‘Beyond Budgeting’: There is a better way!

May 18, 2016July 6, 2016 giantknave Brain Farts Beyond Budgeting, Devolution, Jeremy Hope, Levers, Lock, Robin Fraser, System, Systems Thinking, Transparency, Variation

So this post is part 2 of a two-part piece in respect of budgeting.

Part 1 (The Great Budget God in the Sky) introduced the ideas that:

creating a detailed budget for the next year and then holding people to it is a very poor way to manage;
the budget is part of a wider ‘fixed performance contract’ that understandably causes budget holders and their teams to engage in a set of games that are hugely harmful to the system and its purpose;
but there is a better way…which will be discussed in (this) part 2.

If you can’t remember, or haven’t yet read, why part 1 came to these conclusions then please (re)read it…otherwise read on:

So what do you do instead of a budget?

So there’s a short, simple (and insufficient) answer, and then there’s the rest of what needs to be said.

In simple financial process terms, those organisations that no longer use budgets work with rolling forecasts instead. Here are a few explanatory quotes from successful practitioners:

“Rolling forecasts are updated quarterly and look five quarters ahead…and because [they] are separated from any form of performance evaluation and control*, we get far more accurate forecasts than was ever the case with the budgeting system.”

(* a necessary discussion point covered later in this post)

“…this approach has reduced dramatically the amount of time managers now spend in forecasting compared with the previous budgeting process.”

“Forecasts are used in conjunction with actual results to show trends for high level KPIs such as return on capital, profitability, volumes and so forth. These typically show the last eight quarter’s actual results and the next five quarters forecasts.” (i.e. they see, and understand variation rather than making binary comparisons)

“Rolling forecasts…place the CEO in a much stronger position to anticipate financial results.”

Right, so you’ve got the basic idea about rolling forecasts…but I started by stating that this was insufficient:

Necessary…but not sufficient!

Here’s a rather nice animation of a seven-levered lock:

I find it mesmerising! And it’s pretty cool seeing how it actually works 🙂

Using the lock as an analogy:

The lock is a system. Each of the seven levers (along with the key and accompanying barrel) is a component part;
You can uncover the existence of one lever, work out what position it needs to be in, and get this sorted (e.g. moving from budgets to rolling forecasts)…and yet the lock won’t open;
Further, the moving of this one lever into the ‘right’ position will very likely upset the positioning of all the other levers;
It is only when all of the necessary components work together that the lock opens;
Each component is necessary, but not sufficient.

…and so it is the same for any organisation’s stated desire for (what is often termed) ‘Operational Excellence’.

Clarification: The lock system as an analogy is obviously limited because it is a simple ‘digital’ system – it is either locked or unlocked, on or off, black or white, 0 or 1. This doesn’t represent the real world but it is still useful.

The ‘locked – unlocked’ states in my analogy are the difference between:

a command and control management system (that will likely be playing with a few levers in the hope of change but which hasn’t unlocked the underlying issues with its ideology); and
a truly devolved, adaptive and purpose-seeking system.

The lock is only truly open when all the necessary levers are working together.

What levers?!

Here’s a brief touch on them (with links to further discussions):

1. System-level Clarity:

Of purpose: a meaningful ‘why’ for the organisation, and each of its value streams, from the perspective of the customer and society…where profit is an ongoing result, not an excuse;
Of philosophy: i.e. how to get there (which incorporates the other four levers)

…where this clarity is instead of, not as well as, a ‘management has the answer for you’ plan.

2. Transparency:

Fast, frequent, unadulterated, open-to-all and useful information feedback on what your value streams are achieving over time and if/ how this is changing, NOT activity measures, targets, binary comparisons and management reports
Actual trends and rolling forecasts NOT budgets and variance analysis (as explained at the top of this post)

…meaning that the people who do the work gain constant feedback on the capability of their value stream(s) against customer purpose.

3. Front-line Control (Devolution):

Ownership of decisions and customers by the value creators: that’s the people working at the front line with the customer and their needs;
Freedom to explore, experiment, learn and act:

“Self-managed teams are far more productive than any other form of organising. There is a clear correlation between participation and productivity.” (Margaret Wheatley)

4. Management as Support (NOT control):

Provision of enabling technologies and expertise, NOT dictating what these shall be and how they shall be used;
Guidance, NOT rules;
Farmers, NOT heroes

…in short, value enablers instead of, not as well as, commanders and controllers.

5. Collective Accountability:

You may have noticed that I’ve put this in the centre of my fancy bubbles diagram. That’s because it will be a catalyst for everything else yet, without it, nothing great is likely to be achieved because individualism and extrinsic rewards will act as a highly effective brake.

Recognition and reward only by Long term, (equal) sharing in success a.k.a Profit Sharing;
Balance of collaboration with healthy competition (knowing how everyone is doing AND wanting to help them do better because it is in your interest to do so);
NOT cascaded personal objectives, targets, rating and contingent rewards

…can you imagine if you and everyone around you were all truly harnessed together towards the same aim, and how this would change/ enhance your behaviour?!

With these five levers working together then you will get a ‘whole organisation’ that is very clear on what it is trying to achieve, that is laser-focused on their customers, that will constantly innovate and adapt, that is never satisfied with where it’s at, that wants to know who’s doing well (and why) and who’s not (and, importantly, how to help them).

It will also avoid the huge waste inherent within the fixed performance contract (with all the ‘budget setting, target tracking, performance appraising and contingent reward’ paraphernalia dismantled and replaced).

Revisiting those 10 games

In part 1 of this post I set out, and explained, a series of recognisable games that budget holders and their teams play.

However, if you are working on the set of levers explained above, you can expect to create a management system that reverses those games into highly desirable outcomes (for employees, customers and investors). Here are those opposites:

“Always aim to improve upon and beat the competition”

“Never let the team down and be the one that drains the profit-sharing pool”

“Always aim to know and care for customers”

“Always share knowledge and resources with other teams – they are our partners!”

“Never acquire more resources than you need”

“Always aim to challenge (and reduce) costs”

“Always have the ability to understand root causes”

“Always ‘tell it like it is’ and share bad news”

“Always do your best, never fudge the numbers”

“Always challenge conventional wisdom”

Wow, that would be a cool place to work!

‘Beyond Budgeting’: The movement

So, I might well hear you asking “who’s actually doing this mad-as-a-hatter stuff eh Steve?!!” and I would answer that there are loads and loads of organisations (large and small) all around the world who are somewhere along their journey.

If you want to read case studies then there are plenty of places to go to: There’s the Beyond Budgeting Organisation…but there’s also The Lean Enterprise Institute, Theory of Constraints Institute, Kaizen Institute, Vanguard Method …and on and on. Let’s not forget Toyota itself! It’s not about a methodology – the systemic thinking advocated by these different organisations isn’t contradictory.

And, whilst obviously they don’t all agree on exactly everything, they all point towards what has been called by some ‘Management 2.0’ – the realisation that the command and control management system is ‘the problem’ and advocating evolving to a new one (by humbly studying, experimenting and learning).

It’s not a recipe – it’s a philosophy

A recipe has a set of ingredients and related instructions as to how to combine them – it is something that is implemented (being repeatable and reproducible).

A (scientific) philosophy is a theory, based on sound evidence, that acts as a guiding principle for behaviour. It is a direction to follow, where the path is found through experimentation and learning.

This (or any other) post is not meant to prescribe what needs doing. Instead, this whole blog advocates a move away from command-and-control, and towards systemic thinking and adaptive progress towards a meaningful purpose through empowered (which must imply engaged) people.

Caveat: setting out a ‘philosophy’ is absolute twaddle if it isn’t actually believed in, understood and expertly, humbly and continuously practiced by those in leadership.

‘Lipstick on a pig’

What a great phrase! Putting lipstick, some earrings and a blonde wig on a pig doesn’t change what it is…even if you are doing so with good intentions! (Ewe, that’s a weird thought).

There are many organisations out there attempting to command-and-control their way to ‘Operational Excellence’ but this is an oxymoron.

There is a subtle, yet gargantuan, difference between an organisation fumbling (with best intent) with a few of the levers and one that understands the lock.

Note: All quotes, unless specifically stated, come from Hope and Fraser’s book ‘Beyond Budgeting’ (2003) and their associated case studies.

The Great Budget God in the Sky!

May 13, 2016October 18, 2018 giantknave Brain Farts Beyond Budgeting, Budgets, Command and control, Jeremy Hope, Robin Fraser, Stephan Haekel

So, I’ve always intensely disliked the ‘budget’ thing. Not the basic idea of thinking ahead, about what might happen, and attempting to do sensible things to cope with this – don’t worry, I’m not about to advocate ‘sticking your head in the sand’ – but the management belief that we can and should carry out a grand planning exercise (usually annually) in which we attempt to predict ‘what will be’ in great detail, and then watch for, and attempt to explain away, any and all deviations from it.

Utter madness…and I believe that, underneath it all, many (most?) of you will likely agree with me – yet we carry on worshipping at the altar of the ‘Great Budget God in the sky’.

So why do I dislike it so? I’ll start with the following quote:

“If you cannot know what your customers will want or your competitors will offer next year – or even who your customers or competitors will be – you cannot develop an effective plan for achieving targeted levels of sales and profits.” (Stephan Haeckel)

Creating a detailed budget for the next year and then holding people to it is nonsense. Now, you might respond with “yeah, it’s not perfect but it is useful.” I would respond that it does more harm than good, and that there is a better way.

I’ll need to explain my response in 2 parts. This post (part 1) deals with the ‘doing more harm than good’ part. Watch out for ‘there is a better way’ in part 2.

The (painful) grand planning exercise:

Picture the Chief Financial Officer (CFO) at the end of the multi-month annual budget setting exercise sat in his/her executive suite with that warm, fuzzy feeling: A glorious projected profit figure as the bottom line in a sexy spreadsheet before them, carved out of much toil and pain (and wasted activity). Quick, load it into the accounting system as the ‘baseline’ before it gets away!

So how did that glorious budget come about?

Each manager was likely sent a (really annoying) financial template to fill in that was devoid of operational reality…

…which, after many iterations and re-runs (“because the #@$! numbers won’t save properly!”), was then sent back to Finance and ‘rolled up’ into a single view of ‘exactly what is supposed to happen next year’…

…to which the CFO responded “oh no, THAT won’t do, fiddle with it some more until it says what I want to see”…

…and his/her accounting subordinates oblige, ‘rolling down’ their well intentioned meddling back to the unsuspecting ‘budget holders’ to catch and deal with…

…which only becomes transparent to these managers a few months later (i.e. once the year is well under way in a “hey, where did these numbers come from? They’re not what I sent in!” kind a way) and, despite their protests, they can do nothing about because “sorry about that, but it’s ‘locked and loaded’ now”.

And so, the year is off and running. Finance send out the following memo (often weeks after the period close):

“Here are your variances (actual from budget) for Period X. I need specific reasons (by which I really mean ‘believable stories’) for each deviation from budget and an action plan as to how you are going to get back on track…please provide by return and good luck!”

Each manager then spends hours deciphering the numbers in a desperate attempt to reconcile and ‘explain away’ the differences. And, unsurprisingly, this task becomes more bizarre the further the year progresses as the budget predictions become more divergent from reality.

So, what is a budget?

Here’s a narrow definition, relating to the output of a budgeting process: “An estimate of income and expenditure for a set period of time” (Oxford Dictionary) i.e. a financial plan, usually annual.

However, a budget doesn’t come out of thin air and isn’t for filing away once drawn up. We must see and consider the much broader definition that encompasses what a budget is for, and about i.e. “The performance management process that leads to, and executes, a plan.” (Hope & Fraser, ‘Beyond Budgeting’)

This process involves “agreeing upon and co-coordinating targets, rewards, action plans, and resources for the year ahead, and then measuring and controlling performance against that agreement.” (Hope & Fraser)

This has, with good reason, been labelled as the “Fixed Performance Contract” because, once negotiated, it forms a contract between each level of management as to what is required for the year ahead. But such a contract is cumbersome, inflexible and (most obvious to all) gamed.

Command-and-control by another name:

Very early on in my blog writings, I linked the ‘cascade component level objectives – set targets – dangle incentives – judge performance – provide rewards’ as the core components of the command-and-control management system (I often verbally refer to them as the management instruments of torture)…but the budget word hasn’t come up to date.

So it was a nice surprise for me when I read Jeremy Hope and Robin Fraser’s highly regarded book called ‘Beyond Budgeting’ (2003) and found their ‘Fixed Performance Contract’ label. It encompasses much the same meaning/ thinking.

I have always disliked the budget game and seen it as related, but I hadn’t formulated it as being one and the same.

The games being played:

You might think that the fixed performance contract is necessary, and mainly benign…

…but walk your way through the following ‘fixed performance contract’ games that are understandably played by budget holders and their teams (as identified in, and with quotes from, ‘Beyond Budgeting’):

1. “Always negotiate the lowest targets and the highest rewards.” Each manager will attempt to ‘agree’ a target that is inwardly comfortable to them yet appears outwardly difficult to their supervisor.

2. “Always make the bonus, whatever it takes.” Any actions you can take are fair game if they help you reach your maximum bonus – even though they might stuff up another team elsewhere in the organisation (e.g. sell services that you know will likely lead to problems later down the line)

3. “Never put customer care above sales targets.” Everyone wants to satisfy customers… but that’s not how they are rewarded. Let’s ‘persuade’ customers to buy what we want them to.

4. “Never share knowledge or resources with other teams – they are the enemy!” The main competition is not the external market, but every other team who are all trying to obtain a higher share of the central resource pool than you!

5. “Always ask for more resources than you need, expecting to be cut back to what you actually need.” This is simply anticipating the negotiation process that you know will occur….and this can only get worse as time goes by through bluff and double-bluff.

6. “Always spend what’s in the budget.” If you don’t use it, you will lose it because higher management will reason that “if you didn’t need it this month/year then you obviously won’t need it the next!” Not spending your budget therefore becomes the act of a ‘nutter’ (being either mad or eccentric…or both!)

7. “Always have the ability to explain adverse variances.” Financial variances tell management nothing about real causes. All you need is a ‘believable story’ to get them off your trail…and you should learn to blame plausible causes beyond your control…of which there will always be some.

8. “Never provide accurate forecasts” Don’t share bad news (you will be berated for poor performance) whilst there’s still time in which your fortunes might miraculously reverse. Don’t share good news (you will be expected to sustain higher results going forward) whilst there’s still time for unwanted surprises that might wipe the slate clean. In short, tell your superior what he or she wants to hear.

9. “Always make the numbers, never beat them.” Manage the results: if you are doing better than budget, find some way of holding it back to feed in later in the year when needed.

10. “Never take risks.” If it’s not in the budget, why would you take the risk! No one is expecting it and if it doesn’t work out, your job might be on the line!

Now you might look at the set of games above and cry out that this is a grossly exaggerated picture…and, yes, if every person was playing every game all of the time, we surely wouldn’t have a business! At least not for long…and it would be a hellish place to work in the meantime.

But it’s worth considering that:

I have seen every one of these budgeting games being played at some point in my working life so far, many of them openly, repeatedly and regularly …how about you?

the vast majority of people are decent human beings and don’t want to play such games…and yet the fixed performance contract induces them (to some degree) to do so – this mental strain is a very unhealthy place for a human to find themselves.

So where do we go from here?

So I’ve written enough on the problem.

‘Part 2’ (coming soon to a blog stall near you) will set out a different philosophy and, by revisiting the budget games played, will show what this ‘new way’ enables.

…over and out for now.

Back to that ‘Profit Sharing’ Nirvana

May 9, 2016June 27, 2019 giantknave Brain Farts Alfie Kohn, Beyond Budgeting, Handelsbanken, Jan Wallander, Oktogonen Foundation, Peter Scholtes, Profit Sharing

My last post set out why profit sharing beats incentives by a country mile but I also laid out a note of caution on one aspect, short-termism:

I wrote that “A key consideration for anyone designing a profit share method is to avoid short-termism. Alternative thinking on how to achieve this might be to consider payment in shares that can’t be sold for a certain period, or payments into a person’s pension scheme, or [some other way of thinking outside the box]”

I have been keeping my eye open for a ‘for profit’ organisation out there that has been demonstrably successful in operating a profit sharing method that fits, and doing so for a reasonable (i.e. proven) period of time…and I believe that I have found such a thing! A Swedish bank called Handelsbanken.

Here’s the story:

At the end of the 1960s Handelsbanken was in crisis so it searched around for a radical thinker to lead them. They found Jan Wallander – an economist who had metaphorically ‘put his money where his mouth is’ by leaving academia and becoming a director of a rival Swedish Bank…and he was doing rather well whilst challenging conventional wisdom.

He took on the role of Handelsbanken’s CEO in 1970 and got stuck in to doing things quite differently! As an example, he was particularly scathing about budgets:

“either a budget will prove roughly right and then it will be trite, or it will be disastrously wrong and in that case it will be dangerous. My conclusion is thus: Scrap it!”

As a result of this, Handelsbanken have now been operating very successfully without budgets for over forty years! (There’s an important ‘Beyond Budgeting’ post coming soon)

….but getting back to the profit-sharing subject:

Jan Wallander believed in a profit-sharing system that:

is intended as a reward for everyone’s collective efforts and competitive success (i.e. as against other banks); and conversely
should not be an incentive for individuals to pursue financial targets.

“beating the competition…is a far more powerful weapon than financial incentives. Why do people need cash incentives to fulfill their work obligations to colleagues and customers? It is recognition of effort that is important. Managers will only strive to achieve ambitious goals if they know that their ‘best efforts’ will be recognised and not punished if they fail to get all the way.”

Wallander set out an overall goal for the organisation (within its banking purpose): attaining a better return on equity than its (listed) banking competitors. This is rather interesting:

it doesn’t tolerate for any ‘resting on their laurels’ in easy market conditions; and conversely
it reasonably accommodates what might seem disappointing results (in absolute terms) when the market is tough.

Starting in 1973, the bank has allocated part of its profits to a profit-sharing scheme for employees. The main condition for an allocation to be made is that the ‘return on equity being better than the competition’ goal is achieved for that year.

The funds are paid to a profit-sharing foundation called Oktogonen (which was set up by the bank’s trade union club). In turn, the Oktogonen Foundation places 90% of these funds in Handelsbanken shares, thus giving the employees owner representation on the bank’s board.

The Oktogonen Foundation has become the bank’s largest shareholder, with over 10% of voting power.

Okay, so there’s a big fat fund of money…but how do the employees get at it?

This is the long-term bit, mixed with a healthy dose of equality.

Every year that the bank makes a profit allocation into the foundation (which, as it happens, has been achieved every year since its inception) then each current employee is allocated an equal share of units (i.e. salary level is not relevant to this allocation).

The value of each unit then goes up and down with the value of the foundation’s investments i.e. mainly the price of Handelsbanken’s shares.

Current and past employees can cash up their units from the age of 60 i.e. they cannot access any money until this point. This gives the Oktogonen Foundation the character of a pension fund.

This 2013 financial report shows that, if an employee had worked full time at the bank since the start of the scheme in 1973 (i.e. a 40 year working life), their fund units would be worth SKr 14,000,000…which is US$1.7 million at today’s exchange rate!!!! …that would be my pension pot sorted.

Some thoughts on this:

you can see that everyone working for the bank is ‘joined together’ (working as a system), aiming in the exact same direction over the long term…yet they also need to do so with speed so as to release the yearly profit allocations. This harnesses together the desires for efficiency and effectiveness;

it removes the need for the whole ‘setting personal objectives – arbitrary targets – judgemental scoring – giving of contingent rewards’ commotion….and the people can use this huge amount of freed-up time and wasted energy to work towards purpose. A bye-product is that people can now ‘get on’ as adults rather than as Parent – child;

it removes the batch behaviours associated with annual bonus payments:
- there isn’t a period before year end where some people ‘hang on’ to get their payment when they’ve already checked out for something/ somewhere else; and
- there isn’t an exodus of people out the door in the months after the bonus cheque has been cashed…causing a renewed batch of recruitment.

… people leave as and when they want to, which makes for transparency and a clear flow, making the balancing of capacity much easier;

it binds the employees and the shareholders together. They now have the same long term interest of building and sustaining a business for the future. Conversely, it will likely dissuade short term investors attracted merely by share price volatility…which isn’t in the best interest of organisational success.

What about some likely criticisms?

Here are four likely retorts to the idea of long-term profit sharing instead of short-term incentives:

1. “But what about ‘poor performers’?”

This is usually the first criticism of the profit-sharing method and rests on the belief* that some people will always ‘work harder’** than others and why should ‘slackers’ benefit at the expense of ‘grafters’.

* it is interesting that most people working in a command-and-control environment appear to have this belief about themselves as compared to others. A bit like everyone thinking that they are a ‘better-than-average’ driver 🙂

** I am only covering the ‘effort’ question here. The ability/ scarcity of resource question is covered within the differing levels of salary that people receive.

Incentive schemes are not the answer to supposed ‘poor performance’ – they are frequently used as a substitute for good management and, as such, are an abdication of management’s responsibilities.

Alfie Kohn writes that “In order to solve problems in the workplace, we must know what caused them….holding out a carrot – ‘Do better and here’s what you’ll get’ – is a pseudo solution; it fails to address the issues that are actually responsible for holding back the organisations and the people who work there.

Incentive schemes are frequently used as a substitute for giving workers what they need to do a good job…much less effort is required to dangle a bonus in front of employees and wait for the results…[however] there is evidence that pay-for-performance plans tend to displace careful management…a compensation system is no substitute for careful management.”

But it’s not just management, it’s also about peers! Here’s Handelsbanken’s response to the ‘poor performers’ fear:

“In a team based organisation driven by peer pressure, free riders are exposed very quickly and replaced by people more willing to commit themselves to real performance challenges.” (Source Book: ‘Beyond Budgeting’)

i.e. rather than gifting ‘free riders’ with easy money, the profit sharing method exposes and deals with them!

On advocating the removal of the ‘incentive-performance management’ system, Deming was once asked by a member of his audience “but what will we do instead?” His response was “Try leadership”.

…it has clearly worked rather well for Handelsbanken!

2. “How do we get people to leave? Won’t people hang around forever?!”

This view fits alongside the concern about ‘poor performers’. Consider though that the supposed ‘poor performance’ may very well evaporate…and we now have hugely experienced AND motivated people.

‘But they will be dinosaurs, unable to change’ I might hear someone reply. Really? Do you think that you couldn’t change even if you wanted to? Consider that “People don’t resist change, they resist being changed” (Scholtes). It’s back to that environment again!

Perhaps those ‘resistant to change’ are suffering from ‘change fatigue’: namely, being tired of their huge knowledge being ignored as the next overly simplistic ‘silver bullet’ change programme is done to them.

An organisation with high employee turn-over allows (and often forces) years of highly skilled knowledge to regularly ‘walk out the door’, only for the learning to start again, almost from scratch by the ‘next batch’. If the experienced workers stay, just think of where they could ‘kick on’ to if they so desired.

…but don’t worry, we haven’t engineered a prison! People can and will leave as they wish…and retain the profit-sharing units already assigned to them.

3. “People like getting a lump sum each year to pay for, say, their holidays”

Yes, I can see this (I do too)…but I would happily trade in the pain of the annual performance process (including the dysfunctional behaviours it causes) and the resultant lump sum payment if it meant that I got a real kick out of work because of the amazing environment that I worked in, with people who are equally energised, and who are ‘all running in the same direction’ and helping each other do so.

This brings to mind the quote “Pay people well and fairly…then put money out of their minds.” (Alfie Kohn)…though I might fondly look ahead every once in a while to that pension pot!

4. “What happens if the organisation goes bust?!”

Yep, you’d lose your investment (or at least be at the back of the creditors’ line)…so you would be very keen to constantly:

stay alert: look ahead to see external change coming (rather than ‘sit back and wait’);
know what’s happening: keep close to your customers and how their needs are changing…and be sure to deliver value to them;
innovate: think differently, look at what others are doing, try things out (experiment), pivot in new directions;
collaborate and roll-in meaningful change that demonstrably works for the whole system;
seek out, recognise, and directly attend to obvious waste and failure demand.

i.e. constantly improve your capability of meeting your customer’s purpose….just what your shareholders and profit-share foundation unit holders (incl. past employees) would want of you!

…and finally, that’s not the whole story:

Cleary, it wasn’t just a superb profit-sharing scheme that has led to Handelsbanken’s success…but it is seen as an enabler and a foundation for the necessary environment to stimulate and secure long term success. Jan Wallander did lots of things differently – probably the greatest being that he was also a firm believer in empowering people through decentralisation.

There is a clear relationship between decentralisation² – empowerment – intrinsic motivation – purpose – systemic collaboration – continuous improvement – profit sharing.

Notes:

1. Handelsbanken reference material: The history of Handelsbanken

2. On Decentralization: “What is commonly understood by decentralization originates in the conventional command-and-control paradigm, defined as Decentralization 1.0.

To cope with the world’s exploding complexity, some vanguard companies have evolved to a higher level of organization by adopting a new kind of decentralization originating in the enabling-and-autonomy paradigm – hence the term Decentralization 2.0. This refers to organizations consisting of autonomous groups facilitated by an enabling support organization. To keep these high-trust, spirit-driven organizations together, a new kind of deep leadership is practiced by them.” (Decentralization 2.0)

3. The Oktogonen Foundation: For a very clear explanation, scroll right down to Appendix A at the bottom of the ‘Written evidence from Handelsbanken to the UK Parliamentary Commission on Banking Standards’. (Parliament UK)