Background:
The CEO of BANKO [ficticious name], a large multi-national retail and investment
bank employing over 35,000 people, invested large resources, executive time,
and personal credibility in building and communicating a corporate set of
values for his entire organization. He knew that an organization of that
size only gets one chance to successfully implement a values exercise of
that scale. Failure would, at best, infuse cynicism into the organization
and, at worst, erode trust in leadership.
His challenge to me [David Lapin] was to help him excite his operational managers about the Bank's new values and to generate sustainable commitment from them to the values. Our strategy was to demonstrate to managers what the quantifiable monetary value could be to them if they used the values strategically. To my knowledge, this had never before been attempted with any degree of objectivity or precision.
The CEO asked for volunteers from the Business Units. One volunteered: John headed the relatively small and unglamourous Wills and Estates Unit. The Bank attached little or no financial value to the unit and kept it more as a service to clients than for bottom-line contribution to the Bank's revenue. But, despite the unit's lack of perceived glamour, John, a young, cutting-edge thinker is an inspired leader on the way to an exceptional career in management and leadership. John was excited by what we proposed and brought his team along for the ride!
The Project:
Step 1 - In collaboration with a Cyest® Financial
Modeling methodology, we evaluated the realistic NPV of John's
unit. This
amounted to $300m.
Step 2 - We calculated the potential improvement to that
NPV if they were to use every best practice initiative (BPI). We
identified their primary Business Levers as:
• Volume
• Value
• Efficiency
• Churn (the loss of customers between the
time of signing the will and death)
Implementing conventional best practice BPI, these levers would be improved by
the following percentages:
• Volume: +20% p.a
• Value: 0%
• Efficiency: +10% p.a.
• Churn: -50%
These values were entered into the Cyest® model and translated to an NPV
of $450m. This represented a 50% increase in NPV, achievable
within five years.
Step 3 - Using SBE's proprietary methodology, we developed a Business
Philosophy for John's unit. The Business Philosophy comprised
three sections: i) a Purpose, ii) a System of Values to support
the Purpose, and iii) a measurable Vision.
Their Purpose, surprisingly, identified their customer as the Bank's other
business units, rather than the end customer who writes a will. It
defined their tangible and intangible contribution to those business units. With
the Bank's commitment to a new focus on customer-centricity, John's unit
created an opportunity to become a valuable supplier of intellectual capital
to the Bank (using the will as the tangible vehicle). The will was to be
used as a strategy rather than a product, capable of converting the Bank's
transactional customers into sustainable relationships. This shift
in focus would move John's unit from a service provider to the Bank's customers
to key strategic partner with the Bank's core units in the execution of its
new strategies.
Step 4 - Again using our Business Philosophy methodolgy, we developed a Value System (built upon the Bank's set of values) capable of delivering the unit's intangible offering. This is crucial because, although operational effectiveness will deliver an efficient tangible offering, only an indigenous culture that is unique to that business unit and designed to support its Purpose can deliver on the intangible. The Value System would be our building blocks for the culture.
Step 5 - After identifying performance gaps between current levels
and the levels of performance attainable if the unit would tenaciously
execute on its Purpose and Value System, we revisited the impact
on each of the drivers and discovered some new, hiterto ignored
drivers of the business. We fed this new information into
the Cyest® model.
A conservative evaluation, avoiding any possibility of "double
counting," yielded an NPV of nearly $1bn, achievable in five years.
Step 6 - Too often, change is undertaken with the best of intentions but with insufficient attention to the real reasons why that change never occured previously. Using Harvard Business School methodology, we drilled deep into the root causes of potential inhibitors to the desired transformation and ensured that our action plan addressed those root causes effectively.
Conclusion:
The added value to the business from using the Bank's Values as a means of realizin the unit's Purpose is estimated at $700m in NPV. This is four times the added value that could be achieved from conventional BPI! Additionally, whereas conventioal BPI is costly and often erodesan organization's culture and morale, driving the business with values has the opposite effect: It's costs are minimal, and it uplifts employee morale and inspires human energy.
Less than a year after implementation, John told us that he was much on target for the projected financial growth. In addition, he was not only retaining his best talent, but had resumes coming in daily from talent working for his competitors, willing to join him for significantly less than they were earning at the time. The reason? The excitement, morale, and culture of his unit.
The challenge is that, whereas conventional methods of business improvement require changes to process than the way "others" work, a Values-driven improvement approach requires that leaders and managers change within themselves. The changes are in personal leadership style and the use of their own characters to grow and lead the unit's people to performance excellence. It is a massive cultural change in a Bank whose brilliance has tradtionally been in its capacity to drive its performance with numbers.
We designed an actionable blueprint, as well as the necessary coaching and leadership development initiatives, to equip management to meet the challenge. To date, some 12 months after the initial exercise, the unit is on track to deliver the growth figures it estimated. Other managers in the Bank are now keen to explore what benefit Values can add to their units, too.
