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Abolish budgets
In November 2003, 20 senior executives at UBS Wealth Management gathered for an off-site meeting in a windowless basement room in central London. They were running the biggest private bank in the world, but with only four per cent of a highly fragmented market they could see enormous opportunities for growth. And as they dug deeper into the things standing in the way of growth, a familiar foe emerged: the budgeting process. So they decided to scrap it. "This was not driven from a theoretical angle at all -- it was pure business logic," recalls Toni Stadelmann, then chief financial officer.
But budgeting could not just be thrown out without replacing it with other ways of motivating client advisors -- personal bankers to UBS' clients. The new model was built from the ground up. Rather than comparing the performance of client advisors with a budget number, Stadelmann and his team evaluated them against themselves (their previous year's results) and against their peers. "We created monthly measures of actual performance on the usual criteria -- revenues, net new money, cost/income ratio. And then we ranked all the 'desks' (groups of client advisors). In essence, we created performance league tables, and we made the results available for everyone to see."
And what about the results? UBS Wealth Management achieved four years of double-digit growth until 2006/7, when the financial crisis forced UBS into consolidation mode. And the cultural shift was also enormous. "Now we spend our time discussing clients and market opportunities, rather than negotiating figures."
Julian Birkinshaw is Professor of Strategic and International Management at the London Business School
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This article was originally published by WIRED UK
