"Svenska Handelsbanken is is one of the leading banks in the Nordic region and Europe’s most cost-effective bank. It is one of the most solid and profitable banks in the world. Since 1989, when the first customer survey was conducted, they have had the most satisfied customers among the major Nordic banks."
Of all the statements above it is infact the slightly anodyne final one that is at the core of Handelsbanken’s philosophy. Since the 1970’s the bank has eschewed strategic plans and budgets. Its revolutionary CEO, Dr Jan Wallander, radically put profitability ahead of growth as the primary goal. This goal was to be achieved through radical decentralization, better customer service, and lower costs than competitors. With respect to costs, Wallander stressed that that the quality of the lender should never be neglected in favour of higher volumes. A lesson that we all now wish that other banks had adhered to. But it was his focus on the customer that has marked the bank out.
Wallander enshrined his tenets in a publication called Our Way, that is still in use only slightly modified, at the bank today. The decentralisation concept meant that every branch was run as a mini-bank, and no group strategic plan or budgeting was engaged in. If this is radical now – it was more so in the 1970’s.
Stockholm based, economic philosopher, Kjell Nordström was presenting at a Benchmark for Business event this week – and made the claim that strategic plans and budgeting are out-dated and largely useless. ‘Making plans and budgets is much like do a raindance, they make no difference to whether it rains or not. If it does rain you can be pleased, but infact it is coincidence. All that raindancers achieve is becoming better dancers; and all that business planners and budget makers achieve is improved spreadsheet skills.’
Nordström’s point, made with his unnerving certainty, is that we are surrounded by ‘genuine uncertainty’ – the world moves so fast and is now so complex that it is not possible to predict how events will unfold. Perfect ‘genuine uncertainty’ has traditionally been associated with the occurrence of tsunamis, earthquakes and volcanoes – we cannot foretell them. But this kind of uncertainty is now moving into our manmade culture.
He clarifies that if you cannot make predictions with any accuracy, then you cannot make a plan. No plan means no strategy and without a strategy you cannot apply a budget to it.
So what does this leave? Nordström is clear that incremental change is the only sustainable way to accommodate this uncertainty, combined with innovation and experimentation. To succeed in today’s commercial environment a business needs to be forever pushing at the margins of what is possible –not necessarily in bold strokes, but trying out different styles, approaches, modifications. Some will work many will not, but the fast and flexible organisation should be able to cope with the failures, drop them and move on.
The Leader’s Dilemma – Achieving Fluidity and Control – a book by the Beyond Budgeting Roundtable authors
Benchmark for Business conferences