Implementing Beyond Budgeting

"Budgeting, which lies at the heart of management, is typically backward-looking, inflexible, politicized, and overly conservative in other words, it's a drag on organizational vitality. But in this provocative book, Bjarte Bogsnes shows you how to radically retool the budgeting process in your organization. Based on his experience in large and complex organizations, he takes you through a step-by-step process for transforming the way your organization is managed. This is essential reading if you want to build an organization that is fit for the future." Professor Gary Hamel, London Business School "This book is about how to create the right conditions to liberate people from traditional management practices, which organizations build as they grow, but which usually lead to reduced agility, employee disengagement, and ultimately decline. Since his 2009 book, Bjarte has journeyed a lot further beyond budgeting, gaining substantial new insights from practical experience, told in this edition as ever with great readability, authenticity, and enthusiasm." Robin Fraser, co-founder of the Beyond Budgeting Roundtable; co-author with the late Jeremy Hope of Beyond Budgeting "While it is common to hear managers complain about budgeting activities, too few are aware that the problems with budget management are more insidious. Budget management is a major cause of sub-optimisation; in simple terms, it makes performance worse. As with many human inventions, it solved problems of its time, but as time has moved on the problems and opportunities have changed. This book charts the development of better methods, balancing purpose and practice; improving the effectiveness of decision making; and, hence, organisation performance." John Seddon, Vanguard Praise for the First Edition "At last, Bjarte Bogsnes has made his experience and enthusiasm for Beyond Budgeting available for a wider audience with this remarkable book. I have appreciated his engagement in these important management issues for many years, and his knowledge and leadership have been critical in the transformation of our organization." Eldar Saetre, CFO (now CEO), Statoil "This is an excellent book for those who want to grapple with the difficult task of radically changing conventional ways of running a company to more effective ways of doing it and ways more in accordance with human nature." Jan Wallander, Honorary Chairman of Handelsbanken

BJARTE BOGSNES has had a long international career, both in Finance and HR. He has been advocating Beyond Budgeting for more than twenty years and led its implementation at two large European companies, Statoil and Borealis. Bjarte is the chairman of Beyond Budgeting Roundtable (BBRT) and is a popular international business speaker. He is the winner of a Harvard Business Review/McKinsey Management Innovation award.

Foreword xi Acknowledgments xiii About the Author xv Introduction xvii Chapter 1 Problems with Traditional Management 1 Introduction 1 Which Way in a New Business Environment? 4 The Trust and Transparency Problem 7 The Cost Management Problem 14 The Control Problem 22 The Target-Setting Problem 26 The Performance Evaluation Problem 30 The Bonus Problem 34 The Rhythm Problem 45 The Quality Problem 49 The Efficiency Problem 52 Chapter 2 Beyond Budgeting 55 The Philosophy 55 Beyond Budgeting Roundtable 65 The Beyond Budgeting Principles 69 Handelsbankenthe Pioneer 74 Milesa Master of Servant Leadership 80 The Reitan GroupValues at the Core 84 Chapter 3 The Borealis Case 91 Introduction 91 Creation of Borealis 92 The Journey Begins 94 The Borealis Model 99 Implementation Experiences and Lessons Learned 115 Borealis Today 119 Chapter 4 The Statoil Case 123 Introduction 123 Creating the Foundation 126 Starting Out 130 The Statoil Model 134 A Dynamic Ambition to Action 190 What Could Be Next? 199 The Beyond Budgeting Research Program 210 How Are We Doing? 212 A New Start for Statoil? 217 Chapter 5 Beyond Budgeting and Agile 221 Chapter 6 Making the Change: Implementation Advice 229 Create the Case for Change 232 Handle Resistance 238 Design to 80 Percent and Jump 240 Keep the Cost Focus 241 Dont Start with Rolling Forecasting Only 243 Involve Human Resources and Agile IT 244 You Cant Get Rid of Command and Control through Command and Control 246 Do Not Become a Fundamentalist 249 Balanced Scorecard Pitfalls 250 Revolution or Evolution? 260 Closing Remarks 263 Index 265