Clarity in Chaos: From Budget Control to Adaptive Control
- Bas Kemme
- Feb 12
- 5 min read
A practical way to regain control, increase autonomy, and improve performance.
Ten points, one message: budgets give you comfort, not control. This is not a 10-step program. It’s the argument, plus a few starter moves if you want adaptability without chaos.
Introduction
CFOs (and everyone pulled into the budget cycle), budget season is either here or just ending. With costs under pressure, it has been more draining than ever. And the core frustration is predictable: we lock in decisions months in advance, then spend the rest of the year defending them while reality moves on. Cost control matters. The problem is that traditional budgets often buy a feeling of control at the price of slower decisions, more politics, and weaker performance.
A better alternative exists: Beyond Budgeting, an approach that separates targets, forecasts, and resource decisions, and replaces fixed annual contracts with a more adaptive management model. It’s not theory only. On 9 May 2005, Statoil’s Executive Committee formally decided to abolish traditional budgeting as part of their shift to a different performance framework. [1] What follows is a practical summary, grounded in the work of Bjarte Bogsnes and the Beyond Budgeting movement, plus what I’ve seen in real organizations.
1) Budgeting was built for a different world
Budgeting rose with industrial-era management thinking: central planning, predictability, and control. James O. McKinsey’s 1922 book Budgetary Control is an early, clear example of that mindset. [2][3] This worldview assumes the future is forecastable enough to lock in detailed plans, then manage performance by variance. That assumption is increasingly shaky.
2) The criticism is not new, it’s just more urgent now
Russell Ackoff mocked corporate planning as a “ritual rain dance”: lots of activity, little effect, and most energy spent improving the dance rather than the weather. [4][5]. That line lands because it describes what many leadership teams experience today: budgeting becomes an internal optimisation machine.
3) The cost is not the time, it’s the performance you lose
Budgeting is expensive in time and attention. Harvard Business School’s Working Knowledge once cited that the average billion-dollar company can spend up to 25,000 person-days per year putting the budget together. [6]
More painful than the effort is the performance impact:
revenue targets become ceilings,
cost budgets become floors (“spend it or lose it”),
decisions slow down because the budget becomes the permission system,
and customer reality loses to internal negotiation.
4) Why budgeting keeps failing (even with smart people)
The root cause is simple and structural. Most organizations force one set of numbers to do three incompatible jobs:
Target setting (what we want to happen)
Forecasting (what we think will happen)
Resource allocation (what it will take to make it happen)
Targets should stretch. Forecasts should be unbiased. Resource decisions should be disciplined but adaptable. When you compress these into one number, people will game it. Not because they are bad people, but because the system rewards it.
5) Beyond Budgeting in two moves
There isn’t one recipe. If someone offers you a template that “works everywhere”, be sceptical. But most Beyond Budgeting journeys have two common moves:
Move 1: Split the budget into three separate mechanisms Separate targets, forecasts, and funding.
Move 2: Make each mechanism dynamic instead of calendar-driven Shift from “annual, fixed, negotiated” to “rolling, event-driven, reality-based”.
6) What it looks like in practice
Target setting: from fixed numbers to relative direction
Use goals that are relative and directional, for example:
relative to competitors, peers, or market growth,
relative to your own trend,
directional outcomes like ROCE/ROACE that leave room for local judgement.
Then evaluate performance in context, not by “did you hit the number”.
Forecasting: from weapon to instrument
Forecasts should exist to steer decisions, not to judge people. So you:
separate forecast from target,
simplify detail where it adds no decision value,
update more frequently (rolling),
use driver-based models.
AI can help here, but only if it improves speed and accuracy. The point is not the tech, it’s removing bias and increasing responsiveness.
Resource allocation: from entitlement to dynamic funding
Funding becomes a decision process, not an annual entitlement:
thresholds for local autonomy,
transparency for spend and exceptions,
stage-gated funding for innovation,
investment committee logic for bigger bets.
This is where leadership teams get nervous. Fair. But it’s also where you trade the illusion of control for real control in real time.
7) CFOs and CHROs need to stop running in parallel
This is not a finance-only redesign. If you increase autonomy and adaptability, you must redesign the human system too:
performance evaluation (relative, contextual, values-based),
incentives (less gaming, more intrinsic motivation),
leadership development (enabling conditions, not micromanagement).
Daniel Pink’s work is a useful reference point here: for complex work, heavy extrinsic incentives can backfire by undermining intrinsic motivation. [7]
8) Leadership assumptions decide whether this works
Process redesign won’t stick if leadership beliefs stay “command and control”.
Douglas McGregor framed this as Theory X vs Theory Y:
Theory X assumes people avoid responsibility and need control.
Theory Y assumes people want to contribute and grow if conditions are right. [8]
Beyond Budgeting is, at its core, a Theory Y operating model. A practical metaphor used by Bjarte Bogsnes: traffic lights (central permission, stop-go) vs. roundabouts (clear shared rules, flow, local judgement).
9) A counterpoint you should take seriously
Some budgeting discipline is genuinely useful. If you’re capital-intensive, cash-constrained, or heavily regulated, you cannot simply “let teams decide” without guardrails. Boards and investors may also require annual financial plans and external guidance.
So the aim is not “abolish planning”. The aim is:
Stop using the annual budget as the internal contract for running the business
Separate targets, forecasts, and funding
Keep whatever external planning you need, without letting it poison internal agility.
10) How to start without breaking the business
Do not launch a corporate-wide change program with an army of consultants and a big-bang rollout. You will recreate the same disease, just with new vocabulary. Start like innovation: small, principled experiments, fast learning.
Step 1: Create executive clarity on the problem and the prize
Quantify the cost of the current system in time, delays, missed opportunities, and dysfunctions.
Step 2: Assess readiness and predictable failure modes
Name leadership assumptions, current performance management flaws, tooling gaps, and where resistance will come from.
Step 3: Pick a safe pilot and learn fast
Choose an area with measurable outcomes, strong leadership, contained risk, and willingness to test.
Invitation
If you are serious about performance in uncertainty, here’s the uncomfortable question: Are you running the business, or are you running the budget?
At IntotheNXT, we help leadership teams replace legacy practices that switch people off with modern practices that switch people on, combining Tech & Touch: data and technology (increasingly AI), plus management practices that raise autonomy, accountability, and pace.
If you want to explore what Beyond Budgeting could look like in your context, I’m happy to pressure-test your situation and identify a low-risk starting point that creates evidence quickly.
Sources
[1] Bjarte Bogsnes, Implementing Beyond Budgeting (Wiley, 2016), Chapter 4 “The Statoil Case”.
[2] Library of Congress catalog entry, James O. McKinsey, Budgetary Control (1922).
[3] Example secondary citation referencing the quote (McKinsey 1922, p. 12) used in management control literature:
[4] Reference that attributes the “Corporate Rain Dance” critique to Russell L. Ackoff, The Wharton Magazine (Winter 1977):
[5] Ackoff publication list (includes “The Corporate Rain Dance”, Wharton Magazine, Winter ’77):
[6] Harvard Business School Working Knowledge: “Why Budgeting Kills Your Company” (Aug 11, 2003), includes the 25,000 person-days figure.
[7] Daniel H. Pink, Drive: The Surprising Truth About What Motivates Us (2009).
[8] Douglas McGregor, The Human Side of Enterprise (1960).
[9] Beyond Budgeting Round Table (BBRT).
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