Niels Pflaeging BBTN & MetaManagement Group Keynote at Excellence Conference, Tehran/Iran 27.07.2008 Niels Pflaeging BBTN & MetaManagement Group Keynote at Excellence Conference, Tehran/Iran 27.07.2008 > beyond budgeting transformation network. Beyond Budgeting in Practice. Why an ever-changing world requires a new and different management model. And how you can make it happen. Make it real!
45
Embed
Keynote (EN): Beyond Budgeting in Practice, at Quality & Excellence Conference, Tehran/Iran
Sldies from keynotes at Quality & Excellence Conference, Tehran/Iran
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Niels PflaegingBBTN & MetaManagement Group
Keynote at Excellence Conference, Tehran/Iran27.07.2008
Niels PflaegingBBTN & MetaManagement Group
Keynote at Excellence Conference, Tehran/Iran27.07.2008
>beyond budgetingtransformation network.
Beyond Budgeting in Practice.
Why an ever-changing world requires a new and different management model. And how you can make it happen.
Outlining the ‘industrial age’ model and its pitfalls
“command 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• …
Why most concepts, books and theories about leadership, as well as most advice on management are flawed
“One cannot talk sensibly about leadership or people management, nor design decent management processes, unless we clarifybeforehand our beliefs with regards to what in organizations are like.
We have to develop a shared understanding of human natureand its influence on our organizations.”
W.L.Gore. The best-led “innovation machine“ in the world?
• Consistently successful, for more than 40 years
• “Most innovative company in the U.S.“ (Fast Company)
• For the 8th year in a row among the 100 best employers in theU.S. (“Fortune“ – best medium-sized employer). Best employer in England for the third consecutive year. Among the best companies to work for in the EU and Germany.
• “Since 1958, Gore has avoided traditional hierarchy. Instead, we have practiced a team-based environment that stimulates personal initiative, innovation andcommuncation between all our Associates.”
• “The fundamental belief in the people in our organzationand in their ability continues to be the key to our success.“
• All employees participate in the firm´s success and become“virtual“ shareholders.
• No job titles. Little hierarchy. No job descriptions - instead: “job sculpting“.
The case of a radically decentralized organization: Handelsbanken – an extraordinary leadership philosophy
ROE = Return on Equity, TSR = Total Shareholder Return, EPS = Earnings per share
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, …)
The most important objectivewithin Handelsbanken Group:“Higher Return on Equity than theaverage of comparable banks in the Nordic region and Europe.”
Made real through:
• Radical decentralization, which in turn leads to…
• Best customer service• Lowest costAlexander V Dokukin
1. Region A 38%2. Region C 27%3. Region H 20%4. Region B 17%5. Region F 15%6. Region E 12%7. Region J 10%8. Region I 7%9. Region G 6%10. Region D (5%)
Region to regionReturn on Assets(RoA)etc.
1. Region A 38%2. Region C 27%3. Region H 20%4. Region B 17%5. Region F 15%6. Region E 12%7. Region J 10%8. Region I 7%9. Region G 6%10. Region D (5%)
Branch to branchCost/income ratio etc.
1. Branch J 28%2. Branch D 32%3. Branch E 37%4. Branch A 39%5. Branch I 41%6. Branch F 45%7. Branch C 54%8. Branch G 65%9. Branch H 72%10. Branch B 87%
Branch to branchCost/income ratio etc.
1. Branch J 28%2. Branch D 32%3. Branch E 37%4. Branch A 39%5. Branch I 41%6. Branch F 45%7. Branch C 54%8. Branch G 65%9. Branch H 72%10. Branch B 87%
Strategic „cascade”
Result & value contribution
Leads to lowest operational cost!
Relative target definition through “league tables“ (rankings) –instead of planned, fixed targets and internal negotiation
General principles for designing compensation systemsin Beyond Budgeting organizations
1. Pay the person – not the position. Abolish salary bandwiths.
2. Reward results (ideally, relative to external benchmarks), not target realizationor actuals compared to plans. Abolish all links between targets and money.
3. Apply group- or team-based variable compensation, e.g. participation in theoverall financial result of the firm, not individual bonuses.
4. Design simple variable compensation systems –eliminate complexities, which will lead to manipulation.
5. Compensate long-term value creation – not short-term performance.
6. Only use financial performace indicators in compensation systems –not intermediate indicators which are often hard to quantify or measure(such as quality or customer satisfaction).
7. Include all people in the variable compensation system(turning the system fair and inclusive) – not only an “elite“.
8. Use the language of participation in results -not the philosophy of “incentives“.
All employees should earn a share of the financial success.
Restrain from the idea of “motivating them“!
Organizations can free themselvesfrom conventional forms of
“pay for performance”, through simple and more transparent
• Doesn´t manage “cost” or “plans”, but shows employees how value creation flows through the organization, through internal value creation accounting system
Df( Vx Sx R) >
D = Dissatisfaction V = Vision S = Strategy/Steps R = Resistance
The best-led technology firm in the world?Semco, from Brazil – transformed at the beginning of the 1980s
• Consistent performance during the last decades,inspite of deep crisises in Brazilian economy
• Transformed after deep crises in the early 80s, 3.000 employees today
• “The fastest-growing company in Latin America”(strategy+business)
• One of the most admired companies in Brazil. • “The most democratic company in the world” (HBR)• Lowest staff turnover among competitors• All people participate in their business unit results• Employees choose their own bosses and set their own salaries• No formality – minimum of meetings, memos and approvals.
Everybody knows the numbers.
What they don´t need at Semco!• Org charts• HR department• Rigid plans and fixed targets• Fixed work places• Conflict with syndicates/unions
• Fixed work hours and time control• “Strategic plans”• Mission statement• Obligation to participate in meetings• Job and budget cuts• ...
Source: e.g. Ricardo Semler, „The Seven-Day Weekend“, 2004
1. You didn´t like Beyond Budgeting, and think this isn´t really relevant for you!
• That´s ok. We believe, however, that all traditionally managed organizations will at somepoint have to adopt the new model. Because market forces and human nature will evermore strongly put your organization under stress and make transformation a must.
2. You like the Beyond Budgeting idea a lot, but you didn´t like the speaker!
• That´s quite a common phenomenon. Sometimes the chemistry just doesn´t work!Talk with the speaker about meeting another BBTN director, and organize a workshop with that other director.
3. You liked what you heard, but feel you need to know more to start acting on it!
• Try additional information sources on Beyond Budgeting,like www.bbtn.org, or the Beyond Budgeting channel on Youtube, or our books and DVDs, or the online diagnostic on www.beyondbudgeting.org.Ask the speaker for additional resources and suggestions! We will gladly assist you.
• Talk with the speaker about joining a “BBTN Master Course“, or book our coaching program “Beyond Budgeting On The Fly!“
4. You liked what you heard, feel sufficiently informed, and want to make the nextstep towards transformation rightaway!
• Talk with the speaker about scheduling an in-company workshop at your firm.