Adapt to Win

Chapter 15Lean and Agile Funding and Budgeting

One of the biggest enablers (or obstacles) to achieving agility and adaptability in portfolio management and consequently strategic agility is the organization’s ability to shift funding quickly with little friction to higher returning investment opportunities. It is one of the great tragedies of American corporate governance that corporate budgeting, as conventionally practiced, not only makes spending decisions slow and difficult to change, but is also wildly ineffective, failing to deliver the objectives it purports to optimize for—control and transparency.

Fortunately, for nearly two decades now, alternative models have been developed and are being proven in a wide range of company types and sizes. Initially considered heretical, new techniques like Throughput Accounting (TA) and Beyond Budgeting (BB), provide better insights and reduce waste from traditional accounting and budgeting.

BB is highly agile and adaptive, and delivers more effective governance, control, and transparency than the archaic annual budgeting approach. BB has been more widely adopted in Europe than the United States, with the earliest and largest implementations (though an increasing number of large publicly traded US companies are adopting it). The best introductions to BB are Bjarte Bogsnes’ books Implementing Beyond Budgeting and This Is Beyond Budgeting: A Guide to More Adaptive and Human Organizations. As a senior executive at Statoil, the Norwegian ...