Jan Wallander took over Handelsbanken in the 1970s at a time when the bank was facing a severe financial crisis and regulatory troubles. He decided to drastically change the managerial structure of the company and adopt a system based on decentralization of decision-making processes and independence of its branches. But how could this vision be implemented within an increasingly strict regulatory framework?
Drawing lessons from the 1960s, growth was never the priority for Handelsbanken. Jan Wallander aimed to make it the most profitable bank in the Nordic region in terms of return on equity. This vision was implemented through strong decentralization, more competent customer service, and lower costs compared to its competitors. All internal changes supporting this new vision were documented in a manual called "Our Way," which quickly became mandatory reading for all new employees.
To successfully carry out this transformation, Wallander first abandoned the implementation of sales targets in agreement with the marketing department. He believed that this product-centric approach did not provide enough information about customers, their changing requirements, and their profitability.
Wallander then adopted a radical decentralization system. It was in 1990 that decentralization became almost complete, with branch managers having the power to set salaries and choose the number of employees within their branch.
Even today, employees in the branches are considered the best placed to make operational decisions (granting a loan, setting prices, or offering discounts) simply because they know the customer and their expectations better. On average, three-quarters of branch employees have the authority to grant loans, allowing for very rapid responses.
Similarly, for marketing: apart from the introduction of a new product intended for all branches, each branch is responsible for the costs associated with marketing operations.
Our customers don’t feel better because they can read the bank’s name on a football shirt or on the side of a bus. - Jan Wallander, founder of Handelsbanken
Some decisions, however, are still made centrally. The credit process and credit policy are managed by headquarters. However, it is the branches that manage credit risk. Branches are responsible for analyzing and making decisions regarding credit risk following the credit process defined by headquarters. If a customer were to become insolvent, the credit loss would fall on the branch and be absorbed into its overall balance sheet. In this way, each branch complies with banking regulations. One of Wallander's key principles was not to interfere in branch management. To achieve this, he eliminated headquarters directives to the branches and regular reports. If a decision proved to be detrimental, superiors provided support rather than repression.
Branches are located where their customers are, so they are the ones who know their customers' goals and wishes best. On-site employees are considered the most qualified to make operational decisions. Jan Wallander simply wanted customers to have decision-makers as their preferred contacts, capable of meeting their needs with actions rather than just carrying out tasks.
There are currently three hierarchical levels in the bank's structure: branch managers (approximately 840), regional managers (14), and the CEO. A branch typically consists of an average of 12 employees (a general manager as well as account managers, advisors, and sometimes risk officers for larger branches).
Branches recruit completely autonomously, with the only obligation being to do so themselves. Our interlocutor cannot provide us with more information on the practices of each branch, but knows that today headquarters instructions favor cooptation.
Empowering employees in the bank also involves building long-term internal relationships. At Handelsbanken, recruitment is seen as a long-term, even very long-term process. Our interlocutor explains that the current strategy is to move towards lifelong recruitment, giving each employee the opportunity to change roles and directions within the bank.
For example, Kristiina started her career as a financial investment manager in one of the Finnish branches, then tried portfolio management, and finally found her calling in human resources management.
Employees are thus always encouraged to learn to unlearn their profession to discover another through learning by doing practiced with the help of colleagues. It takes between 3 and 5 years in a position to change roles in the bank. When an employee wants to develop new skills to acquire a new position, they are invited to spend several weeks or even months, depending on the desired position, with one of their colleagues. Our interlocutor explains that one day a week is dedicated to learning this new profession. A good example is that of corporate account managers who spend three weeks a year in the credit department at headquarters to become familiar with the bank's new credit processes. However, the employee must train their successor if they want to permanently leave their current position.
Gaining competence and diversifying is the key to Handelsbanken's longevity and lasting commitment to the company.
Today, the Handelsbanken model works and inspires. Moody's ranks Handelsbanken in the top 10 safest European banks. As for performance differences between branches, Handelsbanken has adopted a very particular system. Branches are compared to each other mainly using the operating coefficient but also profit per employee.
Furthermore, competition between branches forces them to make efforts to become the best. To maintain a level playing field between branches, Handelsbanken has adopted a handicap system. Successful regions receive larger capital allocations the following year, making it more difficult to achieve as high a score in the future. Similarly, regions with less success receive fewer capital allocations and can therefore compete with others in subsequent years.
Wallander laid the foundations for the bank's current culture. Current CEO Anders Bouvin is the guarantor of the bank's mindset. Having spent his entire career in the bank, he believes in its methods. He recently said in the press, "The success of Handelsbanken is explained by the fact that we do not succumb to passing trends in the banking sector. Fundamental values are timeless. That's why some companies are struggling: they invent strategies for the short term."
