Beyond Budgeting

Beyond Budgeting (whose translation is “Beyond the Budget” and is also called “Beta Code” in recent times), is a research initiative started in England in 1998 and a management model for organizations of all kinds “more beyond control and guidance. ” It is understood as an alternative to the Taylorist, bureaucratic-hierarchical organizational model and is defined by 12 guiding principles. The model was developed from research based on case studies and theories between 1998 and 2002. To date, the Beyond Budgeting Round Table (BBRT) has been supported by a community of members from 4 continents.

Beyond Budgeting principle

Comparison with known Procedure models

Beyond Budgeting is an alternative to traditional forms of management, such as the management system of the typical pyramidal organization, divided functionally and hierarchically. The 12 principles of Beyond Budgeting describe how organizations can move from a functional pyramid structure to a “radically decentralized” and functionally integrated network structure. The initiators of the Beyond Budgeting movement have already found several organizations with such structures, which serve as successful and real case studies. Theoretically, Beyond Budgeting makes use of systems theory, cybernetics, chaos theory, and concepts like learning organization.

Comparison with known procedure models

One of the first organizations identified as Beyond Budgeting is the Swedish bank Handelsbanken , which underwent a radical change process in the 1970s. Handelsbanken Was one of approximately 25 organizations visited by BBRT directors during the development phase of the Beyond Budgeting model and presented as a case study. Other companies mentioned in this case study were AES (US), Schneider Electric, Ikea, Borealis, and Guardian Industries. From the research based on case studies, a model based on principles was gradually derived, which includes the common characteristics of the different companies. BBRT publications between 1997 and 2002 document this research and development work. The definitive set of 12 principles crystallized between 2001 and 2002. Other case studies were added in the second phase of research, including the German company dm-drogerie market, which in the early 1990s abandoned classical management, budget, annual plans, and fixed performance contracts, and compliance monitoring. Other pioneering companies identified and explored in various Beyond Budgeting posts includeAldi , Southwest Airlines, Toyota , WL Gore, Google , Egon Zehnder International, Trisa, and others.

The term Beyond Budgeting refers to a paradigm. At the same time, Beyond Budgeting is a movement, supported by a membership organization called the Beyond Budgeting Round Table (BBRT). A key characteristic of Beyond Budgeting, as a paradigm, is that it defines principles that go against traditional management based on Taylorist principles. Unlike other management concepts, Beyond Budgeting is not a standard solution or tool. Rather, it describes a model in the systemic sense and at the same time a way of thinking.

The Beyond Budgeting roundtable was founded in 1998 by Robin Fraser, Jeremy Hope, and Peter Bunce, as a working group within the industry association CAM-I ( Consortium of Advanced Management, International ). In 2001, BBRT became an independent non-profit organization independent of CAM-I.

The procedure is based on a set of mutually interdependent principles. These principles contrast with the implicit and explicit management model that Frederick W. Taylor and others call “traditional”, often referred to as Command and Control. In Beyond Budgeting, twelve principles have been defined that have been identified based on research-based case studies since 1998 and that are considered important to the success of an organization in dynamic and non-linear environments. In 2001, the BBRT divided these principles into six principles for leadership management and the other six for performance management.

Principles for Leadership

Values

Set few values, that are clear and with objectives and limits, not with detailed rules.

Responsibility

Enables all employees to think responsibly and act with an entrepreneurial spirit. Do not encourage adherence to plans.

Self-reliance

Gives teams freedom and space to act without micromanaging.

Organization

Create a simple network of teams accountable for results, not a centralized, functionally shared pyramid.

Customers

Align all employees with their customers; not with hierarchy and power relations.

Transparency

Provides public and open information, with the purpose that professionals regulate themselves, not to limit access hierarchically or to allow the power of the information.

Performance Management Principles

Goals

Set goals for continuous improvement, don’t negotiate fixed performance commitments.

Reward

Rewards mutual success based on team performance. Don’t motivate, or encourage, individual goals.

Planning

It presents the practice as a continuous and integrated process, not as an annual process raised from the top down.

Resources

Allocate as needed and to whom needed, not annually.

Coordination

Coordinate market coordinates dynamically, not during planning cycles.

Control

Base them on relative indicators, trends, and comparisons between the objective and what was achieved in reality, not through plans and deviations.

Case studies, Pioneers and partnerships within Beyond Budgeting

Pioneers are companies that have transitioned to a principled organization that is flexible, decentralized, and financially successful, following the twelve principles of the Beyond Budgeting model. Generally, this transformation to Beyond Budgeting already took place before the development of the Beyond Budgeting model itself. Each of the Pioneer companies developed its own corporate model.

Pioneers of the Beyond Budgeting model include companies such as Aldi, dm-drogerie market, Svenska Handelsbanken , WLGore, Semco, AES, Guardian Industries, Dell, Toyota, Southwest Airlines, Ahlsell, Ikea, Egon Zehnder International, Google, Flight Center, Herman Miller, Statoil, Whole Foods, Trisa, WM-Group, Schindlerhof, and Resource Informatik.

Interest groups

Beyond Budgeting Roundtable (BBRT)

Beyond Budgeting Round Table (BBRT)  was formed as a stakeholder group. BBRT’s work aims to show how companies use Beyond Budgeting to be more successful than by traditional methods. It was in this organization that the twelve guiding principles were outlined.

These principles have been developed by the BBRT since January 1998 and have continued to be supported until now.

Between 1998 and 2007, the BBRT had more than 150 members (the non-profit organization is financed primarily through membership fees), including well-known corporations and public organizations such as Unilever, Statoil, the World Bank, Wachovia, T-Online, UBS, Japanese Tabacco, and other organizations. Most of the member companies are from North America and Europe.

Beyond Budgeting Transformation Network and the BetaCodex Network 

Following the retirement, in late 2007, of Robin Fraser, co-founder, and director of the BBRT and intellectual father of the transformation wing within that organization, the remaining representatives of the transformation approach founded the open-source movement Beyond Budgeting Transformation Network (or BBTN) in early 2008. With this network, companies must actively support the transition from the governance and control management model to Beyond Budgeting. In 2009, the network was renamed the BetaCodex Network: the Beyond Budgeting model has been referred to by the community as the Beta Codex.

While the BBRT continues to focus on research and thinking, the BetaCodex Network seeks to create a network of transformational organizations and the associated development of resources and methodologies.

Development 

Recent publications show the evolution of Beyond Budgeting towards a holistic approach to corporate governance and profound change in all organizations, such as Niels Pfläging. Additional publications published in recent years confirm this trend. Other publications show a transition from a guiding principles approach to a modeling approach, as in Business and Management – Ready for the Future

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