Chemical Bank: Implementing the Balanced Scorecard

Thèmes abordés

Chemical bank - balance scorecard - merger - culture

Résumé du document

In 1993, Chemical Bank and Hanover Corporation concluded a merging process. The new larger banking company was better-positioned to compete with other major players in the market. Michael Hegarty, the head of the Retail Bank Division of Chemical Banking Corporation, wanted to transform the bank into a market-focused organization that would be the financial service provider of choice to targeted customer groups.

This strategy needs major investments to understand customer needs and to identify attractive customer segments. The bank also had to develop and tailor new products to meet customer needs in the targeted segments. For the new larger banking it was a dramatic and extensive strategic change.

Michael Hegarty's biggest problem was communicating and reinforcing the strategy. The balanced scorecard was introduced to define strategic priorities and provide a structure to link strategy, budgeting and results. In other words, the balanced scorecard is one of a set of tools used for strategy formulation and communication. Hegarty's expectations from the scorecard were to give them measures to stay focused on performance, while enabling to clarify and communicate vision, and focus energies for change.

Before analyzing the merger between Chemical Bank and Hanover Corporation, we start by presenting the context in the 90's. Then, we analyze the implementation of the Balanced Scorecard, and the impact of the merger. Finally, in order to compare the merger of Chemical bank with Manufactures Hanover Corporation we treat the merger of two French banks.
Our study is based on this following problematic:

How can we develop a more relevant BCS and improve the running of the company?

External Context

In order to introduce Chemical Bank in its environment, and identify the causal links and drivers playing in the BSC, we are going to centralize and choose indicators of the external environment which are not analyzed in the BSC

To analyze the environment of Chemical Bank, it is important to situate it in time, and to discuss the main themes of the era, including the political and economical aspect.

The 90s in the USA registered the end of the recession, and the beginning of the longest growth of the US economy.

Major events of the 90s:
-The collapse of the USSR
-The war in Kuwait
-The war in Yugoslavia
-The war in Rwanda

We also witnessed the birth of the Internet, and new telecommunications networks (improving the ATM). The management software was deployed in enterprises. More generally, the 90s were discovering the beginnings of a computerized society, where information needed to circulate faster. This was the case of Chemical Bank: ATM, BSC...
Personal incomes doubled from the recession in 1990, and there was higher productivity overall. The North American Free Trade Agreement (NAFTA), which phased out trade barriers between the United States, Mexico and Canada, was signed into law in 1994.
The following graph illustrates the main waves which took place since 1898.

Competition:
The competition was very intense in the 90's when we witnessed the fourth wave of mergers. After the acquisition of Manufacturers Hanover Corporation in 1991, Chemical Bank became the second biggest bank in the US, behind Citycorp, which was the main competitor of Chemical Bank.

We emphasize five keys to success in an M&A. Two are focused on activities which directly impact the financial performance – the hard keys; and three issues relate to people aspects – the soft keys. We focused on the correlation between the pre-deal and the success of an M&A in order to know if those keys were taken into consideration in this case.

Extraits

[...] Concerning the communication for the 8000 peoples of the organisation, Mike Hagerty decided to align 3 strategic Themes in the company with 3 BSC Perspectives. He decided to communicate a lot about these 3 themes in order to brand the minds of each Chemical Bank' employee. People know what they are suppose to do and have to make actions which fit into one of those 3 themes. It is important to emphasis the causal links across the objectives and measures. To achieve the financial objectives (revenue growth and return's improvement for example) it is necessary to implement customer's objectives. [...]

[...] In fact, it could become a beautiful wedding, or an horrible scarf in the background of a firm.” In this case, the merge helps to make an evolution on a very competitive and moving market. Chemical bank has had a better place thanks to Manufacturer Hanover Corporation. Cultural Core To understand the culture of the bank, we have to search in the past. Chemical bank was found in 1823. At the beginning, the Bank was created for the chemist & manufacturing industries. [...]

[...] BNP wanted the Bank to be a consumer product. In 8 years, the number of accounts deposited at the BNP has more than doubled. It rose from 2 million in 1966 to 4,5 million in 1974. The development is around two core businesses: retail banking in France and Large bank customers worldwide 2. Paribas The Act of February decided the nationalization of five major industrial companies registered banks and two financial companies, Suez and Paribas. Michel Francois-Poncet, chairman and General Director, led the privatization imposed by the Act of July successfully: Paribas has 3,8 million individual shareholders. [...]

[...] After the acquisition of Manufacturers Hanover Corporation in 1991, Chemical Bank became the second biggest in the US, behind Citycorp, which was the main competitor of Chemical Bank. We can notice that the more likely scenario for Chemical Bank is the first one: The competition will increase with the merge and we will assist at a concentration of this sector. The risk could be controlled even if Chemical bank is in a reaction behaviour and not an anticipation one. According to the projection, this market is not very keen to be balanced. [...]

[...] Chemical Bank: Implementing the Balanced Scorecard INTRODUCTION 3 External Context 4 Merger between Chemical Bank and Manufacturers Hanover Corporation 8 How introduce and implement the BSC in Chemical Bank? 11 Which are the observable results in the company after the BSC Implementation? 14 How had the merger impacted the company concerning the culture? 16 Sum up of the BNP Merger 18 Presentation of BNP and Paribas 18 Acquisition of Paribas and interests of the merger 19 Comparison between the BNP Merger and Chemical Bank Merger 21 How can we improve the use of the BSC in order to obtain a better management and operational tool for a successful merger? [...]