1. Statoil managers claim that their company no longer prepares a budget. What do they mean by that claim?

CASE STUDY Statoil We have a management model that is very well-suited to Company background dealing with turbulence and rapid change. It enables us to act and reprioritize quickly so that we can fend off threats Statoil, headquartered in Stavanger, Norway, was a or seize opportunities. This is much more difficult in a "tra- large, multinational energy company.' The company ditional budget" world. was formed in 1972 by the Norwegian government and Helge Lund, CEO, Statoil was wholly state owned until 2001 when its shares were listed on both the Oslo and New York stock exchanges. Statoil, the large Norwegian energy company, used an After the 2007 merger with the oil and gas division of innovative performance management process called Hydro, a Norwegian competitor, Statoil became the "Ambition-to-Action" to translate the company's over- world's largest offshore energy producer, the world's all strategies into strategic objectives, key performance third-largest seller of crude oil, and Europe's second- indicators, needed actions, and individual goals. It largest gas supplier. Statoil was also the largest company combined two management concepts - the "balanced based in Scandinavia measured by market capitalization scorecard" and "beyond budgeting" - in a unique way. (nearly US$70 billion) and annual sales (US$70 billion). The implementation of the Ambition-to-Action pro- The company employed 20,000 people in 34 countries. cess had taken a long time, but by 2010 it had been fully Statoil's original focus was on the exploration, pro- implemented across Statoil. In August 2010, Bjarte duction, and development of oil and gas on the Norwe- Bogsnes (Vice President, Performance Management gian continental shelf. The company's distinctive Development), reported that: competency was deep water offshore drilling in harsh environments. Over the years, it diversified into refin- One of our core values is to challenge accepted ing and retailing of petroleum products and produc- truths. We threw out our annual budgeting process tion of alternative forms of energy, such as wind back in 2005. In 2010, we decided to throw out the power. In October 2010, Statoil spun off its retail busi- calendar. We are for instance implementing event- ness to create a separate public corporation, Statoil driven dynamic forecasting. No longer do we Fuel & Retail. require any forecasts to be prepared at any fixed Statoil's strategy was to grow its long-term oil and time, and the planning horizons vary depending on gas production profitably while gradually building a the business or operation. We are striving to make position in renewable energy production. The oil our entire process - strategic planning, target set- reserves on the Norwegian continental shelf, on which ting, action planning, forecasting - totally dynamic, the company had relied for many years, were being done as needed. We want our management pro- depleted. International growth was a key strategy. Sta- cess to be business-driven, not calendar-driven. toil managers knew that the company was entering a This is not accounting. Our aim is to create the con- new, more competitive, and more unpredictable era, so ditions required for teams in Statoil to perform to faster responsiveness to change was deemed critical. their full potential. The Statoil organization structure was relatively flat. The new Ambition-to-Action process had already It consisted of six main business units: (1) Exploration & Production - Norway; (2) Exploration & Production - Copyright provided many benefits. But Bjarte acknowledged that some Statoil managers were still uncomfortable with International; (3) Natural Gas; (4) Manufacturing & the Ambition-to-Action process. "It's a long journey, and it should be. Changing mind-sets is not a quick fix," he said. More information on the company can be found at www.statoil.com. 501 Merchant, K., & Van, D. S. W. (2017). Management control systems 4th edition : Performance measurement, evaluation and incentives. Retrieved from http:/ebookcentral.proquest.com Created from bilibrary on 2019-03-08 00:39-54.Chapter 11 * Remedies to the Myopia Problem Marketing; (5) Projects & Procurement; and (6) Tech- and accounting numbers are getting more distant nology & New Energy (see Exhibit 1).2 from our business. Because oil prices are so volatile, accounting reports tell us very little about perfor- Ambition-to-Action mance unless we benchmark. You can't read strat- egy out of a budget, but you can read strategy out of Statoil's Ambition-to-Action was a process that was a good scorecard. designed to provide integration from organizational strategy to employees' actions, while providing suffi- All the Ambition-to-Action information was displayed cient freedom and flexibility. It was designed around together on a single page. Exhibit 2 shows an Ambition- five basic principles: to-Action example, that for the entire corporation. The overall mission is shown at the top: "Globally competitive 1. Performance is ultimately about outperforming - an exceptional place to perform and develop." The left peers. column shows the strategic objectives, which answered 2. Do the right thing in the actual situation, guided by the the question: "Where are we going?" The center column Statoil Book," the Ambition-to-Action, decision crite- showed the performance indicators, which answered the ria and authorities, and sound business judgment. question: "How do we measure progress?" The right col- 3. Within this framework, resources are made available umn described the key actions to be taken, which or allocated case-by-case. answered the question: "How do we get there?" 4. Business follow up is forward looking and action The corporation's two key financial performance indicators were relative total shareholder return and oriented. relative return on average capital employed (RoACE). 5. Performance evaluation is a holistic assessment of Exhibit 3 shows backup detail for these two KPIs, which delivery and behavior. compare Statoil performance with that of the other major energy companies. Strategic objectives, performance Exhibits 4, 5, and 6 show other examples of Ambi- indicators, and actions tion-to-Action documents. These examples are for organizations at Levels 2 and 4 in the Projects & Pro- The Ambition-to-Action process was built around a key curement organization and at Level 3 in the Explora- performance indicator (KPI) scorecard system that was tion & Production - Norway organization. The originally introduced at the company in 1997. In 2002, examples show the wide variety in the chosen strategic additional information was added to the KPI-dominated objectives and KPIs. scorecard - a mission, strategic objectives, and needed In 2010, over 1,100 Ambition-to-Action documents actions - to provide a broader and richer language for describing and evaluating performance than could were in use within Statoil. Managers were encouraged to try the Ambition-to-Action process, but there was no be provided by focusing just on KPI measures. Bjarte corporate mandate imposing its use. Most, but not all, Bogsnes explained: jon Limited. All rights reserved. organizational entities above a certain size used it. The Ambition-to-Action is the cornerstone of how we number of Ambition-to-Action documents had grown manage our business. It is how we exercise leader- significantly over the years, more than doubling in just ship, and it is the core of our business review meet- the last two years, simply because most Statoil manag- ings. It is a much better tool than a budget for ers wanted to use the process. integrating the strategic processes with financial and The strategic objectives were designed to describe operational measurement activities and people pro- "what success looks like on a medium term time hori- cesses. A budget cannot provide a holistic approach zon." To test the objectives they had developed, manag- to management as it has a narrow financial focus, ers were asked to consider the following questions: Copyright @ 20 17. P . Do they provide clear guidance and direction? Statoil announced a new organization effective January 1, 2011, . Are they written in a language that makes you tick, that carved out North America as a seventh major business unit. without too many buzzwords 3 The Staroil Book explained the company's most important oper- ating principles, policies, and requirements. It set standards for "our . Do they support each other (cause and effect, from behavior, our delivery and our leadership." people and organization to finance)? 502 Merchant, K., & Van, D. S. W. (2017). Management control systems 4th edition : Performance measurement, evaluation and incentives. Retrieved from http:/ebookcentral.proquest.com. Is the time horizon right, within an appropriate entities. Statoil managers thought that relative KPI tar- delivery period? gets were more robust and "evergreen," meaning that The lists of performance indicators (KPIs) were they did not need to be updated as often. They also organized using five perspectives, the four traditional drove performance by stimulating a competitive mind- balanced scorecard perspectives - finance, market, set and peer pressure to perform and encourage learn- operations, and people and organization - plus a fifth ing from the best performers and the sharing of best perspective of particular importance to Statoil: health, practices. Regarding the question as to how challenging safety and environment (HSE). Statoil's conventional to set to targets, Geir Slora (senior vice president, order for display of the perspectives was different from Drilling & Well) clarified, "We want achievement of the that of the standard balanced scorecard. Instead of targets to be possible. In most cases we are not aiming at starting with the financial perspective at the top, Statoil world records. We are aiming at being in the top 25%." placed the people and organization perspective on top, Bjarte Bogsnes noted: followed by HSE, operations, and market, ending with Absolute KPls, such as a cost figure, is just meas- finance. This was done to secure sufficient focus on the uring one side of the equation and is not in relation performance drivers found in the first four perspec- to what you want to get out of those costs. Is meet- tives, as Finance was seen as the ultimate consequence ing an absolute cost target good or bad? Well, it of performing well in the other perspectives. depends on what you get back from those costs. The managers of each entity selected the set of KPIs Perhaps you should have spent more, as you lost that they believed would work best for their organiza- value by missing business opportunities by not tion. There were relatively few attempts to use the doing so. Or maybe you should have spent less same KPIs at multiple levels of the organization if it did because some expected opportunities did not not make sense to do so, although some corporate enti- come true. In any case, you will only know after- ties from time to time tried to "push" their own wards and not beforehand what the "right" cost favorites. Managers were aware of the strategic object level is. It is however not possible to find good rela- tives, performance indicators, and actions of the enti- tive KPIs in all areas, so we also use absolute cost ties above them in the corporate hierarchy, as all of this targets. These should however be set at an overall information was made available on the common man- level, not a detailed level, to secure flexibility for agement information system (MIS) that maintains all teams to take the right decisions. Ambition-to-Actions. But Statoil did not want a mechanical "cascading" of the objectives, performance Finally, the actions listed on the Ambition-to-Action indicators, and actions throughout the organization. documents were those considered to be the most What they wanted was for each entity to run its own important for achievement in the areas of performance strategy process and to "translate" higher-level strate- reflected by the KPIs. gies into strategy themes that were actionable at each Regarding the advice he tended to give managers organization level. The goal was to secure ownership who were working on their Ambition-to-Action docu- and have local teams manage themselves effectively in ments, Bjarte Bogsnes proffered: their local environment while moving in the right Teams must spend quality time defining strategic direction as defined by the strategies of entities higher objectives before moving on to the KPIs. The stra- in the organizational hierarchy. The measures were tegic objectives translate strategy into success changed to fit the circumstances being faced, as Baard using language that people understand. When Venge (Controller, Drilling & Well) explained: "We scorecards only show KPIs, what strategies do change measures when strategy changes or when we they communicate? Making strategy more con- find better ones. If a measure is easy to manipulate, it is crete through strategic objectives can also reveal useless. We take it out." lack of clarity in the strategy ... Statoil wanted managers to define KPIs that were Don't search for the perfect KPI; it doesn't exist. relative, rather than absolute. Relative KPIs linked I've spent 10 years looking for it. There are good inputs with outputs (e.g. cost per barrel) and, where KPIs and good combinations of KPIs, but there's no possible, they compared the organization's performance perfect KPI. The problem is that we often forget with some benchmarks - performance relative to other what the "I" in KPI stands for - indicator. It's only an 503 K, & Van, D. S. W. (2017). Management control systems 4th edition : Performance me ement, evaluation and incentives. Retrieved from http:/ebookcentral.proquest.com from bilibrary on 2019-03-08 00:39-54.Chapter 11 . Remedies to the Myopia Problem indication of whether we are moving towards our resources. An ambitious sales target cannot be the strategic objectives. It's not a goal by itself. There- same number as a 50/50 sales forecast. fore, de-emphasize KPI targets and heighten . The budget became obsolete shortly after it was pre- objectives and actions. pared because the assumptions on which it was pre- The Ambition-to-Action documents were intended pared were no longer accurate. Nonetheless, some to be updated only as required, not on a periodic (e.g. operating managers tended to view the budgeted annual) basis. costs as entitlements that should be spent anyway: "Nobody ever gives anything back." Other operating Performance targets, forecasts, and managers were limited by the cost budget ceiling capital allocations that prevented them from doing additional things Statoil previously used a traditional annual budgeting that would be value-creating. process but, inspired by the beyond budgeting princi- . Detailed budgets became centralized micro-man- ples," the company's Executive Committee approved its agement of highly competent and educated knowl- discontinuance on May 9, 2005.3 Statoil managers had edge workers, which the company claimed were its many reasons for believing that budgeting was harmful most important asset. to the corporation; for example: Managers spent a lot of budget review time looking . The budget forced three different purposes into one backwards, explaining variance, rather than focus- set of numbers - target setting, forecasting, and ing on the future. Even though the budget reference resource allocation - hurting the quality of each points became more irrelevant as the months in the purpose as these are different things. The budget as year went by, they were still compared with actual a forecast became biased because the same number costs monthly with "accounting accuracy." also served as a target, or as an application for . Budgeting was done on an annual cycle, but an annual cycle is not optimal for all parts of Statoil's business. For some that is too often, but others Beyond budgeting is a management model aimed at overcoming the should be evaluating performance and reforecasting problems caused by traditional budgeting. The model, first devel more frequently. oped at the Swedish bank Handelsbanken, has been developed and refined as its use has spread to several other organizations around The budget preparations were predicated on the the world, including Toyota, Southwest Airlines, Whole Foods assumption that financial capital is the main con- Markets, and Nokia. straint. In many areas of Statoil, other constraints, The aim of the beyond-budgeting management model is to increase the adaptability of enterprises. Exhibit 7 shows the 12 core beyond- particularly expertise (human resources), were budgeting principles. The first six principles are focused on taking the more salient. right leadership actions to address the drivers of change. The second rights reserved six principles align management processes with leadership actions. Bjarte Bogsnes explained that all these problems Companies that follow the beyond-budgeting principles have simple with budgeting undermined the power of their score- organizational structures, flat hierarchies, and flexible peer-to-peer networks. They operate with an assumption that organizations, like cards: natural systems, are capable of self-organization and self-regulation. Their managers do not require negotiation of fixed performance A key reason why many scorecard implementa- targets, as is done in a traditional budgeting system. Allocations of tions fail is because they compete with the budget resources are event-driven, not calendar-driven. Allocated resources as a management tool, which confuse the organi- are not treated as entitlements that must be spent. Unconstrained by a fixed and outdated plan, employees strive to improve their perfor- zation over what's the most important. As long as mance relative to their peers or some other benchmark. Creativity we had both, the budget normally won because it and rapid response to customer needs and unpredicted events are had the longest tradition, and managers were most Copyright @ 20 17. Peamon Education encouraged. The 12 principles are closely inter-related. Beyond- budgeting proponents caution that adopting a few principles while familiar with it. When we removed the budget, no ignoring the others could lead to unsatisfactory outcomes. one was in doubt about the role of the scorecard. Bjarte Bogsnes noted that "When you work with external partners We got an amazing turbo-charging of the process. [companies on large projects, say], you are often required to provide traditional budgets. When you aren't preparing budgets to operate inter- The Ambition-to-Action process is shown in diagram nally, this can be confusing for those managers who have this external form in Exhibit 8. The process started with strategic interface. So, we haven't completely eradicated budgets for those purposes." Baard Venge agreed: "It is hard to be dynamic if our partners planning. Strategic themes and issues out to a 10-year are not also dynamic. Most of them want to see an annual budget." horizon were discussed when needed as well as at thetwo Executive Committee meetings held each year. The that happens around us or an action we take ourselves ambition statements and strategic objectives developed that has an effect that should be reflected in our targets out of the strategy discussions. They remained rela- and forecasts." Deciding when to update was a local tively stable over time. manager decision. Forecasts were updated when an Statoil managers separated the functions typically "event" happened or when important new information served by traditional budgeting processes - target set- became available, but the time horizon was whatever ting, forecasting, and resource allocation - from each local managers believed was relevant for their entity. other in order to help improve the quality of each of Forecast updates were noted in a forecast log that was these activities. Statoil used three distinct processes available for everyone to see in the MIS system. Strate- separated in time, or by KPIs used, to accomplish these gic objectives, KPI selection, and target setting could be very different purposes. changed when necessary. However, major changes Performance target setting was done first. Perfor- required approval one level up; minor changes were mance targets were set to be both ambitious and, if pos- only reported as information. If changes affected other sible, relative. Ideally, relative targets both connected entities, the entity initiating the change was responsi- inputs with outputs (e.g. cost per unit of production) ble for informing those entities. Changing targets did and allowed performance comparisons with that of not happen frequently, but they were intended to hap- other like organizations (e.g. "above average in the pen at natural points in time instead of directed by the industry"). For example, targets for the health, safety calendar. Performance evaluation still took place once and environment measure of "serious incidence fre- a year as before, but against Ambition-to-Actions that quency" (SIF) commonly used in the exploration areas varied from very stable to very dynamic. of the company were set relative to other like-entities As a result, Statoil's forecasts were approximately within Statoil. Relative performance targets provided correct at all times, rather than being correct only at several advantages: there was no need to negotiate tar- one fleeting point in time as is true in companies with a gets each year; managers set more ambitious targets traditional annual planning and budgeting process. for themselves because no one likes to be a laggard; But since the targets were set to be ambitious and the and they motivated managers to be interested in learn- forecasts were made to be realistic, it was common to ing from those who performed better on a relative have a gap between the two sets of numbers. This was basis. seen as natural, as managers aimed high but had a real- Forecasts were designed to reflect expected out- istic view of where they were. comes, to provide early warnings of problems that Forecasts were not intended to be performance com- might be occurring so that corrective actions could be mitments, because targets had been set earlier. Cost taken if necessary. Statoil managers knew that there forecasts were also not applications for resources for would always be noise in the forecasts, but they wanted funds, as discussed next. the forecasts to be honest and unbiased. The forecasts Allocations of resources at Statoil were not a mechan- were intended to reflect expected outcomes realisti- ical function of either targets or forecasts. Managers cally, whether favorable or unfavorable. When visibilharziammit resources up to limits ity into the future was poor, the forecasts could include defined by their scope of responsibility. The definition scenarios and ranges of outcomes. of a limit was however significantly redefined. The frequency, lead time, and time horizon of the The problem with the conventional annual budget forecasts were intended to be driven by the business - process was that it forced entities to decide on funding not the calendar. In the first years of use of Ambition-to- once a year, not only the total level but also the funding Action, however, the process was more calendar-driven. composition, which was not always the right time. Entities did strategic planning, KPI selection and target Statoil did still allocate funds to projects or major deci- setting in the spring; action planning and forecasting sions involving costs, but only when the project was in the fall, and performance evaluations at the end of ready for a decision. Additional allocations were made the year. dynamically, when the resources were needed, rather Thus, starting in 2010 and 2011 respectively, Statoil than far in advance as was typically done in a periodic changed the process to require use of dynamic (or budgeting process. Resources were "in principle" avail- event-based ) forecasting and target setting. Bjarte able whenever they were needed, if the project was Bogsnes explained that, "An event is either something good enough and if fresh forecasting informationChapter 11 * Remedies to the Myopia Problem indicated sufficient capacity. "The bank is open year in below the cost targets because they failed to do round," Bjarte Bogsnes exclaimed, "but you can still get all the drilling that was expected for the period a no on your request for money." which, of course, was not good. At the end of the The intention with dynamic resource allocation was day, all we really want to see is whether the organi- to cause a different managerial mind-set. Instead of zation is headed in the right direction. asking "Do I have the budget for this?" managers should As a matter of fact, comparing the performances vs. ask whether spending the money was the right thing to do. Was it within their decision authority, could they targets was only a starting point. More important were justify the expenditure, was the spending necessary, the answers to the following five questions to "pressure and, last but not least, was the spending within the test" the KPI results: framework defined by Ambition-to-Action? This frame- . Did the KPI results contribute to the strategic object work might include KPI targets like profit targets, unit tives? What were they unable to pick up? If we look cost targets or an overall absolute cost target. Some beyond the KPI results, how would we evaluate per- entities had no cost KPIs at all, instead addressing cost formance? through strategic objectives or actions, combined with How ambitious were the targets? With hindsight, a continuous monitoring of their own actual spending would we say that they were stretched? development. . Were there changes in assumptions that should be taken into account? Were the results affected by a Business reviews tail-wind or head-wind that had nothing to do with performance? Performance reviews provided a structured assessment . Were agreed-upon or necessary actions taken? of actual performance. The reviews focused on the Ambition-to-Action documents, which were produced . Were the results sustainable? Or had the managers monthly. Each document (examples are shown in made themselves look better in the short run at the Exhibits 2, 4, 5, and 6) provided a quick summary of expense of the long run? recent performance. The circles to the right of each Eldar Saetre, the CFO, said: performance indicator and each action showed whether forecasted (not actual) performance was meeting tar- Some uninformed observers might fear the pros- gets or schedules. A circle with a plus sign (coded pect of cost anarchy. I disagree. Many businesses green) indicated yes; one with an exclamation point within Statoil have KPI targets on profitability and/ (colored yellow) was questionable; one with a minus or unit costs, benchmarked against peers where sign (coded red) indicated no. The arrows to the right possible. Here, costs are managed by setting unit of the circles indicated if the last forecast update (rather than absolute) cost targets. Entity manag- reflected a positive or negative trend since the last ers cannot spend wildly without a return or a good reporting period. This format created much more for- business case. In other areas we give overall guid- ward-looking business reviews. ing on acceptable cost levels. Across all busi- The reviews typically started with an evaluation of nesses, we monitor cost trends carefully, at least KPIs and necessary action performance vs. targets. monthly, and intervene at any time if a negative This was not as straightforward as it might first appear, trend has no good explanation. as Geir Slora (senior vice president, Drilling & Well) explained: We can live with some red circles, as we look at the Individual performance evaluations reasons for misses. Were there unforeseen prob- Individual performances evaluations were done holistic lems? If the KPIs are all green, we get suspicious cally and with the advantage of hindsight. All Statoil that the manager was too conservative in target employees had individual goals for both delivery setting. For example, one manager in the drilling (what) and behavior (how). Performance was judged business was able to show "all green" on his 50% on delivery, as defined by Ambition-to-Action, and Ambition-to-Action because his cost targets were 50% on behavior and living up to Statoil values. Delive set in absolute terms. His entity was able to come ery performance was evaluated subjectively, takinginto consideration relevant hindsight information. Sta- cannot convince up front. Instead of arguing toil used 360-, 180-, and 90-degree behavior evalua against them, tell them you accept that there is a tions plus a people survey and day-to-day observations risk that it will not work. But what is actually the risk to learn how managers and employees were living up to if throwing out budgets fails? Most companies can the company's values. Delivery and behavior evalua go back to budgeting overnight. Nobody will have tions were each scored on a 1-5 scale and weighted forgotten how to do it. So ask them to compare that equally in determining salary increases and bonuses on minimal downside risk with the upside if it works as top of the common bonus for everybody, which intended. That tends to calm people down. was linked to Statoil's financial performance vs. By 2010, the Ambition-to-Action process was fully competitors. Elder Saetre explained: operational throughout Statoil. All of the major busi- ness units had implemented the process, and virtually We have broken the automatic link between fixed all senior managers thought that it was a success. KPI targets, performance evaluation and bonuses, Exhibit 9 summarizes the major changes from the old not just by introducing behavior as a key element, command-and-control management style to the new but also by broadening our definition of delivery. more dynamic and flexible style. Delivery used to be solely defined by KPIs, but they Corporate managers did not impose the Ambition- seldom provide the whole picture. That is why you to-Action process on any entity. They concluded that need a more holistic assessment. We now look at local managers needed to have the freedom to adapt Ambition-to-Action as a whole and make qualified the principles and practices of the process to fit their judgments with hindsight. It takes a few years for entity's needs, and they needed to find it useful them- employees to understand how it works, but then it selves. If they did not, they would not use it anyway. can be very credible. Corporate managers needed to impose only enough structure to maintain a coherent vision and direction from the top to the bottom of the organization. They Implementation asked only that if the process was being used, all the documents be kept fully up-to-date at all times. They KPI-dominated scorecards were first introduced as a did try to communicate the purposes of the process and local initiative on one of the offshore platforms in the stood ready to train the managers to use it more effec late nineties. Their popularity grew rapidly, both side- ways and upwards in the organization, and by 2003 all tively. They expected that as the managers became of Statoil used them. Then the broader Ambition-to- more comfortable with the system, its use was likely to increase and improve. Action process was introduced, emphasizing also stra- Even though all the major entities had chosen to tegic objectives and actions. In 2005, the company implement Ambition-to-Action, not all implementa- abolished traditional budgets, starting out with some tions were equally effective. The quality of implemen pilots. The 2007 merger with Hydro, which added tation at lower organization levels, particularly, was 10,000 people in new roles in a new organization, meant starting all over again in many entities. In 2010 uneven because the levels of understanding, quality, and commitment varied considerably. Some managers the decision was taken to kick out the calendar. used the process as it was designed, as a "leadership Statoil managers did not wait until they had nailed tool." But others used it merely as a "reporting tool," as down every detail. They designed the major features of the system and implemented it. They knew they were a budget in disguise. Numerous problems were appar- entering unfamiliar territory and did not believe that ent. For example, some of the strategic objectives and KPIs were poorly chosen or defined or not changed everything could be designed up front. often enough. Some performance standards were Some Statoil employees were worried about the absolute when they could have been relative. Some change, as Bjarte Bogsnes recalled: KPIs and performance targets were dictated to subor- The skeptical ones fall in two categories. Some are dinates by higher-level managers through cascading skeptical because they are confused. These just processes. Some important performance qualities, need time to learn and understand. But there will such as "capabilities and competencies" in an internal always be a group of hard-core skeptics that you consulting entity, could not be measured effectively.Chapter 11 . Remedies to the Myopia Problem Too many forecasts were only updated with a year-end objectives, determining the KPIs and KPI targets would horizon. Too many targets had end-of-December delive also be event- and business-driven. Looking forward ery dates. Bjarte thought that, for example, performance evalua tions might also be more closely linked to the comple- The future tion of projects or activities. He added: It was inevitable that refinements to the process would be made over the years. The company was just begin- I still have my dark days when I observe practices or ning to incorporate risk heat maps into Ambition-to- behaviors reflecting what we wanted to leave behind. Action. Bjarte Bogsnes thought that the system could My medicine is, however, both simple and effective. I become even more dynamic. In 2010, action planning, think back to how things were when we started out resource allocations, and forecasting were all done some years ago. If we can make similar progress in dynamically, and from 2011 setting the strategic the coming years, we will have moved mountains