MCKINSEY

QUARTERLY
ON
VALUE BASED MANAGEMENT

What should investment Banks do?

What to do for value based management?
SILO THINKING VS SYSTEM
THINKING
 Silo Thinking
A bank's management system, for example, is
considered a silo if it cannot exchange
information with other related systems within its
own organization, or with the management
systems of its customers, vendors, or business
partners. "Information silo" is a pejorative
expression that is useful for describing the
absence of operational reciprocity
 Lack of communication and common goals
 Opposite to system thinking
 New Demands
 Integrated services
 Advice
 Raisingcapital
 Risk management solutions

 Solutions
 Network mapping tools
 Collaboration in knowledge industry
 Looking beyond organizational chart
NEED FOR SILOS
 Complexity of products needs Specialization
 Organization size are very big
 Focus on accountability and short term
earning – first individual results then group
results

 Few banks enjoy complete control over their

customers – IPO, wealth management,
corporate equity option, risk management,
pension, asset management, treasury
operation.
POWER OF NETWORKING
Effective collaboration and networking have
economic value and higher performance
rating to the banks.
IMPACT OF NETWORKING ON BUSINESS AND INDIVIDUAL
PERFORMANCE
 But more networking is not always better
 Avoiding interactions that didn’t add value
actually improves performance of the
organizations
 Information doesn’t travel effectively
 Groups compete between each other
 Collaboration across business units becomes
difficult
EFFECTIVE ORGANIZATIONAL
METHOD
 Quantitative method- through email analysis
or survey driven
 Interviews and free form comments-
qualitative
RELATIONSHIP BETWEEN PRODUCTS AND
DISTRIBUTIONS
HOW TO OVERCOME THESE
ISSUES
 The top teams alignment (important and
risky)
 Organization wide initiatives
 Bychanging mind sets and building capabilities
 People initiatives
 Knowledge initiatives
 Cross-cutting themes
 Creating new risk managed products for elders
 Targeting pension funds
 Developing HNI clients
 Developing new market
VALUE BASED MANAGEMENT
 Too much on measurement and too little on
management activities that create
shareholders value
TRADITIONAL P&L AND BALANCE
SHEET VS VALUE CREATION
 Organizations focus more on historical
growth
 Setting a target Vs achieving it
 improving efficiency from 53% to 75% by
allowing operators to set their own goals
 Accountability of the persons who sets the
target-