Traditional governance counteracts Beyond budgeting in Swedish companies
We have studied how Swedish companies implement the principles from Beyond Budgeting in their management and control of the business. The answers from Swedish CFOs showed, among other things, that there is a contradiction between the management style that gives employees freedom and management processes/governance principles that are still anchored in old budget processes, bonuses based on budget targets and an annual allocation of resources. This creates a gap between management's expectations and employees' perceptions of the company's goals and strategies. We call it "the Say - Do gap".
The answers to the study show that there is a difference between values regarding culture and employees, versus how you actually manage.
Employee autonomy and freedom to act is a fundamental principle for success with Beyond budgeting. Therefore, this represents a major obstacle to a more dynamic and agile business. To reduce the Say-do gap, it is important to:
- Use the right tools to communicate with employees. Clear objectives and regular communication of the strategy are essential to ensure that all employees understand what the company wants to achieve. A culture of transparency and open communication is important for everyone to understand how their efforts contribute to the company's success.
- Review management processes to support employee freedom and autonomy. To support employee freedom and autonomy, companies should review management processes such as the budget process and the reward system. Conflicts can be reduced by allowing employees to make decisions based on what is best for the company, rather than focusing on achieving budget targets. Developing new reward systems that reward and encourage employees to take initiatives that promote the company's success can also be a way to support freedom.
- Create a culture where management and employees work together to achieve company goals. Communication and management processes are essential to reduce contradictions between freedom and control. By creating a more efficient and innovative work environment, organizations can achieve their goals in a sustainable way.
If you want to know more about our study or discuss questions about Beyond Budgeting, please contact us via e-mail at kerstin.ollesson@ekan.com