Page 442 - Operations Strategy

case study 10 • Hartford Building society: to measure, or not to measure? 417

financial services industry

The financial services industry was heavily regulated and bound by many risk and com-
pliance standards due to the sensitive nature of guarding people’s money. However,
the recent media coverage over such things as the mis-selling of Payment Protection
Insurance (PPI), the extravagance of large corporate bonuses for bank executives, and
the global financial recession, has led to increased public distrust for players in the
field. Financial institutions had to put considerable effort into meeting government
regulatory standards and maintaining a favourable image with the public. However,
the landscape of service delivery within the industry was changing, alongside tech-
nological advancements and capabilities such as internet and mobile banking. People
increasingly did not want to handle cash and visit a bank branch to the same extent;
instead, they would prefer banking processes to occur quickly, efficiently, and securely
from behind an online device of choice. In the UK, approximately 36 million people
were using the internet daily, up to 50 per cent of those individuals for the purpose
ii
of online banking. Furthermore, entirely new markets such as social enterprise and
iii
social impact investing were emerging that required tailored financial services. Such
impending changes meant that most financial services firms, including the Hartford,
were considering how its services would fit in the potentially new market, and how best
to capitalise on the evolving technological interfaces for service delivery. In addition,
how should they attract new and younger customers and employees?

Hartford Building Society – where ‘members come first’

Hartford Building Society had been a ‘mutual’, or member-owned financial institu-
tion specialising in mortgages and savings accounts since it was founded 80 years ago.
With more than 2.2 million members, 2,300 employees and 120 branches across the
country, the Hartford has a significant presence in the UK financial services industry
and had worked hard to gain the respect and trust of its client base. Members’ prefer-
ences and interests drove strategy, decisions and actions within the organisation. The
Hartford culture had been built on five core values: care, kindness, integrity, fairness
and transparency. Its aim was to provide all members with a great experience and con-
tinuously refine its internal processes so it could offer competitive mortgage rates and
higher savings account interest rates. In the words of one senior manager, ‘we stick to the
things we know how to do’, and ‘we feel right not doing anything too exciting’. This strategy
had proved successful for the Society during the 2007–2010 financial recession when,
by focusing its energies on improving service delivery, it had managed to sustain steady
levels of business. During that period numerous building societies that ‘demutualised’
(converted their status to that of a regular joint stock company) for the sake of a cash
infusion failed operationally in their transition to a regular bank. iv
After the financial turbulence of 2007–2010 Hartford had retained its simple strategy
based on straightforward mortgage and savings products, and a good physical ‘high
street’ presence thanks to its vast network of branches. However, the Society was also
aware that the landscape of the financial industry was shifting. Footfall traffic to the
branches was decreasing rapidly, and the Society’s customer service–based strategy had
done little to prevent further decline. Its image of a solid and reliable organisation
also risked turning into a ‘stale’ and ‘boring’ one (as recent customer feedback demon-
strated). Also, internally, growth in the number of employees had made it increasingly

Z10 Operations Strategy 62492.indd 417 02/03/2017 13:54