The Beyond Budgeting Management Model

Transcription

1 The Beyond Budgeting Management Model, FHNW & BBRT Das Managementkonzept Beyond Budgeting, FHNW & BBRT

2 Agenda Why we need to think about management change An offered alternative to think about: Beyond Budgeting 2011 Fachhochschule Nordwestschweiz Beyond Budgeting Round Table 2

3 Industrial age has gone since a while Charly Chaplin, Modern Times Fachhochschule Nordwestschweiz Beyond Budgeting Round Table 3

4 Why Management Innovation? Management Innovation (paradigm) better different Strategic Innovation (position) Process Innovation (throughput) different better Product Innovation (output) Innovation in products, processes and strategies are often seen in today s management practice. But these kinds of innovations are easy to copy. Only management innovation (innovation in leadership and management processes) provides a sustainable competitive advantage in the future. It is not easy to imitate. Source: Gary Hamel in The Future of Management, Fachhochschule Nordwestschweiz Beyond Budgeting Round Table 4

5 Traditional Management Model: Taylor s Principles and McKinsey s Budgetary Control Centralized hierarchy Taylors principles for leadership and organisation (Scientific Management,1908): Separation of planning from doing Work is based on detailed and precise instructions Division of labour / excessive use of specialisation Monetary incentives Fixed managementprocesses Source: BBRT Strategy Budget Fixed Performance Contract Control Mc Kinseys budget process (Budgetary Control, 1922): Budgetary Control, as an axiom of the presentday philosophy of business administration, is urgently needed for two purposes: 1. As a basis for centralized executive control 2. As a means of coordinating the activities of the various functional departments Fachhochschule Nordwestschweiz Beyond Budgeting Round Table 5

6 Traditional Management conflicts with the CSFs of today Information Age Discontinuous change Short life cycles Volatile prices Extensive choice Access to talent Intolerant shareholders Critical Sucess Factors Fast response Continuous Innovation Operational Excellence Customer Intimacy Great place to work Compliance Misalignment of traditional management Annual planning process retards it Centralized bureaucracy stifles it Spend it or lose it mentality fights it Short term targets prevent it Extrinsic motivators undermine it Dysfunctional, even unethical behaviour conflicts with it Value creation Inferior results 2011 Fachhochschule Nordwestschweiz Beyond Budgeting Round Table 6

7 Human Nature Assumptions 2011 Fachhochschule Nordwestschweiz Beyond Budgeting Round Table 7

8 X or Y? Theory X Attitude - People dislike work, find it boring, and will avoid it if they can. Direction - People must be forced or bribed to make the right effort. Theory Y Attitude - People need to work and want to take an interest in it. Under the right conditions, they can enjoy it. Direction - People will direct themselves towards a target that they accept. Responsibility - People would rather be directed than accept responsibility, which they avoid. Motivation - People are motivated mainly by money and fears about their job security. Creativity - Most people have little creativity - except when it comes to getting round management rules. Responsibility - People will seek, and accept responsibility, under the right conditions. Motivation - Under the right conditions, people are motivated by the desire to realise their own potential. Creativity - Creativity and ingenuity are widely distributed and grossly underused. Based on Douglas McGregor, The Human Side of Enterprise, Fachhochschule Nordwestschweiz Beyond Budgeting Round Table 8

9 The traditional model does not solve today s problem, which is complexity Most organisations use a management model, that was designed to improve efficiency. But the problem today is how to cope with complexity*, not just the improvement in efficiency. * to meet all critical success factors, inclusive operational excellence (efficiency) 2011 Fachhochschule Nordwestschweiz Beyond Budgeting Round Table 9

10 Agenda Why we need to think about management change An offered alternative to think about: Beyond Budgeting 2011 Fachhochschule Nordwestschweiz Beyond Budgeting Round Table 10

11 What have these companies in common? 2011 Fachhochschule Nordwestschweiz Beyond Budgeting Round Table 11

12 Management-Processes Leadership & Organisation From traditional management to Beyond Budgeting Command and Control Management Beyond Budgeting Hierarchical Control? Fixed Targets and Processes Strategy Fixed Performance- Contract? Control 2011 Fachhochschule Nordwestschweiz Beyond Budgeting Round Table 12

13 Svenska Handelsbanken (SHB) Sucess Universal Bank Ratings Return on Equity Customer satisfaction Cost-income ratio Best employer 10,000 employees Aa1 / AA- Consistently higher Consistently better Consistently lowest Among the best Management model (since 1970) Radical decentralization (devolved leadership) Adaptive processes for self-management 2011 Fachhochschule Nordwestschweiz Beyond Budgeting Round Table 13

14 SBH s devolved network Principles Customers Customer responsiveness 600 Branch Managers Freedom and capability to act Governance and transparency 11 Regional Managers CEO Product Companies Treasury, IT etc Leading to high customer satisfaction 2011 Fachhochschule Nordwestschweiz Beyond Budgeting Round Table 14

15 Best customer satisfaction in the industry Quelle: Annual report Svenska Handelsbanken Fachhochschule Nordwestschweiz Beyond Budgeting Round Table 15

16 SBH s adaptive processes Principles Relative goals and rewards Continuous planning and controls Resources as needed and dynamic coordination Bank to banks (RoE) 1. Bank A 31% Region to regions 2. Bank D 24% 3. Bank H (RoE) 20% Bank CRegion D 18% 38% Branch to branches Bank ERegion J 15% 27% Bank FRegion I(Cost/Income 13% 20% etc.) Bank B1. Region Branch B 12% C 17% 28% Bank I2. Region Branch E 10% H 15% 32% Bank G3. Region Branch F A8% 12% 37% Bank J4. Region Branch C D2% 10% 39% Region Branch H F 7% 41% Region Branch G E 6% 45% Region Branch A J 5% 54% 8. Branch B 65% 9. Branch I 72% 10. Branch G 87% Leading to low operating costs 2011 Fachhochschule Nordwestschweiz Beyond Budgeting Round Table 16

17 Best cost/income-ratio Quelle: Annual report Svenska Handelsbanken Fachhochschule Nordwestschweiz Beyond Budgeting Round Table 17

18 Best cost/income-ratio Costs/Total loans* % Commerzbank Comparison European Universal Banks with Loans > EUR 100bn and Nordic Banks (Costs include Credit Loss). SEB Danske Bank Swedbank Bank of Ireland DnB Nor Allied Irish Banks HypoVereinsbank Banco Santander KBC Credit Agricole SA Royal Bank of Scotland Bank Austria Unicredito Intesa SanPaolo BBVA Lloyds TSB Standard Chartered MPS Erste Capitalia Nordea Handelsbanken 5 6 ABN Amro Deutsche Bank HBOS Barclays UBS BNP Paribas HSBC Société Générale CS Group Source: Deutsche Bank: European Banks Running the Numbers, January 2007-edition. C/I-ratio, % 2011 Fachhochschule Nordwestschweiz Beyond Budgeting Round Table 18

19 Processes Leadership Beyond Budgeting Principles Principles 1. Customers 2. Network Do this! Focus everyone on their customers Organize as a lean network of accountable teams Not that! Hierarchical relationships Centralized functions 3. Autonomy 4. Responsibility 5. Values 6. Transparency 7. Goals 8. Rewards Give teams the freedom and capability to act Enable everyone to think and act like a leader Govern through a few clear values, goals and boundaries Promote open information for self management Set relative goals for continuous improvement Reward shared success based on relative performance Micro-manage them Merely follow the plan Detailed rules and budgets Restrict it hierarchically Negotiated contracts Fixed targets 9. Planning 10. Controls 11. Resources 12. Coordination Make planning a continuous and inclusive process Base controls on relative indicators and trends Make resources available as needed Coordinate cross company interactions dynamically Top-down, annual event Variances against plan Budget allocations Annual planning cycles Quelle: Beyond Budgeting Round Table BBRT 2011 Fachhochschule Nordwestschweiz Beyond Budgeting Round Table 19

20 Empowerment and Decoupling Plan and Goal Efficiency model Centralized hierarchy Decentralisation of Decisions (6 Principles) Paradigm Shift towards: Empowerment and Servant Leadership Complexity model Devolved network Fixed process Strategy Fixed Performance Contract Adaptive Management- Processes (6 Principles) Paradigm Shift towards: Decoupling Plan and Goal Relative goals Adaptive processes Adaptive process Control 2011 Fachhochschule Nordwestschweiz Beyond Budgeting Round Table 20

21 FHNW / BBRT Folie 21

22 Exceptions do not always prove the old rule. They can also be forerunners of a new rule. Marie von Ebner-Eschenbach 2011 Fachhochschule Nordwestschweiz Beyond Budgeting Round Table 22

23 Hochschule für Wirtschaft Prof. FHNW / Director BBRT [email protected] T Peter-Merian-Strasse 86, P.O. Box, CH-4002 Basel