strategic planning at the deutsche bundesbank · währungssystem geldpolitik bankenaufsicht unbarer...

Strategic Planning at the Deutsche Bundesbank

Oliver Loch30 November 2010

Key aspects in Central Bank Governance

keyaspects

1. set of centralbank tasks

3. legislative and governmental issues

4. transparency, credibility, accountability

5. stakeholders

2. rules for decision making bodies

General remarks on strategic planning and strategic management

Strategic framework

Strategy development

Where are we now?

Agenda

Why is a strategy important?

Strategy helps to raise the external profile of the Bank and to clarify and consolidate the Bank’s role.

In the ESCB the Bundesbank must be clear as to which tasks it wishes to take on.

Without strategy there is no planning certainty for third parties(eg cash strategy).

Financial and staff resources could not be employed effectivelywithout a strategy; strategy enables the Bank to concentrate on its core competencies.

Long-term strategic positions allow individual measures to be evaluated, taking the wider picture into account in terms of technical issues and time frame and, therefore, enable goal-oriented decisions to be taken.

Strategic planning is designed to help ...

“It’s not seeing into the future that counts, but being prepared for it.”

... anticipate future trends regarding markets, competitors, technologies, customers etc

... identify success factors for the future and successful strategic patterns

... develop a common realistic picture of the organisation’s own resourcesand options

... make effects of anticipated developments on organisation transparent!

... determine activities to achieve success in the future.

... implement the selected activities.

… acting instead of reacting, shaping instead of administrating.


Strategic framework


Where are we now?

Agenda

Objectives of a central bank?!

Fulfilment oftasks

Risk mitigationCost effectiveness

• Mission Statement • Strategic Intents • Organisational Principles of the Eurosystem

• Strategic business line planning• Organisational planning

Operational controlling instruments• Cost accounting• Organisational analyses • Personnel assessment procedure

Goal and value planning

of the Eurosystem

Strategicmanagement

of Bundesbank

Operational management of Bundesbank

Bundesbank’s planning structure

PRINCIPLESDecentralisationGood GovernanceEffectiveness and efficiency in a spirit of cooperation and teamworkShared identity

OBJECTIVESCredibilityTrustTransparency, accountability und effective communication

INTENTIONSMaintenance of price stabilitySafeguard Financial stabilityPromotion of the European financial integration

Mission of the Eurosystem

S Y S T E M O F O V E R A L L O B J E C T I V E S

Planning

Objectives of business

area 1


area 2


area x

Implementation

Monitoring

Vision/mission

Internal sourcesof information

External sources of information

General system of strategic planning


Strategic framework


First strategy cycle 2002 – 2007: structural reform

Strategy cycle 2008 – 2012: profile and consolidation

Where are we now?

Agenda

First strategic cycle 2002-2007 “structural reform” - Key Elements of Reorganisation -

Reorganisationof the

management levels

Organisational streamlining and restructuring of tasks

Consolidationof the range of services

Branch Strategy Streamlining the branch network

• change of branch network

• change of employees

• cost reduction per year

- 63 %- rd. 60%

- rd. 30%

end 2007

rd.

300 Mio. €

Results of structural reform 2002 - 2007

Consolidation process of the Bundesbank:


Strategic framework


First strategy cycle 2002 – 2007: structural reform

Strategy cycle 2008 – 2012: profile and consolidation

Where are we now?

Agenda

Stablefinancial and

monetarysystem

PRICESTABILITY

in the euro area

FunctioningofGerman creditand financial

servicesinstitutions

Deutsche Bundesbank

Safeguarding stability

Security and efficiency of payment and

settlementsystems

Efficientcash

supply andinfrastructure

Research / economic policy analysis

Cashmanagement

Financial andmonetarysystem

Monetarypolicy

Bankingsupervision

Paymentsystems

International cooperation / membership in international bodies

Stablefinancial and

monetarysystem

PRICESTABILITY

in the euro area

Functioning ofGerman creditand financial

servicesinstitutions

Deutsche Bundesbank



settlementsystems

Efficientcash

supply andinfrastructure

Research / economic policy analysis

Cashmanagement

Financial andmonetarysystem

Monetarypolicy

Bankingsupervision

Paymentsystems

International cooperation / membership in international bodies

Five core business areas

Strategy development process

Decision by Executive Board

Specifiyingoperat. objectives, activities and indicators

Analysis of SWOT-results and specification of strat. objectives

Strategic evaluation based on SWOT analysis

SWOT-workshops with all 14 departments

Information gathering

High-level work-shops to analyse the SWOT-results, determine strategic intents and objectives, arrange objectives in strategy map

Specifying operational objectives

Working out strategic activities as well as indicators to controll the implementation of the strategy

Executive Board discussions and decisions

1 2 43

Analysis of

Strengths WeaknessesInternalperspective

ThreatsOpportunitiesExternalperspective

SWOT analysis












1 2 43

Low priority Selective attention

Only important in thecase of deviations(exceptional report,diagnostic element)

The few decisive objectives on which the success of the strategy depends

Would accomplishing the objective really

represent a decisive step towards long-

term success of the Bank?

Strategic relevance

Is extra effort necessary to accomplish or defend the objective in the face of resistance?

Strategic need for action

Analysis of SWOT results and specification of objectives - strategic filter

Strategy map


Addr

esse

esFi

nanc

es

Systematically reinforce influence at international levels

Proc

esse

s

Efficient cash supply and

infrastructure

Ensure targeted resource management

Pote

ntia

litie

s

Price stability in the euro

area

Stability and functioning of credit and financial services

institutions in Germany


settlement systems

Stable financial and monetary

system

Continuouslycombat

bureaucracy

Network knowledge Bank-

wide to exploit synergies

Optimise operational

cost-efficiency

Intensify research and

analysis

Tailor supply of services more

closely to demand

Communicate clearly internally and externally

Publicly comment on economic

topics

Offer attractive, performance-

oriented employment conditions

Embrace and actively manage change

process

Foster adequate pool of

knowledge and know-how












1 2 43

Specifying “operational objectives” –these are subordinated objectives which describe the means to achieve a main objective.

Strategy takes a step forward becoming real.

Stärken(Strengths)

Stärken(Strengths)

Schwächen(Weaknesses)

Schwächen(Weaknesses)

InternePerspektive

Risiken(Threats)Risiken

(Threats)Chancen

(Opportunities)Chancen

(Opportunities)ExternePerspektive

Analyse der

Refining strategic objectives


Add

ress

ees

Fina

nce

Proc

esse

s

Cash Management

Pote

ntia

ls

Monetary policy Banking supervision

Cashless payments

Financial and monetary system


Add

ress

ees

Fina

nce

Proc

esse

s

Cash Management

Pote

ntia

ls

Monetary policy Banking supervision

Cashless payments

Financial and monetary system

Specify measures/ tasks/activities to achieve the objectives

Compilation of previous results in „objective sheets“Name of objective

description of the objective

operational objectives

current measures / tasks / activities to achieve the strategic objective

new measures / tasks / acitivities

indicators

Indicators for achieving objectives

Indicators

What we cannot measure, we cannot manage.

What we cannot manage, we must leave to chance.

Serious planning and management to achieve objectives would not be possible.

Specifying objectives only makes sense if

progress can be tracked by indicators.

• For each strategic objective at least one indicator

• Mixture of “qualitative” indicators (internal or external assessment) and “quantitative” indicators (e. g. from business statistics)

• Traffic light approach for management reporting purposes

Idea: Management is steering the Bank by means of a controlling-cockpit

Indicators for achieving objectives












1 2 43

Strategy 2012

Guiding ideas

raising the Bank´s profile

continuing the consolidation process

Guiding ideas of new strategy

The aim is…… „to raise the Bundesbank’s profile as a stability-oriented, independentinstitution both in Germany and within the European System of CentralBanks.“ (annual report)

Core business area “operational objectives”Monetary Policy Intensifying research in monetary policy

Conducting more operational tasks for ESCB in relevant business areas

Financial and Monetary System Intensifying economic research High profile in international academic debates

Banking Supervision Extending analysis instruments (eg stress testing) Further development of regulatory framework

Payment Systems Promoting European integration process Leading position in liquidity provision and transfer

Cash Management Bundesbank will remain in cash cycle Bundesbank strives for a 50% share in banknote

processing Promoting ESCB recycling framework

Refining strategic objectives – Examples for further oper. objectives

Strategy development… raising the bank’ s profile

Perspective: Addressees

Strategic objective:

Example for strategic objectives, operational objectives and activities

Price stability in the Euro area

Description of objectiveOur primary objective is to maintain price stability.The President of the Deutsche Bundesbank is a member of the GoverningCouncil of the European Central Bank (ECB) and takes part in themonetary policy decision-making of the Eurosystem. The Bundesbankalso contributes to monetary policy with in-depth academic analyses ofmacroeconomic developments and sound research results. Another of theBundesbank’s functions is to advise the Federal Government.Furthermore, the Bundesbank ensures that the monetary policy measuresagreed are implemented in what is the largest economy in the EuropeanUnion. It explains the aims of the single monetary policy of the Eurosystemto the German public and thereby promotes awareness of the need forprice stability.

Strategic objective:

Example for strategic objectives, operational objectives and activities

Price stability in the Euro area

Operational objectives (development goals) – Example –

The Bundesbank plays a key role in the implementation of monetary policyfor the euro area and therefore aims to take on joint operational tasks. Itwill also contribute to the further development of efficient instruments andmanagement procedures in this context.

Activities – Example –

Assessment of collateral without market price (no ABS) for the Eurosystem (Valuation hub).

Staff reduced to 9,000 employees by end-2012

No further closures of branches until 2010

In 2009, review of branch network based on economic criteria.

If necessary - consolidation of branch network between 2010 and 2012.

•Safeguarding attractive conditions of employment

Refining strategic objectives – further decisions on “operational objectives” by the Executive Board

Strategy development… continuing the consolidation process

Number of core staff (excluding trainees)

12.133 11.50210.391 9.800

14.346

10.97213.194

14.817

9.000

0

5.000

10.000

15.000

20.000

End of2001

End of2002

End of2003

End of2004

End of2005

End of2006

End of2007

Target2008

... Target end of2012

… continuing the consolidation process


Strategic framework


Where are we now?

Agenda

Achieving the objectives

Where are we now?

What are the next steps to reach our objectives?

Strategic orientation

vision, strategy

Deutsche Bundesbank

Stabilität sichern

Forschung / wirtschaftspolitische Analyse

Stabiles Finanz- und Währungs-

system

PREIS-STABILITÄT

im Euro-Raum

Funktionsfähigkeitder deutschen

Kredit- und Finanzdienst-

leistungsinstitute

Sicherheit und Effizienz von

Zahlungsverkehrs-und Abwicklungs-

systemen

Effiziente Bargeld-

versorgung und– infrastruktur

Bargeld Finanz- undWährungssystem Geldpolitik Bankenaufsicht Unbarer

Zahlungsverkehr

Internationale Kooperation / Mitgliedschaft in internationalen Gremien

Deutsche Bundesbank

Stabilität sichern

Forschung / wirtschaftspolitische Analyse

Stabiles Finanz- und Währungs-

system

PREIS-STABILITÄT

im Euro-Raum

Funktionsfähigkeitder deutschen

Kredit- und Finanzdienst-

leistungsinstitute

Sicherheit und Effizienz von

Zahlungsverkehrs-und Abwicklungs-

systemen

Effiziente Bargeld-

versorgung und– infrastruktur

Bargeld Finanz- undWährungssystem Geldpolitik Bankenaufsicht Unbarer

Zahlungsverkehr

Internationale Kooperation / Mitgliedschaft in internationalen Gremien

Specify measures/ tasks/activities to

achieve the objectives

1. Step 2. Step 3. Step 4. Step 5.Step

Determine indicators and target values

Specification of strategic objectives,

operational objectives and strategy map

Stabilität sichern

Ad

ress

aten

Fina

nzen

Einfluss auf internationaler und auf ESZB-Ebene gezielt stärken

Pro

zess

e

Effiziente Bargeldversorgu

ng und -infrastruktur

Aufgabenadäquate Ressourcensteuerung

sicherstellen

Pot

enzi

ale

Preisstabilität im Euro-Raum

Stabilität u. Funktionsfähigkeit der Kredit- u.

Finanzdienstleistungsinstitute in Deutschland

Sicherheit u. Effizienz v. Zahlungsverkehrs-

u. Abwicklungs-systemen

Stabiles Finanz-und

Währungssystem

Bürokratieabbau langfristig sicherstellen

Wissensvernetzte Bank zur Hebung

von Synergien

Wirtschaftlichkeit der

Leistungserstellung optimieren

Forschung und Analyse stärken

Nachfrage-steuerung von

Support-leistungen stärken

Klare Kommunikation nach Innen und Außen

Kostenorientierte Preisge-staltung bei Dienstleis-

tungen, die keine hoheit-lichen Aufgaben betreffen

u. die zum Teil auch v. Dritten erbracht werden

Zu wirtschaftlichen Themen Stellung

nehmen

Leistungsorientierung und attraktive

Beschäftigungsbe-dingungen

Veränderungsprozess annehmen und aktiv

gestalten

Anforderungs-gerechte

Qualifikation aufrecht erhalten

Stabilität sichern

Ad

ress

aten

Fina

nzen

Einfluss auf internationaler und auf ESZB-Ebene gezielt stärken

Pro

zess

e

Effiziente Bargeldversorgu

ng und -infrastruktur

Aufgabenadäquate Ressourcensteuerung

sicherstellen

Pot

enzi

ale

Preisstabilität im Euro-Raum

Stabilität u. Funktionsfähigkeit der Kredit- u.

Finanzdienstleistungsinstitute in Deutschland

Sicherheit u. Effizienz v. Zahlungsverkehrs-

u. Abwicklungs-systemen

Stabiles Finanz-und

Währungssystem

Bürokratieabbau langfristig sicherstellen

Wissensvernetzte Bank zur Hebung

von Synergien

Wirtschaftlichkeit der

Leistungserstellung optimieren

Forschung und Analyse stärken

Nachfrage-steuerung von

Support-leistungen stärken

Klare Kommunikation nach Innen und Außen

Kostenorientierte Preisge-staltung bei Dienstleis-

tungen, die keine hoheit-lichen Aufgaben betreffen

u. die zum Teil auch v. Dritten erbracht werden

Zu wirtschaftlichen Themen Stellung

nehmen

Leistungsorientierung und attraktive

Beschäftigungsbe-dingungen

Veränderungsprozess annehmen und aktiv

gestalten

Anforderungs-gerechte

Qualifikation aufrecht erhalten


and rolling planning process

Where are we now?

External communication:

Where are we now? – external communication

five pillars of theBundesbank to safeguardstability:

public

Internal communication:

Training for management personnel of regional offices (incl. service centres) and branches for locally implementation of “Strategy 2012” Aims:Et al. improved comprehension of the strategy, preparation for strategy implementation

Regional OfficesService Centresseminar

events:“Animating

Strategy 2012 ” Branches

Where are we now?

February/MarchBudget/performance analysis for preceding period

August – DecemberOperational planning for forthcoming year (incl. planning of needed financial and personal resources)

Integration of strategic and operational

management in annual

planning process

Connecting the strategy with the operational management systems

Where are we now?

April - JuneNEW: Strategy-Review: Evaluation of success of defined operational measures regarding strategic goals, if necessary strategy update

Role of strategic planning unit

The strategic planning unit …

• … supports Executive Board in planning the strategy for the Bundesbank andin reaching organisational objectives

• … clearly communicates strategy and objectives internally and externally

• … makes efficiency analysis to safeguard and improve quality andminimise risks

• … reports on essential bank projects to Executive Board

• … coordinates all kinds of organisational issues

• … reviews planned operational measures for preceding period(budget/performance analysis) and reports on operational planning forforthcoming year

Using our reports as a basis, Executive Board decides on long-termorientation of the Bundesbank.

Conclusions

• Creation of a strategic management system is important for central banks

• Development of strategic and operational controlling instruments is ongoing task

Close integration between strategic definitions/further developments and strategy implementation essential for successful management

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