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Jay Cross helps people work and live smarter. Jay is the Johnny Appleseed of informal learning. He wrote the book on it. He was the first person to use the term eLearning on the web. He has challenged conventional wisdom about how adults learn since designing the first business degree program offered by the University of Phoenix.

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Beyond Budgeting


posted on
January 16th, 2012
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1 comments
category
Unmanagement

The Leader’s Dilemma: How to Build an Empowered and Adaptive Organization Without Losing Control by Jeremy Hope, Peter Bunce, and Franz Röösli

The Leader’s Dilemma describes a practical new approach to management that has grown out of a dozen years of discussions by an outfit named the Beyond Budgeting Roundtable.


Franz Röösli, who suggested Stoos as the locus of our gathering 

Franz Röösli, co-director of the Roundtable and a co-author of the book, handed out copies at the Stoos Gathering. I haven’t been able to put it down.

The BBRT is an international shared learning network of member organizations with a common interest in transforming their performance management models to enable sustained, superior performance. BBRT helps organizations learn from world-wide best practice studies and encourages them to share information, past successes and implementation experiences to move beyond command and control.
The BBRT is at the heart of a movement that is searching for ways to build lean, adaptive and ethical enterprises that can sustain superior competitive performance. Its aim is to spread the idea through a vibrant community.

The Leader’s Dilemma is organized around the Beyond Budgeting Principles:

12 Beyond Budgeting Principles (2011)
Governance and transparency
Values Bind people to a common cause; not a central plan
Governance Govern through shared values and sound judgement; not detailed rules and regulations
Transparency Make information open and transparent; don’t restrict and control it
Accountable teams
Teams Organize around a seamless network of accountable teams; not centralized functions
Trust Trust teams to regulate their performance; don’t micro-manage them
Accountability Base accountability on holistic criteria and peer reviews; not on hierarchical relationships
Goals and rewards
Goals Encourage teams to set ambitious goals, don’t turn goals into fixed contracts
Rewards Base rewards on relative performance; not on fixed targets
Planning and controls
Planning Make planning a continuous and inclusive process; not a top-down annual event
Coordination Coordinate interactions dynamically; not through annual budgets
Resources Make resources available just-in-time; not just-in-case
Controls Base controls on fast, frequent feedback; not budget variances

 

The Roundtable believes that by replacing the command and control model with a Beyond Budgeting alternative (that is, an Empowered and Adaptive Organization), leaders can create an organizaiton that:

The Adaptive Organization relies on teams:

Some leaders struggle with the idea that many small teams can actually cost less than a few large units. While economies of scale can look seductive on spreadsheets, creating many small teams leads to a more flexible and innovative organization that, with more accountability and less management, actually consumes fewer costs.

What do we mean by ‘teams’? In Beyond Budgeting organizations we believe there are three kinds of team (excluding ‘project’ teams that are usually temporary). The executive team is the C-level suite responsible for setting purpose, goals and strategic direction as well as challenging other units to maximize their performance. Support services teams (strategy, finance, human resources, marketing, supply chain management, design, production, logistics, sales and service teams, information technology and so forth) are responsible for serving and supporting value centers. Value centre teams are responsible for formulating strategy, investing capital and delivering value (or profit). They invariably have their own profit and loss accounts and are typically created around lines of business, brands/product groups, regions/countries and plants/branches.

 

The aim is to create as many value centre teams as possible by sub-dividing them and adding new ventures. They should be based round a clear market niche and have a distinctive customer value proposition. On the other hand, the aim is to reduce the numbers and size of support services centres. In other words, the aim is to have as many direct costs within value centres and as few indirect costs as possible.

With a tip of the hat to Meg Wheatley, BBRT argues that the appropriate mental model for the new-age organization is the complex adaptive system:

Putting this into practice is tough. The Leader’s Dilemma offers suggestions but I’m hungry for more. Of course, finding a way to turn dreams like these into reality was the whole purpose of meeting in Stoos.

 

 

 

1comments

  • Niels Pflaeging - January 16, 2012 at 11:31 pm -

    Hi Jay, if you´re hungry for more, you should take a good look at the BetaCodex Network´s white papers at http://www.betacodex.org. Papers 7-11, especially, offer a substantial extension on the thinking presented in the book you read. You might also like the slide packages available from the page http://www.betacodex.org/slides.
    I am looking forward to your thoughts on this material!

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