Return-to-office mandates, cost freezes, and another turn of the budgeting screw are a familiar corporate reflex. Yet the engagement data point the other way. Only 20 percent of employees are engaged globally, and the bill for lost productivity is about 9 percent of world GDP, roughly 10 trillion dollars (Gallup, 2025). Manager engagement has dropped sharply since 2022, including a fall from 27 to 22 percent between 2024 and 2025, even as best-practice organizations report manager engagement near four times the global average (Gallup, 2025). If traditional controls are delivering disengagement, the question is not how to tighten the annual budget. It is how to redesign control so people can respond faster without spinning out of oversight.
What actually happens when you remove budgets
The closest look we have inside a large company that stopped budgeting comes from a field study at a European oil and energy group that replaced its budgets across the corporation and two business units. The core finding was disarmingly simple. Scrapping the budget did not reduce control. It changed it. New control mechanisms emerged, the relationship between corporate and division management was reshaped, and fresh dependencies formed between divisions (Østergren and Stensaker, 2011). In other words, the budget was not the control system. It was a bundle of roles, routines, and targets. When that bundle was disassembled, the pieces were rebuilt differently.
This is a design lesson, not a performance claim. The study was qualitative and conducted in a single organization, so it cannot establish generalizable effects on cost or growth (Østergren and Stensaker, 2011). What it does show is where to look: if you remove fixed annual targets and spending envelopes, expect control to migrate to other anchors and relationships. Corporate centers may govern through comparisons, policies, and dialogues rather than through a master spreadsheet. Divisions may depend more on each other for resources and reputation, which can strengthen learning across units or create new bottlenecks if left unmanaged.
The exemplar that showed budgets are optional
The founding case for Beyond Budgeting sits in European banking. Svenska Handelsbanken abandoned formal budgets around 1970 under CEO Jan Wallander, in favor of radical decentralization that pushed authority to branches and relied on relative performance and branch-level accountability (Lindsay and Libby, 2007). The case is widely used in the accounting literature to demonstrate that a large organization can operate without budgets, and it served as the template for the principles later codified in the Beyond Budgeting movement (Lindsay and Libby, 2007).
Again, caution is warranted. This is a teaching case from a single firm, not a randomized trial, and so it does not prove that others will achieve the same outcomes if they copy the template (Lindsay and Libby, 2007). What Handelsbanken does supply is a coherent replacement architecture. Control rests on comparisons to peers rather than fixed numerical promises, accountability is local and concrete, and head office focuses on setting boundaries and making information visible. If the budget is a contract, the Handelsbanken model is a scoreboard and a set of rules of the game.
Why decentralization and transparency fit the 2020s
Traditional managerial hierarchies are well suited to reliable execution of known tasks in stable environments. They struggle with complex, cross-functional, non-routine problems where speed and local knowledge matter more than compliance (Lee and Edmondson, 2017). That is the argument from organizational research that synthesizes decades of evidence on self-managing systems. Self-managing organizations decentralize authority in a formal, systematic way across the enterprise and remove the manager-subordinate relationship as the primary control spine (Lee and Edmondson, 2017). Budgeting is not the only method that locks people into rigid forecasts and authority escalations, but it is a potent one.
The engagement data add urgency. The steep decline in manager engagement since 2022 signals strain on the middle of the hierarchy, where budgets are written, defended, and policed (Gallup, 2025). Meanwhile, the gap between the global average and best-practice organizations reinforces that engagement is a function of organizational design, not just macro conditions (Gallup, 2025). Moving away from annual budget contracts toward relative performance, open information, and local decision rights is one way to change that design. Practitioners like Bjarte Bogsnes have argued for such shifts in resource governance for years. The core point, supported by both the Statoil field study and the Handelsbanken case, is that control can travel with the work when authority and information do too (Østergren and Stensaker, 2011; Lindsay and Libby, 2007).
Transparency alone is not enough. People must feel able to use the numbers to question assumptions, surface risks, and experiment. That is what the research on psychological safety shows at the team level. In a field study of 51 work teams, psychological safety, defined as a shared belief that the team is safe for interpersonal risk taking, was associated with learning behaviors that mediated performance outcomes. Team efficacy, by contrast, did not predict learning once safety was accounted for (Edmondson, 1999). Open-book practices expose performance gaps. Without safety, exposure produces blame rather than inquiry.
How to trade a budget for better control
The evidence does not prescribe a one-size template. It points to design choices that shift control from annual promises to continuous learning and relative results.
- Separate purposes that budgets conflate. Instead of a single annual document that sets targets, forecasts, and spending authority, use different mechanisms for each. The Statoil field study shows that when one bundle is removed, new ones will form. Make them explicit and coherent (Østergren and Stensaker, 2011).
- Anchor accountability in relative performance where it makes sense. The Handelsbanken case illustrates how peer comparison and local profit accountability can provide discipline without fixed annual contracts (Lindsay and Libby, 2007).
- Push decisions to where knowledge resides, and make information visible. Self-managing designs work by decentralizing authority systematically and ensuring people can see what they need to act (Lee and Edmondson, 2017). If the books are open, train people to read them.
- Build the social conditions for learning. Psychological safety is a precursor to the inquiry and experimentation that open numbers invite. Put mechanisms in place that reward surfacing problems, not hiding them (Edmondson, 1999).
- Watch for new dependencies. Removing the budget reshapes power and coordination. The Statoil case warns that divisions may become more dependent on each other. Map those interdependencies and create forums to resolve them before they become barriers (Østergren and Stensaker, 2011).
Firms will still need constraints. They can be thresholds, policies, or risk limits rather than annual allocations. The operational test is simple. Do your controls help people respond to real uncertainty faster, or do they make responsiveness a variance to be explained away? The Beyond Budgeting canon began as a crisis response in a bank and evolved through experiments in oil and energy. The pattern is clear in both. Control that travels with authority and transparent information is not lighter. It is smarter for the work most companies face now.
Sources
- Østergren & Stensaker (2011). Management control without budgets: a field study of Beyond Budgeting in practice. In a single-firm field study, removing budgets shifted rather than reduced control, reshaping HQ–division relations and creating new interdependencies. https://www.tandfonline.com/doi/abs/10.1080/09638180903487842
- Lindsay & Libby (2007). Svenska Handelsbanken: Controlling a Radically Decentralized Organization without Budgets. A teaching case showing how a large bank replaced budgets with radical decentralization, relative performance, and branch-level accountability. 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. Synthesizes research on when decentralization outperforms hierarchy, defining SMOs and why they suit complex, non-routine problems. https://www.sciencedirect.com/science/article/abs/pii/S0191308517300059
- Edmondson (1999). Psychological Safety and Learning Behavior in Work Teams. Seminal field study linking psychological safety to learning behaviors that mediate team performance, a foundation for making open information usable. https://journals.sagepub.com/doi/10.2307/2666999
- Gallup (2025). State of the Global Workplace 2025. Reports global engagement at 20 percent, a productivity cost near 9 percent of world GDP, and a post-2022 drop in manager engagement, framing the urgency for redesign. https://www.gallup.com/workplace/659610/state-global-workplace.aspx