building a balanced scorecard to implement an innovative banking
TRANSCRIPT
Building a Balanced ScorecardBuilding a Balanced Scorecardto implement an innovative banking strategy.to implement an innovative banking strategy.
AlessandraAlessandra Turi TuriHead of Planning and ControlHead of Planning and Control
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
AgendaAgenda
!! Banca Banca 121121 and its integrated and its integrated multi multi-channel strategy-channel strategy
!! Limits of traditional performance measurement systemsLimits of traditional performance measurement systems
!! The Balanced Scorecard approachThe Balanced Scorecard approach
!! The experience ofThe experience of Banca Banca 121121
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
AgendaAgenda
!! Banca Banca 121121 and its integrated and its integrated multi multi-channel strategy-channel strategy
!! Limits of traditional performance measurement systemsLimits of traditional performance measurement systems
!! The Balanced Scorecard approachThe Balanced Scorecard approach
!! The experience ofThe experience of Banca Banca 121121
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
((mnmn Euro) Euro) 19971997 19981998 19991999
Customer depositsCustomer deposits 2,3362,336 2,1762,176 3,1563,156
Asset under management & CustodyAsset under management & Custody 3,0083,008 4,1604,160 5,5565,556
Non Interest Income / Total IncomeNon Interest Income / Total Income 50.7%50.7% 72.4%72.4% 72.8%72.8%
Net IncomeNet Income 1717 1919 3939
Return on EquityReturn on Equity 9.1%9.1% 10.1%10.1% 19.7%19.7%
Traditional BranchesTraditional Branches 8383 9494 100100Financial ShopsFinancial Shops 2828 7575 154154
StaffStaff 1,3101,310 1,4091,409 1,5561,556Sales agentsSales agents 389389 1,0291,029 1,8591,859
BancaBanca 121 - 121 - Main financial highlightsMain financial highlights
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
BancaBanca 121 strategy in the retail banking business 121 strategy in the retail banking business
!! Focus on personal financial services and asset managementFocus on personal financial services and asset management
!! IntegratedIntegrated multi multi-channel retail distribution-channel retail distribution
!! Low fixed-cost expansionLow fixed-cost expansion
•• Independent sales agentsIndependent sales agents
•• Financial ShopsFinancial Shops
•• Virtual Banking (Virtual Banking (Phone and Internet BankingPhone and Internet Banking))
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
BancaBanca 121 integrated 121 integrated multi multi-channel network-channel network
Traditional Branches, Financial Shops, Independent Sales AgentsTraditional Branches, Financial Shops, Independent Sales Agentsand Virtual Banking leveraging on each other,and Virtual Banking leveraging on each other,
thus strengthening thus strengthening BancaBanca 121 competitive position 121 competitive position
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
AgendaAgenda
!! Banca Banca 121121 and its integrated and its integrated multi multi-channel strategy-channel strategy
!! Limits of traditional performance measurement systemsLimits of traditional performance measurement systems
!! The Balanced Scorecard approachThe Balanced Scorecard approach
!! The experience ofThe experience of Banca Banca 121121
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
!! Short term approach Short term approach ((lack of strategic visionlack of strategic vision))
!! Focus on past performance Focus on past performance (looking backward)(looking backward)
!! Emphasis on “quantitative” and physical assetsEmphasis on “quantitative” and physical assets(no valuation of intangible assets as real performance drivers)(no valuation of intangible assets as real performance drivers)
!! Internal orientation Internal orientation ((versus market orientationversus market orientation))
Limits of traditional performance measurement systemsLimits of traditional performance measurement systems
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
AgendaAgenda
!! Banca Banca 121121 and its integrated and its integrated multi multi-channel strategy-channel strategy
!! Limits of traditional performance measurement systemsLimits of traditional performance measurement systems
!! The Balanced Scorecard approachThe Balanced Scorecard approach
!! The experience ofThe experience of Banca Banca 121121
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
The Balanced Scorecard Approach:The Balanced Scorecard Approach:the management processthe management process
STRATEGICGAP
STRATEGICGAP
STRATEGYSTRATEGY
ACTIONSACTIONS KPIsKPIs• Budgeting process• Reward system
Monitoring
Strategy formulation requires5% of management time,
the implementation the remaining 95%
BSC
• Projects• Initiatives
Identification of the existing “gap”between the actual and theexpected market position
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
!! BSCBSC links strategic goals to targets and annual budgets, filling links strategic goals to targets and annual budgets, fillingthe gap between strategic planning and operational plansthe gap between strategic planning and operational plans
!! BSCBSC focuses on factors creating long-term value and overtakes focuses on factors creating long-term value and overtakesthe financial accounting perspective to measure intangible andthe financial accounting perspective to measure intangible and“qualitative” assets“qualitative” assets
!! BSCBSC translates the strategy into terms easily understandable translates the strategy into terms easily understandableand put in practise by the whole organisationand put in practise by the whole organisation
The Balanced Scorecard Approach:The Balanced Scorecard Approach:what’s newwhat’s new
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
AgendaAgenda
!! Banca Banca 121121 and its integrated and its integrated multi multi-channel strategy-channel strategy
!! Limits of traditional performance measurement systemsLimits of traditional performance measurement systems
!! The Balanced Scorecard approachThe Balanced Scorecard approach
!! The experience ofThe experience of Banca Banca 121121
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
The experience ofThe experience of Banca Banca 121121
The project focuses on the retail business and has been dividedThe project focuses on the retail business and has been dividedin 3 macro phases:in 3 macro phases:
1 1 DEFINITION OF THE LOGICAL MODELDEFINITION OF THE LOGICAL MODEL
22 IMPLEMENTATION OF THE ELECTRONIC BSC IMPLEMENTATION OF THE ELECTRONIC BSC SUPPORTED BY SAS INSTITUTE ™SUPPORTED BY SAS INSTITUTE ™
33 START UP AND MANAGEMENTSTART UP AND MANAGEMENT
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
Macro phase 1:Macro phase 1:DEFINITION OF THE LOGICAL MODELDEFINITION OF THE LOGICAL MODEL
Strategic guidelines acquisition
Developmentof BSC
Compilation of theIndicators’ Book
• Business breakdown according to the Value Chain:
- PRODUCT DEVELOPMENT - DISTRIBUTION (3 CHANNELS) - OPERATIONS - RESOURCES
• Definition of strategic goals
• Distribution of the goalsthroughout the Value Chainsegments
• Identification of the KPIs
• Gathering of available elementary data and related sources
• Definition of calculation functions
The experience ofThe experience of Banca Banca 121121
On what axis should I invest to maximise the value of the business ?On what axis should I invest to maximise the value of the business ?What segments create value for the clients ?What segments create value for the clients ?
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
Developing a commercial
attitude
Number ofnew mortgages
One or more indicators have been connected to every goalOne or more indicators have been connected to every goalin order to measure their achievementin order to measure their achievement
Distribution of strategic goals overthe segments of the Value Chain
Identification ofperformance indicators
Fina
ncia
lFi
nanc
ial
Cus
tom
erC
usto
mer
Inte
rnal
Proc
ess
Inte
rnal
Proc
ess
Lear
ning
& G
.Le
arni
ng &
G.
Increasingmortgagelending
Improvingthe quality of
advisory services
Product development Distribution Production Administration
OPERATIONS
Widening the product range
Fina
ncia
lFi
nanc
ial
Cus
tom
erC
usto
mer
Inte
rnal
Proc
ess
Inte
rnal
Proc
ess
Customer Satisfaction
Index
Number ofcommercial
training days
ProductDevelopment Distribution Production Administration
OPERATIONS
Average time for pre-approval
Average timefor disbursement
PER
SPEC
TIVE
PER
SPEC
TIVE
PER
SPEC
TIVE
PER
SPEC
TIVE
Becoming leaderin loan efficiency
Number ofnew products
Lear
ning
& G
.Le
arni
ng &
G.
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
Macro phase 2:IMPLEMENTATION OF THE ELECTRONIC BSCSUPPORTED BY SAS INSTITUTE ™
The experience ofThe experience of Banca Banca 121121
The electronicThe electronic BSC BSC has been developed according to a gradual approach: has been developed according to a gradual approach:
1)1) DEVELOPMENT OF A PROTOTYPEDEVELOPMENT OF A PROTOTYPEON A SMALL NUMBER OF INDICATORSON A SMALL NUMBER OF INDICATORS(20 indicators, focused on three distribution channels)(20 indicators, focused on three distribution channels)
2)2) EXPANSION OF THE PROTOTYPEEXPANSION OF THE PROTOTYPETO THE OTHER INDICATORSTO THE OTHER INDICATORS
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
THE PROTOTYPE: development phases
• CHECKLIST OF INDICATORS
• CREATION OF A DEDICATED DATA WAREHOUSE
• DEFINITION OF VISUALISATION CRITERIA
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
• aimed at describing and formalising the technical and functional
characteristics of each indicator
• based on the “INDICATOR CARD” defined with SAS Institute ™
• all the information collected during the checklist phase is used to create the
application generating the BSC
• the completion of the indicator card involved the P&C as well as the IT
Dept., as it required a wide knowledge of the internal operational databases
THE PROTOTYPE: checklist of indicators
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
db2
Existingcompanydatabases
EXCEL
ACCESSOPERATIONALDATA STORE
ACCESS
“SAS SYSTEM”
DATA
WAREHOUSE
DATAWAREHOUSE
DELIVER
Y ON
INTR
AN
ET
NormalizedODS
BALANCEDSCORECARD
OTHER
CREATION OF THE DEDICATED DATAWAREHOUSE
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
DEFINITION OF VISUALISATION CRITERIA
Strong creativity, high personalisation, critical factor ofsuccess, vehicle to drop the strategy down into day-by-day
THE PRINCIPAL CHOICES:
• RULES OF KPIs NORMALISATION “how to homogenise the different measurement units through which the KPIs are expressed ?
• DEFINITION OF THE RESULT THRESHOLD RANGES
“when does the red, yellow or green light appear?”
• DEFINITION OF THE SYNTETHIC VALUATION CRITERIA“what happens when a goal shows “contradicting” indicators ?”
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
Normalised KPIs vs target
CRITICAL
UNDER OBSERVATION
GOOD
Less than 80
80 90
THRESHOLDS
86
Threshold
result
75
96
EXCELLENT more than 110
91 110
DEFINITION OF THE RESULT THRESHOLD RANGES
DEFINITION OF THE VISUALISATION CRITERIA
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
PERSPECTIVE GOALS INDICATORS
“WORST CASE”
TAKES OVER
DEFINITION OF VISUALISATION CRITERIA
DEFINITION OF THE SYNTHETIC VALUATION CRITERIA
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
!! Assignment of Assignment of BSCsBSCs to Divisional Heads to Divisional Heads (reward system)(reward system)
!! Target definition Target definition (budgeting process)(budgeting process)
!! Operational plans definition Operational plans definition (projects, initiatives, activities)(projects, initiatives, activities)
Macro phase 3: START UP AND MANAGEMENT
START UPSTART UP!! MANAGEMENTMANAGEMENT
- monitoring - monitoring ((KPIsKPIs calculation, gap analysis, reporting) calculation, gap analysis, reporting)- identifying corrective actions to close the possible “gaps”- identifying corrective actions to close the possible “gaps”-- BSC BSC tuning tuning (with reference to goals, indicators or links)(with reference to goals, indicators or links) and target review and target review
The experience ofThe experience of Banca Banca 121121
DublinDublin, , JuneJune 2000 2000Planning and Control DepartmentPlanning and Control Department
!! Head OfficeHead OfficeStrada Provinciale LecceStrada Provinciale Lecce--SurboSurbo,, Zona Industriale Zona Industriale, 73100, 73100 Lecce Lecce, Italy, Italy
!! Contact nameContact name•• AlessandraAlessandra Turi Turi
teltel: (+39) 0832 669026: (+39) 0832 669026fax: (+39) 0832 669018fax: (+39) 0832 669018mobile phone: (+39) 335 7419363mobile phone: (+39) 335 7419363e-mail:e-mail: alessandra alessandra..turituri@@bancadelsalentobancadelsalento.it.it
Contact detailsContact details