Beyond Budgeting at 25

White Paper | 03.23 | Bjarte Bogsnes, Chairman Beyond Budgeting Roundtable© Beyond BudgetingBeyond Budgeting at 25 | 03.23

Introduction
Business agility is on everybody’s lips these days. Beyond
Budgeting has been around even before Agile was invented
and long before the term “business agility” was coined.
Unlike Agile, Beyond Budgeting was designed from the startas an agile way of running an organisation.
For this and many other reasons, the interest in Beyond Budgeting is today record high, and the model
keeps being updated and refined. The recent introduction of the Viable Map Workbook provides apractical and interactive implementation tool for anyone interested in exploring Beyond Budgeting. My
contribution to this anniversary is a new book, “This is Beyond Budgeting – A Guide to More Adaptiveand Human Organizations”.

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Beyond Budgeting at 25 | 03.23

A Record High Interest
When the Beyond Budgeting model was developed in 1998, few of us imagined that this radicallynew way of leading and managing 25 years later would be more popular than ever. Today, Beyond
Budgeting is adopted by more and more organisations around the world, is taught at businessschools, and has a vibrant global community.
Maybe you wonder why it is taking so long. Perhaps it isn’t. Don’t forget that budgeting was invented
a hundred years ago, but it only became mainstream after the Second World War. Concepts thatgrow slowly and steadily are typically much more sustainable than short-lived hypes that become
fashionable overnight. We have seen a few since Beyond Budgeting was born.
The major consulting firms are also getting interested. Almost all have reached out for cooperation insome form or shape because their clients want to learn more. We come from different places, and wemight have different agendas. Still, we need these firms on board. They have channels and muscles
we don’t have. Some of them have been clear about their intention of offering Beyond Budgeting totheir clients in any case. We are not naive, but we have decided to join forces to help them understandwhat Beyond Budgeting is about and avoid implementations being reduced to Rolling Forecasting
exercises or just a more dynamic resource allocation. We have, unfortunately, seen a few such
examples. We would rather help these firms and their clients get it right than stand by and watch
them fail. Hopefully, my new book and the Viable Map Workbook (see below) can help both reach adeeper and better understanding of Beyond Budgeting.
Boston Consulting Group (BCG) and Bain & Company have recently run very positive Beyond
Budgeting surveys among their clients. Both have also written several articles on Beyond Budgeting.
BCG did a study recently among Beyond Budgeting practitioners on how the model affected theiroperations and performance. The result was pretty impressive. The most profound effect wasfinancial, through an increase in sales, but many others reflected better quality and efficiency inaffected management processes. Almost 60% reported increased sales, and more than 50% reported
lower costs in the process itself, better business decisions, and better agility in reallocating resources.

© Beyond Budgeting

Practitioners see siginificant benefits of Beyond Budgeting% of respondents
Increase in sales beyond former budget ceilings

59

Save cost and resources for executing budgeting process

56

Better business decisions

52

More effective performance management

51

Higher agility in reallocating resources

45

Release of formerly sandbagged resources

41

Higher motivation of our staff
Freed up management time

34
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Figure 1: Survey on Beyond Budgeting Conducted by Boston Consulting Group

Bain surveyed its clients, finding that leading firms in financial planning are much more likely to have adopted theBeyond Budgeting principles. There was a massive difference across most principles, both in leadership andmanagement processes.

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Beyond Budgeting at 25 | 03.23Leading firms in FP&A are more likely to apply beyond

OtherPurpose

percentage of respondents that strongly
agree that they adhere to these principles

Leaders17235030

Transparency

Autonomy

2030

Rhythm21

Targets

214347

23

Resource Allocation

6337

1921

The new subtitle, “Performance. The Right Way.” has an important message. Beyond Budgetingchanges how we define and how we deliver performance.
The “Performance evaluation” text has been adjusted to reflect that the principle addresses
performance measurement and final performance evaluation. The “Rhythm” principle has beenrenamed “Coordination.” The adjustments also involve a few changes in the order of the principles.

60

28Plans & Forecasts

Rewards

67

25Customers

Performance Evaluation

57

28Organization

The Beyond Budgeting principles have evolved over the years and have been updated several times,
but the philosophy hasn’t changed.
The principles have recently been through another minor update, with some more cosmetic changes
but also a few new messages reflecting new learning and insights. Today, they are expressed asdescribed in Figure 4.

50Values

Update of the Beyond Budgeting Principles

4027

Beyond Budgeting: Performance. The Right Way
Leadership principles

Management processes

1. Purpose:

7. Targets:• Engage and inspire people around bold and noble
causes; not around short-term financial targets
Figure 2: Bain Finance Leaders Survey, February 2022, (n = 236)

2. Values:• Set directional, ambitious and relative goals;• avoid fixed and cascaded targets

8. Forecasts:• Govern through shared values and soundjudgement; not through detailed rules andregulations

3. Transparency:• Make forecasting a lean and unbiased process; nota rigid and political exercise

9. Resource allocation:• Make information open for self-regulation,innovation, learning and control;• don’t restrict it

4. Autonomy:• Foster a cost conscious mind-set.
• Plan and make resources available as needed; notthrough detailed annual budget allocations

10. Performance evaluation:• Trust people with freedom to act;
• don’t punish everyone if someone should abuse it

5. Organisation:• Evaluate performance holistically to guideinterventions; not based on measurement only andnot for rewards only

11. Rewards:• Cultivate a strong sense of belonging andorganise around accountable teams;• avoid hierarchical control and bureaucracy

6. Customers:• Reward shared success against competition; notagainst fixed performance contracts

12. Coordination:• Connect everyone’s work with customer needs;• avoid conflicts of interest• Organise management processes dynamicallyaround business rhythms and events; not aroundthe calendar year only

Figure 3: 12 Key Principles of Beyond Budgeting by the Beyond Budgeting Institute© Beyond BudgetingBeyond Budgeting at 25 | 03.23

The Viable MapYou might be familiar with the “Business Model Canvas,” a very popular concept and template used for
documenting existing business models and developing new ones. A similar concept for documenting
and developing management models has not yet existed, but we have now developed one based on theBeyond Budgeting model. The Viable Map can be used to describe a management model, discuss thecurrent situation, diagnose problems, and design a better way.
Why viable? It is about the ability to survive and thrive. Although we must perform well today, we mustalso make sure we adapt for the future.
It starts with an assessment of the organisation’s business environment. Where is it on a SUSO-VUCA
scale (‘stable-understood-simple-obvious’ versus ‘volatile-uncertain-complex-ambiguous’)?
The Map describes alternatives for each of the six management processes, depending on theassessment. The higher the VUCA, the higher the need to move from fixed (traditional budgeting)to decoupled (budget purpose separation) via continuous (event/business-driven rhythm) to relative(external perspectives). The leadership assessment reflects the spirit of Douglas McGregor’s Theory
X and Theory Y. The development path here is more continuous, from X toward Y and more selfregulation, depending on how the organisation view its employees.
The focus on coherence is key, internally between leadership messages and management practices
and externally between the organisation’s adaptability and the VUCA level under which it operates. The
model is not saying that being on the right is always best. It just says there must be coherence. If boththe business environment and employees are on the right, then this is where the management model
must be. If the organisation, however, operates in a SUSO environment and has done a lousy job inrecruitment, then the left might be the place to be. There is still coherence. But there will then be otherrather serious problems to deal with.
Check out the Viable Map Workbook to learn more, and see bbrt.org for more information about how toget it.
(This article was first published at FP&A Trends Group).
Figure 4: The Viable Map
Source: The Beyond Budgeting Institute

When in 15–20 years, we look back at today’s mainstream management thinking, we will all smile,
maybe laugh, just like we today smile about the time before the Internet. It isn’t that long ago!
Organisations have a choice. They can be early movers, embracing management innovation because
they understand it brings a competitive advantage. Or they can end up as laggards, dragged in as oneof the last. The longer one waits, the more competitors will be ahead.
Maybe you also have a choice. Maybe you will be among those remembered for making this happen
in your organisation. Or for the opposite if you resisted. Or forgotten if you didn’t take a stand.

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