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What is the vision for change?

We believe that by replacing the command and control model with a Beyond Budgeting alternative (that is, an Empowered and Adaptive Organization), leaders can, over time, overcome these problems. The achievement of this vision assumes that going Beyond Budgeting will lead to an organization that:

To become more empowered and adaptive, leaders need to rethink the “accountability map” (see figure 2). This means turning the traditional vertically shaped organization on its side to face the customer. This shape helps leaders to see more clearly where accountabilities should lie and how the information and reporting systems should flow. Rethinking team-based accountability is the platform for the Beyond Budgeting model.

Teams

Some leaders struggle with the idea that many small teams can actually cost less than a few large units. While economies of scale can look seductive on spreadsheets, creating many small teams leads to a more flexible and innovative organization that, with more accountability and less management, actually consumes fewer costs.

What do we mean by ‘teams’? In Beyond Budgeting organizations we believe there are three kinds of team (excluding ‘project’ teams that are usually temporary). The executive team is the C-level suite responsible for setting purpose, goals and strategic direction as well as challenging other units to maximize their performance. Support services teams (strategy, finance, human resources, marketing, supply chain management, design, production, logistics, sales and service teams, information technology and so forth) are responsible for serving and supporting value centers. Value centre teams are responsible for formulating strategy, investing capital and delivering value (or profit). They invariably have their own profit and loss accounts and are typically created around lines of business, brands/product groups, regions/countries and plants/branches.

The aim is to create as many value centre teams as possible by sub-dividing them and adding new ventures. They should be based round a clear market niche and have a distinctive customer value proposition. On the other hand, the aim is to reduce the numbers and size of support services centres. In other words, the aim is to have as many direct costs within value centres and as few indirect costs as possible.

 

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