Question 1 (word limit: 700 words) CBA Group is a bank holding company for a sta

Question

Question 1 (word limit: 700 words)

CBA Group is a bank holding company for a state-wide group of retail consumer-orientated banks. CBA was formed in the early 1960s by a group of young investors who believed in a high level of consumer services. The number of banks owned by the holding company expanded rapidly. These banks gained visibility because of their experimentation with innovations such as free-standing 24-hour automated teller machines; automated funds transfer systems, and other advances in banking services.

CBA’s earnings performance has been better than that of most other banks in the state. The founders organised CBA and continue to operate it on a highly decentralised basis. As the number of banks owned has increased, CBA’s executive management has delegated more responsibility and authority to individual bank presidents, who are considered to be representatives of executive management. Although certain aspects of each bank’s operations are standardised (such as procedures for account and loan applications and salary rates), bank presidents have significant autonomy in determining how each bank will operate.

The decentralisation has led each bank to develop individual marketing campaigns. Several of them have introduced unique “packaged” accounts that include a combination of banking services; however, they sometimes fail to notify the other banks in the group as well as the executive office of these campaigns. One result has been interbank competition for customers where the market overlaps. The corporate marketing officer had also recently begun a state-wide advertising campaign that conflicted with some of the individual banks’ advertising. Consequently customers and tellers have occasionally experienced both confusion and frustration, particularly when the customers attempt to receive services at a bank other than their “home” bank.

CBA’s executive management is concerned that earnings will decline for the first time in its history. The decline appears to be attributable to reduced customer satisfaction and higher operating costs. The competition among the banks in the state is keen. Bank location and consistent high-quality customer service are important. CBA’s 18 banks are well located, and the three new bank acquisitions planned for next year are considered to be in prime locations. The increase in operating costs appears to be directly related to the individual banks’ aggressive marketing efforts and new programs. Specifically, expenditures increased for advertising and for the special materials and added personnel related to the “packaged” accounts.

For the past three months CBA’s executive management has been meeting with the individual bank presidents to review CBA’s recent performance and seeks ways to improve it. One recommendation that appeals to executive management is to make the organisation’s structure more centralised. The specific proposal calls for reducing individual bank autonomy and creating a centralised individual bank management committee of all bank presidents to be chaired by a newly created position, vice president of individual bank operations. The individual banks’ policies would be set by consensus of the committee to conform to overall CBA plans.

Required:

Identify four advantages and four disadvantages of a decentralised structure in relation to CBA

Evaluate whether the proposed structure is strategically beneficial to CBA

Explanation / Answer

In decentralized organizational structure, the authorization is given to or extended to the lowest level of the organization. This delegation and authority extension can have many advantages as well as disadvantages. some of them with respect CBA is mentioned below.

Advantages

Disadvantages

2. The proposed organizational structure is decentralized organization structure is beneficial if the organization CBA could reduce the disadvantages and can enhance the advantages mentioned above. The decentralized organizational structure can make the managers and the employees more innovative which can enhance the customer service level which can bring long-term benefits to the organization. The organization can also implement a code of conduct which has to be followed by all the banks so as to implement a uniform policy and procedures.

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