Welcome to this blog series, where I look forward to share with you some of my reflections on what I believe are very important issues for most organisations today.

I would like to start with some stories from employer Statoil, where I have been heading up our Beyond Budgeting journey since 2005. It is in no way over, and I wanted to share with you some exciting recent developments.

I continue with a blog about the many budget problems which everybody complains about, but which fewer seem to realise are about much more than irritating itches. They are symptoms of a serious and systemic problem.

The next blog will be about the “The Rolling Forecasting trap”, where I have some urgent advice about how to get this process right. We continue with a blog about one of the most asked questions when managers hear about Beyond Budgeting; “How do I manage cost without a budget?”. There are some very good and comforting answers to that question. The next one will be about how to escape the straitjacket of the calendar year in favour of a more dynamic and business/event-driven rhythm in our management processes. Then over to what many experience as a main barrier for implementing Beyond Budgeting; the individual bonus.  Since we now are in HR territory, my last blog will address Finance and HR cooperation; is it time to join forces?

But back to Statoil. We are a Norwegian energy company with 20,000 employees in 36 countries and a turnover of around 60 bn. USD. The main activity is still oil and gas exploration and production, but the renewable energy business is increasing fast, preparing the company for a low carbon future. Statoil is the world’s largest operator in waters deeper than 100 meters, and has built on this competence to become a major player in offshore wind, which includes building the world’s first floating offshore wind farm.

Statoil hit the ground running in 1972. The young company had to catch up fast with international giants coming to Norway after significant oil and gas discoveries were made on the Norwegian continental shelf some years earlier.

The company grew fast. Young people were given huge responsibilities very early on in their career, including myself. Not more than a year after my graduation I was heading up the corporate budget department (interesting in itself, given my current Beyond Budgeting role!)

Those early days probably laid the foundation for Statoil’s strong innovation culture. The company is recognised for a range of different technology achievements, including subsea production, increased reserve recovery, offshore CO2 storage etc. Innovation did however not stop with technology. The company has also long been recognised as a frontrunner in management innovation, in exploring news ways of leading and managing in knowledge organisations operating in dynamic and uncertain business environments. A major step was taken in 2005, when the company abolished traditional budgets in favour of “Ambition to Actionis a management model heavily inspired by the Beyond Budgeting philosophy of autonomy, trust and transparency. In 2010 the performance process became even more dynamic when the calendar year was abolished where possible in favour of a more business- and event-driven rhythm.

Strategy, Finance and HR worked closely together during all these years to secure a performance process that was running seamlessly through all three areas. The need for Finance/HR cooperation will be the subject for another blog in this series.

Team, transparency and dynamics have for years been important elements in Ambition to Action. The HR process has evolved in the same direction, with a major step taken in 2017. The new People@Statoil process is much more dynamic. Goals are set and adjusted when needed, and can be shared. Feedback will be continuous and more peer-oriented, with a much stronger forward-looking development focus, building on peoples’ strengths. There will be no deadlines. The annual salary review will be even more assessment based, with performance being one of several drivers only.

Along the way, the label “Performance Management” was also challenged, due to its illusions of control and rather negative tone (“If we don’t manage performance there will be no performance”). 2017 saw the launch of a heavily revised and improved Statoil Book. This is our most important document, a little booklet spelling out what we believe in and how we work. The Statoil Book has a Performance Framework chapter, where Ambition to Action and People@Statoil is described. It talks a lot about enabling and developing performance, but Performance Management is gone. Finally!

Another important step has also just been taken on risk management. Statoil has long been a leading company also within Enterprise Risk Management. The process was however quite separate from business management taking place in Ambition to Action, with separate action databases, for instance. From 2018, Risk has been combined with Ambition to Action, all maintained in the same system, with integrated action management and a lot of other great new functionality.

In 2017 also saw the opening of another step in our journey. For years, target setting has been an important part of Ambition to Action. Since abolishing traditional budgets in 2005, a lot of effort was put into setting better targets. This resulted, for instance, in abandoning many absolute targets in favour of relative ones, on for instance corporate value creation, profit, production unit cost and reserve replacement KPIs. 

What is now on the table is an emerging discussion about having no targets. Targets can be highly problematic, especially those coming from above (as discussed in this article). We have therefore been encouraging the organisation to also use KPIs without targets, where these simply measure that we are moving in the right direction. Norwegian readers will understand the difference between målstyring and målestyring. We are however not yet looking at completely abolishing targets, like some others have done.

This discussion is a great example of Beyond Budgeting implementation being a journey and not a project, where the direction is clearer than the destination, if there is one.  We all get braver along the way. What is scary today will often be obvious tomorrow!

The article was first published in Prevero Blog