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Shinsei case presentation
Transcript of Shinsei case presentation
Shinsei Bank: Developing an Integrated Firm
Vision and Value Initiative
Pedersen joined Shinsei
align corporate strategy and organizational values
--> start with Vision and Value
bottom up decision making (50 senior executives hold a workshop to decide which values should Shinsei adopt)
"we regard the vision and values as something we developed, rather than something imposed by top management"
how to spread it out?
Chief Learning Officer
Prof: Kerri Chen
Long Term Credit Bank of Japan
Government of Japan
provide long-term capital to key industries
LTBC collapsed with 15.7trillion yen (US$152bln) in loan asset
by Japanese Government.
Government announced that LTCB to be sold to Ripplewood, a US equity group
Nominal ¥1 billion (US$9.7 million)
¥120 billion (US$1.2 billion) inject in new capital
don't like private equity group
reluctant to allow a foreign group to control a major local bank
born in 1929
Exxon's Asia - 31 years
CEO of Shinsei
bridge the Japanese and American world
Japanese banking system
The new bank commenced its operations.
requested to forgive ¥100billion (US$9.7 billion) in debt
unwritten quasi-moral code
35 year relationship
2nd biggest corporate failure
To throw away its past, start a new bank
The operating environment remained hostile
Management was under pressure
disband Corporate Planning Department
hiring and promotion decisions
Abolish rotational assignment system-specialize in certain banking areas
Aggressive external hiring-"the old guard"
# is a fully owned asset management subsidiary of Shinsei Bank
# functions as an "investment product provider”
# offers access to a carefully selected range of investment products from around the world in order to meet the various investment needs of customers
# places utmost importance on selection, in-depth due diligence, and performance evaluation
Shinsei Investment Management Co., Ltd.
listed on the Tokyo Stock Exchange
shareholders sold 35% of the outstanding shares for ￥250 billion
a landmark deal--banking reform was real and generating outstanding returns for the investing consortium
360 Performance Evaluation
combination of the retail banking group's derivative expertise and flexible IT system
adopted a "Company with Committees"
implemented a system of prompt decision-making
transparent and objective management
meet various types of stakeholders’ expectations
CORPORATE GOVERNANCE SYSTEM
Japan's Best Bank Award Given By Euromoney
acquires controlling interest in APLUS
installment sales credit
360 evaluation launched
It's a key for organizational transformation
- Vision and value are intangible constructs --> need something more simple, easy to understand to facilitate them
- Create long term view: market control --> value control ( output control --> behavior control)
change the scale --> more reliable
change the process--> evaluatees can receive meaningful feedback
change the structure: more emphasis on values
pilot experiment --> good decision timing
Shinsei Securities: commences operation
New Retail Banking Group
Reason to open
Need to collect deposits from customers
Need to stabilize the bank’s funding
The other Japanese banks: lack thought to retail banking -> fail in attracting customers
-> Shinsei saw opp from the lacks/ faulty of Japanese banks
easy and convenient
delivery of value
A team of 100 employees
-> develop strategy & implementation plan
Attract customer at low cost with free of charge
No need to expand branch network to connect customers
Customers can withdraw $ from outside Japan (120 countries)
through PLUS systems offered by Visa Int’l
Free ATM service: 24/7/365 (10a.m – 8p.m)
Open in even holidays, weekend: target busy people
who can not visit bank during the week
Use computer system: operated nonstop
-> enable processing of new accounts and other application on the same day
Opened 150,000 new accounts
Business: increase gradually
in customer satisfaction
FSA issues business improvement order regarding loans to medium & small companies
Japanese banks: charging small spreads on loan irrespective
Shinsei: began to increase spreads on loans -> less creditworthy
-> Shinsei got criticism cause: bank needs to be obligate in helping small & medium – sized companies
Int’l Financial Review
Shinsei found opp in trading & securitization of nonperforming loans (neglected by others banks)
Shinsei pulled off innovative transactions
Combining the client knowledge of relationships bankers & product expertise
One notable: Japan’s 1st Master trust collateralized loan obligation of ¥115 billion
Institutional Banking group
The Commercial Banking Dept.
The Investment Banking Dept.
Institutional Banking Group
Purposes & Difficulties
To facilitate better collaboration between relationship managers
To offer a wide ranger o financial products to bank’s customers
To reduce dependence on loan spreads
Different perspectives: Permanent staff (long term views) vs. Market employees (short term views)
The bank establishes:
promotion & compensation -> attract talent from foreign firms
Permanent staff (P’s) – Long term contract
Former LTCB: the old guard & other banks
Market employees (M’s) – Short term contract
Expertise & Specialization
Short term profit oriented
Assertive, arrogant & selfish
Question 1. What have been the defining moments in Shinsei Bank’s history? How does the organization today reflect these events? What are your views concerning the two-tiered compensation system?
What was the aim of the values and vision exercise? How successful was it?
Question 4: Should the performance evaluation program be expanded? When do you know whether to expand or eliminate a new initiative?
- Performance evaluation is considered as the key of success for the change in Shinsei. As we discussed earlier, value and vision should be spread out for the whole organization. However, it's hard to understand and to follow them. Those values can be shown by the behavior which assessed by the evaluation. This is one kind of encouragement for employees to follow the new value system.
- Timing for a project (change) is a very difficult part of decision making. One of a clever decision is making a pilot experiment. Since it can provide a sample effect of the project as well as prevent the cost of failing the whole project. During the pilot time, we can also review and make adjustment to improve the project.
Question 5: What other initiatives can Pedersen take to improve cross-divisional collaboration between business units and increase firm learning?
Pederson can consider several solutions below:
Make use of information technology:
create a information system that make the information flows become easier and clearer
create a cross-divisional training among those units
to help employees become more aware about the diversity and familiar with other divisions' characteristic
create some teams like virtual team, cross-functional team or task force to foster collaboration
create more events that all employees can participate such as a competition, campaign, party....
rewarding should be aligned with assessing and evaluation
Increased steadily annual salary
Generous retirement packages
Bonus linked to their performance
Promoted more quickly
Press attacks Shinei for collecting payment & raising interest rates on loan -> weaker credit
Customers are the best consideration all the time
To achieve vision of becoming "Japan's
preeminent financial services firm
Made significant strides to further align corporate culture to customers
Build up the team work to:
Solve conflicts of cultures: hybrid entity
Lack of communication
Change people’s mentality & behavior
Gap between long term & short term views
Involve the younger employees into firm’s vision
How was Vision & Values successful?
Integrate & extend values alignment effort into value aligned competency performance evaluation process
Help to build linkage to the bank's strategic plan & branding strategy
Be well ahead of market and industry peers in the ratio of female titled managers
April 1, 2008: ratio was 21.4% and considering this to be a key differentiating factor for future success
Have established Shinsei bank as an innovative and unique type of financial institution in Japan
Two-tiered compensation system:
Good practice for parties:
For company: good to use new innovative ideas of experienced expatriates in short term paying the high salary
For Market employees: It's fair for them to pay based on what they did, encourage competitiveness between those externals and good ideas.
For Permanent employees: their annual salary increased also generous retirement package is important for them.
How would you rate Pedersen’s performance so far? What is the role of a chief learning officer?
the role of CLO
Formulating overall learning strategy and education initiatives
Integrating and managing training programs throughout the organization
Managing performance-evaluation processes and employee climate surveys
Developing succession plans and leaders for the next generation
creates a learning and growing individually and collectively organization
Shinsei Bank wanted to develop longstanding tradition or a strong corporate culture, because it was made up of professionals with extremely diverse backgrounds. Pedersen had administered a new performance evaluation program for 17 senior executives, and the evaluation program was critical for permeating the vision and values throughout the bank. So I think he was an important leader in the Bank.
HOW TO RATE?
Thank you for your attention.
Pedersen became the CLO
Office of CLO launched
1st: "formulate overall learning strategy and education initiatives aligned to the new vision and value"
2nd: Training, performance-evaluation, planning, create leadership
centralized the training program.
Using information technology for effectiveness. Involving all affected by the change
morale of employees
the conflicts of cultures
Diversity problem comes from:
- culture conflicts between different employee groups
- hybrid structure of the organization (competitive advantage)
--> have to seek for next target
A shift in leadership
Thierry Porte' became CEO
- didn't make major change
- building a consistent bank culture
- external adaptation