Volvo Cars leaves the budget
On November 19, arranged Ekan Management the fifth local BBRT meeting in Sweden (Beyond Budgeting Roundtable) with Volvo Cars as host. Representatives from around 15 large and medium-sized companies had gathered to share experiences and share how Volvo Cars and Getinge developed their control models.
Unpredictability requires greater flexibility
The meeting began with a presentation of Volvo Cars' ongoing work on developing its steering model - performance steering. The work means that the global group leaves the traditional budget management based on command-and-control in favor of governance through purpose and trust. Next year, the company deviates from the annual detailed budget and goes from leading with broken down absolute targets on an annual basis to moving targets based on priorities, trend and pace.
The reason for the change of steering model is that "when we know less about the future we must adapt and accept that we do not know and thus question both our business model and steering model", says Erik Severinsson, Vice President & Operations Controller at Volvo Car Group. Greater flexibility in operations and cost management is needed to match the revenue side variation. The new way of managing also means that the finance function and its role need to be developed as well as new ways of presenting information on how the business is going. We saw an example of how travel costs are now completely transparent to everyone in the organization. Everyone also has an increased mandate to assess and order what's right with the knowledge that it will be visible to everyone. Already, a change in behavior has occurred from ”do I have budget for this?"To"is this the right thing to do?".
From one to two planning cycles at Getinge
Today's second presentation was about Getinge's work on introducing rolling forecasts. From working with an annual planning cycle, two rolling planning cycles have been introduced, says Linda Forsberg (Senior Controller EMEA, Getinge Group). A strategic cycle that focuses on strategy and objectives three years ahead and a tactical one that focuses on follow-up and forecasting to see what the trend towards the objectives looks like. The work of separating the various responsibilities and roles of the finance function is underway with the goal that the function should become more of a strategic support with business partners working with forward-looking analyzes. Less time should be spent on details and retrospective deviation analyzes against an obsolete budget.
Ekan Management, BBRT's local representative in Sweden, will regularly invite more meetings. The next scheduled meeting in Europe is in Zurich on March 13-14, 2019. Contact Rikard Olsson for more information (rikard.olsson@ekan.com).