SHOULD MANITOBA HYDRO GO BEYOND BUDGETING? - Beyond Budgeting Research
TO: BUSINESS MANAGER
FROM: BUSINESS ANALYST
DATE: NOV 20TH, 2014
This business report will provide an understanding of beyond budgeting concept from the research and study of Statoil 's success on implementing beyond budgeting. The purpose of this research is to help Manitoba Hydro management team to understand the value of the beyond budgeting. Furthermore, an analysis of whether or not Manitoba Hydro should go beyond budgeting will be provided. Based on the analysis, a recommendation will be provided to address what change management need to be in place at Manitoba Hydro in order to…show more content… Statoil has always been a values-based and people-oriented organization. But during years of growth, traditional management processes were causing increasing bureaucracy and rigidity. There is gap between the leadership principles and the management processes. In 2005 Statoil started on changing the management processes, which included abolishing traditional budgeting. In 2010 Statoil also decided to “kick out the calendar”. These were both key steps towards a more dynamic, flexible and self-regulating management model.
Statoil started to use relative instead of absolute targets. Relative targets address how the entire organization and each level are doing compared to others, internally or externally, instead of a fixed numbers. The teams find the benchmarking is fair and relevant. It makes a more self-regulated team compared to the traditional budget approach.
Statoil still has financial targets. However, the main financial targets are set against a peer group of other oil and gas companies. The targets include Return on Capital Employed, Shareholder Return, and Unit Production Cost. These are the kind of financial targets the Board approve. They do not approve a budget. These targets are also key components for the bonus system. Everybody in the same boat competes with the competitors.
Statoil introduced the dynamic forecasting. It is different with rolling forecasting. The rolling