Dynamic control: Choose the right planning horizon for your company
In our last blog, we raised some challenges with the classic budget and budget process. The question then is how to avoid them.
One way to get away from the classic budget management is to adopt views from Beyond Budgeting. These have been developed and formulated within the network Beyond Budgeting Round Table (BBRT), consisting of companies and organizations from around the world. Some of the approaches relate to management processes, and others to management principles.
- The rhytm: - Not many companies have a natural start on 1 January and a stop on 31 December. Think about the difference between planning for a business that sells soft ice cream or building condominiums. Definitely different planning horizon. Organize the management process dynamically according to the business rhythm and / or the events that govern the business - not around the calendar year.
- Goal: Create clear, ambitious and relative goals - not goals that are fixed and distributed from the top. The goals should be flexible and relative, preferably in relation to competitors.
- Impartial: Make planning a simple and impartial process - not a rigid and political exercise.
- Resource allocation: Create a cost-conscious approach in the organization and let resources be available when needed - not through a detailed annual budget allocation.
- Measure performance: Work with a holistic view of the entire company - give feedback to colleagues to create a learning organization.
- Rewards: Reward common success and success vs competitors - not against fixed bonus contracts (based on negotiated values in the budget process).
- Why: Engage and inspire around bold and important values - not through short-term financial goals.
- Values: Lead with the help of shared values and common sense - not through detailed rules.
- Transparency: Do not limit the information. Make it available for independent thinking, innovation and learning.
- Organization: Create a sense of belonging and organize around responsible teams - avoid hierarchical control and bureaucracy.
- Self-determination: Show faith in people and give them the freedom to act - do not punish those who make mistakes.
- Clients: Reflect all employees' work with customer needs - avoid conflicts of interest.
The attentive note that the views do not directly have to do with the budget. Rather, it is approaches and principles that become possible to apply as the importance of the traditional budget as a means of control diminishes. Each company and organization needs to investigate which approaches and principles give the greatest effect in their particular business.
- In the next blog, we will write more about the importance of planning and following up the business depending on what rhythm it has.
Feel free to contact us if you have thoughts and reflections on static vs dynamic control.
Did you know that Ekan Management facilitates a network with a focus on dynamic management / beyond budgeting aimed at economists at companies in the Stockholm region? Contact Julia Viklund if you are interested in participating.
Ekan is also Sweden's representative for the international network Beyond Budgeting Round Table (BBRT). Contact us if your company is interested, and we will tell you more about what a membership means.