European University Barcelona Campus: Beyond Budgeting – A (Secret) Performance Booster In Lean | Agile Enterprises

European University Barcelona Campus | Mar-12-2015
Fabiola Eyholzer | @FabiolaEyholzer
Beyond Budgeting – A (Secret) Performance
Booster In Lean | Agile Enterprises
© 2015 Just Leading Solutions LLC. All Rights Reserved

Beyond Budgeting – A (Secret) Performance Booster In Lean | Agile Enterprises
Class of 2000: A joyous moment and the feeling to be at
the top of the (management) world.
© 2015 Just Leading Solutions LLC. All Rights Reserved 2Mar-12-2015

Here are the bad news:
© 2015 Just Leading Solutions LLC. All Rights Reserved 3
Here are the bad news: Most of our management believes
and tools are outdated and no longer valid!
Mar-12-2015

Excited to talk @EurUni Barcelona. Are you ready to dive
into the world of #lean | #agile and #beyondbudgeting?
• The digital age and
how lean | agile
enterprises have a
competitive
advantage.
• Challenges and
downfalls of traditional
budgeting and why
companies desperately
hold on to it.
• “Beyond Budgeting”
and its place in an
empowering and
adaptive management
model.

The World Is No Longer The Same
Mar-12-2015

A social used to be a gathering with colleagues.
Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved 6

Surfing used to be an outdoor sport.

Only your head used to be in the cloud.

Twitter used to be a sound.

Skype used to be a typographical error.

An office certainly did not used to look like that.

Big data used to be a rock band.

4G used to be a parking lot.

What about the way we lead and manage our companies?
How do we achieve performance and flow?

Analogy: What we can learn about flow and performance
from traffic.
Round About
Traffic Light
Mar-12-2015

Companies try to respond to the challenges of today’s
business world: Often making it worse than better.

Successful enterprises have the courage to fully embrace
change and take a different route.

Characteristics Of A Lean | Agile Enterprise
Mar-12-2015

19
Lean | agile enterprises are more innovative, engaging and
fun because they are fit to compete in the digital world.
21st Century Enterprise
Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved

20
Corporate DNA: Lean | agile values are the foundation for
an inspiring, engaging & winning corporate culture.
Lean | agile DNA

21
Corporate Setup: A complex, connected & adaptive
ecosystem.
Connected Ecosystem

22
Strategy Translation: Iterative, meaningful & shared
purpose & objectives.
Meaningful Purpose

23
Main Value Chain: Co-created services, designed in
interactive, flexible processes.
Co-Created Services

24
Inspiring Leadership: Collaborative & empowering style to
ignite the power of self-organizing teams.
Inspiring Leadership

25
Information Flow: Proactively communicated, transparent
& fully accessible on social and mobile platforms.
Shared Knowledge

26
Governance: Decentralized decision making with broad
guidelines and latitude for creativity and innovation.
Ignited Creativity

27
Performance Strength: Focused, responsive and fast-
paced operations with a “if you fail, fail fast” philosophy.
Performance Strength

Lean | agile enterprises embrace dynamic processes and
believe and trust in the power of people.
Adapted from Bjarte Bogsnes «Ambition to Action»
dynamicstable
Theory “X” Theory “Y”
Leadership
Processes
Traditional
Management
Lean | Agile
Mar-12-2015

Challenges With Traditional Budgeting Approach
Mar-12-2015

We trust our people with huge endeavors but do not trust
them on little things.
Source: Bjarte Bogsnes «Implementing Beyond Budgeting»

We see budgets as entitlements.

We do not differentiate between good and bad cost
management.

We believe target setting & evaluation requires absolute
numbers instead of engaging messages.

We are still convinced individual bonuses are the only way
to motivate people and drive performance.

We are trying to fit the real world into a well-organized,
calendar based business rhythm.

We struggle to get high quality budgets with good targets,
reliable forecasts and effective resource allocation.

We spend so much time and energy on budgets and
reporting and have a considerable efficiency problem.

Why hold on to such a budgeting approach? It is old blind
faith! Here are some outdated beliefs and myths.
No centralized control =
Chaos and anarchy
Good performance =
Hitting the budget numbers
No budget = Cost explosion
No individual bonus =
no performance
More details = more quality
Need to know =
Enough to know
I can explain = I have control

Beyond Budgeting Approach
Mar-12-2015

Traditional Budgeting is about stabile processes and
”theory X” leadership.
dynamicstable
Leadership
Processes
• Relative & directional goals
• Dynamic forecasting &
resource allocation
• Holistic performance
evaluation
• Rigid, detail & annual
• Rules-based
micromanagement
• Centralized command &
control
• Secrecy, sticks & carrots
• Value based
• Autonomy
• Transparency
• Internal Motivation
resource allocation
evaluation
• Rules-based
micromanagement
control
• Value based
• Autonomy
• Transparency
Mar-12-2015

Beyond Budgeting is about dynamic processes and
”theory Y” leadership.
resource allocation
evaluation
• Rules-based
micromanagement
control
• Value based
• Autonomy
• Transparency
dynamicstable
Leadership
Processes
Beyond
Budgeting
Traditional
Management
Mar-12-2015

What does ’Beyond Budgeting’ mean and how is the word
‘Budgeting’ used?
Source: Beyond Budgeting Roundtable BBRT.org
‘Beyond Budgeting’ means beyond command-and-control toward a
management model that is more empowered and adaptive.
• Beyond Budgeting is about rethinking how we manage organizations in a post-
industrial world where innovative management models represent the only
sustainable competitive advantage. It is also about releasing people from the
burdens of stifling bureaucracy and suffocating control systems, trusting them with
information and giving them time to think, reflect, share, learn and improve. Above
all it is about learning how to change from the many leaders who have built and
managed ‘beyond budgeting’ organizations.
The word ‘Budgeting’ in this context describes both a management culture
and a performance management system.
• The word ‘budgeting’ is not used in its narrow sense of planning and control, but as
a generic term for the traditional command and control management model (with
the annual budget process at its core).

The Beyond Budgeting principles focus on a change in
leadership and in processes.
Source: Beyond Budgeting Roundtable BBRT.org
Change in Leadership Change in Processes
1. Values – Bind people to a common cause; not a
central plan
2. Governance – Govern through shared values and
sound judgment; not detailed rules and regulations
3. Transparency – Make information open and
transparent; don’t restrict and control it
4. Teams – Organize around seamless network of
accountable teams; not centralized functions
5. Trust – Trust teams to regulate their performance;
don’t micro-manage them
6. Accountability – Base accountability on holistic
criteria and peer reviews; not on hierarchical
relationships
7. Goals – Set ambitious medium-term goals, not short-
term fixed targets
8. Rewards – Base rewards on relative performance; not
on meeting fixed targets
9. Planning – Make planning a continuous and inclusive
process; not a top-down annual event
10. Coordination – Coordinate interactions
dynamically; not through annual budgets
11. Resources – Make resources available just-in-time;
not just-in-case
12. Controls – Base controls on fast, frequent feedback;
not budget variances
Mar-12-2015

The Beyond Budgeting principles focus on a change in
leadership and in processes.
Adapted from Beyond Budgeting Roundtable BBRT.org
ChangeinLeadership
ChangeinProcesses
•9. Planning
•10. Coordination
•11. Resources
•12. Controls
•4. Teams
•5. Trust
•6. Accountability
•7. Goals
•8. Rewards
•1. Values
•2. Governance
•3. Transparency
Governance
&
Transparency
Goals &
Rewards
Planning &
Controls
Accountable
Teams
Mar-12-2015

Principles are key on the cultural journey from traditional
to beyond budgeting.
Adapted from Franz Röösli, Michael Gebauer, based on BBRT
Industrial Age
Traditional Budgeting
Vision
Annual budget
«keeping on track»
Control (vs. budget)
Incentives (vs. budget)
Information Age
Beyond Budgeting
Iterativ,
adaptive
6 Leadership
Principles
Cultural
Journey
6 Process
Principles
dynamic goals
Mar-12-2015

Beyond Budgeting is not a standardized solution, every
journey is different.

Case Study: Start of the Statoil journey – solving a serious
budget conflict.
Source: Bjarte Bogsnes «Ambition to Action»

First movers across the globe apply or are on a journey
towards Beyond Budgeting.
Source: Bjarte Bogsnes «Ambition to Action»

You cannot discover new oceans unless you are
willing to lose sight of the shore.
unknown

Thank you!
Just Leading Solutions
275 Madison Avenue
14th Floor
New York, NY 10016
nyc@justleadingsolutions.com
www.justleadingsolutions.com
Fabiola Eyholzer
CEO
fabiola.eyholzer@justleadingsolutions.com
+1 908 340 8091
@FabiolaEyholzer
Mar-12-2015

European University Barcelona Campus: Beyond Budgeting – A (Secret) Performance Booster In Lean | Agile Enterprises

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European University Barcelona Campus: Beyond Budgeting – A (Secret) Performance Booster In Lean | Agile Enterprises