Transformation Transformation through Partnership through Partnership in Polandin Poland

David Mullins

Strategic Change Unit

AIB Group

Ireland’s largest bank and financial services organisation with an asset base of €85.7bn

Core Retail / Commercial Banking operations in:

• Ireland

• UK

• Poland -

Over 1,000 offices, over 31,000 staff & over 5 million customers world-wide

AIB Group OverviewAIB Group Overview

Poland: Macro Economic conditions

Poland

Poland will benefit from EU structural and cohesion funds -

rising living standards for all

Good Educational standard

Economic discipline - Maastricht Criteria

Movement to a stable low interest rate environment

A positive environment toward foreign direct investment

A country familiar with change and a people prepared to

embrace it

Macroeconomic conditions Macroeconomic conditions - expected to improve - expected to improve

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

2000 2001 2002 2003 F 2004F

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%2000 2001 2002 2003 F 2004F

0.0%2.0%4.0%6.0%8.0%

10.0%12.0%14.0%16.0%18.0%20.0%

2000 2001 2002 2003 F 2004F

2.0

2.5

3.0

3.5

4.0

4.5

2000 2001 2002 2003 F 2004F

PLN

GDP GrowthGDP Growth

Central Budget Deficit Central Budget Deficit

NBP Intervention Rate NBP Intervention Rate EUR / PLNEUR / PLN

AIB’s development in Poland

1992/97 AIB International Consultants

“twinning” with Wielkopolski Bank

Kredytowy (WBK)

1994 Explore Equity Investment potential in

Central Europe - Poland selected

1994 Initial Shareholding in WBK

1999 Purchase of 80% of Bank Zachodni

2001 Merger of WBK & BZ

2001 Bank Zachodni WBK floated on WSE

Investment rationale in Poland...

Population Scale - 10 x size of Ireland

Favourable geographic position in Central Europe

Leverage trade links to existing geographies

Scope for rapid development of financial services industry

Competent & supportive local management

Long Term twinning arrangement

Close cultural fit

The Principles of ReformBeyond Twinning

That transformation would be done through Polish Management.

Twinning “Two in Box”

That the transformation/ reform process would be owned by AIB and not outsourced

That professional management techniques would be applied to the management of change.

Development of AIB Change and Project Management Methodology

Certification of AIB and local management in the approach

“Beginning with the End in Mind”

AIB Investment to date in Poland...

PLN MlnWBK 434

BZ 2,635Total Investment 3,069

The Tranformation Agenda

The Challenge

The Change Challenge

Implement a de-centralised IT system model to a centralised system across 450 branches and 10,000 people

Develop a single business model a s a basis for an eventual merger.

Undertake merger of Bank Zachodni and WBK Shift the organisation from back office activities to

customer facing activities Re-orient the culture of the organisation away from

transaction to Customer facing behaviour. Restructure the organisation and head office to support

the new business model.

Change Capacity

Time

Deg

ree o

f C

han

ge

Demand BZWBKB1

BZWBK

Capacity

•Identify Win/ Win Projects•Integrate Projects into B1 Timeline

•Reduce total number of Projects both IT and Change•Challenge Non B1 focused projects

Risk of superficial application

Transformation Objective

Merger

BZBZ WBKWBK

BZ WBK

To create rapidly a top class customer-centric efficient branch banking business supporting a single product set and operating processes in the new merged bank. This will serve to position the bank for increased profitability and growth.

B1

Integrated Change Journey

„AS IS”

WBK

BZ Integrated Change

Journey

Integrated Change Journey

Two different starting points in change journey for BZ and WBK.

„TO BE”

ONE, COMMONBUSINESS MODEL

Two different levels of change required to reach Branch Model.

Two different levels of capability and experience.

Technical Change Journey

RUP

CBH

Reginal Branch(for Post service)

Headquarters

WBK24MIS

MIS

KIR

Branch

SWIFT_CKI00 ABIO

ST400SLINK

SYBIR-O

SEZAM

NBP nationalSWIFT

INTERNATIONAL

157949596

1252630108139193188

ELIXIR

122124

BRIRSYBIR-O

CSR

12324109140

KGB

158

163

2729

460

113

ATM

EUROPAYeuro-module

VAP VISA EDITPACKAGE

PW2

Minibank(homebanking)36,38,40

35,37,39

1,23,24

1, 25, 26

SEZAMIX

28

BANKMASTER

98

POLCARD

171

74

ELIXIR

Centrum Kart

SEZAMCard cntr

PRIME

SEZAMScanning

CORTEX

73

199

12, 13, 14

20, 21, 22,259,260

136137

10,11,70,195

15161718

19,266243,244257,258

105 49230 252142

ICB

147

148

internet banking

GSM banking

phone banking

153,205

WEBIS

178

179

NBP regional(S-35) 182

SKARBIEC

RBAN

48

130

MAESTROARKA

UNIPRZELEW

CEKE

6

64

41

67

5

110

FILAR

CREDITDESK

Treasurydpt. (SPIK

Analizalokat)

IT dpt.

90,91,106

AMS

154

152

1,23,24

1,23,241,25,26

Scanning

Customer

SUN

IRBIS

51,54

52

33

FFITEST

PLATNIK

RATY

77

75

76

PostGdansk

6162

SI-BANK-KI 83,84

CUR dpt

118119

SI-BANK-KI

KREDO

78

MIS CBD

43

MIS biuletin

7269

128184

34

MISWorkload

68,125

PINPAD(SIK)

IDEA

Z500

Z500

131

82

123

CBD

MIS MKF126,127,183

TRIDENT/Hypercom (POS)

132

135

200

134

133

GBH

63

B2

NEWTYTUS

58177

85

3,16,149,116

71,196,265

2

138 7,8,9

143

PRESS

144

RZB

146

145

MIG-DZ

162

174159,161,164

WSPB4

WSPB4168

169

175BO3

B03

166

167

DKF

47,55

NOSTRO

165

156

87,88,89,261

170

MIS budgeting185

MIS credit module187

Ballance sheet&incomestatement module

186

190

172

189

191

129

CBP

106

194

ATM GBH198197

201

206

205

202203

204

111112

114,141115

180

AIB

181

BPH CU DB207208

CEKE.exe

209

213

211

212

210

214215

104

216

217

UNIPRZELEW

218

221

219

GUS (statistic)

204

220223

1091,25,26

108

222

228

SORBNET

224

225

kred-wal

kred-wal

226

227

MISStrategic

CustomersModule

80

Stock Exchange231

101,102,103, 93

92,99,100

117,150

Customer155

SEZAM6666

232

Minibank

SEZAMCBH

233

237

Accessapp

(MIS)234

235

236

CSICONV.

239

238240

241

242

32

245

246

ARiMR

SI-BANK-KI

120121

KOBRA

79

81

MoneyLoundry

App.

248 249

FRiOR-BK

FRiOR-BF

250

251

FRiOR

176

42

253

255

256PPI

Admin

264

CEKE.4ge

173

263

262

267

WBK

KIR

BRIRGovernment

GINB

AIB

NBP

Branch

Headquarters

ZORBA SETTL

FASTWIRE

ZORBA 2000 plus

BONY

DEBAK

ELIXIR-O

WEBIS

CORTEX

SWIFTNetwork

4243

78

ELIXIR-O

SKWRM_E

77

6

ZORBA 2000 plusDRB

6

85

ZORBAAUTO

72,172

71,73,82,213

ZORBA 2000 plusBKC

43 42

42 43

1

RABA-O27

RABA-C

28

DIS

4

DRAB

ARIMR

ARIMR-Z

27

INOB

DO-DRB 76

SORBNET

33

MONREZ

20

MONREZ-C

3

LONOR LOKAP

74 75

21

SPEKC

35

SPEK

NetBANK222

79

Client PC

PADWA W

PADWA

81

2385

UTRACC

39

5

153

RABA-O

BRIRSYBIR-0

ELIXIR-C

67

28

27

RABA-O

28

BAKIS-C

40

94

70,201

152

6

MONREZ

20

21

90

83

84

10

10

84

83

7

778

BAKIS-O

95

95

BAKIS-O

94

ATLAS

93

FACTORING

ASYGNATA92

BAKIS-O

95

94

BILANS-O

BILANS

97

96

SI-BANKI*KI

98

EWIN

EWIN

101

100

BRAD

99

WALUTY

130

NOTY109

SYNON

137

128

transakcjena bonachskarbovych

127

NOTY_ZOR

110

ROZL_MAG(MAGAZYN)

111

PLUSO-DRB

181

116

SPR_WAL

125

123RAPAIB

FRIOR_BFFRIOR_BK

PLACE

PLATNIK

118

119

COBRA

BZTABELA

MAJATEKTRWALY

107OBLIG112

PLUSO_O

117

116

OBUD

114

KURC_O

103

104

KURC_C

PLACE

119

118

PLATNIK

122

RANK

KONWZAS -Rejestr zastrzeżeń

bankowych

MIG_DZ

108

2

34

115

ZOB2000

131

132

ZOB2000C

STABLODN

STABLODC

126

SEKW

SEKW_C

124

UTRAC

RBAN

179

PROMAK-POWIERNIK

121120

133

OBUD_C

113

151138

27

KRESTU

KRED

KRED

136

ATM

EUROPAYeuro-module

VAP VISAaccess point

POLCARD

POS

FACTORING

139

154

140

141

PLUSO_C

160

160

BILW

BILW

161

161

KRACCN

TRIARCH

PROTECTORADRESAT KRACN

RESZ_O

RESZ_B

RESZ_C

CZEKI

ARS

163

164

165

SETTL

SETTL

SETTL

170 171

170

171

171

170

REUTERS

Zakład Energetyczny,other institutions

sending Direct Debits

173

174

RUP

176175

177

NBPregional

135

BGK

178

180

109

182

183

184

185

186

187

200

PROMAK - DomMaklerski

202203

LUKAS BANK

204,205

206,207

PRIME

208

209

ZORBACORTEX

42 43

SETTL170

171

210

211

212

RBAN

188

BZConverted Branch

Headquarters

KIR - Central

Internationalpayments

SWIFTinternationa

l

ELIXIR

ATM

EUROPAY

VISA

POLCARD

ELIXIR

PRIME

CORTEX

internet banking

GSM banking

phone banking

e-banking

POS

BranchTeller

SYBIR-O

BRIRSYBIR

ICBSTerminal

PINPAD(SIK)

Integratedsupportingsystems

Terminal

NBPnational

SORBNET

Treasurysystem

BRIRMIG-DZ

ZUSPŁATNIK

Bankemployess

payroll

GeneralLedger

pc-banking

Poczta Polska

UNIPRZELEW

WEBIS NEW TYTUS

NEW MIS

GUS(statistic)

AIB

CREDITDESK

SI-BANK-KI

ARiMRSI-BANK-KI

MoneyLaundry

DB

GINB

PLATNIK

ARS /RATY,FFITEST

FixedAssets

batch interfaceto externalapplication

ICBS

Integrated Change

Journey

Integrated Change

Journey

Strategic(AIB Group, Poland Division)

Operational(Bank Divisions, B1)

Execution(B1)

The Strategic Context

Decision to get a centralised system using FISERV package

Year 2000

Year 2001

Year 2002 and later

Solution implementation at Divisions

B1Stage 1

B1 Stage 2 + Parallel Run

B1Pilot

B1Mass Rollout

Solution builtand tested

Achievement of Strategic Objectives

SPONSORSHIP

Solution design, shapedby Divisions (Master Plan, BAG, B1 staff)

The Key Challenge

B1Program

BZ WBK

1) Issues/ Challenges to be addressed by B1

2) Challenges in theCoordination of Change with 2 Organisations

Challenges for both Banks

Change Complexity

The Programme Identity

• To work together to be One Bank To achieve the number one position for excellence in Polish Financial

Services.

The Core Approach

Change Strategy

S-curve experience

Hu

man

Exp

erie

nce

SolutionOwnership Transition

Lesson

s

Learn

ed

Change Strategy

Supply Demand

Macro

Micro+

Navigation Challenges

Scope and scale of the Change Technical Human Structural

“Scope Creep” Too much change already underway in the Organisation. Lack of integrated planning No developed strategy Local decentralised and organic approach to

transformation Developing the pace of the change to map onto the

market and organisational requirements

Navigation

Identification of the Transformation as a Change Management Challenge rather than a technology change.

Development of Change Vision for the programme Implementation of AIB Project and Change Management

Methodology through Polish Certification of Polish staff on “best practice”. Development of a Project Portfolio Engagement of senior and middle management in

developing the “Integrated Change Journey” Development of “Journey Visuals” to address language

barriers. Implementation of multi language planning function.

Integration of Change

• Cohesive change plan across B1, BZ & WBK• Rigorous management of projects

in terms of: content, timing and delivery• CM units to ‘programme manage’ change

Capacity to absorb change

• Large number of initiatives• Insufficient clarity as to objective,

scope, timeline, interdependencies• Uncoordinated content and timing

• Agree strategy and close details of ‘To-Be’ state to provide reference point for all change

• Reduce number of initiatives (Quick Check, grouping)

• Stop, modify and initiate projects to align change in banks with B1

• ‘Contract’ change projects with B1

WBKBZ

BZ

WBK

B1

Change

Integrated Change Journey

Leadership Challenges

Well educated management but little experience of

complex interdependent change programmes. Communication to a multi national interdisciplinary team

Team comprised of Hungarian, Czech, Polish, Irish, Portuguese, Indian, American.

Development of a cohesive management team from two different organisations

Regional and cultural differences between the staff of both banks.

Developing the management cadre to overcome experience gaps.

Stamina to deal with the “overhead” of a multi language environment

Leadership Implementation of results rather than activity based management

system. Introduction of open results based structure.

Removal of offices and associated position based benefits

Introduction of quarterly based incentive scheme based on values and behaviours

Development of multi lingual planning and communications office Set up of B1 organisation as template/ role model for the future

organisation. No distinction made between local and AIB staff Continuous communication based on a stakeholder analysis. Most communication done through local management Regular visits from AIB senior management

Enablement Challenges

No common vocabulary for change and project management.

Inconsistent approach to management processes.

No experience in leading and managing large scale change

No clear development plan for staff

Enablement

Implementation of “best practice” management processes

Change Governance Risk Management Processes Meeting Processes based on results orientation. Development of Change portfolio management

Provision of External consultants based on AIB’s “2 in a box” model.

Provision of classes in English and Polish for programme members.

Development of multi lingual enablement function to facilitate communication able to operate in 6 languages.

Continuous emphasis of the “AIB Way” of doing things

Ownership Challenges

Significantly different cultures in both banks. The perception of both banks of each other

was not conducive to team work Original fear of the change and the impact on

job security. Our most recent acquisition had a poor

history of weak management Lack of experience coupled with enthusiasm

had led to failed attempts at change.

Ownership

Development of a strong sense of urgency through extensive communication

Development of a change network comprising some 500 people

Development of Interdisciplinary team Emotional identification with Project values,

Project logo and values Development of strong values and recognition Flat open organisation structure

Communication The objective of the communication is to build commitment

of various stakeholder groups at a correct pace. A different mix of communication techniques and timing will

be applied, depending on the target audience and the desired level of their commitment.

Stage 1 Stage 4Stage 3Stage 2

INTERNALIZED

INSTITUTIONALIZED

ADOPTED

INSTALLED

POSITIVE PERCEPTION

UNDERSTANDING

AWARENESS

CONTACT

Level of Commitment:

BranchEmployees

Customersand External

Audience

HO Employees/ Senior Mgmt

B1 Members

Managing the Journey of Change

Macro

Micro

ChangeDrivers

PerformingOrganization

Navigation Leadership

OwnershipEnnoblement

• Stakeholder Management• Risk Management• Change Planning• Success Measurement• Benefits Management• Cost Management• Change Initiative Integration• Business Case Building

• Executive Team Development

• Leadership Development• Conflict Resolution• Vision / Agenda Creation• Marketing the Change Journey

• Executives as Sponsors• Executive Coaching / Counselling

• Event Creation

• Redesigned Processes• Organization Design• Training and Performance Support

• Communications• Career Design

• Competency Development

• Appraisal and Rewards• Job Design

• Pain Management• Coaching for New Roles• Encouragement of Creativity

• Establishment of Self-Managed Teams

• Trained Change Agents• Empowered Experts• Best Practices Capitalization• Involve affected

“Supply” “Demand”

The Change Journey

The Change Journey

Navigation Leadership

Ownership

Enablement

Enablement

Leadership

Navigation

Programme Lifecycle