A Bank Without Bonuses
April 4, 2012
What if I told you that there was a bank in the UK, with 124 branches, that shuns paying its staff bonuses, has no sales targets and provides advice that is the best for the customer, not what is most profitable for the bank at that time. And what if I told you that the same bank has no call centres; instead customers ring their local branch and speak to someone they have met and know? You would probably think I was talking about the blueprint for a brand new bank; some sort of Banking Utopia designed to combat the negative press against the damaged reputation of UK Banks.
Well, the Bank that I have just described is the one I work for, Handelsbanken. Although they had been in the UK since 1982, the first branch opened in Nottingham in 1999, before opening 4 or 5 further branches each year. In December 2007, the Enfield Branch where I work opened and was the 34th to do so. Since then, Handelsbanken has steadily extended its network. Last year we opened 21 new branches and in the w/c 26th March, we announced the opening of branch 124 in Weston-Super- Mare, with Hampstead and Loughborough as numbers 120 and 121 being revealed in the last week of February. In just over 4 years 90 new branches have opened through organic growth and without central marketing – quite an achievement.
The success of our growth comes down to a number of things, but central to that success is Handelsbanken’s philosophy of decentralisation ‘where the branch is the bank’, and where perhaps the greatest differentiation from our competitors is the emphasis we place upon the customer. For instance, each branch of Handelsbanken operates as a small business, with its own individual profit/loss and balance sheet, enabling it to make decisions at a local level and provide a service that is truly bespoke.
‘Our advice must always be what is best for the customer, not what is most profitable for the Bank at that time.’
Pär Boman CEO, Handelsbanken
In turn that means the responsibility for each customer of the Enfield branch, without exception, lies with the branch, and all decisions regarding its customers are taken in the Enfield Branch itself. Across the branch network, the majority of credits are agreed by the local branch alone, and no credit can be approved without the support of the local branch manager. (At Enfield that is Adrian Bennet).
Our focus is firmly on nurturing long-term relationships, not only with our customers but also with local professional firms. Our branches are run much like individual small businesses by their managers, and we steer clear of national or regional intermediary partnerships. Instead, our managers are free to forge mutually beneficial relationships with local accountants, lawyers, wealth managers and mortgage introducers as they see fit. As managers, we therefore tend to be actively involved in our local business networks both to explain Handelsbanken’s unique approach, and to identify professionals with whom we can share business introductions for customers’ benefit. Our main initiative in that respect is the Handelsbanken Enfield Professionals Lunch; where an informal gathering of local professional firms meet bimonthly, to discuss issues and foster relationships.
One of Handelsbanken’s most unique aspects is the fact that we do not have a sales target; a target could potentially blur my focus on what the customer actually wants. As a consequence, the bank has no sales targets or market share goals. With that, the bank does not pay us bonuses. This isn’t a new thing, something decided in light of recent public opinion, but something Handelsbanken has deemed unnecessary. The payment of bonuses and the whole bonus culture carries the risk of creating the wrong incentives. Consequently, the bank has no bonus programme for any members of management or for any staff in the branch office operations.
I personally look after individual customers and their residential mortgage needs – be it a house purchase or a remortgage. By being from the local area I know all my customers, the various neighbourhoods in which they live in North London, and understand their unique circumstances better than any central department could hope to do. Indeed, if an enquiry comes to me from a client that lives away from my area, I’m obliged to introduce that client to their nearest branch of Handelsbanken to ensure that the client receives the best local banking support.
These core principles differentiate us from our competitors. They mean that all of our customers have a worthwhile and close relationship with their local branch team, who they can meet face-to-face, or reach via direct line or email. As a consequence, it will therefore come as little surprise that on the back of all this we were recently rated top in an independent survey of British banking customers. For the third year running, Handelsbanken came out top, both for corporate and individual customers, with a result that clearly showed customer satisfaction within Handelsbanken is significantly higher than the industry average.
All of this perhaps explains how we have been able to emerge from the last two banking crises unscathed, now boasting the highest credit rating of UK banks. We were also rated the strongest bank in Europe in May 2011 by financial information provider Bloomberg, having run the bank with the same prudent approach for many decades.
And the simple reason Handelsbanken has organised the business in this way, is because this is what our customers want from their bank: they want a relationship. They have never asked us to computer-score their credit application, so the bank has not considered this approach. Neither have they asked for a random person in a call centre to deal with their day-to-day enquiries, so we continue to provide each customer with access to their own account manager, backed up by access to online banking services whenever and wherever they are preferred.
To work for Handelsbanken is a breath of fresh air and I’m sure this simple fact is evident to my customers.