The Happy Manifesto

Episode 10 – Beyond Budgeting, with Bjarte Bogsnes

Budgeting is time-consuming, can lead to quickly-outdated assumptions, and can stimulate unethical behaviours like resource hoarding. Beyond Budgeting is a management philosophy that challenges traditional management practices, specifically the budgeting process.

In this episode, Henry speaks with Bjarte Bogsnes about the problems with budgeting, and how some companies have broken free of the budgeting mindset. Bjarte is a senior advisor at the Norwegian company Statoil, now Equinor, and has been a key figure in developing and promoting the Beyond Budgeting philosophy.

Bjarte’s tip for a happier workplace

Follow the 12 Beyond Budgeting principles around governance and transparency, accountable teams, goals and rewards, and planning and controls.

Links

Transcript
Maureen:

Hi and welcome to this week's Happy Manifesto podcast.

Maureen:

My name name's Maureen Egbe.

Henry:

And I'm Henry Stewart.

Maureen:

I wanna find out more about a joyful strategy.

Maureen:

You know, how can we create more joy at work?

Maureen:

And before we do that, I wanna ask you, what is your favorite song?

Henry:

Well, of course they is happy.

Henry:

by fll, what's it called?

Maureen:

Pharrell, Pharrell Williams.

Henry:

Pharrell Williams, absolutely.

Henry:

I, I, I love that song.

Henry:

But the, my other favorite is KLF, Justified and Ancient, Last Train to Transcontinental.

Henry:

Those really, um, drive me

Maureen:

Oh, wow, I wouldn't have thought that.

Maureen:

Okay.

Maureen:

So unfortunate.

Maureen:

We, we've lost a, a great musical icon, Tina Turner.

Maureen:

And so at the moment, this moment in time, it's her great songs.

Maureen:

River Deep, mountain High, What's Love Got to Do With it?

Maureen:

So I've got a lot of Tina going on.

Maureen:

I normally don't have favorites, because that limits us.

Maureen:

I'm, I'm open to, to everything.

Maureen:

But yeah, Tina is that at the moment.

Maureen:

So the reason I asked you that question, Henry, is because when I walked into the office, there was some music playing, playing in the cafe.

Maureen:

And immediately I started singing along to the music.

Maureen:

And it's just one of those strategies, I think that it's about creating happy work spaces, you know, where you feel really good and you can relax and you know, that's a communal area.

Maureen:

So one strategy I would love to share is that create that happy workspace, introduce some music or something nice that people can connect to and feel good.

Henry:

what's given me joy at work, uh, just this week is I have sent my book off the copy editor.

Henry:

I've finally got it finished.

Henry:

This is, uh, Creating Joy at Work, 501+ Ideas for Creating a Happy Workplace.

Henry:

And it's gonna come back from the copy editing two weeks and then I'll hopefully get it published.

Maureen:

Fantastic.

Maureen:

Looking forward to Henry.

Maureen:

It's getting closer.

Henry:

it is.

Maureen:

And mine well, um, in terms of what's given me joy right now, it's my allotment.

Henry:

Ah,

Maureen:

So actually it's, the weather's changed.

Maureen:

You know, I've started planting my, um, my peas, my squashes and also, but I went to go and water them the other day.

Maureen:

And it looks like not just am I only enjoying what I've planted, so the slugs and the snails.

Maureen:

So fingers crossed that they may leave me something to harvest in a few weeks time.

Henry:

Excellent.

Henry:

Okay, so now we have Bjarte Bogsnes on Beyond Budgeting.

Henry:

So Bjarte, tell me what is Beyond Budgeting?

Bjarte:

Do you want the short or the long version?

Henry:

Give me a short one to start

Bjarte:

let me try the short one.

Bjarte:

Well, first of all, it is a somewhat misleading name because this is about so much more than budgets.

Bjarte:

It is about business agility and it is about really changing traditional management.

Bjarte:

But, uh, the name still ha makes sense in one way because if you want to change traditional management, you have to change what you find at the core of traditional management, namely the budgeting process and the budgeting mindset and the beliefs behind this stuff.

Bjarte:

Uh, namely number one, that you can't trust people.

Bjarte:

Number two, that, uh, the future is predictable and plantable.

Bjarte:

That is the main assumptions beyond additional management, which we are challenging in Beyond Budgeting.

Bjarte:

So if you really want to do something with, uh, with this, you have to also do something with the budgeting process and mindset, but you also have to do a lot of other, other stuff.

Henry:

So, so what's wrong with the budget?

Henry:

I mean, surely it is a way that you can let people, give people freedom where they can work within it.

Bjarte:

You know, that, uh, it's impossible to give a short answer on that one, but, uh, you know, it's a long list.

Bjarte:

But I mean, you know, it's, it's everything from, it's an extremely time consuming process, making budgets, following your bu budgets, uh, assumptions, quickly outdated.

Bjarte:

And this is a serious problem.

Bjarte:

It stimulates what I would call unethical behaviors, the low balling, the gaming, the sandbagging, the resource hoarding, the friends, the December spending.

Bjarte:

I mean, these are not behaviors that we would like to see between colleagues.

Bjarte:

And this is a serious problem.

Bjarte:

At the same time.

Bjarte:

I'm not blaming anyone for behaving like this because people are just responding to the system we have designed for them to operate in.

Bjarte:

So, uh, as you know, well, if we want to change behaviors, it's not about fixing people, it's about fixing systems, but the list is longer.

Bjarte:

I mean, you have, um, for instance, to define good performance as, uh, uh, hitting the budget numbers is a very narrow and mechanical language for that important question.

Bjarte:

And, um, uh, also this belief that it's a great way of managing cost.

Bjarte:

Well, I agree that a cost budget is a very effective ceiling on cost, but we tend to forget that it's just as effective as a floor in the sense that these budgets tend to be spent.

Bjarte:

And that last but not least, a problem that we'll probably come back to a bit later.

Bjarte:

I'll call it conflicting purposes.

Bjarte:

But, um, it's a problem that's quite interesting because it's not too many have it on their list, but it, and it's a problem, but also it present a solution, which I can come back to afterwards.

Bjarte:

But again, it is a long list.

Bjarte:

And the interesting thing is that I've been sharing this list of problems with.

Bjarte:

Hundreds of thousands of people around the world in the 25 years have been working with this.

Bjarte:

And most people out there agree.

Bjarte:

Executives, managers, finance people, they all complain and at the same time, they continue doing stuff, stuff that they admit is quite stupid.

Bjarte:

And, um, one reason could be that these problems are regarded more as irritating, itches and not symptoms of a deeper and bigger and more systemic problem, which is exactly what they are.

Bjarte:

Because, and this is quite fascinating because here we are looking at, first of all, quite old management technology.

Bjarte:

Budgeting as a technique is actually a hundred years old, invented by Mr.

Bjarte:

James o McKinsey.

Henry:

Oh, really?

Bjarte:

Yes.

Bjarte:

And uh, you know, I, I never met Mr.

Bjarte:

McKinsey, but I don't think he was an evil man.

Bjarte:

I think Mr.

Bjarte:

McKinsey, he had the best of intentions back then.

Bjarte:

This was management innovation a hundred years ago, and the purpose was to help organizations perform better.

Bjarte:

And I'm sure it worked hundred years ago, maybe even 50 years ago, but no longer today because things have changed.

Bjarte:

And today this way of thinking, this way of leading, this way of managing is doing exactly the opposite.

Bjarte:

It has become more of a barrier than a support for, for getting out the best possible, uh, uh, performance in organizations.

Bjarte:

And it is definitely not creating happy workplaces on the

Henry:

No.

Henry:

No, it's not.

Henry:

Um, so what's the alternative?

Bjarte:

Well Beyond Budgeting has tested, proven ways of, uh, doing this in more, uh, adaptive and more human ways.

Bjarte:

And, um, we have 12 principles in Beyond Budgeting, covering both leadership and management processes.

Bjarte:

And the reason for that is that we need a coherence between what is preached on leadership and what is practiced through management processes in companies.

Bjarte:

That is very often, uh, not the case.

Bjarte:

So we have for instance, uh, a leadership principle on autonomy.

Bjarte:

Not that unique.

Bjarte:

Many others would say the same.

Bjarte:

Many others haven't thought much about what kind of management processes do you need to activate that, that principle.

Bjarte:

And a classical example of the opposite that you find in so many organizations.

Bjarte:

I mean, they, they talk loud and warm about, um, how fantastic employees we have on board, and we would be nothing without you.

Bjarte:

And we trust you so much.

Bjarte:

But not that much.

Bjarte:

Of course, we need detailed travel budgets, right?

Bjarte:

I mean, it's hypocrisy as one example.

Bjarte:

So creating this coherency between what is said and what is done is, is key in Beyond Budgeting.

Bjarte:

But we also know that the totality of these principles, on the leadership side, we also talk about purpose, values, transparency and, and so on.

Bjarte:

The totality of this might be a bit overwhelming for some people.

Bjarte:

And I get that, uh, if that is the case, we have a very logical, tested and, uh, kind of not, not a scary way of getting started.

Bjarte:

And it has to do with asking ourselves a very simple question.

Bjarte:

Why do we budget?

Bjarte:

What's the purpose of a budget?

Bjarte:

And that, that goes back to that conflicting purposes problem I mentioned because most people would actually give you three different reasons why they make budgets.

Bjarte:

And now we need to think about budgets wider than just cost budgets.

Bjarte:

We're talking about profit and loss budgets.

Bjarte:

Um, cashflow budgets.

Bjarte:

They cannot balance sheet the full, the full monty.

Bjarte:

And the three reasons are the following.

Bjarte:

Companies use budgets to set targets, financial targets, set targets, production targets.

Bjarte:

At the same time, these budgets shall be a kind of forecast of what next year could look like in terms of yeah, profit loss, cashflow, and so on.

Bjarte:

So forecasting is the second purpose.

Bjarte:

And the third purpose is of course, resource allocation.

Bjarte:

Handing out bags of money to the organization on, uh, operating cost and on investments.

Bjarte:

And it might seem very efficient to solve all three.

Bjarte:

In one process and one set of numbers, which a budget does.

Bjarte:

But that is also the problem.

Bjarte:

And let me explain why.

Bjarte:

Let's assume that we are moving into a budget process and, uh, upstairs corporate finance, they want to understand next year's profit loss.

Bjarte:

They start on their revenue side and ask responsible people, so what's your best number for next year?

Bjarte:

Everybody knows that what I'm now sending upstairs will come back to me as a target for next year, often with a bonus attached to it.

Bjarte:

And we know what that insight might do to the level of numbers submitted.

Bjarte:

Moving to the cost side, asking the same people, other people, what's, what are your best numbers for next year?

Bjarte:

Everybody knows that this is my only shot at getting access to resources for next year, right?

Bjarte:

And some might also remember that 20% cut from last year.

Bjarte:

And that insight and that memory might also do something to the level of numbers submitted.

Bjarte:

And, um, I think you know what I'm talking about, and this is the gaming that we wouldn't like to see, right?

Bjarte:

The, the low balling and the sound bagging and the, yeah.

Bjarte:

And this is a problem not just because it destroys the quality of numbers, but even more because it stimulus this behavior I just talked about.

Bjarte:

So listen, that's the bad news.

Bjarte:

The good news is that there is a very simple solution because we, we can, and in most cases, should still do these three things, but in three different processes.

Bjarte:

Because these are different things.

Bjarte:

A target that is an aspiration is what we want to happen, while a forecast that is an expectation.

Bjarte:

It's what we think will happen whether we like what you see or not.

Bjarte:

And resource allocation that is about.

Bjarte:

Optimization of what is often scarce resources, namely money.

Bjarte:

And once you have separated, then you can start to improve each one in ways impossible when it was all bundled in one process and one set of numbers.

Bjarte:

So we can have great discussions around targets to the extent we shall have them, that's a separate discussion.

Bjarte:

But if we have targets, how can we operate with targets that really inspire and stretch people without feeling stretched, that people take ownership to?

Bjarte:

That people think are meaningful?

Bjarte:

How can we get the politics and the gaming out of forecasting so that we know we can trust the numbers, and how can we find more intelligent and effective ways of managing cost than what Mr.

Bjarte:

McKinsey could offer us a hundred years to go?

Bjarte:

And we have very good and tested recommendations on all these three, uh, target setting, forecasting, resource allocation.

Bjarte:

And once you have done that separation, moving into discussions around targets, what really motivates people Well, that is a, a vector into bigger, beyond budgeting discussions, right?

Bjarte:

About, about motivation.

Bjarte:

Resource allocation, um, well, do we need detailed travel budgets if we say we trust people, right?

Bjarte:

So that's a backdoor into the trust issue.

Bjarte:

So this is not just a, a safe and tested way of getting started, but it also, um, it takes you in, um, in also a safe way into bigger and more important, uh, discussions.

Henry:

Okay.

Henry:

So give, give us some examples.

Henry:

You know, you used to work for Norwegian company Statoil who I think are now Equinor.

Henry:

How did you go Beyond Budgeting in that company?

Bjarte:

Well, first of all, we started off quite a long time ago.

Bjarte:

We're talking 2005.

Bjarte:

Um, and I was he heading off that initiative and, one example, uh, target that thing, Equinor has no, hasn't had traditional financial targets for a long time.

Bjarte:

Instead the company is inspired by football.

Bjarte:

You know, I have, I have yet to meet the football team saying that the ambition for next season is to score 39 goals and get 42 points, right?

Bjarte:

They don't think like that, right?

Bjarte:

Um, those are budget goals and, and, and that would be stupid.

Bjarte:

Um, they think in terms of league tables, right?

Bjarte:

It's all about doing well against peers and hope, hopefully beating them all.

Bjarte:

And that's so Equinor is thinking.

Bjarte:

They have established a league table of 11 other energy companies and the target is to be above average on the, got two financial metrics here, uh, on both every year.

Bjarte:

The two metrics are are not that unique.

Bjarte:

We are talking about return on capital and shareholder return.

Bjarte:

Those metrics have their issues, but the point is that the company is thinking in relative terms.

Bjarte:

And there are many benefits with these kind of targets.

Bjarte:

First of all, they are very robust against a VUCA world.

Bjarte:

It doesn't matter if energy prices are high or low.

Bjarte:

Are they high?

Bjarte:

They are high for everybody.

Bjarte:

Are they low?

Bjarte:

They are low for everybody.

Bjarte:

And um, these are also, what we call evergreen targets.

Bjarte:

The company has had the same targets for, for now, uh, yeah, all the way back till 2005.

Bjarte:

You don't need a big calculation and negotiation every year.

Bjarte:

Uh, so very self-regulating.

Bjarte:

And you, you can also apply these targets internally.

Bjarte:

Between units in a kind of friendly competition, which is more focused on learning than on competition.

Bjarte:

But it is a great way of stimulating learning so that you those struggling know who to call to ask for help.

Henry:

so do they have any budgets at at Equinor?

Bjarte:

Well, in a way, it's a semantic question because the company still does what the budget try to do for them.

Bjarte:

But because they've separated, they do each of these three things in so much better ways, which ways that solves all of these budget problems we talked about.

Bjarte:

So on, they do forecasting, uh, much more continuous dynamic forecasting where, where things are updated when there's a need to do it, instead of saying that, no, it's January one, so you have to update your forecast.

Bjarte:

So kind of getting out the calendar rhythm here.

Bjarte:

And then finally on resource allocation, again, a much more continuous, um, allocation of resources.

Bjarte:

I mean, one example, Equinor does not have a traditional annual investment project where you sit in the autumn and decide everything exactly how much to invest, split exactly on this projects.

Bjarte:

And this is a project, this is a company that invests a lot between 10 and 15 billion US dollars a year.

Bjarte:

So we are taking a lot of money, but no traditional investment budget.

Bjarte:

Instead, there is inspiration from how we think about money in our private life, because there's a lot to learn of frugality and cross consciousness from how we think in our private life.

Bjarte:

In our private lab, we don't sit down once a year in the autumn and decide that the plan, everything and decide that the car will break down in April.

Bjarte:

Right?

Bjarte:

And, and, and if it does well, we have to tighten a little bit.

Bjarte:

And if, if we win some monument lottery, there was room for some more.

Bjarte:

We are actually quite dynamic and flexible.

Bjarte:

And imagine, you know, that car breaking down, imagine it's so serious that you have to buy a new car.

Bjarte:

And you're going to the bank and, uh, you are asking for, uh, a loan to buy a new car.

Bjarte:

And the bank is politely telling you that, sorry, this is April, we are closed.

Bjarte:

We are only open for lending in October right?

Bjarte:

And of course we laugh, but that is what the budget process is about.

Bjarte:

So back to Equinor, um, what the company says is that the bank is always open.

Bjarte:

So anyone, anyone can forward a project for approval at any time.

Bjarte:

How high up you need to go is regulated by a mandate structure to make sure that not everything is ending up upstairs.

Bjarte:

And whether you get a yes or no depends on two things.

Bjarte:

How good is your project?

Bjarte:

And can we afford it as things looks today?

Henry:

And within that project that they're talking about, will there be a budget or not?

Bjarte:

No, I mean it's, it's, uh, there are no traditional.

Bjarte:

Budgets.

Bjarte:

I mean, a unit, a unit might have a unit cost target, which means that they can, they can spend more, if they produce more.

Bjarte:

There might be a benchmark unit cost.

Bjarte:

So, uh, your unit cost should be, uh, uh, competitive, uh, compared to peers.

Bjarte:

There might be an, in some cases an overall burn rate guiding, which is not a budget.

Bjarte:

Um, there is a number right in the range ratio 1 million, ten, hundred, but that is not the pre allocation of money.

Bjarte:

That is meant to help you so that you are not completely in the dark about what kind of activity level is expected for you, expressed in monetary terms until something else is decided.

Bjarte:

Because that's actually one of the problems with a traditional cost budget, you are pre too much, right?

Bjarte:

Everything is pre-allocated in the autumn.

Bjarte:

The more you pre, the more you have to reallocate when things change.

Bjarte:

I mean, creating additional bureaucracy and, and, and waste of time.

Henry:

so at Happy we, uh, we are, we're a training company.

Henry:

And what we don't do is fix a fixed amount of how many associate trainers will have.

Henry:

What we do do is we look at the income and then say, 35% of that will be, will be what we spend on trainers.

Henry:

Um, is that, is that an example of beyond budgeting?

Bjarte:

Absolutely, because that also is also a relative way of think thinking, not in the football sense, but in connecting what we call input with outputs, right?

Bjarte:

So you can, you can train more if you earn more and vice versa.

Bjarte:

So it's a much more intelligent and, and effective ways of, of way of thinking and cost management than what a traditional budget would, uh, would spell out.

Bjarte:

Because in that traditional budget, You would've decided in detail how much to spend on training for next year, right?

Bjarte:

And not just the total, but split on catering and, uh, uh, fees and, and lot of details, right?

Bjarte:

So, um, it's about making decisions too early and too detailed.

Bjarte:

That is what the traditional cost budget is.

Henry:

Okay.

Henry:

And the other big company that uses it is Handelsbanken, isn't it?

Bjarte:

So Handelsbanken is, uh, is a Swedish bank with, uh, around 700 branches in Northern Europe, quite big in the UK.

Bjarte:

It was, there was a time when it was the fastest moving bank in the UK.

Bjarte:

And it's absolutely, it's a brilliant company for many, several reasons.

Bjarte:

Um, one, one reason is that the company has, no budgets, no targets, no individual bonus, and they hardly do any forecasting.

Bjarte:

Well, that's interesting.

Bjarte:

But there was more, this company has been operating like this since 1970.

Bjarte:

That's also interesting.

Bjarte:

But there was more.

Bjarte:

In that period, the company has been performing better than the average of its competitors every single year since 1972, right?

Bjarte:

What's the strategy behind this?

Bjarte:

Well, a very simple strategy.

Bjarte:

They have said that we want to, uh, perform better than peers by having a higher customer satisfaction and lower cost than, than peers.

Bjarte:

Well, how, how do they deliver on that strategy?

Bjarte:

Well, then you are back to Beyond Budgeting.

Bjarte:

It is about a lot of autonomy to branches, right?

Bjarte:

Where, where almost all decisions are, are made.

Bjarte:

So these, these branches do not have traditional cost budgets.

Bjarte:

They know best what the right cost level is.

Bjarte:

They know best how to serve customers well.

Bjarte:

So a lot of autonomy combined with a lot of transparency.

Bjarte:

Because they do use leak tables, not just to compare the bank versus other banks, but also internally to compare branches.

Bjarte:

So every month, Any branch can see, how am I doing on this metric?

Bjarte:

Financial, non-financial versus comparable branches.

Bjarte:

And if you are struggling on a financial metric, there will be no instructions from above that now you need to cut cost and do this and do that.

Bjarte:

The only message from above would be that we note that you have a problem.

Bjarte:

But it's your problem.

Bjarte:

You are closest to that problem.

Bjarte:

You know best what the right medicine is, and your medicine cupboard contains most of what is needed.

Bjarte:

Is this about, uh, manning levels, local decision?

Bjarte:

Is this about salary levels, local decision outside the degraded area, and so on and so on?

Bjarte:

So a lot of autonomy.

Bjarte:

So in a way it's a tough system, but this is just half the story because they also want to use this transparency around internal leak tables to get struggling branches, to call better performing branches.

Bjarte:

Hey guys, what are you doing on since you are so much better on this metric compared to us?

Bjarte:

But they are not saints working in this bank, right?

Bjarte:

They are humans like you and me.

Bjarte:

So if you are a, if you're a great performing branch, why on earth should you help somebody that might start to climb and one day threaten your number one spot, right?

Bjarte:

So why should you help somebody else?

Bjarte:

In order to make that happen or to stimulate, uh, that they have said no individual bonus.

Bjarte:

Instead, all bonus is driven by how is the bank doing versus other banks.

Bjarte:

That gives everybody a reason to pick up that phone, um, and say, yes, let's have a meeting, uh, I want to help you.

Bjarte:

And I know that when some listeners now will smile and say that this is some kind of naive blue-eyed Scandinavian management thinking that doesn't work in the real world.

Bjarte:

Well this is exactly what Handelsbanken is doing in the UK as well, which is quite different from Scandinavia when it comes to these issues.

Bjarte:

So they have applied this, uh, across the board and, uh, again, they have done extremely well.

Bjarte:

And in the UK when they, open a new branch looking for a branch manager, they always pick branch managers from competition.

Bjarte:

Swedish experts too, too expensive.

Bjarte:

Cost is important.

Bjarte:

And they have no problem whatsoever with recruiting people from branch managers from other competitors, even if they don't have individual bonus, because in totality, this bank is still.

Bjarte:

Competitive, right?

Bjarte:

As a branch, these branch managers are allowed to be branch managers, right?

Bjarte:

They have a very different autonomy, um, than, than their, in, in, in the, in the other banks.

Bjarte:

So, uh, yeah, again, it's a, it's a very fascinating, uh, bank and one of the, not the only, but one of the kind of inspirations for the Beyond Budgeting, uh, model.

Henry:

it's interesting cause a lot of UK uh, listeners probably won't be aware of it cuz uh, but they are actually an awful lot of branches in Britain, aren't they?

Bjarte:

And, and you know, they're not just doing well in financial terms.

Bjarte:

I saw a benchmarking on customer satisfaction, uh, in between, uh, UK ban banks, and it was amazing.

Bjarte:

You had hunters bunking up here, and then you had all the other banks clustered well below them.

Bjarte:

It, it was kind of, uh, almost too good to be true, but it is true.

Bjarte:

And anyway, it goes back to the management model, which, um, as the Jan Wallander, the, the kind of the CEO back then that, um, initiated all of this.

Bjarte:

He said, this is about organizing your management model in line with human nature and not against human nature.

Henry:

And so, so indiv individual bonuses are not a thing in Beyond Budgeting?

Bjarte:

No, I mean we are very critical, uh, for good reasons.

Bjarte:

And I can hardly think of any area where there's a bigger gap between what most research is telling us and what most organizations and businesses are practicing.

Bjarte:

It's simply amazing.

Bjarte:

We have the knowledge, we have the research, and then these, uh, business managers still believes that the answer is to dangle carrots in front of people's nurses and say, do this and get that.

Bjarte:

I mean, I, I call it managerial laziness.

Bjarte:

It is so much easier than to take the longer leadership route through mastery, purpose, autonomy, and belonging, um, to help people motivate themselves than to dangle that, that, that bag of carrot.

Bjarte:

So, so again, our recommendation is some kind of common bonus scheme.

Bjarte:

For instance, the one that Handelsbanken has because that is again, about a common scheme.

Bjarte:

How Handelsbanken is doing versus other banks.

Bjarte:

And also that common scheme is interesting for, it's quite different from many other common schemes because it's the same amount to everybody,

Henry:

Oh, the same amount?

Henry:

Not the

Bjarte:

Same amount, no, amount.

Bjarte:

So who has the lowest percentage bonus in that bank?

Henry:

The, the chief exec

Bjarte:

Yes.

Bjarte:

Isn't that What sounds crazy?

Bjarte:

Or maybe not because I mean, if we for a minute kind of, um, uh, disregard all the research and if we say that, oh yes, you need individual boners to motivate and, and so on.

Bjarte:

How come the guy at the top needs the biggest dose of that motivation medicine?

Bjarte:

I actually thought that's where you find some of the most interesting jobs in companies.

Bjarte:

But, um, you know, there is so much that I don't understand.

Henry:

Okay.

Henry:

And tell us, could this work in the public sector?

Bjarte:

The answer is yes.

Bjarte:

And I've actually, I have a new book out and I have, uh, written about this.

Bjarte:

And I would argue that the, beyond budgeting, sorry, the, the public sector, Beyond budgeting is not just, uh, as relevant for that sector as it is for the private sector.

Bjarte:

The public sector also needs this just as much.

Bjarte:

All the problems we talked about are just as relevant, um, in this sector.

Bjarte:

And of course, the, the belief is that, uh, no, it can't be done because I'm giving this, I'm giving this big bag of money once a year from the authorities above, so I'm stuck.

Bjarte:

But first of all, beyond budgeting is about much more than cost budget.

Bjarte:

But on cost management, I mean, even if you are given as a head of that public sector unit, if you're given a bag of money from above once a year, why do you need to turn around on January one and split that big bag into a million small bags and hand it out to the kind of tiniest box on the organization chart and kind of look everybody in and lose our flexibility?

Bjarte:

So if you're given that bag of money, well treat it as a constraint.

Bjarte:

Just like in a private life, you know roughly what your salary level is, and you're optimizing continuously within that.

Bjarte:

That can also be done in the public sector.

Bjarte:

And these days we have proof.

Bjarte:

From the Norwegian public sector, we have an um, organization called, uh, NAV, Nav, which uh, is our kind of social services unit, quite big.

Bjarte:

And they have 12, what they called client contact centers, uh, across the country.

Bjarte:

And in they did a very interesting experiment.

Bjarte:

In two of the 12 centers.

Bjarte:

The message was that there is no cost budget.

Bjarte:

You guys just spend what is needed to do a good job and not more.

Bjarte:

And when 2020 was over, we could look at the results.

Bjarte:

And um, this was of course the first year of the pandemic, right?

Bjarte:

So all units had lower external cost, for instance, travel costs.

Bjarte:

But none of the units had higher cost reductions than these two pilots, minus 50% in both.

Bjarte:

So from 2021, the pilot was extended and from expanded from two to six, and from 2022, all 12 are running without the traditional cost budget.

Bjarte:

If you want to recruit people, you still needed an approval from above.

Bjarte:

Uh, but there's no kind of traditional personnel budget.

Bjarte:

So, uh, yes, it's, it is a proof.

Bjarte:

It works with great results.

Henry:

Wow.

Henry:

And that book is called, this is Beyond Budgeting, isn't it?

Bjarte:

Yeah, that's right.

Bjarte:

This is beyond budgeting, a guide to more, uh, adaptive and Human Organizations.

Bjarte:

And, uh, it is a shorter book than my previous ones.

Bjarte:

Um, written for busy people with limited time to, to read because those are the ones we need to reach

Henry:

And you're also doing a real classroom course with Happy on 12th of July a full day on Beyond Budgeting.

Bjarte:

Yes, and I really look forward to that.

Henry:

I'm looking forward to it too.

Henry:

Absolutely.

Henry:

Um, okay.

Henry:

Finally, your three tips for a happy workplace.

Bjarte:

Well, first of all go beyond budgeting.

Bjarte:

I mean, people, uh, actually to be quite serious, I think it's all contained, uh, within the 12 Beyond Budgeting principles.

Bjarte:

Um, because people like to work for beyond budgeting, uh, organizations, uh, they are attractive as employers.

Bjarte:

And of course it is about autonomy.

Bjarte:

It is about trust.

Bjarte:

it is about changing work into more meaningful value, adding, uh, work.

Bjarte:

This changes work for executives, for finance people, for managers in a positive, uh, way.

Bjarte:

And I think one very important part here is the, that the credibility of leadership messages increases so much, when people realize that there is a new consistency between what is preached and what is practiced.

Bjarte:

That is good news for executives.

Bjarte:

It's good news for employees and everybody, everybody else.

Maureen:

I have to be honest, Henry budgets is not my, my

Henry:

Is it

Maureen:

at spending money.

Maureen:

No, I'm good at spending money.

Maureen:

Budgeting is a challenge, but um, the content that Bjarte shared, I love that whole thing about changing behaviors.

Maureen:

That change of behaviors is about changing systems or not trying to fix people.

Henry:

Exactly, And I loved the real examples, the example from Statoil, the example from Handelsbanken, but especially the example from the Norwegian, uh, DWP.

Henry:

The fact that they, they did it in a pilot and then they spread it out across the whole organization.

Henry:

Could you imagine us doing it in DWP in the UK?

Maureen:

Wow.

Maureen:

It'll be a challenge, but why not?

Maureen:

Hey,

Henry:

Indeed.

Henry:

Why not?

Henry:

Let's do it.

Maureen:

That's it, you know?

Maureen:

Another thing was about organizing your management model in line with human nature and not against human nature.

Henry:

Yes.

Maureen:

So putting people at the heart of leadership.

Henry:

Absolutely.

Henry:

And we have, we have a session with him, don't we?

Maureen:

July 12th,

Henry:

July the 12th.

Henry:

Yes.

Henry:

so we've got a full day workshop with, with, uh, Bjarte Bogsnes, um, where you can explore all the ideas of, of Beyond Budgeting.

Maureen:

So again, if you want more information, check us out at thehappymanifesto.com And you could also listen back to other podcasts that we have done and leave messages.

Maureen:

We love find, we'd love to find out more about what you would like to listen to, what you'd like to hear, or have you got any questions.

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