Handelsbanken: A Budgetless Banking Pioneer

Joost Minnaar
Written by Joost Minnaar August 18, 2024

In the landscape of corporate innovation, Handelsbanken stands out as a prime example of a company that has successfully embraced a budgetless model. This Swedish bank, founded in 1871 and listed on the Stockholm Stock Exchange since 1873, operates across Sweden, Finland, Norway, the UK, and the Netherlands. With over 11,000 employees and a robust nationwide branch network, Handelsbanken's journey towards a budgetless system began in the 1970s under the visionary leadership of then-CEO Dr. Jan Wallander.

Over the years, we have frequently mentioned Handelsbanken, but we have never explained how they operate. This article aims to fill that gap.

I will explain Handelsbanken's 'beyond budgeting' approach using four main elements:

  • Strategy
  • Organizational Structure
  • Performance Management
  • Rewards
Wallander's belief in a decentralized organization, based on trust and respect for individuals, is a cornerstone of Handelsbanken's strategy.
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1. The Handelsbanken Way: A Clear Strategic Vision

Handelsbanken's unique culture, often referred to as 'The Handelsbanken Way,' embodies several core principles that continue to guide its operations:

Excellence in Everything

Handelsbanken strives to be the best in every aspect, aiming to be the best place to work for employees, the best bank for customers, and the best investment for shareholders.

Decentralization

Wallander's belief in a decentralized organization, based on trust and respect for individuals is a cornerstone of Handelsbanken's strategy. He posited that employees' creativity and judgment are the ultimate competitive advantages. Hence, the bank's motto, 'The branch is the bank,' reflects the extensive autonomy granted to local branches to serve their communities effectively.

Customer First Attitude

Every business decision at Handelsbanken begins with the customer's needs. This customer-centric approach ensures that motivated employees with significant autonomy can promptly and effectively meet customer needs, fostering long-term, profitable relationships.

Transparent Performance Culture

Handelsbanken combines a strong performance culture with low-risk tolerance to achieve financial stability and strength. The bank prioritizes profitability over sales volume and emphasizes continuous improvement, with a focus on customer satisfaction and cost efficiency.

2. A Decentralized Structure

Handelsbanken's decentralized structure is inspired by Wallander's 'church principle,' where local branches operate autonomously, akin to local parishes in a church.

This model ensures that business decisions are made close to the customer, promoting agility and responsiveness to local market conditions. The organizational structure comprises:

Local Branches

With around 800 branches worldwide, each branch is a profit center responsible for its customers, staff, and profitability. Branches have the autonomy to develop local strategies and make business decisions tailored to their customer base.

Regional Banks

Each home market has a national organization consisting of regional banks that oversee multiple branches. Regional banks support branch operations and strategy, with a focus on profitability and performance improvement.

Global Headquarters

The central head office in Stockholm handles overarching responsibilities like strategy, values, and credit policy. It supports the branches and regions, emphasizing consistency and quality across the bank.

3. Transparent Accounting System

Handelsbanken utilizes a fast, transparent accounting system that provides all employees with comprehensive business performance data. This system monitors various performance measures, enabling branches to understand the impact of their decisions on overall profitability. Key features include:

Setting Expectations

The bank sets performance expectations through simple ratios and relative goals, focusing on higher profitability than peer banks by maintaining lower costs and higher customer satisfaction.

Performance Reporting and Benchmarking

A robust system of monthly performance reporting, efficiency matrices, and league tables fosters healthy competition and continuous improvement among branches and regions.

Facilitating Internal Transactions

Central services are benchmarked against external vendors, and costs are negotiated between service providers and branches, ensuring value for money and market-driven efficiency.

4. Collective Reward Scheme

Handelsbanken eschews short-term individual bonuses in favor of a long-term collective profit-sharing scheme. When the bank exceeds its profitability goals, a portion of the excess profit is contributed to the Oktogonen Foundation.

This employee-owned fund invests in Handelsbanken shares and distributes benefits upon employees reaching the age of 60, fostering long-term loyalty and alignment with the bank's success.

Conclusion

Handelsbanken's strategic direction is clear: by being the best place to work, bank, and invest, they aim for sustainable profitability and growth.

This budgetless, decentralized, and customer-centric approach has positioned Handelsbanken as one of the most cost-effective and customer-satisfying banks in Europe.

The combination of a transparent performance culture, empowered employees, and a long-term collective reward scheme ensures that Handelsbanken remains a resilient and innovative leader in the banking industry.

Membership

I am currently in the final stages of developing an in-depth case study about Handelsbanken (and Mainfreight) for our community. Are you eager to dive deeper into Handelsbanken's way of working? Then become a member here.

Written by Joost Minnaar
Joost Minnaar
Co-founder Corporate Rebels. My daily focus is on research, writing, and anything else related to making work more fun.
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