Increase Agile s credibility and influence by creating better outcome with finance. Dean Latchana

Size: px

Start display at page:

Download "Increase Agile s credibility and influence by creating better outcome with finance. Dean Latchana"

Curtis Daniel
5 years ago
Views:

1 Increase Agile s credibility and influence by creating better outcome with finance Dean Latchana Agile Tour London 2018!1

2 !2

3 Current situation with Agility!3

4 Much spoken about approaches Delivering customer value in a complex environment: Scrum: People & Interactions Lean: Balance & Flow Lean Start-up: Learn & Experiment!4

5 Business agility is the ability of a business system to rapidly respond to change Evan Leybourn!5

6 !6

7 Some Theory!7

8 Ashby Law of Requisite Variety The variety of the regulator must be equal to, or greater than, the variety of the environment

9 Traditional Budgeting!9

10 Traditional Financial Budgeting A business plan is based on assumptions about the outside world - the interactions of customers, competition and the economy And planned actions (which consumes resources) That are combined to paint a picture of potential performance!10

11 Elements of a Traditional Budget Targets: fixed for the year Incentives: tied to financial incentives Planning: created from detailed annual planning Resource allocation: fixed at the start of the year Measurement: performance judged against original plan Coordination: adherence to the original plan!11

12 Traditional Financial Budgeting Once a year a chosen version of the business plan is locked down to create the budget BUT...!12

13 Lens: Ashby s Law of Requisite!13

14 Lens: Ashby s Law of Requisite!14

15 Lens: Ashby s Law of Requisite!15

16 Lens: Ashby s Law of Requisite!16

17 Problems with Traditional Budgeting Bureaucracy: detailed budgeting is time consuming, costly and wasteful Inflexibility: difficult to adapt to changing circumstances Political: striving to set lower targets and sandbagging costs budgets leads to a focus on internal affairs!17

18 Problems with Traditional Budgeting!18

19 Problems with Traditional Budgeting!19

20 Applying Ashby s Law!20

21 Ashby Law determines the Degree of Control and Flexibility of Decision-Making!21

22 Ashby Law determines the Degree of Control and Flexibility of Decision-Making!22

23 Ashby Law determines the Degree of Control and Flexibility of Decision-Making!23

24 Ashby Law determines the Degree of Control and Flexibility of Decision-Making!24

25 Beyond Budgeting!25

26 Beyond Budgeting An Organisational Operating System!26

27 Beyond Budgeting A management system characterised by flexible financial management processes and a devolved organisational structure. 27

28 Beyond Budgeting It enables businesses to adapt to their environment more effectively than those with traditional fixed budgets and functional hierarchies. 28

29 BB: Measure Performance against Peers!29

30 BB: Measure against Rate of Change!30

Problem with traditional target setting We need a dynamic forecasting process which reflects the variation in business rhythms and lead times.

31 Problem with traditional target setting We need a dynamic forecasting process which reflects the variation in business rhythms and lead times. Does not mean more forecasting but better; done at the right time with the right time horizon Forecasting - compensating for lack of agility?!31

32 !32

33 BB: Plan & Reallocate Resources continuously!33

34 BB: Plan & Reallocate Resources continuously!34

35 BB: Reward Shared Success!35

36 Beyond Budgeting Enables better, more consistent levels of performance based on efficient processes and the collective endeavours of self motivated and fulfilled people. 36

37 BB recognises what an Organisations needs to function Co-ordination Alignment Synchronisation!37

38 A Dilemma!38

39 To Function Organisations Need Co-ordination Alignment Synchronisation!39

40 To Function Organisations Need Co-ordination Alignment Synchronisation!40

41 To Function Organisations Need Co-ordination Alignment Synchronisation!41

42 Ashby Law of Requisite Variety The variety of the regulator must be equal to, or greater than, the variety of the environment

43 Perpetuating Existing Structure?!43

44 Perpetuating Existing Structure?!44

45 Beyond Budgeting s Solution!45

46 BB method for Cohesion without reducing Flexibility Co-ordination Alignment Synchronisation!46

47 BB method for Cohesion without Reducing Flexibility Method Approach Structure Supported x-functional teams Purpose Mission orientated teams Authority Decision-making delegated Control Goal-focused accountable team Information Decentralised transparency Values Customer needs creates pull!47

48 !48

BB method for Cohesion without Reducing Flexibility Method BB Structure Supported x-functional teams Purpose Authority Control Information Values Traditional Hierarchical specialist roles to exploit

49 BB method for Cohesion without Reducing Flexibility Method BB Structure Supported x-functional teams Purpose Authority Control Information Values Traditional Hierarchical specialist roles to exploit scaling Deliver returns by Mission orientated teams executing predefined plan Decision-making delegated Decision making handled by those at apex of org Goal-focused accountable Comply with rules, team procedures & policies Information pushed to Decentralised transparency authority Customer needs creates Performance reflects quality pull of decisions at the apex!49

50 Other Complimentary Approaches!50

51 Title: Owner: Context The critical challenge or opportunity is Team The people and skills we need are Intent Our goals are to Boundaries Freedoms Our freedoms and constraints to experiment are Constraints Higher Intent This helps the business to... Plan The hypotheses we will test are Karl Scotland Ltd Backbriefing A3

52 !52

53 This content of this slide is too client-specific to be shared publicly. Contact Dean Latchana to discuss the specifics

54 Real Applications and Where You Can Start!54

55 Examples From Across Industries Norwegian Oil Conglomerate No annual budget / Bank always open / based on project idea & capacity Fast growing European bank No budget / Cost control through autonomy & transparency / Branch KPIs: ROI, cost/income ratio, customer satisfaction!55

56 How is it done - In Summary Increase the flexibility of the budgeting process by: Moving annual budgeting to funding outcomes and teams. Switch accountability for decision-making and ownership of profits and losses (P&Ls) to teams which are closest to the problem and/or the commercial opportunity So moving from cost-centric to value-centric accounting!56

57 !57

58 Conclusion!58

59 Business agility is the ability of a business system to rapidly respond to change Evan Leybourn!59

60 !60

61 Going beyond the much spoken about approaches Delivering customer value in a complex environment: Scrum: People & Interactions Lean: Balance & Flow Lean Start-up: Learn & Experiment NOW CONSIDER: Approaches to include Finance!61

62 !62

Beyond Budgeting en smidig styringsmodell som tar virkeligheten på alvor. Bjarte Bogsnes Statoil Formann - Beyond Budgeting Roundtable Europe

Beyond Budgeting en smidig styringsmodell som tar virkeligheten på alvor Bjarte Bogsnes Statoil Formann - Beyond Budgeting Roundtable Europe 10 Outline The case for change - what is the problem? Beyond