analyse performance is a variance, then we have to have budgets even if we do not believe in budgeting itself. Therefore, finding better ways to measure, analyse and communicate performance will remove a serious obstacle to the adoption of Beyond Budgeting.
Steve Morlidge has just completed his fourth and last working paper on variance analysis. In the previous papers, Steve addressed these important issues: Why conventional approaches to performance measurement don’t work, understanding the patterns of behaviour and establishing dynamic measures, and the problems we face when trying to make meaning of large quantities of data. In this last paper, Steve introduces a ‘tracking signal’, the process of measuring performance against a dynamic target or benchmark. Steve also asks us to consider if we need targets at all.
Click here to read the paper.
Steve has spent most of his professional career in designing and running performance management systems. He is the former Chairman of the BBRT and remains a tremendous support of our network for which we are most grateful.
Please reserve these dates:
– Tuesday 21 March (afternoon): Implementers’ meeting
– Wednesday 22 March (all day): European BBRT Members’ meeting
The meetings are held in London.
Jan Wallander, Handelsbanken’s CEO 1970-1978 and board chairman 1978-1991, has passed away at the age of 96.
Jan Wallander and the unique management model that he developed and introduced in the bank in the early 1970’s remains one of the key sources of inspiration for our network. At several occasions did BBRT founders Robin Fraser and Jeremy Hope meet Jan Wallander who was a great support for our network from its beginning in 1998.
In our talks with Wallander, he reminded us that their success lay not in the absence of budgets and other traditional management tools, but in how they were organised. In Wallander’s great book: “Decentralisation – Why and How to Make it Work – The Handelsbanken Way”, he wrote:
“Much of the interest in what we have done in Handelsbanken has focused on the fact that we work without a budget. However, this is not the essential part of our model. The basic idea in the Handelsbanken model is decentralisation. If the issues are studied from this viewpoint, the abolition of budgets emerges as a mere detail, something simple and obvious; one of the several aspects of the basic idea.”
In 2003, Robin Fraser wrote the foreword to the above-mentioned book. Here’s a passage that captures the essence of his leadership principles:
“The Handelsbanken management model introduced by Dr. Wallander is predicated on the belief that the only sustainable competitive advantage available to a firm in a fast-changing world (especially in a service business) lies with its people – especially their creativity, insights, and judgment – a model in vivid contrast to the numbers-driven alternative so prevalent elsewhere.”
When developing the 12 Beyond Budgeting principles, the Handelsbanken model has been a key inspiration for us.
We remain in close contact with Handelsbanken and its management, which continues to provide invaluable support and inspiration.
When learning about Jan Wallander’s passing, we reflect at all that he has meant – not only for us – but to so many more people in and around Handelsbanken; and we feel very grateful.
Gary Hamel and Michele Zanini at the MLab have recently estimated that an excess of bureaucracy costs the U.S. economy more than $3 trillion in lost economic output; a figure that rises to nearly $9 trillion when you include all of the 32 countries in the OECD. While the incentives for dismantling bureaucracy are substantial, so are the hurdles. Bureaucracy is ubiquitous, familiar and deeply entrenched. For those immersed in bureaucratic orthodoxy, radically flat organizations like W.L. Gore, Handelsbanken, Netflix, Morning Star, Buurtzorg, Nucor, Mainfreight, Reitan or Miles are more likely to be seen as weird exceptions than as valuable exemplars. For most managers, bureaucracy is not merely the “safe” choice, it’s the only choice.
The first step in dismantling bureaucracy is to expose just how much it is costing your organization. These costs are both direct and indirect, but mostly fall into the following categories:
• Bloat: Too many managers and management layers
• Friction: Too much bureaucratic busywork that impedes timely decision-making
• Insularity: Too much time spent on internal issues
• Disempowerment: Too many hurdles to taking initiative
• Conservatism: Too many disincentives for risk-taking
• Inertia: Too many barriers to proactive change
• Factionalism: Too much energy devoted to gaining and protecting turf
Not all of these costs can be easily measured, but that shouldn’t deter you from working to build a baseline. You need to calculate your organization’s BMI, or Bureaucracy Mass Index. How pervasive is bureaucracy within your organization? How much time and energy does it suck up? To what extent does it undermine resilience and innovation? Which bureaucratic processes are more trouble than they’re worth?
To get an initial read, please complete a brief survey below by Friday, October 21. Michele will present the initial results at the BBRT Meeting in London on October 27 and we’ll share them widely across our network shortly thereafter. To access the survey, please go to: https://www.surveymonkey.com/r/BureaucraticMass
In addition to our biannual regional events, such as next month’s European BBRT Meeting in London, we host many local events. Here are examples of such upcoming activities:
The next Swedish BBRT workshop takes place on 29 September
At this event, the A.P. Moller – Maersk Group will share insights about their management model. This includes how they eliminated the traditional budget and replaced it with new tools for target setting, forecasting and capital allocation.
Several very interesting Swedish companies have already signed up (Klarna, SKF, Spotify and Volvo Cars).
The event is organized by Ekan and is held in Copenhagen.
The next BBRT workshop in Denmark is held on 1 December
At this meeting, we have the pleasure of visiting Tryg Forsikring, one of the leading insurance companies in Scandinavia. They too have challenged their management model, as they have embarked on their Beyond Budgeting journey.
In the Beyond Budgeting community we have a particular interest in finding better ways to measure and analyse performance. Variance analysis (‘how are we doing against plan?’) is a cornerstone of traditional management and budgeting. It is one of the reasons why budgeting is so hard to eradicate and why we need to find alternatives. If the only tool we have to analyse performance is a variance, then we have to have budgets even if we do not believe in budgeting itself. Therefore, finding better ways to measure, analyse and communicate performance will remove a serious obstacle to the adoption of Beyond Budgeting.
Steve Morlidge has just completed his third working paper on variance analysis. The first paper set out the reasons why conventional approaches to performance measurement don’t work. The following paper was about understanding the patterns of behaviour and establishing dynamic measures. This third paper is titled “Signals from noise” and addresses the problem we face when trying to make meaning of large quantities of data. To read the paper click here
Steve Morlidge has spent most of his professional career in designing and running performance management systems in Unilever. He co-authored ’Future Ready: Mastering business forecasting’ (John Wiley, 2010) and has written many papers on business forecasting. Steve is the former Chairman of the BBRT and remains a tremendous support of our network for which we are most grateful.
It is a great pleasure to announce that Bjarte Bogsnes is speaking at “Tackling the Productivity Challenge”, a Financial Times conference taking place in London on 13 October 2016.
The event will examine a range of factors with the potential to affect business output including government policy, leadership, workforce development and technology. Bjarte will be speaking on the topic of “People and productivity”.
We are very happy for this recognition which also demonstrates the breadth of Beyond Budgeting; it is not just for finance people, and it is not just about getting rid of the annual budget – there is so much more to it!
Danone, one of the world’s leading food companies with annual sales above €20 billion, has also started on a Beyond Budgeting journey. Among the reasons for starting was a wish to create a more flexible organisation, and to ensure that resources are allocated to where they add most value. During a recent interview with Financial Times, Danone’s CEO Emmanuel Faber referred to this new initiative.
Kurt Salmon, our local consulting partner in France, is advising and participating in Danone’s project team.
If you want to know how the Beyond Budgeting Institute and its partners can help you, please do not hesitate to contact Anders Olesen email@example.com
The second edition of Bjarte’s great book: “Implementing Beyond Budgeting:Unlocking the Performance Potential” is out next month in the US and in Europe in August. You can find it on Amazon here.
This new second edition has been significantly revised and expanded, and Robert S. Kaplan has written the foreword. The book covers the amazing development of the Beyond Budgeting movement and how the Statoil implementation journey has continued since the first edition of the book was published in 2009, sustaining major events like for instance the 2015 oil price crash. A new chapter on “Beyond Budgeting and Agile” has also been added. New implementation experiences, great new case stories, new management innovation examples and management metaphors are introduced, as well as Bjarte’s latest reflections on a range of management issues including target setting, forecasting, performance evaluation and incentives.
You can read the introductory chapter here.
Recent research by Professor David Dugdale from Bristol University in the UK will soon be published in a book titled ‘Routledge Companion to Performance Management and Control’. The research concludes that theory over-emphasises the importance of linking organisational vision and goals through strategy and planning to the setting of targets, performance evaluation and incentives.
This finding is fully in line with the observations and experiences of our network. To quote another thought leader from our network; here’s John Seddon from Vanguard Consulting on targets (The Whitehall Effect, 2014): “If you drive any arbitrary target number down a hierarchy you will engage people’s ingenuity in finding ways to meet the target and make the numbers, which is not the same as improving performance. The problem is not only ubiquitous, it is systemic. On the other hand, when measures are derived from the purpose (from the customer’s point of view) and are used where the work is done, method is liberated.”
Bristol University is a member of the BBRT.
Vanguard Consulting is our official partner in the UK and Ireland.
Some months ago, Steve Player (BBRT Director in North America) and several academics decided to start the largest research project on Beyond Budgeting practices around the world. The idea is to collect objective evidence on how traditional planning and budgeting practices compare to new and evolving approaches. Getting convincing evidence on how exactly Beyond Budgeting adds value would give the new ideas a better chance to change the world.
Your participation can make a big difference and help us build a more solid foundation for the statistical analysis. Please contribute with your experiences with traditional or new planning and budgeting practices.
To access the online survey, please click here.
The time required is approximately 10-15 minutes. We guarantee confidentiality, and participation is anonymous.
To thank you for your participation, we will provide a summary of our findings. To thank you for your input, we have also made available three BBRT© white papers for immediate downloads free of charge:
- Mastering Forecasting – A practical methodology for forecasting in the 21st century.
- The Leader’s Dilemma – How to build an empowered and adaptive organization without losing control.
- Beyond Budgeting Principles – The journey behind the 12 Principles of Beyond Budgeting through The Leader’s Dilemma to the current version just updated.
Thank you in advance for your participation in this important study.
On 22 May, Financial Times published a great article titled: Why the annual company budget no longer adds up
The article is very well written and it includes many great examples of why organizations should stop the madness of the annual corporate budget.
The article was based on an interview with Anders Olesen, and it makes numerous references to people and companies in and around our network.
To read the article click here: BB in FT.com
On 21 April, Statoil hosted the biannual Norwegian BBRT event, which once again was a great success. As the host, Bjarte Bogsnes facilitated the meeting, and he shared interesting insights about how Balanced Scorecards can work in a Beyond Budgeting setting such as Statoil’s. He also reviewed the recently updated 12 Beyond Budgeting principles.
Once again, we were fortunate to have Reitan Group’s CFO Kristin Genton attend this forum, and again she delivered a great presentation. This time the focus was on their very effective financial culture.
Reitan is one of the largest companies in Norway, with a turnover of close to EUR 10 billion and some 36,600 employees. The group operates in several business areas (brand names in brackets): Food Retail (REMA 1000), Kiosk/Convenience (Narvesen, Pressbyrån, R-Kioski, 7-Eleven), Energy & Fuel (Uno-X) and Real Estate (Reitan Eiendom).
Reitan’s goal is to be the most value-driven company. The company has a strong culture with the customer as the ultimate boss, and a working environment where authority is delegated to employees who are their own decision makers. Accordingly, we were not surprised when it was recently announced that Great Place to Work® awarded them the best large employer (>500 employees) in Norway in 2016 – Congratulations!
One striking resemblance between Beyond Budgeting and the Reitan Group is our common view on the importance of having a holistic and coherent management model. In Beyond Budgeting, we talk about coherence between Leadership Principles and Management Processes. Reitan uses slightly different words for the same; namely Culture and Structure – but the essence is the same.
The role of Reitan Group’s HQ is to give direction and support regarding values, and to provide standards for financial management. Other than this, there are no HQ functions or activities on group level. The HQ is thus very lean with only about 15 employees.
Here are the key elements of Reitan’s financial culture, which were presented and debated at the BBRT meeting:
- Avoid debt: Interest is seen as a fee on impatience
- Have fun and be profitable (and in that order! – passion is everything).
- Quality in everything we do (quality is an attitude)
- “Cuttism”: This is a word invented by CEO Odd Reitan, and it describes their mentality on costs. Cutting prices is a mantra in Reitan. But it is not only about cutting sales prices; it is also about cost efficiency and cost consciousness on every cent. “Kuttisme,” as it reads in Norwegian, has actually been formally endorsed in the Norwegian language!
- “Managing by percentages”: I.e. translating measures to meaningful percentages (or income/costs per unit). This is simple and self-regulating, and it helps the understanding of profitability (“Prosentuell Økonomisk Styring” or PØS in Norwegian)
- Rock solid understanding and insight (“Stålkontroll” in Norwegian): Every employee must have solid control over his/her area of responsibility; how are we doing and where are we heading. This requires a deep understanding of both details and the big picture.
- Effective coaching: Making sure that the receivers of financial information receive exactly what they need, when they need it (no more and no less).
- Apply common sense
It goes without saying that Reitan Group does not bother with annual budgets. Here is Odd Reitan on budgets: “Many companies have big departments only doing budgeting, sending numbers up and down the organization, before they are presented to the board to give them something to talk about. A waste of time and energy! A forecast, however, is something very different. It gives us a picture of how things might develop. If we don’t like what we see, it forces us to do something!”