 Welcome to the Agile People FICAcast. We talk about how to navigate with agility in our organizations. Today we were supposed to talk about how finance can enable agile organization. And Ingla, you said that yeah, I just met beyond budgeting. And so you're a bit enlightened in the subject. So maybe you have something fun to share or something thoughtful to share in this subject. Yeah, yeah. Yeah, Martin and I, we attended a morning seminar with Richard Olsson from Beyond Budgeting. And Richard is actually a very good presenter of the subject. And he also has a strong financial background, so it's really interesting to listen to him, I think. But what he kind of started with today is a little bit like, you know, in our trainings we draw back to the why organizations are organized as according to Taylorism and that the world had changed and that. And it's also the case within the finance world. So he told about the story about why we started doing budgets. And it's really going back to UK and their history there, but also the first book on budget, it was written by a guy called Mackinsey. And I think we all know the Mackinsey name today. But that he really wrote this book to get. And he did that in 1923, which is 100 years ago. And at that time you had very many stable issues in like stable currencies. You had local production. You didn't have a global market. There are really long product cycles. The amount and supply. Yeah, and everything you produced, you kind of managed to sale. So it's really very different circumstances, but we still have the budget today. And then we started to talk about the limitation with the annual budgets. And also interesting that in his book Mackinsey pointed at two things. Why you should consider what you are doing with the budgets. And he said the need for consideration and the important on limitations. And he kind of in these two short sentences in the in the later part of the book, he kind of describes what's actually happening on the market today and why budget doesn't really work, but we still continue doing it. Yeah, we're using a tool that was developed for a situation that is no longer applicable today. So what's what is the comfort that the budget is giving us so we still continue with it. Tradition, traditional feeling of control. I would like to emphasize feeling of control. So what did Richard say, what should we do instead? There was one interesting thing and I on. He said, okay, we have agile or agile transformations. And they are sort of methods or tools or approaches. But if you put them in operating system, a fight financial operating system that is not suited for that type of behavior. It will fail. More or less, you need to adapt operating system of the financial structures in order for it to be enabled to succeed. Could be right. I, my first reflection is, okay, I'm not the financial focus person. I don't come from that space. So what, how would I look at it from my point of view, I would not look at it from as an operational system, but the person from a financial sector, of course, they use their perspective as the. Operational system, I think of it as people as being the operational system. And then we put them into a system. So it's a matter of perspective, I guess, but it was an interesting help for me to reflect on how can yeah. Isn't that something that will break or make regardless of if it's an operational system or if it's something else. Yeah, isn't that one part of the problem, because if you have been in a in a large organization that is super budget driven. You feel more like a number than a person. And when adjustments according to budget needs to happen. It's, it's more or less like they play a set of cards and remove some of the cards more or less. And that card is a seven that's, that's nice to somewhere else. So you lose a bit the people side of the system. Yeah, and that is also connected to what you were talking about the ring and the old operational system. Then if you continue to use that analogy. The old operation system is tuned to efficiency. To make things efficient to make sure that we have throughput and in an efficient way follow processes and structures. But in a volatile environment where we are right now. That is not what we want. We want to affect effectiveness. Want to do the right thing, not in the right way. Or follow the process, so to speak, and a budget sort of blocks us from. From doing that, then you need other types of approaches to handle financial. Systems and he also presented a few ways to handle that and order them in a good way. That was interesting also to see. I'm looking forward. I would like to attend this course that we have soon. I think I can learn a lot. I think that the key I was speaking in the wrong microphone previously so I said simultaneously. Martin that it's down to feeling that we are in control and that's why it feels good to have a budget and so on. And isn't it the same way when it comes to not keeping our eyes open to that we are in complexity. We think we can plan things in projects and then we can have budgets for projects. There are still kind of control mechanisms for feeling even more secure even though we somewhere no one realized that we never really turns out as we think it does. We end up in some kind of chaos with delays and task forces and so on. So I think it's the strength of it that it provides control and feeling of control but it's a false feeling. You still need it to some extent. You need to have some sort of forecast. You need to understand how much money you have but you need to be flexible. I guess I died. The money where they are needed now based on the situation at hand so you need to be adaptive. And if you create budgets you're not flexible anymore because you're sort of boxing the money where there's where you think that they will be needed. And you're forecasting that for 18 months before it actually is needed maybe. I can see that the old system of having a budget it also puts on a lot of control in order to function. And when I have tried to or when I have been coaching people to take away that control and give that control to the people to take bigger responsibility. That's a challenge also. Sometimes it's hard to get the people and the teams to take that responsibility and at the same time having the behavior of the budget holder to behave in a different way and to coach people in order to be able to feel empowered to take that budget. It's quite easy if you say we are three developers and we create this app and we get money from App Store. It's quite easy to take the whole responsibility of how much money do we have, how much can we spend, what's the investment of this feature we would like to build. But if it's a bigger system than that it's tough to make teams aware and also to dare to take that responsibility. I, it really depends how you do it because today, I know Beatte Boknes he gives this example from from a pharmaceutical company about traveling. Instead they removed all the travel policies, but they made it all transparent. So everyone could see how much you had spent. And then it's kind of, I don't know, in Swedish you would say self-justice, what is the English word? Self-regulated. Yeah, self-regulated. Where people act, they take the responsibility, they act responsible. And Richard also gave some examples of that today from when you make people aware of costs and that people are much more responsible when they get the responsibility. It really depends how you do it. But what I hear sometimes in many organizations is that managers say that they give responsibility, but in practice the systems doesn't go there. The system is not designed for them to take this responsibility. And it might be of historical and company culture. And I think that is what you highlighted, Daniel, and what you built on to English is one of the biggest transformational challenges. I think to move away from a system that is quite controlled and maybe boring and not that fun to work in, but it's quite convenient. So when moving in such an old-fashioned organization, you can feel that you can have lots of frustration on that system and you feel that you're not allowed to do things and so on. But then if you too quickly get that responsibility, then it's kind of difficult and it doesn't feel really good because how can you trust on me to take that decision? I think that just points at the journey that's needed. It is a transformation journey with all these things. We can't just move from day one to day two to different behaviors because the system doesn't allow it, the culture doesn't allow it. People are stuck in the old culture, for instance, and they need some guidance and some time to transform and transfer to the new way of working. It is more convenient the old system in some ways, frustrating and limiting, but kind of get used to it. So you need to understand and gradually be able to take the new kind of responsibility, I think. What do we do if people don't take the responsibility then? You need to give them all these possibilities to take it, but they don't dare to. You need to give them the foundation and enable them to be able to. You need to trust them to take it, but you of course need to make sure that it's possible for them to take it. Baby steps, small steps. So as I see it, you need to make this maybe a new type of leadership because they are used to punishment, maybe. So they dare. So you need maybe to implement a learning structure and talk about failures and these classic we have in software development, but it needs to be part of budget and money. So it hurts us more because it's actual money that we maybe have lost in a certain learning, but on the long term, it's a fantastic investment because it's a good learning. So that's a bit what I'm after. We also need to help them and to show that you're not punished and you can make mistakes even though it's direct money that it is about. Yeah, and for the leader as well to be vulnerable and saying that I have I have done mistakes as well in these from a financial perspective for instance so so I'm what what I don't have more information than you so so I'm not it doesn't make sense that I take those decisions and I have been in the past maybe and I've messed up so you should feel the trust for me that you can. You won't get punished because you're likely to make an even as good decision as I did, for instance. I also think it's about training because you know if you're going to take financial decisions you also need to have background to be able to take that. Of course, skill and skillset it's important, of course, but I was what I was what I'm on meaning to being enabled. We need to have a developer skillset and you need to have some person to interact with in order to take those steps by yourself does not just happen. Here's your your budget or whatever you call it. Go and play. You need some sort of framing of course. But when I talk starting to when I'm talking here I'm starting to think about the book humanocracy. It covers financial parts in it in itself in very different type of companies and I'm thinking especially at the end of that book. They are talking about Michelin is called Michelin tire company creating tires. I'm remembering I think I remember I don't it's been a long time I've read it but I think it was in in that they have an example of a transition from a very traditional type of company and manufacturing structures and ownership of different things on on a hierarchical and how they change the behavior and also in the financial area if I don't recall incorrectly, which I thought was very interesting because they they are explaining different challenges that happened through the way there because it's sort of a storytelling chapter. That's what's very interesting because there will of course be backlashes when you interact and change it's not yet you can just if it's an operating system. It's not super easy to change an operating system. It's sort of the base. So where do we start them in that book. He also describes a corporation called new car, which is still company. And I think that is a very good example to start. Yeah, they have grown into a large corporation, but they have built even if it's even if it's an all company. It was founded in 1940, I see. It's still very untraditional to if you compare to companies in that from the same. Yeah, very self deciding sections or manufacturing plants that are very and they're, yeah, it's a steel manufacturing company. And they have a very different type of salary approaches where it's more easily to compute, I guess, the feedback mechanism for for producing and improving things but they're very open and free to how to go into different type of initiatives. Anyone can start to think of, okay, how can we improve this furnace thing that melts all the metal so that we can start to be in a better way so and people can go out on business trips to other type of plants. It's much easier to actually act and do things, which makes them more resilient, I guess, to changes. So the words that I was missing from Richard also on stock, by the way, resilience, he did never talk about resilience. Start, what is the first thing you should stop them budgets. I don't think you can just stop doing budgets then. Okay, but we don't have fiscal budgets. You can have budgets that stretch through the time when they are needed of horizon of where we can see. Couldn't it be that we keep the budgets that we have but we start to iterate. We start to follow up the budgets more frequently and start new types of behaviors and how we talk around the budget and maybe we can start some adjust in a quarter or in a month or whatever it could be because we see new opportunities or new challenges or whatever it could be. Beyond budgeting, they talk about you need to because the budget really has three purposes, which is target setting forecasting and resource allocation. And you need to separate them into three different processes. So the target setting is really what we would like to happen. And, you know, we have talked a lot about separating that targets from payroll and so on. And then he covered that today also. Because I think most companies are very much driven by sales profit and loss. So when it comes to resources like a new onboarding employees on board it, they are not even willing to buy a new laptop but they give a very, very old laptop that been used for many years. So, and there is no willingness even like the employee complains the laptop is not working properly. The battery is draining but the answer that the person get is like we are very stringent on the budget so we don't have an allocation. So that's that's quite sad. That's the fact it's like because when we talk about finance, the company is surviving with projects when they get a new tender. That's where the revenue is coming in but if they like do not know how to manage it, then it's very difficult for the employees in that company. So how an organization can change the mentality. Yeah, it's a challenge. I can see that we are just touching the surface of this extremely big subject. I think we should dig into it, especially since we have the new training being launched in Business Agility Foundation. So I think we should talk more about this subject but the FICA for today is over. So now it's time to go back to what we are doing to fulfill our budgets at the moment where we are working. So thank you very much for today. Thank you. Thank you. Good day. Bye bye. Thank you. Bye bye.