First Euro Case Study


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  • 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.
  • First Euro Case Study

    1. 1. Creating the Strategy Focused Bank A Discussion Document Jonathan Chocqueel-Mangan February 2003 t : m tyler mangan clear thinking: decisive action
    2. 2. The pace of change in the banking industry has increased along many dimensions <ul><li>Financial </li></ul><ul><ul><li>Increased assets and efficiencies through merger and acquisition </li></ul></ul><ul><ul><li>Geographic diversification to mitigate risk </li></ul></ul><ul><ul><li>Exit of low margin products and customer segments </li></ul></ul><ul><ul><li>Increasing focus on fee-based products </li></ul></ul><ul><li>Customers </li></ul><ul><ul><li>Increased wealth, higher levels of credit and higher levels of debt </li></ul></ul><ul><ul><li>Preference for one-stop shopping </li></ul></ul><ul><ul><li>Increased demand for integrated, alternate channels and self service </li></ul></ul><ul><ul><li>Demand for financial advice not just products </li></ul></ul><ul><li>Competitors </li></ul><ul><ul><li>New entrants for new sectors (e.g. supermarkets) </li></ul></ul><ul><ul><li>Increase competition from products and transaction specialists, brokerages and venture capital </li></ul></ul><ul><ul><li>Alliances and partnering </li></ul></ul><ul><ul><li>More effective use of e-commerce </li></ul></ul><ul><li>Channels </li></ul><ul><ul><li>Channel diversification (interactive, IVR, ‘Virtual Banks’) </li></ul></ul><ul><ul><li>Cross Selling and the deepening of relationships with the most profitable customers </li></ul></ul><ul><ul><li>Migration to lower cost channels </li></ul></ul>
    3. 3. Many banks are seeking to migrate from traditional banks to diversified financial services companies <ul><li>Strategic Goals </li></ul><ul><li>Increase revenue form fee based products and services </li></ul><ul><li>Expand the ‘share of wallet’ for existing customers through cross selling </li></ul><ul><li>Differentiate services levels depending upon customer profitability </li></ul><ul><li>Provide consistent service experience across channels </li></ul><ul><li>Exploit partnerships to create better product development </li></ul><ul><li>Improve operational efficiency </li></ul><ul><li>Manage risk </li></ul><ul><li>Potential Obstacles </li></ul><ul><li>Be all things to all people (The Martini Complex) </li></ul><ul><li>Lack of alignment between business units and support functions </li></ul><ul><li>Poor communication throughout the workforce </li></ul><ul><li>No link between strategy and budget </li></ul><ul><li>No link between strategy and performance management process </li></ul><ul><li>Under appreciation and management of enterprise wide risk </li></ul>
    4. 4. A wide range of Financial institutions have been executing their strategies using the Balanced Scorecard <ul><li>Halifax Bank of Scotland </li></ul><ul><li>The Industrial Bank of Japan </li></ul><ul><li>J.P. Morgan </li></ul><ul><li>Lloyds TSB </li></ul><ul><li>Nationwide Building Society </li></ul><ul><li>Nordea </li></ul><ul><li>People’s Bank </li></ul><ul><li>Royal Bank of Canada </li></ul><ul><li>Royal Bank of Scotland </li></ul><ul><li>Wells Fargo </li></ul><ul><li>Abbey National </li></ul><ul><li>ABN Amro </li></ul><ul><li>AMP </li></ul><ul><li>AXA Financial / The Equitable </li></ul><ul><li>Barclays Bank </li></ul><ul><li>Chemical Bank (Chase Bank) </li></ul><ul><li>Citibank </li></ul><ul><li>Deutsche Bank </li></ul><ul><li>Fannie Mae </li></ul><ul><li>First Chicago (Bank One) </li></ul>Short-List of Balanced Scorecard Users in Financial Services
    5. 5. There are a number of critical components to a Balanced Scorecard – not just measures Objectives <ul><li>Increase cross-business sales </li></ul>Statement of what strategy must achieve and what’s critical to its success Target <ul><li>Yr 1 40% </li></ul><ul><li>Yr 2 45% </li></ul><ul><li>Yr 3 50% </li></ul>The level of performance or rate of improvement needed <ul><li>CRM system </li></ul>Key action programs required to achieve objectives Initiative Measurement <ul><li>% customers with products from >2 LOBs </li></ul>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
    6. 6. 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”
    7. 7. Case Study – First Euro <ul><li>Expected consolidation in the market place </li></ul><ul><ul><li>High share in local market would be attractive to a larger European rival </li></ul></ul><ul><li>Recent re-organisation aligned retail distribution channels </li></ul><ul><ul><li>230 rural and metropolitan based branches, 400 offsite ATMs </li></ul></ul><ul><ul><li>Telephone banking and internet services becoming more popular </li></ul></ul><ul><ul><li>1.5 million customers </li></ul></ul><ul><ul><li>4700 staff </li></ul></ul><ul><li>Substantial investment in Business Transformation Programme </li></ul><ul><li>Balanced Scorecard introduced initially to: </li></ul><ul><ul><li>Improve Resource Allocation </li></ul></ul><ul><ul><li>Solve Interdependencies </li></ul></ul><ul><ul><li>Clarify Roles </li></ul></ul><ul><ul><li>Eliminate Duplication </li></ul></ul>
    8. 8. First Euro’s Strategic Themes . . . “ Segment & Focus” “ Trusted Adviser/Provider” “ Sustainable Profitable Growth” “ Enable our People” Customer Service Operational Excellence Propositions / Customer Relationships Technology
    9. 9. . . . 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
    10. 10. Initiative alignment focused their change programme
    11. 11. Reports communicated the key issues, provided focus, and fostered collaboration and learning
    12. 12. Results were both tangible and intangible <ul><li>Tangibles: </li></ul><ul><li>Group profitability increased by 23%, </li></ul><ul><ul><li>Asset and liability bases increased 9% and 6% respectively </li></ul></ul><ul><li>Planning cycle reduced by 25% </li></ul><ul><ul><li>From 4 months to 3 months with no net increase in staff time </li></ul></ul><ul><li>‘ Half the management meetings in half the time’ </li></ul><ul><li>Intangibles: </li></ul><ul><li>‘ 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’ </li></ul><ul><li>‘ We’re convinced that branch staff are more focussed about their contribution to the group’s success’ </li></ul>First Euro remains independent
    13. 13. Critical Success Factors <ul><li>Short Term (Up to 12 months) </li></ul><ul><ul><li>Consistent and coherent vision for performance management </li></ul></ul><ul><ul><li>Leadership commitment and support </li></ul></ul><ul><ul><li>The ‘Right’ Project Team and Team Leader </li></ul></ul><ul><ul><li>Integrated Scorecard design </li></ul></ul><ul><ul><li>Mobilisation and communication </li></ul></ul><ul><li>Long Term (12 months +) </li></ul><ul><ul><li>Cascading the Balanced Scorecard to link business units and support functions </li></ul></ul><ul><ul><li>Establish the link to the budgeting process </li></ul></ul><ul><ul><li>Establish the link to the planning process </li></ul></ul><ul><ul><li>Evaluate the link to compensation </li></ul></ul><ul><ul><li>Keeping it fresh! </li></ul></ul>
    14. 14. Three stages of the vision . . . <ul><li>Performance measurement </li></ul><ul><ul><li>KPIs and data analysis </li></ul></ul><ul><ul><li>Management and operational reports </li></ul></ul><ul><li>Performance management </li></ul><ul><ul><li>Management Decision making and governance </li></ul></ul><ul><ul><li>Communication to staff </li></ul></ul><ul><ul><li>Link to individual performance management </li></ul></ul><ul><ul><li>Senior management rewards </li></ul></ul><ul><ul><li>Link to budgeting and project prioritisation </li></ul></ul><ul><ul><li>Communication to customers </li></ul></ul><ul><li>Strategy Management </li></ul><ul><ul><li>Operational and strategic planning </li></ul></ul><ul><ul><li>Communication to stakeholders </li></ul></ul><ul><ul><li>Link to reward across the business </li></ul></ul>Technology can come in at any stage It’s effect and long term value is dependent upon the vision
    15. 15. Discussion Topics! <ul><li>What is the vision for Balanced Scorecard in your organisation? </li></ul><ul><ul><li>Why are you doing it? </li></ul></ul><ul><ul><li>What is the case for change? </li></ul></ul><ul><ul><li>How far is the horizon? </li></ul></ul><ul><ul><li>What are the interim steps along the way? </li></ul></ul><ul><li>What have been the typical barriers to successful delivery for other change projects within your organisation? </li></ul><ul><ul><li>What processes and activities are in place to break down these barriers? </li></ul></ul><ul><ul><li>What will your customers say today about the Balanced Scorecard? </li></ul></ul><ul><ul><li>What would you like them to say in 12 months’ time? </li></ul></ul><ul><li>What are the Critical Success Factors for your Balanced Scorecard implementation? </li></ul>
    16. 16. We can bring examples from a wide range of blue chip clients
    17. 17. For more information contact Jonathan Chocqueel-Mangan tel(m): 07767 498411 tel(o/f): 01737 226857 email: [email_address] t : m tyler mangan clear thinking:decisive action Helping clients create adaptive organisations