Transformation through Partnership in Poland

1. Transformation through Partnership in Poland David Mullins Strategic Change Unit AIB Group

2. AIB Group Overview Ireland’s largest bank and financial services organisation with an asset base of €85.7bn Over 1,000 offices, over 31,000 staff & over 5 million customers world-wide • Core Retail / Commercial Banking operations in: • Ireland • UK • Poland -

3. Poland: Macro Economic conditions • Poland • Poland will benefit from EU structural and cohesion funds - rising living standards for all • Good Educational standard • Economic discipline - Maastricht Criteria • Movement to a stable low interest rate environment • A positive environment toward foreign direct investment • A country familiar with change and a people prepared to embrace it

4. GDP Growth Central Budget Deficit EUR / PLN NBP Intervention Rate Macroeconomic conditions - expected to improve

5. AIB’s development in Poland • 1992/97 AIB International Consultants “twinning” with Wielkopolski Bank Kredytowy (WBK) • 1994 Explore Equity Investment potential in Central Europe - Poland selected • 1994 Initial Shareholding in WBK • 1999 Purchase of 80% of Bank Zachodni • 2001 Merger of WBK & BZ • 2001 Bank Zachodni WBK floated on WSE

6. Investment rationale in Poland... • Population Scale - 10 x size of Ireland • Favourable geographic position in Central Europe • Leverage trade links to existing geographies • Scope for rapid development of financial services industry • Competent & supportive local management • Long Term twinning arrangement • Close cultural fit

7. The Principles of ReformBeyond Twinning • That transformation would be done through Polish Management. • Twinning • “Two in Box” • That the transformation/ reform process would be owned by AIB and not outsourced • That professional management techniques would be applied to the management of change. • Development of AIB Change and Project Management Methodology • Certification of AIB and local management in the approach • “Beginning with the End in Mind”

8. AIB Investment to date in Poland... PLN Mln WBK 434 BZ 2,635 Total Investment 3,069

9. The Tranformation Agenda The Challenge

10. The Change Challenge • Implement a de-centralised IT system model to a centralised system across 450 branches and 10,000 people • Develop a single business model a s a basis for an eventual merger. • Undertake merger of Bank Zachodni and WBK • Shift the organisation from back office activities to customer facing activities • Re-orient the culture of the organisation away from transaction to Customer facing behaviour. • Restructure the organisation and head office to support the new business model.

11. Capacity BZ WBK BZ WBK B1 Demand Change Capacity • Reduce total number • of Projects both IT and Change • Challenge Non B1 • focused projects Risk of superficial application Degree of Change • Identify Win/ Win Projects • Integrate Projects into B1 Timeline Time

12. BZ WBK B1 WBK BZ Transformation Objective • To create rapidly a top class customer-centric efficient branch banking business supporting a single product set and operating processes in the new merged bank. This will serve to position the bank for increased profitability and growth. Merger

13. „AS IS” „TO BE” BZ ONE, COMMON BUSINESS MODEL WBK Integrated ChangeJourney Integrated Change Journey Integrated Change Journey Two different starting points in change journey for BZ and WBK. Two different levels of change required to reach Branch Model. Two different levels of capability and experience.

14. WBK BZ Integrated Change Journey Integrated Change Journey Technical Change Journey

15. SPONSORSHIP Strategic (AIB Group, Poland Division) Decision to get a centralised system using FISERV package Achievement of Strategic Objectives Solution design, shapedby Divisions (Master Plan, BAG, B1 staff) Solution implementation at Divisions Operational (Bank Divisions, B1) Execution(B1) Solution builtand tested B1Stage 1 B1 Stage 2 + Parallel Run B1Pilot B1Mass Rollout The Strategic Context Year 2002 and later Year 2000 Year 2001

16. 1) Issues/ Challenges to be addressed by B1 2) Challenges in the Coordination of Change with 2 Organisations B1 Program Challenges for both Banks WBK BZ The Key Challenge

17. Change Complexity

18. The Programme Identity • To work together to be One Bank • To achieve the number one position for excellence in Polish Financial Services.

19. The Core Approach S-curve experience Change Strategy Human Experience Lessons Learned Solution Ownership Transition

20. Macro Supply Demand Micro Change Strategy +

21. Navigation Challenges • Scope and scale of the Change • Technical • Human • Structural • “Scope Creep” • Too much change already underway in the Organisation. • Lack of integrated planning • No developed strategy • Local decentralised and organic approach to transformation • Developing the pace of the change to map onto the market and organisational requirements

22. Navigation • Identification of the Transformation as a Change Management Challenge rather than a technology change. • Development of Change Vision for the programme • Implementation of AIB Project and Change Management Methodology through Polish • Certification of Polish staff on “best practice”. • Development of a Project Portfolio • Engagement of senior and middle management in developing the “Integrated Change Journey” • Development of “Journey Visuals” to address language barriers. • Implementation of multi language planning function.

23. BZ WBK BZ B1 WBK Integration of Change • Large number of initiatives • Insufficient clarity as to objective, scope, timeline, interdependencies • Uncoordinated content and timing Change • Agree strategy and close details of ‘To-Be’ state to provide reference point for all change • Reduce number of initiatives (Quick Check, grouping) • Stop, modify and initiate projects to align change in banks with B1 • ‘Contract’ change projects with B1 Capacity to absorb change • Cohesive change plan across B1, BZ & WBK • Rigorous management of projectsin terms of: content, timing and delivery • CM units to ‘programme manage’ change Integrated Change Journey

24. Leadership Challenges • Well educated management but little experience of complex interdependent change programmes. • Communication to a multi national interdisciplinary team • Team comprised of Hungarian, Czech, Polish, Irish, Portuguese, Indian, American. • Development of a cohesive management team from two different organisations • Regional and cultural differences between the staff of both banks. • Developing the management cadre to overcome experience gaps. • Stamina to deal with the “overhead” of a multi language environment

25. Leadership • Implementation of results rather than activity based management system. • Introduction of open results based structure. • Removal of offices and associated position based benefits • Introduction of quarterly based incentive scheme based on values and behaviours • Development of multi lingual planning and communications office • Set up of B1 organisation as template/ role model for the future organisation. • No distinction made between local and AIB staff • Continuous communication based on a stakeholder analysis. • Most communication done through local management • Regular visits from AIB senior management

26. Enablement Challenges • No common vocabulary for change and project management. • Inconsistent approach to management processes. • No experience in leading and managing large scale change • No clear development plan for staff

27. Enablement • Implementation of “best practice” management processes • Change Governance • Risk Management Processes • Meeting Processes based on results orientation. • Development of Change portfolio management • Provision of External consultants based on AIB’s “2 in a box” model. • Provision of classes in English and Polish for programme members. • Development of multi lingual enablement function to facilitate communication able to operate in 6 languages. • Continuous emphasis of the “AIB Way” of doing things

28. Ownership Challenges • Significantly different cultures in both banks. • The perception of both banks of each other was not conducive to team work • Original fear of the change and the impact on job security. • Our most recent acquisition had a poor history of weak management • Lack of experience coupled with enthusiasm had led to failed attempts at change.

29. Ownership • Development of a strong sense of urgency through extensive communication • Development of a change network comprising some 500 people • Development of Interdisciplinary team • Emotional identification with Project values, Project logo and values • Development of strong values and recognition • Flat open organisation structure

30. Communication • The objective of the communication is to build commitment of various stakeholder groups at a correct pace. • A different mix of communication techniques and timing will be applied, depending on the target audience and the desired level of their commitment. Level of Commitment: INTERNALIZED HO Employees / Senior Mgmt B1 Members Branch Employees INSTITUTIONALIZED ADOPTED INSTALLED Customers and External Audience POSITIVE PERCEPTION UNDERSTANDING AWARENESS CONTACT Stage 1 Stage 2 Stage 3 Stage 4

31. The Change Journey Managing the Journey of Change Navigation Leadership • Executive Team Development • Leadership Development • Conflict Resolution • Vision / Agenda Creation • Marketing the Change Journey • Executives as Sponsors • Executive Coaching / Counselling • Event Creation • Stakeholder Management • Risk Management • Change Planning • Success Measurement • Benefits Management • Cost Management • Change Initiative Integration • Business Case Building Macro Change Drivers Performing Organization • Pain Management • Coaching for New Roles • Encouragement of Creativity • Establishment of Self-Managed Teams • Trained Change Agents • Empowered Experts • Best Practices Capitalization • Involve affected • Redesigned Processes • Organization Design • Training and Performance Support • Communications • Career Design • Competency Development • Appraisal and Rewards • Job Design Ennoblement Ownership Micro “Supply” “Demand”

32. The Change Journey Ownership Navigation Leadership Leadership Navigation Enablement Enablement Programme Lifecycle