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Handelsbanken: A radical business model transforms a conservative bank
Author(s) -
Bukovinsky David M.
Publication year - 2019
Publication title -
global business and organizational excellence
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 16
eISSN - 1932-2062
pISSN - 1932-2054
DOI - 10.1002/joe.21979
Subject(s) - equity (law) , business , profit (economics) , finance , shared resource , profit sharing , marketing , economics , computer science , microeconomics , computer network , political science , law
In 46 of the last 47 years, Sweden's Handelsbanken has met its corporate goal of achieving a higher return on equity than peer banks and weathered worldwide financial crises largely unscathed. Its success can be attributed to an organizational model that replaced traditional top‐down, centralized management guided by an annual budget with decentralized operations that gave decision‐making authority to frontline branch employees with intimate knowledge of customers’ preferences. The new system also abolished the annual budget process and allowed managers to make resource requests as needed. Corporate goals were simplified, branch performance measures were tied directly to the new targets, and a profit‐sharing plan was designed to treat all employees equally. The benefits that the bank reaped from this radical approach prompted other organizations to follow its lead and continue to inspire replication of the beyond budgeting concept.