Developing Business Excellence While Delivering Responsible Competitiveness – The Case of Lloyds TSB

Using the EFQM Excellence Model to focus on customers and how we can create value by better meeting their needs, while identifying what we need to do to develop our people and maximize their potential — all while archiving such sustainable excellence.


There is a coherent business approach which brings together all
facets of corporate responsibility – leadership, values, policy and
processes, people, customers and society – to deliver improved
performance. The EFQM Excellence Model help us to:

• Ensure we
have a clear and constant purpose, to help us focus on the delivery
of results.
• Focus on customers and how we can create value by better meeting their
• Focus by systematically applying processes and fact‐based assessments
to manage our business and to make us strategic decisions.
• Identify what we need to do to develop our people and maximize their
• Derive value from meeting our responsibilities to the communities we
• Archive sustainable Excellence.

The EFQM CSR Framework, based on the EFQM Excellence model, is more
suited to its purpose than other CSR specific frameworks as it more


• Is business driven;
• Aligns corporate responsibility with business strategy;
• Aligns with balanced scorecard strategic and tactical priorities;
• Delivers intrinsic internal and external benchmarking opportunities;
• Facilitates stakeholder engagement at all levels of the organization.
• Links self‐assessment, improvement activity and external reporting.

The areas for improvement, identified in self‐assessment against the
Framework, are translated into prioritized objectives and key
performance indicators developed to measure performance against these
objectives. Working with colleagues across the business, bringing their
particular knowledge and expertise to bear on the process, those
objectives will inevitably reflect key business unit priorities.

The intention for Lloyds TSB is to deliver corporate responsibility
performance that reflects the key strategic priorities of the business
and aligns the organization’s corporate responsibility priorities with
the business strategy to deliver value.


1. A value based approach to corporate responsibility
Lloyds TSB is a major banking and insurance group, predominantly
UK‐based, but with operations in some 25 countries around the world. At
the end of 2006, we were Europe’s 13th largest bank by market
We have nearly 63,000 employees worldwide, serving a franchise
comprising some 16 million personal and business customers. Our
operation in the UK is probable the largest in terms of distribution
reach, serving urban and rural communities through a network of over
2,000 retail outlets in addition to other mainstream channels such as
Internet and telephone banking.

Since the merger between Lloyds Bank and TSB Group in 1996 we have
more than doubled profits, built significant market shares in the
provision of retail financial services, and our cross‐selling ratio of
products per customer is industry leading. In 2006, our post‐tax return
on average shareholder equity was 26.6%.

This has been accomplished against the background of a huge amount of
change in the UK financial services industry. Competition is
intensifying, and the UK financial services market is facing up to the
impact of ever increasing regulation and price controls.


But managing a multi‐billion pound operation comes from having total
focus in what we do:
• Strategies and governance that deliver sustainable business growth –
profitable growth – for our shareholders;
• Offering good products at the right price backed by a relentless
pursuit of superior service and accessibility for customers;
• Developing a committed and engaged workforce operating at recognized
global high performance standards.
Against this backdrop, how exactly does corporate responsibility fit
into our business strategy?
In our view, there are three approaches to corporate responsibility:
• A way of doing business, ethically as a good corporate citizen. It’s
about a value system with an agenda being driven from the top and
absorbed throughout the organization…
• A disparate collection of policies and practices across different
areas of business operation that have been bought together as part of an
externally driven agenda to define a business’ social responsibilities…
• Conscious pursuit of a business strategy that recognizes that the
development of a brand and a reputation which reflects the expectations
of all stakeholders will create real business value.

They are not mutually exclusive. They are three points on a continuum
that take us from corporate philanthropy at one end of the spectrum to
value‐based corporations at the other, where external expectations
demand a very hard focus on margin, productivity and investment

That is the value‐based approach to corporate responsibility: a
business strategy that recognizes that a brand and reputation, which
reflect the expectations of all stakeholders, will create real business
value. Corporate responsibility is no different from any other
investment in the strategic assets and capabilities that drive business


2. Integrating corporate responsibility in the
business strategy

Our corporate vision is to make Lloyds TSB the best financial services
company, first in the UK then across borders. Our CSR strategy is to
support our corporate vision by helping to build a great place for our
people to work, a great place for our customers to do business and
generating great returns for our shareholders. In so doing, we believe
we create value for all our stakeholders through:

• More effective
risk management;
• Enhanced brand perception, consideration and commitment;
• Increased employee engagement;
• Increased customer satisfaction;
• Improved responsiveness to changes in patterns of customer behaviour;
• Supporting development of new markets and innovation in existing
• Delivering competitive advantage through better corporate
responsibility management.

There is a coherent business approach which brings together all aspects
of managing stakeholder relationships and delivering value. We have been
using the European Foundation of Quality Management’s Excellence Model
for some ten years. Its greatest value to us comes from the framework it


• The model helps us to ensure we have a clear and constant
purpose; it helps us to focus on the delivery of results;
• It helps us to focus on customers and how we can create value by
better meeting their needs;
• It helps us to focus by systematically applying processes and
fact‐based assessments to manage our business and to make our strategic
• It also helps us to identify what we need to do to develop our people
and maximize their potential;
• And it helps us to derive value from meeting our responsibilities to
the communities we serve.

3. The EFQM Excellence Model

The EFQM Excellence Model is the most widely used organizational
framework in Europe, Being used by at least 30,000 organizations across
more that 20 European countries. There are similar approaches in the
United Stated and Japan. The EFQM Excellence Model is based on eight
fundamental concepts of Excellence – a set of axioms that define
excellence for European organizations. Corporate responsibility is one
of these concepts: “Excellence is exceeding the minimum regulatory
framework in which the organization operates and to strive to understand
and respond to the expectations of their stakeholders in society”.


know from the research amongst UK businesses conducted in 2005 by the
University of Leicester for the EFQM and British Quality Foundation that
companies which adopt and embrace the Excellence Model are more likely
to create wealth and shareholder value that those that don’t.

The research clearly demonstrates a direct relationship between
adoption of the Excellence Model and an improvement in overall business
performance. The primary message is that the Excellence Model has a very
important role to play in improving UK productivity and competitiveness
but the opportunities are still not being exploited to the full. Key
findings from the research include:

• When the principles of the EFQM Excellence Model are
effectively adopted, performance improves in both the sort and long term
• Adopting the Excellence Model significantly enhances company value for
all stakeholders.


The EFQM Framework for CSR provides a complete CSR picture, while
working within a framework that is about achieving organizational
excellence. In essence, the EFQM Excellence Model is an organizational
tool used to drive performance and continuous improvement, and the EFQM
Framework for CSR signposts the key CSR fundamentals inherent in the
The framework recognizes that, although the outcomes of an
organization’s social and environmental policies may belong, very
properly, under society results, the successful implementation of those
policies depends upon how well it performs in all of the criteria. It is
affected by:

• The effectiveness of leadership at all levels of
the organization;
• Alignment of the organization’s policy and strategy with its overall
mission and vision;
• How partnerships and resources and processes are managed;
• The awareness and commitment of people, as well as the way they are

Success can be quantified by measuring people, customer, society
and key business results. Together with the RADAR (Results, Approach,
Deployment, Assessment & Review) scoring methodology, organizations
are able to use the framework to assess themselves – to identify the
strengths they should build on and the areas where they need to focus on


Furthermore, the framework helps organizations to report
performance by optimizing the use of available information in a coherent
approach which directly links inputs and outputs. The identification of
all the appropriate stakeholders and the understanding of their
potential needs and expectations is a crucial starting point for
organizations that want to be more socially responsible.

The EFQM Framework for CSR enables the organization to:

• Research who all the stakeholders are;
• Understand what their expectations are;
• Understand which measures are needed to meet these expectations.


It is a comprehensive, systematic and regular review by an
organization of its activities and results referenced. The self‐
assessment process allows the organization to discern clearly its
strengths and areas in which improvements can be made and culminates in
planned improvement actions that are then monitored for progress.

The primary purpose of undertaking self‐assessment is to better
understand the status, the CSR maturity, of the organization and to
drive continuous improvement. It can be linked to other management
processes within the organization, primarily strategy development and
business planning, particularly where the organization uses a common
approach to these processes.

The EFQM Framework for CSR is far more suited to its purpose than
other emerging corporate responsibility specific frameworks as it more


• Is business driven;
• Aligns corporate responsibility with business strategy;
• Complements balanced scorecard type approaches;
• Delivers intrinsic internal and external benchmarking opportunities;
• Facilitates stakeholder engagement at all levels of the organization.
• Links self‐assessment, improvement activity and external reporting.

The framework integrates CSR with stakeholder engagement in every
activity and with many of the performance indicators of the
organization. It focuses not only on direct results, but also on the
causes and how to get there. And, since it is a management framework,
not a standard, organizations can easily integrate existing standards
(e.g. ISO 9000 and ISO 14000) into the framework.

Lloyds TSB has been integrally involved in development of the
EFQM Framework for CSR. It was represented on the working group which
devised it and was the first organization to test it through high‐level
self‐assessment, in 2003.


There were a number of drivers behind
Lloyds TSB’s involvement.

• The value‐based approach which it takes to corporate
responsibility dictates that the company’s corporate responsibility
strategy should be aligned with the strategic focus of business. That
means that the corporate responsibility management model had to fit with
the primary means of driving the company’s strategic and tactical
priorities – the Balanced CSR are ideally suited as the model is, in
itself, a balanced scorecard and there are clear synergies in the
stakeholder focus of both approaches.

• Lloyds TSB’s corporate responsibility steering group of senior
executives clearly wanted to develop a corporate responsibility
management system that could be integrated throughout business and owned
by individual business units rather than the central Corporate
Responsibility team. Firstly, this reflected the complexion of the
steering group which, although including heads of relevant functional
disciplines such as Human Resources, Risk Management and Investor
Relations, is fundamentally led by business unit leaders. Secondly, it
ensured that responsibility is devolved throughout the business to key
line management. Widespread familiarity with the EFQM Excellence Model
across the organizations, its fit with the Balanced Scorecard and the
essential business nature of the Framework, facilitated this objective.

The company had ground‐breaking and award‐winning programs in corporate
responsibility areas such as training and people development, equality
and diversity, work‐life balance and community investment. But it
recognized that this was not enough and had already indentified the need
for a systemic approach which meant both developing programs in areas
where it was not as strong and creating a commitment to continuous
improvement where it was. This involved identifying and incorporating a
range of corporate responsibility Key Performance Indicators (KPIs)
across the business building on existing Balanced Scorecard objectives
within individual business unit. Working with individual business units
to identify and implement improvement activity against agreed KPIs is
inherent in the broad‐based self‐assessment and improvement focus of the
EFQM approach.

4. Implementing the EFQM approach

2004, the group’s corporate responsibility team undertook a full‐company
self assessment against the framework. In 2005, a number of
representatives from key business units contributing to the group’s
corporate responsibility profile participated in a more comprehensive
self‐assessment. We identified areas for improvement which have been
built into the balanced scorecard priorities of the corporate
responsibility team. They included:

• Undertaking a self‐assessment across the business against the
EFQM Framework for CSR
• Use existing data collection processes to inform the self‐assessment
• Use existing data collection processes to inform the self‐assessment
and relate to external reporting
• Analyze performance and perception of performance against the
framework and identify strengths and key areas for improvement
• Identify improvement priorities and improvement activity that aligns
with Balanced Scorecard objectives for each business unit
• Set Key Performance Indicators and targets based on these priorities
aligned with specific target measures under the Balanced Scorecard of
individual business units
• Review progress with business unit on an ongoing basis and globally
with the Corporate Responsibility Steering Group
• Share results and progress with relevant networks of employees
throughout the business, to both highlight achievements and gain buy‐in
to supporting improvement activity in individual business units.

Table 1. Areas for improvement
Areas Objectives
Targeted internal communications
Develop CR content in all internal
communications channels and establish business unit champions amongst CR
steering Group and Enablers’ network
Ensure managers understand how CR fits
with business as usual
Built the business case for corporate
responsibility with specific case study evidence to demonstrate
application across the business.
Promote employee CR proposition Shift internal perceptions from basic CR
awareness and understanding, through commitment and engagement to built
employee advocacy.
Develop CR management system Use enablers’ self‐assessment and areas
for improvement to develop agreed balanced scorecard objectives and
resultant Key Performance Indicators.
Local stakeholder engagement Develop best practice resources to support
local activity and leverage existing commitments.
Build our financial inclusion program Support research to increase
sustainability of community finance schemes and enhance commercial
attractiveness of sector.
Review CR contribution to business tender
Work with Corporate Relationship Managers
to develop CR contribution to business tenders and pitches.
Enhance CR aspects of procurement process Work with Group Procurement to implement
ethical purchasing policy and review contribution to environmental
Develop Climate Change Strategy Review carbon management program,
environmental performance indicators and develop targets.

In early 2007, the CR team undertook a series of review meetings with
enablers to review progress against the identified areas for
improvement. Progress against the objectives is detailed in the relevant
sections of this report. From this review, and the self‐assessment
incorporating review evidence undertaken in March 2007, we have now
developed a coherent set of strategic focuses to frame our primary
objectives and actions going forward.

These are:
• CR management development;
• Better communication;
• Focused key stakeholder engagement;
• Confronting climate change;
• Increasing financial inclusion;
• Supporting brand positioning.

5. Results

Already we are seeing significant results
from this process in our key focus areas:

5.1 Communication

Fundamental to our communications strategy is the belief in a
corporate responsibility business case premised on the impact of our
reputation on employee engagement. That is, not just in terms of
employees’ perception of our social, environmental and ethical
performance but, equally, in a greater understanding of how that
responsibility is a feature of all our business operations. This
employee “CR proposition” recognizes that effective communication of the
link between business strategy and CR priorities will increase
employees’ awareness and understanding and ultimately raise levels of
engagement, commitment and advocacy f the organization as both an
employer and provider of financial services.
In September 2006, as part of our communication segmented by stakeholder
audience approach, we published an employee‐focused CR report for the
first time. Workout reflected the key CR issues our employees told us
they thought important in a series of focus groups in 2005 – responsible
lending, people development, local community engagement and the
environment – in a lively and engaging format. It was published as a
supplement to our employee magazine, UpFront and circulated to all

UpFront magazine itself is published monthly and contains a range
of features and news stories on key CR events and issues. It builds on a
daily intranet news service, UpFront News, which featured over 250 CR
related news stories in 2006. This “bulletin” news stories are
supplemented by extensive CR information, regularly updated, on the
group’s corporate responsibility intranet site which is also linked to
CR information on other business units’ intranet sites.

Our customer CR leaflet, “honest, trustworthy…who cares?”,
containing case studies of our commitment to various stakeholder groups,
was available from branches throughout 2006 and by early 2007, nearly
200,000 had been distributed.

5.2 Stakeholder engagement

Our interaction with
communities through local opinion formers, community organizations,
local authorities, as well as major local employers and the wider
business community, is a critical platform for developing our brand and
reputation with key stakeholder groups.
An estimated 20,000 Lloyds TSB employees are involved with these local
stakeholder organizations in some form. For example, we employ around
1,500 school governors and hundreds of local councilors and magistrates.
Much is represented by personal volunteer activity but there is also
significant interaction on behalf of the company or in time supported by
the company.

Some of the relationships are based on operational
issues – maintaining our “license to operate” as a local business.
Others reflect local business development priorities – the development
of business introducer networks or building profile in critical local
markets, for example.
Supporting local stakeholder engagement was a key CR objective for 2006.
Over the year we have undertaken both qualitative and quantitative
research amongst local branch directors, senior business mangers and
Corporate Bank relationship directors. This has allowed us to develop a
simple diagnostic tool for local managers to identify their own
priorities, and a database of case studies illustrating the wealth of
business best practice across the group.

We have also supported personal development activity in this
area. The leadership and management curriculum of the University for
Lloyds TSB includes a range of courses which can include short‐term
“secondments” or interim management “consultancy” with external
organizations. The approach is designed to both test individuals’ skills
and competencies in a different environment and provide performance
development in key stakeholder engagement approaches including
networking and influencing skills. In 2006, such courses were part of
the support to those people in the organizations moving from managing
“self” to managing others and managing managers.

5.3 Climate change
The UK Government has stated its belief that climate change is the
greatest long‐term challenge facing the world today. Measures to tackle
climate change will have potential implications for regulation, taxation
and public policy and will carry both risks and opportunities for
companies and the public.

In respect of our own direct environmental impacts, our immediate
priority is to reduce our carbon emissions. We have introduced a
five‐year carbon management program, which, through a series of energy
saving projects and other initiatives, will reduce our carbon footprint.
We have a target to reduce property‐ related emissions and identified
other opportunities in relation to waste reduction and business travel.
While our direct carbon intensity is relatively low compared to other
industry sectors, we still need to fully understand the potential
financial impact of climate change on others that we may lend to or
invest in, so that we can manage the risks and identify business
opportunities. We established a group‐wide Climate Forum, led by the
deputy group chief executive, to develop a holistic approach to managing
climate‐related risks and opportunities.

Using 2002 as the baseline, we have set a target to reduce our
CO2 emissions by 30% by 2012. Having set this reduction target, we will
offset those emissions we cannot reduce, commencing in 2007. This will
make our operations carbon neutral.

5.4 Financial inclusion
Community finance initiatives offer a range of loans covering diverse
requirements from debt refinancing, to home improvements and business
start‐ups. We have supported a number of the early pilots with staff
secondments and funding, using our expertise to develop appropriate
processes. Lloyds TSB has also been involved in a wide range of projects
on both a commercial and semi‐commercial basis, providing capital for
loan funds which are on‐loaned to business start‐ups, micro‐business and
social enterprises.

With our involvement in Change London, the Local Investment Fund,
Bridges Community Ventures Fund, South Coast Money Line and Hampshire
Community Banking Partnership, Lincolnshire Loan Fund, One London
Limited, Wessex Development Fund, Prime, South West Investment Group and
Arrow Fund, around GBP 10 million was committed to the sector in 2006.
This is in addition to our normal commercial lending direct to small
businesses in the most deprived areas.

South Coast Money Line (SCML) is a community development finance
institution, providing a mix of unsecured personal and micro‐enterprise
loan, and home improvement loans which are secured. This year, SCML
launched a financial capability initiative called “Smart Money” to
provide money and budgeting skills. SCML also provided a lead role in
the development of a Community Banking Partnership for South Hampshire,
in partnership with Portsmouth Housing Association and Lloyds TSB who
are funding a project manager.

The SCML model of working in partnership to deliver a
comprehensive financial inclusion project is also helping them become
financially sustainable. Since commencing trading in May 2000, SCML has
lent customers loans to the value of GBP 2 million. For the financial
year ending March 2007, SCML will generate sufficient income from
interest income and other contractual relations to cover up to 70% of
its operating costs. These contracts are with housing associations,
local authorities and Government. SCML now operates, either by directly
delivering services or in partnership with sub‐contractual arrangements,
in Hampshire, Devon and Sussex. To improve their sustainability still
further SCML is working with the original funder Lloyds TSB and
Community Finance Solutions from the University of Salford.

In 2006 we set up a Financial Inclusion Fund to finance research
and development activities in promoting the long‐term sustainability of
community finance and enhance the commercial attractiveness of lending
to the sector.

5.5 Brand positioning
By the end of 2006, the group’s refreshing of its brand positioning saw
the development of our “for the journey…” concept. This underpins the
long‐standing commitment in our Group Code of Business Conduct (see
to maintaining long‐term relations with our customers and the premise
that honesty and integrity in our dealings with customers are
prerequisites for a sustained and successful relationship. This, and
Lloyds TSB’s sponsorship of the 2012 London Olympic and Paraolympic
Games, with its legacy issues around economic regeneration, skills
development social inclusion, community investment and youth, offers a
tremendous platform for increasing the contribution of corporate
responsibility to Lloyds TSB’s brand identity.

An Excerpt from “Management Models for the Future”

Co-Author, Nick
Avlonas is leading the Centre for Sustainability and Excellence(CSE)
3rd North American Sustainability and Corporate Social Responsibility
(CSR) Certification Workshop on June 17 – 18, in San Francisco, CA. 
For more information
please visit the The Centre for Sustainability and Excellence
web site or  contact Nick Andrews at
or call 773 714 5065.

About Nick Avlonas: Nikos
Avlonas is an Adjunct Professor of Management at the American College
of Greece (the largest American educational organization in Europe).
Among his areas of expertise are corporate social responsibility (CSR),
and total quality and supply-chain management. He lectures for executive
MBA programs at the French International College of Business and
Management (ESCEM) and at the Sheffield Hallam University in the U.K.

As a management consultant specializing in business excellence
performance, he has carried out numerous projects for leading
organizations in Greece and Europe, including Fortune Global 500
Companies such as BP Consumer Europe, Dell Computers, McCain, LLoyds
TSB, TNI, Eurobank Ergasias, Deutsche Post, and Famar, as well as with
the 2003 European Quality Award Winner and Role Model Organization,
CocoMat.He has served as Special Advisor and Senior Assessor for
European organizations developing CSR supported by the European
Commission and United Nations.


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