How Autonomy Leads to Profitability at Handelsbanken

Hi, I'm Henry.

And I'm m Egbe with a cold, so please excuse my soulful voice.

And on this podcast we have Bernard Charles, the head of HR at handles

who are a very different sort of bank.

So Maureen, what is your joyful?

Just reflecting back is that recently we had, um, a team day.

So it was an opportunity from everybody in the office to come together and

we had lots of activities, but the.

Joyful part for me was to just see everybody.

You know, we have different sections, different teams, and we

all came together to play a game.

And usually I'm very competitive.

But actually for the first time it was about the taking part.

Well that, well, that's really interesting because actually at Happy,

we are still quite hybrid, aren't we?

We still go into the office probably only once or twice a week or even that.

Yeah, it's very rare, and because of the sort of organization we have, we have

different training sessions going on, so you have certain people in the office

and obviously some that are online.

But it was really lovely just to see everybody face to face

and just in that one space.

Absolutely.

Um, my joyful is that today is my wife's birthday, and because we have

the four day week, I can take that day off and, and work on Fridays instead.

So we're going to, um.

session at the, at the Tate, uh Britain, uh, called Women in Revolt.

Uh, hundred bits of feminist art.

And we're going to the Q Gardens for the light show.

That's lovely Figures a lovely tree.

Is your wife excited?

Uh, yes.

Yes, I think so.

Yes.

Was it supposed to be a surprise?

I hope it wasn't a surprise.

No.

No it wasn't.

Okay, well happy birthday to your wife.

. Okay, and now over to Bernard Charles.

So Bernie, tell me, tell us more about Handelsbanken and what it does.

So Handelsbanken.

building our be our branch presence here over the last 20 years.

And, uh, we've now got about 160 branches across the UK.

And we are a relationship led bank.

We're offering individual and corporate banking, um, as well as

wealth management with really high levels of bespoke customer service.

Our branches form relationships with customers in their local areas.

Mm-hmm.

Who like us are financially prudent and responsible, and who value a

long-term relationship with the bank.

We are a decentralized bank, so our branches are empowered to make the

majority of the banking and credit decisions and customers, uh, speak

to decision makers in our branches.

And, um, for example, the branches decide which customers to work with, and thanks

to the personal relationships they form with our customers, they're able to

offer bespoke banking services based on our individual customer requirements.

Okay.

So, so when I went to my NatWest manager and he had to go up to somebody way up in

the things who I knew nothing about, that wouldn't be the case at Handelsbanken?

No.

Our, our branches take the majority of the banking and credit decisions

within, within the, the local branch.

We do, of course, have a framework and of, uh, you know, a credit

policy that we work within.

But key to our model and our decentralized model is that empowerment of people

to take decisions and those people who are closest to our customers to

take decisions about our customers.

And now Handelsbanken has worked without budgets for over 40 years.

Tell us more about that.

Yes.

who really introduced our decentralized model and culture.

Um, and he scrapped top-down b uh, budgets and targets, Henry.

So we benchmark our performance against our competitors rather

than setting absolute goals for overall profit or revenue.

Um, and internally we benchmark our profit centers or our branches

against comparable branches.

So we avoid budgeting and we focus really on adaptability to an unknown future

rather than long-term fixed planning.

We don't set central product targets, sales targets volume

or activity targets either.

Um, and our whole remuneration approach reflects this and the bank's low risk

to tolerance, uh, because we don't have individual performance bonuses.

So it's only when the bank outperforms its peer group profitability benchmark

that then a share of profits is allocated to, um, to all of our employees.

So, so, Budgeting doesn't feature in a, um, in our model.

So how if somebody wants to, wants to buy something, um, how does that work then?

Do they, do they just go out and buy it without a budget?

No, I, I think, I think there is a, I think fundamental to our culture, Henry,

is, is really, we have got one simple corporate goal, which is to have, um, a

higher profitability than our competitors, our, our, our, our peer banks, and

there are really two means to do this.

One is through higher levels.

Of customer satisfaction, and the other one is, is through cost

control and cost effectiveness.

Um, and really cost control and care about costs is, is fundamental to our

culture and, and to the bank and is really instilled in every Handelsbanker.

So you will find that every branch manager cares deeply about costs and about and

about expenditure, and it's this sort of prudence that's kind of like really

helps to underpin the model as well.

so you don't even within the branches have budgets.

The branches don't have budgets?

No, definitely not.

Intriguing.

So it's a very different, it's a very different way of, of working.

And our, and our steering systems really kind of reflect and underpin the culture

and the business model that we have.

And as I say, the, the, the, the culture is really a worked

around, is really based on having.

Kind of a, a, a fundamental, I guess, belief in human nature, and that we

believe that people will do, uh, the right thing and that they're naturally

motivated to do the right thing.

We don't believe that people wake up on a Monday morning and come into work

and want to make bad decisions or wrong decisions, or wanna spend excessively.

We trust our people.

Um, and, and again, it's that trust is one of the cornerstones

of, um, of our culture.

So again, from our branch managers, um, perspective and all our kind of leaders

throughout the bank, you there, there is the trust and empowerment there for them.

Can you give an example of where one of your frontline staff has,

has been given, given that trust and has maybe helped to, helped to come

customer without uh, needing approval?

Yeah.

I, I, I mean, I, I, I, I think that we have examples of that every day.

I mean, I think the trust that's kind of like imparted in our, in our employees,

uh, as I say, comes back to kind of like that sort of decision making, um,

decision making ability that they have.

Um, and we've got lots of examples I think of, kind of really good customer service.

A, a and um, and that special sort of customer service.

So we've got, you know, an example that would be, there was a customer

of ours who, who traveled to a conference without his, without

his wallet, didn't have any money, wasn't able to get hold of his wife.

Contacted his branch manager to see what could be done and what could

be, um, put in place from him.

The branch manager came and met that customer at the railway station with £200

of his own money to help the customer kind of like through what was a sticky

and difficult situation for, for them.

Another great example that we have is that, you know, we had a customer

who was, um, on holiday in Cuba and couldn't access their own funds, um, and

got in touch with the branch manager.

And the branch manager found a way to wire funds to that customer so that

they reached them so that they could pay their hotel bill over a weekend.

And we've got lots of examples of that, which is almost, I

guess, spontaneous service.

Mm-hmm.

By our, you know, by, by the, by the people in, in the organization, people

in our branches really sort of working to go the extra mile for our customers.

And do

you have an example of, uh, a frontline staff rather than

a branch manager doing that?

Uh, yes.

I, I, I, I, I do.

So, I mean, I guess we count our branch managers as frontline staff.

But, uh, another really good one, we, a really, another really, uh, kind of, uh, I

guess powerful one we had was that one of our clients was diagnosed with, um, Covid,

um, and had to isolate him, was prevented from returning home, um, where, where

one of their, their children, who was kind of like, of legal adult age was in

charge of another two of their children.

But they couldn't drive or go and get shopping delivered.

Um, so one of our branch employees, uh, took it upon themselves to cook and to

drop off some homemade meals and a bag of shopping, um, for this customer's family.

Now, now you rank your branches according to customer service and

according to that cost control thing.

How do, does that help support the branches rather than make

compete against each other?

Yeah.

We, we, we benchmark our, our, our branches, again, on some of,

um, on some of our key metrics.

Um, and I think that that benchmarking, I mean, I think it does help with,

uh, a healthy sense of competition.

Um, but it also helps to drive continuous improvement and, and really

collaboration between the branches.

And, uh, I think what's really fundamental within our model, Henry, is that because

we only have one corporate goal and we don't have any centrally set product

targets, volume targets, et cetera, we either we all succeed or we don't.

And because we don't have individual performance bonuses as well, which

often help to drive and to, to steer the wrong behavior, this again,

encourages collaboration between, between the branches because it's

that sense of collective achievement and, and collective success.

So we again, have kind of plenty of examples of, yes, our branches

like that healthy competition of where they are in the benchmark.

But you know, the underlying thing is great collaboration

across the organization as well.

Okay.

So, so the, the bonus that you pay is, uh, is the same for the chief

executive ads for the frontline staff.

It, it is.

So, it's it, we don't have individual, uh, based performance bonuses.

Uh, we have a profit sharing scheme.

And, uh, as long as we, um, hit, uh, uh, our profitability metric

and kind of like have, have better profitability than our, than our

peer banks, um, then an allocation is made to that profit sharing scheme.

Um, and then that is divided equally between all employees.

So whether you're the c e O or you are, uh, you know, uh, uh,

Uh, a first year apprentice with us, um, it's an equal allocation.

And that's based on the, you know, again, that's based on the

belief that if we're successful, we all contribute to the success.

Mm-hmm.

So therefore the kind of like that allocation should be equal to us all.

And now I'm really intrigued by the fact you don't have

individual, even sales targets.

Because there's, you know, there's, I believe in that, but there's a lot

of, uh, people who don't, who think that you need to have sales targets

for salespeople and uh, big bonuses for managers and whatever, but, um,

that isn't the case in Handelsbanken.

No, not at all.

And, and, and I mean, I think when we talk about our culture in our.

Business model and, you know, the absence of targets, uh, um, individual

targets and the absence of kind of individual kind of performance

bonuses, the, the, the question people often ask is, does that work?

You know?

Yeah.

You know.

Yeah.

And of course we do it because we believe that it's the right thing to do.

Um, but also we do it because ultimately we believe that's what makes us

successful and a successful bank.

Mm-hmm.

And we regularly and consistently voted top for our customer

satisfaction and relationships.

Uhhuh.

So the, if you, I can give you two examples from a, from that,

from, from that perspective.

Yeah.

Um, the Competition and Markets Authority, CMA, you know, they

have an independent service quality survey conducted bi-annually.

And that's rated does the best for relationship and account management in

every, um, edition for the last six years.

Wow.

Is that, that's in the UK?

That's in the UK.

Wow.

And so that's, and so that's 11 times over the last six years now.

Wow.

There, there's another survey.

The EPSI survey and Handelsbanken has been ranked top in the UK for

customer satisfaction for both corporate and personal, personal

customers for 15 years in a row.

And the EPSI survey covers the UK's five main banking groups, Barclays, HSBC,

Lloyd's, NatWest, RBS, and Santander.

And we have been, uh, top as I say, in that for customer satisfaction,

uh, for the, for 15 years in a row.

Um, we have just in the, in this month, Global Finance has rated

us as, um, uh, as the safest commercial bank in Europe as well.

And then to just add, add another dimension to kind of like the, the

success of the model, as I say, our goal is to have higher profitability than

the average of our competitors in our home markets which are, which, which are

the key countries that we operate in.

And we've achieved this goal every year for the last 48 years.

Wow.

So, you know, so the, I I think the, the model bears out in all of those

kind of aspects and metrics that we look at, Henry, we, we can see that,

you know, having motivated, empowered staff who we believe are naturally

motivated to do the right thing, we give them the right conditions to make,

you know, decisions in their areas of expertise, bears out in those customer

satisfaction and those kind of like profitability achievements as well.

Wow.

So a culture of trust and freedom is what, is what's enabled those results, yeah?

Yeah.

I, I think that, you know, that, that, as I say, that cornerstone of our culture

and values is that belief in human nature.

Yeah.

And because we believe we're motivated the right thing, we

trust them and we empower them.

And uh, this was, this was based on, was it Jan Wallander?

Um, Jan Wallander, yeah.

He became the c e o of our bank, uh, I think back in the late

sixties or early seventies.

And he was the, he was the, the person who really has formed the, the, the model

and the culture and put this in place.

And it's endured, um, you know, over the last 50 years.

So it endured beyond, beyond him.

Yes, yeah, definitely.

It, it did.

So, you know, with every subsequent c e o to, to Wallander, the, the

culture and the model has endured.

And again, It, it's, it's proven to be not just the right thing to

do, but as I say, it's sustainable.

So, I mean, I, I guess that's the secret.

It's sustainable and it's endured over that time.

And it's been successful and commercially successful over that time.

So why do you think other banks don't, don't share your model?

I think because, uh, I, I think the natural inclination

is to centralize, you know?

Mm-hmm.

So there is a natural inclination to centralize decisions and maybe authority

or, and I guess that's the way a lot of companies, organizations are set up.

Um, and actually to have a decentralized model is really fundamentally different.

And, and this took Wallander, you know, quite a bit of time to be able to

introduce and again to endure beyond him.

So I think it kind of works against that natural inclination, which

is around sort of centralization.

And so tell me, um, uh, Bernie, what are your three tips for a happy workplace?

Well, o unsurprisingly, Henry, I think, uh, I think you'll find that,

that, that they're, they're very much kind of rooted again in our culture.

At your culture, yeah.

Definitely.

So, I, I, I think fundamentally I is to trust your employees, you know?

Mm-hmm.

And, and if you fundamentally believe that they're going to do the right thing.

Um, so trust is the first one.

Um, I think empowerment is really key, because I think where employees

are empowered and they're given the, the right conditions to

make decisions in their areas of expertise, that creates engagement.

That creates a sense of . , it creates a sense of shared purpose

and ultimately, I believe, leads to a, a happy workplace as well.

Yeah.

Um, and the third one for me is really around respect.

And that's sort of respect for the, the individual.

Um, and we want everybody to feel respected as an individual

in their own right in this bank.

Mm-hmm.

And that's very important in terms of them feeling like they can

bring their whole selves to work.

Um, and that they do have the opportunity, constantly, to be included, to be heard.

We've got a very flat organization.

We try to avoid hierarchy wherever we can throughout the bank.

And again, I think it is that respect for everybody as an

individual, which really sort of permeates through the organization.

So I think with those three things, they're really the kind of the key, my

key tips for a, for a happy workplace.

Sounds good, Bernie.

Well thank you very much for this, Bernie.

Um, it's, it's, uh, I'm just amazed why most other banks don't, don't work

the same way, but thank you very much.

You're welcome, Henry.

Thank you.

A lot of culture.

I love the culture.

I love the fact that, um, the people and the customers are the

heart of everything, you know.

And what really resonates with me is, was the last tip that he shared

about respecting the individual, you know, um, and allow them

to come with their whole self.

'Cause with them coming their whole self, then they can be empowered and

share more and feel that they can share and be, and that they are included.

I, I just really love the whole culture of the organization.

Well, I liked the individual bonuses, the fact that everybody

has the same bonus, whether they're chief executive or apprentice.

There were been a lot of banks, you know, particularly in, you know, the

nineties and the two thousands, you know, they did all this PPI stuff because.

People were based on individual bonuses, and Handelsbanken didn't do any of

banks fell hugely, they on the stock market did, you know, went only a little

bit down and then went straight up again.

Again, proves also all about the customers.

Absolutely.

And, uh, I'm hoping that some banks will have reflected on, you

But, um, Hanelsbanken has been going for all those 50 years

without any budgets or anything.

Well, Henry, what I would love is my bank manager could come out and support

me in my hour of need, you know, so.

Yes.

Yes indeed, Okay.

So check out www.happy.co.uk.

And just keep on creating joy at work.

Yeah.

creating joy at work.

That's it, Henry.