With a plan in place, and a simple process for monitoring progress, the next stage is to identify actions. Closing the gaps with ‘internal projects’ is not new – but doing it in such a way that takes account of the scarcity of resources and aligns them with clear goals, clarifies accountability, and potentially links projects to budgeting and planning processes may be. With your strategy map in place, projects that don’t support key objectives should be shelved or delayed. And if you can’t bring yourself to do that, then you may have to ask if you have the right objectives.
Creating the Strategy Focused Bank A Discussion Document Jonathan Chocqueel-Mangan February 2003 t : m tyler mangan clear thinking: decisive action
The pace of change in the banking industry has increased along many dimensions
Increased assets and efficiencies through merger and acquisition
Geographic diversification to mitigate risk
Exit of low margin products and customer segments
Increasing focus on fee-based products
Increased wealth, higher levels of credit and higher levels of debt
Preference for one-stop shopping
Increased demand for integrated, alternate channels and self service
Demand for financial advice not just products
New entrants for new sectors (e.g. supermarkets)
Increase competition from products and transaction specialists, brokerages and venture capital
Cross Selling and the deepening of relationships with the most profitable customers
Migration to lower cost channels
Many banks are seeking to migrate from traditional banks to diversified financial services companies
Increase revenue form fee based products and services
Expand the ‘share of wallet’ for existing customers through cross selling
Differentiate services levels depending upon customer profitability
Provide consistent service experience across channels
Exploit partnerships to create better product development
Improve operational efficiency
Be all things to all people (The Martini Complex)
Lack of alignment between business units and support functions
Poor communication throughout the workforce
No link between strategy and budget
No link between strategy and performance management process
Under appreciation and management of enterprise wide risk
A wide range of Financial institutions have been executing their strategies using the Balanced Scorecard
Halifax Bank of Scotland
The Industrial Bank of Japan
Nationwide Building Society
Royal Bank of Canada
Royal Bank of Scotland
AXA Financial / The Equitable
Chemical Bank (Chase Bank)
First Chicago (Bank One)
Short-List of Balanced Scorecard Users in Financial Services
There are a number of critical components to a Balanced Scorecard – not just measures Objectives
Increase cross-business sales
Statement of what strategy must achieve and what’s critical to its success Target
Yr 1 40%
Yr 2 45%
Yr 3 50%
The level of performance or rate of improvement needed
Key action programs required to achieve objectives Initiative Measurement
% customers with products from >2 LOBs
How success in achieving the strategy will be measured and tracked Strategic Theme: Broaden Revenue Mix Financial Learning Customer Internal Strategic Map: Diagram of the cause and effect relationships between strategic objectives Grow Fee based Income Offer a one stop shopping experience Increase cross-business sales Understand our customers Expand Fee-based knowledge
The Balanced Scorecard identifies individual strategic themes which define the bank’s overall strategy The BSC articulates a business’ unique set of hypotheses about what drives value creation across these dimensions Sample Banking Strategic Themes Product Development Focus on developing and bundling innovative & tailored financial products and services. Marketing / Sales Focus on relations with customers to build the value proposition (e.g., cross-sell services). Risk Management Rapidly approve loans while maintaining the highest level of credit quality. Manage enterprise-wide risk. Customer Service Offer seamless customer service across all channels: branch, call center, and internet. “ Customized Financial Solutions” “ One-to-One Marketing” “ Effectively Manage Risk” “ Provide Seamless Customer Service” Operations Focus on productivity management, operating performance, and improving the efficiency ratio. “ Enhance Productivity”
. . . and the corresponding Strategy Map Sustainable profit growth Revenue growth in Key Segments Achi e ve s trateg i c c ost base Streamline and optimise business processes Bala n ce growth and r isk Risk and capital management Enhance productivity through lowering cost to serve “ Provide me with good value and innovative solutions” “ Be my valued, Trusted Financial Adviser / Provider” “ Provide me with consistent, personalised, easy, and convenient service” Deliver Propositions to meet existing and future customer needs Understand Customer needs Execute right delivery experience for each proposition Enable delivery channels to provide high quality, differentiated services Provide Chann e l c la r ity internally and externally Migrate routine transactions to cost efficient channels Deliver reliable, easy to use SVC information Exploit technology driven by the business needs Modernise technology and communication cap a bili t y Deliver performance management systems that recognise and reward high performance Enable achievement of personal career goals in line with business need Create an open and supportive culture where staff are entrusted and empowered Establish organisation skills in coaching, mentoring, selling and relationship management
Initiative alignment focused their change programme
Reports communicated the key issues, provided focus, and fostered collaboration and learning
Asset and liability bases increased 9% and 6% respectively
Planning cycle reduced by 25%
From 4 months to 3 months with no net increase in staff time
‘ Half the management meetings in half the time’
‘ There was a need to bring focus to the new group, bringing the management of the different regions together, thinking about the same business issues. The Balanced Scorecard helped to facilitate this process’
‘ We’re convinced that branch staff are more focussed about their contribution to the group’s success’
What is the vision for Balanced Scorecard in your organisation?
Why are you doing it?
What is the case for change?
How far is the horizon?
What are the interim steps along the way?
What have been the typical barriers to successful delivery for other change projects within your organisation?
What processes and activities are in place to break down these barriers?
What will your customers say today about the Balanced Scorecard?
What would you like them to say in 12 months’ time?
What are the Critical Success Factors for your Balanced Scorecard implementation?
We can bring examples from a wide range of blue chip clients
For more information contact Jonathan Chocqueel-Mangan tel(m): 07767 498411 tel(o/f): 01737 226857 email: [email_address] www.tylermangan.com t : m tyler mangan clear thinking:decisive action Helping clients create adaptive organisations