In this Kybos Diary of a CFO special, Stephen Hambling talks to Dr Stephen Morlidge about the radical changes he brought into Unilever. Watch the video and read the full story below.
Transforming Unilever
Growth had flatlined, and the harder growth stalled, the more management doubled down on ever more granular, short‑term targets. They hit the targets, but mainly through promotion‑driven “sugar rushes” that were inevitably followed by crashes. Performance became volatile and unsustainable.
A new board came in and recognised that the existing model was fundamentally broken. They stopped the old practices but quickly realised they didn’t yet have a clear alternative. Crucially, they admitted that, while they were seasoned executives, they didn’t truly speak the operational “language” of the business. They also knew they had strong people trapped in functional silos who wanted the company to succeed. So they gave those people the mandate to redesign how the company worked.
After an intensive two‑week offsite, two major shifts emerged.
First was a cultural and leadership shift: away from rigid, top‑down, board‑driven prescription and towards self‑managing teams, supported and coached rather than directed. This aligned closely – albeit unintentionally – with the leadership principles behind beyond budgeting.
Second was a fundamental process redesign on beyond budgeting lines. Instead of fixed, granular quarterly targets, the foods leadership team (one level below the main board) set continuously updated goals framed as “silver, gold, platinum” – a range from minimum acceptable performance through to extreme stretch. These ranges were reviewed regularly.
The crucial design feature was this: the closer teams got to excellent performance, the more revenue they generated; the more revenue they generated, the more resources became available for high‑value initiatives; and the more resources available, the more revenue they could create. This created a positive feedback loop: stronger collective performance meant more collective resources and, frankly, more collective enjoyment. In contrast, traditional budgeting often creates a doom loop: stretch targets are missed, profit commitments remain, costs are cut, and expectations – and ambition – spiral downwards.
This new approach completely changed behaviours. Instead of defending “my budget”, managers would say, “I could spend this money, but that colleague’s project will deliver more – give it to them.” The chairman knew something fundamental had shifted when a marketing manager volunteered to give up budget for a better idea elsewhere. That is a radical change in targeting and resource mindset.
On forecasting, they moved to a single set of numbers. There were no competing forecasts and no debates about whose version was “right”. If the forecast diverged from aspirations, the conversation wasn’t “why didn’t you hit the target?” but “why is this happening, and what do we need to do?” That was the biggest lesson: a forecast is an expectation, not an aspiration. There should be gaps between the two. Those gaps are valuable: they signal what must change to reach aspirations and help determine how much you can and should invest.
This led to the third major change: funding. Instead of fixed annual budgets, they introduced a quarterly funding cycle that worked like an internal competition for capital. Teams brought forward proposals; if ideas were affordable and compelling, they were funded. Money flowed to the best ideas. Each initiative defined what success would look like in advance, so it was transparently clear whether it had delivered. That clarity replaced vague “accountability” with visible outcomes. There was no reward for spin – only for impact.
Every quarter, they reassessed: how much money do we have, what ideas do we have, where will funds deliver the most value? Money followed proven ideas; ideas were either validated or not, and everyone learned and moved on.
For performance evaluation, they eliminated traditional variance analysis. Instead, they used what I consider the number‑one secret weapon: moving annual totals. You take the last 12 months of data, plot it, then roll forward a month at a time, constantly showing a 12‑month view. The resulting trend line often reveals what people have sensed intuitively but couldn’t see in conventional dashboards. It’s a simple but extremely powerful way of turning performance into a clear picture rather than a set of disconnected numbers.
Their S&OP process generated the financial forecast and ensured cross‑functional coordination. Interestingly, they didn’t touch the reward system. Many people think beyond budgeting is primarily about changing incentives; I disagree. Incentives can be part of the problem, but they’re rarely the solution. In this case, Unilever’s reward scheme was so weak it barely influenced behaviour at all, so misalignment with beyond budgeting principles was largely irrelevant.
What really mattered was the performance impact. Before the leadership and process changes, the moving annual total of revenue showed the same volatility caused by “hit the number” tactics. The new approach was approved by the board at the end of December, implemented from 7 January – and within weeks the moving annual total showed a decisive shift. A flatlining business moved to consistent 7% annual growth for three consecutive years.
Even as someone who understands, academically and scientifically, why these methods should work, I was astonished by the scale and speed of the improvement. And this wasn’t some extreme, purist version of beyond budgeting – nothing like the most radical cases you sometimes hear about. It was simply clear, consistent, and a clean break with the past – both in process and culture. Middle management, in particular, became the real engine of the business.
One anecdote captures the sense of ownership and camaraderie. The foods leadership team told the business, “We’re targeting 5% growth, but we believe you can achieve 7%. If you hit 7%, we’ll shave our heads.” When I later filmed that leadership team, every one of them had very short hair. It’s a light‑hearted example, but it reflects a deeper shift: performance was now a shared, visible, collective achievement.
Another telling comment came from a senior sales leader: “I never used to like the finance people. Now I go for a drink with them.” That is what happens when finance stops enforcing static budgets and starts enabling a dynamic, transparent cycle where good ideas attract resources, forecasts guide decisions, and performance is managed as a continuous flow rather than a yearly negotiation.
About Dr Stephen Morlidge
Known as “the Radical Pragmatist”, Dr Stephen Morlidge is a leading thinker, writer and speaker who specialises in cutting through the complexity of forecasting and financial performance management. He helps finance practitioners design and implement practical, radically pragmatic solutions to their real-world challenges.
Dr Morlidge has more than 30 years’ hands-on experience designing and running performance management systems at Unilever, including three years leading a major global change programme. A former chairman of the European Beyond Budgeting Round Table, he now focuses on management thinking, writing and speaking, drawing on his extensive experience at the leading edge of performance management theory and practice.
He is driven by a deep interest in how organisations work and how they can be improved – not only to deliver better outcomes for the organisation and its shareholders, but also to create more fulfilling and purposeful work for the people within them.
About Stephen Hambling,
CEO and Founder of Kybos, a UK based Jedox partner.
I provide simple, clear, commercial forward looking financial support to founders, entrepreneurs and CFO’s of Small and Medium sized companies. Typically I’m the special projects guy, commercial troubleshooting, systems help, M&A or cashflow & turnarounds. I’ve implemented several hundred finance systems. Implementations are not a core skill set for the average finance team, so it’s easy for a project to go off track. Clear simple guidance before, during and after an implementation can make the world of difference.
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