Transforming an organization's management model
from “command and control” to “Beyond Budgeting”:
The Logoplaste case GERAL
A Nossa Empresa
Os nossos Parceiros
Our Products
Logoplaste throughout the World
Logoplaste in numbers
This white paper is based upon a public case presentation held on 21.02.2008
at the InterNews seminar “Beyond Budgeting” in São Paulo.
Info@logoplaste.com
logoplaste.com
www.logoplaste.com

The company: Logoplaste Group
Founded in 1976.
49 plants in Austria, Brazil, Canada, Czech Republic, France, Holland,
Portugal, Spain, England, USA and Asia.
3rd largest container transformer in Europe.
2nd largest container transformer in Brazil employing 450 people.
1st in integrated operations in Brazil and Europe.
Approx. 150,000 tons of raw material processed in 2007.
5.5 billions in plastic packaging sold in 2007 throughout the world.

Our organization in South America
2007: 8 plants

A selection of Logoplaste plastic packaging products in Brazil

The board's vision for the company's future
“There is a need to grow, so that we do not disappear (...)
The sheer size of this sector is a driving competitive factor.”
(Alexandre Relvas, FIEP Conference, February 2002)
Our goal:
• “.. 15% annual growth rate in each country”
• “A new contract every year, in each country”
(Annual Report 2006)
Logoplaste in the Future
Transforming the model to achieve the board's goals:
“Competitiveness – Growth – One Logoplaste”

Why should we change?
• We are not regarded as a leading company within our sector in Brazil, today.
• Our profitability has decreased over time
(greater customer demands are not reflected in the price).
• We are overly reactive to customer demands
• We lack agility in responding to the market, resulting in missed opportunities.
• “Paternalism” from Headquarters in Europe has created a comfort zone,
excessive job stability and bureaucracy in the decision making process.
• We have lost market space and have not developed the market.
• Is our price too high?
• Is our structure too expensive?
• Are we efficient?
• How long can we stand this?
Conclusion: Given the historic results recorded by Logoplaste over the last five
years, it is not possible to meet the goals set by the Board (15% per year),
if we do not make significant changes.

Oct/07: How the story began...
10/17/2006 Seminar “Leading people and teams –
new concepts for the 21st century”
Participation: Managers
Speaker: Niels Pflaeging – Director of the Beyond Budgeting Round Table

Our urgency: The world has changed!
• Recently installed capacity at one of our units is
Information Age already smaller than what the client needs
• Continuous production re-scheduling
Highly competitive, unpredictable • Constant changes in new project assumptions
Abrupt/unpredictable change • Product life spans: from eight years to
three years (with impact on investment)
• Demand from customers for greater
Short life cycles innovation on the part of Logoplaste
Speed of Change
• More complicated contract renewals
Price pressure • More competitive electronic bids
• R$ 1.5 MM in Technology and Change
Investments in 1 year
Disloyal customers
• One project was passed on to our competitors
by partner-customer
Demanding employees • Lost 18MM PET containers from our customer
• Electronic bids
Transparency • Strike at one of our units (Nov/07)
• Demand for “positions&salaries“ policy
1980 1990 2000 2010 2020 and
2030 more recognition
• ERP Restructuring project
• Internal and external audits

Today's Critical Success Factors (CSF) require “freedom”
All are important
today!
Information Age
Highly competitive, unpredictable Critical Success Factors
Abrupt/unpredictable change Fast response
Short life cycles Innovation
Speed of Change
Price pressure Operational excellence
Disloyal customers Customer relationship
Demanding employees Best place to work
Transparency Ethical behavior
1980 1990 2000 2010 2020 2030

But we have gone down a different path:
“Classic” and “alternative” paths for an organization's evolution
Low degree Differentiation Classic path:
of decentralization/ Stagnation within the
Phase tayloristic model
empowerment.
Out of sync with
today's critical success factors!
Classic path: Alternative path:
Bureaucratization and Transformation, This is our
functional differentiation, based on radical path now!
owed to growth and decentralization,
application of leadership and process
“tayloristic“ principles change.
High degree of
decentralization/ Alternative path: Extension of the
empowerment. Pioneering Maintenance of an Integration decentralized
Aligned with today's Phase empowerment and Phase model throughout
critical success factors! confidence culture operations
Foundation Time Scale – Several decades old
increasing age of the organization

Critical Success Factors (CSF)
Importance of management model:
Most organizations use the “management model” that
has been designed for efficiency....while the problem today is complexity*.
* Multiple critical factors for competitive
success that include efficiency
Creating adaptive organizations:
“The secret of success is not being able to predict the future and create
an organization that prospers in the unforeseen future.”
Michael Hammer

Traditional management processes
from the command and control model are “straightjackets.”
Strategy
Strategy
Strategic Learning cycle
“Fixed”
“Fixed”
performance
performance They conflict with our
contract
contract Critical Success Factors!
Management control
cycle
Control
Control

Our entire management model actually restricts performance
Success factors Examples of non-alignment
• Fast response • Delays caused by excessive planning processes
• Innovation • Innovation is asphyxiated by central bureaucracy
• Operations excellence • Budget mentality: ‘spend it or lose it’
• Close customer relations • Incentives created short-termism
• The best people • Motivation is extrinsic rather than intrinsic
• Ethical behavior • Individualism causes dysfunctional and even
unethical behavior
• Financial performance • Inferior financial performance
When pressure increases, the problems get worse!

The Beyond Budgeting model: Rooted in science and in practice.
Sciences: Practice:
Thought leaders • Stafford Beer Industry leaders
• Margareth Wheatley
(selected) • Niklas Luhmann (selected)
• Kevin Kelly
• Ross Ashby
• Joseph Bragdon
• Douglas McGregor • …
• Chris Argyris Complexity
• Jeffrey Pfeffer theories Manufacturing
• Stephen Covey
• Viktor Frankl
• Howard Gardner Social
• Reinhard Sprenger sciences & HR Distribution
• …
• Peter Drucker Leadership &
• Tom Peters Services
• Charles Handy Change
• John Kotter
• Peter Senge Strategy &
• Thomas Davenport Government
performance & Not-for profit
• Peter Block
• … management
• Charles Horngren
• Henry Mintzberg
• Gary Hamel
• Jeremy Hope
• Michael Hammer
• Thomas Johnson
Source: Niels Pflaeging/BBTN • …

“Command and control“ and budgetary management: widely
recognized as a problem: BBRT membership between 1998 and 2007
• ABB • De Beers • Maxager • Softlab
• ABC Technologies • DFW Airport • Mencap • Solver Inc.
• ACCO Europe • Diageo • Millipore Corp. • Southco
• ACNeilsen • Deutsche Bank • National Power • Standard Life
• Accenture • Deloitte & Touche ERS • Navigant Consulting • Statoil
• Alcan Packaging • DHL • Novartis • Stratature
• Alstom • EADS • Omgeo LLC • T-Online
• American Express • eNiklas • openBC (agora: XING) • TelecomNewZealand
• Anheuser Busch • Ernst & Young • Park Nicollet Health • Texas Instruments
• Archstone Consulting • EBRD Services • Thames Water
• Armstrong-Laing • Exelon • Parker Hannifin • The World Bank
• Andersen • Halifax • Pentland Group • ThinkFast Consulting
• Ascom • Hammond Suddards • proDacapo • Time Warner Telecom
• Barclays Bank • HON Comp. • Puget Sound Energy • TPG
• BT Group • Housing Associations • Priority Health • UBS AG
• Burmah Castrol • HP Bulmer • Resorts World • United Engineering
• BG Transco • Hyperion • Royal Mail Forgings
• Boots The Chemists • IBM-BCServices • Rugby Group • Unilever
• Cadbury Schweppes • Ingersoll Rand • Sainsbury's • US Analytics
• Charles Schwab • Interbrew UK Supermarkets • Vaisala Oy
• CIBC • International Finance • SAS Performance • Valmet Corporation
• CIMA • Johnsonville Sausage Management • Verisign
• CITB • Kaiser Permanente • Schneider Electric • Wachovia Corp
• Clariant International • Kingfisher • Schwan Food • Welsh Devel. Agency
• Cognos • KPMG Consulting • Scottish Enterprise • West Bromwich
• Coors Brewers • Mars Confectionery • Siemens Building Society
• CorVu • Port of Tyne Authority • Sight Savers Intl. • Wright Williams&Kelly
• CSIRO Livestock • MasterCard • SKF • ...
Fonte: www.bbrt.org

Learning more about Beyond Budgeting:
pioneering organizations we met, visited, researched or interviewed
- Each one of these companies has developed its own, unique management model,
according to its reality.
- However, all of these organizations share the same principles for decentralized
and adaptive leadership (“Beyond Budgeting principles“), including clearly
defined values, relative performance contracts and result-orientation, aligned with
the reality of the “Information Age.”

Critical success factors in today's world
½B@2010: An ambitious Transformation Program aimed at building the
foundations for Logoplaste 2010 centred around 5 themes…
Best for the community
Company-oriented 6. Effective governance Market-oriented
Best to invest in
7. Creation of greater
sustainable value
Think Differently/
Align Minds! Disruptively
Best for doing business Innovate!
2. Close customer relations
3. Fast response Reshape the Way
4. Innovation We Organize!
5. Operations excellence
Best place to work
1. Best people and teams
Pursue
Nurture our
Commercial
Talent!
Aggressiveness!
The common factor among pioneering companies: There is a conviction
that stakeholders´ interests actually are united within a virtuous cycle, integrating
today´s critical success factors within one mental model.
LOGOPLASTE 27

Feb/07: Management workshop and Beyond Budgeting diagnostic
February/2007 Workshop at Logoplaste
Duration: 1 day.
Participation: Directors and Managers.
Workshop facilitators: Valeria Junqueira, César Souza, Niels Pflaeging.
BBRT Diagnostic Survey conducted on-line.

A formula for change:
How transformational change can be achieved
DxVxS>R
• Dissatisfaction
• Vision
• Strategy & Steps (change strategy and the first steps)
• Resistance

The BBRT online diagnostic: assessing your perception of the firm,
in relation to the “Beyond Budgeting” model

Our diagnostic survey results: A first ‘case for change’
(Step 1: “Create a sense of urgency”)
Dissatis Strategy Re-
f( -faction
x Vision x & Steps
)> sistance

Mapping the organizational culture –
an analyses of necessary and desired changes made by the team
Acquire Consolidate Eliminate
Communication
Initiative
Accessibility Departmentalization
Extension Customer solution
Feudalism
Closer relations with Service Provider Concept
Communication failures
customers (internal and Commitment to the
external) company Reactivity
Commitment Individual competencies Lack of commitment with
Speed final overall result
Focus on business
Agility
profitability Prima Donnas
Innovation
Pro-activity
Culture = Habits, beliefs, values, modus operandi

How to change: Documenting the top management's
commitment to change, early-on.
References

Creating profound change, based upon a structured process that
encompasses both organizational and individual change
References
3.
Beginning
Organizational change
process according to 2.
John Kotter/HBS Neutral Zone
1. 2. 3. 4. 5. 6. 7. 8.
Establish a Create a Communicat Create Generate Consolidate Anchor new
Develop a
sense of coalition that vision and e the change empower- short term gains and approaches
urgency will guide vision ment and gains produce in culture
strategy
the program broad based more change
action
References
1. Individual change
Ending process according to
“Double Helix Transformation Framework“ William Bridges
Source: Niels Pflaeging/BBTN

Mar/07: Managerial workshop “Building a vision“
Workshop “Building a vision for change”
• Participation: Directores and Managers
• Duration: 2 days
• Consultants: Niels Pflaeging and Roberto Ebina

Managerial workshop “Building a vision“

Descriptive vision of what we think about as an organization:
How we envision our company within 3-5 years
• “We want a decentralized company, run by an inspiring group of leaders,
people who can form new leaders to face uncertain situations which the future
will certainly bring.”
• “It will be one of the 10 best companies to work for and will make
professionals feel attracted enough to want to work for it.”
• “It has a fantastic and transparent information system that enables quick
responses and ready solutions anchored to the desire to continually improve.”
• “The people are happy. There is a culture of innovation and creativity, which
serves as a market benchmark.”
• “Our management model is talked about throughout the market as a
benchmark to be copied. We are asked to bring this experience to other units in
other countries and to our surprise the parent company as well.”
• “People will enjoy working at Logoplaste.”

Questions raised by the participants
• “Who will be the teams closest to the customers at Logoplaste? This is an answer
that must be found over the short term as well as the level of autonomy they should
have.”
• “How do we connect the center and the outside, leading and not managing? This
cannot be done by command and control.”
• “How can we create dialogue and transparency among 100% of the people at
Logoplaste? Without transparency, there is no change. Several measures refer to
transparency.”
• “How can we turn people who occupy space into the enterprising people they
deserve?”
• “How do we put an end to our own arrogance?“

Apr/07: Beyond Budgeting conference in São Paulo
and visit from Robin Fraser (BBRT) at Logoplaste
e
• Conference: Presentations by BBRT directors related to the Beyond Budgeting
concept, and case companies that have achieved success because “they apply
a totally different model” (Toyota, Google, Egon Zehnder and Handelsbanken).
• BBRT meeting (www.bbrt.org) with discussions on transformation hosted at
Logoplaste´s head office in Brazil.

At Logoplaste Brazil, Beyond Budgeting gets a new brand:
“Decentralize – Lead - Grow”, or DLC

Forming a Guiding Coalition that will lead the change initiative
(Step 2: “Forming the guiding coalition”)
“Make sure that a strong group can be relied upon to direct the first changes
and who have leadership skills, availability to act, credibility, communication
skills, authority and analytical competency.” John Kotter
Members of the Guiding Coalition:
June/2007: March/2008:
1. Andreia Gil 1. Andreia Gil
2. Carlos Reis 2. Carlos Reis
3. Eugénio Barroso 3. Eugénio Barroso
4. José Pilão 4. Hideko Teruya
5. Júlio Fontana 5. José Pilão
6. Oldecir Antunes 6. Júlio Fontana
7. Ricardo Fagionato 7. Morivaldo Souza
8. Silvio Carvalho 8. Oldecir Antunes
9. Valéria Junqueira 9. Paulo Finardi
10. Reginaldo Souza
11. Ricardo Fagionato
12. Silvio Carvalho
13. Valéria Junqueira

Jun/07: Putting a guiding coalition together
The Guiding Coalition's mission:
• Write a first draft of the “Change Manifesto” (“Version 1.00”).
• Lead the transformation process, in order to assure success.
• Involve and influence people to assure implementation of actions.
• Initiate and support DLC Task Forces.
• Create internal communication platforms to explain and represent DLC,
and to align ideas.
• Continuously measure “process temperature” and stand up to resistance.

Aug-Nov/07: Leadership development activities
• Aug/07: Team Building Workshop
Participants: Directors and Managers
• Module I – Leadership self-awareness
(Create self-awareness for devolved leadership)
• Aug/2007: Managers and directors
• Sep/2007: Supervisors and plant forepersons
• Module II – Leadership returned and formation of high Performance teams
(Understand and practice devolved leadership and envision the decentralized model)
• Oct/2007 – Managers and directors
• Nov/2007 – Supervisors and forepersons

Aug/07: Team-building workshop with full management team
Julho/2007
Workshop Team Building
Participants: Directors and Managers
Objectives:
• Create understanding of the group for the
need to work as a team
• Identify the first steps of change * Kotter

Jun/07 to Feb/08: Writing up the “Change Manifesto”
(Step 3: “Define the change vision and strategy“)
The document's structure and contents:
1. Urgency for change at Logoplaste do Brasil
(or: “Why we need to change now!”)
2. Our vision for change
(or: “What do we want to be”)
3. Business model and values that are
consistent with our company (reason for being, limits etc.)
(or: “What will guide us as a firm and as people”)
4. Our strategy for change
(or: “What will we do”/“How will we get there”)
5. What will we do so that we will not fall back
into the old model and so that the model
continues to remain on the minds of people?
(or: “How can we guarantee that this will work?”)
6. Final comments: What do we get out of this?

The change manifesto

The change manifesto: On hierarchy and human nature
Theory X Theory Y
“Why is it that every time “Motivation and the potential
I need a pair or arms, there is to develop, a capacity to assume
a brain that comes with it?” responsibility, all that is present in all people.
(Henry Ford) It´s not the executives
who induce these qualities.”
(Douglas McGregor,
Harvard Business School, 1960).

The change manifesto: Explaining the principles
of a model beyond “command and control”
Principles Do this! Not that!
Customers and Customer focus Focus on the boss
responsibility Responsible teams Centralization
Leadership
Performance and Performance culture Inspired by the past
6 devolved
freedom Autonomy and responsibility Adherence to fixed plans
leadership principles
Governance and Clearly defined objectives and values Impose objectives
transparency Open and shared information Restrict information
Goals and Goals related to continual improvement Fiscal year fixed goals
rewards Rewards related to company results Reward local fixed goals
Processes
Planning and 6 adaptive management down annual planning
Continuous and inclusive planning Top
controls process principles
Compare performance against actuals Variations against fixed plans
Resources and Resources on demand Annual budget allocations
coordination Coordinate dynamic interactions Departmentalization
Source: BBRT

The change manifesto: 10 guiding principles
(or key values), in line with principle # 5 of the model
1) Decentralize: create a 6) Dialogue: Talk as equals to
chain of collaboration and equals. Work as a team, share.
empower people
7) Consult: Apprenticeship attitude,
2) Lead: Influence people to work you cannot know it all, all of the
as a team and at their time.
maximum capacity
8) Dare: Everything can be
3) Grow: company growth improved, risk, challenge
depends on the individual surpass limits
9) Work with zeal: Happiness is
4) Be transparent: ethics in contagious; celebrate
relationships, information and conquests.
experience
10) Act as an entrepreneur:
5) Respect: Do not discriminate. feel as if you owned the
Do not be biased. Paternalistic business, foresee problems
attitudes are against our and opportunities.
principles.
te, in any situation.”
tions by all people at Logoplas
“To serve as a guide for all ac

The change manifesto: The firm as a “collaborative network” (with
decentralized decision-making power and “devolved” leadership)
Traditional model (supports efficiency) New model (supports complexity)
(“Taylorism”) (“DLC”/“Beyond Budgeting“)
Centralized Decentralized
hierarchy, network,
“command and “Sense and
control“ Six critical respond“
success factors
• Fast response
• Innovation
• Operations
Strategy
Strategy excellence Relative
Relative
Performance
Performance
• Close customer Contracts
Fixed relations Contracts Dynamic
processes Fixed
Fixed • The best people Processes
performance
performance
contracts Dynamic
contracts • Ethical behavior Coordination
Control
Control

Sep/07: Spreading DLC with “tandem bicycles”
(Step 4: “Communicate to achieve understanding and acceptance“)
The Tandem Bicycle concept enables involvement of
all persons in the change process, encouraging
dialogue among the 450 people at Logoplaste in Brazil.
* Kotter

Our change scorecard

Nov/07: “Breaking the pyramid” at one of our eight plants
• Urgency for action in the unit is identified by
DLC guiding coalition
• 22/23 November – initial event held at unit with 19 people
from different areas of the local team DLC - DESCENTRALIZAR, LIDERAR E
DLC - DESCENTRALIZAR, LIDERAR E
CRESCER
• Transparency in relation to changes to be made CRESCER
Nosso modelo de gestão é estruturado em células
Nosso modelo de gestão é estruturado em células
(by commercial director) auto-gerenciáveis e descentralizadas que regem
auto-gerenciáveisseguintes princípios: regem
através dos e descentralizadas que
através dos seguintes princípios:
• “Museum” exercise and Knowledge Turntables create 1º. Somos responsáveis pela Qualidade
1º. Somos responsáveis pela Qualidade
urgency and vision for new model
2º. Somos intolerantes com o desperdício
2º. Somos intolerantes com o desperdício
3º. Somos responsáveis por cumprir o programa - assegurar a produção
• 28 November – local guiding coalition meeting
3º. Somos responsáveis por cumprir o programa - assegurar a produção
4º. Somos responsáveis pelo que prometemos
4º. Somos responsáveis pelo que prometemos
• group being formed by plant manager 5º. Seremos ágeis, simples e eficientes em todos os processos e combateremos
5º. Seremos ágeis, simples e forma de burocracia os processos e combateremos
toda eficientes em todos
toda forma de burocracia
• outline of the new model is developed 6º. Trabalharemos como um verdadeiro time, mantendo espírito de equipe,
6º. Trabalharemos dinâmica e sinergia - “somos solidários”
gerando como um verdadeiro time, mantendo espírito de equipe,
gerando dinâmica e sinergia - “somos solidários”
• Detailed preparation of future cell structure,
7º. Nos comprometemos a compartilhar experiência e desenvolver pessoas
7º. Nos comprometemos a compartilhar experiência e desenvolver pessoas
8º. Somos parte do problema e da solução
including job analyses and functions during work sessions 8º. Somos parte do problema e da solução
9º. Nós praticaremos a melhoria continua e estimulamos o ambiente de
9º. Nós praticaremos a melhoria continua e estimulamos o ambiente de
participação e criatividade - “nenhuma idéia pode ser censurada”
(local guiding coalition) participação e criatividade - “nenhuma idéia pode ser censurada”
10º. Somos transparentes em todas as nossas comunicações
10º. Somos transparentes em todas as nossas comunicações
• Weekly work meetings/follow-up by local guiding coalition 11º. Informações disponíveis com transparência
11º. Informações disponíveis com transparência
(“on Tuesdays“), supported by coalition support group
12º. Somos francos e éticos em todas as nossas atitudes
12º. Somos francos e éticos em todas as nossas atitudes
• Action groups against waste are being formed

“Breaking the organizational pyramid “ at a production plant:
Designing a new, networked model for a 130-people unit
• Unit (local) guiding coalition team develops new
structure, helped by the central guiding coalition;
• Members of other plants take part in the process;
• At local coalition meetings, real examples from the plant
are discussed in detail.

Designing the model in a production unit at a client site
and making it work, by involving a local guiding coalition

Designing a networked organization structure for
a 130-people unit – an example
Shareholders
Shareholders What characterizes a “cell”,
“Team”
Customer
Customer within the model?
Cell 5
(all cells within a unit)
Cell 4 • It contains several functions,
Former Former
production roles and duties, which would
production
line No.6 line No.5 be traditionally separated into
different departments. A cell
integrates functions and roles
Support Support • It offers and sells products
cell I
cell II
(rest of former
and/or services on its own,
Banks
Banks departments) and is independent in its
decisions about them.
Cell 1
Cell 1 Cell 3
Former serigr.
Former serigr.
• It is customer focused, in
Support Former
and Production
and Production production that it responds to internal or
line No.1 cell III
line No.1 lines Nos.3/4 external clients, not to hierarchy.
• It is held accountable by the
company leadership and is
Cell 2 responsible for it’s own
Former value creation.
production Market
line No.2
Market • It applies the 12 Beyond
Competition
Competition
Budgeting principles.

Jan/08: Foundation of further DLC Task Force begins
(Step 5: “Empower all others to act”)
• Task Force “Cell networks within the plant units”
(“Break the pyramid” – create networks of highly autonomous teams responsible for results)
• Task Force “Compensation systems” (reward success based on relative performance)
• Task Force “Financial and non-financial reports” (promote open and shared information)
• Other Task Forces (TFs) and Work Groups (WGs) to be created:
“TF Cell Network in the main office“, “WG Waste reduction” at units and head office

Apr/08: Ready to put steps 4, 5 and 6 of the
organizational change process into action
• Publish the manifesto; • Prepare improvement plans at cells;
• Run more “tandem bicycles“ • Attack waste;
• Create on-line discussion forum. • Create rational system of variable
Organizational change compensation;
process according to • Eliminate some departments.
John Kotter/HBS
1. 2. 3. 4. 5. 6. 7. 8.
Establish a Create a Create Generate Consolidate Anchor new
Develop a Communi- empower- short-term gains and
sense of coalition that vision and approaches
urgency will guide the strategy cate the ment and gains produce
change broad-based in culture
program more change
vision action
• Map and remove areas of resistance; • Create mechanisms to test new ideas
• Create a network of cells and local coalitions for change. and solutions;
• Install DLC Task Forces and work groups. • Practice waste elimination culture;
• Make information accessible for decision making processes. • Leadership becomes challenging and
• Transfer knowledge and technical competencies to the cells. is monitored.

Reinventing Logoplaste´s DNA
If you want one year of prosperity, plant seeds.
If you want 10 years of prosperity, plant trees.
If you want 100 years of prosperity, plant people.
Chinese proverb

GERAL
A Nossa Empresa
Os nossos Parceiros
Our Products
Thank you! Logoplaste throughout the World
Logoplaste in numbers
Maria Valéria Junqueira
valeria.junqueira@logoplaste.ind.br
Info@logoplaste.com
logoplaste.com
www.logoplaste.com