Exclusive Trusted Magazine Q&A with Bjarte Bogsnes, Chairman of the Beyond Budgeting Roundtable & Founder of Bogsnes Advisory.
How could you describe your career path in a few words?
I have a finance/business education and have held finance leadership roles for most of my career. I am however one of very few with that background who also have headed up an HR function. This was in a large European chemicals company, where the second phase of my career started. Prior to moving to this HR role, I headed up the Finance function in the same company. Here I led a major business agility initiative built around the abolishment of traditional budgeting in favor of more adaptive and human management processes. This case, and similar ones in some other companies inspired the development of the Beyond Budgeting model. Its 12 principles and the Agile Manifesto developed a few years later have much in common, but there are also some important differences which I will discuss below.
Some years later I headed a similar project in Equinor (formerly Statoil), one of Scandinavia’s largest companies. Throughout my career I have done hundreds of keynotes and helped numerous organisations all over the world with implementation of Beyond Budgeting. I left corporate life a few years ago to be able to devote myself full time to this important management idea through Bogsnes Advisory.
I am the Chairman of the Beyond Budgeting Roundtable, an international network of organisations and individuals on Beyond Budgeting journeys. I have written two books on the topic. The last one, “This is Beyond Budgeting – a Guide to More Adaptive and Human Organizations” was published last year with a foreword by Gary Hamel.
I am also the winner of a Harvard Business Review/McKinsey Management Innovation award.
Why has scaling agile and agile transformations turned out to be so difficult?
I believe there are several reasons.
First, the initial success of agile has much to do with its birthplace in software development and how teams work. What executives in large organisations observed in those early years was faster and better projects and more engaged employees. Who can be against this? But when agile scaled and started to challenge executive beliefs and behaviors, it wasn’t that fun anymore.
Second, it is also hard to scale agile using the same language that served early “software & team” agile so well. “Scrum” might sound like a skin disease for executives unfamiliar with agile, or rugby. A “Sprint” is not about running faster. “Slack” is not about laziness. “Continuous delivery” is not about 24/7 or faster assembly lines.
Finally, due to its birthplace, agile was not developed as a way to run an enterprise. When executives are challenged to go for an agile transformation, they want to understand what the implications are for corporate management processes like target setting, forecasting, resource allocation, performance evaluation and rewards, and the new rhythm of these processes.
The Agile Manifesto doesn’t provide many answers here. Beyond Budgeting does, because it was born at corporate level as a business agility model, challenging the two main assumptions behind traditional management; that the future is predictable and plannable, and that employees can’t be trusted. Traditional budgeting is probably the most fundamental barrier there is to an agile transformation. Not just the annual budget and the budgeting process itself, but just as much the mindset behind it: that people can’t be trusted, and that he future is predictable. These assumptions are the antithesis of agile. It doesn’t get more un-agile.
The agile principle of continuous delivery of software functionality instead of big batch releases is a classic example of philosophy crash. An annual cost budget is a big batch of decisions and resources, and not a continuous delivery of decisions and funds as needs appear.
Agile has been suffering from traditional management, including budgeting (both the process itself and the mindset behind) since its early days. Although there have been complaints, little has happened. Maybe because the annual budget was seen as something given, a law of business, unavoidable and untouchable.
This is all wrong. There is no such law, and if this elephant isn’t addressed, any agile transformation will struggle. Many organisations all over the world have understood this and implemented Beyond Budgeting, sometimes as part of an agile transformation, sometimes not.
What successful cases of agile transformations have you had the opportunity to observe that have particularly stood out to you?
One of the most fascinating cases I know of is the Swedish bank Handelsbanken, with around 10 000 employees and 700 branches in Northern Europe. The bank has no budgets, targets or individual bonuses, and they have been operating like this since 1970, way before agile came along. The bank has an amazing performance track record, performing better than the average of its peers every year since 1972. It is among the most cost-effective universal banks in Europe and has very high customer satisfaction scores.
This is achieved through very high branch autonomy. Almost all credits decisions are for instance made in the branches, and a “no” cannot be overturned further up. There is also full transparency regarding performance and cost levels across branches. This transparency not just drives performance, but also stimulates learning between branches.
My latest book has the full story about this amazing company who, by the way never, use the label agile to explain their model.
Another amazing case is the Norwegian IT company Miles. Again, no budgets and no targets, but an extreme employee focus. Recruitment is their most important process. When management interviews, it is all about the candidate’s beliefs, values and attitudes. IT skills are not discussed, that is left for employees to check out. A no here cannot be overruled by management.
Employees can buy whatever PC or phone you want, there is no PC or phone budgets. They can attend whatever training and conference they want, as often as they want, wherever in the world. No training budgets, nor travel budgets.
But it is not anarchy. When you have bought a PC or a phone, or returned from your training, you need to post on the intranet what you did and the costs of it. Transparency is their only cost control mechanism. Management’s one small concern? Could it be too effective?
Will agile practices continue to generate interest? What challenges do you see in the context of deploying these practices?
I believe the practices will, but the label itself might disappear. We have unfortunately seen the emergence of an agile industry, given agile a bad name. I see so many actors in the community turning into commercial machines. Some even seem to enter only with this purpose in mind. Certification has become big business. It provokes me when I hear about expensive re-certifications being required every year.
Some scaled agile implementation frameworks do, unfortunately, seem to have been developed simply to be acceptable to organisations that want to pretend they are agile but maintain top-down decision-making hierarchies. “Agile theatre" is a label I often hear, and I understand why.
Finally, I believe the Agile Manifesto needs an update. While it has been surprisingly robust given its birthplace, the concept is now applied way outside of its original scope. An update reflecting this would make the Manifesto more relevant and easier to understand and implement for the many without a background in software development.