Beyond Budgeting from Command-and

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Beyond Budgeting from Command-and
2015-03-29
Beyond Budgeting
from Command-and-Control to
Empower and Adapt
25 March 2015
Knut Fahlén
© Ekan AB
Short facts about Ekan
• Independent Management consultants
• Founded in 1985
• 40+ Management consultants
• Offices in Göteborg and Stockholm
• Official representative for Beyond
Budgeting Institute in Sweden
© ekan AB
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2015-03-29
We help businesses
develop and evolve
within their reality
© ekan AB
Available
resources
Goal
BUDGET
Spending
plan
Guideline
Forecast
Allocated
funds
Business plan
© ekan AB
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2015-03-29
Five Budgeting myths..
1.
2.
3.
4.
5.
No Budget
Good Performance
No individual Bonus
More Detail
Need to Know
= Chaos and Overspend
= Hitting the Budget Numbers
= No performance
= More Quality
= Enough to Know
© ekan AB
The process
The budget
• Target
• Forecast
• Resource
allocation
Same number – conflicting
purposes
1. Separate
2. Improve
Target
What we want to
happen
• Ambitious
• Relative where possible
• Holistic performance evaluation
Forecast
What we think
will happen
• Unbiased – the expected
outcome
• Limited details
Resource
allocation
Based on RoI
• Dynamic – no annual allocation
• Mandates, decisions, criteria
• Trend monitoring
Different
numbers
Event driven – not always annully
© ekan AB 6
3
2015-03-29
© ekan AB
An inherent conflict
Power balance
The fiscal year
Administrative task
Cost control & variance
analysis
Co-ordination
© ekan AB
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2015-03-29
0%
© ekan AB
Uncertainty
Economy
Volatility
Uncertainty
Complexity
Ambiguity
Globalization
Market shift
(De-)regulations
Competition
4 arguments for going
Beyond Budgeting
Technology
Digitization
Transparency
Speed of change
Demography
Generation shift
Globalization
Demographic shifts
Lack of talents
© ekan AB
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2015-03-29
Beyond Budgeting is about
Management innovation
I
N
N
O
V
A
T
I
O
N
Management
Innovation
Industry
transformation
Business
Model
Products and
services
Operational
excellence
SUSTAINABILITY
Based on ”Potential for long term advantage”, J. Birkinshaw
© ekan AB
Kaiser
Permanente
NORS
Spotify
AVIVA
Health care
Automotive retailer
Music / Media
Incurance
Lego
HOLT Cat
Coloplast
Össur
Toys
Automotive
Healthcare
High Tech
Morning Star
Statoil
Handelsbanken
Arla Foods
©
ekan AB
Food
processing
Oil industry
Bank / Finance
Food / Diary
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2015-03-29
Beyond Budgeting is
about creating
AGILE
&
VALUE BASED
Organizations
© ekan AB
Organizations and
leadership
Management control
system & -process
Organization
Leadership
Motivation and
incentives
Target setting






Responsibility
Culture
Trust
Transparency
Values
Coordination
Forecasting
Decision &
resource allocation
© ekan AB
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2015-03-29
Create a link between
Resource allocation and
the Decision process
© ekan AB
Strategic
decisions
Crossroads &
investments
WHO?
HOW?
WHEN?
Responce
handling
Proactivte and/or
reactive
Non Decisions
”Business as
usual”
© ekan AB
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2015-03-29
Decentralize and put
the customer in
focus
© ekan AB
• Focus on leadership and organization
• From function oriented to customer
oriented
• Changed work design, roles and
measures (employee turnover etc)
• From competition to collaboration –
group bonuses
• “From making things to providing
service”
© ekan AB
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2015-03-29
• Building a value-based organization
• Working with behavior, leadership style
and roles
• Working with trends, rolling forecasts
• No “noice” between strategy and
operations
• More focus on actions and making the
profit, than being aligned with a yearly
plan.
© ekan AB
Ambition
Autonomy
Making bad
decisions
Making good
decisions
Doubt about
role and direction
Understanding
role and direction
x
x
x
x
x
x
Passive, waiting x
for tasks
Making no decisions
No freedom
Can, but do
not dare to
take decisions
© ekan AB
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2015-03-29
Rolling forecast,
follow-ups and
relative targets
© ekan AB
• Budget was not in line with reality.
• Worked with finding ”Key Value Drivers”
• Relative KPIs and “Performance League” –
market share, gross margin, indirect
costs/sales and service sales/Number of
trucks sold
• Rolling forecast – and using trends to
monitor progress
• Separation between ambitions and forecast
© ekan AB
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2015-03-29
Problems & Challenges
Budget next year =
budget this year + forecast next year
If you are good at forecasting, and spend all you got,
You will (with high probability)
Receive all you ask for the following year.
•
•
•
Volatil business environment
Targets obsolete before the year begun
No incentives to spend less
© ekan AB
Contact details
Knut Fahlén
[email protected]
+46 (0)31-761 60 10, +46 (0)734-424771
www.ekan.com
www.bbrt.org
© ekan AB
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