Return-to-office fights get headlines, but a quieter fracture runs through most firms: engagement is falling while leaders tighten traditional controls. Global employee engagement is down to 20 percent, with managers’ engagement dropping from 27 to 22 percent in a year, and the productivity cost is vast, roughly 9 percent of world GDP (Gallup, 2025). In that context, the annual budget season functions as ritual and restraint. It promises certainty, then traps managers in targets that age badly. The alternative is not chaos. It is a different operating system.
What it looks like when the budget goes away
The founding case of the Beyond Budgeting movement is not a tech startup, it is a bank. Around 1970, Svenska Handelsbanken abandoned formal budgets during a crisis and built a radically decentralized model that made each branch accountable for its own performance and compared units on relative results rather than fixed plans (Lindsay and Libby, 2007). The case is taught precisely because it shows a large organization can operate without budgets, and its mechanisms later informed the principles associated with Beyond Budgeting in the accounting literature (Lindsay and Libby, 2007). This is a single-firm teaching case, so it cannot settle the question for every industry, but it does puncture the assumption that budgets are synonymous with control.
Removing budgets does not remove control
The central empirical test of Beyond Budgeting in practice comes from a field study inside the oil and energy company Statoil after it abandoned traditional budgets. The researchers found something many executives need to hear before they reach for the red pen: taking budgets off the table did not dissolve control, it changed it (Østergren and Stensaker, 2011). New control mechanisms emerged, the relationship between corporate and divisional management shifted, and fresh dependencies formed between divisions (Østergren and Stensaker, 2011). In other words, the organization rewired itself. Headquarters still steered, but through different levers. The study is qualitative and limited to a single firm, so it does not prove causation across contexts. It does, however, document the mechanics of how control migrates when the budget is no longer the spine of the system.
This migration matters. In budget-centric firms, the annual number tries to play three roles at once: a target, a forecast, and a resource allocation device. When markets move, that mash-up drives dysfunctional behavior. The Statoil evidence suggests that once budgets are removed, managers stitch together alternative controls and interdependencies. The job becomes designing those replacements intentionally rather than letting them accrete by habit (Østergren and Stensaker, 2011).
The scaffolding: decentralization and transparency
Beyond Budgeting often rides alongside deeper decentralization. Research on self-managing organizations defines the idea clearly: they systematically and formally distribute authority across the company and remove the classic manager-subordinate relationship as the default (Lee and Edmondson, 2017). The synthesis is careful about context. Hierarchy handles repeatable execution reliably in stable environments, but it tends to suppress cross-boundary problem solving and slow adaptation when work is complex and non-routine (Lee and Edmondson, 2017). That is the organizational case for getting decisions closer to the edge.
Decentralization without visibility is drift. This is where open-book practices help, not as a slogan but as infrastructure. Teams can only take real responsibility if they understand the economics they are affecting. The behavioral engine under that transparency is psychological safety. In a foundational field study, Edmondson showed that teams with higher psychological safety engaged more in learning behaviors, and that learning mediated the link to performance outcomes (Edmondson, 1999). Put simply, people need to feel safe to surface problems, test assumptions, and ask naive questions about the numbers. Without that, transparency becomes performative and the new controls revert to old compliance.
Practitioners have pushed this direction in heavy industry as well as services. Bjarte Bogsnes, a leading voice for Beyond Budgeting, has argued for years that when budgets disappear, you must replace them with relative performance, dynamic planning, and radical transparency. The Statoil field evidence shows the system-level challenge: get those pieces wrong and you do not remove control, you scatter it (Østergren and Stensaker, 2011).
The 2020s read for CFOs and COOs
You do not have to go budgetless overnight to learn from these cases. Start by naming the trade-offs. The Gallup data shows managers are disengaging faster than the workforce as a whole (Gallup, 2025). If your control system turns managers into negotiators of fixed numbers rather than stewards of adaptive performance, expect that disengagement to deepen. A Beyond Budgeting path is a design choice that shifts control from annual commitments to continuous course correction. The Statoil study suggests this will change power and create new interdependencies, so plan for that rewiring explicitly rather than treating it as a side effect (Østergren and Stensaker, 2011).
Second, treat transparency as a capability, not a memo. If you want branch or unit accountability like Handelsbanken’s, invest in timely, comparable metrics and the routines where teams interpret them together (Lindsay and Libby, 2007). Build the psychological safety that makes those conversations honest and useful, because that is where learning translates to performance over time (Edmondson, 1999).
Finally, mind your claims. The evidence base here is nuanced. Handelsbanken is an emblematic case, not a randomized trial (Lindsay and Libby, 2007). Statoil’s experience is a single-organization field study, not a universal law (Østergren and Stensaker, 2011). The research on self-managing organizations is a theoretical synthesis, not a causal blueprint (Lee and Edmondson, 2017). What you can take to the bank is this: control is a design variable. If you treat the budget as the only control that counts, you will get brittle compliance and stale plans. If you redesign control around decentralized decisions, relative performance, and open economics, you give people a fighting chance to care, learn, and respond.
The practical implication is stark. In a world where only one in five employees is engaged, clinging to the budget as your main lever is not prudence, it is avoidance (Gallup, 2025). The firms that separate planning from target setting, shift decision rights closer to customers, and make the numbers common property are not becoming looser. They are choosing a harder kind of management, one that swaps ritual for responsibility.
Sources
- Østergren & Stensaker (2011). Management control without budgets: a field study of Beyond Budgeting in practice. Field evidence from Statoil showing that abolishing budgets reshapes rather than removes control, altering HQ–division relations and creating new dependencies. https://www.tandfonline.com/doi/abs/10.1080/09638180903487842
- Lindsay & Libby (2007). Svenska Handelsbanken: Controlling a Radically Decentralized Organization without Budgets. Teaching case documenting how Handelsbanken eliminated budgets and ran on decentralization and relative performance at the branch level, illustrating feasibility and mechanisms. 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. Theoretical synthesis defining self-managing organizations and the contexts where decentralization helps complex problem solving. https://www.sciencedirect.com/science/article/abs/pii/S0191308517300059
- Edmondson (1999). Psychological Safety and Learning Behavior in Work Teams. Seminal field study linking team psychological safety to learning behaviors that in turn relate to performance, supporting the case for transparency practices. https://journals.sagepub.com/doi/10.2307/2666999
- Gallup (2025). State of the Global Workplace 2025. Survey finding global engagement at 20 percent, managers’ engagement down to 22 percent, and an estimated 9 percent of global GDP lost to low engagement, framing the urgency of redesigning control. https://www.gallup.com/workplace/659610/state-global-workplace.aspx