Budget season still eats months of managerial time while engagement sinks. Only one in five employees worldwide report being engaged, and the bill for lost productivity is roughly 9 percent of global GDP, about 10 trillion dollars (Gallup, 2025). Manager engagement has fallen sharply since 2022, which hints at the exhaustion of the middle layers that administer plans they can neither set nor adapt quickly (Gallup, 2025). Boards want discipline. Teams want autonomy. The annual budget sits in the middle, pretending to do both and doing neither well.
What actually happens when you remove budgets
A rare in-depth field study looked past slogans to see how Beyond Budgeting works inside a large, complex company. At Statoil, later StatoilHydro, executives abandoned traditional budgets and lived with the consequences across the corporate center and two business units. The finding was blunt. Removing budgets did not remove control. New control mechanisms emerged, the relationship between corporate management and divisions changed, and dependencies shifted among units (Østergren and Stensaker, 2011). In other words, discipline did not evaporate, it moved.
This is the point leaders often miss when they treat budgets as synonymous with control. A budget fixes targets, allocates resources, and sets incentives in one bundle. Once that bundle is unpicked, other mechanisms take its place. Some sit closer to operations, others reset how headquarters interacts with the field. The study is a single-organization qualitative analysis, so it does not prove universal effects, but it gives the best on-the-ground view we have of Beyond Budgeting in practice: control migrates to where information lives, and power dynamics change with it (Østergren and Stensaker, 2011).
The classic counterexample to budget worship
The exemplar is Svenska Handelsbanken, which scrapped formal budgeting around 1970 during a crisis under CEO Jan Wallander. The bank replaced budgets with radical decentralization, branch-level accountability, and evaluation based on relative performance rather than fixed annual targets (Lindsay and Libby, 2007). Handelsbanken is held up in the accounting literature as proof that a large organization can run without budgets, and even thrive, by pushing decision rights to the edge and comparing units to peers instead of to a dated plan (Lindsay and Libby, 2007).
There are caveats. This is a teaching case, a single firm, not a randomized trial. You cannot infer that every company will replicate its results. Yet the case remains foundational for the Beyond Budgeting movement championed by practitioners such as Bjarte Bogsnes. Its lesson is practical and precise. If you want to replace budgets, you must replace them with something, usually a mix of relative targets, fast feedback on performance, and genuine local authority.
Why decentralization needs psychology, not just dashboards
Cutting budgets is easy compared with redesigning authority. Research on self-managing organizations defines their core move as the radical, formal, organization-wide decentralization of authority. These systems eliminate the traditional manager–subordinate relationship and perform well when work is complex, uncertain, and cross-functional, conditions that punish rigid hierarchy (Lee and Edmondson, 2017). The same logic underpins Beyond Budgeting. If frontline teams have better information, they should make more of the calls.
But decision rights alone are not enough. Teams need the conditions to surface problems, challenge assumptions, and learn quickly from data. The construct of psychological safety names that condition. In a field study of 51 manufacturing teams, psychological safety was associated with more learning behavior, which in turn mediated better performance; team efficacy without safety did not show the same effect (Edmondson, 1999). If you ask people to manage without a budgetary script, you owe them a climate where speaking up about risks and trade-offs is not punished. That is the human infrastructure behind any open-book approach to performance.
This is where many budget-free experiments stumble. Leaders tout transparency, then keep the real economics hidden. They promise autonomy, then replace budgets with centralized approvals in new guises. The Statoil study warns that removing budgets will rewire dependencies. Unless leaders are explicit about which calls move to the edge and back that shift with information and safety, control recentralizes by stealth (Østergren and Stensaker, 2011).
The 2020s read: autonomy with adult supervision
The engagement slump is not a vibe problem. It is a design problem. When only 20 percent of employees are engaged, and managers themselves are disengaging, the status quo has failed the basic test of energizing people to do their best work (Gallup, 2025). Beyond Budgeting and open-book management offer a way to redesign, not a silver bullet. The evidence base is mixed, from a seminal bank case to a careful single-company field study to broader theory on self-management and team learning. Taken together, three implications stand out.
First, separate target setting, resource allocation, and rewards. Fixed annual numbers tend to anchor all three. Replace them with relative performance comparisons where they make sense, and with rolling, information-rich reviews where comparisons do not. The Handelsbanken case shows that relative performance can anchor accountability without freezing plans in time (Lindsay and Libby, 2007). The Statoil study shows that new control mechanisms will emerge, so design them deliberately rather than letting them grow in the shadows (Østergren and Stensaker, 2011).
Second, push authority to where information is richest, and be explicit about the limits. Self-managing designs excel when work is nonroutine and interdependent, but they still require clear structures, roles, and escalation paths (Lee and Edmondson, 2017). Spell out which decisions live with teams and which remain central, then publish that map. Ambiguity breeds the kind of invisible recentralization the field study observed.
Third, make transparency teachable. Open-book does not mean dumping spreadsheets on people. It means giving teams timely performance data and the literacy to use it, then protecting the candor required to learn from it. The link between psychological safety, learning behavior, and performance provides the mechanism (Edmondson, 1999). If you want accountability without budgets, invest in the social conditions that make accountability real rather than performative.
The practical payoff is retention of energy and attention. Budgets rarely predict the world you get. Systems that combine relative performance, fast review cycles, and local authority are more likely to meet the world as it is. In a year when engagement is costly to ignore, that is a discipline worth having (Gallup, 2025).
Sources
- Østergren and Stensaker (2011). Management control without budgets: a field study of Beyond Budgeting in practice. Removing budgets at Statoil did not eliminate control, it shifted it into new mechanisms and altered HQ–division relationships, a grounded view of Beyond Budgeting. https://www.tandfonline.com/doi/abs/10.1080/09638180903487842
- Lindsay and Libby (2007). Svenska Handelsbanken: Controlling a Radically Decentralized Organization without Budgets. A teaching case on scrapping budgets in favor of decentralization and relative performance, illustrating what can replace budgets and with what caveats. https://www.researchgate.net/publication/247875136_Svenska_Handelsbanken_Controlling_a_Radically_Decentralized_Organization_without_Budgets
- Lee and Edmondson (2017). Self-managing organizations: Exploring the limits of less-hierarchical organizing. Defines radical decentralization and where it works, grounding why Beyond Budgeting requires real shifts in authority. https://www.sciencedirect.com/science/article/abs/pii/S0191308517300059
- Edmondson (1999). Psychological Safety and Learning Behavior in Work Teams. Shows that psychological safety enables learning behaviors that mediate performance, a precondition for open, budget-free accountability. https://journals.sagepub.com/doi/10.2307/2666999
- Gallup (2025). State of the Global Workplace 2025. Reports global engagement at 20 percent and a productivity cost near 10 trillion dollars, framing why budget-centric control is ripe for redesign. https://www.gallup.com/workplace/659610/state-global-workplace.aspx