Category Archives: Unmanagement

Beyond Budgeting

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:

  • Responds rapidly to threats and opportunities. Adaptive organizations operate with speed and simplicity and this can best be achieved by giving managers the scope to act immediately and decisively within clear values and strategic boundaries. Making strategy an open, continuous and adaptive process is the key. It enables the firm to react to emerging threats and opportunities as they arise rather than being constrained by a fixed and outdated plan.
  • Attracts and keeps the best people. It is no coincidence that Adaptive Organizations such as Google, Handelsbanken and W.L. Gore regularly appear in the lists of “best companies to work for”. The reasons are obvious. From the employee perspective, talented people want to learn and develop; they value time to think, reflect and try new ideas; they want decision-making responsibility and they want a friendly, collegiate culture. From the employer perspective they want people who have the right attitude, have ideas and can add value, want to participate in decision-making, are good team players and have the talent to become leaders at any level.
  • Enables and encourages continuous innovation. Innovation is about thinking and acting differently whether it is about strategies, business models, processes, or management practices. In adaptive organizations, people work within an open and self-questioning environment. Clear governance principles set the right climate and builds the mutual trust needed to share knowledge and best practices. This is also encouraged by the move away from rewards based on budgets and toward rewards based on a business unit or group.
  • Drives operational excellence. Adaptive organizations have lower costs. Not only do they connect the work that people do with customer needs, but they also align products, processes, projects, and structures with their strategy. Operating managers also challenge resources used rather than seeing them as ‘entitlements’. Just asking the question, “Does it add value to the customer?” is often sufficient to ensure that unnecessary work is eliminated.
  • Leads to loyal and profitable customers. Adaptive organizations know how customers want to conduct business with them. Key issues are whether customers just want the lowest-cost transaction, added-value services, or customized solutions. Under this “outside-in” approach, firms know how to satisfy customers’ needs profitably. This means not only knowing their needs, but also their net profitability.
  • Support good governance and ethical behavior. Adaptive organizations are held together by strong values and inviolate principles. But it is not a soft option. It exposes nonperformers. It challenges people all the time. You can’t just agree on a number. You have to show people that you can actually achieve real performance improvements, and must always be prepared to be judged against others with similar problems and opportunities.
  • Leads to sustained value creation. Leaders in Adaptive organizations focus their attention (either explicitly or implicitly) on creating wealth over the longer term. In particular, they focus on setting high performance expectations and stretching people’s ambitions. Those companies that operate this way tend to beat the competition not just this quarter or this year but year after year.

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.




Reflections on the Stoos Gathering

Ten days ago I flew to Switzerland for a mountaintop retreat with twenty thought leaders from around the world to ponder better ways to manage organizations.

On the flight over, I watched the film Inside Job, a documentary about the shenanigans that led to the financial meltdown fueled by the subprime mortgage bubble. The movie’s incendiary. There are lots of bad apples out there: self-serving financial engineers, ratings agencies, regulators, bankers, and more. Guilty, guilty, guilty.

As a graduate of the “West Point of Capitalism,” I’d been reluctant to condemn the system but Inside Job pushed me over the edge. Business is broken. Right before watching the movie, I read a series of Harvard Business Review articles by Roger Martin about the wrong-headedness of maximizing shareholder value. This slippery slope leads to short-term thinking, cooking the books, and screwing everyone up and down the chain except grossly overpaid CEOs. Chasing shareholder value is like trying to make your car go faster by rigging the speedometer.

Dissatisfied workers, pissed-off customers, and lousy returns on investment are the outcomes of a broken system. The current business environment is a breeding ground for Murphy’s Law. Nobody’s happy and rebellion is in the air.

Stoos is a tiny village atop a mountain about an hour south of Zurich. It’s a beautiful spot for getting away from it all. Four people — a Swiss professor, a Dutch entrepreneur and author, an American agile development coach living in Switzerland, and an American management author — realized that lots of us were talking about the same malaise with management independently. They invited us to convene on the mountain to find common ground — and a better framework for doing business.

After the two-day session in Stoos, I took the train south to Lugano, a perennially sunny town that couples Swiss efficiency and Italian verve  (Mangiare!) on the shore of an Alpine lake. Fragments of the mountain top conversations rolled around in my head. My thoughts are still coming together.

Foremost is that the business world must shift its focus from things to people. Living things trump machines. Moreover, people are inherently social. We cannot thrive — or even survive — in isolation. Connections are vital to creating value. And how is that value created? By adapting to change — and that requires learning. Bottom-line: businesses are networks of learning individuals.

Financial success not the ultimate target. Chasing money for its own sake is wrong-headed and demoralizing. Drucker had it right: the purpose of business is to create and satisfy customers. People in sustainable organizations focus on doing this better and better, forever delivering more value to their customers. Do this right and the money will follow.


For several hundred years, the machine has been the metaphor for the organization. Management’s role was to make the machine work efficiently. People were cogs; managers controlled human resources as if they were interchangeable parts. Bosses did the thinking; workers were told to get the job done. It was as if workers lacked intelligence, emotion, and initiative. Shut up and do your job.

Machines work well when you need to do the same thing over and over. They’re not so hot when doing different things is required. Denser interconnections have transformed the world into one vast complex system. The past is no longer a guide to the future. Small things have enormous consequences. Logic breaks down. Shit happens. Everything’s different.

Organism, a living system. Source:

These days it’s more productive to think of organizations as organisms. Managers become stewards of the living. Their role is to energize people, empower teams, foster continuous improvement, develop competence, leverage collective knowledge, coach workers, encourage collaboration, remove barriers to progress, and get rid of obsolete practices.

Living systems thrive on values that go far beyond the machine era’s dogged pursuit of efficiency through control. Living systems are networks. Optimal networks run on such values as respect for people, trust, continuous learning, transparency, openness, engagement, integrity, and meaning.

On the flight back to San Francisco, I watched Werner Herzog’s fabulous film about the 32,000 year old Chauvet Caves in Southern France. Herzog says the Caves are the place “where the modern human soul was awakened.” A review noted that the paintings “are exceptional not only for their age or their historical importance, but for their beauty and grace, the strange window they offer into the development of man’s ways of looking at the world through art.” The Stoos Gathering resonates the same chord. It’s all about the creativity of people.

Those of us who took part in the Stoos Gathering are sorting through what we came up with. The punchline is “learning networks of (diverse) people creating value,” but I imagine that will be refined. You can track where we’re at and join the conversation on our website and LinkedIn group.

Next I’m going to explore the implications for professional learning and working smarter.

The Stoos Gathering: Links

Stoos is a village located in the municipality of Morschach. It lies at 1,300 metres in the Swiss canton of Schwyz and has about 100 inhabitants. It is used as a small ski resort with a cable car leading to the Fronalpstock. The village itself is car-free and is accessible via a funicular. (Wikipedia)

Help the Stoos Gathering Transform Management (Forbes)

More Ideas for Jumpstarting the Transformation of Management (Forbes)

The Stoos Network

Starting ideas

The Stoos Network on LinkedIn

The invitation to Stoos

Stoos Network on Twitter

A great summary of the Stoos Gathering from Steve Denning

Photos from the Stoos Gathering

Jay’s initial post on Stoos

Jay’s Stoos Gathering video on YouTube

From Steve Denning, examples of companies that exemplify things we discussed at Stoos:

In terms of companies that exemplify for instance some aspects of the
principles of radical management, here are some possibilities among
some large well-known companies:







Banks: USAA


Li & Fung


Moonshots for Management by Gary Hamel

Extracts from Semco’s “Survival Manual”

Culture at Bridgewater


Agile Management

In early January 2012, I’ll take the two-hour train ride from Zurich down to Schwys and on to Morschach, where I’ll board a cable car for the ride up the mountain to the skiing village of Stoos. I’ll let Steve Denning explain why:

Help the #Stoos Gathering Transform Management

Why doesn’t management advance? Why are most big organizations still run in a way that leads to steadily diminishing returns, dispirits those doing the work and frustrates those for whom the work is done? There is no shortage of good ideas for improvement. Some good ideas have been around for decades. This isn’t rocket science.

And yet overall, very little has changed. Why do most firms–and their investors–still focus on maximizing share value, which even Jack Welch called “the dumbest idea in the world”? Why do firms ignore Peter Drucker’s insight that the only valid purpose of a firm is to create a customer? Why is command-and-control still the order of the day? Why is it that even promising improvements don’t seem to last?

The Stoos Gathering
On January 6, 2012, twenty thought leaders from around the world will gather for two days in the ski resort at Stoos Switzerland to discuss what can be done to accelerate the transformation of management in organizations around the world.

We will be searching to see what can be done to create and energize organizations in ways that make them better for the organizations themselves, better for the people doing the work, better for those for whom the work is being done and better for society as a whole and to do so on a sustained basis.

The Agile Manifesto
The four of us believe that this is possible. We have seen how in 2001 seventeen software developers came together at Snowbird and crafted some ideas in the Agile Manifesto that did inspire many people working in the software industry to do things differently .

Granted, the agile movement is still evolving. But there has been huge progress. Tens of thousands of organizations around the world are developing software in a better way–better for the organization, better for the developers and better for the ultimate user.

Subscribing to something larger
We believe that one reason why this happened is that the Agile Manifesto created a kind of banner or umbrella or set of values that all of the people present could subscribe to, while still continuing to pursue their own individual variations on the theme. The individual activities were transformed into a large scale global movement, because the participants saw themselves as part of something larger.

The question that we will be exploring at the #Stoos Gathering is whether we can discover synergies that could accelerate the transformation of the way whole organizations are run. To succeed, we will need to find elements that we can all subscribe to and that will energize and accelerate the movement for global change.

Getting into this
I’m learning a lot from sources like these and from conversations with generous peers.

“Agile” means different things to different folks. It’s sort of like instructional design. Some people think instructional design is ADDIE. Others of it see instructional design as a large bag of multidisciplinary concepts and techniques. A priesthood of ID purists lash out at people who stray from strict doctrine. The strays respond that old-style ID is irrelevant.

Both instructional design and agile development are touted as superior to waterfall design. Iterative design makes sense in a rapidly-changing world. However, change is not evenly distributed. Agile is not a panacea. While work itself is increasingly conceptual, some work remains procedural; agile’s not going to be much help there. Agile also runs into a brick wall in dealing with complex systems. 75% of scrum shots fail.

This is not going to be as simple to figure out as I’d thought. Good thing I enjoy learning!

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A dozen key behaviors

Here’s shorthand for a dozen ways workers and managers in the 21st century can prosper:

  • Take stock, take charge
  • Delight customers
  • Collaborate, team-work
  • De-stress, make people happy
  • Inspire performance
  • Take the pulse
  • Sprint
  • Decide wisely
  • Coach
  • Nurture serendipity
  • Net-work
  • Conduct, don’t control
The foundation is treating people like people. Fostering relationships and improving connections.
As my colleague Jane Hart would say, unmanagement replaces “Command & Control” with “Encourage & Engage”.

Why now?

Business is Falling Behind

Business organizations are lagging reality. The 21st century is radically different from what came before and yet most businesses act as if nothing has changed.

Half of the adult population of the United States uses social media, up from 5% a scant six years. 750 million people converse on Facebook. A couple of hundred of us were blogging a dozen years ago; today 160 million people blog. Yet most corporations are  reluctant to “take the risk” on social media.

Consumers are sharing photographs and videos of their grandkids in real time. Most corporations are buried in email.

Managers and professionals do daily battle with rigid systems that don’t flex with the times, strain under mountains of trivia, and rely on obsolete practices that serve neither the customer or the company.

Our research suggests that business in general may be facing a “Customer Spring.” Like the Arab Spring, customers who are weary of being dominated by unresponsive corporate regimes will rise in protest and topple the old order.

Perhaps it won’t get to that point. Companies that cling to vestigial ways doing business as usual and don’t open themselves to serve their constituents may simply die of old age. Average corporate life expectancy is about half that of a human being and is already at an all-time low. It won’t take long.

Business is at a crossroads. It’s do or die.

The Network Era

When the economy went to hell in a hand basket a couple of years back, my gut told me this was not a downturn. Rather, the network era had taken the wind out of the sails of the industrial age. The economy was not going to “bounce back.” We were entering a new era. This was a total game changer. A new normal.

At the turn of the last century, we entered an age of unparalleled volatility, uncertainty, and accelerating speed where ideas had become more valuable than physical things. Financial markets sensed this and shifted investments from what’s on the balance sheet to bets on what would be on future income statements. Intangibles — know-how, know-who, ideas, and the tacit lessons of experience — have limitless potential; plant and equipment can be millstones that hold you back.

Relationships are the glue that holds networks together. Enlightened businesses would shuck off the factory mentality that treats workers as interchangeable parts in a machine. Rigid command and control systems would give way to a spirit of “we’re all in this together.” Barriers that wall off customers from suppliers would come tumbling down. Collaboration would crowd out giving orders. We’d end up enjoying one another’s company.

A new CEO with a grand vision of social networks, openness, innovation, experimentation, and continuous improvement is not enough to turn a large organization around because she’s anchored to a legacy culture.

Managers and professionals who have grown up taking and giving orders simply don’t know how to adapt. The CEO and her team flip the switch but the lights don’t go on below because they’re wired differently down there.

What’s required is a wholesale shift to a new way of doing things. The knowing/doing gap surrounding the advent of the network era is humongous.

The core problem was that while the landscape of business has radically changed, managers are conducting business with the obsolete tools. A manager could execute from the 20th century playbook flawlessly but still fall behind because the nature of the game had changed.

Internet Time Alliance resolved to identify the beliefs and practices that can make organizations successful in the 21st century workplace. We start by focusing on front-line managers and professionals, those closest to the customer.

Stay tuned….


It’s how to get things done in the 21st century.

Forget planning (the world’s unpredictable), organizing (self-organization’s better), directing (people are self-directed ), and controlling (control is an illusion).

Welcome to the era of unmanagement.

Internet Time Alliance is partnering with organizations that are ripe for change to co-develop the means to put the behaviors of unmanagement into practice. If your organization shares our belief that 20th century management practice is obsolete and change is necessary for survival, let alone prosperity, let’s talk.