Organization innovation and employee empowerment at the Bank of New Zealand

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The Bank of New Zealand was founded in 1861 and, on the verge of bankruptcy, purchased by the National Australia Bank Group in 1992. The acquisition was completed in 2003. It was rebranded BNZ, with a new logo and colors in 2008, to better align with its parent company, now known as NAB. BNZ promised its individual, agricultural and business customers positive, flexible and efficient service; access to a network of specialist expertise; and ongoing innovation.

This article was originally posted on the Management Innovation eXchange (MIX), an open innovation project aimed at reinventing management for the 21st century.

Part of the BNZ’s strategy for delivering on that promise involved an increased focus on the performance of local branches, known as stores, which typically had four to seven team members: the store manager, a few tellers, and a few salespeople. The bank’s 200 branch managers reported to 20 area managers who, in turn, reported to 3 regional managers overseen by the general manager of retail banking, who was part of a head office team that also included staff groups such as human resources, and finance.


When I was appointed director of retail banking at BNZ in April 2007, my #1 priority was to build competitive advantage by moving us from a banking mentality to a retail mindset where we continually surprised and delighted customers.  I had a clear sense of what needed to be done; the question was how to do it – top down or bottom up? I strongly believe that front line staff knows much better than me how to run their local businesses. I wanted them to feel – and act – like it was their own business. I wanted to eliminate the “victim” mentality; the “I can’t be successful  because I don’t have enough staff”, or “we need refurbishment”, or “we need ATMs.” I wanted to empower them – which would get me high fives in the corridors – but they also would have to understand that they would be accountable for results. Once we started empowering them, I knew, we’d quickly find out if we had the right people.

Key innovations and timeline

Grassroots empowerment begins

A few months after arriving at BNZ, I was visiting a store in Christchurch. It was just past 9 am on a Tuesday, and the store wasn’t open yet. Most days, it opened at 9 am but on Tuesdays and Wednesdays, it opened at 9:30 to accommodate staff training. Corporate policy dictated that schedule for all of our stores. The problem was the growing line of impatient customers outside the store. I asked the store manager if this was a regular occurrence. She said it was, and that it was very frustrating. I asked the store manager if she would open the store earlier, and reschedule training, if she could. She enthusiastically said she would, and I gave her the go-ahead. There was a condition, though; there wouldn’t be any extra money from me for staff pay.

Within days, news spread across our retail network, and I was fielding calls from managers throughout New Zealand, requesting the same prerogatives. The general manager of marketing and I decided to give all the stores the flexibility to set their own hours.  Within six months, nearly 95% of our stores had altered their hours in some way, to better serve their local customers. In one Auckland suburb, we became the first bank to open on a Sunday morning, allowing us to service the thousands of customers who flooded the local farmers’ market. In South Island ski areas, stores stayed open until late in the evening, so skiers could attend to their banking needs after a day on the slopes.

The change raised concerns at BNZ headquarters, where policy changes typically went through detailed risk assessments, with every corporate function weighing in. Some objections were political, but most were practical. HR was concerned that changing hours would raise objections from the employee union, so store managers had to get agreement from all employees. Marketing thought that the hand-lettered signs being used to advertise store hours looked tacky, so we developed a software template that allowed store managers to print out a simple sign with store hours. Risk management was concerned about adherence to detailed policies about how a store was supposed to be opened, and cash pick-ups from armored trucks had to be scheduled at precise times. IT typically scheduled major maintenance work when stores were closed. What would happen if a store opened at an odd hours and the system was down? We worked that out, too.

The freedom to open stores when they wanted to was one of the most symbolic things we could have done for branch managers. It was in direct contrast to the “one size fits all” approach taken by head office. The same was true for other aspects of our business like marketing, where we run national campaigns, which meant some poor local branch would find itself promoting gold credit cards in a demographic where there’s zero chance of selling them. Bit by bit, we were able to give the branches more decision making authority. Now that branch could choose not to run the credit card campaign, and might opt to extend the previous promotion instead.

We kept encouraging store teams to take the initiative in testing ideas to better serve our customers, and they did. One of zanier ideas was a “trailer” bank that can be pulled behind a vehicle. While the concept had been in development for several months, a local store caused a splash when they towed the trailer onto a beach on New Year’s Day. Clad in BNZ t-shirts, staffers blew up balloons, fired up a barbecue, and chatted with people in the gathering crowd about BNZ products. HR was concerned about possible perceptions that employees were being exploited by being made to work on New Year’s Day, or that cooking sausages was breaching health and safety regulations.  I wasn’t really worried; the staffers were charged up by the freedom to experiment. If we had told them to do it, it never would have happened. But it was their idea, and no one bothered to ask permission.

In December 2008, BNZ was featured in the New Zealand Herald with the headline:  “Personal banking with a latte.” We were launching our most radical store experiment yet. We believed that ATM, telephone and internet banking overlooked the human enjoyment of interaction with other people, so our new “concept store” revolved around a café, had monitors running promotional videos, an internet kiosk, a free wireless network, and café style booths instead of private bankers’ offices. Store employees were encouraged to walk around the store, to improve customer service, not to wait behind the counter. Our employees embraced the approach, which fundamentally changed the way they did their work and demonstrated our new retail mindset. I always say that when it comes down to strategy and culture, culture will win out.

Inspiration and a radical move

In May 2009, I attended an NAB Enterprise Leadership Program led by Gary Hamel in San Francisco. We talked about management innovation and looked at Gore and Google as examples; it was refreshing to look outside our industry for new ideas. I was especially struck by the notion of challenging traditional spans of control; Google had gone to 60 employees per manager. It was a way of forcing innovation through spans.

My plan was to remove a whole layer of the retail network infrastructure. That would mean eliminating area managers, and having all 200 branch managers report to the 3 regional managers. It wasn’t about cost reduction; it was about further unleashing front line management. I ran the idea by branch managers; they were comfortable with empowerment by now and up for it. I assured area managers that there would be opportunities for redeployment. I got BNZ leadership’s OK.

Six months ago, the experiment began. It forced reengineering of business practices. Before, area managers were doing decision making and performing control functions; supervising branch managers; leveraging best practices across branches; and interfacing between branches and regional managers.  We looked at area managers’ checks and balances, which were based on the assumption that branches couldn’t do their own controls, and turned them into exception reports. We looked at things like staffing decisions and gave those authorities to branch managers, which still had to go through corporate HR for processing but didn’t require sign off.

For performance management, we changed from traditional top down reviews to self appraisals submitted by branch managers to regional managers every six months. We assume that regional managers are out there coaching on a regular basis – which means traveling – so there should be no surprises come performance review time. Generally, a regional manager gets 50 to 60 self appraisals and sorts them into 3 piles: ones he is happy with – typically half of them; ones he is not happy with – they call for a talk with the branch manager; and ones he is not sure about – they require a second opinion. For sharing of best practices, we created a whole new role: mentor/coach. Of our 20 area managers, a few opted for retirement and the rest adopted mentor/coach roles: some for people management, some for customer management, and some for sales management. They are available to store managers as a service, for consults, and are used a lot.

It was interesting; simply by interacting with area managers, store managers felt like they had got a promotion. We hadn’t really given them a promotion but we had changed their roles. They now were expected to manage, inspire and lead people; ensure great customer service; understand how the business works; and run it like their own. To encourage that, we changed our renumeration system. If they hit plan numbers for profits, they get a specified bonus amount. Then they get a percentage of anything over that. Of course, that requires financial figures at a branch level, we are comfortable with, something – ironically – banks struggle with given the challenges of accurate cost allocations and margin transfers. We had to improve our internal financial systems.

We were able to implement the new structure in just six months. It was just part of the journey to make our retail network more innovative and customer oriented. Of course, the new approach requires a new mindset and new skills. We provided training but still it’s not right for everyone. Some people decided they were better suited to and happier in different roles. That was fine, and we happy to help them find them.

Challenges and solutions

Head office: The gatekeepers

  • Challenge: Head office was responsible for ensuring standards and policies were upheld, and national programs were implemented
  • Solution: Develop new, less cumbersome ways to ensure compliance with essential standards and policies
  • Solution: Provide degrees of freedom on national programs (e.g., choosing between options)
  • Solution: Help corporate staff view their roles as enablers to local success in serving customers, by supporting branch managers (note: requires redefinition of corporate roles as shared services, which may need top down support)

Benefits and metrics


  • BNZ reported sound profits and a strong balance sheet in May 2010, with especially strong results in retail banking
    - Achieved 9.1% increase in average volume of customer deposits over past year while deposit rates increased significantly
    - Increased retail deposit market share to 17.5% from 16.1% in 2009 

For BNZ employees

  • Hay study reports engagement of staff (e.g., wouldn’t consider leaving) at 80%

For BNZ customers

  • Positive for customer satisfaction as measured by
    - daily stores (electronic keypads)
    - monthly call program
    - quarterly industry survey (all banks)


When you treat people like adults, they act like adults. If you give employees the incentives, data and the freedom typical of a small business owner, they’ll see themselves as more than clock-punchers. They’ll have a real stake in making “their” business a success.


Chris Bayliss, former BNZ general manager for retail banking, current Executive General Manager of NAB retail network; with assistance from Shirley Spence.

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Chris Bayliss, formerly Director of Retail Banking at Bank of New Zealand, is now Executive General Manager, Retail at National Australia Bank.

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