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The End of Performance Management 
(as we know it) 
Bjarte Bogsnes 
Vice President - Performance Management Development 
C...
Outline 
• The case for change - what is the problem? 
• Beyond Budgeting - a solution 
• The HR - Finance alliance 
2
3 
Statoil in brief 
• Turnover approx. 130 bn. USD 
• 23000 employees 
in 33 countries 
• World’s largest operator in 
wa...
Managing traffic performance - one alternative 
Who is in control? 
Based on which 
information? 
4
Managing traffic performance 
- another alternative 
Who is in control? 
Based on which 
information? 
5
Which is most efficient? 
Which is most difficult? 
In which are values most important? 
6
The world has changed - 
what about the way we lead and manage? 
Stable Dynamic 
People 
Business 
environment 
Traditiona...
We must change both processes and leadership 
Stable Dynamic 
”Theory X” ”Theory Y” Leadership 
Processes 
No traditional ...
9 
Companies on a similar journey 
9
The 12 Beyond Budgeting principles 
© BBRT 2013 – All rights reserved | www.bbrt.org 
10 
Change in leadership 
Governance...
Performance - a growing HR/ Finance 
interface 
11 - 
Yesterday Today Tomorrow? 
Transactions 
Administration 
Business ma...
Questions or comments - now or later? 
Bjarte Bogsnes 
bjbo@statoil.com 
+ 47 916 13 843 
Twitter @bbogsnes 
Beyond Budget...
Want to hear more? 
1. The problems with traditional management 
2. The Beyond Budgeting model 
3. The Borealis case 
4. T...
Other recommended books
Back-up 
15 -
Ambition to Action - purpose and process 
• Translating strategy - from ambitions to actions 
• Securing flexibility - roo...
Ambition to Action example 
Where are we 
going? 
”Strategic 
objectives” How do we 
measure 
progress? 
”Key 
Performance...
More than 1400 ”Ambition to Action’s” 
across the company 
…..and more 
18
A broader performance language 
- from narrow measurement to a holistic assessment 
B e h a v i o u r 
Deliv 
ery 
Living ...
Towards a simpler, more dynamic and 
self-regulating Ambition to Action process 
More cost conscious 
- less «cost cutting...
Beyond Budgeting 
- why it’s different and powerful 
Recipe Idea Elements only The whole 
Management 
agenda 
coverage 
Gr...
Potential for more consistency 
22 - 
Team 
Transparency 
Dynamics 
Individual 
Secrecy 
Annual
Potential for further integration 
Our values, our leadership profile, the Ambition to Action process and People@Statoil a...
The Statoil Performance Process (Draft) 
Strategic objectives & 
KPI targets 
People & leadership 
Actions 
•Delivery 
•Be...
Implementation advice 
• Create problem understanding before talking solutions 
• What’s the real risk – upside vs downsid...
26 
Improve 
Start of the Statoil journey 
- solving a serious budget conflict 
The budget purposes Separate 
“Same number...
Financial performance - as we define it 
27 - 
Shareholder Return Return on Capital
Budget 
Not 
OK 
OK 
OK? 
OK? 
OK? 
OK? 
OK? 
The mindset required….. 
Is this really 
necessary? 
Do I have a 
budget for...
…..and the tools available 
Traditional 
cost budget 
Absolute KPIs If no KPIs found 
Ambition level / 
burn rate 
Relativ...
Budget problems 
Often weak link to strategy 
Very time consuming 
Decisions made too early and often too high up 
Assumpt...
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BJARTE BOGSNES

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BJARTE BOGSNES

  1. 1. The End of Performance Management (as we know it) Bjarte Bogsnes Vice President - Performance Management Development Chairman - Beyond Budgeting Roundtable Europe 1
  2. 2. Outline • The case for change - what is the problem? • Beyond Budgeting - a solution • The HR - Finance alliance 2
  3. 3. 3 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 Europe • World leader of crude oil sales • Listed in New York and Oslo Russia Arctic Current production of oil and gas US Gulf of Mexico South America West Africa North Africa Caspian Middle East North Sea & Norwegian Sea Canada East Africa Aus/Indo.
  4. 4. Managing traffic performance - one alternative Who is in control? Based on which information? 4
  5. 5. Managing traffic performance - another alternative Who is in control? Based on which information? 5
  6. 6. Which is most efficient? Which is most difficult? In which are values most important? 6
  7. 7. The world has changed - what about the way we lead and manage? Stable Dynamic People Business environment Traditional management ”Theory X” ”Theory Y” 7
  8. 8. We must change both processes and leadership Stable Dynamic ”Theory X” ”Theory Y” Leadership Processes No traditional budgeting Relative and directional goals Dynamic planning, forecasting and resource allocation Holistic performance evaluation Values based Autonomy Transparency Internal motivation Rigid, detailed and annual Rules-based micromanagement Centralised command and control Secrecy, sticks and carrots Beyond Budgeting 8
  9. 9. 9 Companies on a similar journey 9
  10. 10. The 12 Beyond Budgeting principles © BBRT 2013 – All rights reserved | www.bbrt.org 10 Change in leadership Governance & transparency 1. Values – Bind people to a common cause; not to a central plan 2. Governance – Govern through shared values and sound judgement; not detailed rules and regulations 3. Transparency - Make information open and transparent; don’t restrict and control it Accountable teams 4. Teams - Organize around a seamless network of accountable teams; not around centralized functions 5. Trust – Trust teams to regulate and improve their performance; don’t micro-manage them 6. Accountability – Base accountability on holistic criteria and peer reviews; not on hierarchical relationships Change in processes Goals & rewards 7. Goals – Set ambitious medium-term goals; not short-term fixed targets 8. Rewards – Base rewards on relative performance; not on meeting fixed targets Planning & Controls 9. Planning - Make planning a continuous and inclusive process; not a top-down annual event 10. Coordination - Coordinate interactions dynamically; not through annual budgets and planning cycles 11. Resources - Make resources available as needed; not through annual budget allocations 12. Controls - Base controls on fast, frequent feedback; not on budget variances
  11. 11. Performance - a growing HR/ Finance interface 11 - Yesterday Today Tomorrow? Transactions Administration Business management HR FIN Transactions Administration People & leadership SHARED SERVICES People & leadership Performance management Performance Management Business management Transactions Administration Performance -people, leadership and business Transactions Administration
  12. 12. Questions or comments - now or later? Bjarte Bogsnes bjbo@statoil.com + 47 916 13 843 Twitter @bbogsnes Beyond Budgeting Round Table www.bbrt.org 12
  13. 13. 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) 13
  14. 14. Other recommended books
  15. 15. Back-up 15 -
  16. 16. 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? • Most important strategic change areas • Medium term horizon How do we measure progress? • Indicative measure of strategic delivery • 5-10 KPIs, shorter/ longer term targets What is my or our contribution? My Performance Goals •Delivery •Behaviour How do we get there? • Concrete actions and expected outcome (forecast) • Clear deadlines and accountabilities 16
  17. 17. Ambition to Action example Where are we going? ”Strategic objectives” How do we measure progress? ”Key Performance Indicators” How do we get there? ”Actions” People & Organisation HSE Operations Market Finance 17
  18. 18. More than 1400 ”Ambition to Action’s” across the company …..and more 18
  19. 19. A broader performance language - from narrow measurement to a holistic assessment B e h a v i o u r Deliv ery 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 negative effect? • Agreed actions implemented, or corrective actions initiated as needed? • Delivered results sustainable? •Development plan •Rewards 19
  20. 20. 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 n o t the same as easy!
  21. 21. Beyond Budgeting - why it’s different and powerful Recipe Idea Elements only The whole Management agenda coverage Granularity Beyond Budgeting Many leadership theories Complexity theory Lean, Agile, Holocracy Balanced Scorecard Budgeting TQM, ABC etc… 21
  22. 22. Potential for more consistency 22 - Team Transparency Dynamics Individual Secrecy Annual
  23. 23. 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
  24. 24. The Statoil Performance Process (Draft) Strategic objectives & KPI targets People & leadership Actions •Delivery •Behaviour •Development Execution Results •Evaluation •Learning •Reward and recognition Strategy & ambitions Values What How Where are we going? How do we get there? How did we do? Who we are How we work Transparency - Team - Dynamics 2015- 10-29 24
  25. 25. Implementation advice • 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 25
  26. 26. 26 Improve 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 Budget = •Target •Forecast •Resource allocation Step 1 Step 2 Target What we want to happen Forecast What we think will happen Resource allocation “Event driven - not calendar driven”
  27. 27. Financial performance - as we define it 27 - Shareholder Return Return on Capital
  28. 28. Budget Not OK OK OK? OK? OK? OK? OK? The mindset required….. Is this really necessary? Do I have a budget for this? What is good enough? How much value is this creating? Is this within my execution framework? – cost conscious from the first penny 28
  29. 29. …..and the tools available Traditional cost budget Absolute KPIs If no KPIs found Ambition level / burn rate Relative KPIs Unit cost input/output Unit cost vs peers EBIT RoACE (abs/rel) Strategic objectives or actions only Xx Xx Xx Xx Xx Xx Xx Xx 1003,4 ~1000 ”USD/bbl” ”USD/customer” ”USD/employee” ”1. quartile” ”Better than average” Increasing autonomy and flexibility Bottom line focus only ” A simplified and cost conscious way of working” “More video - less travel ” 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 Detailed and annual 29
  30. 30. Budget problems 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 30 - Irritating itches - or symptoms of a bigger problem?

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