Banking and Capital Markets

The JournalLooking after number one: Delivering theshareholder value from ‘One’ programmes

August 2010

How do we sustain profitability andgrowth in today’s tough competitiveenvironment? How can we enhancecustomer satisfaction and loyalty, whilekeeping a tight curb on costs? Manybanks are looking to ‘One’ companyprogrammes to create the tighterstrategic cohesion, sharper clientfocus and enhanced operationalefficiency needed to address thesequestions and deliver transformationalchange (Figure 1 outlines some of thepotential benefits).

By promoting a single unifying vision,‘One’ initiatives can be especiallyuseful in overcoming the legacy issuesthat affect so many banks. Many oftoday’s banking groups have beenformed through a series of mergers,creating overly convoluted operationalstructures and an accumulation ofoften incompatible systems andprocesses. This in turn creates costlyinefficiencies and hampers customerservice. Indeed, management and staffcan often find themselves spending somuch time grappling with thedeepening complexities within theirbusinesses that they have too littletime to focus on their clients.Successive takeovers have alsocreated a profusion of diffuse localbrands and operations, each with theirown distinct cultures, attitudes andways of working, which can make itdifficult to realise the benefits of scaleand create a consistent group-widecustomer experience.

Harnessing the potential

One financial services group isaddressing these issues through thecreation of a harmonised ‘experience’for customers wherever they are inthe world, which is closely aligned tothe development of a common globalIT network. The technologicaldevelopments are freeing up staff time,improving customer tracking andenabling the group to introduce newproducts in multiple markets withoutthe difficulty and delay of having toadapt them to different systems.In addition to improving efficiency,moving to a single platform is alsoenabling the bank to concentrate itsresources on maximising systemsfunctionality, which can then be rolledout across the group. In the past, newand upgraded software would havehad to be designed for each of themany separate networks, which eitherincreased the costs or meant thatinvestment was spread too thinly to beof real value.

By cutting through some of thecomplexities facing larger banks,‘One’ programmes can help to simplifyoversight, speed up reporting andstrengthen control. They can also beused to standardise operational areassuch as human resources. Forexample, a financial services groupused its ‘One’ programme as anopportunity to harmonise employmentterms and performance managementacross its global operations, which has

David JessupPricewaterhouseCoopers (UK) +44 (0)20 7212 6656david.jessup@uk.pwc.com

Antony RuddenklauPricewaterhouseCoopers (UK) +44 (0)20 7213 1194anton.ruddenklau@uk.pwc.com

Andrew GrayPricewaterhouseCoopers (UK) +44 (0)20 7804 3431agray@uk.pwc.com

2 PricewaterhouseCoopers The JournalLooking after number one: Delivering the shareholder value from ‘One’ programmes

Many banks are looking to ‘One company’ initiatives to enhancecustomer service, cut costs and ultimately boost share values.However, the anticipated benefits have often failed to materialise as‘One’ programmes come up against a lack of organisational buy-inand sceptical indifference from analysts. How can banks deliver thefull value from their ‘One’ programmes?

made it much easier to move staffaround the organisation.

However, other ‘One’ programmeshave been less successful. A case inpoint was a group that tried to createa common operating platform for itsretail and investment business. Whilesome aspects of the marriage worked,the initiative ultimately fell apartbecause of the inherent differencesin the complexity and customer needsof the two divisions.

Even where the overall objectives aresound, many groups have failed torealise their goals because of a lackof clarity about the scope of the‘One’ programme and difficulties intranslating high-level aims into tangibleactions on the ground. In this respect,it is important to ensure that theinitiative is not just seen as an ITproject, but will also have an impacton how the business is organised andhow it serves its customers, which willin turn demand active engagementfrom HR and line management.However, while some breadth andflexibility is valuable, it is important toavoid needless proliferation causedby allowing pet projects to be tackedon to the initiative.

Some groups have also found it hardto identify and quantify the specificbenefits from the ‘One’ programme,which can make it difficult to sustainmomentum. A particular problem ishow to distinguish gains such ascost savings or improved customersatisfaction that can be directlyattributable to the ‘One’ initiative andthose that would have been achievedanyway. This underlines theimportance of being clear about thescope of the programme, being ableto measure costs and benefits at theoutset and then tracking them overthe course of the initiative.

PricewaterhouseCoopers The Journal 3Looking after number one: Delivering the shareholder value from ‘One’ programmes

Figure 1: Potential benefits of ‘One’ initiatives

Source: PricewaterhouseCoopers

Revenue growth • Gaining access to new markets and customers

• Increasing client referrals between business units

• Improving product bundling and transferringproduct between business units

• Accelerating product development and roll-out

• Strengthening pricing discipline across theorganisation

• Enhancing customer service and relationshipmanagement

Cost control • De-duplicating administrative tasks

• Achieving economies of scale

• Standardising products and processes

• Simplifying legal and corporate structures

• Setting up regional or global IT and infrastructureplatforms

• Developing shared service centres

Organisational responsiveness • Strengthening central management andand flexibility monitoring of all activities

• Enhancing decision making by improvingmanagement information

• Speeding up the transfer of best practices

• Improving the ability to respond to unexpectedcrises

• Making the integration of acquired businessesmore straightforward

Talent management • Improving the impact of talent allocation

• Harnessing ideas, innovation and expertisemore effectively

• Reinforcing best practices through co-ordinatedtraining

• Standardising review and reward systems acrossthe company

• Aligning staff objectives with group-level targets

Capital management • Improving the efficiency of capital raisingand return

• Achieving more effective capital allocationand management

• Strengthening working capital and liquiditymanagement

• Enhancing external perceptions of transparencyand creditworthiness

Risk management • Strengthening central control, oversight andaccountability

• Improving resilience in time of crisis, throughgreater simplicity and transparency

• Allocating risk management responsibilitiesmore clearly

• Developing an enterprise-wide view of credit,market, country and other risks

• Reducing operational risk by simplifyinginfrastructure

Branding and cultural factors • Developing stronger, more unified branding

• Aiding the recruitment and retention of customersand staff

• Fostering a group-wide culture

• Gaining the maximum leverage from marketinginitiatives

• Improving external perceptions of size, stabilityand permanence

4 PricewaterhouseCoopers The JournalLooking after number one: Delivering the shareholder value from ‘One’ programmes

Ultimately, ‘One’ initiatives requireorganisational support, co-operationand co-ordination to work, which mayrun up against the conflicting culturesand entrenched operational divisionswithin many banks. For example, themanager of a derivative operation inone particular market may be happyto apply the programme in his or herterritory, but may be more reluctant towork with peers from other countriesor product types.

Delivering lasting change

PricewaterhouseCoopers1 hasanalysed a range of different ‘One’programmes from across the financialservices industry to find out why someinitiatives work and others fail. Theresulting report identifies a number of

common attributes that mark outthe most successful initiatives.2

Taken together, these themes canprovide a firm foundation for lastingchange (see Figure 2):

Scope and drivers: What are wedoing and why?

Set clear priorities based on a rigorousassessment of the benefits, whetherthey are achievable and whether thecontribution to business objectivesjustifies the necessary investment.Don’t let the initiative be compromisedby a whole series of extraneousprojects.

1 “PricewaterhouseCoopers” refers to

PricewaterhouseCoopers LLP (a limited liability

partnership in the United Kingdom) or, as the

context requires, the PricewaterhouseCoopers

global network or other member firms of the

network, each of which is a separate legal entity

2 ‘The meaning of ‘One’: The value of a unified

vision’, PricewaterhouseCoopers – 03.10.

www.pwc.co.uk/fs

Scopeand driversWhat are wedoing and why?

LeadershipBringing the vision to life

CommunicationPromise the right things and deliver

Supporting changeExecution is critical

Driving it throughthe business

Dealing with IT

Source: PricewaterhouseCoopers

Figure 2: The foundation of successful change

PricewaterhouseCoopers The Journal 5Looking after number one: Delivering the shareholder value from ‘One’ programmes

Leadership: Bringing thevision to life

Good leaders are able to create andconvey a bold and coherent visioncapable of engaging the organisation.They also lead by example, embodyingchange rather than just demanding it.

Communication: Promise the rightthings and deliver

Win hearts and minds and allay anyunfounded concerns. Explain tocustomers how the initiative shouldresult in better service. Explain tostaff how the initiative will affect theirroles and responsibilities. Marketcommunications are especiallycritical in translating progress intoshareholder value.

Supporting change: Executionis critical

Develop a clear and realistic actionplan. Take the time to identify themost useful set of metrics for gaugingprogress. Back this up with staffincentives where appropriate.

Dealing with IT: Don’t put the cartbefore the horse

While upgrading and integratingsystems may be a key elementof the ‘One’ programme, strategictransformation goes beyondtechnology. Assess what the businessneeds and gear systemsdevelopments to achieving this ratherthan allowing IT to drive the agenda.

Driving it through the business:Getting processes right

Quick wins can be achieved byharmonising processes withinparticular operations, before movingon to more demanding group-wideinitiatives such as the possibledevelopment of shared services.

Realising the rewards

Even where progress has beenachieved within the business itself,it has often proved difficult to convinceanalysts of the merits of the ‘One’programme. Clearly, analyst reactionwill largely determine the impact onshare prices. As equity values are inturn a key determinant of executivebonuses, a lift can help to secure theirsupport and sustain the momentumof the initiative in other parts of theorganisation. Drawing on a range ofanalyst reports and subsequent shareprice movements, our study hasidentified the key factors that influencemarket reaction and how firms cangear their ‘One’ initiatives andassociated market communications toachieving the best possible boost forshareholder value.

Our study underlines the importanceof clear presentation, whichemphasises quantifiable operationalbenefits such as synergy savings.Commenting on a particular bank’s‘One’ programme, an analyst said:‘Should the [One] strategy besuccessful there could be a substantialre-rating of the share price.’ Whereclarity and detail are absent, the resultcould be in line with this commentfrom an analyst: ‘It is not clear whetherthere is sufficient detail behind thesenumbers to give enough confidenceto drive estimate upgrades.’2

Cost reductions can be achievedrelatively quickly, are easy todemonstrate and can provide animmediate share value boost.Commenting on an investment bank,an analyst said: ‘[The CFO] proposedthat the [One] cost saving initiativewas one year ahead of schedule…We believe these early gains are someof the more positive announcementsat the event.’2

6 PricewaterhouseCoopers The JournalLooking after number one: Delivering the shareholder value from ‘One’ programmes

In contrast, revenue forecasts areoften treated with scepticism,especially as it can be difficult todetermine subsequently whether theyare the result of the ‘One’ initiative orsome other factor. Similarly, qualitativebenefits are often too intangible to winover the investment community.An analyst comment on an insurancecompany is telling: ‘The presentationwas entirely qualitative and therewasn’t too much for analysts andinvestors to get their teeth into,in our view.’3

To help sustain momentum andanalyst interest it is important to setout a clear timeline of milestones andfollow up with fresh announcementsas targets are met. Trying to achievea quick win for presentationalpurposes can be risky and could leadto a downward rating if the firm failsto deliver. It is better to be realisticthan over-ambitious.

Ultimately, the presentation of ‘One’programmes works best when it formspart of an ongoing story. Otherwise,companies risk a subsequent fall backin market sentiment and share values.This analyst comment highlights thechallenge: ‘We think that over the pastthree years management has deliveredan exceptional turnaround…It leavesthem the difficult task of presentinganother new trick to the market forupgrades to be forthcoming.’3

Unlocking value

‘One’ initiatives can deliver a widerange of strategic and operationalbenefits and have the potential tounlock considerable value forshareholders. This includes sharpeningefficiency, strengthening customersatisfaction and improving the agilityand cohesion of the organisation.However, they are no panacea.Banks that have gained most fromsuch exercises have set out a clearvision of what they want to achieve,the tangible benefits stakeholdersshould expect and the benchmarksagainst which progress can bemeasured. They have also looked athow to overcome potential culturalbarriers by communicating therationale and benefits of theprogramme, explaining how roles andexpectations will change and seekingto foster greater organisationalcollaboration.

If you would like to discuss any aspectof the issues raised in this article,please speak to your usual contactwithin PricewaterhouseCoopers or oneof the article authors.

3 ‘The meaning of ‘One’: The value of a unified

vision’, published in March 2010. www.pwc.co.uk/fs

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publicationwithout obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, tothe extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you oranyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

For information on the PricewaterhouseCoopers Journal marketing programme please contact Susan Carpenito, Senior Marketing Manager, Global Banking and Capital Markets,PricewaterhouseCoopers LLP (US) on +1 (646) 471 2161 or at susan.carpenito@us.pwc.com

For hard copies please contact Russell Bishop at PricewaterhouseCoopers LLP (UK) at russell.p.bishop@uk.pwc.com

pwc.com© 2010 PricewaterhouseCoopers LLP. All rights reserved. “PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) or, as the contextrequires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate legal entity.