By studying major leading-edge companies that had ‘abandoned’ traditional budgeting, the BBRT was able to conclude that there is an alternative to traditional budgeting. There is, however, not just one standardized management model or solution; every journey is different. Accordingly, we promote a set of principles that lead to more dynamic processes and front-line accountability; they are our “compass”. Organizations that follow this approach transform their management model. Members draw on the experience of others, but what they do and how they do it is up to them.
Ambition to Action translates our strategy into Strategic objectives – where are we going and what does success look like? Key Performance Indicators – how do we measure progress? Actions – how do we get there? Individual or team goals – what is my or our contribution? Remember that KPIs are indicators only, they are not always able to tell the whole truth. That is why we have a holistic performance evaluation, where we look at much more than only measurement. Ambition to Action can and should be changed when needed, driven by events more than by the calendar. Big changes require approval, small changes require information only.
We have over the last years tried to make Ambition to Action even more relevant and useful for business teams across Statoil. The goal is an even simpler, self-regulating and efficient process This means. A more cost conscious culture - and less traditional cost cutting A more event driven and a less calendar driven rhythm More translation and less cascading More relative and less absolute KPIs In short, we want to give Ambition to Action back to the line!
(Monica 10 min) The IT solutions supporting these processes are in two separate tools. The solutions are based on internally tailor made platforms with limited user-friendliness that make people focus more on tool than the performance process
We want a responsible, cost conscious and commercial organisation, where people ask different and better questions before making cost decisions A budget “ceiling” is effective in keeping cost down, but also in keeping them up. The ceiling is also a “floor”, because one might get less next year if under-spending . There is some flexibility during the year in a budget, but normally upwards only. Many ask for more money when assumptions change, few if any does the opposite….. A detailed cost budget is also comfortable for managers who dislike uncertainty and decision making, because most decisions are already made by someone above (what to do and how much it shall cost). So dynamic resource allocation is not necessarily “easier” for managers, but we believe its is much better. Such a different mind-set is necessary, but not sufficient. We also need a set of tools to help us. These are explained on the next slide.
(Note: slide show !) We have a number of alternative ways of managing other costs: Manage against a total ambition level or “burn rate” “(in the range of 1000)”. This solves some, but not all of the budget problems, because we don’t always know up front if 1000 is exactly the right level. This is solved by moving from absolute to relative KPIs; a unit cost target or comparing with others and set a ”league table” target. If a unit has a profit target, this is an indirect way of managing cost . You can spend more if you earn even more (good cost).. It is also possible to manage without costs KPIs, and address costs only through strategic objectives and/or actions. Remember that we in a addition always monitor actual cost trends. If these reveal irresponsible spending, we have not abdicated the right to intervene . But we do this only when and where needed, and not for everybody like in a traditional budget. Select from this ”menu” based on type of business and the actual situation in each unit. The further to the right, the higher the need for strong value s and a clear strategic direction.
The End of Performance Management
(as we know it)
Vice President - Performance Management Development
Chairman - Beyond Budgeting Roundtable Europe
• The case for change - what is the problem?
• Beyond Budgeting - a solution
• The HR - Finance alliance
Statoil in brief
• Turnover approx. 130 bn. USD
• 23000 employees
in 33 countries
• World’s largest operator in
waters deeper than 100 metres
• Second largest gas exporter to
• World leader of crude oil sales
• Listed in New York and Oslo
Current production of oil and gas
US Gulf of Mexico
North Sea & Norwegian Sea
Managing traffic performance - one alternative
Who is in control?
Based on which
Managing traffic performance
- another alternative
Who is in control?
Based on which
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?
”Theory X” ”Theory Y”
We must change both processes and leadership
”Theory X” ”Theory Y” Leadership
No traditional budgeting
Relative and directional goals
Dynamic planning, forecasting
and resource allocation
Holistic performance evaluation
Rigid, detailed and annual
Centralised command and
Secrecy, sticks and carrots
Performance - a growing HR/ Finance
Yesterday Today Tomorrow?
People & leadership
Questions or comments - now or later?
+ 47 916 13 843
Beyond Budgeting Round Table
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)
Ambition to Action - purpose and process
• Translating strategy - from ambitions to actions
• Securing flexibility - room to act and perform
• Activating values and leadership principles
objectives KPIs Actions &
Where are we going
– what does success
• Most important strategic
• Medium term horizon
How do we measure
• Indicative measure of
• 5-10 KPIs, shorter/
longer term targets
What is my or our
My Performance Goals
How do we get
• Concrete actions and
• Clear deadlines and
Ambition to Action example
Where are we
objectives” How do we
More than 1400 ”Ambition to Action’s”
across the company
A broader performance language
- from narrow measurement to a holistic assessment
B e h a v i o u r
Living the values
• Day-to day-observations
• 360°/ 180°/ 90° surveys
• People survey
Ambition to Action
Pressure testing KPI results: 50/50
• Deliver towards the strategic objectives?
• How ambitious KPI targets?
• Changed assumptions, with positive or
• Agreed actions implemented, or corrective
actions initiated as needed?
• Delivered results sustainable?
Towards a simpler, more dynamic and
self-regulating Ambition to Action process
More cost conscious
- less «cost cutting»
More event driven
- less calendar driven
- less cascading
- less absolute KPIs
- less secrecy
Simple is n o t the same as easy!
- why it’s different and powerful
Recipe Idea Elements only The whole
Many leadership theories
Lean, Agile, Holocracy
TQM, ABC etc…
Potential for more consistency
Potential for further integration
Our values, our leadership profile, the Ambition to Action process and People@Statoil are
key building blocks in our performance approacg
23 Classification: Inte2r0n1a5l -10-29
The Statoil Performance Process (Draft)
Strategic objectives &
People & leadership
•Reward and recognition
Where are we going? How do we get there? How did we do?
Who we are How we work
Transparency - Team - Dynamics
• Create problem understanding before talking solutions
• What’s the real risk – upside vs downside
• Design to 80% and jump
• A ”pull-based” approach
• ”One war but a thousand battles”
• Involve HR
• Don’t become a fundamentalist
Start of the Statoil journey
- solving a serious budget conflict
The budget purposes Separate
“Same number –
conflicting purposes” ”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
Step 1 Step 2
What we want
What we think
- not calendar driven”
Financial performance - as we define it
Shareholder Return Return on Capital
The mindset required…..
Is this really
Do I have a
budget for this?
What is good enough?
How much value is this
Is this within my execution
– cost conscious from the first penny
…..and the tools available
Absolute KPIs If no KPIs found
Ambition level /
Unit cost vs
or actions only
” A simplified and cost
conscious way of
“More video - less
Select based on what works best in your business
Monitoring of actual development, intervention if needed only
Often weak link to strategy
Very time consuming
Decisions made too early and often too high up
Assumptions quickly outdated
Can prevent value adding activities
“Accordion” forecasting horizon
Often a bad yardstick for evaluating performance
Irritating itches - or symptoms of a bigger problem?