1. Beyond Budgeting - the Statoil
implementation
Bjarte Bogsnes
Vice President - Performance Management Development
Chairman - Beyond Budgeting Round table Europe
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2. Statoil in brief
• Turnover and market cap Arctic
approx. 75 bn. USD
North Sea & Norwegian Sea
• 20.000 employees
in 34 countries Russia
• World’s largest operator in Canada
waters deeper than 100 metres Caspian
• Second largest gas exporter to North Africa
Europe US Gulf of Mexico
Middle East
• World leader of crude oil sales
• Listed in New York and Oslo South America
West Africa
Current production of oil and gas
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3. Fortune 500 ranking (2011)
Social responsibility Innovation
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4. The Beyond Budgeting principles
Change in leadership Change in processes
1. Values - Govern through a few clear values, goals and 7. Goals - Set relative goals for continuous improvement,
boundaries, not detailed rules and budgets don’t negotiate fixed performance contracts
2. Performance - Create a high performance climate 8. Rewards - Reward shared success based on relative
based on relative success, not on meeting fixed targets performance, not on meeting fixed targets
3. Transparency - Promote open information for self 9. Planning - Make planning a continuous and inclusive
management, don’t restrict it hierarchically process, not a top-down annual event
4. Organization - Organize as a network of lean, 10. Coordination - Coordinate interactions dynamically, not
accountable teams, not around centralized functions through annual planning cycles
5. Autonomy - Give teams the freedom and capability to 11. Resources - Make resources available as needed, not
act; don’t micro-manage them through annual budget allocations
6. Customers - Focus everyone on improving customer 12. Controls - Base controls on relative indicators and
outcomes, not on hierarchical relationships trends, not on variances against plan
4 - Classification: Internal 2011-08-15

5. Start of the Statoil journey
- solving a serious budget conflict
Step 1 Step 2
The budget purposes Separate Improve
• Ambitious
Target • Relative KPIs where possible
What we want • Holistic performance evaluation
Budget = to happen
•Target • Unbiased - expected outcome
Forecast • Limited detail
•Forecast What we think
will happen • Dynamic - no annual allocation
•Resource allocation
• KPI targets, mandates, decision
Resource gates & decision criteria
allocation • Trend monitoring
“Same number – “Event driven
conflicting purposes” ”Different numbers” - not calendar driven”
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6. Key principles – Ambition to Action
Performance is
ultimately about
performing
better than
those we
compare
ourselves with
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7. Statoil financial performance - as we define it
Total shareholder return 2011 Return on capital (ROCE) 2011

8. Key principles – Ambition to Action
Performance is Do the right Within this
ultimately about thing in the framework,
performing actual situation, resources are
better than guided by the made available
those we Statoil Book, or allocated
compare your Ambition to case-by-case
ourselves with action, decision
criteria &
authorities and
sound business
judgement
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9. Spending wisely - the CFO on cost culture
Classification:
9 Internal
2011-11-24

10. Key principles – Ambition to Action
Performance is Do the right Within this Business follow Performance
ultimately about thing in the framework, up is forward evaluation is a
performing actual situation, resources are looking and holistic
better than guided by the made available action oriented assessment of
those we Statoil Book, or allocated delivery and
compare your Ambition to case-by-case behaviour
ourselves with action, decision
criteria &
authorities and
sound business
judgement
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11. The CEO on Ambition to Action
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12. Ambition to Action - purpose and process
• Translating strategy - from ambitions to actions
• Securing flexibility - room to act and perform
• Activating values and leadership principles
Strategic Actions & Individual
objectives KPIs forecasts or team
goals
Where are we going – How do we measure How do we get What is my or our
what does success progress? there? contribution?
look like?
• Most important strategic • Indicative measure of • Concrete actions and My Performance Goals
change areas strategic delivery expected delivery • Delivery
• Medium term horizon • 10-12 KPI’s, shorter/ (forecast)
• Behaviour
longer term targets • Clear deadlines and
accountabilities
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13. Ambition to Action example
People &
Organisation
Where are we
How do
going?
we get
HSE
”Strategic there?
objectives” How do we
measure ”Actions”
Operations
progress?
Market
”Key
Performance
Indicators”
Finance

14. More than 1600 ”Ambition to Action’s”
across the company
…..and more
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15. Towards a simpler, more dynamic and self-
regulating Ambition to Action process
More cost conscious
- less «cost cutting»
More event driven
- less calendar driven
More translation
- less cascading
More relative
- less absolute KPIs
”Giving Ambition to Action back to the line”
Classificati
on: Internal
2011-09-07

16. Implementation advice
• Create problem understanding before talking solutions
• What’s the real risk – upside vs downside
• Design to 80% and jump
• A ”pull-based” approach
• ”One war but a thousand battles”
• Don’t become a fundamentalist
Classif
ication:
Interna

17. Questions or comments - now or later?
Bjarte Bogsnes
bjbo@statoil.com
+ 47 916 13 843
Twitter @bbogsnes
Beyond Budgeting Round Table
www.bbrt.org
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18. Want to hear more?
1. The problems with traditional management
2. The Beyond Budgeting model
3. The Borealis case
4. The Statoil case
5. Implementation advice
Out on Wiley (US)
Available from e.g. Amazon.co.uk
(Now available in Russian and Japanese)
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