Boardrooms have an engagement problem and a control reflex. Engagement has fallen to 20 percent worldwide, with Gallup estimating a productivity cost of about 10 trillion dollars, roughly 9 percent of global GDP (Gallup, 2025). As managers burn out and compliance rituals multiply, many firms cling to the annual budget as their anchor of order. The evidence suggests a better bargain: abandon the budget, keep control, and replace it with a system that treats people as stewards, not supplicants.
What actually happens when you drop the budget
A rare field window into the shift comes from an in-depth study inside a large oil and energy company that had abandoned budgets at corporate level and in two business units. The core finding was surprising only to those who equate budgets with discipline. Removing budgets did not remove control. New control mechanisms emerged, the relationship between corporate headquarters and divisions changed, and fresh dependencies formed across divisions (Østergren and Stensaker, 2011). In other words, budgeting was not the control system. It was one version of a control system.
The study is qualitative and single-company, so it does not settle the question for every context. It does, however, show the organizational math you can expect if you go beyond budgeting. Headquarters still sets expectations and monitors performance, but it does so through mechanisms other than fixed annual line items. Divisions gain room to maneuver, yet they become more mutually dependent because coordination, shared benchmarks, and internal markets matter more when money is no longer rationed by a calendar (Østergren and Stensaker, 2011). Leaders who hope that killing the budget will make oversight disappear will be disappointed. Leaders who hope that killing the budget will make learning and adaptation easier have a shot.
The founding proof-of-concept
Svenska Handelsbanken is the canonical example that a large firm can operate without budgets. Facing crisis around 1970, the bank abandoned formal budgets and built a radically decentralized model that made local branches accountable for their own profit outcomes and their relative performance against peers (Lindsay and Libby, 2007). That system became the blueprint for what later came to be called Beyond Budgeting.
It is a teaching case and therefore anecdotal, not a randomized trial. Still, it matters because it demonstrates feasibility at scale and clarifies the mechanism. Control migrated from headquarters forecasts to branch accountability and transparent peer comparison. The center still controlled, but through principles and relative metrics rather than negotiated promises captured once a year. For leaders contemplating open-book management, this is the lesson worth lifting: disclosure of the numbers is necessary but not sufficient. You also need a way for units and teams to make sense of those numbers together and to own the outcomes locally.
The people side of financial transparency
Decentralized control is not an accounting trick. It is an organizational design choice that shifts authority closer to the work. Research on self-managing organizations defines the edge case of this shift: systems that decentralize authority radically and eliminate the traditional manager–subordinate relationship through formal, organization-wide processes (Lee and Edmondson, 2017). That literature also synthesizes why a move away from manager-centric control can help. Classic hierarchies are good at reliable execution of known tasks in stable settings, but they inhibit complex, cross-boundary problem solving. Less-hierarchical systems can surface and address nonroutine issues faster, provided the design is explicit and disciplined (Lee and Edmondson, 2017). Beyond budgeting is not the same thing as a fully self-managing organization, yet both rest on the same premise: in uncertain environments, local judgment and rapid learning matter more than adherence to a plan drafted months earlier.
Open-book management takes this premise into daily practice. Sharing financials and unit economics invites people to act like owners. It also exposes people to risk: naming a variance, questioning a target, or proposing a tradeoff in public can feel unsafe. That is not a soft issue. In a field study of 51 teams in a manufacturing company, team psychological safety, defined as a shared belief that it is safe for interpersonal risk taking, was associated with learning behaviors. Those learning behaviors, in turn, mediated the link between psychological safety and performance (Edmondson, 1999). The study is cross-sectional and single-company, so interpret causality with care. Its practical message travels well. If you open the books without opening the climate for inquiry, silence will fill the room and the numbers will perform a new kind of theater.
A practical way to start
If you are tempted to go beyond budgeting and toward open-book management, treat it as a redesign of control, not as a finance project.
- Replace fixed, negotiated targets with relative performance measures where you can. Handelsbanken’s branch system shows how peer comparison and local profit accountability can substitute for annual budget haggling (Lindsay and Libby, 2007). Relative goals are harder to game and easier to adapt midstream.
- Expect and plan for new interdependencies. The Statoil field study found that removing budgets reshaped the contract between headquarters and divisions and created fresh lines of dependency across units (Østergren and Stensaker, 2011). Make those contracts explicit. Clarify how shared metrics, internal pricing, and cross-unit forums will work.
- Pair transparency with capability and safety. Do not just circulate income statements. Teach people how the business makes money and how their work moves the key levers. Create team environments where people can question assumptions without penalty, which is the condition that supports learning behavior linked to better performance (Edmondson, 1999).
- Watch your managers. Gallup reports a sharp drop in manager engagement since 2022, with large gaps between average practice and best practice (Gallup, 2025). If you remove budgets but keep the same approval queues and status rituals, you will double the load on already strained managers. Redesign roles toward coaching and sensemaking, and let peer accountability carry more of the weight.
One final point. The strongest advocates of Beyond Budgeting, including practitioners such as Bjarte Bogsnes, are clear that this is not a faith-based movement. It is a way to keep control while raising adaptability. The field evidence says the controls will not vanish if you take away the budget. They will move. The leadership test is whether you move them to where learning, ownership, and performance can compound.
Sources
- Østergren and Stensaker (2011). Management control without budgets: a field study of Beyond Budgeting in practice. In a qualitative study of a large energy company, they show that removing budgets shifts rather than removes control, altering HQ–division relationships and creating new dependencies. 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 describing how Handelsbanken dropped budgets around 1970 and used branch accountability and relative performance as control in a decentralized system. 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. A theory synthesis defining self-managing organizations and explaining why decentralization helps with nonroutine, cross-functional problems. https://www.sciencedirect.com/science/article/abs/pii/S0191308517300059
- Edmondson (1999). Psychological Safety and Learning Behavior in Work Teams. A field study linking team psychological safety to learning behaviors that mediate performance, underscoring the human conditions required for open financial dialogue. https://journals.sagepub.com/doi/10.2307/2666999
- Gallup (2025). State of the Global Workplace 2025. A global survey reporting 20 percent engagement and an estimated 10 trillion dollars in lost productivity, highlighting the cost of disengagement and the need to rethink control systems. https://www.gallup.com/workplace/659610/state-global-workplace.aspx