The archive · Work & Ways of Doing · Strategic decision · 1970–1978
Handelsbanken scraps budgets — branches become the bank, beating peers for 50 years
In crisis in the early 1970s, Handelsbanken's new CEO Jan Wallander abolished budgets and central planning, letting each branch run itself.
Handelsbanken
What it had to solve
By the late 1960s Handelsbanken was in trouble: weak profitability and a leadership crisis. In 1970 the board brought in Jan Wallander, who decided the problem was the centralised, budget-driven organisation itself.
How it works
Handelsbanken entered the late 1960s in crisis: profitability was sliding and the leadership had resigned. In 1970 the board recruited Jan Wallander, who concluded the bank's centralised, budget-driven management was itself the problem — so he began dismantling it.
Wallander abolished the annual budget, forecasts and most headquarters planning. Every branch became a semi-autonomous bank: branch managers decide lending, rates, staffing and local marketing, with no sales campaigns, product quotas or bonuses. Performance is judged not against internal targets but against other banks in the same local market.
The counterweight was shared ownership: when the bank outperforms its peers, profits go into Oktogonen, an employee foundation that pays every colleague — CEO and part-time teller alike — the same share, vesting at retirement. The bank's own site still describes the same design today: a decentralised business, no budgets, no bonuses, and one corporate goal of beating the average competitor year after year.
The result has been durable: Handelsbanken has beaten the average of its Nordic peers for more than 50 years, weathered financial crises with lower loan losses, and regularly tops customer-satisfaction surveys; Oktogonen now owns roughly a tenth of the bank.
Why it lands
- No budget means nothing to game: branches optimise customers instead of inflated forecasts.
- Decision rights sit where the knowledge is — the branch that knows the borrower sets the rate.
- Equal, retirement-vested profit sharing kills short-termism and internal competition.
- Benchmarking against local competitors replaced top-down targets with market reality.
What it did
Handelsbanken has beaten the average of its Nordic peers on profitability for more than 50 years, with low cost-to-income, few bad loans and top customer satisfaction; Oktogonen now holds roughly a tenth of the bank.
What you can take
Remove the number people can game: budgets and targets invite gaming. Push decisions to the front line, benchmark against the real market, and align everyone through equal, long-vested ownership.
Since then
Handelsbanken kept the model for five decades. Its success made it a founding case for the 'Beyond Budgeting' movement, which cites the bank as proof that budgets can be abandoned. Observers note caveats: the model depended on Wallander's leadership and Swedish trust culture, and branch-centric banking faces pressure from digital-first competitors. Even so, the bank's own pages still describe the same design — decentralised branches, no budgets or bonuses, one corporate goal — as how it runs.
Sources
- A bank built on trust and long-term perspective
- Handelsbanken: 50 Years of Beating Every Swedish Bank
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