european university barcelona campus: beyond budgeting – a (secret) performance booster in lean |...

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


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


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Here are the bad news: Most of our management believes and tools are outdated and no longer valid!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


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.



The World Is No Longer The Same

Mar-12-2015


A social used to be a gathering with colleagues.

Mar-12-2015© 2015 Just Leading Solutions LLC. All Rights Reserved 6


Surfing used to be an outdoor sport.



Only your head used to be in the cloud.



Twitter used to be a sound.



Skype used to be a typographical error.



An office certainly did not used to look like that.



Big data used to be a rock band.



4G used to be a parking lot.



What about the way we lead and manage our companies? How do we achieve performance and flow?



Analogy: What we can learn about flow and performance from traffic.


Round About

Traffic Light

Mar-12-2015


Companies try to respond to the challenges of today’s business world: Often making it worse than better.



Successful enterprises have the courage to fully embrace change and take a different route.



Characteristics Of A Lean | Agile Enterprise

Mar-12-2015

19


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


Corporate DNA: Lean | agile values are the foundation for an inspiring, engaging & winning corporate culture.

Lean | agile DNA


21


Corporate Setup: A complex, connected & adaptive ecosystem.

Connected Ecosystem


22


Strategy Translation: Iterative, meaningful & shared purpose & objectives.

Meaningful Purpose


23


Main Value Chain: Co-created services, designed in interactive, flexible processes.

Co-Created Services


24


Inspiring Leadership: Collaborative & empowering style to ignite the power of self-organizing teams.

Inspiring Leadership


25


Information Flow: Proactively communicated, transparent & fully accessible on social and mobile platforms.

Shared Knowledge


26


Governance: Decentralized decision making with broad guidelines and latitude for creativity and innovation.

Ignited Creativity


27


Performance Strength: Focused, responsive and fast-paced operations with a “if you fail, fail fast” philosophy.

Performance Strength



Lean | agile enterprises embrace dynamic processes and believe and trust in the power of people.

Adapted from Bjarte Bogsnes «Ambition to Action»


dyn

amic

stab

le

Theory “X” Theory “Y”

Leadership

Pro

cess

es

Traditional Management

Lean | Agile

Mar-12-2015


Challenges With Traditional Budgeting Approach

Mar-12-2015


We trust our people with huge endeavors but do not trust them on little things.


Source: Bjarte Bogsnes «Implementing Beyond Budgeting»


We see budgets as entitlements.




We do not differentiate between good and bad cost management.




We believe target setting & evaluation requires absolute numbers instead of engaging messages.




We are still convinced individual bonuses are the only way to motivate people and drive performance.




We are trying to fit the real world into a well-organized, calendar based business rhythm.




We struggle to get high quality budgets with good targets, reliable forecasts and effective resource allocation.




We spend so much time and energy on budgets and reporting and have a considerable efficiency problem.




Why hold on to such a budgeting approach? It is old blind faith! Here are some outdated beliefs and myths.


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



Beyond Budgeting Approach

Mar-12-2015


Traditional Budgeting is about stabile processes and ”theory X” leadership.



dyn

amic

stab

le


Leadership

Pro

cess

es

• 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



evaluation





Mar-12-2015


Beyond Budgeting is about dynamic processes and ”theory Y” leadership.





evaluation





dyn

amic

stab

le


Leadership

Pro

cess

es

Beyond Budgeting

Traditional Management

Mar-12-2015


What does ’Beyond Budgeting’ mean and how is the word ‘Budgeting’ used?

Source: Beyond Budgeting Roundtable BBRT.org


‘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).


The Beyond Budgeting principles focus on a change in leadership and in processes.

Source: Beyond Budgeting Roundtable BBRT.org


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


The Beyond Budgeting principles focus on a change in leadership and in processes.

Adapted from Beyond Budgeting Roundtable BBRT.org

Ch

ang

e in

Lea

der

ship


Ch

ang

e in P

rocesses

•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


Principles are key on the cultural journey from traditional to beyond budgeting.

Adapted from Franz Röösli, Michael Gebauer, based on BBRT


Industrial Age

Traditional Budgeting

Vision

Annual budget

«keeping on track»

Control (vs. budget)

Incentives (vs. budget)

Information Age

Beyond Budgeting

Iterativ, adaptive

6 LeadershipPrinciples

Cultural Journey

6 ProcessPrinciples

dynamic goals

Mar-12-2015


Beyond Budgeting is not a standardized solution, every journey is different.



Case Study: Start of the Statoil journey – solving a seriousbudget conflict.

Source: Bjarte Bogsnes «Ambition to Action»



First movers across the globe apply or are on a journey towards Beyond Budgeting.

Source: Bjarte Bogsnes «Ambition to Action»


You cannot discover new oceans unless you are willing to lose sight of the shore.

unknown

Thank you!

Just Leading Solutions

275 Madison Avenue14th Floor

New York, NY 10016

[email protected]


Fabiola EyholzerCEO

[email protected]+1 908 340 8091

@FabiolaEyholzer

Mar-12-2015

european university barcelona campus: beyond budgeting – a (secret) performance booster in lean |...

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