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Beyond Budgeting in Practice

Implementing Beyond Budgeting – our unique approach.

The Beyond Budgeting Management Model and its principles are at the heart of our consulting solutions and implementation concepts. Beyond Budgeting is today widely recognized as a concept that enables better and more cost-efficient management. It has also been tested in practice and proven its value, as a number of case studies from a wide array of industries confirm.

However, implementation of the Beyond Budgeting model and its 12 key principles is still not widespread. What remains a challenge for those organizations willing to examine or adopt the model is how exactly to make the change towards this better way of managing happen, in a specific organization of any industry and size. Few consulting firms have gained deep knowledge in this field.

If you're thinking of moving to a Beyond Budgeting model then, as with any important change, you face risk and uncertainty. Will people within the organization accept what you propose? What happens if a key project supporter (e.g. the CFO) is replaced? What should you do about the bits of your vision that aren't very clear? Others are looking at your proposals and wondering if they will work and what could go wrong.

Even the best supported and quickest Beyond Budgeting implementations have not been done overnight. The most aggressive implementation yet documented - Rhodia - took 2 or 3 years to complete even though the initial changes to remove fixed performance contracts were very quick. There are scores of things that must be changed and some of the steps some companies have taken, such as implementing rolling forecasts, can be technically difficult.

On the other hand, as we have learned from the significant experience of the BBRT and associated thought leaders, there are some relatively easy yet very beneficial early steps to get your implementation program started. One of the golden rules we apply is to help you divide the total project into around 50 deliveries, each of which is beneficial on its own. Beneficial changes are delivered (often in groups) every few weeks or even more often, rather than in a big bang after months of analysis and design. This technique allows to be flexible and prepared to change the implementation approach based on what you learn from work completed.

This state-of-the-art approach is called "Evolutionary Project Management" and there are many excellent technical reasons why it is the best known method of structuring projects:

	-	It slashes risks of failure,
	-	accelerates benefits,
	-	reduces costs,
	-	increases learning from experience,
	-	reduces the risk of working towards obsolete requirements,
	-	and enables real progress to be tracked instead of imagined progress.

It is also just about the only style of project management that is philosophically compatible with Beyond Budgeting, as it emphasises adaptive processes. Thus, implementing the new management model with us will not be handled nor perceived as a "gigantic change management program", but as a series of steps that deliver benefits quickly and easily (see example illustration).

Quite often there has been one delivery of particular importance that has been seen as the Beyond Budgeting implementation. This is mostly when a new procedure for adaptive planning is rolled out for people to follow, instead of budgetary control. However, there are many other activities that go on before and after this crucial step so the true scope of a Beyond Budgeting implementation is always wider than this.

The main resource needed in a Beyond Budgeting program is training. This will be the major cost factor within the initiative. People need help and assistance to adapt to the new management model. Developing templates for how to engage people in the new strategy and action planning processes, for instance, will be a valuable investment.

Several years of research have led us to the development of a framework for Beyond Budgeting programs that distinguishes between 9 clearly defined areas of change. This framework helps us to sketch out the future model of an organization in cooperation with our clients, and to elaborate with you a list of around 50 customized deliveries. These deliveries make your move towards Beyond Budgeting a comprehensive journey, in which plans are adapted as implementation unfolds (see illustration).

Planned well, management performance will improve from the very first step of your Beyond Budgeting implementation, with no transitional dip, and as all the elements of the Beyond Budgeting model fall into place the benefits will be magnified by increasing coherence. The tendency for the old model to reassert itself while key elements remain can be managed by obtaining Board support for the whole vision at the outset and by other actions that manage this particular risk.

If you want to know more about how we can help you, please get in touch. Our fees reflect your circumstances, because they are based on value added, not on hours billed. A meeting costs nothing and is sure to be interesting.

If you already want to make a first step towards implementing Beyond Budgeting in your organization, then you can take the BBRT online Diagnostic now. The Diagnostic is available at no cost at www.beyondbudgeting.org.

MetaManagement Group and the Beyond Budgeting Round Table

Niels Pflaeging is leader of the Beyond Budgeting Round Table South America (BBRT-SA). The BBRT-SA studies how Latin American organizations manage performance better without budgets as well as identify the budgeting and performance management practices of leading South American companies.

In a nutshell: The BBRT is an international facilitated network for organizations that are evaluating, implementing and gaining value from the Beyond Budgeting management model. The focus is to help companies improve the bottom line results through continuous planning and adaptive control, creating highly flexible, decentralized and ethical organizations.