Imagine that you have been asked to join a company as the CEO, a company that is losing customers to a rival firm. And it is your job to turn the tide. What would you do?
Dr. Jan Wallander found himself in this very position with Swedish bank Svenska Handelsbanken. He was invited to become CEO of the bank because he was the one running the smaller, rival bank that was winning customers from Svenska Handelsbanken. Wallander did in fact turn the bank around, and it managed to outperform its competition on a number of key measures including customer satisfaction and earnings per share.
Wallander achieved this by discarding the traditional management model that is designed for leaders to plan and control organizations from a corporate center. Wallander understood that front-line managers were more than capable of running the business – and in fact were more qualified to understand the needs of the customers and how to profitably meet those needs than those in more isolated corporate positions.
Wallander sought to allow those on the front line to focus on creating value for the customer and shareholders, freeing them to take advantage of opportunities and respond to the changing needs of customers. He eliminated the bureaucracies, restrictions and predetermined plans (that are quickly outdated) put in place by centralized planners bent on control.
Wallander shifted the work dynamic so that the corporate center served the operating units, providing them with information and support. In fact, this new freedom depended upon opening up the flow of information (critical information such as data on profitability per customer and the like) to the operating units.
Wallander felt that only by enabling everyone to see the same information at the same time would the right questions be asked and the right decisions be made. And decisions at Svenska Handelsbanken remain at a local level, without the need for corporate approval. What makes this work is that Svenska Handelsbanken uses a clear governance framework based on principles, values, and boundaries.
What do senior executives do? They challenge and coach. They also look for exception conditions or unusual patterns or trends that might reflect a change in customer behavior or branch performance. These changes lead to a review and potentially a change in direction.
Convincing others that the organization should not be coordinated and controlled from the center was a tough challenge for Wallander because this was a major cultural shift. However Wallander held his ground because he believes that what holds the organization together is not a plan, but a commitment to a clear purpose and to a set of clearly articulated principles and values. The return is in those on the front line having greater ownership and engagement, less waste and overhead, and better business results.