Lessons from 'Church Tower' Management

Last week over dinner with a group CFO’s from some of Sweden’s leading companies after SAP’s Butterfly Event, we got to discussing banking and the fact that Handelsbanken is rumoured to be increasing their presence in the UK by acquiring some of the branches that the UK government has asked the Royal Bank of Scotland to sell off as a condition of their refinancing.

Handelsbanken are frequently cited as best practice by the Beyond Budgeting Round Table for their practices of only rewarding staff for outperforming peers, driving continuous improvement rather than simply delivering against a pre-negotiated annual budget and for devolving responsibility and decision making to the front line. One executive at the dinner table related that all performance related pay is paid into the Handelsbanken pension scheme and that the bank’s time-served employees retire with an enviable pension – and we all sighed enviously.

But another executive quipped that “they manage with the church tower philosophy”. Probing for more insight, he explained that the bank preferred to do business only with those clients that branch managers can personally keep an eye on – meeting them face to face at local events; able to see comings and goings and presumably quickly picking up on any local rumours. This approach has certainly stood them in good stead for the past couple of decades; outperforming their peers on virtually any metric you care to choose. See the BBRT Newsletter for November 2009, which shows them top of the table yet again!

For me, their success clearly shows that no matter how pervasive your business intelligence platform or how integrated you performance management suite, you are less likely to deliver top quartile results unless you align your remuneration policies to produce the desired behaviour and devolve decision making to front line managers. Clearly the CFO and CHRO in other banks - and indeed most companies in other sectors - should be talking more.