building a balanced scorecard to implement an innovative banking

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


((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


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))


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


AgendaAgenda






!! 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


AgendaAgenda






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


!! 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


AgendaAgenda






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


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


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 ?


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.


Macro phase 2:IMPLEMENTATION OF THE ELECTRONIC BSCSUPPORTED BY SAS INSTITUTE ™


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


THE PROTOTYPE: development phases

• CHECKLIST OF INDICATORS

• CREATION OF A DEDICATED DATA WAREHOUSE

• DEFINITION OF VISUALISATION CRITERIA


• 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


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


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 ?”


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


PERSPECTIVE GOALS INDICATORS

“WORST CASE”

TAKES OVER

DEFINITION OF VISUALISATION CRITERIA

DEFINITION OF THE SYNTHETIC VALUATION CRITERIA


!! 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



!! 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

building a balanced scorecard to implement an innovative banking

Documents