Balanced Scorecard drives 3 times growth at Westpac Cards

Who is Westpac Merchant Cards

The Merchant Cards group are an end to end business unit of 200 staff within one of Australia's 4 major banks, providing card receivable solutions for businesses. Westpac Banking Corporation is a leading Australian bank, providing business banking solutions to corporate, medium and small businesses, as well as a full range of consumer products. During 3 years of sustained Balanced Scorecard use, they drove 3 times growth in revenue and profits.

Their Challenge

Commercial challenges

The Merchant Cards group's commercial challenges were to achieve significant growth targets amidst increasing downward pricing pressure, limited resources, and an increasingly competitive market.

Their sales model was labour intensive, they were perceived from within the Bank as a poor cousin, and their new product pipeline was failing to keep up with competitors innovative solutions.

The internal perception was leading to limited sell through by their greatest potential ally, a vast network of Business Bankers reporting through a separate line, who each managed a portfolio of business customers.

The bank wide focus on corporate customers were squeezing margins, to the point that cross product subsidization in some cases saw enormous volumes through Merchant Cards resulting in losses for the unit.

Existing Strategic Management

The management planning processes involved annual objective setting for financial, customer and staff perspectives. These were communicated in traditional fashion, leading to limited understanding of the critical drivers across the business. Measurement of progress was largely financial, with few non-financial measures in place to progress of customer and internal drivers.

The Approach

Strategic themes determined

At the onset of a new strategic planning period, the group initially determined their key strategic themes, to act as overarching intentions of direction. A process called Thinking Outside the Bow™ was used to determine these themes in a one day workshop, preceded by background inquiry and research.

As an example, one theme that emerged from was to intensify focus on acquring Small to Medium Enterprise clients, due to the improved margins gained in this segment. To access this large number of customers, the network of business bankers were seen as an under utilised resource to provide far greater reach to the client base than they could manage with their small sales team. These intentions were succinctly stated as one of the four strategic themes: "Acquire profitable SME business through the Network"

Scorecard design

The group then conducted a scorecard design process, that enabled translation of themes into a Strategic Road Map, and defined strategic measures of success. Targets were set against measures, and people took ownership of various measures.

The strategic road map served to clearly articulate the thinking behind the strategy for improved communication to the wider staff group.

First review of strategic progress

After 3 months, the group conducted its first quarterly review. This required a level of discipline and activity that was new to many of the group, including capturing data against measures for which they had taken ownership. The quality of initial data gathered in the first review was in many cases circumspect.

Nevertheless, when the group came together for a first Strategy Review meeting, they were able to assess the progress that had been made toward objectives, identify and drill down on road blocks and develop short to medium term solutions. As well, they were able to re-evaluate the cause and effect relationships they had initially mapped in the design, with actual data enabling better validation.

As a result of the first review, the group resolved to ramp up their efforts toward some of the previously planned objectives. They also saw the benefit of capturing quality data, and so there was increased commitment to developing methods of data collection against new measures in the following quarter. They also became clearer about high priority projects and initiatives needed to drive some of this activity. In some cases, these initiatives had been noted in the design, but which had not necessarily been given the priority attention they now were deemed to deserve.

As an example, the measurement of activities in relation to Banking network activity was limited, as this required discipline by the sales team to maintain good records. As a result of the first review, it was found that the shift in emphasis and effort toward the network was slow. The group resolved to ramp up their efforts toward this channel as initially intended. A survey to assess satisfaction and mind share of the network was given higher priority, even whilst this was recognised as a lag indicator of relationship building activity.

Second review phase

With a second strategy review after another quarter, the group were much more in tune with the importance of data capture. As a result of more effective and timely reporting of data, they were able to gain greater understanding of their current situation.

When the group came together for a 2nd Strategy Review Meeting, they were able to generate more insightful dialogue about corrective actions and refinements to the cause and effect thinking behind the strategy, because of this enhanced awareness of performance successes and obstacles.

This was facilitated in part through one to one reviews with each functional head prior to the group Strategy Review Meeting.

To continue the example, the group had now conducted an initial survey of the Business Banking network, and this established a benchmark indication of their satisfaction and mind share. As well, it enabled the group to gain greater clarity and detail in their planning of education and relationship building activities.

Strategy refinement

At 12 months, the group recognised a shift in strategic priorities was needed. One of the four strategic themes was well on it?s way to achievement. Meanwhile, the growing gap in product pipeline was strongly felt. Rather than having to begin another annual 'blank sheet' strategic planning process, they replaced just one theme of the four with the new focus, namely Drive needed product development

They were then able to then design a Strategic Road Map for this theme, whilst the other three themes remained as continuing 'pillars', providing sustainability to their existing strategic focus. New strategic measures were defined that would help focus on changing behaviours to drive improved new product output.

By this time, their lag measure of Business banking satisfaction and mind share was showing improvement against the initial benchmark they had established at 6 months.

Results

The group has been used the Balanced Scorecard for 3 years.

In this time, the nett profit for the group has increased by >250% with 3 times revenue growth. Product pipelines are yielding needed new products first to market, including a customer retention loyalty product. The Business banking network is now a satisfied and effective sales channel. Their satisfaction and mind share ratings have risen from an initial 40% up to 86% in the latest survey. This has driven improved sales results, with a 35% lift in sell through by the network.

Core product training modules have been developed to provide product knowledge across the network to ensure ongoing consistency, as changes in personnel occur.

Alignment and focus

The head of Cards Acquiring comments extensively on the significant increase in focus and alignment across the business toward the key drivers of success as a result of the Balanced Scorecard being implemented.

The scorecard has facilitated a cultural shift toward the use of measurement as a means of learning and changing behaviours. The discipline of review encourages the group to monitor and navigate each quarter, enabling faster and more sustainable response to performance challenges. As well their strategic thinking has evolved in response to their changing environment.

The sharper focus has heightened the group's ability to say 'No' to projects and initiatives that will not directly contribute to a strategic objective. Communication and understanding of strategy across the business has been facilitated through the establishment of a common language across the group. More people are involved at quarterly intervals in insightful discussion about cause and effect relationships, so that people understand the impact of their work on the overall results.

The Balanced Scorecard has contributed significantly to a sharper and more aligned team, for current and future success.