1. Beyond Budgeting – a new management model for new business realities Bjarte Bogsnes Vice President - Performance Management Development Chairman - Beyond Budgeting Round Table Europe

4. Fortune 500 ranking (2011) Social responsibility Innovation

5. Statoil performance – as we define it RoACE – 2010 * Peer group: Anadarko, BG, BP, Chevron, ConocoPhillips, Devon, Encana, Eni, ExxonMobil, Lukoil, Occidental, Petrobras, Repsol, Shell, Statoil, Total. Source: Barclays Capital RoACE – 2009 Target Target Total shareholder return 2010 Target Target Total shareholder return 2009

6. Managing traffic performance - one alternative Based on which information? Who is in control?

7. Managing traffic performance - another alternative Based on which information? Who is in control?

8. Which is most difficult ? In which are values most important? Which is most efficient ?

9. The world has changed – what about the way we lead and manage? People Business environment Traditional management “ Theory Y” “ Theory X” Dynamic Stable

10. We must address both processes and leadership Leadership Processes Beyond Budgeting “ Theory Y” “ Theory X” Dynamic Stable Relative and directional goals Dynamic planning, forecasting and resource allocation Holistic performance evaluation Rigid, detailed and annual Rules-based micromanagement Centralised command and control Secrecy, sticks and carrots Values based Autonomy Transparency Internal motivation

11. Companies on a similar journey Classification: Internal 2010-09-10 ” I have been waiting for this for 20 years” (CEO) (Main Norwegian cases) (Some international cases) Europe’s most cost effective universal bank Beating the competition 40 years in a row

12. The Beyond Budgeting principles 12. Controls - Base controls on relative indicators and trends, not on variances against plan 6. Customers - Focus everyone on improving customer outcomes, not on hierarchical relationships 11. Resources - Make resources available as needed, not through annual budget allocations 5. Autonomy - Give teams the freedom and capability to act; don’t micro-manage them 10. Coordination - Coordinate interactions dynamically, not through annual planning cycles 4. Organization - Organize as a network of lean, accountable teams, not around centralized functions 9. Planning - Make planning a continuous and inclusive process, not a top-down annual event 3. Transparency - Promote open information for self management, don’t restrict it hierarchically 8. Rewards - Reward shared success based on relative performance, not on meeting fixed targets 2. Performance - Create a high performance climate based on relative success, not on meeting fixed targets 7. Goals - Set relative goals for continuous improvement, don’t negotiate fixed performance contracts 1. Values - Govern through a few clear values, goals and boundaries, not detailed rules and budgets Change in processes Change in leadership

14. Key principles – Ambition to action Performance is ultimately about performing better than those we compare ourselves with Do the right thing in the actual situation, guided by the Statoil Book, your Ambition to action, decision criteria & authorities and sound business judgement Within this framework, resources are made available or allocated case-by-case Business follow up is forward looking and action oriented Performance evaluation is a holistic assessment of delivery and behaviour

15. The CEO on Ambition to action

17. Ambition to action example Where are we going? ” Strategic objectives” How do we measure progress? ” Key Performance Indicators” How do we get there? ” Actions” Finance Market Operations HSE People & Org.

18. Ambition to action - one size does not fit all Global Local Temporary Continuous

19. More than 1100 ”Ambition to actions” across the company … ..and more

21. The journey continues ...

22. The controller and the fisherman ...

26. Back-up

27. A forecast – what we think will happen … not a promise, not an application for resources - whether we like what we see or not!

31. Dynamic resource allocation – the menu Traditional cost budget Ambition level / burn rate Relative KPIs Unit cost input/output Unit cost vs peers EBIT RoACE (abs/rel) Strategic objectives or actions only Absolute KPIs No KPIs Xx Xx Xx Xx Xx Xx Xx Xx 1000 1000 ” USD/bbl” ” USD/customer” ” USD/employee” ” 1. quartile” ” Above average” Increasing freedom and flexibility Bottom line focus only ” Cost effective and competitive operations” ” More video – less travel” ” Reduce consultancy spending” Select based on what works best in your business Monitoring of actual development, intervention if needed only Increasing need for strong values and clear direction