Pär Boman, CEO of Handelsbanken, discusses the bank’s unique approach and the philosophy which has underpinned their long term success.
Well, I’d like to say congratulations to Handelsbanken for winning both the Investment Bank of the Year and also Banking CEO of the Year. Many congratulations indeed.
Thank you. Thanks a lot, and on behalf of all colleagues in the bank, I will thank International Banker that you have recognized what we are doing and also inspired us to continue our work with customer satisfaction, customer service, and be a top-ranking investment bank. Thank you very much.
Our pleasure. Here then are your awards.
Thank you. Thanks a lot.
Thank you very much.
I’m going to ask you first, I think, about, if you like, the outlook…both Sweden and Europe, the economic situation forecast is the same; it’s uneven. What do you think are the key factors for growth for Handelsbanken going forward?
When you look particularly at this bank, I think it’s our capability to find the right team around the branch managers. And the key role is played by the branch manager who is responsible for the bank’s activities in a defined geographical area.
And that in a way is going to be the real factor for growth, linking that geographic with the right people?
Yes, I think so. But then, of course, it must be supported by digital platforms and all the IT you need to deliver a good offer to our clients. But the key role is played by the branch manager, I think.
Rolling back to when you started at the bank—so that was 1996, you became CEO in 2006—what do you think were the key challenges that faced you when you took on that leadership role at the bank?
There was no particular challenge for me. When you get a new job, which is happening every day for a lot of employees in Handelsbanken, you can take some skills with you, some experiences with you, but you also have to learn new things and work together with your colleagues. So I cannot put down a particular challenge and say this is what was my challenge. It was a new job, and I had to learn a lot of new things.
And I’ve also found out that you still spend some time on the front desk. Is that true?
Yes, yes I do. I cannot do it in all countries every year, but I do spend some days every year behind the desk.
And what does that give you?
A lot, I would say. Meeting clients and meeting customers is absolutely necessary. And in my job generally I meet clients with larger business with the bank, but it is very important also to meet all kinds of clients.
Now the bank has got a fantastic reputation for customer service, and you, I think, have been credited for having a laser-like focus on customer service and making sure you deliver for customers. But that’s a challenge in its own right. Because if you’re meeting those levels of expectation and service, how do you improve on that, how do you get better, how do you keep moving forward? So what new services will you be offering your clients and customers over the next few years?
There are many areas where we have to improve better and better. We all know that clients typically want to use more new devices when they are launched from Samsung, for example, so you must always be capable of learning to be at the frontline of the new digital platforms. But what customers want is a combination of local presence, building a relationship and digital platforms. Being both local and being digital, that’s the key.
- Now, turning to the UK, there’s been significant growth and development of the bank here in the UK. 180 plus branches I think it is at the moment. What were the specific challenges of expanding into the UK when compared to say Sweden?
I think—we’re coming back to what we talked about initially—it’s a question of finding the right branch manager. And he or she can build a team around that. And build up a local reputation and relationship, and be a part of the local community.
In terms of thinking about the factors for growth here in the UK, what do you think is really going to drive your growth apart from getting the right people and getting the right places?
I think the driver, a lot of the driving, is that clients talk about us. We don’t have a marketing department, we don’t do any advertisements, so it’s only mouth-to-mouth marketing. And it’s essential that our clients think and believe that we are doing a good job. If we’re doing that, they will tell others that, and that will drive the wheel.
And without spending any money at all on marketing, do you genuinely believe that the business is going to grow?
Definitely. Definitely. And I think you can see what we have done for the last six, seven years in the UK, and we haven’t spent months installing marketing.
A lot of that then depends on the quality of the people that you get, so how do you motivate and inspire your workforce in order to sustain that kind of growth?
My experience is that people generally are motivated. People have a natural motivation, and it’s much more common that the people at the headquarters destroy that natural motivation by sending out reports and guidelines and whatever it is. So I have not seen that it is a problem to motivate people. People are motivated. I think it is part of being a human being.
You yourself have been described as being bold as a leader. What qualities do you look for in the people that you hire? What qualities and values do you seek out?
There are so many aspects, you can’t really pick up one single thing; but what I think is good is, good to have, is the capability to be a decision-maker. But also building teams. If you can do that and have a social talent where you really, really like to be a part of the society and community around you, that’s some parts of it. But there are also many other things.
You mentioned the importance of the digital platform. What have been the major challenges the banks faced from a kind of technological point of view over the last few years?
I think what we can see is that the number, and the differentiation of devices…I mean if you go back 10 years, there was a huge screen, mostly used in an office or at a home. Today you have a smartphone, you have apps. There will be an iWatch here in March; Google will launch Google glasses; there will be new types of devices. And the only thing we know is that our clients will buy those devices and then connect them to the bank. And this is the challenge for our IT department.
In order to keep up with the very latest devices, you’re going to have to invest in making sure you have the people who understand how to make those work for you.
Yes, we need good people in the IT department, and we’ll kind of combine that with local presence, that local service concept, which is very appreciated.
But again in terms of your profile, you’ve managed to maintain what some people might call a kind of traditional element of service and value. Particularly face to face. How do you see the balance between face-to-face and say digital delivery? How does that balance have to be worked through?
You have to be good in both arenas because clients want to have both the possibility to walk into a branch, talk to the person. They know the person to whom they have told their story before. And also the person who makes decisions. If they can do that, they are very happy with that meeting. But when they are walking away from the branch, they want to pick up their smartphone, log on through an app and check the balance on their account, for example. So there’s no conflict between those two ways to serve a client. You need both. And clients want to have both.
I’m thinking again about the technology. What area do you think in terms of innovation that you’d like to pursue over the next few years? Where do you think your focus is going to be?
If you look at a technical area, that will be the differentiation of devices. There will be so many types of devices. There will be small tablets, huge tablets, pads, watches, glasses, televisions at home that you can easily switch over with your remote control and check something. The number of different types of devices, I think, is the largest challenge.
And does that apply across your customer base so whether that’s personal through to corporate, large or small, do you think all of your customers will be embracing that kind of technology?
Yes, I think so. This is a huge shift. If you go 50 years back, you can say—15, 20 years back—you can say that young clients used PCs and the Web. The older clients appreciated the branch. Today you can’t say that any more. You have all types of clients who are using both digital platforms and appreciate branches. And I saw in our last customer survey in Sweden…we saw that young clients, customers, who mostly use the smartphone, they appreciate the local branch as much as clients who are older than 55 years. Those young clients also appreciate it a lot. And we asked, “Why?” Why, what was the reason behind it? But the screen is so small on the smartphone that you had to walk into the branch to get your questions answered.
But thinking about that mix between technology and a face-to-face, what particular products and services do you believe make you stand out from the competition in the marketplace?
Well, we talked to our clients, and of course our product range only reflected demand from the clients. They want traditional products. What they believe in is the traditional products of the bank; that’s the reason why they walk into the bank or make a phone call to the bank. So I can’t see any huge changes in the product range for Handelsbanken.
But how do you continue to set yourself apart from the crowd? Is it by planning on that traditional element, or is it by planning on your ability to really listen carefully to your clients? What do you think is the most important thing that makes you stand out?
Being close to the market is, of course, the most important thing in our business, and I think in most businesses. You need happy and satisfied clients. That’s what it’s all about. We are doing that by daily service, local presence and frontline digital platforms. That combination is what we try to make in us unique and also where we try to differentiate ourselves. And building an organization where colleagues in the bank can make decisions when they meet clients, and it’s not necessary to need to make a phone call to the headquarters or send in some data to a computer where an algorithm will make the decision. We still believe that the human being is a really, really good decision-maker and can compete with all computers.
And leaning away from the way your operation behaves to the kind of regulatory regime in which it has to operate, how do you expect that to develop locally and globally over the next few years in terms of the global banking sector?
I think it’s very natural that politicians and regulators came out with new regulations after the financial crisis. And there are no reasons for banks to complain about that, because if every bank had stood up for their own business and didn’t ask taxpayers for support, there wouldn’t have been any new regulations. So there are reasons to be a little bit humble when you talk about those things. We haven’t asked any taxpayers for support, and we don’t borrow money from any central bank. So we are on the safety side. But what I think is important for managers in the bank…it is not necessary to discuss and debate every single detail in the regulation. From our perspective, regulation is only a way for politicians and for the government to try and communicate what kind of banks they want in their country. And there are different regulations in different countries. But for managers in the bank, it is important to understand what the idea is behind the regulation. And we want to be good citizens in the country where we are running our business. So we try to understand what kind of bank they want, and that’s what we try to deliver. Then, of course, as the technical specialists in banking, you can, of course, have an opinion about some details. But that’s not unique for the financial sector. If you are a car manufacturer or if you are working in a health-care company, whatever it is, there are regulations everywhere.
Do you think it’s a peculiarly Swedish way of working? Can you think of some of the other big brands that have come out of Sweden that have helped you develop into overseas markets by really relying upon reputation and word of mouth? Is that something that is Swedish in its essence, or is it just something that happens to be something that works well for Handelsbanken?
I don’t know if it’s Swedish or not, but for us it was a huge step when we said to ourselves that we need to establish branches outside Scandinavia. It was a huge step. And at that time most banks were orientated for the former Eastern Europe and the Ukraine and the Baltics. And for some reason we said that we didn’t believe in that direction so we said maybe the UK was a better place for us. And it was a huge step, as I said. When we came to the UK, we had to ask ourselves how to do it. We knew very well how to run the banking business in itself. A sustainable business without support from taxpayers, without asking shareholders for capital injection. So we were very comfortable about the business model. But to grow to that scale was a new thing for us. So we started a lot of companies, which have been very successful in growing, and we tried to find something, which is quite similar to what we can see some Swedish companies doing. H&M the clothing company, the IKEA furniture company, but we are also very impressed about how Starbucks have done their business. And we tried to find a combination—and we’re still in the learning process—for how to grow efficiently and sustainably. But there are some role models around us, and some are Swedish. But if that’s typical Sweden, I don’t know. I don’t think so.
So what factors will be vital to growth in the UK going forward?
The only factor that can drive growth for us is demand from clients. That’s because we don’t do any advertisements. We don’t even have a marketing department. And we haven’t spent one single sterling on marketing in the UK. We don’t even have a bonus system. Everybody has a flat salary. I have a flat salary. There are no incentives inside the organization to sell, sell, sell. And we don’t do a budget. So our branch managers and our team…they don’t have any sales targets or budgets. So the only thing that could drive growth is demand from the market. And that means that word of mouth is the only way that the bank will be promoted in the local society. And word of mouth is only a consequence of how well we have served our clients. In the branch, in the local community and on the digital platforms. So word of mouth and demand is the key word when you are talking, demand from the market. And we have skipped everything else. We have skipped bonuses, variable salaries, marketing and those kinds of traditional drivers behind sales. So it’s only a natural demand for the service we have.
So in a way you have…you’re not going to acquire new risk, you’re divulging responsibility.
Yes, that’s one way to describe it.
Well, it has been an education today, Sir. Thank you very much indeed for your time.
Thank you for letting me talk about my favorite subject. The bank. Thank you.