Management of Decision Making: Bank Muscat - Case Study Example

Bank Muscat has tied up with Prudential Insurance (Prudential Insurance is a world famous Insurance company) for retailing insurance policies. The Investment Banking Division of the Bank, where I work, has been asked to handle the additional work of insurance retail. The managers and employees are putting up stiff resistance to introduction of insurance operations for fear of being burdened with additional work. We (we is always better than I) analyse the problem with Soft System Methodology and suggest possible recourse to be adopted for smooth implementation of the Board decision. Bank Muscat—A Profile Bank Muscat is the largest bank of Oman with a strong presence in Corporate Banking, Consumer Banking, Investment Banking, Treasury, Private Banking, Project Finance and Asset Management. The Bank has recently forayed into international market by opening a branch in Riyadh. It holds the rare distinction of being voted the ‘Best Bank in Oman’ five times in a row by The Banker, FT London, six times in a row by Euromoney and seven times by Global Finance Inc. The Bank Muscat has six divisions-- Corporate Banking, Consumer Banking, Investment Banking, Treasury, Private Banking, Project Finance and Asset Management ( http://www.bankmuscat.com/ accessed on July 3rd 07). The Decision and its Impact A decision has been made to enter the insurance sector in collaboration with a leading insurance company of the world— Prudential Insurance. The Bank Board sees it as a strategic decision to meet the futuristic vision of providing a wider range of financial services and meet competition by diversification. The Investment Banking Division will sell Life, Business, and Vehicle insurance policies in collaboration with Prudential Company. The insurance sales will be handled by the Investment Banking Division and all other insurance operations of underwriting, premium deduction, surveys, meeting liabilities and collection of premium shall be done by Prudential Insurance. All back end operations, of insurance will be handled by the Prudential Insurance (the company). The target clientele in the beginning will be the people, who deal with Bank Muscat like account holders, loan takers, investors but ultimately, it aims to provide the broaden the insurance operations to cover the entire communities where Bank Muscat has a presence. Insurance selling training to Bank will be given by the Prudential Insurance and motivational training will be given in-house by the Bank. The AGM (Investment) (Assistant General Manager) is overall in charge of introducing insurance operations in the bank. The staff members have been given targets in selling insurance policies for the current fiscal. But since no incentives policy or increase in the salaries has been announced there is an air of resistance and restlessness in the staff of Investment Banking. The employees and managers feel that there will be additional load of meeting insurance targets within the same working hours and salaries. We will solve the problem by studying the problem in the light of SSM. (Ref to Fig 4) The Different Division of Bank Muscat Figure 4 Problem: The managers of the Investment Division are used to working with the corporate finance, product structuring, and brokerage and research services and resist any additional work. (We are talking about core banking functions and staff is resisting not only additional work but also digression into another field that is against their banking culture). They feel that they were not taken into confidence by the Board, when the critical decision of entering the insurance retail was made. The target clientele is individuals and corporate who deal with the Bank, the staff is doing little to sell the insurance policies (little here means nothing; doing little is an idiom used to convey that they are not doing anything—training, selling or any other activity) One major drawback in the current scenario is that the staff has not undergone two months of training into insurance retail from trainers of Prudential Insurance. The staff feels that acceptance to take training will automatically mean acceptance of the Board decision. We begin by stating problem through two metaphors, Cultural and Political. The metaphors will help us to understand the problem better. Later we will give Root Definition of the problem, create a Conceptual Model and carry out comparison to actual situation and make suggestions to the Board. Metaphors There are nine metaphors that symbolize organizations differently to give a better idea of their existence and functioning. In fact, to use a metaphor to denote an organisation is step towards understanding human mass behaviour in a particular dispensation. The nine metaphors are listed below: 1. organization as machines; 2. organization as organism; 3. organization as brains; 4. organization as flux and transformation 5. organizations as cultures 6. organizations as political systems 7. organizations as psychic prisons 8. organizations as instruments of domination 9. organizations as carnivals We will use the “organisation as cultures” and “political systems” as the dominant and dependant metaphors respectively in our problem. Since the resistance of the staff to adopt insurance retail is passive. They emphasize the record of excellence in Investment Management of the Bank, and express fear that insurance retail will dent the clean image of division we take culture as the dominant metaphor. Prudential Insurance (don’t be confused it is a company), they feel has different image, culture which they feel would eclipse their own. The staff members also haven’t resorted to any direct action to oppose the move. The staff members are only indulging in delaying tactics. Adoption of insurance retail is merely a matter of time, the AGM, is reported to have told the Board. The staff, he feels, can be convinced into adoption of insurance retail as one of the portfolios of the bank. The solidarity amongst the staff members in offering passive resistance make us sense political undertones. Thus we use the political metaphor as the dependant metaphor. Once retail insurance gets embedded in the work ethos of the division, the dependant metaphor or the political undertones of the problem will vanish but the cultural metaphor will stay. The Problem interpreted in Culture Metaphor: The Bank Muscat has a strong culture of providing excellent banking services in Oman and is now rapidly expanding into foreign territories through its international branch. Historically, the bank staff and managers have been tutored to provide efficient core banking services only. The Division has the earned distinction of delivering excellent investment banking services. Each team member takes pride in its past culture and identifies himself with clients and services. The employee feels that switching over to insurance retail, infringes upon the culture of the Division. A fear of failure lurks in the minds of the employees that insurance retail may blemish their past records unbeatable records. As the Division is an advisor to leading financial institutions and, corporations of Oman, the esteem value of employees is too high. They feel going into insurance retails would reduce their status to mere ‘agents’ of Prudential insurance. The Political Metaphor: The decision of entering insurance retail has been taken by the Board and conveyed to the staff members. The staff members, as of now, perceive it as an additional burden without commensurate increase in remuneration. The staff members feel that since insurance retail is a difficult call, failure to meet targets will lower their prestige amongst other divisions of the bank. The staff members also resist change because they feel it is digression from the core banking operations. They are united in their stand to resist introduction of insurance retail. Unstructured Problem Resistance of the staff in adopting new portfolio is an intangible situation. It is messy problem with involvement of a lot of people working at different levels, exhibiting different thinking patterns. It is not a tangible and hard problem associated with technology, infrastructure, wealth and buildings. The causes of resistance of staff to take up insurance retail have to be understood from a wider perspective, and valid and invalid causes of concern should be segregated. Only then the management can understand and tackle the problem. We will introduce the Soft System Methodology pioneered by Management expert, Peter Checkland, in the 1970s to draw clear picture of the situation for its deeper understanding. SSM is a phased technique that helps us understand a problem situation that involves high social and political behavioural problems of humans in an organisation. In a phased manner, it helps structure the unstructured problems, create a root definition, conceptual systems and compare them with real life situation leading to solution of the problem. Structuring the Problem: We talk to all members of the staff of the Division and try to elicit in frank terms why they resist entry of insurance retail into Bank Muscat. No dissenting voice is ignored and everybody is allowed to have his say. All the key men in the functioning of the Division are identified and their views sought. Information is also sought about working of the Division, client management, and client relationships. (Ref. to Fig 1). Implementation of Change in Investment Banking Division Figure 1 Structural Analysis: This is the phase that involves analysis of the information gathered. An intervention, cultural and political analysis of the problem is conducted. The main issues that emerge are noted down. Problems are identified with their problem owners. An individual can own more than one problem. Intervention analysis: Intervention analysis can be done through evaluation of Roles, Values, and Norm. The role is the position of an employee in the organisation. The expected behaviour is the norm and employee performance is evaluated on a certain value system. Through Roles, Values and Norms employees of the Investment Banking may have to be taught to how the roles have to change with changing circumstances (norms) to increase the efficiency and performance (values) of the Bank Muscat. Information Collection Both formal and informal methods can be employed to collect information. A problem solver can use discussions, seminars, and interviews, to gather as much information as possible. Rich pictures can be drawn to give the problem owners a chance to understand their position now, and in the changed atmosphere (Ref. to Fig 2). They can be used to give a vivid picture how the diversification plans of the Bank will benefit all. Figure 2 Root Definition Root definition helps us know the ‘what’, ‘how’ and ‘why’ we need to introduce retail insurance sales in the division. The problem of resistance to insurance retail is defined in certain terms. The root definition in terms of transformation that takes an entity as the input, transforms that entity to give a different output which is perceived differently by different people. The ‘what’ is ‘introduction of insurance retail sales in the division?’ ‘How’ how to introduce the change?—it is by giving motivational and insurance selling training to the employees. “Why” is to make Bank Muscat become more adaptive to changing market need and make it more competitive and efficient. Root definition of the desired change in the Bank Muscat Investment Division can be explained as: “A system to retail insurance policies of Prudential by Investment Division of Bank Muscat to increase the range of services for the client in order to increase the profits of Bank.” Input Output As perceived by Insurance retailing in bank Better Service Customer More clients More services HR Manager Value Addition Increased Profits The Board, The Stake holders More Work Greater Rewards Employees CATWOE Analysis The CAT WOE analysis is part of the root definition and is a stage of SSM. CATWOE stands is an acronym that in expanded form stands for—C for Customer, A for Actor, T for Transformation, W for Weltanschauung (or the worldview), O for Owner and E for environment. The beneficiaries of the new system will be C the customers of the bank, the Bank and the entire community of customers, staff, the Board and the stake holders of the bank. . A stands for ‘Actors’ of the current scenario are the staff members of the Investment Banking Division. Weltanschauung is the German word for world view. This means how the world perceives the activity of a bank providing over the counter insurance sales. It may be viewed as an expansion activity by strategist and criticized by a human resource specialist as overburdening of the employee. O stands for the owner is the Bank Muscat’s Board of Directors representing the stake holders who took the decision of introducing insurance retail. E –is the environment and the culture that impedes the adoption of insurance retail; these core banking functions and in the broader context the environment includes changing needs of the customers, competition in banking and providing complete client servicing. Conceptual Model Root definition helps us evolve a conceptual model of the activity. The conceptual model is an ideal working environment that conforms to the root definition using minimum set of activities. The activities mentioned in the root definition are mentioned in a single phrase using a single verb and they merge into each other to complete the flow of activity. To understand the conceptual model we will have to conjure up the picture of System Thinking which consists of a perceived model, ideas and methodology. System Thinking (Couprie et. al, Soft Systems Methodology) The conceptual model constitutes of a perceived world, ideas, and methodology and the resultant effects of perception in development of ideas. Formal Systems Model A formal systems model is created by supposing S as a human activity system. The model is feasible only under following conditions: 1. S has a mission. 2. S has a measure of performance 3. S has a decision making process 4. S must have components which interact with each other such that the effects and actions are transmitted throughout the system From the Root Definition of the system: “A system to retail insurance policies of Prudential by Investment Division of Muscat Bank to increase the range of services for the client in order to increase the profits of Bank” following activities can help us to arrive at a conceptual model: 1. Motivate the staff to sell insurance policies. 2. Impart insurance selling training to the staff. 3. Identify the potential clients from the clients already using the banking services. 4. Identify the needs of the clients. 5. Identify the insurance policies that meet the requirements of the client. 6. Sell insurance policies to the clients. The comparison of the Conceptual Model and the Real Life situation can be carried comparing the latter with the structured problems that emerge out in Phase 2 (structuring of problems) of SSM created out of the social, cultural and intervention analysis of the situation. (Ref to Fig. 5). Six Steps of Soft System Methodology Figure 5. In this comparison, we find out where our conceptual models go unrealistic and give us an opportunity to replace the impractical ideas by feasible ones. Since we understand that the difference between the conceptual model and the real scenario at the Investment Division is large we can generate a questionnaire taking conceptual model as the base. Questions should be answered sequentially and systematically. We will see that while answering most of the questions, we will solve most of the issues that concern the implementation of ‘change’. Comparison has to be made between the situations in reality. A comparison table of the first three activities of the conceptual model is drawn below and compared with the real scenario prevalent in the bank. We compare three activities are compared for the purpose of analysis. The emergent question of what, how and who for every activity, and answers will guide us in implementing the change in the Investment Division. Activity  Conceptual Reality How to do it? Who will do it ? Alternatives? 1.Motivate the staff to sell insurance policies. Yes No Intense motivational training HR Outside motivators 2.Impart (Impart) insurance selling training to the staff. Yes No Insurance selling training Prudential staff No alternative 3. Identify potential clients Yes No Introduce rewarding system Investment Banking Staff Regular monitoring. Monitoring the System The System is monitored in three steps. (Refer to fig 3) 1. Such a system is continuously monitored for performance in respect of three Es’—Efficiency, Efficacy, and Effectiveness. 2. Then the activities in the system are monitored in accordance with metrics defined in step 1. 3. Take action to control the operational system. Conceptual Model of Introduction of Insurance Retail Figure 3 Implementing Desirable and Feasible Changes The sixth is the last, but most important step for completing the cycle of Soft System Methodology. It is the implementation of the most desirable and foremost required changes in the Investment Division of the bank in context of insurance selling activities. It gives us the opportunity to define the desirable and feasible changes that have emerged in the SSM. The comparison of the conceptual and the real models show a wide gap between the two. This shows that a lot needs to be done. The reason, benefits, and means to effect a change have to define to win the confidence of the staff. Any change that is to be introduced got to have a positive reason behind it. It should further lead to positive outcomes. As a test motivational training could be started on a small section of the staff. If the results are positive, the training schedule can be implemented over the rest of the system. The motivational training should be immediately followed by insurance training on the bank premises itself. Through motivational training, the staff members need to be made aware of the fact that the collaboration of Bank with Prudential Insurance to sell insurance policies is beneficial to both the organizations. Decoy customers can be sent to gauge the mood insurance selling staff and if a shortcoming is found in any staff member, he should be made to undergo further motivational training. The fears of the staff members should be allayed and they be shown that in best interests of the staff lies the long term interests of the Board and the stake holders and vice-versa. Observations and Conclusions The profile of Bank Muscat, as of now, is focused only on core banking operations. Introduction of insurance business in the ambit of Bank’s services will further make it competitive in the globalizing market. Prudential has over 100 years of experience in insurance and underwriting that can be utilized by the Bank to consolidate is hold in the local and international markets. Change once started should be made a dynamic aspect in the functioning of the Bank. The adaptive change especially, like the present one, should be slow but incrementally progressive in nature. Each positive step taken forward by the managers, the employees and the team should be suitably and publicly rewarded. Nothing works better than an incentive based motivation. But care should also be taken that the employees do not ignore their core banking responsibilities to more lucrative and incentive pursuits. Effective checks and balance can be introduced to keep the collaboration with Prudential Insurance grows from strength to strength without failing on core responsibilities of investment banking. References: 1. BankMuscat.com 2. Couprie, et.al. Soft systems methodlogy, http://sern.ucalgary.ca/courses/seng/613/F97/grp4/ssmfinal.html Questions answered 1. Please show in the assignment that Im an employee in that division (Investment Banking), which show that Im involve and I know the problem very well. Ans: In the intro paragraph, I have written that I work in the division and am trying to solve the problem with SSM. 2. I couldnt understand the problem very well. At the beginning you said that the problem is with the Investment Banking employees are not ready to work in other division which means more load. Than you show in the rich picture that the problem is with the training (motivational training & insurance retail training)? Rich picture should show the whole parts which make the problem. Ans. Problem is with the staff of Investment Banking Division who are not ready to take up insurance retail. They need to be motivated to diversify and trained to handle insurance activity. 3. The five figures you draw better not to make them as attachments but involve them in the assignment plus it is very important to title them. They have titles and added to the text. 4. Please if you copy any figure or any text from the attachments or other sources than it very important to tell me from where and must reference them. The university are very strict with such matter and they might mark it as plagiarised if they find little copying without references. We have made the reference wherever required. 5. Regarding the SSM:  you havent mention what is SSM Ans : I have added some more text in the paragraph named Unstructured Problem to define SSM.  and why you use it and, It is explained in the same para. It is used where intangible problems like human behaviour is involved.  what the benefit to use it and, Ans. It helps solve an unstructured problem. It is explained in the same para.  Is it success in our case??? Yes, it has helped evolve a module to go about change. 6. I have seen that you say there are mangers in the Investment Banking Division, why mangers?? Why not only a manger?? Ans. There are many managers in one Division of Bank. They could be located in different or the same branch. 7. If you copy the paragraph about Bank Muscat profile from some sources than it must to write the reference. Added the name of the site. 8. Rich Picture: Rich picture should show the whole parts which cause the problem. It is very important to show the parts in samples and show what links between them which result the problem. What I understood that the problem is with staffs which not agree to have more loads and that might effect in the division and bank production. In general I think you can show the related between the following problem parts:  Staffs are not happy to have more loads. In this you can put unhappy faces or people with questions marks on their minds.  Show the Investment Banking Division.  Show the new Insurance division.  Show the board which make the decision.  Show that the staffs might look for good training.  Show that the staffs might look for rewards or extra salaries.  You can show also unhappy customers because the staff work quality is not good and they take long time Ans. Added a new rich picture. Read More