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Case
Study: Swiss Bank Corporation
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Review And Renewal In Practice This case study is based on the work of Interactives at Swiss Bank Corporation that was first published under the title "At the Heart of Business" in Personnel Management in March, 1994. It first appeared as a case study in Delivering Exceptional Performance by Pam Jones, Joy Palmer, Carole Osterweil and Diane Whitehead, published by FT/Pitman, 1996. |
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Introduction Swiss Bank Corporation (SBC), which became SBC Warburg in 1995,* was faced with a depressing business environment at the end of the 1980s. The industry as a whole was in decline and the role of banks was under question. The traditional strengths of banks as providers of capital was being undermined by the ability of borrowers to access capital markets directly. The emergence of non-bank stand-alone competitors increased the risk and reduced the profitability of many commercial banks, and equity values suffered as a consequence. In the U.S., the value of the bank's stocks fell by 60 percent between mid-1989 and mid-1990. In the U.K. throughout 1990, the FT Banks Index under-performed the FTSE 100. Customer requirements were changing, but the financial services industry generally was suffering from a lack of marketing experience and talent in the field. At the same time, technology was advancing very quickly. Unit costs for sophisticated financial computing decreased from the mid-1960s to the mid-1980s by close to 100 percent. Unit costs for transmission of such data decreased by about the same, in the same period. According to Peter Cole, HR Director at SBC, the low productivity of the gigantic investments being made in technology would not have been tolerated in other more financially and managerially disciplined industries. There was also deregulation and globalization to contend with -- significant barriers to entry had given way to significant barriers to exit. The Internal Issues These external problems were compounded by internal ones including a lack of general management skills, marketing skills and a weak culture. High levels of compensation combined with an acceptance of mediocre performance standards and low yields on investment in technology and marketing meant that overall quality suffered. The cost base of the industry needed to be brought into line and managed with a genuine adding of value. Management behavior and values needed to change substantially. Those responsible for running the business needed the means to apply the knowledge, technologies and methods which relate to managing human performance. "More from Less" became the theme of the change initiative at SBC. Senior management accepted the dilemma between expedient short-term actions and the need to build competitive advantage for the future; they accepted that change was vital. The effective management of this change was critical to ensure future survival and profitability. Ironically, some of the very psychological and cultural characteristics of the banking industry that had helped in the past were now a potential hindrance. Factors such as conservatism, prudence and caution could manifest themselves as resistance to change and the inability or unwillingness to experiment with new ways of doing things.
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The cost analysis for 1990 showed that the single largest item of expenditure in the organization was for people -- four percent of the total. Also, the ratio of support people to productive people at SBC was significantly higher than the industry average. Improving employee performance was seen as a major challenge for the immediate future. As human resources were rapidly replacing capital assets as generators of income, the HR function initially provided the catalyst, drive and methods for the changes. Later, the change process was able to be transferred to line management, as were many of the day-to-day organization and people processes. People add value by being effective and they do this by applying their skills. This implies a need to manage the corporate portfolio of skills and to create skill intensity where it is lacking. Management information on the skill inputs for different business functions is required, together with how to source and deploy these cost effectively. It means knowing the requirements for converting these skills to adequate outputs. It is here that it is necessary to assess return on skill through many layers of business performance at the individual or business unit level.
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This need to develop solutions that made a real contribution to business performance demanded that mechanisms were put in place to measure how well the company was doing. SBC recognized the need to move away from crude, superficial, quantitative analysis toward an in-depth picture of what was going on and how productive the organization was. There was a need to quantify what it had previously treated as purely perception-based or qualitative measures. In doing this, it pinpointed the cause of inefficiencies and specific quality and performance problems.
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The Change Process Using the Organization Review process (see Delivering Exceptional Performance), SBC set about achieving a detailed understanding and analysis of their business objectives and plans in organizational terms. In this context, organization means organizing principles, structure, systems, processes, management practice, culture, skill, demographics and all aspects of performance. Review means the systematic analysis and diagnosis of these elements in relation to the current business environment and future business goals. A diagnostic framework was applied to this analysis and business-specific initiatives were developed. All actions were defined as having a quantifiable outcome and all outcomes were related to the achievement of a specific business goal.
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"Change management is not for gifted amateurs. It requires a methodology and a technology to achieve it. Change is forever; even the nature of change changes," said Rudolph Bogni, chief executive of the bank's London office.
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At
SBC, systematic initiatives were implemented to address four key business
issues:
The measures taken were being achieved by managing both qualitative improvements and quantitative reductions. Revenues increased by more than 30 percent per employee during 1991 and, in 1991 and 1992, record levels of profitability were reached. "There has been a major blood transfusion here: 350 people have left and 250 people have come. We have got rid of the cynics and gained switched-on people who have taken ownership of the bank," said Rudolph Bogni, chief executive at SBC's London office. |
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Turned Around Since the transformation, the company successfully acquired the O'Connor Partnership in 1992, Brinson and Partners (a leading U.S.-based fund manager) in 1994 and SG Warburg in 1995. SBC Warburg established itself as the pre-eminent European-based global, integrated, investment bank, as highlighted in Euromoney's 1995 Poll of Polls, in which the company held second position.1 As Peter Cole said: "Within SBC, we have continued to demonstrate not only our ability to initiate and manage continuous change, but we have proven that it is essential for the future viability and success of the business. By every measure of performance and productivity, the bank has been turned round. But we cannot afford to become complacent. SBC is now very strongly positioned to build on its successes and continue to improve."2
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*SBC Warburg subsequently completed the full integration of Wall Street Corporate Finance specialist Dillon, Read & Co. in September 1997 to become Warburg Dillon Read. Warburg Dillon Read was combined with the investment banking business of UBS when UBS and Swiss Bank Corp. merged in June 1998. 1. "Poll of Polls,"
Euromoney, January 1994. |
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