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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
- Veröffentlichungsjahr: 2023
Beyond Budgeting is the idea of making organizations perform better by changing their management model, including abolishing the traditional budgeting process. The model's tested and proven leadership and management process recommendations makes organizations more adaptive and human, and helps making agile transformations successful. This book is written for decision makers within an enterprise. In nontechnical language it explains what Beyond Budgeting is, how it works, and why it improves performance through the use of actual cases where it has been implemented. It discusses what challenges will need to be overcome to make implementation succeed and provides the many benefits that can be realized once the organization has completed the implementation.
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Table of Contents
Cover
Title Page
Copyright
Dedication
Foreword
Escaping the curse of bureaucracy
Acknowledgments
Introduction
My Beyond Budgeting Journey
Why This Book?
Chapter 1: Initial Reflections
The Innovation Paradox
The Illusion of Control
Can We Learn from Traffic Control?
Chapter 2: The Problem
The Problems with Budgets and Budgeting
The Citizen‐Employee Paradox
Chapter 3: Beyond Budgeting
The Model and the Principles
Why Do We Budget?
Chapter 4: Separate and Improve
Target Setting
No Targets?
Forecasting
Resource Allocation
Performance Measurement and Evaluation
Rewards
Chapter 5: Beyond Budgeting for Whom?
Beyond Budgeting for Small and Big
Beyond Budgeting for Improvers and Transformers
Can Beyond Budgeting Work in the Public Sector?
Companies on the Journey
Chapter 6: Agile Transformation
The Elephant in the Room
Beyond Budgeting and OKRs
Beyond Budgeting and Psychological Safety
Chapter 7: Handelsbanken
How It Started
The Model
A Branch Manager's Story
Chapter 8: Implementation
The Change Formula
The Case for Change
A Compelling Risk Picture
Up with the Umbrella
The Viable Map
Start with Purpose Separation (but Never with Rolling Forecasts Only)
Design to 80% and Jump
Finance and Human Resources
Join the BBRT
Nobody Can Do It for You
Chapter 9: What's in It for the Bottom Line?
Chapter 10: What's in It for Me?
Epilogue
Index
End User License Agreement
List of Illustrations
Chapter 1
Figure 1.1 The illusion of control.
Chapter 3
Figure 3.1 The corporate rain dance.
Figure 3.2 The Beyond Budgeting principles.
Figure 3.3 Beyond Budgeting coherence.
Figure 3.4 Budget purpose separation.
Chapter 4
Figure 4.1 Target setting uncertainty.
Figure 4.2 Tools for cost management.
Chapter 5
Figure 5.1 Companies on the journey.
Chapter 8
Figure 8.1 The Viable Map.
Chapter 9
Figure 9.1 BCG study.
Figure 9.2 Bain survey.
Figure 9.3 Equinor operating margin versus peers.
Guide
Cover Page
Title Page
Copyright
Dedication
Foreword
Acknowledgments
Table of Contents
Begin Reading
Epilogue
Index
Wiley End User License Agreement
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This Is Beyond Budgeting
A Guide to More Adaptive and Human Organizations
Bjarte Bogsnes
Copyright © 2023 by Bjarte Bogsnes. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per‐copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750‐8400, fax (978) 750‐4470, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748‐6011, fax (201) 748‐6008, or online at http://www.wiley.com/go/permission.
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Library of Congress Cataloging‐in‐Publication Data
Names: Bogsnes, Bjarte, author. Title: This is beyond budgeting : a guide to more adaptive and human organizations / Bjarte Bogsnes.
Description: Hoboken, New Jersey : John Wiley & Sons, Inc., [2023] | Includes index.
Identifiers: LCCN 2022053747 (print) | LCCN 2022053748 (ebook) | ISBN 9781394171248 (hardback) | ISBN 9781394171255 (adobe pdf) | ISBN 9781394171637 (epub)
Subjects: LCSH: Management. | Organizational effectiveness. | Organizational change. | Organizational behavior. | Organizational sociology.
Classification: LCC HD31.2 .B64 2023 (print) | LCC HD31.2 (ebook) | DDC 658—dcundefined
LC record available at https://lccn.loc.gov/2022053747
LC ebook record available at https://lccn.loc.gov/2022053748
Cover Design: Wiley
Author Photo by Christian Elfstrøm
For Robin
Foreword
Escaping the curse of bureaucracy
Across the globe there is a small but growing band of bold thinkers and doers who are reinventing management from the ground up. Bjarte Bogsnes is one of those rebels. He understands that management—the structures and systems we use to get things done at scale—is one of humankind's most important technologies. He also knows that bureaucracy—the management model that underpins virtually every large organization—is fast becoming a competitive, social, and economic liability. Bureaucracy, with its authoritarian power structures and rule‐choked processes is a 19th‐century technology and no longer fit for purpose. It was built at a time when most employees were illiterate, when information was expensive to gather and share, and when the pace of change was comparatively glacial. Bureaucracy was built to maximize compliance for the sake of efficiency. But in the 21st century, efficiency is but one advantage among many. Organizations need to be cost‐effective, yes, but they must also be adaptable, creative, and purpose‐driven. That's why we need a new management model—one that maximizes contribution for the sake of impact.
To build this new management model, we must start by radically reimagining the budgeting process—bureaucracy's central nervous system. It is through the annual budgeting wrangle that priorities get defined, targets get set and resources get allocated. Arguably, no other process has a bigger impact on organizational performance—and at the moment, the performance of many organizations is lackluster at best.
Years ago, with the late C. K. Prahalad, I wrote an article for the Harvard Business Review titled “The Core Competence of the Corporation.” If I were writing that article today, I would call it “The Core Incompetence of the Corporation.” When I look around the world, virtually every large organization is afflicted with the same disabilities: they are timid, inertial, and incremental. Typically, large institutions are content with single percentage point gains in revenue and profit growth. They're reactive and are often years late in intercepting new trends. They invariably overinvest in legacy business while starving new ideas of resources. Budgeting is at the heart of all these failures. As a process, it's a backward‐looking, internally focused, and highly politicized. It discourages boldness, perpetuates the past, and rewards mediocrity.
Put simply, we'll never build fundamentally more capable organization unless we raze the traditional budgeting process and build something better in its place. That's why Bjarte's work, and this book, are so important.
The good news is that there are powerful, practical alternatives to budgeting as usual—radical new approaches that can help your organization aim higher, move faster, and take control of its own destiny. The bad news is that changing the way your organization budgets won't be easy. This is true for at least three reasons. First, budgeting is tightly intertwined with other critical processes—like performance management and compensation. You can't change the budgeting process in isolation. Second, budgeting is about power as much as money. Managers index their authority by the size of the budgets they command and compete vigorously to acquire more capital and headcount. In this sense, budgeting is a massive multiplayer game—and those who've learned to play the game well will resist a rule change. Finally, most leaders view the budgeting process as an indispensable tool for exercising control. Budgets are used to enact corporate priorities (by earmarking funds for key initiatives), ensure fiscal discipline (by setting category limits on expenditures), and identify substandard performance (by setting baseline targets). The idea of managing without budgets would strike most managers as something akin to financial suicide.
Overcoming these challenges—complexity, resistance, and fear—is a daunting task. It's why the vast majority of companies are still stuck with Budgeting 1.0. Even those companies that have adopted Beyond Budgeting are mostly “improvers” rather than “transformers”—as Bjarte notes in Chapter 5.
There's a risk, then, that “beyond budgeting” follows the same trajectory as “agile teams.” Companies apply the tools without fully embracing the philosophy. They make minor adjustments, fail to follow through, and get disillusioned when the benefits fail to live up to the hype. It's a bit like buying an exercise bike, doing a couple of 15‐minute stints, and then being frustrated that you're not yet impressively fit. Soon the bike is covered in dust, like the yoga mat in the closet and the barbells under the bed.
Given all this, you need to keep one central point in mind as you read this book: the transformative power of Beyond Budgeting is less about tools (as valuable as they are) and more about principles—like purpose, transparency, autonomy, and trust. Beyond Budgeting isn't a set of techniques for improving the way bureaucracy works; it's a set of principles for upending the bureaucratic status quo and reversing the “controlism” that undermines organizational resilience and creativity. An organization that works diligently to operationalize these principles will end up looking almost nothing like its bureaucratic peers. It will be flatter, leaner, simpler, faster, and radically more empowered.
You will find plenty in this book about how to get from here to there. But for now, let me note that you will need to think both big and small—you'll need an approach that is both revolutionary and evolutionary. Back in the 1960s, putting a human being on the moon was an audacious goal, but Neil Armstrong's “giant leap for mankind” was the culmination of many much smaller steps. So it is with reinventing budgeting. You must first commit to a lofty goal—ridding your organization of bureaucracy and the fiction that more elaborate budgets yield more control—and then find a way of moving forward through small, risk‐bounded steps.
As you'll learn, there is nothing conceptually difficult about Beyond Budgeting, nor is there any doubt about the payoff, if you take the idea seriously. Fact is, the challenges of replacing the traditional budget with built‐for‐purpose processes, while considerable, are relatively modest when compared to a major IT overhaul or a typical, top‐down “transformation program.”
Nevertheless, the challenge of reshaping executive behaviors and reimagining management processes isn't for the faint‐hearted. The journey requires curiosity, audacity, and perseverance. Leaders need to be open to the possibility that tomorrow's most successful organizations will be as different from today's stratified, rule‐choked leviathans as YouTube is different from broadcast television or PayPal is different from a checkbook. Leaders must be willing to venture beyond the safe precincts of conventional wisdom and experiment with bold new approaches to planning, target‐setting, and control. They must believe, in the deepest recesses of their hearts, that human beings need and deserve organizations that are fundamentally more capable than the ones we have right now—and must be willing to put their shoulder to the plough to make this happen. I hope that's you. If it is, you'll find a heaping portion of encouragement, wisdom, and advice in the pages that follow.
Professor Gary HamelLondon Business School
Acknowledgments
Performance is seldom individual. So often, there is someone next to or behind you who also contributed and someone ahead of you who provided inspiration and guidance. That includes writing books.
The writing process has not been a lonely one. A big thank you for great help and feedback goes to my fellows at the Beyond Budgeting Institute: Anders Olesen, Dag Larsson, Steve Morlidge, Rikard Olsson, and Franz Röösli, and to Sebastian Becker at HEC Paris.
Nothing would have happened without my many wonderful colleagues at Borealis and Equinor, and certainly not without these companies’ former CEOs, Svein Rennemo and Eldar Sætre.
I also wish to thank my friends in the “Supporting Agile Adoption” group.
And last, but not least. A big thank you to Gary Hamel for writing the foreword and for inspiring so many for so long.
Introduction
My Beyond Budgeting Journey
“I may not have gone where I intended to go, but I think I ended up where I needed to be,” Douglas Adams once wrote. This is the story of my life.
I graduated from business studies in the early 1980s, after a short flirt with a military career. My first management job after joining Norwegian Statoil (now Equinor, one of Scandinavia's largest companies) was as head of the corporate budget department. I have led more budgeting rounds than I want to remember in that and in many later finance roles. Looking back, I have done some quite stupid things in my career. But it also means that I know what I am talking about. I have been there and done that. I know most of the tricks in the budget game, including some quite nasty ones.
There was nothing back then indicating that I would become a vocal opponent of this management concept and the philosophy behind it. I have now been one for almost 30 years. I am still embarrassed about an interview I gave to the in‐house company magazine, praising the brilliance of budgeting. I hope there are no more copies around!
It all started in the mid‐1990s at Borealis, at the time Europe's largest petrochemicals company. The company was partly owned by Statoil and headquartered in Copenhagen. I headed up the corporate finance team. We were all challenged to think of new, different, and better ways of doing our work and of running the company. Our proposal to kick out the budget felt scary. We had not heard of anyone else doing this. We got a “yes,” provided we could find an alternative. Beyond Budgeting was not yet born, so we went looking for possible solutions.
After a lot of searching (no Google back then!), many discussions, and some dead ends, we finally cracked it. “Why do we budget?” was the simple question we needed to ask. The answer, which I will return to later, provided us with all we needed. Borealis became one of the inspirations for Jeremy Hope (RIP) and Robin Fraser, the founders of the Beyond Budgeting Roundtable. I later became the chairman of this international network of organizations and individuals interested in Beyond Budgeting.
After heading up finance, I moved to a similar role in human resources before returning to Statoil. I am probably one of very few having worked in both these functions. Those HR years had a big influence on my Beyond Budgeting journey. I will revert to why the two need to work much more closely together.
In my new role as corporate controller for Statoil's international business I could not resist challenging my colleagues on the budget management we were running. In 2004 we went together to the executive committee with a proposal that now had become more ambitious than just kicking out the budget. It was about a new way of leading and managing. The model we proposed, Ambition to Action, has been at the core of the company's performance process ever since. I left my controller role to work full time on Ambition to Action, both on further development and internal training.
The Borealis and Statoil/Equinor cases triggered a lot of external interest. I have been speaking at hundreds of conferences over the years. At Equinor, I also started to run external workshops and do small‐scale consulting, with kind permission from my employer. I then made a difficult decision. I left Equinor and started Bogsnes Advisory. I love being able to devote so much more time to Beyond Budgeting, while being a free bird choosing just the work that makes me tick. I seldom have been busier or have had more fun!
Equinor is a great company. I miss my colleagues, and I hope and believe they will take Ambition to Action even further.
I come from a family of teachers. My father, my mother, and my sister all made a difference in so many people's life. My finance education took me in a different direction, but I now feel I am back in the fold. I ended up where I needed to be.
I also married a teacher!
Why This Book?
Some of you might know that I already authored two books. Implementing Beyond Budgeting was published in 2008 and later in a significantly revised second edition in 2016. These books are about Beyond Budgeting, great cases, and my own journey and implementation experiences.
So why another book?
The previous books have done well, with readers all over the world. These include executives and senior managers. I know because of nice feedback from many of them. Still, they represent a minority of my readers, for the simple reason that they are terribly busy people. There are so many great books out there. Reading them all is a luxury few can squeeze into hectic schedules. If you are one of them, this is on purpose a short book, something that could be read on a flight, for instance, one of the few occasions left without meetings and phone calls.
My own insights and experiences keep evolving. I have now worked with even more great organizations and have written several articles that this book also draws on. So much has happened since the last book; I just have to share it!
The pressure on executive teams today is immense. They keep being challenged by stakeholders about the need for change and radical transformation. The pressure is not just about becoming greener and more sustainable. It is also about becoming more dynamic and adaptive. There is a jungle of models and thousands of books claiming to have the answer. No wonder many feel overwhelmed and confused.
Many respond by embarking on an agile transformation journey. Most discover that agile wasn't designed as a way to run an organization. Its original purpose was to improve how software was developed and how teams worked, which it did, very successfully. But when scaling agile, its “holes” become visible.
Beyond Budgeting fills these holes because it was intended and designed as an agile way of managing an organization. Many companies on transformation journeys are therefore reaching out to us. I hope this book can help even more executive teams understand that there can be no true agile transformation without Beyond Budgeting.
