Organizational Change in Umpqua Bank - Essay Example

Organizational change Introduction The current Umpqua bank has grown over the years to become as great as it is now having started as a small community bank founded over five decades ago. Like most banks, Umpqua’s growth threatened to wipe away its culture which included the manner in customer service were handled and the general modes by which business activities were handled. The leadership, knowing that Umpqua's culture was their biggest asset, came up with measures to maintain it. Challenges faced by the Umpqua's leadership in maintaining the culture: One of the biggest challenges the bank faced was the influence of the culture in the other acquired bank branches on the culture of Umpqua bank. Adoption of other banks involved retaining the banks’ employees. These employees had got used to a different culture and it was therefore a major challenge to make them adjust to a new culture smoothly. To overcome this problem, the leadership injected Umpqua’s culture into the other bank branches by bringing their employees in busloads to Umpqua's stores to offer them with orientation. This enabled a real firsthand introduction to a new business world and which in turn made the employees feel the desire to change and hence adapt faster (Freeze, K., ND). It was a challenge for Umpqua to run its operations in a harmonious manner especially considering the fact that its individual stores were different in terms of size, demographics and layout. In addition, the branches were also different in the sense that their loan and deposit potential varied considerably. This therefore demanded individual stores to be handled differently. The bank created a cross-functional task force to look for the best means by which the challenge could be overcome. The taskforce provided a strategic financial proposal which later streamlined its operations. Competition from other large banks posed a serious challenge to Umpqua's desire to succeed. Banks such as Washington Mutual and Bank of America sent the leadership of Umpqua bank to the drawing board to come up with new strategies that would aid in retaining its culture now that their competitors had started copying their already-in-use strategies. In 2002, for example, Washington Mutual had its first ‘occassio’ branch opened whereas the Bank of America started holding experiments to ascertain the effectiveness of the branch design. To counter this, the leadership at Umpqua decided to invest in the best customer service delivery as compared to their competitors. Umpqua's customer service, especially its in-store customer service which was unique, was its competitive edge and so it had to be perfected (Freeze, K., ND). Umpqua bank with the aim of remaining the leader in the banking business settled on a plan to train and retrain its employees to ensure high standards of customer service. Hiring of new qualified employees was effected as a measure to arm the bank with enough manpower. The bank’s newly hired employees were trained in new and more efficient ways of dealing with customers and were tasked to put them in use while serving their customers. The future impact of Mergers and acquisitions Mergers and acquisition result in large banks gobbling up small banks in the process of creating networks both nationally and regionally. This will continuously lead to the increase in the number of the community banks. However this increase can also be caused by or realized if large community banks acquire small community banks and if small community banks continue to merge with each other. Continued merging and acquisition therefore, could lead to a situation where the resultant large banks start suppressing the small banks and even in worse case scenarios pushing them out of the market. This could lead to a banking business less considerate to customers with low income in a given region (Young, 2002). Mergers and acquisition lead to large banks hence favorable economies of scale. This could catalyze the big banks to take the advantage of the existing scale economies and initiate actions such as giving mortgages at low interests to their customers as compared to the small banks. This could negatively impact on the small banks who would find the banking business unprofitable for they may end up losing customers to the big banks (Young, 2002). From other perspectives, it has been argued that mergers may result in transfer of wealth to shareholders from employees, an act that would in the long run lead to disadvantaged employees. Mergers and acquisitions might provide loop holes for the new owners to use the new ownership contracts as tools of ensuring profitability of new firms at the expense of workers’ welfare. This results in the disregard of the previously signed contracts between former owners and employees about wages or other benefits while on the other hand causing an increase in shareholders’ wealth. The continued desire to increase firm profits by the new owners who also automatically become the new employers may result in the down sizing of the staff for some sections, like the catering department, may become irrelevant when two banks are merged. This may lead to mass lay-offs in some cases (Siegel, 2008). It is however argued that mergers result in a take and give situation and it does not always end up in disadvantaging the small banks. In certain business lines such as credit card lending and mortgage banking it is possible that the large banks are likely to have a substantial increase in market share, all at small bank’s expense. On the other hand the small community banks will experience increased market demand in certain lines of business such as small business relationships and other household deposits. This shows that, in as much as there will be shifting of customers from small banks to large so as to enjoy the economies of scale, there will also be those shifting from large bank to small banks to enjoy specific services provided efficiently by small banks (Young, 2002). If this mergers result in the implementation and use of new technologies for example, it might lead to the promotion and upgrading of skills of the workforce competitively. This is because the mergers and/or acquisition transactions may provide for mechanisms to stimulate and initiate measures that would result in investment in additional human capital (Siegel, 2008). Conclusion Mergers and acquisition are just modes of banks doing business. Each and every bank whether it is community based or not, is in a position to make a decision towards or against such. Success or failure as a result of mergers or non-mergers should be interpreted and understood that by the end of the day, it is still business. References Freeze, K., (ND) Umpqua Bank: Managing the culture and implementing the brand. Boston, MA: DMI. Young, R., ( 2002). “The challenges facing community banks: In their own words.” Economic Perspectives. 4Q. Siegel, D., (2008). Evaluating the Effects of Mergers and Acquisitions on Employees. NY: University of California Press. Read More