Cascading Strategy Throughout the Organization
The Case for an Integrated, Holistic Approach at China Everbright Bank
Shen Yi

Ask ten different managers, in any one organization, about their organization’s strategy and you will probably get ten different answers. But the problem is not just that strategy is often times uncertain and un-communicated; there is also the problem of translating whatever strategy may exist into actual action at the departmental and individual levels.So, how do you get each department to understand there is a single comprehensive strategy to follow, and how do you get alignment and action throughout the organization.
China Everbright Bank – TaiYuan Branch found themselves in a similar situation. TaiYuan Branch, established in 1999, had the authorization and the autonomy to develop their own regional strategy (deemed necessary given the nature of the region and market they were serving).TaiYuan Branch had enjoyed a market leadership position for some time, mainly due to their flexible policies and product innovation. They were well-known and enjoyed a solid reputation for continuously offering new and leading-edge financial products.But, when local banking started to develop, their previous strength in product leadership was not enough to carry them to new success in emerging business models.It was back to the drawing board for TaiYuan and a deep SWOT analysis to understand their own position and, in particular, to understand the nature of the new and fierce competition.
There was a lot of learning and discovery during their internal discussions and debates, including discoveries about weaknesses. Painful discoveries included, for example:
     1.lack of customer focus, focus on products rather than customers
     2.multiple, redundant, uncoordinated and geographically separated customer service centers all serving the         same customer base
     3.fragmented product and service offerings, no “entire solution”
     4.lack of customer data, or lack of actionable customer data, no centralized customer database
     5.silo mentality (focus only on own narrow functional responsibilities)
     6.overly focused on lagging indicators such as financial measures, rather than focusing on leading/driving         factors

With a clear-eyed view of their strengths and weaknesses, Tai Yuan appointed e-Gate consulting to assist them in their BSC strategy execution (Q4 2003).Key leaders and staff committed themselves to a rigorous and deep training process to understand BSC strategy implementation, from basic concepts to practical implementation. Every department committed to designate an implementation coordinator.

The Private Banking business unit, for example, took on the task of developing BSC as it applied to their particular unit (a cascade down from the company level to their departmental level). While formulating aligned objectives for their own unit, they also looked across units to understand how and if what they were planning supported the needs of other departments. This broad, horizontal exercise provided new discoveries and deep insight into overall organizational strategy. Finally, concrete measures were established that would translate strategy into observable and quantifiable workplace action.

As a result of these steps, there were new implications for upgrading staff effectiveness. For example, some customer contact managers remained more comfortable in the old model of selling products (the old products). But the new model required new behaviors – focusing on customers first and, using their own best judgment, developing a customized mix of products (old and new) that would meet the customers’ total need. These new competencies and behaviors were critical to revitalizing and repositioning the TaiYuan brand in the mind of the consumer, as well as being critical for achieving financial targets. New and more usable forms of operating and sales data were captured (quantities and types of products, product mix ratios, employee sales productivity, etc.).

The key success factors for TaiYuan included; being in a position to use a cascading BSC (from company level to business unit to department), a clear and succinct strategy map, clarification of departmental responsibilities and objectives, objective and measurable behaviors.

Once all of these major success factors were in place and operating, the system was made sustainable by implementing performance management processes and feedback mechanisms (formal and informal).
Performance tracking involved the effort of both directors and staff to evaluate, analyze and summarize performance data and to map data to pre-committed individual performance targets (performance targets mutually agreed upon between directors and staff to facilitate employee “buy-in”). Feedback and coaching was provided to help staff gain new skills and to improve their performance, as well as to help them understand the importance of their work. If needed, special training, additional headcount, or financial resources were provided to strengthen the prospects for success.

One of the significant learnings for TaiYuan was the deep understanding of how every part of the company was inter-connected and inter-dependent. Without a BSC or a strategy map, an individual account manager would be right in thinking that their primary responsibility was to simply maximize account profitability. Of course, profitability is essential. But profitability is a result. The inputs to profitability must be considered, in their totality, if profitability is to be maximized, sustained, controlled and predicted. The design of BSC teaches that financial objectives must be considered along with non-financial objectives. Often, it is the non-financial objectives that are most likely to be the causal inputs to financial outputs. Falling financial performance may just be the result of problems in other domains of concern to BSC – the domains of the Customer, Internal Process, and People & Organizational.

For example, difficulties in TaiYuan’s profit in the Private Banking unit, prior to BSC, may have been interpreted as a shrinkage of the Private Banking market. But the tools of BSC allowed TaiYuan to dig deeper. The true reason the unit was challenged for profit was traced to a root cause of a lack of customer satisfaction, a subjective and leading indicator of operational performance.

In the drill-down, it was further discovered that customer dissatisfaction was being driven by problems brought on by rapid growth in customer accounts while simultaneous staff turnover severely effected the quality and availability of service for those new accounts. Customers were becoming more sophisticated and demanding, but the bank was failing to match the growth in customer requirements with a corresponding growth in skill of service delivery. To remedy the situation, TaiYuan implemented new time-sensitive service procedures, and allocated more staff and staff training. Improved customer satisfaction ratings began to show up in the very next quarter’s data analysis.

It was BSC that gave the bank the necessary tools to understand what was going on beneath the surface of financial performance. Financial reporting analysis alone would not have been enough to uncover the deeper problems in the customer experience. Bank directors needed to understand the customer, the bank’s work processes, and how people and organization effected service delivery.

The Balanced Scorecard methodology gave the management of the bank a way to align strategy with actual workplace performance. Because all of the department managers and staff were involved in the process, everyone felt close to the strategy, could feel how what they did on their individual jobs made it possible for the Bank to serve its customers in new, significant and profitable ways.