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Implementing Beyond Budgeting: Unlocking the Performance Potential, 2nd Edition



Implementing Beyond Budgeting: Unlocking the Performance Potential, 2nd Edition

Bjarte Bogsnes

ISBN: 978-1-119-15247-7 July 2016 304 Pages

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The future of management is here!

Traditional management was invented for very different times and is today in serious trouble. The level of volatility, uncertainty, complexity and ambiguity in business environments is record high. People’s expectations towards their employers and leaders have also radically changed. A number of organizations are exploring management innovation that can help them not just coping but thriving and out-performing in these new and different realities. Beyond Budgeting may be the most important new idea out there addressing these radical changes, due to its broad scope and coherent approach. Abolishing the traditional, detailed annual budget is necessary, but not sufficient. Organizations on the journey are questioning their old leadership beliefs and are tearing up their old command-and-control management models, with “agile” and “human” as the foundation for a new start.

Implementing Beyond Budgeting is both a theoretical introduction and a practical guide to bringing such a more empowered and adaptive management model to life. Drawing on the author’s twenty years of Beyond Budgeting experience, this book not only demonstrates the serious problems with traditional management through numerous practical examples. It also follows several companies on their Beyond Budgeting journey, including Scandinavia’s largest company Statoil where the author has been heading up implementation since 2005. You'll get a first-hand glimpse at the reality of transitioning a large multinational company, and gain a real-world perspective on what successful implementation entails.

This new second edition has been significantly revised and expanded. It covers the amazing development of the Beyond Budgeting movement and how the Statoil implementation journey has continued since the first edition of this 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 (traffic controls!) are introduced, as well as the author’s latest reflections on a range of management issues including target setting, forecasting, performance evaluation and incentives.

Foreword xi

Acknowledgments xiii

About the Author xv

Introduction xvii

CHAPTER 1 Problems with Traditional Management 1

Introduction 1

Which Way in a New Business Environment? 4

The Trust and Transparency Problem 7

The Cost Management Problem 14

The Control Problem 22

The Target-Setting Problem 26

The Performance Evaluation Problem 30

The Bonus Problem 34

The Rhythm Problem 45

The Quality Problem 49

The Efficiency Problem 52

CHAPTER 2 Beyond Budgeting 55

The Philosophy 55

Beyond Budgeting Roundtable 65

The Beyond Budgeting Principles 69

Handelsbanken—the Pioneer 74

Miles—a Master of Servant Leadership 80

The Reitan Group—Values at the Core 84

CHAPTER 3 The Borealis Case 91

Introduction 91

Creation of Borealis 92

The Journey Begins 94

The Borealis Model 99

Implementation Experiences and Lessons Learned 115

Borealis Today 119

CHAPTER 4 The Statoil Case 123

Introduction 123

Creating the Foundation 126

Starting Out 130

The Statoil Model 134

A Dynamic Ambition to Action 190

What Could Be Next? 199

The Beyond Budgeting Research Program 210

How Are We Doing? 212

A New Start for Statoil? 217

CHAPTER 5 Beyond Budgeting and Agile 221

CHAPTER 6 Making the Change: Implementation Advice 229

Create the Case for Change 232

Handle Resistance 238

Design to 80 Percent and Jump 240

Keep the Cost Focus 241

Don’t Start with Rolling Forecasting Only 243

Involve Human Resources and Agile IT 244

You Can’t Get Rid of Command and Control through Command and Control 246

Do Not Become a Fundamentalist 249

Balanced Scorecard Pitfalls 250

Revolution or Evolution? 260

Closing Remarks 263

Index 265