Banking is supposed to be the least likely home for decentralization. It is regulated, risk-sensitive, and built on control. Which is exactly why Svenska Handelsbanken is such an inconvenient example. According to a teaching case by Lindsay and Libby (2007), Handelsbanken abandoned formal budgets around 1970, under chief executive Jan Wallander, as a deliberate response to crisis, and replaced them with radical decentralization. Branch managers hold operational decision rights, and each branch runs as an independent profit center. The bank became the exemplar in the accounting literature for the claim that a large organization can operate successfully, perhaps more successfully, without budgets at all, and its control system became the seed of the principles later codified as Beyond Budgeting.
The move is more radical than "we skipped the annual budget meeting." A budget is not only a spending plan; it is a command structure in disguise. It tells a branch what to sell, what to spend, and what to fear, all decided a year in advance by people who are not in the branch. Removing it forces a choice: either recentralize control some other way, or genuinely trust the people at the edge. Handelsbanken chose the edge. It replaced the fixed target with relative performance, each branch measured against comparable branches rather than against a number negotiated upward months earlier, and it made the branch, not head office, the unit that owns the customer relationship.
Relative performance is the quiet engine of the whole design. When a branch is judged against a fixed budget, the game is to negotiate an easy number and then hit it, and information flows upward distorted by that incentive. When a branch is judged against comparable branches, the target moves with reality, sandbagging stops paying, and the branch's attention turns outward to customers and competitors instead of inward to the budget negotiation. That shift, from beating a forecast to beating peers, is what lets the center step back without losing its grip on how the business is actually doing.
Killing the plan, keeping the discipline
The fear with any "no budget" story is that it means no discipline. The research says the opposite happens, and it is worth being precise about it. Field studies of firms that dropped budgets, such as Ostergren and Stensaker's study of a large oil and energy company (European Accounting Review, 2011), find that removing budgets does not remove control. New control mechanisms emerge to take the budget's place, and new lines of dependency form between units. The point is not to run blind. It is to stop pretending that a number frozen a year ago is a better guide than current reality.
Ricardo Semler reached the same suspicion of long plans from the other direction. As Ricardo Semler has told it, Semco ran on six-month budgets and treated a five-year plan as a sign of inattention, and across fourteen businesses he never planned beyond three years, on the logic that three years is about as far as anyone can honestly see. He liked to point out that "career" comes from the rut worn by a cart wheel, a groove. A budget can be that groove: a track laid down in advance that everyone follows long after the ground has changed. Handelsbanken's answer, like Semco's, was to keep the discipline of measurement while refusing the false comfort of the fixed plan.
What the wider evidence says
Handelsbanken is a single, celebrated firm, and one bank does not settle an argument. The broader picture is more nuanced and more honest for it. A survey study by Matejka, Merchant and O'Grady (Journal of Management Accounting Research, 2021) compared 80 organizations that adopted Beyond Budgeting with 121 that did not, and found the adopters really are more decentralized, allocate resources more flexibly without a fixed calendar, lean on relative targets, and use weaker individual incentives. But it also found that many adopters struggle to fully let go of the fixed annual budget for decisions and of financial metrics for evaluating people. Old habits survive the reform.
So Handelsbanken should be read as an existence proof, not a guarantee. It proves that decentralized decision rights, branch-level ownership, and relative rather than absolute targets can run a large bank over decades. It does not promise that any firm can copy the artifacts and get the result. The bank did not simply delete a document. It moved authority to the branch and then held the line for fifty years against the gravitational pull back toward the center. That endurance, more than the missing budget, is the achievement. The budget was the thing they removed. Trust in the branch was the thing they built in its place, and that is the part that is hard to import and easy to quietly abandon.
Sources
- Lindsay, R. M. & Libby, T. (2007). Svenska Handelsbanken: Controlling a Radically Decentralized Organization without Budgets (teaching case). Handelsbanken abandoned budgets ~1970 under Jan Wallander; branches run as independent profit centers; founding case of Beyond Budgeting. https://www.researchgate.net/publication/247875136_Svenska_Handelsbanken_Controlling_a_Radically_Decentralized_Organization_without_Budgets
- Matejka, M., Merchant, K. A. & O'Grady, W. (2021). An Empirical Investigation of Beyond Budgeting Practices. Journal of Management Accounting Research 33(2). Survey of 201 organizations: BB adopters are more decentralized with relative targets, but many struggle to abandon the fixed annual budget. https://doi.org/10.2308/JMAR-19-010
- Ostergren, K. & Stensaker, I. (2011). Management control without budgets: a field study of Beyond Budgeting in practice. European Accounting Review 20(1). Removing budgets does not remove control; new control mechanisms and dependencies emerge. https://www.tandfonline.com/doi/abs/10.1080/09638180903487842