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Beta Universe · Deep Dive

Relative Targets

The performance system of the BetaCodex: without budgets, plans, fixed targets, bonuses and "cost management" — and instead with relative comparisons, radical transparency and team economics. The conceptual foundation of relative steering in BetaOS.

1 · Core idea 2 · Relative to what? 3 · The 10 principles 4 · What goes 5 · The 7 tools 6 · Adoption (12 patterns) 7 · Origins & cases 8 · For BetaOS 9 · Literature 10 · References

1  The core idea

Relative Targets is neither improved budgeting nor a variant of Management by Objectives — Pflaeging explicitly distinguishes the approach from OKRs as well. It is a complete performance system built on McGregor's Theory Y.[1]

The trouble with fixed targets

Fixed targets: internally referenced

Plan-versus-actual comparisons, negotiated targets and forecasts turn attention inwards: in Pflaeging's reading they produce obedience towards the plan instead of responsiveness towards the market.[2] Fixed performance contracts are therefore held to be structurally unsuitable in complex markets — regardless of how good the planning is. The fundamental critique of budgeting comes out of Beyond Budgeting research.[22]

The answer

Relative comparisons: externally referenced

Performance is never measured against plans but in comparison: with one's own past, with other teams, with the market, with the optimum. Always actual-to-actual, never plan-to-actual.[3] The view of human nature behind it: people are intrinsically motivated (Theory Y, after McGregor) — the organisation only has to create the conditions under which team performance can emerge.[32]

The key claim: Relative Targets covers the entire performance system — from foresight through resource coordination and reporting to remuneration.[1] The approach and cell structure design depend on one another: without cells that have their own profit and loss account, relative comparisons have nothing to refer to; without relative comparisons, self-steering cells have nothing to steer by.[4]

Open-source social technology since 2021 (CC-BY-SA-4.0, relativetargets.com) — commercial use in BetaOS is explicitly permitted as long as the source is credited and derivatives stay open source.[5]

2  Relative — but relative to what exactly?

Four kinds of reference replace the plan. Each answers a different question.[3]

1 · Your own past

Trends & prior periods

Rolling time series (24/36 months) show one thing: are we getting better? What matters is improvement over time — the single most important monitor in the whole system.[6]

2 · Other internal teams

League tables

Teams compare themselves with teams: region with region, plant with plant, cell with cell. The comparison is meant to encourage beating the average and is explicitly never tied to sanctions.[7]

3 · Market & competitors

External benchmarking

Comparison with other organisations or with the industry average — as a snapshot or over time. Also the basis for profit sharing (pattern 12).

4 · Optimum / process

Statistical process control

Process metrics against optima or acceptable variation (statistical process control, in the Deming tradition) — for the repeatable part of value creation.[8]

3  The 10 principles

Verbatim from White Paper No. 22 (January 2025) — each as an "instead of" pair. This is the binding specification.[9]

✅ This (beta)❌ Instead of (alpha)
1Measure actual performance only at organisation and team levelFixed targets for individuals, departments, products, levels, silos
2Actual-to-actual comparisons for self-steering in every teamPlan-versus-actual variance analysis for external control by bosses
3Continuous preparation involving everyoneCalendar-driven planning by a few
4Sporting, playful competition between internal teamsRivalry between individuals
5Discourse about identity and the forging of agreementsStrategy-setting and decisions by managers
6Control through social density, principles and high standardsRules, "values" and intrusive micromanagement
7Open books, fast close — "everyone sees the same numbers at all times"Opacity, number games, "figures only on request"
8Team P&Ls plus a few relative trend indicatorsNumerous, pre-fixed data points
9Market-like, outside-in resource coordinationPlanned allocations from above
10Relative, fair base salaries plus profit sharingMinimised salaries plus bonuses

4  Organizational hygiene: what goes

Building the new system starts with abolishing the old one — in Pflaeging's account that is what creates credibility, time and attention. The elimination list from White Paper 22:[10]

Eliminate entirely
  • Budgeting / annual planning, capital expenditure planning
  • Plan-versus-actual variance reporting
  • Cost management, cost allocations, cost-cutting programmes
  • Strategic planning / canvases, balanced scorecards, strategy maps
  • Fixed targets, individual targets, OKRs, sales quotas
  • Working-time monitoring
  • 360° feedback, performance appraisals
  • Bonuses and incentive schemes
  • Report presentations in meetings
Merely tone down
  • Forecasting — not forbidden, but confined to supporting individual decisions; never a basis for steering or for meetings
  • Analytics / business intelligence
  • Ad-hoc reporting

A field observation from the white paper: part of the workforce changes its behaviour immediately, while another part first gains the conviction that a different system is possible — both count as valuable early on, because they shift the prevailing narratives.

5  The 7 core tools

These are the concrete artefacts a relative performance system works with day to day.

Tool 1

Daily ticker

Daily, pushed to everyone without exception: the day's revenue plus the distance to the monthly break-even. Developed by Silke Hermann in the late 2000s. Its purpose is collective economic awareness ("organizing the we"), not pressure on individuals — hence the whole organisation only, never individuals.[11]

05 Nov   150,663 €   −1,530,208 € to break-even

Push rather than pull is mandatory: information that has merely been "made available" is felt to be less relevant than information delivered personally.[11]

Tool 2

Trend reporting

The most important monitoring concept in the entire system: rolling time series ("24 months rolling", "36 months rolling"; depending on the process also "54 weeks" / "30 days") as a table, chart or sparkline. Rule of thumb: for internal figures that are available frequently, drop totals and period comparisons and go straight to the rolling trend.[6]

This makes reports 80–90% leaner — and richer in content nonetheless. Gone: year-to-date columns, plan figures, quarterly totals and overloaded charts ("chart junk").[12]

Tool 3

Fast close + open books

The "twin champions of transparency": the books closed on the 1st or 2nd working day of the following month (any later counts as "administrative sloppiness"), and all figures open to everyone — including training everyone to read them (P&L, balance sheet, cash flow = "financial literacy"). Without these two, no relative system works.[13] Open book management as a concept goes back to John Case.[14]

Tool 4

Value creation accounting (cell P&L)

Every cell gets a full P&L — deliberately in different language: there are no "costs", only three kinds of contributions (anything else would be "waste"):[15]

  • Own contribution — the team's own work
  • Internal inputs — contributions from other teams in the network
  • External inputs — contributions from third parties outside

A rule from cell structure design: periphery cells must earn a margin, centre cells exactly break even — never a profit, otherwise the shift of power to the periphery would be undermined.[16][4]

Tool 5

Internal price lists

Centre cells charge the other cells for their services — because nobody has a budget and there are no cost allocations. The rules: a maximum of 5–7 services per centre cell; two are enough to start with (one per head, one by usage); refine and renegotiate later. Executive salaries stay entirely outside the internal market.[16]

Tool 6

League table (exactly one, to begin with)

Start with a single league table for the periphery cells, with one metric: the cost-income ratio (costs ÷ revenue; lowest value at the top). The cost-income ratio is preferred over margin because it keeps the search for effectiveness open — "there is no good enough". The strict rule: observe, understand, help one another — do not judge, control, reward or punish. At least once a month the cells talk to each other about the table.[7]

Tool 7

Profit sharing (for everyone)

The basis: an external profitability league (your own firm against selected competitors plus the industry average). A predefined share of the profit above the industry average is distributed — preferably per head (alternatively weighted by salary). Note: profit sharing is a consequence of the transformation, not a precondition — it can come along calmly after the 90 days.[17]

Supporting moves

Salaries & contracts

Embedding bonuses: what used to be variable pay is folded into fixed salary on the basis of each individual's history — nobody ends up worse off. According to the white paper, variable pay does not motivate; it signals a culture of obedience and fear.[18] On the harm done by reward systems, Alfie Kohn is the foundational reference.[19]
Contract management: cut waste in practical terms by systematically reviewing every contract (licences, hire cars, subscriptions, retainers and so on) — in Pflaeging's words a "blind spot" in most organisations, and at the same time a purely craft-level field that is well within reach.[20]

6  Adoption: the 12 patterns in transformation order

The order follows the observed sequence of real beta transformations run with the OpenSpace Beta method. The relative system goes live after 15–20 weeks.[21]

Phase 1 · Build-up (60 days)
  1. Scrap budgets and fixed targets, tone down forecasting
  2. Set up a staged introduction
  3. Start the daily ticker
  4. Declutter reporting & make it relative
  5. Establish fast close + open books
Phase 2 · Practicing-flipping-learning (90 days)
  1. Make trend reporting visible
  2. Waste out: contract review
  3. Embed bonuses into fixed salaries
  4. Value creation accounting: a P&L per cell (from the first month-end close after go-live)
  5. Super-simple price lists at go-live
  6. One league table (cost-income ratio)
Phase 3 · Quiet period (30 days +)
  1. Install profit sharing calmly afterwards
The logic of the sequence: first the old practices are removed (credibility, time freed up), then the transparency foundation is laid (ticker, fast close, open books), then team economics are built (value creation accounting, price lists, league table), and only then is remuneration changed. The tools build on one another — a league table without fast close and cell P&Ls would say nothing at all.

7  Origins & documented cases

Relative Targets is the further development of the Beyond Budgeting process strand and rests on roughly a hundred years of organisational theory.

Lineage

Follett → Deming → BBRT → BetaCodex

Follett (1920s) → McGregor & Deming (the system beats the individual, no rankings) → Tavistock/socio-technical systems → Beyond Budgeting Round Table from 1998 (case studies on Handelsbanken, Ahlsell, Guardian Industries, Toyota, Semco; Pflaeging was a director there) → the BetaCodex Network deepens the work, adds value creation accounting, takes a more critical line on forecasting — and turns the whole thing into open-source social technology in 2021.[23][22]

Reference cases

Cases in practice

  • Handelsbanken — budgetless since the 1970s; a monthly cost-income league of its branches; more profitable than the industry average for decades; profit sharing through "Oktogonen"[24][25]
  • Buurtzorg — team benchmarking for 1,000+ self-managed teams via BuurtzorgWeb[26]
  • Morning Star — peer contracts (CLOU) with self-set metrics ("stepping stones")[27]
  • dm-drogerie markt — value creation accounting, relative steering[28]
In fairness — the counter-voices (at length in the article Understanding Beta): Wohland regards internal charging as "economic theatre" (there is no market inside a company — only symmetrical seams);[29] Laloux's teal pioneers partly work without any targets at all;[30] Beyond Budgeting itself permits incremental adoption.[31] And Snowden/Cynefin warns against any measurement framed as distance from a target state — never let comparisons tip into a logic of reward and punishment; which is precisely what WP 22 itself forbids for league tables.[33][7]

8  Relative Targets in BetaOS

BetaOS models organisations as a cell structure with its own team economics — Relative Targets is the matching steering model. White Paper 22 yields the design principles by which BetaOS implements relative steering.

What BetaOS models
  • Rolling trends — actual time series per cell and per organisation (24/36 months) instead of an annual budget view
  • League table — exactly one per organisation to start with, metric: cost-income ratio; deliberately without incentive or traffic-light logic
  • Service catalogues — 5–7 priced services per centre cell (per head / by usage) as the basis for internal charging
  • Cell P&L following value creation accounting — with the three contribution categories: own contribution, internal inputs and external inputs
  • Daily ticker — the day's revenue plus the distance to break-even, pushed to everyone
  • External benchmarks — competitor and industry figures, among other things as the basis for profit sharing
What BetaOS deliberately does not build
  • Plan-versus-actual comparisons, budget objects, forecast dashboards
  • Individual targets, OKR views, individual performance traffic lights
  • Year-to-date columns and fiscal-year fixation as the default
  • League tables coupled to reward or sanction
  • Metrics below team level

A guardrail from complexity research: no "beta maturity score" against a target state — if there is assessment at all, then direction and speed from where things actually stand (a vector), and diagnosis rather than a grade.[33]

Why the two belong together: a cell structure without relative steering stays a description — it takes trends, a league table and a ticker to make each cell's economics visible in everyday work. That is why Relative Targets is the heart of the steering view in BetaOS: the same numbers for everyone, relative rather than planned, teams rather than individuals.

9  Literature & web links

The main source for this article is White Paper No. 22 of the BetaCodex Network; all works were read in full for the Beta Library.

Primary source

[PH25a] Pflaeging, Niels: Relative Targets: Patterns in Practice — 12 real-world insights from the application of rationally designed and scientifically sound performance systems. BetaCodex Network White Paper No. 22, January 2025. Freely available at betacodex.org/white-papers.

Literature

[PH20] Pflaeging, Niels; Hermann, Silke: Zellstrukturdesign. Vahlen, Munich 2020.

[PH19a] Pflaeging, Niels; Hermann, Silke: Komplexithoden. Redline, Munich 2015.

[HF03] Hope, Jeremy; Fraser, Robin: Beyond Budgeting. Harvard Business Review Press, Boston 2003.

[Wa03] Wallander, Jan: Decentralisation — Why and How to Make it Work. The Handelsbanken Way. SNS Förlag, Stockholm 2003.

[De94] Deming, W. Edwards: The New Economics for Industry, Government, Education. MIT Press, Cambridge 1994.

[McG60] McGregor, Douglas: The Human Side of Enterprise. McGraw-Hill, New York 1960.

[Ko93] Kohn, Alfie: Punished by Rewards. Houghton Mifflin, Boston 1993.

[Ca96] Case, John: Open-Book Management — The Coming Business Revolution. HarperBusiness, New York 1996.

[OS19] Oestereich, Bernd; Schröder, Claudia: Agile Organisationsentwicklung. Vahlen, Munich 2019.

[Wo12] Wohland, Gerhard; Wiemeyer, Matthias: Denkwerkzeuge der Höchstleister. 3rd edition, Unibuch, Lüneburg 2012.

[La14] Laloux, Frederic: Reinventing Organizations. Nelson Parker, Brussels 2014.

[Bo23] Bogsnes, Bjarte: Beyond Budgeting at 25. White paper, 2023.

[Sn21] Snowden, Dave; Rancati, Alessandro: Managing Complexity (and Chaos) in Times of Crisis — A Field Guide for Decision Makers. EU Joint Research Centre, Luxembourg 2021.

Web links

relativetargets.com — the official concept site (open source, CC-BY-SA-4.0)

cellstructuredesign.com · openspacebeta.com — sister social technologies of the BetaCodex

Corporate Rebels: Handelsbanken — A Budgetless Banking Pioneer

Paul Green Jr.: The CLOU — Replacing Jobs with Commitments (Management Innovation eXchange)

ANEO: Buurtzorg's Networked Self-Management System

10  References

Short references by sigla; the full references are in the literature list (section 9). The main source is [PH25a] (Pflaeging, Relative Targets: Patterns in Practice, BetaCodex Network 2025); page numbers refer to that source, web sources carry an access date.

  1. ↑ [PH25a], pp. 3–4: “Relative Targets is not yet another take on target-setting. It is not ‘better budgeting', or a rehash on MbO (such as ‘OKRs')."
  2. ↑ [PH25a], p. 5: fixed references are “internally referenced (producing inward orientation), they will produce obedience and a lack of responsiveness".
  3. ↑ [PH25a], p. 5: “Four ways of assessing relative performance are key" — the past, internal teams, market/competitors, optimum/SPC.
  4. ↑ [PH20] Pflaeging/Hermann: Zellstrukturdesign, Vahlen 2020 — value creation accounting, cells with their own mini P&L, periphery/centre.
  5. ↑ [PH25a], pp. 2 and 6: published as open-source social technology in 2021 under CC-BY-SA-4.0; see relativetargets.com.
  6. ↑ [PH25a], p. 13: “trend reporting is the single most important concept for the monitoring of actual performance"; rolling 24/36-month series, sparklines.
  7. ↑ [PH25a], p. 18: one league table to start with, cost-income ratio; “League tables must strictly condemn judging, controlling, rewarding and punishing"; “there is no ‘good enough'".
  8. ↑ [De94] Deming: The New Economics, MIT Press 1994 — theory of variation / statistical process control.
  9. ↑ [PH25a], p. 4: "10 principles of Relative Targets" (the complete list).
  10. ↑ [PH25a], p. 8: the eliminate list ("Organizational Hygiene") and the tone-down list (forecasting, analytics/BI, ad-hoc reporting).
  11. ↑ [PH25a], p. 10: daily ticker, developed by Silke Hermann; push delivery; “Awareness is not a management task."
  12. ↑ [PH25a], p. 11: “applying such ‘relative' principles will make reports 80-90% ‘slimmer'"; criticism of year-to-date columns, plan figures, "chart junk".
  13. ↑ [PH25a], p. 12: fast close ("1st or 2nd day", otherwise “administrative sloppiness") and open books including "financial literacy" as the “Twin Champions of Transparency".
  14. ↑ [Ca96] Case: Open-Book Management, HarperBusiness 1996.
  15. ↑ [PH25a], p. 16: value creation accounting with three contribution categories; “none of these categories is referred to as ‘costs'".
  16. ↑ [PH25a], p. 17: a maximum of 5–7 services per centre cell, starting with 2; “center cells cannot be allowed to turn a profit"; executive salaries outside the internal market.
  17. ↑ [PH25a], p. 19: “Profit sharing is a logical consequence, not a pre-condition to transformation"; an external profitability league table as the basis, distribution preferably per head.
  18. ↑ [PH25a], p. 15: fixing variable components on the basis of individual pay history; “such changes won't leave anybody worse off".
  19. ↑ [Ko93] Kohn: Punished by Rewards, Houghton Mifflin 1993.
  20. ↑ [PH25a], p. 14: contract management as a “blind spot in most organizations"; four facets of contract review.
  21. ↑ [PH25a], p. 9: “a ‘staged' approach is necessary … 15 to 20 weeks into the transformation process"; distribution of the patterns across build-up (60 days), 90 days, quiet period.
  22. ↑ [HF03] Hope/Fraser: Beyond Budgeting, Harvard Business Review Press 2003.
  23. ↑ [PH25a], p. 6: roots in Follett, McGregor, Deming, Tavistock/STS; BBRT case studies on Handelsbanken, Ahlsell, Guardian Industries, Toyota, Semco.
  24. ↑ [Wa03] Wallander: Decentralisation — Why and How to Make it Work, SNS Förlag 2003.
  25. ↑ Corporate Rebels: Handelsbanken — A Budgetless Banking Pioneer, accessed 3 July 2026.
  26. ↑ ANEO: Buurtzorg's Networked Self-Management System, accessed 3 July 2026.
  27. ↑ Paul Green Jr.: The Colleague Letter of Understanding — Replacing Jobs with Commitments, Management Innovation eXchange, accessed 3 July 2026.
  28. ↑ [OS19] Oestereich/Schröder: Agile Organisationsentwicklung, Vahlen 2019 — value creation accounting in the dm/Alnatura tradition, service catalogues instead of internal targets.
  29. ↑ [Wo12] Wohland/Wiemeyer: Denkwerkzeuge der Höchstleister, 3rd ed. 2012 — internal customer-supplier relationships and transfer prices as "economic theatre"; coupling only through symmetrical seams.
  30. ↑ [La14] Laloux: Reinventing Organizations, 2014 — none of the twelve pioneer organisations studied works with top-down target-setting.
  31. ↑ [Bo23] Bogsnes: Beyond Budgeting at 25, 2023 — Beyond Budgeting as a coherent set of 12 principles, yet adopted step by step in practice.
  32. ↑ [McG60] McGregor: The Human Side of Enterprise, McGraw-Hill 1960 — Theory X/Y; cf. [PH25a], p. 4: “people are self-motivated, Theory Y creatures".
  33. ↑ [Sn21] Snowden/Rancati: Managing Complexity (and Chaos) in Times of Crisis, EU JRC 2021 — vector measurement (direction/speed from the actual state) instead of distance from an ideal target state.

As of 4 July 2026 · Compiled from the Beta Universe corpus of the Beta Library · The Relative Targets concept is licensed under CC-BY-SA-4.0.