BBRT - Beyond Budgeting Roundtable

Introduction

How do business leaders respond to the case and vision for change? What mental models do they use to base their actions upon? One of the world’s experts in corporate culture, MIT Professor, Edgar Schein, believes that the answer lies in removing mental blockages. “Changing something”, he says, “implies not just learning something new but unlearning something that is already there and possibly in the way.

What most learning theories and models overlook are the dynamics of unlearning, of overcoming resistance to change. They assume that if you can just get a clear enough vision of a positive future, this is motivation enough to get new learning started.

"Whosoever desires constant success must change his (or her) conduct with the times" - Nicolo Machiavelli

Alternative management models

Command and Control model

The command and control mental model is pervasive in business today. It represents the greatest barrier to change. Command and control leaders invariably see the organization as an obedient machine comprising of replaceable parts (the parts determine the performance of the whole). This mental model (see above left) also assumes that organizations comprise of ‘cause-and-effect’ relationships that are predictable. It takes managers down a pathway of central planning, coordination and control (Theory X management). And it assumes that change is reactive, often involving extensive restructuring and reorganizing of the organization’s parts. This has been the standard model for hundreds of years. It descends from Newtonian physics (clock-like mechanisms and cause-and-effect linkages), from the work of Frederick Taylor, and from military and church command and control management models.

Beyond Budgeting model

The beyond budgeting mental model does not assume that the corporate center knows best. Nor does it assume that the organization is like a machine with a driver in control. Rather it assumes that the organization is more like an adaptive system within which performance improvement comes not from fixing the parts but from connecting and combining all processes seamlessly to serve and satisfy (internal and external) customers. It assumes that it is not the individual parts, but the whole system that determines performance. It assumes that organizations, like systems in nature, are capable of self-organization and self–regulation. Instead of seeing ‘hard-wired’ organization charts, they see ‘soft-wired’ webs of relationships that are unpredictable but, within a supportive cultural (Theory Y) climate, are capable of producing ideas for process improvement and innovative products, services and business models. In other words, innovation is not an administrative function but a social, emergent process. And it assumes that change is integral and adaptive as the organization constantly reshapes and renews itself in response to changing events.

This mental model dramatically changes how leaders implement the beyond budgeting vision. For example:

• To build an ethical and transparent organization they will govern through inviolate values, guiding principles and transparent information.
• To build an open and stimulating workplace that encourages creativity they will trust people with the freedom and capability to create and decide.
• To respond rapidly to customer needs and unpredicted events they will build processes that enable people to learn and adapt.
• To reduce waste in all processes and projects and encourage more experimentation they will enable resources to follow the best opportunities and eliminate waste.
• To beat peers consistently and sustain profitable growth they will challenge teams to set aspirational goals but recognize and reward relative improvement.