Harvard Business School
Rev. June 10, 1999
Chemical Bank: Implementing the
In early 1995, Michael Hegarty, head of the Retail Bank Division of Chemical Banking Corporation, was overseeing a transformation in his organization. The process had begun with the merger of Chemical Bank and the Manufacturers Hanover Corporation at year-end 1991. The new, larger banking company was better-positioned to compete in a marketplace characterized by intense pricing competition, an outflow of deposits to mutual funds, rapidly evolving technology, and increased customer demand for value. Hegarty commented on just one indicator of the future competitive environment for retail banking:
At the time of the merger, the old Chemical Banking Corporation with assets of $75 billion, had a market capitalization of $2 billion. Less than four years later, Microsoft has offered to buy Intuit, a personal financial software company with $223 million in sales for $1.5 billion. What do you think Bill Gates is buying for all that money?
Historically retail banking had emphasized efficient collection and processing of deposits. Hegarty wanted to transform the bank into a market-focused organization that would be the financial service provider of choice to targeted customer groups. To implement this strategy, Hegarty knew that the bank had to make major investments to understand customer needs and to identify attractive customer segments. The bank also had to develop and tailor new products such as annuities, investment products, and technology-based payment services to meet customer needs in the targeted segments. With a broader product and service line, and excellent knowledge of its customer base, the bank would then be able to find ways to develop new relationships with its most desirable customers and expand the bank’s business with them—increasing its share of its customers’ financial transactions (or “share of wallet” as it was described in the bank). When asked how he expected to implement such dramatic and extensive strategic change, Hegarty said:
My biggest problem is communicating and reinforcing strategy. The Balanced Scorecard is one of a set of tools we are using—along with Mission and Vision Statements, Gap Analysis, Strategy Consensus, and Brand Positioning—for strategy formulation and communication. The Balanced Scorecard can’t win without a good mission statement and vision, an excellent strategy, and good execution. But it is certainly part of the architecture of success. It is an element in a major communications program to 15,000 individuals.
Norman Klein and Professor Robert S. Kaplan prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 1995 by the President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School. 1
This document is authorized for use only in Understanding Financial Information for Decision Making by Dr. Bala V Balachandran from March 2012 to September 2012.
Chemical Bank: Implementing the Balanced Scorecard
No one owns a process end-to-end (most do just a small snippet). But every individual should understand how they fit in—what their role is for helping the company achieve its strategy. The scorecard gives us the measures we need to stay focused on performance, while at the same time enabling us to clarify and communicate our vision, and focus our energies for change. The measurement allows learning, and the learning renews the vision and...
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