Throughout the report there are numerous examples of organisations that have taken innovative approaches to planning and budgeting. In addition, there are in-depth case studies based on exhaustive interviews with those responsible for designing and implementing new processes and practices – some evolutionary and others radical.
Boston Scientific’s dissatisfaction with the annual budget came to a head at the turn of the Millennium. The pain of dealing with a dysfunctional process and its wasteful and demotivating consequences finally outweighed the daunting prospect of change. The company’s response was to adopt a quarterly budgeting process supported by a 12-month rolling forecast in 2000. Since then the company has enjoyed a period of excellent growth significantly supported by the greater precision with which it is now able to plan and target improvements. Company managers claim it has resulted in a better understanding of business drivers and gives senior managers a better conversation with the business unit leadership. How it renegotiated performance-based compensation and involved managers in this radical break with the past are some of the inside revelations contained in this case study.
Henkel was not prepared to abandon the budget. But it did want to find a far more responsive system. The company took the decision to develop a more responsive budgeting system based on a more streamlined, integrated approach across all divisions of the business. Aside from anything else, the company was concerned about the cost and manpower that the process was taking up. Its target plan breaks down annual goals into shorter-term and the process has been contracted from six to one iteration. Find out Henkel achieved the combined benefits of lower costs, faster planning and budget cycles and improved output quality.
Herman Miller concluded that its reliance on traditional planning and budget methods was simply not delivering the kind of results the company wanted. Its search for an alternative led the leading furniture maker to Economic Value Added, EVA. At the same time, the company moved to a quarterly planning process and linked compensation to EVA performance. Find out how the company made these dramatic changes in their processes and the challenges this raised through a corporate-wide programme of employee involvement and the new role of the budget under this new regime.
Nordea, the financial services company, pioneered an Integrated Planning and Performance Management Model. At the core of the new model is a balanced scorecard, quarterly rolling financial forecasts and services level agreements. The case study explains the reasons why Nordea abandoned the traditional annual budget and how the new planning and performance management model provides the basis for management to control and run the business, as well as a means for linking rewards to performance through the balanced scorecard. There are also lessons: including the importance of distributed ownership of the process as well as cultural conditions where people are prepared to take on a new level of responsibility for performance.
Scottish Enterprise determined to escape the limitations of the annual performance contract that was tied to the annual budget. It was too restrictive and constraining. With support from the CEO, the organisation developed a new approach, embodying many of the principles developed by the Beyond Budgeting Round Table group. This case study explores the ways in which the company developed its own solutions to planning, forecasting and control, as well as the results of this transformation. It includes insights into the steps Scottish Enterprise took to ensure that everyone from the board to front-line managers bought in to this new way of working.
The global engineering group has abandoned the budget in favour of year-on-year improvement targets based on a 10-10-10 formula: 10 per cent revenue growth, 10 per cent sales growth and 10 per cent ROI. This has been implemented with a range of processes and practices that represent a simpler, more straightforward approach to planning and resource allocation. Using a business excellence framework, the company tracks two sets of measures:
UBS Global Wealth Management and Business Banking
UBS Global Wealth Management and Business Banking is another organisation that has abandoned the traditional budgeting process. Culturally, it saw the traditional annual budget as being at odds with its vision of developing an entrepreneurial business. In its place, the bank introduced rolling financial forecasts supporting a five-year strategic plan. This case study looks at the issues raised by this new approach: the challenges to find a workable incentive/compensation scheme, the implications for individual responsibilities and accountabilities, empowerment and leadership. It also reflects on the benefits of taking this major step.