The Bank of Excellence - Case Study Example

? Bank of Excellence case Grade (2nd, April. Bank of Excellence case Introduction The Bank of Excellence was started in 2001 as a microfinance institution, which has grown to a fully fledged bank with several operational branches. The transformation from a microfinance institution occurred so rapidly, that many aspects of the bank’s operations and service delivery were not harmonized effectively. The most affected was the Human resource department of the Bank, since it registered an immense growth, rising from the initial 23 employees that the microfinance had started with, to a massive 417 employees. Thus, while the other departments provided the bank with operational challenges, the HR department was the most affected. This study seeks to delve into the growth of the BoE, with a focus on how the growth has impacted on its effective delivery of services to the customers, as well as how the challenges experienced in the HR department has impacted on the bank’s performance. Summary When it first opened its doors in the year 2001, the Bank of Excellence (BoE) became the center of attraction to many. Despite the fact that it started as a microfinance institution, its growth and transformation to a fully fledged bank took only 6 years, and by the year 2007, it was granted a fully fledged bank status. The bank now prides itself for having 8 branches in different regions, with a growing profit margin every single year, except in the 2012 financial year, when the profit of the bank declined significantly. Several questions have been raised, regarding how the microfinance institution registered such a rapid growth, to attain a bank status within 6 years of its operation. First, the innovative product strategy was applied by BoE when it first opened its doors, to give the customers a range of new financial products that were not offered by other financial institutions. BoE specialized in offering low-interest loans to the customers, which were processed fast and the terms and conditions attached were not stringent. This made it easy for the many customers to apply and qualify for loans, which they would not have otherwise been granted by other financial institutions, due to the strict requirements that hindered their application for loans, such as high security and collateral requirements (Falcone, 2009). BoE introduced the system of giving loans to the customers based on movable and other less secured assets, which allowed many applicants to qualify for the loans. Excellent customer service is the other strategy that the microfinance institution had applied to attract many customers. The microfinance institution ensured that customers were served as quickly as possible, while also ensuring that they got good customer service from its employees. This made the customers feel valued by the financial institution, and thus kept increasing by the day. The microfinance institution had also ensured that its employees are well motivated and enabled, to deliver the best services to the customer, an aspect that helped to build good customer relationship and consequently customer loyalty to the microfinance. There was a direct and cordial relationship between the employees and the management of the microfinance, which made the employees feel appreciated. There was also a reward system for the employees, who were rewarded with bonuses and even promotion, once they performed well and even came up with innovative ideas for the microfinance to implement and benefit the business, the employees and the customers. By the end of its first year of operation, the microfinance had managed to attract over 200, 000 regular customers. This growth trend continued until the microfinance attained a customer base of over one million, and thus applied to be registered as a fully fledged Bank. Analysis The attainment of the bank status was a privilege to the microfinance institution, since it would now benefit more from the central Bank lending, as opposed to when it was just microfinance. This would allow it to give even more loans to its customers, and thus meet their needs adequately, while also growing and expanding, and improving its profitability. However, the growth of the Microfinance came with various challenges. First, the number of employees recruited by the Bank increased, which prompted the Bank to adjust its Human resource department, and the system of hierarchy in the department, making it more bureaucratic. While previously the department of human resource was headed by a departmental head who dealt directly with the employees in resolving any of their issues, it was now reformed to constitute of the human resource Manager, the assistant and the secretary. Therefore, for employees to reach the manager, they had first to go through the secretary, then the assistant, before they reach the manager. The reward system for the employees was also scraped, with the increase in the number of employees who could make such claims; the bank could no longer sustain the reward system. The level of employee motivation also dropped significantly, with the employees now feeling very much discontented with the new bureaucracy and the lack of a reward motivating system. The Bank also found that its expenses were significantly increasing, while the returns were declining, which made the company decide to reduce some of the benefits it was offering to the employees, including a comprehensive insurance cover, which was now restructured to cover only the essentials of the working environment, while leaving the rest of the responsibility to be covered by the employees. The other aspect of the employees that was negatively affected by the growth of the BoE is the annual leave days. While the bank initially gave its employees some 22 days for annual leave, the increase in the customer base and the workload required the bank to restructure its operations and seek to increase its working capacity, while not increasing its costs. This way, the Bank reduced the annual leave days for the employees from the initial 22 days to just 17 days. Later-on, the position of the employee supervisor that increased the bureaucracy of the Human resource department even more was established. The employees had first to pass through the supervisor, before reaching the office of the manager, creating more inconveniency for them. The most fundamental aspect of these changes is that; the changes did not affect only the bank and the employees negatively, but also affected the customers. Considering that the level of employee motivation had declined significantly, the level of customer satisfaction with the bank also declined, since the employees were not fully motivated to give the customers the best of their services. The customers started feeling less valued by the bank, and consequently reduced their transaction with the bank, while others shifted to doing business with other financial institutions, which were more satisfactory, compared to BoE. This in turn affected the performance of the bank, since the bank’s profitability highly depended on the customers it was serving. It is this occurrence that explains the reduction in the bank’s profitability for the year 2012, since the more the bank grows and expands, the more the challenges are rising, and the more the level of employee and customer dissatisfaction. By the end of the year 2012, the bank had recorded an employee turnover rate of 15%, with a loss of its highly trained and experienced employees increasing the concern (Falcone, 2009). Conclusion The challenges that are looming for the business are many, and if some immediate actions are not taken, the bank may end-up losing more customers and thus reducing its profitability margin. In the worst case scenario, the Bank may even collapse, if the current trend is something to go by, since the rate of employee turnover and the reduction in the Bank’s profitability indicates further challenges for the bank. The case presents various challenges that need to be resolved by BoE, which include employee motivation, rewarding system and the bureaucracy in the Human resource department, which has highly affected the Bank. This wil help to resolve the challenges facing the business, which would otherwise cause the collapse of the Bank. This raises the question; what are the strategies applicable to resolve the challenges facing the business? References Falcone, P. (2009). 101 Tough Conversations to Have with Employees: A Manager's Guide to Addressing Performance, Conduct, and Discipline Challenges. New York: AMACOM. Read More