Strategy

Strategy Formulation 5.
0 | Coopbank
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Strategy Formulation 5.0 | Coopbank
Contents
Contents---------------------------------------------------------------------------------------------------------------------------------------------- ii
List of Tables--------------------------------------------------------------------------------------------------------------------------------------- iii
List of Figures--------------------------------------------------------------------------------------------------------------------------------------iv
1. Introduction---------------------------------------------------------------------------------------------------------------------------------------1
1.1. Background-------------------------------------------------------------------------------------------------------------------------------- 1
1.2. Rationale-----------------------------------------------------------------------------------------------------------------------------------2
1.3. Objectives----------------------------------------------------------------------------------------------------------------------------------3
1.4. Scope----------------------------------------------------------------------------------------------------------------------------------------3
2. Major Achievements and Shortfalls of the Fourth Strategy--------------------------------------------------------------------------4
3. Coopbank Mission, Vision and Core Values---------------------------------------------------------------------------------------------7
3.1. Mission--------------------------------------------------------------------------------------------------------------------------------------7
3.2. Vision---------------------------------------------------------------------------------------------------------------------------------------- 7
3.3. Core Values-------------------------------------------------------------------------------------------------------------------------------- 7
4. Strategy Formulation--------------------------------------------------------------------------------------------------------------------------8
4.1. SWOT Analysis--------------------------------------------------------------------------------------------------------------------------- 8
4.2. Strategic Alternatives------------------------------------------------------------------------------------------------------------------10
4.3. Strategic Perspectives-----------------------------------------------------------------------------------------------------------------13
4.4. Strategy Themes and Results-------------------------------------------------------------------------------------------------------14
4.5. Strategic Objectives--------------------------------------------------------------------------------------------------------------------17
4.5.1. Strategic Objectives Commentaries-----------------------------------------------------------------------------------------20
4.6. Strategy Map----------------------------------------------------------------------------------------------------------------------------- 25
4.7. Performance Measures---------------------------------------------------------------------------------------------------------------27
4.8. Targets and Performance Thresholds---------------------------------------------------------------------------------------------34
4.8.1. Targets and Baseline------------------------------------------------------------------------------------------------------------35
4.8.1. General Assumptions---------------------------------------------------------------------------------------------------------------36
4.8.2. Specific Assumptions---------------------------------------------------------------------------------------------------------------38
4.9. Strategic Initiatives---------------------------------------------------------------------------------------------------------------------50
4.9.1. Prioritizing Strategic Initiatives------------------------------------------------------------------------------------------------50
4.9.1.1. Prioritization Criteria-------------------------------------------------------------------------------------------------------51
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List of Tables
Table 1: Summary of Coopbank’s Achievement in key Parameters (FY 2017/18-2019/20)------------------------------------4
Table 2: SWOT Matrix of Coopbank FY 2017/18-2019/20------------------------------------------------------------------------------9
Table 3: Strategic Themes and Results----------------------------------------------------------------------------------------------------15
Table 4: Commentaries of Strategic Objectives------------------------------------------------------------------------------------------20
Table 5: Performance Measures (KPIs)----------------------------------------------------------------------------------------------------29
Table 6; Performance Threshold-------------------------------------------------------------------------------------------------------------35
Table 7: Baseline and Targets (FY2020/21 to 2024/25)------------------------------------------------------------------------------47
Table 8: Strategic Initiatives Rating System-----------------------------------------------------------------------------------------------53
Table 9: Strategic objectives impacted Vis a Vis strategic initiatives---------------------------------------------------------------54
Table 10: Score of Strategic Initiatives-----------------------------------------------------------------------------------------------------56
Table 11: Commentaries of Strategic Initiatives------------------------------------------------------------------------------------------45
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List of Figures
Figure 1: Strategic Alternatives------------------------------------------------------------------------------------------------- 10
Figure 2: Strategic Theme and Results of the bank--------------------------------------------------------------------------17
Figure 3: Strategy Map of Growth Strategy------------------------------------------------------------------------------------ 26
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1. Introduction
1.1. Background
As a strategy-led organization, Coopbank devised(develop) its fourth and foregoing corporate

strategy in 2017 using the balanced scorecard (BSC) tool. This corporate strategy which was in
operation for the last three years (2017/18 to 2019/20) was thus a ‘turnaround strategy’, or
"Mini-Maxi" strategy that was aimed to minimize weaknesses by taking advantage of
opportunities. During this strategic period, the bank registered decent(gonfachu) achievements
in key financial and non-financial parameters. For this strategy has ended in June 2020, the
bank, therefore, needs to devise the succeeding and fifth corporate strategy.
As a part for the devise of the fifth strategy, an evaluation was made on the foregoing strategy
to extract(gamagama) the major achievements and shortfalls. Besides, having the mission,
vision, and core values of the bank in mind, detailed background assessments were conducted.
The assessment part comprises of external environmental assessment, Ethiopian bank industry,
and internal environment analysis. Moreover, a detailed assessment on the banks’ stakeholders
and revalidation of the bank’s customer value propositions were conducted.
Similar to the preceding strategy, this strategy formulation processes the BSC (Balanced
Scorecard) framework was employed as a strategy development tool for it is a contemporary
and integrated management tool used to translate strategy into actions and day-to-day
activities. Moreover, BSC is a popular approach in strategy and performance management
practices because it balances leading and lagging indicators by accommodating both short and
long-term performance metrics. It also addresses a major concern in the area of monitoring and
ensuring the objectives of the organization through the full implementation of strategies.
Specifically, the tool allows the bank to1;
 Clarify vision and strategy by translating into action,

 Translate the vision into measurable operational objectives,
 Balance both internal and external aspects of the business to achieve tangible
results,
 Implement feedback and organizational learning to modify and adapt strategic
objectives when indicated.
1
Rothaemal, F.T. (2017). Strategic Management
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Finally, by considering the evaluation of the previous strategy and the result of background
assessments, a SWOT matrix has been developed to define the strategic choice of the bank.
Thematic areas or pillars have been defined with their respective strategic results. The bank's
strategic objectives have also been defined and mapped according to their cause-effect
relationship that again are translated into KPIs. Finally, targets have been set for the next five
years (2020/21-2024/25) supported by strategic initiatives.
1.2. Rationale
Competition in the 21st century’s global economy is complex, challenging, and fast-changing
thus making it difficult for any modern business company to successfully operate. To keep up
with a pace of change, business companies require strategic thinking, and only by evolving
good corporate strategies can they become strategically competitive. Thus, in such a type of
environment, a sustained or sustainable competitive advantage occurs when a company
formulates a value-creating strategy that other companies are unable to duplicate the benefits or
find it too costly to initiate2.
Moreover, a strategy is a continual process to be formulated, tested, and revised/refined

through time3. According to Wheelen and Hunger’s strategic management model, it is required
that a company should periodically conduct environmental and market forces through a SWOT
analysis which is a rational and scientific procedure to determine an appropriate strategic path4.
Therefore, failing to devise strategies on a consistent basis by analyzing internal and external
environments in a changing environment is mean that an organization will become reactive,
vulnerable to threats, and closed to opportunities. Hence, a timely formulating strategy enables
organizations to move strategically by having a clear set of direction or blueprint that matches
internal strengths and weaknesses with the environment’s opportunities and threats.
Accordingly, considering the bank’s current business growth, dynamic banking industry, change
in customer preference, advancement in technology, and other enablers, it is found important
for Coopbank to devise its strategy (road map) to cope-up with the highly competitive business
environment. Particularly, formulating strategy enables the Coopbank to choose the most
2
Ireland, R. D., & Hitt, M.T, (2005). Achieving and maintaining strategic competitiveness in the 21 st century: The role of strategic
leadership
3
Robert, S. K., & Norton, D. P. (2001). Transforming the Balanced Scorecard from Performance Measurement to Strategic
Management
4
Weisheng, L. (ND)/, an improved SWOT approach for conducting strategic planning in the construction industry.
Page | 2
appropriate strategic choice that converts weaknesses and threats into strengths and
opportunities which realize strategic objectives and hence the bank’s vision.
1.3. Objectives
The major aim of this document is to formulate the fifth corporate strategy that enables the bank
to attain its vision. Specifically, it is aimed at;
 Choosing strategic direction,

 Identifying strategic themes and results,
 Developing strategic objectives,
 Setting performance measures, targets, and baseline,
 Developing strategic Initiatives.
 Drawing a strategic action plan for objectives and initiatives
1.4. Scope
This strategy is a five year (FY2020/21-2024/25) corporate strategy formulated using the six-
step of BSC framework for it balances the four perspectives, leading and lagging indicators,
financial and non-financial measures. Therefore, the strategy is crafted using the four
perspectives to develop strategic themes, objectives, measures (KPIs), targets, and initiatives.
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2. Major Achievements and Shortfalls of the Fourth

Strategy
Following the implementation of its turnaround strategy since FY 2017 Coopbank has scored
major achievements in the last three fiscal years (2017/18 to 2019/20). At the June 30, 2020,
the bank’s status and market position in key financial parameters has considerably improved, to
4th and 3rd positions, respectively. The bank has also gained a leading position in customer-base
as well as in interest-free banking market. Accordingly, the summary of major financial and non-
financial achievements of the bank during the last three years are illustrated as follows.
Table 1: Summary of Coopbank’s Achievement in key Parameters (FY 2017/18-2019/20)
Amount in billions of ETB except mentioned thereon

Parameter Baseline FY 2017/18 FY 2018/19 FY 2019/20 %age
(FY 2016/17) Growth
Financial
Total Deposit Position 14.28 25.81 36.17 45.51 49
 Conventional Deposit 13.79 23.59 31.17 39.1 43
 IFB Deposit 0.48 2.22 5.00 6.41 172
FCY Generation (millions of USD) 189 279.26 310.4 363.42 25
Paid-up Capital 1 1.59 2.05 3 45
Total Capital 1.45 2.38 3.3 5.43 56
Total Asset 17.74 29.89 41.79 52.94 45
Loans and Advances 10.02 15.62 24.36 34.21 51
Total Revenue 1.55 2.51 3.71 5.13 49
Gross Profit 0.43 0.67 0.77 56
Market Share in Deposit (%) 7 9 10 10 9
Market Share in Asset (%) 7 8 9 9 9
Market Share in FCY Mobilization (%) 6 7 7 8 7
Non-Financial
Customer Base Expansion (in millions) 2.43 4.2 5.3 6.25 39
Branches 256 298 389 420 18
ATMs 38 38 58 164 78
Source: Coopbank Annual Performance Reports, and Own Computations, 2020
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During the strategy period, the bank has registered significant improvements in the leading
activities too such as aggressive resource mobilization campaigns and strengthening
relationships with various customer segments. Further, the bank has also undertaken different
strategic awareness workshops, restructured its operating/business model considering the
change in customer preference, and prepared/revised several working policies and procedures
to standardize and smoothen its operations. Additionally, by considering the bank’s business
expansion, two additional district offices (Hawassa and Jimma districts) were established to
ease its service rendering and enhance support activities. With regard to the digitalization, after
the rollout of T-24 core banking system, the bank has implemented a competitive and integrated
digital banking eco-system (COOPay) though it is not effectively marketed yet. Moreover, the
bank rebranded itself in a new corporate identity including a new logo, corporate color, and
typography to further enhance its image and identity in the eyes of customers and the general
public.
Regarding fixed asset formation, though the move was not satisfactory, substantial efforts were
made to enhance the fixed asset acquisition practices of the bank. For instance, the
construction of transitional headquarters and Waliso building is going well. Moreover, the
process of acquiring the land for the main HQs of the bank is not yet finalized. Likewise, to
strengthen its risk management practices, the bank has delineated the three lines of defense
model in which compelling improvements were recorded.
On the other hand, there were areas that the bank has failed to achieve successful outcomes. It
has been pointed out that though the bank adopted BSC tool, which in principle, calls for
balancing all the four perspectives or financial and non-financial goals, the bank relatively
registered better results in financial and customer perspectives while showing inadequate
results in internal business process as well as learning and growth perspectives. Specifically,
compared to the plan, the bank has marked a satisfactory performance level on the financial
KPIs such as RoA, RoE, market share in deposit and assets, incremental deposits, paid-up
capital growth, NPL management; and non-financial KPIs like customer satisfaction, market
share in deposit accounts, and reputation index.
Nonetheless, the bank registered unsatisfactory performance levels on FCY generation from
remittance, gross profit, and new product developments. It is also noted that there is a limitation
in bringing vertical and horizontal alignments within the bank. Above all, there is a leadership
and employee competency gap attributed to inadequate employee engagements which is a
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basic driver for other perspectives. Moreover, although the current and the future banking
business model requires the bank to invest heavily in digital competencies, the bank still is at
the basic digital level and the headway in this regard is inadequate.
3. Coopbank Mission, Vision and Core Values
Mission, Vision, and Values are vital aspects of the bank’s corporate strategy which concisely
convey the purpose, direction (where it intends to go), and driving forces of a company (how it
continues to drive the bank). Accordingly, the bank’s MVVs, which were already defined in the
previous strategy and governing this strategy too is articulated as follows.
3.1. Mission
“We root our foundation in communities to provide banking solutions that create greater
customer experience with emphasis to cooperatives and agro-based businesses through
proper use of human resource and up-to-date technologies to maximize stakeholders’
value.”
3.2. Vision
“To be the leading private bank in Ethiopia by 2025.”
3.3. Core Values
o Integrity
o Customer Satisfaction
o Learning Organization
o Teamwork
o Cost Consciousness
o Concern for Community
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4. Strategy Formulation
In order to devise a five years (FY 2021/22-2024/25) strategy that realizes the mission and
hence the vision of the bank, the six-steps strategy formulation steps of BSC have been
followed which begins with market assessments, enablers, and challenges, customer value
propositions, stakeholder needs analysis and others. Building on the assessments conducted so
far, the bank’s strategy has been formulated by visualizing strategy and decomposing the high-
level strategic direction into three to four themes, objectives, and measures. The detail steps are
discussed here-under;
4.1. SWOT Analysis
Strategy formulation begins with situation analysis which involves the process of finding a
strategic fit between external opportunities and internal strengths while working around external
threats and internal weaknesses. The SWOT matrix5 is the most frequently used tool and
technique for analyzing external and internal strategic factors.
SWOT analysis is used for the identification of bank’s distinctive capabilities and resources that
it possesses and the way they are used as well as opportunities that the bank is not currently
taking advantage of due to lack of capacity. It is a technique used to explore and identify forces
that impact the bank’s short-term and long-term success. SWOT matrix helps to summarize the
results of reviews and analysis of the internal and external environment. The analysis helps to
ensure that multifaceted variables are taken into consideration during the strategy formulation.
More specifically, it helps to identify and summarize the key;
 Internal strengths: any existing or potential internal resources or capabilities that if

properly capitalized upon can provide a competitive advantage to the bank.
 Internal weaknesses: any existing or potential internal forces that if not properly
addressed may inhibit the bank’s success.
 External opportunities: any existing or emerging forces in the external environment
that if properly exploited can provide an advantage to the bank.
 External threats: any existing or emerging forces in the external environment that if not
properly addressed may inhibit the bank’s success.
5
SWOT stands for strengths, weaknesses, opportunities, and threats.
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Accordingly, the SWOT matrix of Coopbank has been identified through a detailed analysis of
internal and external environment assessments. Particularly, the available opportunities and the
threats that constrain the bank’s operation were identified through external environment analysis
(PESTEL and Industry analysis). The relative strengths and weaknesses of the bank’s internal
capabilities and resources were identified through the evaluation of strategy implementation,
and internal resource and capability analysis. Then, the resulting key strategic factors (key
strengths, weaknesses, opportunities, and threats) that are helpful to formulate the strategy of
the bank have been compiled and prioritized as shown in the following table:
Table 2: SWOT Matrix of Coopbank
Strengths Weaknesses
 Good strategy direction settings  Low FCY generations specifically on remittances
 Broad ownership base and diversified  Inadequate paid-up capital compared to business growth
ownership structure  Low penetration and marketing of digital banking
 Improved reputation and image of the bank channels and products
 Sustainable business growth of the bank  Limited branch accessibility in city areas
 Stable core deposit base  Inadequate fixed asset acquisition
 Large customer base  Leadership and employee competency gap
 Leading market position in IFB deposit and  Poor strategic alignment
financing and customer base from private  Low employee engagement level
banks  Weak IS management system
 Young and energetic workforce  Poor Innovation and Learning practices
 Customer segment based business model  Weak Human Capital Management practices
development practices  Inadequate customer focus and relationship
 Branch accessibility in outlying areas management
 Community orientation and CSR  Poor supply chain management
 Weak risk management practices
 Inadequate marketing of the bank especially above the
line publicity
 Underdeveloped organizational culture
Opportunities Threats
 Expected global economic recovery in 2021  Geo-political instability and global tension
and onwards  Socio-economic shocks in 2020 due to Covid-19
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 Expected decline in prices of major import  A large number of domestic new entrant banks; and
commodities such as oil, fertilizer, and metal. possibility of foreign banks entry
 Undergoing economic reforms, and positive  Poor telecom and energy infrastructure
prospect of the macro-economy  Increasing cyber-attack on financial institutions
 Growing Ethiopian banking industry  High bargaining power of corporate and Institutional
 Emphasis of the government on digital customers
transformation  Prevailing of the parallel market
 Increasing trends in government budget and
expenditure; and huge funds/money outside
the banking industry
 Policy focus to cooperative, SMEs and
industrial parks development
 Infrastructure expansion and development
 A large number of economically active
unbanked and underbanked populations
 Growing and a large number of telecom
service subscribers
4.2. Strategic Alternatives
Strategic alternatives are options available to the bank for the achievement of its strategic
imperatives. It is a framework for a systematic analysis that facilitates matching the external
threats and opportunities with the internal weaknesses and strengths of the bank. Therefore,
given the results of external environment analysis (opportunities and threats identification) and
the internal environment analysis (strengths and weaknesses) SWOT matrix is developed to
select the strategic direction or choice of the bank. Accordingly, basing the result of SWOT
matrix, Weihrich (1982), has identified four sets of possible strategic alternatives as presented in
the following table;
Figure 1: Strategic Alternatives
Internal Assessment Strengths Weaknesses
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External Assessment
Opportunities SO: Growth Strategy WO: Turn-around Strategy
Max-Max-Strategy that use strengths to Mini-Max-Strategy that take advantage of
take advantage of opportunities opportunities by overcoming weaknesses
Threats ST: Stability Strategy WT: Defensive Strategy
Max-Mini Strategy that use strengths to Mini-mini- Strategy that minimizes
avoid threats weaknesses and avoids threats
Source: David, (2013), Weihrich, (1982)
As presented in the above matrix table, among the options6, Growth strategy or SO is a choice
to use internal strengths to take advantage of external opportunities. This alternative helps
organizations to be in a position in which internal strengths can be used to take advantage of
external trends and events. The aim of growth strategy is to increase an organization’s size
through expanding its volume and market share via widening service span, diversifying into a
new market of business, expanding operations into new geographical areas, and the adoption of
new technology to improve efficiency and effectiveness. Organizations persuading growth
strategy expand and diverse their business activities to achieve growth in both financial and
non-financial (Thomas et al, 2018)7.
When an organization’s objectives are market penetration, product development, and

diversification, they should follow growth strategy (Ansoff as cited from Institute of chartered
accountants of India, 20088). Moreover, growth strategies also present the opportunity to
develop more expertise or take advantage of an existing strong management team and also to
address opportunities for diversification, realizing business synergies and achieving product
streamlining (Mwadime, 2010)9. Growth strategy is not only a means to overhaul competitors,
but it is a defense mechanism that helps the bank to remain competitive in a fast-moving and
rapidly changing financial services landscape (Deloitte, 2015)10.
Turn-around strategy or WO aims to maximize opportunities arising from the external
environment and minimizing the organization’s internal weaknesses that hinder its growth. This
type of strategy choice is designed to reverse a negative trend and to get the industry back on
6
Weihrich, H. (1982). The TOWS Matrix, “A Tool for Situational Analysis”
7
Thomas, L.W., David, J.H., Hoffman, A.N., & Bamford, C.E, (2018). Strategic Management and Business Policy: Globalization,
Innovation, and Sustainability, 15th Edition, ISBN 978-0-13-452205-0
8
Institute of chartered accountants of India, (2008). Strategic management
9
Mwadime, C. (2010), analysis of growth strategies by the Kenya commercial bank ltd
10
Deloitte, (2015), Growth in banking; unlocking the full potential profitable growth as the basis for long term competitive success
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the track to profitability11. According to McKinsey, (2004)12, companies should peruse turnaround
strategy when internal crises are striking.
This type of strategy choice may emerge from the initiation of management of the
troubled/distressed organizations or when restructuring and reorganization are done by the
regulatory. As a result, it brings reallocation of resources and most often leads to top
management changes. The strategy generally is aimed at the implementation of a set of
actions required to save an organization from business failure and return it to operational
normality and financial solvency. On the other hand, companies opt turnaround strategy
because they may face asset retrenchment, cost retrenchment or it is running wrong companies
and/or it runs companies in the wrong way (Gotteiner, 2018).
The third type of strategy choice is Stability strategy or ST which is opted to use internal
strengths to avoid or reduce the impact of external threats. Such strategies use internal
strengths that can counteract threats from competitors, the industry, and the greater
environment. Finally, problem strategy or WT is the worst-case scenario when an organization
has to minimize both its weaknesses and threats. This strategy focuses on tactics directed at
reducing internal weaknesses and avoiding external threats to fight for survival, merge,
retrench, declare bankruptcy, or choose liquidation13.
With regard to Coopbank strategy choice for the coming five years, the SWOT matrix derived
from the result of background assessments is utilized. Accordingly, the external environment is
still full of opportunities as detailed in the external environmental analysis. Just to mention a few,
positive macro-economic variables, increasing government spending and huge funds outside
the bank, large unbanked population, and growing mobile subscribers, among others, are the
preeminent opportunities an environment offers. Internally, unlike the previous strategic period,
the bank has improved a lot and made a good stride in its market position by improving its
internal competencies. Although there are internal limitations deterring enhanced results, the
bank has improved enormously not only in financial points but also in internal capabilities. It is
believed that the current internal limitations could meaningfully be curtailed by implementing an
effective performance management system, enhancing employee engagement across the bank,
creating horizontal integration and vertical alignment, and digitizing the business processes.
11
Maishanu, M.M, (2010). Corporate Failure And Turnaround Strategies In Banking Industry
12
McKinsey, (2004). McKinsey on banking; An in-depth look at the challenges facing senior managers
13
David, F. R. (2013). Strategic Management, “Concept and Cases”
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The bank, on the other hand, has a large number of customers, has a young and energetic
workforce, a sizeable share of its deposits from a stable source (saving deposits), a large
number of outlying branches, and its business model framed as per the customer segmentation.
It is therefore a best alternative to go for a strategic option that allows leveraging internal
strengths to maximize the opportunities. Hence a ‘Growth Strategy’ or ‘SO’ is a best strategic
choice for the bank during this strategic period. This strategic choice is aimed at allowing the
bank to successfully achieve its vision of “to be the leading private bank in Ethiopia by 2025” by
strategically exploiting the potential opportunities and minimizing the consequence of likely
threats.
4.3. Strategic Perspectives
Kaplan and Norton (199214) developed an innovative multi-dimensional corporate performance

scorecard, the BSC, which provides a framework for selecting multiple key performance
indicators that supplement traditional financial measures with customer satisfaction, internal
business processes, and learning and growth activities. BSC framework identifies four
categories of perspectives (Financial, Customer, Internal Business Process, and Learning and
growth) to enhance balanced achievements among the financial and non-financial.
Accordingly, Coopbank had adopted BSC framework in its previous strategy as its strategy and
performance management tool and the four perspectives identified by Kaplan and Norton are
well considered in its strategy formulation document. The bank accordingly has been giving an
emphasis to its financial performance, customers, improvement of its internal business
processes, and enhancement of its learning and growth activities. In this strategy too, the
perspectives defined in the preceding strategy is completely taken and unchanged.
14
Kaplan, R. S., & Norton, D. P. (1992). The Balanced Scorecard “Measures that drive performance”
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4.4. Strategy Themes and Results
Strategic themes are the main, high-level business strategies that form the basis for the
organization’s business model. Once the vision of an organization is set, then it is essential to
systematically decompose it into 3-4 strategic themes. The strategic themes are very broad in
scope and can be regarded as a pillar of excellence that the organization wants to focus to
achieve its vision. Themes affect all four of the balanced scorecard perspectives (financial,
customer, internal process, and organizational capacity)15.
Furthermore, a strategic theme is generally a vertical slice within the strategy map, a subset of
the overall strategy consisting of a distinct set of related strategic objectives. Strategic themes
provide sub-architecture within the strategy map to support the boundary-less approach
necessary for successful strategy execution16. Moreover, strategic themes are action-oriented
statements which serve as a broad component of a strategy and are comprised of linked
objectives flowing through the four perspectives of the Balanced Scorecard framework17.
Developing strategic themes requires considerations of other strategic elements, such as the
challenges, enablers, customer value proposition, and other components of the strategic
assessment work.
Each theme has a strategic result associated with it. This is a statement of the desired end-
state. Strategic results are measurable and explicitly defined using outcome language. The
specificity of the result gives guidance to organizational transformation. The strategic
themes/results are the load-bearing walls that support the mission and vision of the organization
and provide stability by linking all the way from the foundation, through each perspective level,
to the roof (Perry, 2011). Accordingly, the strategic themes which decomposed from the vision
of the bank and the associated strategic results are summarized hereunder;
15
Perry. G. S. (2011). BSC Institute, Strategic Themes ‘How are they used and WHY?’
16
Kaplan, R. S. (2007). Balanced Scorecard Report, Insight Experience and Ideas for Executing Strategy
17
Niven, P. R. (2014). Balanced Scorecard Evolution A Dynamic Approach to Strategy Execution
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Table 3: Strategic Themes and Results

Strategic Themes Descriptions Strategic Results
To meet its vision, the Coopbank needs to enhance its A leader in the private banking
business growth on a sustainable basis by maximizing market share
resource mobilization endeavors via existing and new
A leader in market share in key
channels, capitalizing on the existing business
financial and non-financial
Sustainable Business opportunities, improving its asset management, and thus
performance measures and
Growth ultimately maximizing its stakeholder's value. This will be
increased shareholders value;
achieved by offering values to its stakeholders, excelling in
internal business operations, and focusing on enhancing the
capacity of its human capital and advanced information
technologies.
Customer experience is the customers’ holistic perception Satisfied Customers
of their experience with the business or brand of the bank. The bank delivers quality
By providing special attention to its customers through banking products and services
targeted marketing, vigorous customer relationship sustainably by providing due
management and delivering quality banking products and emphasis to targeted customers
services, the bank, thus increases customer satisfaction, and strong relationships.
ensures customer loyalty, and customer lifetime value for
Customer Experience Increased customers’ lifetime
ensuring sustainable business growth.
value
The bank offers superior values
to create loyal customers for its
business which in turn results in
enhancing customers lifetime
value;
Operational This theme is extracted from the CVP assessments and Convenient services
Excellence value discipline adopted therein. The bank shall deliver its
Providing convenient services
customers reliable banking products and services at
by enhancing the capability of
competitive/fair prices with minimal inconvenience. It will be
the bank and through efficient
achieved through end-to-end business transformation, and
utilization of its resources.
rapid and flexible solution offerings and execution.
Responsive services
Operations are standardized, simplified, tightly controlled,
and centrally planned, leaving few decisions to the The bank shall offers rapid and
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Strategic Themes Descriptions Strategic Results

discretion of rank-and-file employees. prompt services to its
customers via excelling in
internal business processes;
Digital transformation is the integration of digital technology Service excellence, transformed

into all areas of a business, fundamentally changing how products, and services
the bank operates and delivers value to customers. It transformed operational and
focuses on the cultural, organizational, and operational digital service backbone
change of a bank’s ecosystem through smart integration of
Digital transformation
digital technologies, culture processes, and competencies
remarkably transforms the
across all levels and functions in a systematic way.
bank’s business by renovating
Further, it builds bridges between Information System and products and services, and
Digital Transformation
the business process side, and business and customers operations through digitalized
which can create a capability for differentiation and and innovative solutions which
competitive advantage. Also, it radically improve the in turn enhances the service
bottom-line performance (i.e. customer relationships, excellence and hence customer
internal processes, and value propositions) through the set experience.
of systems and processes that ensure the security,

efficiency, scalability, reliability, quality, and predictability of
the bank’s core operations.
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Finally, the strategic theme and hence results of the bank is illustrated as follows;
Figure 2: Strategic Theme and Results of the bank
Mission
Vision
Satisfied Customer
Market share Leader Convenient Service Service Excellence
Perspectives
Sustainable Business Growth
Digital Transformation
Operational Excellence
Financial Customer Experience
Customer
IBP
L&G
Source: Own Construct, 2020
4.5. Strategic Objectives
The third step of strategy formulation using the Balanced Scorecard framework is setting
strategic objectives. Strategic objective statements are just concise statements that describe the
specific things that the company must perform well if it aims to successfully implement the
strategy. As a result, objectives act as a bridge from the high-level strategy to the specific
performance measures that determine the progress toward overall goals (Niven, 2002). It
determines what the company must do well under the four perspectives to execute the strategy
successfully. Also, strategic objectives can be defined as specific results that an organization
seeks to achieve in pursuing its basic mission. So, strategic objectives are essential for
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organizational success as they state direction, aid in evaluation, create synergy, and reveal
priorities18.
Further, developing strategic objectives are considered as one of the critical steps in strategy
formulation process after defining the strategic themes. Because, to convert the pillar of
excellence deliverables (strategic theme results) into performance targets, setting objectives
can be used as yardsticks for measuring the bank’s performance. As a result, strategic
objectives need to spell out how much and what kind of performance and by when it will be
achieved. Therefore, the starting points for developing strategic objectives are the strategic
results developed for the themes in the strategy step. Candidate's strategic objectives should be
considered by answering the question “What does the bank has to do continuously to achieve
this desired strategic result?” On the other hand, to set an effective and meaningful strategic
objective that can realize the strategic themes and perspectives which in turn realizes the vision
and mission, the objectives have to fulfill seven essential criteria (SMARTER) namely;1920
 Specific: Objectives should provide the “who” and “what” of program activities to easily
identify what has to be achieved to accomplish the task.
 Measurable: Objectives should include a measure to enable organizations to monitor
progress and to know when the objective has been achieved.
 Attainable: Objectives should be attainable within a given period and with available
program resources.
 Realistic: Objectives are most useful when they accurately address the scope of the
problem and programmatic steps that can be implemented within a specific period.
 Time Bounded: Objectives should provide a period indicating when the objective will be
measured or a time by which the objective will be met.
 Extending/Evaluative: Objectives should be challenging (stretched) and the progress
has to be assessed regularly to provide some recommendations to overcome eventual
obstacles. It should be linked to the bigger picture or goals of the organization.
 Rewarding/Recognizing: Based on strategy evaluation, the accomplishment of
objectives has to motivate and engage employees for more achievements.
18
David, F. R. (2011). Strategic Management and Cases
19
Available on: https://leadersyndrome.files.wordpress.com/2015/03/deltanomix-leadersyndrome-smarter-goals.pdf
20
Chartered Management Institute, (2011). Setting SMART Objectives
Page | 17
Accordingly, in formulating a Coopbank fifth corporate strategy, the above-defined strategic

themes need to be decomposed into actionable and measurable SMARTER strategic objectives
to achieve the vision of the bank. Hence, the proposed strategic objectives that achieve the
strategic results and hence the mission of the bank are presented as follows;
1. Increase Profitability
2. Enhance Market Share
3. Enhance Financial Resource Mobilization
4. Enhance Financial Soundness
5. Increase Customer Satisfaction
6. Increase Customer Acquisition
7. Improve Customer Retention
8. Enhance process efficiency and effectiveness
9. Improve Risk and Internal Control Management
10. Improve Marketing of the bank
11. Enhance Human Capital of the bank
12. Enhance Organizational Capital of the bank
13. Enhance IS Capital of the bank
Page | 18
4.5.1. Strategic Objectives Commentaries
In order to develop strategic objectives that accurately measure progress toward a vision in a way that is meaningful to the
stakeholders, defining the scopes and intended outcomes of the objectives in detail is vital. Accordingly, the commentaries of
strategic objectives are articulated in the following manner;
Table 4: Commentaries of Strategic Objectives
Perspective Strategic Objective Commentaries Intended Outcomes

Financial To attain its vision of becoming the leading private bank by the year 2025, the bank needs to
increase its market share at an increasing rate as compared to its competitors in key financial  Leading market
Enhance Market Share resources. Through enhancing market share, the bank will strengthen its competitive position from private
advantage. This objective is measured by performance measures such as a market share in banks
deposit, market share in profit and market share in FCY.
Profitability is the ultimate goal of the bank. As a result, to ensure this objective, the bank needs
to surge its profitability by focusing on efficient and effective resource management
Increase Profitability  Satisfied Stakeholders
continuously. The performance measures (KPIs) used to measure the objective is Return on
Asset, Return on Equity, Gross Profit, and other measures.
Enhance financial Resource mobilization is the collection of deposits resources (savings, current and fixed  Improved asset and
resources mobilization amounts) from domestic sources and FCY generation from external sources through retaining profitability
the existing customers, recruiting new customers, and expanding the channels. It will be
measured by incremental deposit mobilization and FCY earning
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Enhance financial Aiming to have a healthy, solid, and stable bank through avoiding vulnerabilities coming from  Financial healthiness
soundness not adhering to regulatory requirements requires improvement of asset quality and capital  Maximized
adequacy among other measures. Therefore, to measure financial soundness, NPL ratio, and shareholders value
Capital Adequacy Ratio shall be used.
Increase Customer This objective focus on satisfying customers through creating a strong and long-term business  Customer retention
Satisfaction relationship, availing quality products and services, enhancing customer handling, and  Improved customer
improving information system to meet their expectation. The customer satisfaction index will be lifetime value
used to measure customer satisfaction.  Positive brand of the
bank
Increase Customer This objective deals with increasing the customer base of the bank through attracting new  Increased resource
acquisition customers from the potential segment, which has a direct impact on resource mobilization and mobilization
the customer base of the bank. As the financial inclusion level of the country is at a low stage,  Large customer base
this objective creates a solution where everyone benefits for the bank and its targeted potential
segments. Measurements such as number of accounts opened with respect to a new deposit
account, Coopay account, agent, and merchant in all customer segments are used to measure
the objective.
Improve Customer It is about the number of private corporate, cooperative, and institutional customers who shift to  Maintained and
retention other banks and ceased to use the bank’s service due to various reasons. The focus of this Improved wallet share
objective is to make sure that the recruited customers sustainably work with the bank by  Increased customer
building strong relationships and trust. It is measured by the dropout ratio of private corporate, loyalty
cooperative, and institutional customers.
Internal Enhance Process This objective helps the bank to improve the overall financial and operational performance by  Customer experience
Business Efficiency and enhancing operational efficiency, people efficiency, and management efficiency. The bank will
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Process achieve operational efficiency and effectiveness through standardizing and automating the  Quality of service,
business processes, optimizing resources, creating organizational alignment.  Improved productivity,
 Improved service
Effectiveness delivery time,
 Error-free service
 Improved stakeholder
relationship
This objective aims to improve the assessment, evaluation, treatment, and reporting risks in  Financial soundness
accordance with the bank’s risk appetite by ensuring prudence and stability in the bank through
Improve Risk and
the use of a more transparent and efficient process that protects shareholders against the
Internal Control
regulatory organ. Internal control includes risk control, compliance, and internal audit to bring
Management
performance efficiency, standardized financial information, and adherence to compliance
requirements. It is measured in terms of Audit coverage ratio and composite risk rate.
Improve Marketing of the It focuses on delivering a customer values by attracting new customers and maintaining  Increased customer
bank existing customers through four A’s such as awareness (the extent to which customers are base,
informed regarding the product’s characteristics via various marketing tools), acceptability (the  Increased reputation
extent to which a bank’s total product and service offering exceeds customer expectations), and goodwill of the
affordability (the extent to which customers in the target market are able and willing to pay the bank
product’s price), accessibility( the extent to which customers can readily acquire the product  Improved financial
through various channels). This objective is measured by; position
Incremental Accessibility: number of branches, number of ATM, number of POS, number of
active merchants recruited, and number of active agents recruited for digital banking.
New Products: number of new products introduced
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Promotion (Awareness): Conducting promotions through various marketing tools to all targeted
stakeholders so as to enhance the image and identity of the bank which measured by the
Reputation Index.
Enhance Human Capital To execute the bank strategy effectively by delivering bottom-lines, attracting, engaging, and  Capable,
retaining the most important and valuable asset- the human capital is crucial. Thus, committed,  Loyal and
satisfied and effective employees with the right skills, knowledge, and attitudes are the key  Engaged human
ingredients to create a high-performance culture that drives operational excellence, build great capital
customer experience, and ultimately result in financial returns that enable the bank to
outperform the private banks in the industry. Accordingly, this objective will be measured by the
Leadership Competency score, Employee Engagement, and Stability Index.
Enhance Organizational This objective represents the level of bank competence in implementing the change process  High Performing
Capital needed in the area of culture, leadership, employee alignment, teamwork, and knowledge Culture, and Strategic
management so as to evolve and grow as a bank by ensuring success today and sustaining alignment
that prosperity for the long-term. To do that, taking advantage of intangible assets such as
human capital that surface, nurture, and support a desirable and right organizational culture is
decisive to deliver exceptional performance that achieves the building blocks of the bank.
Particularly, this objective assesses the strengths and weaknesses of the bank's cultural traits
and it is aligned with the strategy and employees. The Organizational Culture Audit will
measure it.
Enhance Information This objective is used recognize the need to create new forms of digital transformation and  Digital transformation
System Capital working to identify ways to exploit and monetize what already exists. It aims at enhancing the  Improved system
operation
IS function efficiency by promoting an organized approach of digitalization of overall bank’s
 Enhanced process
operation by improving operational efficiency of both software and hardware employed, system
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developed and implemented. It can be measured by %age of system availibity, IS project operation
implementataion level, digital maturity level and system response time.  Improved customer
service
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4.6. Strategy Map
Strategy Map is the fourth step of the Balanced Scorecard framework for strategic planning and
management. There are two primary purposes for a Strategy Map, the first is to provide a
means to create a coherent strategic story and the second is to communicate that story. A good
Strategy Map is a picture that demonstrates a cause-effect linkage between multiple objectives.
From the bottom up it can tell the story to answer the question “If the bank does this what will
the result be?” Moreover, a strategy map is a tool that forces the bank to focus on the most
important things. It is a logic map with a logical progression from bottom to top. It shows that if
there is an improvement in an objective at a lower level, it in turn will cause an improvement to
an objective in the next level up. Accordingly, the bank strategy map which shows a cause-
effect relationship between strategic objectives are illustrated as follows;
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Figure 3: Strategy Map of Coopbank’s Growth Strategy
Page | 25
4.7. Performance Measures
In strategy formulation, performance measures or KPIs are the tools that an organization uses
to determine whether they are meeting the strategic objectives and moving toward the
successful implementation of their strategy. Specifically, it described as quantifiable standards
used to evaluate and communicate performance against expected results (Niven, 2002).
Further, KPIs are defined as performance management techniques employed to enable efficient
and effective business monitoring and are generally acknowledged to be a set of measures
critical to the current and future success of any organization. Particularly, KPI’s informs the
company what to do to increase the performance dramatically. As a result, for the KPI’s to
indicate the performance and results, they should be a direct link between KPI’s and goals, from
goals to strategic objectives and from strategic objectives to goals21.
KPI’s are categorized as “lagging” and “leading” indicators22. Lagging indicators provide
historical information that measures past performance. It typically focuses on the “output”. They
are often called “outcome measures” or “performance results”. Whereas the leading indicator is
a metric that mainly refers to future developments and drivers/causes. They are the key factors
that enable the overall end result that the bank wants to achieve.
Moreover, the organization KPI’s has to exhibit seven characteristics to develop effective
performance measures such as non-financial, timely (has to be measured frequently), CEO
focus, simple to understand by the all staff, team-based, major impact on the organization (e.g.,
it impacts on more than one of top critical success factors and more than one balanced
scorecard perspective), and the limited dark side (they have to encourage appropriate and
tested to ensure that they have a positive impact on performance)23.
Besides, to develop meaningful performance measures, the KPIs has to pass through three
steps/process which is presented as follows;
a. Results: creating a result for each strategic objective using a result-oriented language
such as reduce or increase.
b. Identify and Describe the Measures: identify the direct and indirect measures.
Accordingly, to do that, first description (A sentence to describe as accurately as
21
Griffin, J. (2004). Developing Strategic KPIs for your BPM System, p.70-73.
22
Kaplan, R.S., & Norton, D.P. (2007). Using a BSC as a Strategic Management System
23
Paramenter, D. (2020). Key Performance Indicators: Developing, Implementing, and Using Winning KPIs, pp.1-407.
Page | 26
possible what the KPI is for, the calculation (A mathematical formula that describes how
the data elements (tangible perceivable items) are combined to provide a number,
percentage or currency (sometimes a yes/no), frequency (how often the KPI is counted
and recorded), scope (What should be included or discounted, often a cap or data
range), metrics and a description of the metrics items used individually to avoid
ambiguity, the data and the sources of data used in the calculation.
c. Describe the Thresholds and Targets: A KPI is meaningless unless it can be compared
to something. The actual value of the measure has to be compared to what would be
considered good, bad or indifferent. The comparator could be a target based on previous
performance or on a notional future performance or even a made-up value.
Therefore, to achieve desired strategic options, cascading the strategic perspectives into
objectives and then into financial and non-financial performance measures is essential.
Accordingly, the key performance indicators (KPIs) that are used to measure, monitor and track
how the strategic objectives are contributing to the achievement of strategic perspectives and
hence the mission of the bank are articulated hereunder;
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Table 5: Performance Measures (KPIs)
Strategic Objective KPIs Unit of Meas. Description /formula Frequency Data Source
It indicates the level of profitability of the bank
as seen against its total asset.
ROA % Annually Financial statement
ROA = Net profit after tax/ average total asset
It is the level of profitability of the bank against
its shareholders equity.
ROE % Annually Financial statement
ROE= Net Profit after tax/Average
Shareholders’ Equity
Increase profitability It is the profit the bank makes after deducting
the costs associated with making and selling its
Gross Profit ETB products. Monthly Financial Statement
Gross Profit = Total income – Total expense

It is the efficiency of managing expenses to
earn more returns.
Expense to
% Quarterly Financial Statement
income ratio
Expense to income ratio = Total expenses
divided by total incomes
It indicates an average share of Coopbank’s
deposit mobilization from the total deposit of
private banks.
Market Share in
Enhance Market Share % Monthly Industry Data
Deposit
Coopbank’s Market share in deposit =
Coopbank’s deposit position at a time / Total
private banks deposit position at a time.
Market share in % It shows the share of Coopbank’s FCY Monthly Industry Data
FCY mobilization from private banks.
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Coopbank’s Market share in FCY =
Coopbank’s FCY generated/Private banks total
FCY generated.
It shows the market share of Coopbank’s profit
from the total profit of private banks.
Market Share in
% Quarterly Industry Data
Profit Coopbank’s Market share in Profit =
Coopbank’s Profit / Total private banks profit at
a time.
Incremental It indicates additional/incremental deposits
ETB Monthly Financial Statement
Enhance Financial Deposit mobilized.
resource Mobilization Foreign Currency It indicates total Foreign Currency generation
USD Monthly Trade service Report
Mobilization from all sources.
It depicts the amount of loans whose credit
quality has deteriorated.
NPLs ratio % Quarterly Credit report
Enhance Financial
NPL Ratio = the amount of NPLs/Total Loans
Soundness
and advances
It measures the percentage of banks capital
CAR % Quarterly Financial statement
(Tier 1)24 to the average risk-weighted asset
Increase Customer Customer It is used to indicate %age of the satisfied
% Annually Survey Result
Satisfaction Satisfaction Index customer from the total customers of the bank.
It is the number of additionally recruited
Increase Customer New customer
Number customers (Depositors, Institutions, Diasporas, Monthly MIS
acquisition acquisition
NGOs, E-banking users etc.)
Drop out ratio of- It evaluates the number of corporate-private,
Improve Customer Cooperatives, cooperative societies, and big institutions
Number Quarterly MIS
Retention Corporate-private switched to other banks and/or ceased to use
and Institutions the bank’s service due to various reasons
24
Capital includes capital contribution, retained earnings, legal and other reserves to be approved by the National Bank of Ethiopia
Page | 29
(corporate depositors, corporate borrowers,
institutions, etc.).
It is used to measure a number of non-
Non-Compliance compliance to an SOP (a measure of
Number Quarterly IA and system report
to SOP compliances to standard frameworks, policies
Enhance process
& procedures, regulations etc.)
efficiency and
It measures an average percentage of
effectiveness
Non- Compliance process-wide compliance to the terms of a
Number Quarterly Organs report
to SLA written agreement on service/support expected
of the IS process.
Composite risk rating is an assessment of the
bank’s overall risk profile (safety and
soundness). A bank’s Composite Risk Rating
Composite risk can be low, moderate, or high, with the
Improve Risk and Level Quarterly Risk Management Report
rating level direction of change assessed as decreasing,
Internal Control
stable or increasing for a specified timeframe,
Management
depending on the industry, technology, and
economic environment.
Audit Coverage It indicates %age of the organs actually audited
% Quarterly IA report
Ratio against the plan set.
It indicates the percentage achievement of plan
Incremental
accessibility channels (Branches, POS, ATM,
accessibility % Quarterly Quarterly Report
number of active agent and merchant recruited
channels
for digital banking)
Improve Marketing of
It indicates a number of new products
the bank New Products Number Annually Processes’ report
introduced.
It is the perception level of the bank’s services,
Reputation Index % acceptance, brand, and image in the society Annually Survey Result
(general public).
Enhance Human Leadership % It shows the weighted average capability level Annually Survey Result
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competency of the bank’s leaders (middle management,
Score and line managers)
It depicts high-level insights into the workplace
Employee
by displaying the %age of engaged, not
Engagement % Annually Survey Result
engaged, and actively disengaged employees
Index
out of the total.
It indicates the proportion of employees who
Capital
have stayed in the bank over different periods.
It is also a good indicator of employee morale
Employee Stability and satisfaction level.
Index
Staff Stability Index = Number of an employee
with more than one-year service /Total number
of employee one year ago
Organizational culture is an organization's
expectations, experiences, philosophy, and
Enhance Organizational Organization values that hold it together. It is based on
Capital Culture Audit shared attitudes, beliefs, customs, and written
and unwritten rules that have been developed
over time and are considered valid.
System availability refers to periods when the
core banking system is available to perform its
primary function.
System availability %
Monthly IS Report
It can be measured as a proportion (%age) of
Enhance IS Capital
a time-span that a system is available out of
expected fully operational time.
System response time refers to the amount of
System response
time time it takes an application or a server to return Monthly IS Report
time
the results of a submitted request to an end-
Page | 31
user.
Level of IT
It measures a %age of IT projects implemented
projects %
out of the planned. Quarterly IS Report
implementation
It is used to gauge the digitalization level of the
bank. It is the collective digital success level of
the overall operation of the bank, both
Digital maturity
Level customer front-office experience and back- Annually IS Report
level
office processing. There are four levels of
digital maturity, viz; manual, basic digital,
advanced digital, and fully digital.
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4.8. Targets and Performance Thresholds
A target is a quantitative representation of the performance measure at some point in the future
(i.e. desired future level of performance). It is a reference point against which performance is
measured. Similar to objectives, effective targets have to be specific, measurable, attainable,
realistic, and time bounded. Targets make the results derived from measurement meaningful
and inform the bank whether it is progressing on the right track to achieve the strategic
objectives. Particularly, targets can be created from trends and baselines, benchmarking,
external and internal assessments, and industry averages.
These days, many business organizations use a combination of three distinct yet related target
types, each with a corresponding period such as Big Hairy Audacious Goals, or BHAGs,
stretched and incremental targets. Among them, BHAGs are long-term targets (normally take 10
to 30 years to complete) that act as compelling mechanisms used to guide organizations toward
tremendous breakthroughs. Whereas stretch (mid-range) targets are based on a shorter time
frame, normally three to five years. To prove effective the stretch target must represent a great
challenge but must also be rooted in reality and decomposed into years within the set
timeframes. Lastly, incremental targets are the (normally) annual targets that, if achieved, will
lead to the fulfillment of stretch targets for each of the measures appearing on the Balanced
Scorecard. They serve as the guideposts to the larger goals represented by stretch targets as
they break into quarters within a year.
For performance measures to be useful, it needs to clearly state both an acceptable and
unacceptable result. This is known as defining thresholds. Thresholds are frequently based on
targets. Particularly, thresholds define the desired level of performance around a target value
and hence determines the area of involvement through effective positive and negative
consequence management or decisions.
Accordingly, there are several threshold models available to set the performance thresholds.
Among the models, the bank has been implementing a BSC performance management tool
partially with a RAGC threshold Model developed in FY2016/17 to determine acceptable and
unacceptable results by adding a Cyan color to encourage outstanding performances. However,
the gap of the unacceptable result is very high which discourages the poor and moderate least
performers and makes it difficult to identify the teams who are exerting an effort vis a vis no
effort at all to achieve the strategic objectives of the bank.
Page | 33
Therefore, to more engage the workforce and hence improve the bank bottom lines through
performance enhancement mechanisms such as performance improvement plan and
performance development plans, it is deemed necessary to modify the unacceptable range into
two-color arrangements (light and deep red) i.e. performance failed to meet expectations (light
red) and very poor performance (deep red) using RAGC model variants. The modified
performance threshold with their respective consequences are presented in the following table;
Table 6; Performance Threshold
Color Code Color Arrangement Performance Definition
x ≥ 120 % Achievement; exceptional/superb achievement or

Cyan
performance.
Green 100 % ≤ x< 120 % Achievement: Performance met expectations.
Amber 75 % ≤ x< 100 % Achievement; Satisfactory performance.
Red 50 % ≤ x< 75 % Achievement: Performance failed to meet

expectations (poor performance) and needs improvement.
X <50 % Achievement; Extremely poor performance and critically far
Deep Red
from the goal set.
Where x is an actual performance level of the bank
As indicated in the above table, using the intended performance thresholds, the bank will
manage and monitor the KPIs from the very poor (unacceptable) result to over achievements
(Cyan).
4.8.1. Targets and Baseline
To set targets for the performance measures, identifying the current level of performance
(baseline) for all measures are critical for successful strategy formulation. Therefore, to predict
future levels of the bank performance that realizes the strategic intents of the bank, defining the
targets and baseline is one of vital steps in BSC. Accordingly, to set reasonable and achievable
targets, the considered general and specific assumptions are discussed as follows.
Page | 34
4.8.1. General Assumptions
To set the bank’s targets for the coming five years (FY 2020/21-2024/25) the following general
assumptions are taken into consideration and detailed here below.
 The world economy will be expected to recover from Covid-19 shock beginning
2021: The recent outbreak of Covid-19 has created multiple shocks on global economic
conditions and forecasted to put the world into a recession by 2020. However,
considering the undergoing joint containment efforts and strong multilateral cooperation
across the globe, World Bank, (2020), has projected the global economy will recover
from the shock by 2021. This will stimulate the world economy by facilitating international
trade (export earning), stabilizing commodities markets, enhancing capital inflow in the
form of remittance, and FDIs to developing countries like Ethiopia, which in turn directly
benefit the banking business.
 Undergoing economic reform in Ethiopia: The undergoing economic reforms which
aimed to stabilize macro-economic condition of the country by focusing on key and
potential sectors such as agriculture, manufacturing, tourism, and mining could be
considered as an opportunity for banking business as it is expected to correct the major
economic imbalances if the detail action plan is outlined according to the reform
framework, and by considering the country’s resources and capabilities.
 Positive and strong forecast of the macro-economy: Ethiopia, has experienced the
fastest-growing economy over the past decade. According to the 10 years development
plan of 2021 to 2030, it’s projected that the country will maintain its growth momentum
with an average annual growth rate of 10.2% which leads to increased aggregate supply
by focusing on modern agriculture, manufacturing, and mining. In the year FY 2020/21,
the COVID-19 pandemic is also forested to pose a challenge on the macro-economy
with an estimated 2.8% decline from the previous annual growth target. The country’s
continuous growth coupled with growing government budget year on year will stimulate
the market and per-capita income which will be a fertile ground for the Coopbank.
 The expected stable monetary and fiscal policies of the country: During this
strategic period the country’s macro-economic policies are expected to be stable (i.e.
stable interest rate, exchange rate, taxation system, and others) which positively
contribute to the banking business.
Page | 35
 Existence of a large number of unbanked and underbanked population in Ethiopia:

The financial inclusion of the country is low even as compared to some east African and
sub-Saharan countries. Recent data revealed that less than 40% of Ethiopian adults
hold the bank accounts. Hence, having this low level of financial inclusion and existence
of a large number of outlying branches enables Coopbank to expand its customer base
by approaching un-reached areas via fitted channels (branches and alternative
channels) which in turn helps to enhance its resource mobilization practices.
 Growing trend of Ethiopian banking industry: According to Ethiopian banking
industry analysis, (2020) findings, in Ethiopia, the banking sector is the most attractive
and profitable sector. Moreover, the level of competition in Ethiopian banking industry is
low and most of the banks operating in the country concentrate in large cities. In the
country, the level of financial inclusion is still low (below 40%) which shows that the
banking sector will remain attractive if managed strategically. As of June 30, 2020 the
total deposit mobilized by the Ethiopian banks has surpassed an ETB one Trillion though
still there is a large amount of money circulating out of the bank (estimated around ETB
113 billion). Therefore, the low level of financial inclusion and low level of competition in
the industry with a large amount of money circulating outside the bank will be a great
opportunity for Coopbank (for resource mobilization and expanding other banking
services) if addressed in a strategic manner.
 Improvement of economic and social infrastructures in Ethiopia: To bring
sustainable economic growth, the Ethiopian government is highly spending on
infrastructure development (road, railway, airline, dry port, and energy). These will
stimulate the economy as a whole and positively affect the banking business (for
accessibility expansion, for resource mobilization, to conduct ease businesses and
others).
 Digital economy is expected to be enhanced: In today’s digitalization era, technology
is becoming a paramount concern in all sectors. Looking at the financial sector, a wide
range of technological advancements and innovative solutions are developing which
shows that the tomorrow banking business is all about digitization. Therefore, the
currently undergoing financial tech innovation and disruptions around the world coupled
with the Ethiopian digital economy strategy is assumed to create a fertile ground for
Coopbank so as to digitalize its overall operation in an efficient and effective way if
addressed strategically.
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 The expected establishment of secondary and stock markets will expected to

stimulate the economic activities of the country if it will be supported with strong
governing institutions, legal frameworks and infrastructure. Accordingly, following the
commencement of stock markets new businesses will be created, resource utilization
and management will be improved, existing investors are encouraged to diversify their
business, money circulation in the economy will be improved, and others.
 More than fifteen private banks are expected to join the Ethiopian banking industry by
focusing their business on conventional banking services, full Islamic banking services,
mortgage banking, investment banking, and diaspora banking. However, entry of foreign
banks is not expected during this strategic period as there is no clear direction set by the
government and no negotiation is started with WTO yet regarding financial sector
openness.
4.8.2. Specific Assumptions
To set the bank’s targets for the coming five years (FY 2020/21-2024/25) the following general
assumptions are taken into consideration and detailed here below.
 The world economy will be expected to recover from Covid-19 shock beginning
2021: The recent outbreak of Covid-19 has created multiple shocks on global economic
conditions and forecasted to put the world into recession by 2020. However, considering
the undergoing joint containment efforts and strong multilateral cooperation across the
globe, World Bank, (2020), has projected the global economy will recover from the shock
by 2021. This will stimulate the world economy by facilitating international trade (export
earning), stabilizing commodities markets, enhancing capital inflow in the form of
remittance and FDIs to developing countries like Ethiopia, which in turn directly benefit
the banking business.
 Undergoing economic reform in Ethiopia: The undergoing economic reforms which
aimed to stabilize macro-economic condition of the country by focusing on key and
potential sectors such as agriculture, manufacturing, tourism and mining could be
considered as an opportunity for banking business as it is expected to correct the major
economic imbalances if detail action plan is outlined according the reform framework,
and by considering the country’s resources and capabilities.
Page | 37
 Positive and strong forecast of the macro-economy: Ethiopia, has experienced

fastest-growing economy over the past decade. According to the 10 years development
plan of 2021 to 2030 it’s projected that the country will maintain its growth momentum
with an average annual growth rate of 10.2% which leads to increased aggregate supply
by focusing on modern agriculture, manufacturing and mining. In the year 2020/21 the
COVID-19 pandemic is also forested to pose a challenge on the macro-economy with an
estimated 2.8% decline from the previous annual growth target. The country’s
continuous growth coupled with growing government budget year on year will stimulate
the market and per-capita income which will be a fertile ground for the Coopbank.
 The expected stable monetary and fiscal policies of the country: During this
strategic period the country’s macro-economic policies are expected to be stable (i.e.
stable interest rate, exchange rate, taxation system and others) which positively
contribute to the banking business.
 Existence of a large number of unbanked and underbanked population in Ethiopia:
The financial inclusion of the country is low even as compared to some east African and
sub-Saharan countries. Recent data revealed that less than 40% Ethiopian adults hold
the bank accounts. Hence, having this low level of financial inclusion and existence of
large number of outlaying branches enables Coopbank to expand its customer base by
approaching un-reached areas via fitted channels (branches and alternative channels)
which in turn helps to enhance its resource mobilization practices.
 Growing trend of Ethiopian banking industry: According to Ethiopian banking
industry analysis, (2020) findings, in Ethiopia, the banking sector is the most attractive
and profitable sector. Moreover, the level of competition in Ethiopian banking industry is
low and most of the banks operating in the country concentrate in large cities. In the
country, the level of financial inclusion is still low (below 40%) which shows that the
banking sector will remain attractive if managed strategically. As of march, 2020 the total
deposit mobilized by the Ethiopian banks has surpassed an ETB one Trillion though still
there is a large amount of money circulating out of the bank (estimated around ETB 113
billion). Therefore, the low level of financial inclusion and low level of competition in the
industry with the large amount of money circulating outside the bank will be a great
opportunity for Coopbank (for resource mobilization and expanding other banking
services) if addressed in a strategic manner.
 Improvement of economic and social infrastructures in Ethiopia: To bring
sustainable economic growth, the Ethiopian government is highly spending on
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infrastructure development (road, railway, airline, dry port and energy). These will
stimulate the economy as a whole and positively affect the banking business (for
accessibility expansion, for resource mobilization, to conduct ease businesses and
others).
 Digital economy is expected to be enhanced: In today’s digitalization era, technology
is becoming a paramount concern in all sectors. Looking at the financial sector, a wide
range of technological advancement and innovative solutions are developing which
shows that the tomorrow banking business is all about digitization. Therefore, the
currently undergoing financial tech innovation and disruptions around the world coupled
with the Ethiopian digital economy strategy is assumed to create a fertile ground for
Coopbank so as to digitalize its overall operation in an efficient and effective way if
addressed strategically.
 The expected establishment of secondary and stock market will expected stimulate
the economic activities of the country if it will be supported with strong governing
institutions, legal frame works and infrastructure. Accordingly, following the
commencement of stock markets new businesses will be created, resource utilization
and management will be improved, existing investors are encouraged to diversify their
business, money circulation in the economy will be improved and others.
 More than fifteen private banks are expected to join the Ethiopian banking industry by
focusing their business on full Islamic banking service, mortgage banking, investment
banking, and diaspora banking. However, entry of foreign banks is not expected during
this strategic period as there is no clear direction set by the government and no
negotiation is started with WTO yet regarding financial sector openness.
4.8.2. Specific Assumptions
The specific assumptions that were used to forecast the deposit, profit, FCY, customer base,
and accessibility and digitalization are presented in the following manner.
a. Deposit
The total deposit mobilized by the Ethiopian banking industry has reached ETB 1.05 trillion as of
June, 2020. However, the share of Coopbank is low vis-a-vis the market potential. Therefore,
during this strategic period, the bank’s performance in deposit mobilization should increase at
increasing rate so as to achieve its vision. Over the preceding three years, the bank has
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exhibited an average growth rate of 49% in deposit mobilization. During the same period, the
peer and private banks have depicted a growth rate of 31.3% and 30.0%, respectively. In setting
the deposit target, the following specific assumptions are considered.
 The government budget spending has been growing year on year basis at increasing rate. In the past three
years, on average, the country’s budget spending has been increased by 14.2%. Thus, by strengthening
relationships with government institutions, the bank shall augment resource mobilization endeavors via the
marketing of digital banking services for various payments like bills and salary. It is also assumed to mobilize,
the resources at the bottom levels through bank branches where the majority of government projects are
implemented and from the recurrent expenditures.
 The existence of a large amount of money outside the bank will give an opportunity to mobilize deposit
resources to the bank.
 The existence of untapped potential and emerging markets such as IFB, cooperatives, diaspora, SMEs and
others shall offer good opportunities for the bank to mobilize resources. Thus, through enhancing relationship
marketing and delivering specific value propositions, the bank shall mobilize sizable share of deposits from
these segments.
 In the coming years, the bank will provide exceptional attention towards digital transformation to capitalize on the
resource mobilization potential.
 The bank has introduced its business model from product-based services to customer focused. Consequently,
by reinforcing customer relationships management at all levels, the bank shall mobilize substantial share of
deposit through resource augmentation practices, cross-selling, up-selling and referral marketing.
 The bank shall optimally open branches primarily focusing in resource potential areas of major cities (especially
Finfinnee) and through opening dedicated IFB branches for mobilizing high worth deposit amounts.
 High attention will be given to the productivity and long-term business relationships to the new deposit accounts
to be opened.
 Public awareness creations, effective resource mobilization campaigns, introducing new deposit products and
other marketing initiatives are assumed to be realized in the coming years.
 At the end of June 2020, the bank’s deposit position per branch is estimated at ETB 108.40 million. Considering
the bank’s growth in branch accessibility, enhancing digital banking and improving the productivity of the existing
and new deposit accounts into considerations, it has been projected to increase the deposit per branch year on
year basis. Thus, at the end of 2025, the deposit per branch of the bank is predicted to reach ETB 255 million
from ETB 108.40 million as of June,2020.
 In the previous three years, the market share of the bank from the private banks have continually increased to
reach 10.20% at the end of June 2020 from its baseline (June 2017) of 7.00%. Taking the growth trends of
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deposit into account, the bank’s market share from existing private banks has been estimated to reach 13.76%
at the end of strategy period.
 Looking into deposit by category, the bank has shown commendable growth rate in IFB deposit in the last three
years, depicting an average growth rate of 171.60% annually. On the other hand, on average the bank’s
conventional deposit has been grown by 42.82% during similar period. By considering the previous year’s
growth trends and the existing potentials into account, on average it has been estimated to increase
conventional deposit by 29% and IFB deposit by 38% on yearly basis.
 In the last three years, on average, the deposit structure of the Coopbank has been 32%, 63% and 5% in
demand, saving and fixed time deposits, respectively. During similar period, the average deposit mix of peer
bank was 26%, 64% and 10%; and private bank’s average was 27%, 62% and 12%, respectively. Thus, by
focusing on mobilizing stable core deposit sources, giving less attention to costly deposit and the average
deposit mix of peer, private and Coopbank into considerations, on average the deposit mix of the Coopbank is
forecasted to be 30%, 65% and 5% in demand, saving and fixed time deposit, respectively.
 By assuming a 30% average annual growth in deposit during this strategic period, the total deposit position of
the bank is targeted to reach ETB 170.90 billion at the end of June 2025, out of which conventional deposit
shares ETB 139.36 billion and the remaining ETB 31.54 billion goes for IFB deposit.
b. Foreign Currency
As the country’s foreign currency generation is expected to be enhanced during this strategy
periods, there is a high opportunity for Coopbank to be materialized. To put the FCY
mobilization target of the bank for the coming five years, the following specific assumptions are
taken into consideration.
 Export of the country is expected to be improved because of the country’s strategic direction to transform
manufacturing sector such as intensive development of industrial park, agro-processing development,
supporting Cooperative sector to involve in international business and others.
 The government is expected to take corrective actions in foreign currency management especially parallel
market. For instance, foreign exchange rate expected to be managed by market which in turn expected to
minimize the impact of parallel market.
 Remittance and FDI inflow of the country is assumed to be improved as the global economy is forecasted to
be recovered from Covid-19 shock.
 The bank will be expected to work with foreign employment agencies in a way to create long-lasting
relationship.
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 The emphasis given by the government to make the country as a hub of tourist destination in Africa and the
associated activities undergoing are expected to generate more foreign currency.
 As the bank’s business growth and risk management practices are expected to be improved, during this
strategic period relationship with new correspondent banks is assumed to be created.
 Diaspora communities are assumed to be addressed strategically by developing and implementing
attractive CVPs.
 The average growth of foreign currency earning of the bank is assumed to be improved to 30% from an
average growth of 25% during the last three years. Specifically, Export is forecasted to grow by 30%,
remittance by 40%, SWIFT by 25 % and cash Purchase by 10%. Accordingly, total FCY earning of the bank
is targeted to reach USD 1,371.74 million by 2025.
 Among the total FCY generation, in the coming strategy period, export is forecasted to take the dominant
share of 67%, followed by remittance (20%) while SWIFT and cash purchase collectively share 13%.
c. Profitability
Profitability is one of the major strategic objectives and the ultimate concerns of the bank to
ensure continuous business growth and maximizing stakeholders’ values. Thus, it is one of the
critical focus areas of the bank during the strategy period. In doing so, the specific assumptions
underlying in target setting of gross profit including, but not limited to, the following;
 In the coming years, the bank shall increase its revenue bases through enhancing digital banking services,
implementing new products and others for generating fees, charges, commissions and non-interest income.
 The earning basis is expected to be enlarged as a result of increasing resources mobilization (local and
foreign) efforts of the bank.
 The provision held for bad assets will be as low as possible in the coming years through proper
management of asset quality.
 The terms and tariffs (domestic and foreign) of the bank will be revised regularly via appropriate study as
deemed necessary to collect the desired interest income from the increasing earning assets of the bank.
 The bank has been constructing its own buildings at various cities/towns which are expected to be
operational in the coming years. Thus, possessing/using of own buildings will either increase the bank’s
other income sources and/or minimize the rent and related expenses.
 General expenses are assumed to be increased in line with the growth of the operational volume of the
bank. Although the general expenses are expected to be enlarged, proper management of controllable
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expense is assumed to be applied through target setting to cost centers and evaluating its proper use on
regular basis.
 Competitive payments of salary and benefit packages are expected to be applied in the coming strategy
period.
d. Customer Base and Branch Accessibility
As the bank opts to invest in transforming digital services, the traditional bricks-and mortars
approach shall not be the main strategic concern of the bank in the coming period. However, to
enhance the bank’s presence in the capital city (Finfinnee) and other big potential towns, and
expansion of dedicated interest-free branches at potential areas, conservative branch opening
approach will be considered.
Regarding customer base expansion, it becomes one of the indicators of the national financial
inclusion strategy which is aimed at promoting banking services to a considerable portion of
Ethiopia’s population which is excluded from financial services. During the last four years,
increasing deposit accountholders has remained one of the key initiatives of the bank. As a
result, it not only became a foundation for increasing transactions but also turn out to be a
strong basis for deposit collections. Therefore, expanding its customer base remains a strategic
direction for the bank during the next strategic period. Likewise, in the upcoming strategy period,
the bank shall provide distinctive emphasis to the enhancement of digital banking services as it
is the driver of the banking business as a whole.
The following specific assumptions are considered in setting the target of accessibility channels
and customer base;
 The country’s low level of financial inclusion, which is estimated at 40% at the end of June 2020, will be an
opportunity for the bank to enhance its accessibility channels.
 There is large number of the economically active population in the country which creates good opportunities
for recruiting new deposit customers.
 Large unbanked population coupled with broad accessibility created and digital banking options could offer
a chance of working on the unbanked areas.
 In the last three years, on average the bank’s branch network has been grown by 19%. By considering, the
existing and emerging market potentials, in the next strategy period, it has been targeted to open an
average of 50 branches annually, and the total new branches is forecasted to be 250 (out of which at least
Page | 43
120 branches in Finfinnee) and other for dedicated IFB and other potential areas. Accordingly, total branch
network of the bank is expected to reach 670 at the end of June 2025.
 Presently, of the total branches, the branch network in Finfinnee city covers only 20% which is the lowest
proportion as compared to the private banks. Thus, great attentions will be given to accessibility expansion
in Finfinnee city in particular and also other large cities in the coming strategy period.
 Supported by technology, it has been also assumed that kiosk or mini branches with limited number of
employees could be opened.
 Evolving digital banking system and a growing number of mobile subscribers will definitely give an
opportunity to create customer experience allowing transactions more rapidly and conveniently.
 Special emphasis will be given to expanding the customer base of the bank having in mind the low financial
inclusion in the country. Accordingly, on average, by considering 2,500 new deposit accounts per branch
during this strategic period it is planned to recruit 7.10 million new accounts. Accordingly, the total deposit
accountholders of the bank are estimated to reach 13.37 million at the end of the starthey period.
e. Digitization
The information and communication applications are of paramount concern to the banking
industry in today's business environment. Moreover, future banking is expected to be dominated
by digitalization. Therefore, in the coming strategy period, the bank will give special emphasis to
the expansion of digital banking services. In setting the digitalization target, the following
specific assumptions have been considered.
 Digitalization is assumed to be the base of the bank’s operation during this strategic period,
 The continuous innovation and development of financial technology in the world coupled with the emphasis
of the Ethiopian government to develop digital economy help the bank to transform its digital banking. In
association with this, the country’s Telecom infrastructure is assumed to be improved.
 The existence of substantial number of mobile subscriptions and Tech-Savvy generation in the country is
assumed to create many opportunities for the bank to expand its digital banking services.
 To enhance the operationalizing of Coopbank digital platform.
 On average 50 merchants are assumed to be recruited per branch annually which puts the total
number of merchants 145,203 at the end of this strategic period
 Ten agents per branch is assumed to be recruited annually to put total agent 28,625
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 To avail alternative channels to customers during this strategic period it is planned to deploy 200 ATM
which puts the total ATM machine of the bank to 364. Additionally, it is targeted to deploy 5,000 POS
machines annually at feasible locations. This puts the total number of PS machine of the bank to more than
25,000.
 Furthermore, by giving special focus to digital banking expansion, the bank’s COOPay number of customers
are projected to reach 10.02 million (75% of the total customer base of the bank, from current share of
6.00%). ATM cardholders are projected to reach 3.34 million (25% of the total customer base of the bank,
from current share of less than 3%).
Accordingly, the baseline and set targets of the next strategy period (FY2020/21 to 2024/25)
computations are presented in the following table;
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Table 7: Baseline and Targets (FY2020/21 to 2024/25)
Strategic Objectives KPIs Targets by Fiscal Year

Baseline
2020/21 2021/22 2022/23 2023/24 2024/25
(2019/20.)
Increase Profitability ROA 2.56%(e) 2.60% 2.70% 2.80% 2.90% 3.00%
ROE 48.10%(e) 51.67% 55.00% 58.00% 61.00% 63.00%
Gross Profit (in mil.) 1,527.05 2,158.00 3,219.83 4,539.04 6,272.99 8,519.88
Expense to income ratio 65.00% 64.00% 63.00% 62.00% 61.00% 60.00%
Enhance Market share Market share in total deposit 10.17% 11.51% 12.31% 12.93% 13.39% 13.76%
Market share in FCY 8.20% 8.96% 9.25% 9.71% 10.33% 10.90%
Market Share in Profit 8.84% 9.6% 10.7% 12.1% 13.5% 14.6%
Enhance financial resources mobilization Incremental Deposit (in mil.) Total 9,413.74 15,900.00 20,000.00 24,500.00 29,500.00 35,500.00
Conventional 8,004.96 12,667.00 16,000.00 19,566.84 23,528.67 28,494.79
IFB 1,408.74 3,233.00 4,000.00 4,933.16 5,971.33 7,005.21
Foreign Currency Total 363.42 483.95 630.15 822.40 1,075.62 1,371.74
Mobilization (in million USD) Export 257.17 324.90 422.37 549.10 713.85 906.53
Remittance 33.22 82.82 115.95 162.33 227.26 306.80
SWIFT 47.77 53.20 66.50 83.13 103.91 124.69
Cash Purchase 25.27 23.03 25.33 27.87 30.65 33.72
Enhance financial soundness NPLs ratio 2.31% 3.00% 3.00% 3.00% 3.00% 3.00%
CAR 9.52 % 9.72% 9.92% 10.12% 10.32% 10.50%
Increase Customer Satisfaction Customer Satisfaction Index 74.00% 75.20% 76.40% 77.60% 78.80% 80.00%
Increase customer acquisition (customer New customer acquisition (in Deposit 6,253,167 1,162,500 1,300,000 1,425,000 1,550,000 1,675,000
Page | 46

Baseline
2020/21 2021/22 2022/23 2023/24 2024/25
(2019/20.)
accountholders
base) number) Coopay wallet 377,856 850,167 1,528,712 1,849,566 2,194,880 3,223,068
Cardholders 171,065 232,983 558,842 669,248 793,472 915,806
Drop-out of Cooperatives, Private corporate and
Improve customer retention NA 0.00% 0.00% 0.00% 0.00% 0.00%
Institutional banking clients
Enhance Process Efficiency and Non-compliance to SOP NA 0 0 0 0 0
Effectiveness Compliance to SLA NA 100% 100% 100% 100% 100%
Improve risk and internal control Composite risk rating level High Medium Medium Medium Medium Medium
management Audit Coverage Ratio 100 100 100 100 100 100
Branch 420 45 55 50 50 50
Merchant 2,953 23,250 26,000 28,500 31,000 33,500
Incremental accessibility
Agent 175 4,650 5,200 5,700 6,200 6,700
channels
Improve marketing of the bank ATM 164 60 50 40 30 20
POS 69 5,000 5,000 5,000 5,000 5,000
New Products 1 3 3 3 3 3
Reputation Index 77.00% 78.60% 80.20% 81.80% 83.40% 85.00%25
Enhance Human Capital Leadership competency Score 66.00% 67.80% 69.60% 71.40% 73.20% 75.00%26
Employee Engagement Index 55.00% 58.00% 61.00% 64.00% 67.00% 70.00%27
Employee Stability Index 95.40% 95.70% 96.00% 96.40% 97.70% 97.00%28
25
A practical highest Reputation index of the banking industry is 85% (1.6% incremental against the baseline year on year basis)
26
The global novation score of leadership competency is 75% with an improvement score of 1.8% each year against the baseline
27
The Employee Engagement index of the bank is expected to be 70% by FY 2024/25 with annual advancement of 3% against the baseline
Page | 47

Baseline
2020/21 2021/22 2022/23 2023/24 2024/25
(2019/20.)
Enhance Organizational Capital Organization Culture Audit 65.00% 68.00% 71.00% 74.00% 77.00% 80.00%29
System availability NA 99.99% 99.99% 99.99% 99.99% 99.99%
System response time NA 15 sec 10 sec 9 sec 8 sec 5 sec
Enhance Information System Capital
Level of IT projects implementation 75.40% 100.00% 100.00% 100.00% 100.00% 100.00%
Digital maturity level30 Basic Digital Basic Digital Advanced Advanced Advanced Fully Digital
28
The stability index of the bank is expected to be 97% with a progress of 0.32% per year against the baseline
29
According to the Deloitte, (2018) survey result, the acceptable standard for desirable or strong culture in banking industry is above 80%
30
Manual; paper applications, branch-based channels, telephone and e-mail communications with customers, and manual-based document processing, retrieving and reporting.
Basic digital goes from minimal online offerings, digital transactions, and partial ecosystem integration.
Advanced Digital means minimal paper use, significant digital offerings, and real-time processing. Whereas, full digital level requires frictionless applications, consumer data
integration, and fully automated back-office processing including KYC filling, reporting and analytics
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4.9. Strategic Initiatives
Once the measures and the target have been set for the strategic objectives, it is the
implementation of strategic initiatives and projects that cause change. Strategic initiatives are
programs or projects that turn the strategy into operational and actionable terms. Strategic
initiatives are action programs designed to close the strategic performance gap between the
current and the target performance. They can be long-term or short-term and must be able to
produce a clear and measurable impact on the objectives to which they are aligned. They
answer the question, ‘What strategic projects must we implement to meet the Strategic
Objectives?’.
Kaplan & Norton (2010), also defined strategic initiatives as a finite duration discretionary
projects and programs outside the organization's day-to-day operational activities that are
designed to help the organization achieve its targeted performance. This definition underlines
how strategic initiatives live outside of the realm of business as usual while, dependent on
cross-functional coordination. Also, unlike ongoing operating activities, strategic initiatives have
a start and a finish date. Further, strategic initiatives generate changes in business outcomes as
it creates new sources of business growth, transforms how organizations work, and redefine
how markets perceive the organization.
An objective can possess as many initiatives as deemed necessary given a unique set of
internal and external variables the organization faces. Organizations may certainly put a
maximum of 15 initiatives based on its resource capacity or its appetite to take more initiatives
at a time (HBR, 202031). Further, according to the BSC Institute (2008) the number of strategic
initiatives should be manageable (5-15 strategic initiatives) depending on the size of the
organization.
4.9.1. Prioritizing Strategic Initiatives
Once potential initiatives for objectives have been identified and listed, it is important to prioritize
the strategic initiatives that truly drive the strategic results by taking the resource and capability
of the bank into account. Because, the implementation of strategic initiatives involves the use of
scarce resources like human, financial, time, and attention of senior management. Moreover,
prioritization helps to eliminate non-strategic initiatives and free up valuable resources that can
31
Available at: https://hbr.org/2008/06/the-secrets-to-successful-strategy-execution
Page | 49
be channeled into projects that create real value. The list of strategic initiatives can also include
existing initiatives.
The following four steps were used to prioritize the strategic initiatives of Coopbank:
1. Performing an inventory of all current strategic initiatives taking place within the bank
right now. This helps to make an informed decision regarding which initiatives are
strategic and which are not;
1. Map those initiatives to the strategic objectives on the strategy map. Take an initiative
and look at it in the context of each objective. If it contributes to the achievement of an
objective put a mark and if it does not, leave that grid empty.
2. Eliminating Nonstrategic Initiatives. Eliminate initiatives that do not contribute to the
achievement of the strategic objective(s);
3. Prioritize the remaining initiatives to focus on the most important projects.
Accordingly, the identified strategic initiatives are listed as follows;

1. Enhancing Fixed Asset and Capital Formation
2. Enhancing Customer Relationship and Experience
3. Enhance Capacity of Cooperatives
4. Business Process Improvement
5. Business Model Improvement
6. Enhance Stakeholders Engagement
7. Instill Performance Measurement System
8. Improve Marketing of the Bank
9. Enhance Employee Engagement
10. Strategic Learning and Development
11. Enhance IS Capital
12. Augmenting Resource Allocation with Resource Mobilization
4.9.1.1. Prioritization Criteria
The lists of strategic initiatives can be prioritized by using various selection criteria. The potential
candidates for selection criteria are customer requirements, potential alleviation of
organizational pain, organizational capacity (the financial and human resources), alignment with
organizational strategy, cost, level of risk, number of objectives impacted, and
interdependencies among initiatives. From the list of candidate selection criteria, the following
Page | 50
five items are identified for the prioritization of Coopbank strategic initiatives by taking the
specific characteristic of the strategic development process into account;
 The strategic impact of the initiatives: The number of strategic objectives impacted by
the strategic initiatives;
 Time to complete: The time required to implement the initiative;
 Total Cost: The anticipated implementation and operational cost;
 Interdependencies: Impact of other initiatives on the successful strategic outcomes with
other initiatives, and;
 Resource requirements (key talents): Key talent needed for the implementation of a
strategic initiative.
A scientific ranking framework, ‘Weighting Criteria Scoring’ were applied to select and
prioritize the strategic initiatives. Based on the ranking framework, weighting to each criterion
was established and each initiative scored against the criteria. In prioritizing the strategic
initiatives, weight was assigned to each of the selected criteria based on its strategic importance
and each initiative was rated based on the criteria. Accordingly, weight was assigned to each of
the criteria, such as the strategic impact of the initiative (50%), time to complete the initiative
(10%), the total cost to implement the initiative (5%), interdependencies of initiative with other
initiatives (25%) and key talent required for the strategic implementation (10%). The scores
range from 1 to 5 as shown in the following table:
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Table 8: Strategic Initiatives Rating System
Criteria Weight Scores

1 2 3 4 5
Strategic Importance 50 Very Low Low Moderate High Very High
<=3 4-5 6-7 8-9 >=10
Total Cost 5 Very High High Moderate Low Very Low
Time to complete (Months) 10 Very Long Long Moderate Short Very Short
>12 9-12 6-9 3-6 <=3
Resource requirements (key 10 Very intensive Intensive Moderate Less intensive Insignificant
staffs)
Interdependencies 25 Very Relatively Moderately Relatively Stand-Alone
Source: Niven, (2006) and Own Constructs, (2020)
Firstly, among the initiative criteria’s, the number of strategic objectives impacted by each strategic initiative is presented in the
following matrix;
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Table 9: Strategic objectives impacted Vis a Vis strategic initiatives
Instill Performance Measurement System
Enhancing Customer Relationship and

Enhance the Capacity of Cooperatives
Augmenting Resource Allocation with

Candidate
Strategic Learning and Development
Enhancing Fixed Asset and Capital

Enhance Employee Engagement
Initiatives
Business Process Improvement
Enhance Marketing of the Bank
Business Model Improvement

Stakeholder Engagement
Corporate
Resource Mobilization
Enhance IS Capital
Strategic
Objectives
Experience
Formation
Enhance Market share
Increase Profitability
Increase Financial Resources
√ √ √ √ √ √ √ √ √ √ √
Mobilization
Improve Financial Soundness √ √ √ √ √
Increase Customer √ √
√ √ √ √ √ √ √ √ √
Satisfaction
Increase Customer Acquisition √ √ √ √ √ √ √ √ √
Improve Customer Retention √ √ √ √ √ √ √ √ √ √
Enhance Process Efficiency √
√ √ √ √ √ √ √
and Effectiveness
Improve Risk and Internal √
√ √ √ √ √ √
Control Management
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Capital
Capital
follows;
Strategic
Corporate
Objectives
Enhancing Organizational
Candidate
Enhancing Human Capital

Initiatives
Enhance Information System

Improve Marketing of the Bank
√
√
√
√
Enhance Employee Engagement
Strategic Learning and Development
√
√
√
√
Instill Performance Measurement System
√
√
√
√
Enhancing Fixed Asset and Capital

√
√
Formation
√
√
Enhance the Capacity of Cooperatives
Enhancing Customer Relationship and

√
Experience
√
Business Process Improvement
Enhance Marketing of the Bank

√
√
√
Stakeholder Engagement
Enhance IS Capital
√
√
√
√
√
√
Business Model Improvement

Accordingly, using the above evaluation rating system, the strategic initiatives that were rated on the 5-points are presented as
√
Augmenting Resource Allocation with

Page | 54
Resource Mobilization
Table 10: Score of Strategic Initiatives
Initiatives Strategic Total Cost Time to Resource Interdependencies Total score

Importance complete Requirements (out of 5)
Enhance Employee Engagement 2.5 0.25 0.4 0.5 1.25 4.90
Strategic Learning and Development 2.5 0.1 0.2 0.3 1.25 4.35
Enhance IS Capital 2.5 0.05 0.1 0.3 1.25 4.20
Augmenting Resource Allocation with Resource 2 0.15 0.5 0.3 1.25 4.20
Mobilization
Instill Performance Management System 2.5 0.15 0.1 0.3 0.75 3.80
Enhancing Customer Relationship and 1.5 0.05 0.1 0.5 1.25 3.40
Experience
Enhance Marketing of the bank 1.5 0.05 0.3 0.3 1.25 3.40
Fixed Asset and Capital Formation 1.5 0.05 0.1 0.4 1.25 3.30
Enhance Capacity of Cooperatives 1.5 0.1 0.1 0.1 1.25 3.05
Business Process Improvement 1 0.2 0.1 0.5 1.25 3.05
Business Model Improvement 1.5 0.05 0.1 0.1 1.25 3.00
Stakeholder Engagement 1 0.15 0.1 0.4 0.5 2.15
Source: Own Computations, 2020
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Lastly, based on the above score, the strategic initiatives are prioritized in the following orders;
1. Enhance Employee Engagement

2. Strategic Learning and Development
3. Enhance IS Capital
4. Augmenting(expanding) Resource Allocation with Resource Mobilization
5. Instill Performance Management System
6. Enhancing Customer Relationship and Experience
7. Enhance Marketing of the bank
8. Fixed Asset and Capital Formation
9. Enhance Capacity of Cooperatives
10. Business Process Improvement
11. Business Model Improvement
12. Stakeholder Engagement
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Table 11: Commentaries of Strategic Initiatives
No Strategic Initiatives Initiatives Commentaries Major Actions

1 Enhance Employee Engagement is an involvement, enthusiasm about, and  Implement a compelling Employee Value Propositions;
Engagement commitment of employees to their work and workplace. It  Executing Employee Performance Management;
aimed to build an environment where employees feel  Integrating the HCM practices horizontally;
positive about their job, exercise discretionary behaviors,  Implement a continuous and ongoing performance-based recognition system
psychologically connected, and are motivated to across the bank (e.g. Launching the Coopbank STARS day quarterly, semi-
accomplish high levels of performance that realizes the annually and annually);
strategic imperatives of the bank.  Establishing an employee engagement center that collects, reviews and following
up the initiative;
 Developing engagement tracking framework (bottom-up and top-down feedback
tracking mechanisms);
 Implementing an engagement meeting bi-weekly on the core agendas at the team
level.
 Fostering a leadership capability of the bank leaders via learning and development
strategy;
 Align employees with the bank’s culture (mission, visions, values, norms) through
weekly team discussions.
2 Strategic Learning and Equipping the employees with the desirable competencies  Institute a learning center;
Development Practices that the bank needs through integrated learning and  Assess employee competency gap;
development practices at the organizational, team, and  Develop training Curriculum;
individual levels are vital to successfully attain the  Develop technical and leadership competency of employees through strategic
strategic intents. So, implementing this initiative will learning, training and development programs;
enable the bank to build a learning culture where

employees are encouraged to learn and develop and then  Institute an ongoing learning and development practices (learning culture)
in turn contributing to the bottom-line performances through;
through having competent, knowledgeable, skilled, and  E-learning (learning and talent development platform);
engaged talents that meet present and future tasks  On the job learnings such as customized job rotations, coaching,
required by the banking business. mentoring, delegation, and knowledge sharing.
 Align reward, performance and learning and development management practices
horizontally;
 Implement a succession planning and career path framework.
3 Enhance IS Capital The main aim of this initiative is to create the  Prepare and Implement a digital transformation strategy;
capability to leverage different IS resources to meet  Leverage technology to manage risks, execute strategy and drive business
the business and customer’s needs. performance;
It also enhances the digital maturity level through the  Improve the organization’s technology infrastructure;
integration of digital technology into all business units  Aligning IT strategy with the corporate strategy to achieve sustainable business
which in turn results in operational efficiency, performance;

 Identify, prioritize and Implement major IS projects;
customer experience, and competitiveness of the
 Ensure technical and business support on implemented IS projects;
bank in the industry.
 Transform digital delivery of the bank;
 Digitalize the product and service of the bank.
4 Augmenting Resource Diversifying and optimizing resource utilization in order to  Follow-up resource mobilization and allocation;
Allocation with Resource diversify risk and increase the profitability of the bank.  Follow-up customers’ deposit transaction;
Mobilization This is an initiative that is implemented to manage the  Follow–up of exporters’ and importers’ loan/financing productivity;
risks between the different baskets of customers.  Provide business advisory service to exporters and corporate deposits
Page | 46

customers
 Enhancing money tracking;
 Enhancing upselling and cross-selling;
 Referral marketing- spreading the word about a product or service through a
bank’s existing customers
 Increasing customer wallet share;
 Recruit new corporate and institutional customers;
 Scheduled corporate and institutional customer visits by the top management
team, including CEO.
5 Instill Performance Strengthening and instituting effective performance  Finalize the cascading process of the bank’s scorecard down to each team and
Management System management helps the bank to periodically ascertain and individuals;
gauge that each organ and performers are working  Strengthen coaching and mentoring practices by developing guiding principles;
towards the achievement of its strategic imperatives. It  Automating processes which help to easily extract data and information;
also helps the bank to identify whether its operations are  Define and institute timely evaluation and monitoring practices at each level;
aligned with the strategy or not, then take corrective  Strengthen strategic feedback management system;
actions. Effective performance management should be
 Align performance management system with HCM practices
aligned with the Human Capital Management practices of
 Take appropriate corrective actions timely.
the bank.
6 Enhancing Customer Customer relationship management is a customer-driven  Enhance Customer Relationship Management;
Relationship and Experience approach to attract, retain, satisfy, build a long-term o Automation of CRM tools (contact, document, report, and analytics;
relationship with profitable customers, and maximizing management) to enhance CRM efficiency;
their lifetime value, to build loyalty and increase their o Enhance the capability of RMs (human and IS capability).
wallet share. Moreover, customer experience is how the
Page | 47

bank meets customer expectations at each interaction  Implement CRM Principles;
between the customer and the bank over the duration of  Establish Customer experience Management Center
the relationship. By applying this strategic initiative, the o Establish a call center and enhance its responsiveness;
bank will achieve its performance target of customer o Establish customer center for customer queries, feedback and complaint
retention, satisfaction, and acquisition from customer management;
perspectives and other strategic perspective objectives o Tracking Customer Experience through persistent and periodic monitoring
and performance targets.
of customer interaction with the bank.
 Embedding the customer value proposition in offerings of every product and
service and in each interaction.
7 Enhancing Marketing of the It is efforts made to find, attract, keep, and grow target  Incentive packages for depositors and FCY users;
Bank customers by creating, delivering, and communicating  Enhance cross-selling, up-selling and referral marketing;
competitive customer value for a long period. It requires  Improve Integrated Marketing Communications (ads, public relation, publicities,
building a greater customer experience of the bank’s customer sessions, PAC, and other marketing tools);
through an understanding of the needs and wants of  Brand and standardize the bank.
target segments and delivering the desired values better
than the competitors.
8 Fixed Asset and Capital This initiative aimed at boosting the wealth of the bank  Increasing paid-up capital of the bank;
Formation through enhancing paid-up capital, constructing of own  Headquarters (HQs) construction;
buildings in the feasible major city and towns. It also o Finalize the land acquisition process by December 2020;
enables the bank to build the headquarter, training o Organize construction project Office, by June, 2021;
centers, and other buildings that help the bank to reduce o Commence the design phase from July, 2021-June 2022;
office rent expenses, enhance learning culture, and
o Conduct bid process (July 2022-June, 2023);
generate revenues, and to build an image of the bank.
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o Hiring contract administration and site supervision consultant by December.
2023;
o Commence construction by June, 2024;
 Acquisition of three building through purchase in Finfinnee city during coming three
consecutive years, the 1st building by the year, 2021, the 2nd building during the
year, 2022 and the final building during the year, 2023;
 Finalize construction projects under progress such as transitional HQs by June
2021, Wolisso by Sept. 2021, Hundanne, by March 2022;
 Coopbank Academy Construction:
o Pre-construction phases – feasibility study and submitting a design proposal
to municipality by Octo. 2020;
o Acquire land holding certificate by June 2021;
o Commence design phase from July 2021-June 2022;
o Finalize construction bid process from July 2022 - March 2023;
o Hiring contract administration and site supervision consultant from April, 2023-
Sept. 2023;
o Commence construction by, Oct. 2023;
 Building Construction at Adama, Dire Dewa and Shashamane:
o Acquire land holding certificate by December 2020;
o Commence the design phase by, 2021;
o Finalize construction bid process by December, 2021;
o Commence construction by, March ,2022;
Page | 49

 Hawasa: Acquire land holding certificate by, December, 2020;
 Jimma: Complete feasibility study and design proposal by, 2020;
 Establishing new investment/business ventures (joint ventures, or direct
investment) to enter into potential or emerging market, such various Coop;
investments by 2023;
o Establish Coop Property.
9 Enhancing Capacity of As cooperatives are the founder and major shareholders  Strengthen the capacity of selected cooperative through offering technical training,
Cooperatives of the bank, giving due emphasis to cooperative societies advisory services, and technical support;
at all levels is highly decisive to gain sustainable  Conduct various studies focused on cooperative sectors for improving the sector,
competitive advantage. Cooperative societies along with  Enhance the capacity of selected cooperative leaders through facilitating local and
its members are the key to the future growth of the bank. global exposure visit;
In addition to assisting the growth of the cooperatives  Create relationships with various stakeholders working on cooperatives such as
through adequate financing based on their demand and government organs, higher institutions, NGOs, etc.;
detail assessments, the bank is anticipated to highly  Improve awareness of cooperative societies at the grassroots level on financial
engage in close intimacy with cooperative clients by services through aggressive public awareness;
providing capacity buildings via various involvements  Financing the cooperatives value chain through detail assessments;
 Identify cooperative shareholders data and ensure the payments of dividends to
the members on a yearly basis;
 Update cooperatives data and mapping to proximity branches and districts;
 Promoting and advocating the contribution of cooperatives to the country’s
economy;
 Increase mobilization of resources from cooperative members through the network
Page | 50

of cooperatives;
 Organize cooperatives forums and meetings with key stakeholders periodically;
 Prepare curriculum for cooperatives training; and delivering training as per the
curriculum.
10 Business Process This initiative focuses on the process of modeling,  Developing and Implementing business and functional- level strategies;
Improvement automating, and optimizing business processes to allow  Re-designing business processes;
different organs of the bank to work together efficiently o Identify the need for change in the business process by conducting a process
and effectively toward the achievements of strategic audit and prioritize areas for improvement;
objectives. It also involves organizational alignment o Analyze the current business process to identify the process from end-to-end
through devising a business level strategy that led to set and set the improvement program.
business objectives, roles, and how they should be  Automate business processes.
achieved. Moreover, it also comprises developing an
operating model that combines processes, procedures,
employees and IT systems.
11 Business Model Based on environmental assessments improving the  Study and implement the operating model of the bank depending on the growth of
Improvement business model helps the bank to diversify its business to the bank;
exploit the prospect potentials from the economy. The  Conduct Assessment on business model improvement;
bank’s needs to institute itself towards exploiting the  Establish Coopbank Islamic subsidiary;
prospective potential in areas like Islamic banking  Establish Coopbank Investment.
businesses and secondary markets.
12 Enhance Stakeholder Stakeholder engagement is the process of communicating  Assess the current bank’s gaps in meeting stakeholders needs and expectations;
Engagement and collaborating with stakeholders to meet their  Craft appropriate stakeholder’s engagement strategies to maximize their value and
needs/expectations, address issues as they occur, and create a long-lasting positive relationship;
Page | 51

build a long-lasting relationship. The primary aim of  Enhance internal preparation and alignment (allocate resource and time) towards
stakeholder engagement is improving the quality of appropriate stakeholder management;
relationships with them to achieve the greatest alignment.  Conduct continuous monitoring and follow-up practices (arranging discussion
Stakeholders can be engaged in many different ways, secession and arranging feedback collection mechanisms like consulting,
which goes from information sharing to participation in workshop, forums, survey, panel discussion).
decision-making.
Page | 52

Strategy

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Strategy

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Strategy Formulation 5.

As a strategy-led organization, Coopbank devised(develop) its fourth and foregoing corporate

 Clarify vision and strategy by translating into action,

Moreover, a strategy is a continual process to be formulated, tested, and revised/refined

 Choosing strategic direction,

2. Major Achievements and Shortfalls of the Fourth

Table 1: Summary of Coopbank’s Achievement in key Parameters (FY 2017/18-2019/20)

Amount in billions of ETB except mentioned thereon

3. Coopbank Mission, Vision and Core Values

“To be the leading private bank in Ethiopia by 2025.”

3.3. Core Values

4.1. SWOT Analysis

 Internal strengths: any existing or potential internal resources or capabilities that if

Table 2: SWOT Matrix of Coopbank

4.2. Strategic Alternatives

Figure 1: Strategic Alternatives

Internal Assessment Strengths Weaknesses

When an organization’s objectives are market penetration, product development, and

4.3. Strategic Perspectives

Kaplan and Norton (199214) developed an innovative multi-dimensional corporate performance

4.4. Strategy Themes and Results

Table 3: Strategic Themes and Results

Strategic Themes Descriptions Strategic Results

Digital transformation is the integration of digital technology Service excellence, transformed

bottom-line performance (i.e. customer relationships, excellence and hence customer

internal processes, and value propositions) through the set experience.

of systems and processes that ensure the security,

Figure 2: Strategic Theme and Results of the bank

Source: Own Construct, 2020

4.5. Strategic Objectives

Accordingly, in formulating a Coopbank fifth corporate strategy, the above-defined strategic

4.5.1. Strategic Objectives Commentaries

Table 4: Commentaries of Strategic Objectives

Perspective Strategic Objective Commentaries Intended Outcomes

Perspective Strategic Objective Commentaries Intended Outcomes

Perspective Strategic Objective Commentaries Intended Outcomes

Perspective Strategic Objective Commentaries Intended Outcomes

Perspective Strategic Objective Commentaries Intended Outcomes

4.6. Strategy Map

Figure 3: Strategy Map of Coopbank’s Growth Strategy

4.7. Performance Measures

Table 5: Performance Measures (KPIs)

Gross Profit = Total income – Total expense

4.8. Targets and Performance Thresholds

Table 6; Performance Threshold

Color Code Color Arrangement Performance Definition

x ≥ 120 % Achievement; exceptional/superb achievement or

Green 100 % ≤ x< 120 % Achievement: Performance met expectations.

Amber 75 % ≤ x< 100 % Achievement; Satisfactory performance.

Red 50 % ≤ x< 75 % Achievement: Performance failed to meet

4.8.1. Targets and Baseline

4.8.1. General Assumptions

 Existence of a large number of unbanked and underbanked population in Ethiopia:

 The expected establishment of secondary and stock markets will expected to

4.8.2. Specific Assumptions

 Positive and strong forecast of the macro-economy: Ethiopia, has experienced

4.8.2. Specific Assumptions

d. Customer Base and Branch Accessibility

Table 7: Baseline and Targets (FY2020/21 to 2024/25)

Strategic Objectives KPIs Targets by Fiscal Year

Strategic Objectives KPIs Targets by Fiscal Year

Strategic Objectives KPIs Targets by Fiscal Year