Svenska Handelsbanken Flashcards
Wallander thoughts on budgetting
Forecasts made for environment to remain the same, which it often won’t. Discontinuous change
Also said that trying to plan for these different scanrios was usell as ‘very rarely’ came into effect.
People need to be involved in their own target settingm imposing targets on others would result in “little to no ownership or commitement”
Beyond Budgeting:
Handelsbanken Actions
branches made decisions on loans, discounts as they knew customer best, 50% of branch staff had lending authority
Branches decided on staffing levels & salaries
Only bank ins weden not needing government assistance in 1990 property crisis
Key control mechanisms allowing handelsbanken to control without budgets
Relative performance system to ensure competition
Managers expected to ‘coach’
Strict accountability for performance
Rolling forecast
What do we learn about what makes an excellent accounting & control system in a radically decentralised org?
focus on long-term, qualitative measures like customer satisfaction and efficiency rather than solely quantitative financial metrics. This approach allows each branch to operate responsively and encourages a shared commitment to the organization’s strategic goals without top-down control
Handelsbanken profit sharing
Profit sharing, 1/3 of excess post-tax profits (compared ith the average for other nordic banks) shared between all employees equally, even the CEO, which encouraged branches and ‘competitors’ to work together to ensure the success of the whole firm.
- Is the success of Handelsbankens system tied to the right match of a cultural environment?
Strong culture of trust, empowerment and responsibility allows it to operate effectively without traditional budgets.
Wallander believed people had to set their own goals, so no formal process was introduced. The competitive nature of the firm helped here as branches knew that managers in other regions were also setting their own targets, with he idea being that the more people that tried, the higher the bar increased.
Bourmistrov & Karboe (2013)
Traditional budgetting creates “comfort zone” for managers to operate in risk-free environments
Authors want “stress zones” that use beyond budgetting approaches of Dynamic forecasting (rolling budgets), decentralised decisionmaking
3 Budget Aspects;
Target setting: must be ambitious
Forecasting: Realistic
Resource allocation: must be dynamic
Cons of Stretch Zones:
Risk of stretching too far, creating ‘panic zone’, worsening performance
Reluctance to take authority for decisions, gap in the 3 systems (target, forceast, allocation) meant responsibilities blurred -
would always ask bosses for help on minor decisions
Handelsbanken performance measurement
Regions compared with ROE and cost-to-income ration. Best regions rewarded with trophy, and branches withinr egions also competed
96% managers in 2006 recruited internally
