Aug 16, 2010
Even if our leadership thinking has evolved significantly over the years, our management processes has not, leading to a serious gap between what companies say (and often also mean) and what they actually do.
The way most companies are managed has not kept pace with an increasingly dynamic business environment, and with the knowledge worker becoming the norm more than the exception. Budgeting, planning and performance evaluation is still conducted in more or less the same way as in earlier times, through a rigid and centralised command-and-control approach.
Beyond Budgeting offers a proven and coherent alternative to this serious problem. The main purpose is not to get rid of budgets, but to take reality seriously, both the world around us and people in the organisation. The three different (and often conflicting) budget purposes of target setting, forecasting and resource allocation are not abolished, but separated and improved in ways not possible when all three are crammed into one annual set of budget numbers.
Performance evaluation is turned from blindly reading performance against fixed and preset targets, towards more relative targets combined with relevant hindsight insights. Forecasting is relieved from the gaming caused by also serving as target negotiation or resource applications.
Resource allocation is made dynamic and more self-regulating, instead of once a year defining the “right” level and mix of resources by handing out millions of small bags of money each autumn. More responsibility is devolved to the front-line, with full transparency on targets, resource use and performance as an effective control mechanism. Misuse of trust and freedom is resolutely dealt with, but all employees are not locked up because someone someday might do something wrong.
About the presenter:
Bjarte Bogsnes has a long international career, both in Finance and HR. He is currently heading up the Beyond Budgeting implementation in the oil and gas company Statoil, Scandinavia’s largest company with operations in 40 countries and a turnover of 70 bn USD.
Bjarte is Chairman of the Beyond Budgeting Round Table in Europe (BBRT). He has just published the book “Implementing Beyond Budgeting – Unlocking the Performance Potential”, where he writes about his experiences from heading up major change projects both in Statoil and in the European petrochemicals company Borealis . Both companies realised that traditional leadership and management practices no longer works in today’s competence organisations operating in a business environment more complex, dynamic and unpredictable than ever.
They both implemented innovative and agile alternatives to traditional management, which also included abolishing traditional budgeting
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