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Beyond Budgeting - a management model
for new business and people realities
Ambition to Action - the Statoil journey
Bjart...
Statoil in brief
• Turnover and market cap
approx. 130 bn. USD

Arctic
North Sea & Norwegian Sea

• 22000 employees
in 36 ...
Fortune 500 ranking (2011)
Social responsibility

Innovation
Managing traffic performance - one alternative

Who is in control?
Based on which
information?
Managing traffic performance
- another alternative

Who is in control?
Based on which
information?
Which is most efficient?
Which is most difficult?

In which are values most important?
The world has changed what about the way we lead and manage?

Stable

Dynamic

Business
environment

Traditional
managemen...
We must change both processes and leadership

Dynamic

Processes
Relative and directional goals
Dynamic forecasting and
re...
The Beyond Budgeting principles
Change in leadership
1. Values - Govern through a few clear values, goals and
boundaries, ...
10

Companies on a similar journey
Start of the Statoil journey
- solving a serious budget conflict
Step 1

The budget purposes

Step 2

Separate

Improve

T...
Statoil financial performance - as we define it
Total Shareholder Return 2012

12 -

Return on Capital (RoACE) 2012
Spending wisely - the CFO on cost culture

13
Ambition to Action - purpose and process
• Translating strategy - from ambitions to actions
• Securing flexibility - room ...
Ambition to Action example
People &
Organisation

HSE

Operations

Market

Finance

Where are we
going?
”Strategic
objecti...
More than 1400 ”Ambition to Actions”
across the company

…..and more
A broader performance language
- from narrow measurement to a holistic assessment
Ambition to Action

Pressure testing KPI...
Towards a simpler, more dynamic and
self-regulating Ambition to Action process
More cost conscious
- less «cost cutting»
M...
Questions or comments - now or later?
Bjarte Bogsnes
bjbo@statoil.com
+ 47 91 61 38 43
@bbogsnes
Beyond Budgeting Round Ta...
Want to hear more?
1.

The problems with traditional management

2.

The Beyond Budgeting model

3.

The Borealis case

4....
Backup
The mindset required…..
– cost conscious from the first penny
Do I have a
budget for this?

Is this really
necessary?
What...
…..and the tools available
Traditional
cost budget

Absolute KPIs

Detailed and
annual

Ambition level /
burn rate

Relati...
The CEO on Ambition to Action

24 -
Key principles - Ambition to Action
Performance is
ultimately about
performing
better than
those we
compare
ourselves with...
A target – what we want to happen
• Relative where possible
− Input/output or benchmarking
• Translation - not cascading
−...
A forecast – what we think will happen
- whether we like what we see or not!

… not a promise,
not an application for reso...
A forecast is a call to action

Get issues on the radar
screen early enough …

… to be able to take
corrective actions
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Bjarte Bogsnes, Vice President Performance Management Development at Statoil - Beyond Budgeting - A management model for new business and people realities; the Statoil implementation journey

Bjarte Bogsnes, Vice President Performance Management Development at Statoil - Beyond Budgeting - A management model for new business and people realities; the Statoil implementation journey spoke at the CFO Event UK 2013

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Bjarte Bogsnes, Vice President Performance Management Development at Statoil - Beyond Budgeting - A management model for new business and people realities; the Statoil implementation journey

  1. 1. Beyond Budgeting - a management model for new business and people realities Ambition to Action - the Statoil journey Bjarte Bogsnes Vice President, Performance Management Development Chairman, Beyond Budgeting Roundtable Europe
  2. 2. Statoil in brief • Turnover and market cap approx. 130 bn. USD Arctic North Sea & Norwegian Sea • 22000 employees in 36 countries Russia • World’s largest operator in waters deeper than 100 metres • Second largest gas exporter to Europe Canada Caspian North Africa US Gulf of Mexico Middle East • World leader of crude oil sales • Listed in New York and Oslo Aus/Indo. South America West Africa East Africa Current production of oil and gas
  3. 3. Fortune 500 ranking (2011) Social responsibility Innovation
  4. 4. Managing traffic performance - one alternative Who is in control? Based on which information?
  5. 5. Managing traffic performance - another alternative Who is in control? Based on which information?
  6. 6. Which is most efficient? Which is most difficult? In which are values most important?
  7. 7. The world has changed what about the way we lead and manage? Stable Dynamic Business environment Traditional management ”Theory X” 7- ”Theory Y” People
  8. 8. We must change both processes and leadership Dynamic Processes Relative and directional goals Dynamic forecasting and resource allocation Holistic performance evaluation Stable Rigid, detailed and annual Rules-based micromanagement Centralised command and control Secrecy, sticks and carrots ”Theory X” Beyond Budgeting Values based Autonomy Transparency Internal motivation ”Theory Y” Leadership
  9. 9. The Beyond Budgeting principles Change in leadership 1. Values - Govern through a few clear values, goals and boundaries, not detailed rules and budgets 7. Goals - Set relative goals for continuous improvement, don’t negotiate fixed performance contracts 2. Performance - Create a high performance climate based on relative success, not on meeting fixed targets 8. Rewards - Reward shared success based on relative performance, not on meeting fixed targets 3. Transparency - Promote open information for self management, don’t restrict it hierarchically 9. Planning - Make planning a continuous and inclusive process, not a top-down annual event 4. Organization - Organize as a network of lean, accountable teams, not around centralized functions 10. Coordination - Coordinate interactions dynamically, not through annual planning cycles 5. Autonomy - Give teams the freedom and capability to act; don’t micro-manage them 11. Resources - Make resources available as needed, not through annual budget allocations 6. Customers - Focus everyone on improving customer outcomes, not on hierarchical relationships 9- Change in processes 12. Controls - Base controls on relative indicators and trends, not on variances against plan
  10. 10. 10 Companies on a similar journey
  11. 11. Start of the Statoil journey - solving a serious budget conflict Step 1 The budget purposes Step 2 Separate Improve Target Budget = •Target •Forecast •Resource allocation What we want to happen Forecast What we think will happen Resource allocation “Same number – conflicting purposes” 11 - ”Different numbers” • Inspiring & motivating • Relative where possible • Holistic performance evaluation • Unbiased - expected outcome • Limited detail • Dynamic - no annual allocation • KPI targets, mandates, decision gates & decision criteria • Trend monitoring “Event driven - not calendar driven”
  12. 12. Statoil financial performance - as we define it Total Shareholder Return 2012 12 - Return on Capital (RoACE) 2012
  13. 13. Spending wisely - the CFO on cost culture 13
  14. 14. Ambition to Action - purpose and process • Translating strategy - from ambitions to actions • Securing flexibility - room to act and perform • Activating values and leadership principles Strategic objectives KPIs Actions & forecasts Individual or team goals Where are we going – what does success look like? How do we measure progress? How do we get there? What is my or our contribution? • Most important strategic change areas • Indicative measure of strategic delivery My Performance Goals • Medium term horizon • 5-10 KPIs, shorter/ longer term targets • Concrete actions and expected outcome (forecast) • Clear deadlines and accountabilities •Delivery •Behaviour
  15. 15. Ambition to Action example People & Organisation HSE Operations Market Finance Where are we going? ”Strategic objectives” How do we measure progress? ”Key Performance Indicators” How do we get there? ”Actions”
  16. 16. More than 1400 ”Ambition to Actions” across the company …..and more
  17. 17. A broader performance language - from narrow measurement to a holistic assessment Ambition to Action Pressure testing KPI results: D e l i v e r y 50/50 • Development plan • Rewards Behaviour • Deliver towards the strategic objectives? • How ambitious KPI targets? • Changed assumptions, with positive or negative effect? Living the values • Agreed actions implemented, or corrective actions initiated as needed? • 360°/ 180°/ 90° surveys • Delivered results sustainable? • Day-to day-observations • People survey
  18. 18. Towards a simpler, more dynamic and self-regulating Ambition to Action process More cost conscious - less «cost cutting» More event driven - less calendar driven More translation - less cascading More relative - less absolute KPIs More transparency - less secrecy Simple is not the same as easy!
  19. 19. Questions or comments - now or later? Bjarte Bogsnes bjbo@statoil.com + 47 91 61 38 43 @bbogsnes Beyond Budgeting Round Table www.bbrt.org
  20. 20. Want to hear more? 1. The problems with traditional management 2. The Beyond Budgeting model 3. The Borealis case 4. The Statoil case 5. Implementation advice Out on Wiley (US) Available from e.g. Amazon.co.uk (Now available in Russian and Japanese)
  21. 21. Backup
  22. 22. The mindset required….. – cost conscious from the first penny Do I have a budget for this? Is this really necessary? What is good enough? How much value is this creating? Budget Not OK Is this within my execution framework? OK? OK OK? OK? OK? OK?
  23. 23. …..and the tools available Traditional cost budget Absolute KPIs Detailed and annual Ambition level / burn rate Relative KPIs Unit cost input/output Unit cost vs peers If no KPIs found Bottom line focus only Strategic objectives or actions only Increasing autonomy and flexibility Xx Xx Xx ”USD/bbl” Xx Xx ”USD/customer” Xx Xx ”USD/employee” Xx 1003,4 ~1000 ”1. quartile” ”Better than average” EBIT RoACE (abs/rel) ” A simplified and cost conscious way of working” “More video - less travel ” ”Reduce down-time at all our facilities” Select based on what works best in your business Monitoring of actual development, intervention if needed only Increasing need for strong values and clear direction
  24. 24. The CEO on Ambition to Action 24 -
  25. 25. Key principles - Ambition to Action Performance is ultimately about performing better than those we compare ourselves with 25 - Do the right thing in the actual situation, guided by the Statoil Book, your Ambition to action, decision criteria & authorities and sound business judgement Within this framework, resources are made available or allocated case-by-case Business follow up is forward looking and action oriented Performance evaluation is a holistic assessment of delivery and behaviour
  26. 26. A target – what we want to happen • Relative where possible − Input/output or benchmarking • Translation - not cascading − Must all targets add up? • Ambitious - without overstretching − Remember Aristotle • SMART* − but not too SMART *SMART: Specific, Measureable, Achievable, Realistic, Timebound
  27. 27. A forecast – what we think will happen - whether we like what we see or not! … not a promise, not an application for resources
  28. 28. A forecast is a call to action Get issues on the radar screen early enough … … to be able to take corrective actions
  • marcocalzolari

    Dec. 27, 2016
  • ckti

    Apr. 9, 2015
  • AnneFrisch

    Nov. 15, 2013

Bjarte Bogsnes, Vice President Performance Management Development at Statoil - Beyond Budgeting - A management model for new business and people realities; the Statoil implementation journey spoke at the CFO Event UK 2013

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