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Wells Fargo

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Sam Becker

on 11 November 2013

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Transcript of Wells Fargo

The Balanced Scorecard Approach
Wells Fargo History
William G. Fargo
Henry Wells
Founded in 1852
Banking and Express services to gold rush pioneers
Headquartered in San Francisco
Overview of Wells Fargo Corporation

Industry of Competition

Case Problems

Balanced Scorecard

Key Takeaways
Products and Services
Prior Services
New Products and Services
Target Customers
38 years old

Income of 75K-100K
Value Chain Engagement
Online Financial Services (OFS)
Increased Customer Acquisition/Retention rates
Balanced Score Card
Banking Industry
What is it?
Banking Industry

Increased Competition

M&A and Sector Consolidation

Balance Sheet Explosion

Unprecedented Profitability
Forgot the lessons learned from the Great Depression
1933 Banking Act
Financial Modernization Act, 1999 -> Glass-Stegall repealed
Wells Fargo: $100 bn of Assets in 1997 -> $1.3 trillion in q3 2011
Emergence of Electronic Banking
Only 250,000 households in 1994

2,700 banks & credit unions by 1998

Allowed for reductions in overhead & administrative expenses.
4.5 million by 1997
Fueled by internet boom
Few (< 6% ) offered 'direct' account access
Customers able to conduct numerous functions without visiting an actual branch.
OFS Organization
Operations, Development, Marketing, Finance and Planning, and Human Resources

Operations made up most of the OFS staff

Handled customer service requests to Online Banking

3 types of customer support agents: Technical, Phone,Email

Goal is to migrate customers to email agents for support
OFS Cost Allocation
Attempted to recover operating costs by charging other bank departments for its services.

Two primary fee structures:

Examples: Checking customer logged on to review account balances, OFS would charge that service back to the checking division.
Fee for service session in which customers logged on for information only
Fee for conducting a transaction
The Need for a New Approach
Bank used traditional financial measures to track performances at all levels.

OFS team believed that financial metrics, alone, did not effectively measure or communicate its strategy.

Over-reliance on financial measures could lead to short-term decision making.

Online banking required a long-term, strategic view of its role within the bank

Future benefits of online banking warranted increased investment, not an emphasis on cost containment and reduction.
Main Case Characters
Dudley Nigg - Executive Vice President of Online Financial Services (OFS).

Mary D' Agostino - Vice President and manager of fianace, strategy and planning for OFS.
Why a Balanced Scorecard
A need to focus on more than just financial measures

The balanced scorecard's approach to integrating a set of multidimensional measures to assess a company's progress toward its goals.
Key factors in the decision:

1. Balance between the various elements that make up success - Finance, Operations and Human Resources

2. Emphasis on quantitative measures for evaluating business performance
Implementing the Balanced Scorecard
Balanced Scorecard Development Team
Five functional heads from OFS
Cross-functional group of middle managers

Critical to include middle management
Depth of operational knowledge
Easier from a buy-in standpoint
Strategic Themes
Add and retain high-value and high-potential-value customers

Increase revenue per customer

Reduce costs per customer
Product and feature development
Superior customer service
Third-party alliance programs
Increase customer support base to spread fixed costs
Automated processes, support and self-help systems
Balanced Scorecard Perspectives
Balanced scorecard team developed a comprehensive set of objectives linked to each strategic theme looking at the business from the four balanced scorecard perspectives:

3)Internal business process
4)Learning and growth

Each objective must lend itself to a quantifiable measure
Not limited to currently available data
Linkage Map
The next step was to develop a "linkage map" which mapped the interrelationships between each objective and the three strategic themes.

This was step took weeks and was the most controversial.

It was a useful exercise wherein the cross-functional team had an opportunity to discuss the interelatedness of the complex issues facing the business.

41 objectives were developed - cut down to 25 in order to focus on the most important performance drivers.
Communicating the Results
The OFS team decided to use three icons to display monthly results:

1. greater than 5% better than plan

2. within 5% of plan

3. greater than 5% worse than plan
Potential Problems
Integrating the balanced scorecard into OFS's culture

Concept is more abstract than traditional financial based measurements

Technology in online services is changing rapidly - may need to reassess objectives over time
Will need buy-in from employees
Online Banking
Measure Success
Short Term Goals
Long Term Goals
Finance Metrics
Finance Metrics
L & G
Balanced Scorecard
Add and Retain High Value Customers
Increase Revenue per Customer
Reduce Costs per Customer
Maximize Reliability

Manage Attrition

Superior Service

Retain Value Customers
Weighted Internet Availability
Response Time
Bill Claim Ratio
Telephone Total Service Factor
Customer Satisfaction Ratio
Online Checking Attrition Rate
# of Incremental and Total Online Customers
Profit (value) per Customer and Portfolio
Mark Neumann
Full transcript