“Unless you address the budgeting process, all the talk about radical change are just nice words”.
There probably isn’t a better way to introduce this show than the words of our guest
Bjarte Bognses.
Bjarte, winner of the Harvard Business Review/McKinsey Management Innovation award,
is the undisputed leader of the Beyond Budgeting movement - the topic of today's episode.
Lots of ground was covered in this one, including where the movement was originally inspired, how the adoption of beyond budgeting has increased since the pandemic, how to get the CFO and executive team on board with rolling budgets and how Handelsbanken operate with no budgets, targets or individual bonuses.
The topic becomes more than just about the budgeting process. It’s an exercise in challenging traditional management and leadership principles that can unlock the true potential of organisations normally slowed by bureaucracy and red tape.
As usual, a ton of value for any executive or leadership team looking to change and innovate.
References:
- The first time we kicked out the budget, and costs came down
- The beginning of the Beyond Budgeting journey back in 2005
- Enjoying public speaking and podcasting
4.17 - What is Beyond Budgeting?
- The purpose is to create a more dynamic, flexible human organisation
- Changing the budgeting process, but also the budgeting mindset
- We are looking for a better name!
5.44 - Heritage of Scandinavian Management Techniques
- Beyond Budgeting is more prevalent because of culture. Informal and trusting
- A movement inspired by companies in both Scandinavia and the UK
- The idea started in 1998, two years before the agile manifesto
8.24 - The 12 key principles and what they are looking to challenge
- Divided into six leadership principles
- The traditional models don’t reflect the management processes you need to unlock these leadership beliefs
- We have to practice what we preach as leaders
- Traditional management built on two principles - can’t trust people and that the future is predictable and plannable.
- The pandemic has busted these apart
13.16 - Are you seeing a shift in uptake of Beyond Budgeting since the pandemic from boards?
- Every big company is on some sort of agile transformation
- Unless you address the budgeting process, wanting to change is just lip service
- Everyone loves innovation, but that enthusiasm is limited to tech - not management
18.58 - Using the right language to align groups of executives
- We should leave performance management behind as a label
- Stop managing performance, and start enabling
- E.g. Traffic lights manage performance while roundabouts enable it
20.55 - What are the barriers to transitioning to this new world?
- The fear of losing control, although that is often just an illusion
- We don’t need targets to evaluate performance
- Hitting the target, but missing the point
25.33 - Case Study
- Handelsbanken has been operating with no budgets, targets or individual bonuses since 1970. Has never needed a government bailout
26.55 - How to take the CFO and Finance team on a journey to rolling budgets
- They initially find it a bit big and scary
- Ask ourselves - why do we budget? Set targets, forecast and resource allocation
- It created gaming and sandbagging
- We can continue to do all three, but we do them in separate processes
- Target- an aspiration, what we want to happen
- Forecast- what we think will happen
- Resource allocation- optimisation of scarce resources
35.28 - What does the future look like?
- Like-minded communities are joining forces to spread the word
- In 15-20 years, we’ll smile at management in 2021
- Be the pioneer or the laggard