 Thank you very much. I hope you do that. I'm finished as well, applaud. It's great to be back, and I've been really looking forward to this. The author Douglas Adams, he once wrote that, I may not have gone where I intended to go, but I think I ended up where I needed to be. And that is the story of my life. Because it was in no way given that I should be here with you today and talk about beyond budgeting, because my career started in a very different place. After graduating from business studies many years ago, I joined what is now Scandinavia's largest company. It's called Equinor, and my first management job in that company was head of the corporate budget department. So I've been heading off more budget processes in my life than I want to be reminded about. I have done a lot of stupid things in my life, but it also means that I know what I'm talking about. The words of Adams resonates with me for another reason, because I come from a teacher family. My mother, my father, my sister, all great teachers that had a big positive impact in many people's lives. I was the black sheep in the family because of my business studies. But right now, I actually feel I'm almost back in the fold, trying to do the same as they did. And by the way, I also married a teacher. She's right around the back, and if you see her, raise her hand. That is because I'm talking too fast, which I tend to do when I get excited about stuff, and I do get excited about beyond budgeting for good reasons. So what I want to share with you today is first the case for change, the problems with traditional management. And you might say, well, we know what these problems are, and we know the solution. Isn't that agile? Well, yes and no. And what I will say no is no criticism of agile. I'm a big fan. I'd have been that even before the agile manifesto was formulated. But I think that the initial success of agile had a lot to do with its birthplace in software development and how teams work. And what do you think executives in big organizations observed in these early years? They observed better projects, better outcomes, more engaged employees. Who can be against that? Hey, guys, I love agile. Keep up the good work. Then agile started to scale, and one day it had implications for executive beliefs and behaviors, and then it wasn't that fun anymore. Another reason scaling agile can be challenging is if you apply exactly the same tools and language that work so well in those early days. I mean, for an executive in a big company who are not that familiar with agile and don't pay rugby, scrum might sound like a skin disease. Sprint might think it's about running faster. Slack, that must be about laziness. And continuous delivery, that must be about 24-7. So we need a language in this scaling which executives can understand and relate to, and beyond budgeting has that language. They might still kind of challenge us, but they understand what we are talking about. And the last reason why scaling agile is challenging has to do with the fact that agile was not designed originally as the way to run an enterprise. So when you try to scale it, the holes in agile become visible. There are so many things that agile for good reasons didn't have a need to talk about, and that is what I will talk about today because beyond budgeting is filling the holes in agile so that you can get through agile transformations. Without beyond budgeting, no true agile transformation, I would argue, but I'm not entirely objective, I know. So I'm gonna talk about beyond budgeting, business agility, that is basically what this is about, the model itself, a few exciting cases, and then some tips about how to get started. So that's basically the outline for today. Every time I talk about beyond budgeting, there is one word that keeps coming up over and over again, and that word is control, and the context is of course the fear of losing control. When I hear people say this, right, then I often ask them, what do you mean with control? What are you so afraid of losing? And after people have said, cost control, many go quiet. They actually struggle with putting words defining what they are so afraid of losing, which is interesting. I checked up in Oxford Dictionary, how do they define control? And they call it the power to influence or direct people's behavior or the course of events. And what does this mean in organizational terms, business terms? Well, it basically means two things, controlling people and controlling the future. And behind these two lies the two main assumptions behind traditional management. Number one, you can't trust people. Number two, the future is predictable and planable, and none of those are true, and this is what we are challenging in beyond budgeting because these are illusions, grand illusions. Of course you can manage people, but if people have managed in stupid ways, they hopefully find a way in order to get their job done, and when it comes to the future, well, the only thing we know is that we don't know. Talking about trusting people, I've always traveled a lot, and the first thing I always check when I enter the hotel room at night is what kind of clothing hangers do they have? Because there are typically two types of clothing hangers that hotels offer us. It's the one at the top with a hook and the one without a hook. Fortunately, this hotel has hangers with a hook because I simply hate these at the bottom. It's just such a hassle to use to kind of fit it into that small hole and so on. So how come some hotels offer us those stupid kind of hangers? And you all know why, right? It is about a few stolen hangers with a hook, and what was the response? To punish everybody because somebody did something wrong. Actually one of the problems with traditional management. Why is people out there have definitely agreed with what I just have said when it comes to people? Good old Peter Drucker. Most of what we call management is about making it difficult for people to do their job. And I couldn't agree more because very often the problem is that we manage too much. And when it comes to planning the future, another wise guy, Russell Aikoff, he compared a lot of the planning he was observing in big companies. He compared it with the ritual rain dance. It has no effect on the weather, but those who engage in it think it does. And I can relate to this as well because I have done a lot of dancing in my life through all the budget processes I've been heading up. And the dancing was great, but I'm not sure it had a big impact on the performance of the organization. Okay, so much for wise people. Imagine an organization that 100 years ago invented a fantastic machine. It was state-of-the-art and key for the success of this organization. 50 years ago, this machine started to make some trouble, and today this machine is completely broken, kaput. It looked like this. This is not a true story because in real life, hopefully, people would have done something 50 years ago. Either try to fix the machine or even better try to invent a new machine, new, different, and much better because innovation is something we all love, right? Innovation is great, wonderful. We all want to be leading edge, unique, right on the forefront, better than everybody else. Great. But that enthusiasm for innovation seems to be limited to technology innovation into products and services and so on, but there is also something called management innovation that we shall talk about today. And management innovation, that isn't great. That is scary. Kicking out the budget, are you crazy? Loosing control, are you crazy? The consequence of this is that it's very crowded on the left-hand side. Everybody is into that kind of innovation in some form or shape. Everybody. Management innovation, on the other hand, is not yet a crowded place because it is scary. But this is actually good news for brave companies who dare to explore and embrace also this kind of innovation because you can get just as much performance, competitive advantage out of management innovation as you can get from technology innovation. There are companies out there who openly state that we have no advantage whatsoever in what we produce, sell, provide. We find it in the way we lead and manage. And I got an example for you a little bit later. So this word performance is important. That is why we should go beyond budgeting because it is good for performance defined in the right way. So I will come back to that important word. But it is still called beyond budgeting. It has something to do with budgets and budget problems. So before we move on, I want to share with you my budget problem list, which is actually quite long. It's a very time-consuming process, making budgets, following up budgets. And by the way, when I talk about budgets, it's not just cost budgets, project budgets. It's the broader finance definition, profit and loss budgets, balance sheets, cash flow, and so on. But anyway, the problems are the same. Very time-consuming, assumptions quickly outdated. This is a very serious problem. Budgeting can stimulate what I would call unethical behaviors. The lowballing, the gaming, the sandbagging, the frenzy, December spending. These are not the behaviors we would like to see in our organization. At the same time, I'm not blaming anyone for behaving like this because they are just responding to the system that we have designed for them to operate in. So if we want to change behaviors, it's not about fixing people. It's about fixing systems, which again will change behaviors. Budgets can create these illusions of control. Of course, it might feel very comfortable to have next year described with a million details and decimals, but again, the only thing we know is that it will be wrong. And if we don't have control, whatever that word means, maybe it's better to acknowledge it, accept it, and act accordingly, than to think that we have control, to fool ourselves and act accordingly. It can be a bit difficult, painful, but it's so much better. Budgeting can force us to make decisions too early. We have to decide in the autumn of the year before what we shall do next year and what we shall cost. And in big companies, too many of these decisions are taken too high up. That doesn't improve the quality of these decisions. Sometimes it's actually the very other way around. Budgets can prevent us from doing stuff that we should have done, but we can't because it's not in the budget. But this also works the other way around. Maybe it sometimes can lead to us doing things that we shouldn't have done, but it is in the budget and it is spend it or lose it. You know the game. And linked to this, I fully accept that the cost budget can be a very effective ceiling. On cost, it works generally, but that's just half the story because that ceiling is just as effective as a floor in the sense that these budgets tend to be spent for the reasons we just discussed. And to define good performance as hitting the budget numbers is a very narrow, mechanical, and sometimes quite an outdated way of answering that important question, what is good performance? We need a richer, broader, more intelligent performance language. Now, are there any of these problems that you haven't experienced in your own organization? No hands up. And if so, you are in very good company. Ah, two hands, okay. Three, okay. Four, but still not many. So most of you have recognized these problems and you are in very good company. I've been sharing this list of problems with hundreds of thousands of people around the world in the almost 30 years I've been working with this stuff. And most people out there agree, executives, managers, finance people, other. At the same time, most organizations continue doing this stuff even if they do admit it isn't very smart. That's interesting. I have a theory, but before that I'd like to share with you one more problem that not too many have on their list. I've called it conflicting purposes. I'll come back to that problem. It's an interesting problem because it's both a problem and it represents solutions to many of the others. But again, how come so many continue doing stupid stuff? One reason could be that these problems are regarded more as irritating issues and not symptoms of a deeper, more serious and more systemic problem. But that is exactly what these problems are. Symptoms of a very serious problem which is also a paradox. Because what we are looking at here is first of all quite old management technology. Do you know how old budgeting is roughly? It's a hundred years old. Do you know who invented budgeting a hundred years ago? No, he was a hang around. But you have heard his name. His name was James O. McKinsey, the founder of McKinsey Consulting. I never met Mr. McKinsey, but I don't think he was an evil man. I think Mr. McKinsey had the best of intentions. He wanted to help organizations perform better. This was management innovation a hundred years ago. And it probably worked maybe even 50 years ago, but no longer today because things have changed as we will come back to. Today, this way of thinking, this way of managing, this way of leading is doing exactly the opposite. It has become more of a barrier than a support for getting out the best possible performance. And that, my friends, I would call a pretty big problem. So we are back to this important word, performance. And some of you know that I have a metaphor I like to use here. I would like us to move into traffic because when we are out driving, we'd also like to experience good performance. And for me, that is a safe and good flow. I simply hate traffic jams. And I have, by the way, never understood why it's called the rush hour. There's no rush at all. Those cars are standing dead still. There's so much I don't understand. Anyway, I think traffic authorities want the same. And this is something we often meet when there is crossing traffic. And this light has no sensors, okay? And to these questions, the one who is in control here to make decisions about when you can drive, when you have to stop, that's the guy who programmed this light, right? The programmer is the manager here. And where would that person be as you sit there waiting for the green light? Well, somewhere else. Which information would this programming be based on? It would be based on some historical information, some trends, maybe some forecasts, but would this be entirely fresh information as you sit there waiting? No, obviously not. So here we have a management model where the manager is actually absent and decisions are based on somewhat outdated information. But again, the best of intentions. Fortunately, there is a very different solution with exactly the same purpose. I haven't seen too many around here in Bangalore, but still we are talking about a roundabout. Same questions with very different answers because here we make decisions, right? We are in control about when to drive, when to stop, and the information we use to make these decisions is fresh real-time information. So very different answers could be interesting to compare these two ways of managing. So let's do that. And I've got a few leading questions for you. It's actually proven scientifically that the roundabout is not just more efficient. It's actually also safer. And lifetime cycle cost is lower. But we also know that the roundabout takes more competence from us. It is more difficult to drive in. And going back to our organizations, everything that we need to leave behind of traditional management is in many ways much easier for everybody involved. Managers, employees. But we can't go for what's easy because it's easy. We have to go for what is best for performance even if it takes a bit more promise. But it's not enough with fresh information and the authority to act on it. You also need a positive value set because if there is a value set, the mindset among drivers waiting for that green light which is about me first. I don't care about the rest. That is normally not the big problem here but in the roundabout, me first don't care about the rest can be a big problem because here we depend on people sharing a positive wish or purpose of wanting this to flow well. We have to help each other. We have to interact with each other in a very different way than what you need to do in front of that light. Two other important words here. Trust is obviously one. In front of that light we are not trusted in the roundabout you are. And whom we need to trust also differs. Here we need to trust the programmer and the hardware. Here we need to trust other people. We're going to leave traffic in a minute but there are some words and labels in the corporate language which I actually dislike. I'm quite sensitive to words and language maybe too sensitive but one such label is performance management. Performance management. I dislike it first because I find it quite negative. Aren't we basically saying that if we don't manage your performance there will be no performance? Isn't that the message? And second I think there's quite some illusions into this. I think our ability to manage performance in today's people and business realities is somewhat more limited compared to what managers, executives, finance people, HR people often like to think. Many of them love to manage performance. Nobody likes to be managed, right? But everybody wants to manage. Interesting. Anyway, performance management. It is a label that fits very nicely when we talk about the traffic light. That's exactly what traffic authorities are doing. Managing performance very directly. In the roundabout it is about something else. Here it is more about creating conditions for great performance to take place. It is about enabling performance not managing performance. And this, my friends, this is more than playing with words. These are two fundamentally different ways of addressing that important question. How do we get the best possible performance? That question is not new. That has been there always. It is the answers that has changed. The roundabout is a more self-regulating way of managing. More self-organizing. And today organizations need more self-regulating management models for at least two reasons. The first one, obviously, our business environment with all the volatility, the uncertainty, the complexity, and the ambiguity out there. And that VUCA level must have implications for how we design our management models compared to if there's little or no VUCA out there. And the VUCA level has definitely increased since budgeting was invented 100 years ago. The other reality we need to reflect on is not external. It's internal. It has to do with people, employees, asking ourselves what kind of employees do we generally believe that we have in our organization? And I'm sure you're all familiar with Theory X and Theory Y. These two views on people and what motivates people. Whereas, you know, Theory X is quite a negative view on people, a view that most people, most employees, well, that's a bunch of potential thieves and crooks. And unless we manage tightly and keep them on short leeches, they will all run away and do a lot of stupid things and spend money like crazy. Theory Y, much more a positive view, a view that most people actually want to do a good job. They want to perform. They want to be involved. They want to be listened to. They want to be treated as adults. And we don't need to agree so far on where our sympathy lies, X or Y, even if I have a certain hope. But it should be very easy to agree that if we mainly believe in Theory X, our management model should look very different compared to if we mainly believe in Theory Y. That should be quite obvious. So if we combine these two dimensions, could look like this, you recognize the two, and traditional management lies in this lower left-hand corner with a conscious or unconscious assumption that the world is still a predictable and planable, stable place and that most people is on this side. If we disagree with this, then this is not the place to be. Then we need to move up in that upper right-hand corner by addressing both leadership horizontally and our management processes vertically. And what we need to get out of traditional management is something that's very rigid, very detailed, very annual, very rules-based. A lot of micro-management, centralized command of control, a lot of secrecy and a strong belief in sticks and carrots as ways to drive performance. I asked the participants in my workshop yesterday, am I being too hard on traditional management here? Because I don't want to overdo it. And they all said, no, I'm not too hard. Anyway, maybe there was a time when this was the right thing to do, maybe, but things have changed as we talked about. So to get out of this, what do we need to do? Well, some headlines before I'm going to make this all more concrete. On the leadership side, we need to be more purpose and values-based and less rules-based. I'm not saying no rules. I'm saying more purpose values, less rules. There has to be more autonomy for obvious reasons and there has to be more transparency. And in this context, this is good news for scared managers afraid of losing control because transparency can actually be quite an effective control mechanism, a social control mechanism. Let me give you an example. You might have heard about the Swiss pharmaceutical company called Rush. They are quite big. And they are today on a beyond-budgeting journey. Some years ago, they did a very interesting experiment around travel cost. In a pilot that kicked out the travel budget, kicked out travel rules and regulations and replaced it with full transparency. So with a few exceptions, everybody could see everything. If you traveled to where did you fly, sleep, eat, cheap or expensive, open for your colleagues to see and vice versa. What do you think happened with travel cost in that pilot? Came down through a very simple self-regulating control mechanism. This was about tearing out pages in that rules book instead of doing the opposite. At the same time, a word of warning. This is a very powerful mechanism. It must be applied with wisdom. If it becomes naming and shaming, it doesn't work. And that's why we should always position transparency more from a learning perspective than from a control perspective. How can we learn from each other if everything is secret? Learning is positive. And last but not least, internal intrinsic motivation as opposed to external extrinsic motivation. And I could have spent the rest of this session talking about why individual bonus in knowledge organizations is such a flawed idea. We don't have the time, but I can think of no area. There's a bigger gap between what most research is telling us about motivation in these organizations and what more businesses is practicing. So what we recommend in Beyond Budgeting on bonuses is more common bonus schemes than individual bonus schemes. A number of organizations, they have the best of intentions around people and leadership. They say the right things. They write the right things. But it doesn't help to have these theory-wise leadership visions and intentions. If there are theory-x management processes, which is the case in so many organizations, creating these poisonous gaps between what is said and what is done. So if we are serious about these words, we need to change your management processes so that these words are reflected in our management processes. And then, at the same time, we should make our management processes more buka-lobust. If you headlines on what that means in practice, well, this is one reason why we have to do something really traditional, detailed annual budgets because they represent so much all defined down here. More specifically, when we shall set targets and goals to the extent we shall do that, maybe we can find some inspiration in football. I have yet to meet the football team saying that the ambition for next season is to score 39 goals and get 42 points. Those are budget goals, and they don't think like that, right? They think in terms of league tables, doing well against competition peers, hopefully outperforming them. And that way of thinking can actually sometimes also be applied in business, thinking in relative instead of absolute terms when we are setting goals and targets. When it comes to the rhythm of all these processes, why on earth shall everything circulate around the fiscal year of January to December? In many, I mean, from a pure business point of view, that is very often a completely artificial construct. So when it's possible, when it makes sense, we have to organize these management processes more on business-driven and event-driven rhythms and less around calendar rhythms. And last but not least, when we shall evaluate performance, that cannot be reduced to comparing two numbers, actual versus budget, right? We need a richer, broader performance language. And this was a very high-level crash course in what Beyond Budgeting is about, addressing both leadership and management processes in a coherent way in order to become more adaptive and more human. Not necessarily as a goal in itself, but this is what it takes to survive, to thrive, and to outperform in today's and tomorrow's people and business realities. It is as simple and as difficult as this. This is the high-level version of Beyond Budgeting. This is the model itself. 12 principles, six on leadership, six on management processes. I will not go through any of this in detail right now. I have already talked a little bit about purpose values, transparency, autonomy. I will come back to some of these management processes a little bit later. But a few important messages here. First of all, these are principles, right? This is not a recipe. What does this should mean, for instance, in your organization? That depends on your organization's business, culture, history, and that's the way it should be. I don't like management recipes because then somebody has done all the thinking for you. The only thing you have to do is to buy the books, read them by the way, hire the consultants, tick the boxes. I find that both boring and dangerous. So here you have to think for yourself, what shall this mean? There's a very strong focus here on coherence between what is said and what is done. A classical example of the opposite, it doesn't help that we under autonomy talk loud and warm about how fantastic employees we have on board and we would be nothing without you. And we trust you so much, but not that much. Of course we need detailed travel budgets, right? Hypocrisy is what I'm saying. And people notice the words become hollow because the management processes have the very opposite message. So coherence is key here between what is said and what is done. Finally, two classical misunderstandings around beyond budgeting, both linked to this principle. Some people think this is just about another way of managing costs. Well, it is that there are 11 other principles. This is quite a comprehensive, complete leadership management model. Second misunderstanding beyond budgeting or budget, I can spend whatever I want. Cost is not important. Hit parade. No, that's not what we are saying. Cost is still important and can sometimes be a constraint. Money can be a constraint. But we simply need more intelligent, effective ways of managing costs than what Mr. McKinsey could offer us a hundred years ago. Now, does this stuff work? Well, we have some strong indications. First of all, companies going beyond budgeting tend to do well. Very few go back once they have started and I got an overview of companies on the journey a little bit later. But lately we started to get more indications because the big consulting companies over the last few years have become seriously interested in beyond budgeting. That was not the case 10 years ago. They all want to work with us in some form or shape because their clients are asking for it. And two of them have done surveys about how this stuff works in their network among their clients. Boston Consulting Group, they looked at companies they know that are only beyond budgeting journey and asked what kind of benefits are you seeing? And it varied quite a lot from direct financial impacts, increase in sales, to a lot of other indirect things that in the end will provide good performance. In other consulting company, Bain and Company had a slightly different angle. They have defined a group of companies which they call leading companies in financial planning. And they looked at how likely is it that these companies use the beyond budgeting principles compared to the non-leading ones. And this is what they came out with. The leading ones is in dark blue and this is quite a clear pattern that between being leading here and applying beyond budgeting principles. A number of companies are today on this journey in some form or shape. And I could have talked for hours and hours and hours about amazing management innovation taking place here. And we don't have the time. So just one quick example. Let's go to Sweden. There's a bank at the top here called Handelsbanken. That bank has 500 branches in Northern Europe, quite big in the UK. And it's a very interesting bank for many reasons. And the guy behind it all is the Jan Vallanda, passed away some time ago, unfortunately. Here is one of the things he said about the budget. But again, an amazing company for many reasons. First of all, because the bank has no budgets, no targets, no individual bonus, and they hardly make forecasting. That's interesting. But it's also interesting that they have done this all the way back since 1970, right? So for many, many years. But it's even more interesting how the bank has performed over these years. This bank has been performing better than the average of its competitors every single year since 1972, right? That's how they find performance in football. How are we doing versus competition? And they are doing great year after year. And how is that happening? Well, they have a very simple philosophy. We will have lower costs and better customer satisfaction than competitors. And how do they achieve that? By applying beyond budgeting. A lot of autonomy to branches, a lot of transparency, a lot of league tables between branches so that they can see who can be learned from if somebody's better than us internally. So again, a very, very fascinating case. My new book has a lot more about the bank and actually also one chapter is written by one of the branch managers in the UK. So that's an insight story from the bank, not through my words, but through his words. Okay, beyond budgeting. I know that some people who, especially finance people, when they see this for the first time, they find it a bit big, overwhelming, even scary. I don't think you guys would, right? Those guys would. And some managers, and some executives. If that is the case, I have some good news. There is a very simple practical, tested way of getting started that later can take us into the bigger beyond budgeting discussions. And it has to do with asking ourselves a very simple question. Namely, why do we budget? What's the purpose of a budget? And again, think about that broad definition of budgets. And that is an answer, a question with more than one answers because companies typically use budgets for three different things. First, they use budgets to set targets, financial targets, sales targets, production targets. Second, this budget shall provide a kind of forecast of what next year profit can look like, cash flow. And third, the beyond the budgeting process is the resource allocation mechanism, handing out bags of money to the organization on operational costs and investments. So, three different purposes in one process, one set of numbers. That sounds very efficient, but that's also the problem. And let me explain why. Let's assume that we are moving into a budget process, finance upstairs, they won't understand next year's profit and loss. So, let's start on the revenue side, asking responsible people, what are your best numbers for next year? But everybody knows that what I'm sending upstairs will come back to me as a target for next year, maybe with a bonus attached to it. And what could that insight do to the level of numbers submitted? I think you all know the numbers tend to go this way, right? Everybody wants to hit their targets. Moving to costs, operational cost investments, the same people, other people are asked, what are your best numbers for next year? But everybody knows that this is my only shot at getting access to resources for next year, and some might also remember that 20% cut from last year. And that insight and that memory might also do something to the level of numbers submitted, and this way they tend to go the other way, right? And I see some smiling faces here, so I see, I think you understand what I'm talking about. This is a problem, not just because it destroys the quality of numbers, but even more because it stimulates this behavior that is at least borderline unethical, right? The lowballing, the gaming, the sandbagging. But again, I'm not blaming anybody behaving like this. They are just responding to the system we have designed for them. The good news is that the rest of the very simple solution way of changing the system, we recommend that these three things should be done in three different processes that allow for different numbers, right, because they are different things. A target is an aspiration, it's what we want to happen. When a forecast is an expectation, it's what we think will happen, whether we like what we see or not, brutally honest, and resource allocation, that is about the best possible optimization of what is often scarce resources. And when we have separated, that allows for great improvement discussions around each one. Now we can have great discussions around how can we set better targets that really inspire and stretch people without feeling stretched and thinking relative here can often be a solution. Some companies go further and they say we don't need targets. Hunters' bunker, no targets, a lot of great performance. Then we can move to forecasting. How can we get the politics and the gaming out of forecasting so that we know that we can trust the numbers? And if you have gaming in your forecast, there's always a reason for it. That is the one you need to uncover and address. And we don't need a million details here. We are looking at the future. There's uncertainty. Very different from looking at the past through accounting, but details and decimals make sense. It's often required. Looking to the future, we need to let go of that accounting mindset. And again, some companies even hardly do forecasting like Hunters' bunker. Everybody has to do resource allocation. And in Beyond Budgeting, we have much more effective and intelligent ways of managing costs than what Mr. McKinsey can offer us. And last but not least, when we have split, then we can and design new processes. Then we can organize each of them on rhythms that better reflect not just the business we're in, but also the kind of purpose that we are talking about. You would target setting less... Not that often. Forecasting, update forecast, more often. This would happen more or less continuously. Now, I don't have time to go through any details here, but I know that most of your questions will be around the last one. How do we manage costs without the budget? So I'm going to focus on that. So my last slide is on that topic. And then I'm ready for questions. Again, a little metaphor to share with you or to help you understand how we are thinking about resource allocation and costs in Beyond Budgeting. Imagine an organization that requires fuel to produce and operate. What would be the best way for this organization to be supplied with fuel? Would that be to be given a fixed number of fuel cans once a year, January 1? Or would it be to have fuel supply through a pipeline where you can consume more if you produce more and vice versa? And that, my friends, that was a leading question. And I hope you can all agree that this is a much better way. And this is the Beyond Budgeting way of thinking. Whatever tools we kind of put in place here, they all have to rest on a mindset, a culture of cost consciousness, right? So that's what I want to talk about first. And this implies very much asking different questions when we shall spend money. The classical budget question is, do I have a budget for it? If you have, it's okay. If you don't have, it's not okay. A bit simplified. We would like to hear more of these questions instead, right? Is this really necessary? How much value is this creating? What is good enough? Is this within my execution framework? This is not an anarchy. We are trying to make the room to move in bigger for the organization, but there are still walls and guardrails in this room, as I will come back to. And these are questions we should ask all the time. Every time we spend money. Of course, we do hear these questions in the budget world, but for some reason only in November and December. Oh, shit, the budget bag is almost empty. Hey, guys, we have to be cost conscious for two months until January 1, then the bag is full again. Meaningless, right? We need to think like this all the time. For some companies, this mindset combined with some transparency is enough. Big companies typically need something more. And what they need of more typically falls in two categories. The first is around investments. And let me give an example from Equinor, where investments in projects is very much about stealing power and steal and concrete and building platforms or windmill farms or whatever. Equinor has no traditional annual investment budget, but the company sits in the autumn every year and decides exactly how much to invest, exactly split on these projects and then these bags of money is handed out to the organization. That is not very meaningful. And instead, the company has found inspiration in how things work kind of when we are citizens and not employees. Because imagine that you're planning to buy a new car. It's April. You go to the bank and say, I'd like to have a loan for a new car. And the bank tells you that, sorry, we are only open in October. And that is stupid. No bank would do that. But that's what the budgeting process is about. The bank is only open in the autumn. In this company, the bank is always open. So the line can always forward a proposal for a project, how high up you need is regulated by a mandate structure. And whether you get a yes or no depends on two things, how good is your project and can be afforded as things look today. So this is beyond budgeting version of continuous delivery. Not of software functionality, but of decisions and financial resources. Another kind of parallel between agile and beyond budgeting. So that's investments, not that difficult. A bit more challenging when it comes to operating cost. But there is an answer here as well. We offer a menu of different options for managing operating cost, admin cost, travel cost, whatever. And that menu looked like this. And what we would like to leave behind is the traditional detailed annual budget. It's too detailed, decided too early, and all the other reasons we talked about why this is wrong. We need something that has more autonomy, more flexibility. One alternative is what we call a burn rate guiding. There's still a number in the range of 1,000, 1,010, but within that full autonomy to make the right decision. Big difference within these two. We call it burn rate guiding because this is not to be seen as a bag of money that you're given. This is a guiding to you about what kind of activity level is expected, expressed in money until something else is decided. So it's about to help you in your decision making, but it's not a bag of money that you've been given. But sometimes it can be difficult to know should it be 1,800, 1,200? Then we can move into relative thinking, right? Because here we are still on absolute numbers. We can start to think about unit cost, right? So you can spend more if you produce more if you sell more and vice versa. So more self-regulating, more roundabout. We can make it even more self-regulating by saying that there is no kind of number here about what your unit cost should be. Your unit cost should be competitive, compared to peers, internally, externally, even more self-regulating. If you have internal profit centers, that is units that fully control their own income side and cost side, then if these units have a tough bottom-line target expressed in these financial terms, then that's also a way of managing cost. That unit can not run away and spend money like crazy, but it might be okay to spend more if what they spend is what we should call good cost. Good cost is not a problem as long as we can afford them because they create value, right? It's the bad cost that we want to get rid of. They are less generous. When we introduced this in Ecuador back in 2005 when the company went beyond budgeting, of course our CFO got the question for employees, what is good cost and what is bad cost? And his response was very simple. You guys out there know even better than I do what is good cost and bad cost in this company. People now out there, they have the best information, very often much better information than what you find upstairs. The last alternative on this menu is what I often call nothing at all. No budget, no target. The only numbers you have here are actual cost numbers, right? That you monitor through, for instance, control charts or moving averages. You look at trends. If a trend, cost trend looks okay. We do nothing. If it looks a bit strange, we take a look at it. And there might be very good explanations, right? The dose is a good cost, for instance. But, and this is important, we might also come across teams, managers who consciously or unconsciously abuse the trust that lies in this model. In order to the right, the more trust we are showing and the only thing you know if you show trust is that someone will abuse it, right? At Equinor, it has happened, it will happen again. That is not the issue. The issue is how do we respond? Because the easy but wrong response from a CEO or a CFO would be to say that, look, this trust thing doesn't work. Look what happened here and here. Back to the good old way of budgeting, right? That's the easy but wrong way. It doesn't take much leadership. You can just issue that mail, case closed. The right response, take a little bit more leadership. And that involves having a very serious talk with those involved and let it, if necessary, have consequences, right? This is not about being soft. It's about not punishing everybody because somebody did something wrong. Back to the hotel and the clothing hangers, right? And it's very important that executives have thought through this upfront because it will happen. And if you haven't thought through it, your response will typically be hectic and wrong. These mechanisms can be, first of all, the further to the right you are, the stronger we need to be on values and direction. If your strategy is unclear, if you are weak on values, be a bit careful. These mechanisms can be supplied, supported by two other guardrails. One is decision authorities. So how high up do you need to go for specific decisions, right? Could be kind of monetary values on how, yeah. What can you decide for yourself? What do you need to lift upstairs? This must be generous enough, right? Second, spending guidelines. Like Equinor, no travel budgets. But in Europe, then people fly coach. Outside Europe, you can fly business. That's nothing to do with travel budgets. It's about helping people to make decisions. So, that is what I wanted to share with you. These are my contact details. If you want to follow me on Twitter and LinkedIn, as I said yesterday, this is the only stuff I write about. There are no cats and dogs and grandchildren. I don't have cats and dogs, but you have grandchildren. This is my website. Check out the Beyond Budget and Roundtable website. You might want to wait a week or two, because we're just changing into a new one. Yeah. And you heard about books. This is the... What you just heard was the very short version of Beyond Budgeting and what this is. There is a longer version. It looked like this. And it has more of everything. More cases and also what we did back in Borealis before there was anything called Beyond Budgeting back in the mid-90s. There's a chapter about Beyond Budgeting and Agile and more about Implementation Advice that I didn't have time to talk about today. The size of this book is kind of typical for a book. And that is an issue for many executives who are busy people that don't have time to read. And those are the ones we need to reach. A new book, just out, is on purpose, thinner. It's meant for... Actually, you can read it on a longer flight, for instance. And it kind of has some key messages from other books, but also a lot of new insights and learning since that last book came out. And I'm really proud that Gary Hamill wrote the foreword. If you are familiar with him, he is, if you think about management innovation, he is the number one thinker and speaker I would argue in the world. So I'm really pleased about that. All right. Any questions, any comments? Would you have a microphone? Thank you for your presentation on Beyond Budgeting. When we speak about Agile, we always think about technology and other things, but not about budgeting. Any questions regarding your principles? Beyond Budgeting. You spoke about holistic performance evaluation. Can you give some examples or insights on that? Yes. And one more comment on the slide. Okay. I appreciate that slide upon a round-day boat and also a traffic signal, but in India, we have a round-day boat with a traffic signal. Yes. Actually, I've tried it. I've been walking a little bit around but it does work, right? So absolutely, yes. Now, I'm glad you asked that question because I didn't have a slide on it. What is a holistic performance evaluation? Well, again, it is back to the meaning less, that it's meaningless only to compare two numbers and then conclude, right? And if you use KPIs here to measure performance, we have to remember that the I in KPI stands for indicator. They are indicating something. Not necessarily telling the full truth. There is a reason they are not called KPTs, key performance truth. They are called key performance indicators and we must never forget. So whether we use KPIs or not, we have to look behind measurement and look at what measurement didn't pick up, right? We have to look at tailwind, headwind, changes in assumptions. Sometimes, how did you achieve your results? All the information that we have afterwards that we didn't have up front. Again, this is something that takes a bit more of leadership than compared to just looking at two numbers. But it's so important to look behind here. And you've probably heard the quote from, it's not Einstein, but the guy called William Bruce Cameron, not everything that counts can be counted and not everything that can be counted counts. And that is something that we have to remember, especially finance people, to think that all the truth is in the numbers. It's not. So that's what we mean with holistic performance operation. Michael, from then, I don't think so. Yeah, my question is around resource allocation. Resource allocation, right. And what I have seen in this presentation, you talk about continuous reallocation. So how is it valuable in agile teams where we talk about having dedicated teams at least for some time before we redeem them? Yeah, that's the question we often get at conferences like this, and I do write a little bit about this in my book. But I mean, you guys know that situation even better than I do. But in my head, I mean, because I think you're talking about how to fund agile teams. And of course, the initial funding decision lies in setting up the team, making decisions about the size. So that's the big resource allocation. And then when it comes to ongoing work, then, for instance, operate with that burn red guiding. It could be one option. If there are kind of specific decision points involving, for instance, some purchase of external software and whatever, then think about that as a little project decision that you look at. So I think the main thing, independent of whether it's this situation or other situation, is the general beyond budgeting advice of making decisions at the right time, which is as late as possible, given what we shall decide on. Because then we have better information, not just about what we shall decide on, and also if we can afford it. Making decisions at the right level, which means out where people have the best information. So at the right time and at the right level is important. So I think this kind of general, these principles can apply just as well in that situation as in other situations. What you shouldn't have for any team is that detailed annual pre-allocation with all the details and it's meaningless. I think there was a question down here. Hi, my name is Ankur. And I could totally relate to the resource allocation bid in an agile manner, where if there's a new risk that emerged or new information that you received, you may want to put people there instead of waiting the quarter to end. But one of the challenges that I've faced in sort of getting management and the founders or the leaders to adopt is that what you mentioned about the control bid. It makes people feel sort of in control that when you have a plan laid out for three months or six months. I'm just curious, I've struggled a lot with changing that mindset of taking people from letting go of control towards enabling performance from managing performance. From your experience, what has worked for you in convincing people towards beyond budgeting? I think what works and is needed in general to help people get started here is to help them understand the problems with the current way of doing things. You want to help them build that case for change and help them to understand that all the illusions of control that's into this and that there is such a huge performance potential in doing things in a different way. Get them to understand the power of management innovation. I'm curious, can you share a specific incident or a moment where by this example you were able to convince somebody that this is less performance and this is going to be better performance? Again, I'm not sure if I answered your question, but if you think about that separation of budget purposes, that is something we often use as a way to get started because that is not for skilled people. That's not scary. That is simple, pure logic. They understand the three different purposes and that they are in conflict. And once you have separated and start to improve, you are actually on a beyond budgeting journey in a very safe, no pun intended, very safe way. And then having those improvement discussions around each one, that takes you into further beyond budgeting territory like targets, what really motivates people. Resource allocation, do we need detailed travel budgets if we save and trust people? So it's a very kind of organic and generic way into... I can see that. Thank you. Can I go next? Okay, I can start. First of all, thank you so much for really covering this wonderful topic, very, very important one. And I really especially love the quote where you talked about managing performance versus enabling the performance. Innovation, right? And when I talk about innovation, I talk about the teams innovating. And where I see really the challenges and you touched upon that where possibly the budget acts as a floor, right, where there is a ceiling and it stops ceiling attacks as a floor. So what is your guidance or a take on of how can we really encourage teams to innovate but at the same time have really the concept that you shared in terms of beyond budgeting? How do we apply them in practice and encourage innovation that's to introduce the situation? Yeah, I mean, if I understood your question right, so this is about how teams can kind of contribute in that. Actually, I think that this type of innovation that I've been talking about is something where it's not enough that teams are being innovative. I mean, this is executives, finance functions, HR functions, corporate that needs to kind of dive into management innovation mode. Because I think that, you know, teams out there, they know this already. They know that this would be much better. They don't need to innovate this because I mean, I kind of think it up because they know how things should have been done. It is upstairs the problem is. And that is where this innovation is needed more than in the teams itself. The problem is not in the teams. It's upstairs. Yeah, I understand. That's what I was hearing. With the teams who would want to innovate, we always encourage agile teams to innovate and come up with the solutions, right? And the problem is really lying with the management, but when you talk about that floor or where we have to hit, how do we kind of, at times, share that vision with the teams and more from a management side, how do we guide them on the right areas? So you're thinking about, I mean, how the team should understand beyond what you think? Is there an element for teams to understand this? Well, I think that what we do in almost all companies is starting out with a session like this. And in the best cases, all employees are present. We had a session with a Portuguese healthcare pharmaceutical company some time ago. 2,000 employees, many of them working in manufacturing. Big room, but a lot of people attending online. I think 1,600 of 2,000 employees attended that session. The rest couldn't because they were making sure that manufacturing was running. So it is about reaching as many as possible. If that is not the case, I mean, if you first reach executives, these guys or finance functions, these guys need to understand this and be able to take it further out in the organization. Sometimes that go wrong because they just get the mechanics of this, right? They get the part which is about changing what we do. That's the simple part. What they don't get is changing how we think. That's the challenging part, and that's more challenging to get out to people. But in general, what we see is that once companies get started and very few go back, they get bravery along the way, right? What is scary today is not scary tomorrow because it works and the appetite increases. And that goes for kind of everybody. But again, I mean, people in these teams out there, they typically get this and are less scared than the guys upstairs. Thank you. Yeah. Yeah, thanks. So does beyond budgeting only work for large organizations and companies? Or does beyond budgeting work for countries or states? Or I just wanted to know your thought process on that because generally you have a country, you have a budget which will be presented, correct? So does beyond budgeting work in that aspect as well at a larger scale at all, state level or a country level? Yeah. Actually, I have a chapter in my new book about that, Beyond Budgeting in the Public Sector. And we have an example from a Norwegian social services organization, Public Sector, who kicked out the cost budget in all their customer contact centers. And it worked wonderful, right? Cost did not increase even if the budget is improved. But when it comes to, we often get the questions, it's for companies. Is this just for big companies? What about small companies? Well, my response to that would be that companies, organizations are born beyond budgeting, right? They are a startup. A startup is beyond budgeting. But the problem is that most small companies, they want to grow. They want to become big, right? And then they look at big companies who have grown. They're calling the management consultants. And as they grow, they add on management process after management process. And then some become big. But they discover that we have not just become big. We have also become slow, rigid, bureaucratic. We've lost a lot of that agility we had as a small company. So there is an interesting parallel here to the aging process of man. Because as we get older, we do lose a bit of that agility we had as teenagers. At least on the physical side and maybe a little bit up here. And trust me, I know what I'm talking about. And when it comes to man, we don't have a choice, right? In the end, age takes us all. But organizations have a choice. It's written nowhere that because you are big, you should be slow, rigid, and all the things we don't want to be. So the big question for big companies, how can we find our way back to what we had without losing the benefit of being big? For small companies, how can we grow without ending up in the same misery? And it's possible if you're conscious about it. If not, you will slowly drift into traditional management and one day it's too late. Thank you. Thank you, Björkta. I think it's been such an insightful session and so interactive.