Keynote (EN): Leading with Flexible Targets - Beyond Budgeting & the performance revolution,...
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- 1. beyondbudgeting >transformationnetwork. Dr. Sergio Mascheretti e Niels Pflaeging Leadership e obiettivi flessibili. Beyond Budgeting: come rivoluzionare il sistema delle performance. Come trasformare, orientare e gestire le aziende verso la creazione di valoreVenerd 22 Gennaio 2010 Beyond Budgeting Introduction
2. beyond budgeting> transformation network.Dr. Sergio Mascheretti e Niels Pflaeging Presentazione ITM Consulenza lieta di organizzare nel territorio bergamasco, la prima tavola rotonda su un nuovo approccio di management conosciuto a livello internazionale come Beyond Budgeting. A tal proposito il Dr. Sergio Mascheretti ha ritenuto fondamentale la collaborazione di uno dei fondatori del movimento, Niels Pflaeging, con il quale presenter a breve, il libro: Leadership e obiettivi flessibili Beyond Budgeting: come rivoluzionare il sistema delle performance. In pi di unoccasione il Dr. Mascheretti si trovato con ciascun partecipante a discutere di gestione, di strumenti, di processi organizzativi, di sistemi incentivanti, al fine di trasformare, orientare e rendere performante ciascuna organizzazione. Questa tavola rotonda rappresenta unoccasione per cogliere nuovi stimoli di business management, cogliendo lopportunit della presenza di uno speaker e management consultant di livello internazionale.Elenco Aziende Partecipanti Brembo Radici Percassi Banca Popolare dellEmilia Romagnia SameBeyond Budgeting Introduction 3. Workshop Beyond Budgeting 3 BBTN All rights reserved 4. Workshop Beyond Budgeting 4 BBTN All rights reserved 5. Outlining the industrial age model and its pitfallscommand and control Too centralized Too inward-looking Too little customer-oriented Too bureaucratic Too much focused on control Too functionally divided Too slow and time-consuming Too de-motivating film Modern Times with Charlie Chaplin, 1936 From the Workshop Beyond Budgeting 5 BBTN All rights reserved 6. How markets govern organizations from the outside in PeripheryMar ke t CenterInformationDecisionCommandCentralist command and Impulsecontrol collapses inReactionincreasingly complexenvironments Source: Gerhard Wohland Workshop Beyond Budgeting7 BBTN All rights reserved 7. Beyond Budgeting means: From hierarchy to network structurebeyondbudgeting >transformationnetwork. modelTraditional New model(centralized functional hierarchy)(decentralized leadership network) Changing leadership and structure Bosses rule! The market rules! Top-down Outside-in command and control sense and respond Top management Front-line teams are always is always in charge in charge Centralized leadership Devolved leadership Seminar Beyond Budgeting8 BBTN All rights reserved 8. There is a new model, which is supported by science and practiceSciences: Practice: Stafford Beer Thought leaders Margareth Wheatley Industry leaders (selected)Niklas Luhmann(selected) W. Edwards Deming Kevin Kelly Ross Ashby Joseph Bragdon Douglas McGregor Chris Argyris Complexity Jeffrey Pfeffer Reinhard SprengertheoriesIndustry Stephen Covey Howard GardnerSocial Viktor Frankl sciences and RetailHR Peter Drucker Tom Peters Leadership &Services Charles Handychange John Kotter Peter Senge Thomas DavenportStrategy & Governments Peter BlockPerformance & NGOs management Henry Mintzberg Gary Hamel Jeremy Hope Michael Hammer Thomas Johnson Charles Horngren Workshop Beyond Budgeting 9 BBTN All rights reserved 9. From the old coherence to a new coherenceTraditional model (supports efficiency)New model (supports complexity)CentralizedDecentralized hierarchy, network, command sense and control and respondThe old model is notaligned with todaysCSF and it does notsupport Theory Y.> We need a new Relative strategy model to cope with performancecomplexity contracts> We must change Fixedthe whole model! performancecontractsDynamiccoordination FixedDynamic processesprocessescontrol Workshop Beyond Budgeting10 BBTN All rights reserved 10. There are two different ways of working on the model evolution and transformationSustaining anddeepening of theIntegration decentralized model,Evolutionphasethrough generationswithin the decentralizedmodel (culture ofTransformationempowerment and trust) through radical decentralization of decision-making Differentiation Stagnationphasewithin the tayloristic modelLow degree of decentralization/Bureaucratizationempowermentthrough growing hierarchyand functional differentiationPioneering phase High degree of decentralization/ empowermentFoundationTime scale: organization's ageSeveral decades old Workshop Beyond Budgeting11 BBTN All rights reserved 11. The 12 principles of the Beyond Budgeting model are in fact a full set of design principles for the new organization type PrinciplesDo this! Not that!Customers andCustomer/outside focusFocus on the boss responsibilityResponsible teams (cells)Centralization, functional division LeadershipPerformance and Performance culture, beat the marketInspired by the past, burocratic6 devolved freedomAutonomy and responsibilityAdherence to fixed plansleadership principlesGovernance andClearly defined objectives and valuesImpose objectives from above transparency Open and shared informationRestricted informationGoals and Goals related to continuous improvement Fiscal year, fixed goalsrewardsRewards related to organization resultsReward local, fixed goals Processes6 adaptive management Planning and Continuous and inclusive planningTop-down annual planningprocesses principlescontrolsCompare performance against actualsVariations against fixed plansResources andResources on demand Annual (budget) allocationscoordination Coordinate dynamic, market-like interactionsDepartmentalization, hierarchy Workshop Beyond Budgeting 12 BBTN All rights reserved 12. Why traditional management with fixed performance contracts regularily fools us: We have lost control a long time ago Fixed targets Relative, self-adjusting targetsTarget: absolute ROCE in % (here: 15%)Target: relative ROCE in % (to market)PlanActual Target Actual Comparison:Comparison: Market-ActualPlan-Actual Most Target: ROCE Mostimportantin % better important Market competitorthan market Market competitor (25%) (28%)average(25%) (28%)Actual Actual Plan (21%)(21%)(15%)[independent [expected from expected market : 13%] market ] Interpretation within the plan-actual- Interpretation within actual-actual compa-comparison: Plan was outperformed by 6rison: Performance was 4 percentage pointspercentage points > positive interpretation below competition! > negative interpretation Better ROCE of the market average and the Absolute assumptions at the moment ofmost important competitor remain unnoticed! planning dont matter. Targets always remain updated and relevant! Workshop Niels Pflging Source: Beyond Budgeting13 BBTN All rights reserved 13. The case of a radically decentralized organization: Handelsbanken an extraordinary leadership philosophyThe most important objectivewithin Handelsbanken Group:Higher Return on Equity than theaverage of comparable banks inthe Nordic region and Europe.Made real through: Radical decentralization, which in turn leads to Best customer service Lowest costAlexander V Dokukin Consistently over a period of 30 years one of the most successful banks in Europe, measured by almost all key performance indicators (e.g. ROE, TSR, EPS, Cost/Income, customer satisfaction, ) ROE = Return on Equity, TSR = Total Shareholder Return, EPS = Earnings per shareWorkshop Beyond Budgeting 14 BBTN All rights reserved 14. How radical decentralization is being reflected in the companys organizational structure and decision-makingPrinciplesCustomersCustomer intimacyA large network of self-managed600 branch managersteams with full responsibility for(Profit Centers)customer resultsFreedom and capability to act12 regional managersFast, openFast, open Winning culture, combined(Invest Centers)information informationwith the freedom and ability tosystems systems actGovernance and transparencyFramework for decision making CEO,with clear values, limits and product firms, treasury, IT etc.relative targets, plustransparency Leads to maximum customer satisfaction! Workshop Beyond Budgeting Source: BBRT 15 BBTN All rights reserved 15. Relative target definition through league tables (rankings) instead of planned, fixed targets and internal negotiationStrategic cascade Bank to bankBank to bank Return on Equity (RoE)Return on Equity (RoE) Region to regionPrinciplesRegion to region Return on Assets(RoA)etc. 1. Bank D 31% Return on Assets(RoA)etc.1. Bank D 31%Branch to branch 2. Bank JJ 24%1.2. Bank Branch to branch 24%1. Region A 38% Cost/income ratio etc.Region A 38% Cost/income ratio etc. 3. Bank I I 20%2.3. Bank20%2. Region CC 27%Relative targets andRegion 27% relative compensation 4. Bank BB 18%3.4. Bank18%3. Region H 20%1.Region H 20%1. Branch JJ 28%Branch 28% 5. Bank EE 15%4.5. Bank15%4. Region B 17%2.Region B 17%2. Branch D 32%Branch D 32% Continuous6. Bank FF 13%5.6. Bank13%5. Region FF 15% 3.Region 15%3. Branch EE 37%Branch 37% 7. Bank CC 12%6.Region EE 12%4. 12%4. Branch A 39%Branch A 39%planning/control7. Bank12%6.Region 8. Bank H 10%7.5. Region JJ 10% 5.Branch I I 41%Branch 41%8. Bank H 10%7. Region 10% 9. Bank GG 8% 8.Region I I 7% 6.7% 6. Branch FF 45%Branch 45%On demand flow of 9. Bank 8% 8. Region 10. Bank AA (2%)9.10. Bank (2%) 9. Region G 6% 7.Region G 6% 7. Branch CC 54%Branch 54% resources/ 10. Region D (5%) 8.10. Region D (5%) 8. Branch G 65%Branch G 65%dynamic coordination9. 9. Branch H 72%Branch H 72%10. Branch B 87% 10. Branch B 87% Result & value contributionLeads to lowest operational cost! Workshop Beyond Budgeting16 BBTN All rights reserved 16. Flexible coordination and resources on demand - instead of allocations and budgets Headquarters/Headquarters/Region RegionBranches acquire resourcesthrough internal markets Resources Resources CustomerCustomerBranch Branch (IT, HR etc.)(IT, HR etc.) demand demandBranches decideBranches alone areBranchesover necessaryresponsible for efficientobserveresource levelsuse of resources customer demand Leads to eradicating and avoiding waste! Source: BBRT Workshop Beyond Budgeting17 BBTN All rights reserved 17. Creating a virtuous circle a common factor among Beyond Budgeting pioneers Better to invest in Better for society Better to do business with 6. Sustainable value 5. Ethical & social standards Beats peer group every year 4. Customer intimacy HighestSupport the long term interests of on ROE and cost-to-income (independent) customer satisfaction the bank and society.ratio; highest total scores in sector year-after-year;shareholder return in sector; lowest customer complaints;devolved adaptive monitors customerorganization is key driver of acquisitions/defections. success. 3. Operational excellence Lowest costs of any bank in Europe; lowest bad debts; cost reduction Better to work for culture; flat organization (half a 1. Best people SHB is first head office person per branchchoice financial services versus five for rivals); internalcompany in Sweden for market exerts constant pressure on graduates; employee central services.turnover is lowest in sector; 2. Innovation SHB voted jointchallenge, personalresponsibility and freedom to best Internet bank in Europe inrun their part of the 2000; any competitive productsVirtuous circlebusiness; group-wide profit and solutions are fed back fromsharing scheme. branches to product development. Text relates to Svenska Handelsbanken Workshop Beyond Budgeting18 BBTN All rights reserved 18. Simple and relevant: creating reports without actual-plan-variances, fixed targets, or plans! last Same Same Company KPI Regions KPI Compe-month month monthlast12 titor A last prev.. 12 prev.Competitor A31%Region G 7% yearyear mnths mnthsOurCompetitor E24%Region E 7% unit ACompetitor C20%Region B 6% KPI 2Us18%Region F 4% Compe-Competitor B13%Region A 3%titor B IndicatorsUsCompetitor D12%Region D 3%or OurGroups of accountsCompetitor G10%Region C 1%unit BCompetitor F 8%Region H 0%KPI 1Ranking (League table) ext./intern. Snapshot (static) with benchmarks Accouts/KPIs vs. Previous periods (A) Maximum Tolerance levels Us (B) Gliding average KPIKPIKPI UsCompetitor A Curve with varianceTime (Actuals) Time (Actuals) Time (Actuals)Trend with tolerance Trend with benchmarkTrend with referencesWorkshop Beyond Budgeting19 BBTN All rights reserved 19. To transform your organization from command & control to decentralized network, a double helix change is neededOrganizati onal change process 3. Beginning2. Neutral Zone1.2. 3.4. Create aPull5.6. Develop Communi-7. 8. sense of together aEmpower Producechangecate forDon't Create urgencyguidingunder- all others short-termvision and leta new coalitionstandingto actwins strategyup!culture and buy-in References 1. Ending ualIndivid rocess ep chang Workshop Beyond Budgeting 20 BBTN All rights reserved 20. beyondbudgeting >transformationnetwork. Dr. Sergio Mascheretti e Niels Pflaeging Niels [email protected]>transformationnetwork. www.metamanagementgroup.com Dr. Sergio [email protected] www.itmconsulenza.it Tel. 035 212224 Beyond Budgeting Introduction