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

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Barcelona, Spain | Mar-12-2015

Forbes Magazine calls Agile “The Best Kept Secret in Management” and industry leaders and key players across all industries are already embracing lean | agile – a leadership philosophy with a set of tools and techniques based on specific values and principles – with the goal of making their organizations more responsive, innovative, and engaging.
Besides applying a toolset instrumental for driving innovation, reducing time-to-market, and improving customer satisfaction, companies are revising and realigning their leadership approach in order to ensure not only precise, but also fast and flexible decisions, swift accomplishments, and valuable interactions. This will alter their approach towards providing, managing, and monitoring their initiatives and resources and help them meet the demands of a constantly and rapidly changing business environment. Lean | agile provides them with an unparalleled competitive advantage that will impact their bottom line in a positive and sustainable manner.
This presentation focuses on the characteristics of Lean | Agile enterprises and how they approach financial planning and investment approaches in a more flexible way. We talk about “Beyond Budgeting” (also known as “Beta-Complex”) that eliminate traditional budget and budget reporting and discuss their validity and impact.

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

  1. 1. 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
  2. 2. 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
  3. 3. Beyond Budgeting – A (Secret) Performance Booster In Lean | Agile Enterprises 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 All Rights Reserved 3 Here are the bad news: Most of our management believes and tools are outdated and no longer valid!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
  4. 4. Beyond Budgeting – A (Secret) Performance Booster In Lean | Agile Enterprises 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. © 2015 Just Leading Solutions LLC. All Rights Reserved 4Mar-12-2015
  5. 5. © 2015 Just Leading Solutions LLC. All Rights Reserved 5 The World Is No Longer The Same Mar-12-2015
  6. 6. The World Is No Longer The Same A social used to be a gathering with colleagues. Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved 6
  7. 7. The World Is No Longer The Same Surfing used to be an outdoor sport. Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved 7
  8. 8. The World Is No Longer The Same Only your head used to be in the cloud. Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved 8
  9. 9. The World Is No Longer The Same Twitter used to be a sound. Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved 9
  10. 10. The World Is No Longer The Same Skype used to be a typographical error. Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved 10
  11. 11. The World Is No Longer The Same An office certainly did not used to look like that. Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved 11
  12. 12. The World Is No Longer The Same Big data used to be a rock band. Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved 12
  13. 13. The World Is No Longer The Same 4G used to be a parking lot. Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved 13
  14. 14. The World Is No Longer The Same What about the way we lead and manage our companies? How do we achieve performance and flow? Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved 14
  15. 15. The World Is No Longer The Same Analogy: What we can learn about flow and performance from traffic. © 2015 Just Leading Solutions LLC. All Rights Reserved 15 Round About Traffic Light Mar-12-2015
  16. 16. The World Is No Longer The Same Companies try to respond to the challenges of today’s business world: Often making it worse than better. © 2015 Just Leading Solutions LLC. All Rights Reserved 16Mar-12-2015
  17. 17. The World Is No Longer The Same Successful enterprises have the courage to fully embrace change and take a different route. © 2015 Just Leading Solutions LLC. All Rights Reserved 17Mar-12-2015
  18. 18. © 2015 Just Leading Solutions LLC. All Rights Reserved 18 Characteristics Of A Lean | Agile Enterprise Mar-12-2015
  19. 19. 19 Characteristics Of A Lean | Agile Enterprise 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. 20. 20 Characteristics Of A Lean | Agile Enterprise Corporate DNA: Lean | agile values are the foundation for an inspiring, engaging & winning corporate culture. Lean | agile DNA Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved
  21. 21. 21 Characteristics Of A Lean | Agile Enterprise Corporate Setup: A complex, connected & adaptive ecosystem. Connected Ecosystem Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved
  22. 22. 22 Characteristics Of A Lean | Agile Enterprise Strategy Translation: Iterative, meaningful & shared purpose & objectives. Meaningful Purpose Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved
  23. 23. 23 Characteristics Of A Lean | Agile Enterprise Main Value Chain: Co-created services, designed in interactive, flexible processes. Co-Created Services Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved
  24. 24. 24 Characteristics Of A Lean | Agile Enterprise Inspiring Leadership: Collaborative & empowering style to ignite the power of self-organizing teams. Inspiring Leadership Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved
  25. 25. 25 Characteristics Of A Lean | Agile Enterprise Information Flow: Proactively communicated, transparent & fully accessible on social and mobile platforms. Shared Knowledge Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved
  26. 26. 26 Characteristics Of A Lean | Agile Enterprise Governance: Decentralized decision making with broad guidelines and latitude for creativity and innovation. Ignited Creativity Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved
  27. 27. 27 Characteristics Of A Lean | Agile Enterprise Performance Strength: Focused, responsive and fast- paced operations with a “if you fail, fail fast” philosophy. Performance Strength Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved
  28. 28. Characteristics Of A Lean | Agile Enterprise Lean | agile enterprises embrace dynamic processes and believe and trust in the power of people. Adapted from Bjarte Bogsnes «Ambition to Action» © 2015 Just Leading Solutions LLC. All Rights Reserved 28 dynamicstable Theory “X” Theory “Y” Leadership Processes Traditional Management Lean | Agile Mar-12-2015
  29. 29. © 2015 Just Leading Solutions LLC. All Rights Reserved 29 Challenges With Traditional Budgeting Approach Mar-12-2015
  30. 30. Challenges With Traditional Budgeting Approach We trust our people with huge endeavors but do not trust them on little things. Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved 30 Source: Bjarte Bogsnes «Implementing Beyond Budgeting»
  31. 31. Challenges With Traditional Budgeting Approach We see budgets as entitlements. Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved 31 Source: Bjarte Bogsnes «Implementing Beyond Budgeting»
  32. 32. Challenges With Traditional Budgeting Approach We do not differentiate between good and bad cost management. Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved 32 Source: Bjarte Bogsnes «Implementing Beyond Budgeting»
  33. 33. Challenges With Traditional Budgeting Approach We believe target setting & evaluation requires absolute numbers instead of engaging messages. Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved 33 Source: Bjarte Bogsnes «Implementing Beyond Budgeting»
  34. 34. Challenges With Traditional Budgeting Approach We are still convinced individual bonuses are the only way to motivate people and drive performance. Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved 34 Source: Bjarte Bogsnes «Implementing Beyond Budgeting»
  35. 35. Challenges With Traditional Budgeting Approach We are trying to fit the real world into a well-organized, calendar based business rhythm. Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved 35 Source: Bjarte Bogsnes «Implementing Beyond Budgeting»
  36. 36. Challenges With Traditional Budgeting Approach We struggle to get high quality budgets with good targets, reliable forecasts and effective resource allocation. Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved 36 Source: Bjarte Bogsnes «Implementing Beyond Budgeting»
  37. 37. Challenges With Traditional Budgeting Approach We spend so much time and energy on budgets and reporting and have a considerable efficiency problem. Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved 37 Source: Bjarte Bogsnes «Implementing Beyond Budgeting»
  38. 38. Challenges With Traditional Budgeting Approach Why hold on to such a budgeting approach? It is old blind faith! Here are some outdated beliefs and myths. Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved 38 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 Source: Bjarte Bogsnes «Implementing Beyond Budgeting»
  39. 39. © 2015 Just Leading Solutions LLC. All Rights Reserved 39 Beyond Budgeting Approach Mar-12-2015
  40. 40. Beyond Budgeting Approach Traditional Budgeting is about stabile processes and ”theory X” leadership. Adapted from Bjarte Bogsnes «Ambition to Action» © 2015 Just Leading Solutions LLC. All Rights Reserved 40 dynamicstable Theory “X” Theory “Y” 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 • 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 Mar-12-2015
  41. 41. Beyond Budgeting Approach Beyond Budgeting is about dynamic processes and ”theory Y” leadership. Adapted from Bjarte Bogsnes «Ambition to Action» © 2015 Just Leading Solutions LLC. All Rights Reserved 41 • 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 dynamicstable Theory “X” Theory “Y” Leadership Processes Beyond Budgeting Traditional Management Mar-12-2015
  42. 42. Beyond Budgeting Approach What does ’Beyond Budgeting’ mean and how is the word ‘Budgeting’ used? Source: Beyond Budgeting Roundtable BBRT.org © 2015 Just Leading Solutions LLC. All Rights Reserved 42Mar-12-2015 ‘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).
  43. 43. Beyond Budgeting Approach The Beyond Budgeting principles focus on a change in leadership and in processes. Source: Beyond Budgeting Roundtable BBRT.org © 2015 Just Leading Solutions LLC. All Rights Reserved 43 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
  44. 44. Beyond Budgeting Approach The Beyond Budgeting principles focus on a change in leadership and in processes. Adapted from Beyond Budgeting Roundtable BBRT.org ChangeinLeadership © 2015 Just Leading Solutions LLC. All Rights Reserved 44 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
  45. 45. Beyond Budgeting Approach Principles are key on the cultural journey from traditional to beyond budgeting. Adapted from Franz Röösli, Michael Gebauer, based on BBRT © 2015 Just Leading Solutions LLC. All Rights Reserved 45 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
  46. 46. Beyond Budgeting Approach Beyond Budgeting is not a standardized solution, every journey is different. Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved 46
  47. 47. Beyond Budgeting Approach Case Study: Start of the Statoil journey – solving a serious budget conflict. Source: Bjarte Bogsnes «Ambition to Action» © 2015 Just Leading Solutions LLC. All Rights Reserved 47Mar-12-2015
  48. 48. Beyond Budgeting Approach First movers across the globe apply or are on a journey towards Beyond Budgeting. Source: Bjarte Bogsnes «Ambition to Action» © 2015 Just Leading Solutions LLC. All Rights Reserved 48Mar-12-2015
  49. 49. You cannot discover new oceans unless you are willing to lose sight of the shore. unknown
  50. 50. Thank you! Just Leading Solutions 275 Madison Avenue 14th Floor New York, NY 10016 nyc@justleadingsolutions.com www.justleadingsolutions.com © 2015 Just Leading Solutions LLC. All Rights Reserved 50 Fabiola Eyholzer CEO fabiola.eyholzer@justleadingsolutions.com +1 908 340 8091 @FabiolaEyholzer Mar-12-2015

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