Every few years a management fashion promises to dismantle the annual budget, and every few years most companies decide the risk is too high. The instinct is understandable. The budget feels like the last handrail between a large organization and chaos. Which is why the most important fact in this entire debate is that one large, heavily regulated, famously conservative institution let go of the handrail more than fifty years ago and is still standing. The bank is Svenska Handelsbanken, and its story is the reason Beyond Budgeting exists as anything more than a thought experiment.
A crisis, and a bet against the budget
Around 1970, under chief executive Jan Wallander, Handelsbanken abandoned formal budgeting entirely. Lindsay and Libby (2007), whose teaching case remains the fullest account, describe it as the bank's response to a crisis, not a management-theory indulgence. Wallander's conviction was blunt: a budget is either a confirmation of what you already expect, in which case it is redundant, or a bet on a future that will not arrive as forecast, in which case it is dangerous. So he removed it and rebuilt the control system around something else.
That something else was radical decentralization. Lindsay and Libby (2007) describe a structure in which each branch operates as a profit center with real authority, and performance is judged not against a negotiated internal target but against relative measures, branch versus branch, region versus region, the bank versus its rivals. The point that gets lost when people call this a bank without controls is that it swapped one control for a tighter one. A branch manager no longer has a soft budget to hide behind. There is nowhere to sandbag, because the standard is the live performance of your peers, and the peers keep moving.
Why it counts as evidence, and why it does not settle everything
Handelsbanken is the exemplar the accounting literature reaches for when it wants to show that a large organization can run successfully, perhaps more successfully, without budgets. The management control system it built, relative performance and branch-level accountability, became the raw material for the principles the Beyond Budgeting movement later codified. It is, in the plainest sense, the founding empirical case.
It is also, honestly, a single case. A teaching case built on one exceptional firm cannot prove that budget abandonment causes good performance. Handelsbanken had an unusual culture, an unusual leader, and decades to let the model set. The more careful reading is that the bank demonstrates possibility, not a formula: it shows the thing can be done and can endure, which is more than the average skeptic will concede but less than a law of management.
The broader evidence keeps that caution in place. Matejka, Merchant and O'Grady (2021), comparing 80 Beyond Budgeting adopters with 121 non-adopters across a survey of 201 organizations, found that many adopters struggle to actually let go, clinging to the fixed annual target for decisions and to financial metrics for appraisal even after declaring themselves budget-free. Handelsbanken's rarity is part of its lesson. Most firms that admire the model cannot bring themselves to fully live it.
What a modern firm should take from it
The temptation in 2020s management circles is to read Handelsbanken as a licence to declare freedom and delete the spreadsheet. That misreads the case entirely. What Wallander removed was the budget. What he installed was harder accountability, not softer. Ostergren and Stensaker (2011), studying budget abandonment at a large energy company, found the same pattern from the other direction: taking away the budget did not remove control but forced new control mechanisms to emerge and new lines of dependence to form. Nature abhors a control vacuum, and so does a balance sheet.
The practical implication for a leadership team is therefore uncomfortable. You cannot copy Handelsbanken by subtraction. Dropping the budget is the easy half and the dangerous half if it stands alone. The bank's durability came from what it added: genuine local authority, and a relative yardstick that no one could negotiate down. If you are not willing to push real decision rights to the front line and to judge people against a moving external standard, keep your budget. It is a weak control, but a weak control beats none. The half-century of quiet profit that made Handelsbanken famous was never about the absence of a budget. It was about the presence of something stronger.
Sources
- Lindsay, R. M. & Libby, T. (2007). Svenska Handelsbanken: Controlling a Radically Decentralized Organization without Budgets. Documents the bank's 1970 abandonment of budgets under Jan Wallander and its replacement by branch-level profit centers and relative performance, the founding case of Beyond Budgeting. https://www.researchgate.net/publication/247875136_Svenska_Handelsbanken_Controlling_a_Radically_Decentralized_Organization_without_Budgets
- Matejka, M., Merchant, K. A. & O'Grady, W. (2021). An Empirical Investigation of Beyond Budgeting Practices. Finds many self-declared adopters still cling to fixed annual targets and financial appraisal, showing how rare full commitment like Handelsbanken's actually is. https://doi.org/10.2308/JMAR-19-010
- Ostergren, K. & Stensaker, I. (2011). Management control without budgets: a field study of Beyond Budgeting in practice. Shows removing the budget forces new control mechanisms and dependencies to emerge, confirming that abandonment adds accountability rather than removing it. https://www.tandfonline.com/doi/abs/10.1080/09638180903487842