keynote: beyond budgeting

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    Beyond Budgeting a new management model for new business realities

    The Statoil implementation journeyBjarte Bogsnes Vice President - Performance Management Development Chairman - Beyond Budgeting Round Table Europe

  • * -OutlineThe case for change - what is the problem?The Beyond Budgeting principlesThe Statoil model - Ambition to actionNext steps

  • * -Statoil in briefTurnover and market cap approx. 75 bn. USD20.000 employees in 34 countriesWorlds largest operator in waters deeper than 100 metresSecond largest gas exporter to Europe World leader of crude oil salesListed in New York and OsloUS Gulf of MexicoSouth AmericaWest AfricaNorth AfricaCaspianMiddle EastRussiaArcticNorth Sea & Norwegian SeaCanada

  • * -Fortune 500 ranking (2011)Social responsibilityInnovation

  • * -Statoil financial performance as we define itRoACE 2010*Peer group: Anadarko, BG, BP, Chevron, ConocoPhillips, Devon, Encana, Eni, ExxonMobil, Lukoil, Occidental, Petrobras, Repsol, Shell, Statoil, Total.Source: Barclays CapitalRoACE 2009TargetTargetTotal shareholder return 2010TargetTargetTotal shareholder return 2009

    Waardal Arnesen, Gry Hilde - hva henviser fotnoten til?

  • * -Managing traffic performance - one alternativeBased on which information?Who is in control?

  • * -Based on which information?Who is in control?Managing traffic performance - another alternative

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    Which is most difficult?

    In which are values most important? Which is most efficient?

  • * -PeopleBusiness environmentTraditional managementThe world has changed what about the way we lead and manage?Theory YTheory XDynamicStable

  • * -We must address both processes and leadershipLeadershipProcessesBeyond BudgetingTheory YTheory XDynamicStableRelative and directional goalsDynamic planning, forecasting and resource allocationHolistic performance evaluationRigid, detailed and annual Rules-based micromanagementCentralised command and controlSecrecy, sticks and carrotsValues basedAutonomyTransparencyInternal motivation

  • * -Classification: Internal 2010-09-10 Companies on a similar journeyI have been waiting for this for 20 years (CEO)(Main Norwegian cases)(Some international cases)Europes most cost effective universal bankBeating the competition 40 years in a row

  • * -The Beyond Budgeting principles

    Change in leadershipChange in processes1. Values - Govern through a few clear values, goals and boundaries, not detailed rules and budgets7. Goals - Set relative goals for continuous improvement, dont negotiate fixed performance contracts2. Performance - Create a high performance climate based on relative success, not on meeting fixed targets8. Rewards - Reward shared success based on relative performance, not on meeting fixed targets3. Transparency - Promote open information for self management, dont restrict it hierarchically9. Planning - Make planning a continuous and inclusive process, not a top-down annual event4. Organization - Organize as a network of lean, accountable teams, not around centralized functions10. Coordination - Coordinate interactions dynamically, not through annual planning cycles5. Autonomy - Give teams the freedom and capability to act; dont micro-manage them11. Resources - Make resources available as needed, not through annual budget allocations6. Customers - Focus everyone on improving customer outcomes, not on hierarchical relationships12. Controls - Base controls on relative indicators and trends, not on variances against plan

  • * -ImproveSame number conflicting purposesDifferent numbersUnbiased - expected outcome Limited detailAmbitious Relative KPIs where possibleHolistic performance evaluationDynamic - no annual allocationKPI targets, mandates, decision gates & decision criteria Trend monitoring Start of the Statoil journey- solving a serious budget conflict Budget = TargetForecastResource allocationStep 1Step 2TargetForecastResource allocationThe budget purposes SeparateEvent driven - not calendar driven

  • * -Performance is ultimately about performing better than those we compare ourselves with

    Key principles Ambition to actionDo the right thing in the actual situation, guided by the Statoil Book, your Ambition to action, decision criteria & authorities and sound business judgementWithin this framework, resources are made available or allocated case-by-caseBusiness follow up is forward looking and action orientedPerformance evaluation is a holistic assessment of delivery and behaviour

  • * -The CEO on Ambition to action

  • * -Ambition to action - a process which balances alignment from strategy to people with flexibility and freedom

  • * -Ambition to action exampleWhere are we going?Strategic objectivesHow do we measure progress?Key Performance IndicatorsHow do we get there?Actions

  • * -More than 1100 Ambition to actions across the company..and more

  • * -A new performance language- from narrow measurement to a holistic assessment B e h a v i o u r DeliveryLiving the valuesDay-to day-observations360/ 180/ 90 surveysPeople survey50/50Pressure testing KPI results: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?Ambition to actionDevelopment planRewards

  • * -The journey continues ...

  • * -The controller and the fisherman ...

  • * -Ambition to action new principlesFrom calendar-driven to business-driven No annual versionsUpdate when necessary, triggered by external or internal events (big for you)Simple change and coordination controlsSeek approval if big, inform if small. Inform other affected [email protected] change, review status on dynamic Ambition to action Varying time horizonsTarget and forecast horizons reflecting urgency and lead times

  • * -Questions or comments now or later? Bjarte Bogsnes [email protected]+ 47 916 13 843

    Beyond Budgeting Round Table

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    The problems with traditional managementThe Beyond Budgeting modelThe Borealis caseThe Statoil caseImplementation advice

    Out on Wiley (US) 2009Available from to hear more?