From Vängåvan to Kungsträdgården by Jan Wallander is more than ever on top of the agenda in view of the need for new agile organizational forms to be developed and disseminated.
From Vängåvan to Kungsträdgården: Decentralisation – Ideals and Reality by Jan Wallander was published in 1991. It is perhaps a bit late to make a review, however, the thoughts and ideas of Wallander are more important than ever. Companies with top-down management and hierarchical business culture are no longer competitive. It is necessary to develop and disseminate new and more agile and dynamic organizational forms.
Jan Wallander (born 1920) was the CEO of the Swedish bank Sundsvallsbanken in the 1960s, he was the CEO of the Swedish bank Handelsbanken in 1970-78 and then he was the Chairman of the Board until his retirement in 1991. Today it seems that few people know who Wallander is, and even fewer know of the results he achieved in Handelsbanken, at least outside the banking world. This is a pity since the way Wallander organized a company has been shown to be highly successful. It is above all Handelsbanken’s performance through the years which has demonstrated that Wallander achieved something special. While other banks had great difficulties during the real estate crisis in 1990-1994 and during the finance crisis in 2007-2008, Handelsbanken was doing all right. Frequently, the Toyota Way is highlighted as an example on how to organize a business activity. And there is a lot to learn from Taiichi Ohno’s methods for daily guidance and decentralisation of problem solution. But, many valuable lessons can also be drawn from the bank Svenska Handelsbanken. In the book From Vängåvan to Kungsträdgården, Jan Wallander tells us about his way of organizing an activity and how this agile organizational form emerged.
Vängåvan is a small park in the town of Sundsvall, Sweden, which extends in front of a palace-like building, formerly the central office of the bank Sundsvallsbanken. On taking up his duties as the CEO of Handelsbanken, Wallander had no experience in banking. He had to take a distance course for bankers when he started working. A course that all future bank employees were supposed to pass. Maybe this was the reason that he chose other solutions than the usual. Without preconceived ideas it may be easier to perceive the actual needs in the activities.
An example of Jan Wallander’s independence is the organizational chart he developed. When he detected that Sundsvallsbanken lacked these charts, he believed that introducing them would be an appropriate measure. Everyone else has organizational charts and they are basic in all management literature. But when he discussed this matter with different persons, and in particular, with his predecessor Erik Huss, he was discouraged. Firstly, the bank functioned well without charts. And to draw a chart would cause problems in the future. If the organization were to be modified, the chart would have to be redrawn and there would probably be individuals who would feel to have been put in an inferior position and to have lost face. If there is no chart, changes can be implemented gradually. Wallander listened to the advice, and this caused both Sundsvallsbanken and Handelsbanken to be more flexible when changes were introduced. When there is an organizational chart, every change becomes a painful experience often expressed by many employees. Stories about the last change and how difficult everything turned out because of this, has been expressed by a lot of people. A lot of energy is lost due precisely to the organizational chart, a chart which in reality describes very little of how the business activity actually functions with its informal channels. As Wallander pointed out, the telephone directory can be used to obtain all necessary information about who the manager is for a specific unit.
One of the most important interventions to make a bank profitable and with a minimum of credit losses is, according to Wallander, to place the responsibility for granting credits on the employees in the branches. When Jan Wallander implemented this, it was a revolutionary way of thinking. The view was that complex decisions always should be made by experts. At Handelsbanken there were a lot of experts at the central office in Stockholm. All important matters should therefore be submitted for analysis to the expert, then the management made the decision at the general assembly. This way of thinking was high fashion then and perhaps still is in some companies.
Wallander affirms that decentralisation is the basis of the success of Handelsbanken. So did also Taiichi Ohno, the author of Lean. To work in teams and to organize the work in order for the operators themselves to solve issues arising due to discrepancies is fundamental in Lean. As several researchers noted, in particular, the European industry has difficulty in delegating to the employees. When making decisions in the branches, a higher bandwidth is achieved in the decision-making. Over time, this bandwidth is increasingly difficult for the competitors to handle. While a decentralized company can go through several decision turns in, for instance, the contacts with a customer, a top-down company may have time for one. Wallander also notes this difference. This is what we also can observe in companies with agile organizations. Matters are solved much faster and more accurately. Accuracy is achieved through being close both to the problem and to those affected by the problem. A situated learning is created. An expert, independently of how well-trained and smart he is, cannot match the loops of learning of those in contact with the problem.
However, in a decentralized organization matters requiring a higher level also arise. Wallander describes the effect of decentralisation on the granting of credits to the branches. The years before he took office as CEO there were 725 matters handled by the central board. Twenty years later, the number was down to 50-60 a year. The matters actually handled by the central office in a decentralized organization are the truly complex matters requiring strategic competence. We have the same solution in Puls. Matters are constantly upgraded from the projects to strategic Puls meetings. But few matters require this kind of attention, which is why there is the time and possibility to work them thoroughly.
Wallander was during his time at Handelsbanken most well-known for abolishing the budget process. The only thing done in the budget process is to project the history on the future. This says nothing about what will happen in the future. To plan in the form of budget processes risks locking up the company in the past. What is needed is a structure allowing the company to create its own future. How Wallander solved this is unfortunately not specified neither in this book nor in the follow-up book “With Human Nature – not Against! To Organize and Lead Companies. But as Wallander writes in the book reviewed here, he does not disclose all secrets on how to successfully organize a decentralized business.
Not all secrets of Handelsbanken are disclosed, but despite this, I recommend all managers and others interested in organizations to read Jan Wallander’s books. There is a lot of food for thought, in particular now when hierarchical company culture is increasingly questioned.