Cooperative banks a business model under pressure

Transcription

1 ISB Summer School 2015 Cooperative banks a business model under pressure Daring more blended cooperation to face the challenges of today s banking industry Prof. Dr. Thorn Kring Montabaur, July 6th 2015

2 My motivation and my background My motivation: to find evidence that ethically based management constitutes a route to greatness a preference for networking satisfaction from teaching and mentoring (young) professionals My background (in the recent years): Since 2007: Professor of Bank Management at Steinbeis University Berlin Head of Research institute IEFP core research areas: ethics, leadership and human resource management : Managing Consultant at Horváth & Partners consulting projects: strategy development, balanced scorecard, change management and remuneration systems (mainly in cooperative banks) : Doctoral student at Institute of Cooperative Networks (WWU Muenster) with a dissertation on the strategic management of cooperative banks

3 Content Introduction Cooperative banks in Germany who they are Trends in the banking industry today s challenges Daring more blended cooperation what they should do Questions & answers 3

4 Content Introduction Cooperative banks in Germany who they are Trends in the banking industry today s challenges Daring more blended cooperation what they should do Questions & answers 4

5 Cooperative banks have a unique kind of organisational structure and they form an important pillar within the German banking system. Definition (UN): A cooperative is an: autonomous association of people united voluntarily to meet their common economic, social, and cultural needs and aspirations (through) a jointly-owned and democratically-controlled enterprise. Number of banks: 1,078 Staff members: 190,000 approx. Total balance sheet assets: 763 billion Members: 17,700,000 approx. Customers: > 30,000,000 approx. Market share: 15 % approx. 5 (DGRV, data as at end 2013)

6 Various partners support cooperative banks in Germany together they constitute the cooperative financial network. own central banks: own DZ Bank AG financial services partners: WGZ Bank AG operational partners: Bausparkasse Schwäbisch Hall (home/housing savings bank) DG HYP, MHB, WL Bank (mortgage banks) Union Investment (investment company) R+V Insurance Group Teambank (consumer credit) VR Leasing Group (leasing company) own support Fiducia GAD (IT services) Schwäbisch Hall - transaction bank (real estate) dwp bank transaction bank (securities) Equens transaction bank (payments) support support local cooperative banks (Volksbanken Raiffeisenbanken, Sparda-Banken, PSD-Banken) 6

7 Cooperative banks at their core reveal characteristics of social or sustainable banking. Social/Sustainable banking Social Banking refers to the provision of banking and financial services that consistently pursue, as their main objective, a positive contribution to the ability of all human beings to develop, both, now and in the future (ISB, 2011) Cooperative banking values & convictions of members and managers values of cooperative organisation principles of cooperative 7 (GABV)

8 Cooperative principles are guidelines by which cooperatives put their values individual & organisational into practice. values & convictions of members and managers values of cooperative organisation principles of cooperative honesty / integrity openness social responsibility caring for others 8 self-help self-responsibility democracy solidarity equality fairness (equity) cooperative membership identity principle democratic member control cooperative supporting mission member promotion (economically, socially, culturally) development competencies cooperation culture subsidiary principle

9 In general, the business model of cooperative banks could be regarded as sustainable 9 Cooperative banking values of cooperative organisation values & convictions of members and managers principles of cooperative Similarities to sustainable banking: Grounded in communities, serving the real economy meeting financial needs of customers in the local community serving the communities as an employer Establishing long-term relationships with customers and employees practicing identity principle proximity to their customers Maintaining a high degree of transparency in governance practicing democratic member control active relationship with bank s extended stakeholders Adopting long-term perspective to maintain their business and stay resilient task of member promotion not oriented to a short-term profitability

10 but putting cooperative values and principles into practice today remains a great challenge. Cooperative banking Challenges in being cooperative : 10 Lack of knowledge: neither members nor managers/employees have broad knowledge of the values of cooperatives Lack of credibility: mismatch between communication policies and banking practices Lack of strategic alignment values and principles are often not aligned with day-to-day routines Lack of transparency members often no longer participate actively in the system of democratic control Lack of resilience in view of competitive pressure, profit maximisation often replaces value-based management

11 Content Introduction Cooperative banks in Germany who they are Trends in the banking industry today s challenges Daring more blended cooperation what they should do Questions & answers 11

12 Trends in the banking industry put pressure on the business model of cooperative banks. banking regulation low-interest environment Cooperative banking route to greatness demographic change? digitalization failure 12

13 From the significant banking industry trends today, a number of challenges emerge associated with specific business activities. banking regulation low-interest environment challenges cost pressure margin pressure business activities being more efficient developing new (sustainable) business-segments demographic change competition over customers war for employees generating identification and (affective) commitment broadening participation and integration digitalization 13 new (digital) competitors new financial needs changes in communication and consumer behaviour transferring cooperative values to the digital world (e.g. proximity, self-help, culture of cooperation) broadening digital access to financial services

14 To implement these business activities, cooperative banks should dare to cooperate more economically & socially, digitally & physically. being more efficient developing new (sustainable) business-segments generating identification and (affective) commitment broadening participation and integration blended cooperation transferring cooperative values into the digital world broadening digital access to financial services 14

15 Content Introduction Cooperative banks in Germany who they are Trends in the banking industry today s challenges Daring more blended cooperation what they should do Questions & answers 15

16 Similar to the concept of blended learning, cooperative banks should establish different forms of blended cooperation. economic and social (level of objectives) blended cooperation digital and physical (level of methods) formal and informal administration (level of formalisation) various types of membership structure: Type A employees of different departments of one cooperative bank employees only of various cooperative banks 16 Type B employees and members/customers of a cooperative bank cooperative banks and financial or operational partners in the financial service network Type C cooperative banks and charitable organizations cooperative bank as an initiator of P2Pcooperations between its members/customers

17 Type A: Example of (internal) Community of Practice key partners employees of different bank departments services and operations retail and corporate banking different hierarchies specific skills key activities exchange of experiences frequent meetings (physically and virtually) supported by web-based management platform type of blended cooperation structure: informal issue-based self-organized without hierarchy issues: products and/or services process optimization qualityimprovement organization learning process long-term resilience cost reduction quality improvement skill development long-term relationships (customer/employee) customer satisfaction employee commitment serving communities indirect 17

18 Type B: Example of Business-Segment Innovation Network key partners bank employees members/customers specific abilities or skills to improve the defined business segment key activities innovative conferences, e.g. open space, barcamp (physically and virtually) combination of partners skills & resources supported by web-based management platform 18 type of blended cooperation structure: semi-formal (voluntary membership) initiated and chaired by a bank issues: improvement of (new) business segments real estate energy healthcare long-term resilience profit improvement business expansion ( blue oceans ) long-term relationships (customer/employee) customer integration relationship-building (social & economic) serving communities safeguarding services for the public; e.g. regional energy production

19 Type C: Example of Corporate Volunteering Platform key partners bank employees customer s employees charitable organisations non-profit associations church groups sports clubs cultural organisations key activities realisation of charity projects networking with customers and their employees human resource development program (especially social skills) 19 type of blended cooperation structure: semi-formal (voluntary engagement) project-based issues: social caring days mentoring-programs (employee pupils) developmentprograms (special training for disadvantaged groups) long-term resilience reputational improvement social skill development long-term relationships (customer/employee) reputational improvement employee commitment employer attractiveness serving communities meeting special needs of regional charitable organisations

20 Conclusion Cooperative banks in Germany reveals several characteristics of social and sustainable banking. Their business model could be regarded as sustainable. Putting their sustainable values into practice remains a very substantial challenge. This challenge is even becoming harder through certain trends in today s banking industry. One way to face these challenges could be to dare more blended cooperation revitalize traditional cooperative values and principles create deeper relationships with employees and customers could lead to greatness. 20

21 Content Introduction Cooperative banks in Germany who they are Trends in the banking industry today s challenges Daring more blended cooperation what they should do Questions & answers 21

22 Name: Prof. Dr. Thorn Kring Unternehmen: Institut für Ethik, Führung und Personalmanagement der Steinbeis-Hochschule Berlin Themenfokus: Unternehmensethik, Führung und Personalmanagement Erreichbar unter: T:

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24 Type A (exemplary): Regional Service Centers Key partners different cooperative banks and its employees Key activities outsourcing or insourcing of specific services Type of blended cooperation structure: formal sharing human resources issues: back-office operations supervisory regulations; e.g. reporting requirements Long-term resiliency economies of scale and scope cost reduction improvement of quality Long-term relationships (customer/employee) ability to focus on relationshipmanagement Serving communities aim to keep employees within the regional communities 24