CFOs are tightening the screws again. Markets are jumpy, boards want certainty, and the budget book looks like the last solid artifact in a fog of forecasts. Yet engagement is sliding. Gallup puts global employee engagement at 20 percent in 2025, with lost productivity estimated at about 10 trillion dollars, roughly 9 percent of global GDP. Manager engagement has fallen nine points since 2022, including a one‑year drop from 27 to 22 percent between 2024 and 2025 (Gallup, 2025). Micromanagement is back just as managers are burning out. It is a bad match. There is a better way to get discipline without deadening initiative.
What beyond budgeting actually replaces
The classic case for abandoning budgets is not romantic. It came from a crisis. Around 1970, Svenska Handelsbanken scrapped formal budgets and rebuilt control around radical decentralization: branches as profit centers, accountability pushed to the front line, and performance judged relative to peers rather than against a negotiated annual number (Lindsay and Libby, 2007). Handelsbanken became the founding example that a large bank could run without budgets and still maintain, even strengthen, control. The case is a teaching case, not a statistical generalization, but it seeded the principles that advocates later codified.
The first in‑depth field study of a modern beyond budgeting rollout shows what this actually looks like inside a large, complex firm. Østergren and Stensaker examined the oil and energy company Statoil after it abandoned budgets at corporate level and in two business units. Their core finding is precise: removing budgets does not remove control. New control mechanisms emerge, the relationship between corporate headquarters and divisions changes, and fresh dependencies appear between units (Østergren and Stensaker, 2011). Budgeting had been the central spine coordinating targets, resources, and evaluation. Take it out, and the body does not collapse. It grows new connective tissue.
This matters for leaders who fear a slide into managerial anarchy. The evidence suggests the opposite. Control shifts from annual promises to continuous comparison. It moves from ex ante negotiation to ongoing scrutiny of relative performance. It becomes more interdependent, because units now watch and balance one another, rather than retreat into the private kingdom of a twelve‑month plan. None of that is costless. Østergren and Stensaker document that removing the budget changes power relations between headquarters and divisions and creates new lines of dependency that must be managed deliberately (2011).
The conditions that make decentralization safe
The broader organizational literature is clear about one thing. Pushing authority down works only if you formalize how it will work. Lee and Edmondson define self‑managing organizations as those that decentralize authority in a radical, formal, and systematic way across the company, eliminating the traditional manager‑subordinate relationship (Lee and Edmondson, 2017). Their point is not that every firm should abolish managers. It is that less hierarchy requires more explicit rules of the game: who decides what, how conflicts get resolved, and what counts as good performance. Otherwise, ambiguity replaces bureaucracy.
That is where transparency and learning come in. Opening the books and inviting teams to act on them is not a slogan, it is a social risk. People need to ask naive questions about margins, challenge plans that no longer fit, and admit when a forecast went wrong. Edmondson’s seminal research on psychological safety found that teams with higher psychological safety engaged more in learning behaviors, and that such learning mediated the link to performance (Edmondson, 1999). In practice, beyond budgeting needs the same climate if financial transparency is to translate into better local decisions. The budget’s promise was stability through rules. The post‑budget promise is adaptability through informed, candid dialogue.
Leaders should also avoid a common trap. Decentralization is not abdication. Handelsbanken’s model worked with branch‑level accountability and peer comparison as ever‑present yardsticks, not as occasional reviews (Lindsay and Libby, 2007). Statoil’s experience shows that as budgets disappear, other mechanisms proliferate, along with new interdependencies that require careful orchestration from the center (Østergren and Stensaker, 2011). The work of the corporate core changes from approving line items to designing the information, benchmarks, and forums that keep a decentralized system honest.
Why this matters now
The engagement slump makes this an urgent design choice, not a philosophy seminar. Gallup’s figures are a blunt reminder that the cost of disengagement is vast, and that middle managers in particular are losing steam (Gallup, 2025). Traditional budgeting piles more burden onto that layer: more variance explanations, more bottom‑up sandbagging, more top‑down cuts. A control system that relies less on annual bargaining and more on continuous, transparent performance can ease that load by clarifying outcomes and compressing cycles. The evidence does not claim that beyond budgeting fixes engagement, and it should not be read that way. It does show a path to discipline that does not require recreating a 1990s planning machine at a moment when speed and judgment matter more than ever.
How to start without losing control
This is not an overnight conversion. The cases and field evidence suggest four practical moves that reduce risk:
- Replace negotiated annual targets with relative performance where it is credible. Peer comparisons focus attention on outcomes and reduce gaming. Handelsbanken used this principle at scale, though the case is a single‑firm account and not a universal law (Lindsay and Libby, 2007).
- Expect, and design for, new interdependencies. When budgets go, you will need new mechanisms to coordinate across units. Treat this as a corporate design task, not an emergent miracle. Statoil’s experience shows that ties between headquarters and divisions will change, along with dependencies among divisions themselves (Østergren and Stensaker, 2011).
- Invest in the social infrastructure of transparency. Psychological safety is not a platitude. It predicts whether teams will use new information to learn and improve. Without it, open‑book practices become performative rather than productive (Edmondson, 1999).
- Be explicit about decision rights. If you intend to push authority down, state who decides, on what basis, and how performance will be judged. The literature on self‑managing organizations emphasizes that decentralization must be formal and systematic to avoid drift (Lee and Edmondson, 2017).
The takeaway is simple. Budgets are a technique, not a religion. If the goal is control with adaptability, the record shows you can have both by changing where and how control operates. In a year when engagement is low and managerial capacity is tight, that is not a radical bet. It is good stewardship.
Sources
- Østergren & Stensaker (2011). Management control without budgets: a field study of Beyond Budgeting in practice. Shows that removing budgets at a large oil and energy company led to new control mechanisms and altered HQ–division relationships, evidence that control does not disappear. https://www.tandfonline.com/doi/abs/10.1080/09638180903487842
- Lindsay & Libby (2007). Svenska Handelsbanken: Controlling a Radically Decentralized Organization without Budgets. A teaching case of a large bank that replaced budgets with decentralization and relative performance, illustrating how control can work without annual budgets. https://www.researchgate.net/publication/247875136_Svenska_Handelsbanken_Controlling_a_Radically_Decentralized_Organization_without_Budgets
- Lee & Edmondson (2017). Self-managing organizations: Exploring the limits of less-hierarchical organizing. Defines how radical decentralization requires formal, systematic mechanisms, supporting the argument that beyond budgeting needs explicit governance. https://www.sciencedirect.com/science/article/abs/pii/S0191308517300059
- Edmondson (1999). Psychological Safety and Learning Behavior in Work Teams. Finds that psychological safety is associated with learning behaviors that mediate performance, grounding the claim that transparency must be paired with a learning climate. https://journals.sagepub.com/doi/10.2307/2666999
- Gallup (2025). State of the Global Workplace 2025. Reports global engagement at 20 percent and estimates 10 trillion dollars in lost productivity, with a sharp drop in manager engagement, framing the current urgency to redesign control. https://www.gallup.com/workplace/659610/state-global-workplace.aspx