The Investment Banking at HSBC - Essay Example

What are the arguments for and against HSBC managers making public their short-term and intermediate -term objectives, unit by unit or division by division The process of setting objectives goals and targets by divisions and branches would follow in a way that it dovetails with the overall company's objectives. While at the corporate level statements on medium and short term objectives will have an impressive ring, at unit level it would sound mundane and list would look like increase in deposits, increase of loans, growth in credit cards, increase in number of insurance policies and so on. There would also be objectives related to customer service, productivity, and profitability. These are commonly understood goals and objectives which every customer is aware that an organization will pursue at unit level, though he may not be aware of quantitative details. The organization needs are that its services marketed, customers serviced and revenues earned. A units or divisions targets and objectives will be achieved by following a strategy and implementing it. How making the goals and objectives public will aid in this seems doubtful. At the most it may serve the overall objective of the company of being transparent in its dealings with its customers. Sharing company's objectives on issues like profitability may be even unwise. At the operational level, customers would be more interested in the level of service he receives and the value he derives from his purchase of services. Information on targets and objectives will be irrelevant for the existing customer. A new customer is unlikely to walk in after reading the objectives now made available to him, if at all in the first place he is induced to read it. Making the customers aware of the objectives is a subtle marketing exercise. If the manager in Thailand decides to target high net worth individuals and wants to add them to his account, surely the wrong thing to do would be to post it on the notice board. An organizations strategic intent and image is better conveyed through its promotional efforts, especially if it has unique and differentiated services to offer (focus on supporting technologies related to better environment). Making public short term and medium term goals could supplement such specific service offerings or be part of promotional efforts. Ultimately the process of creating new customers and retaining them is through a branding process. A customer will associate himself with a brand that identifies his needs and serves him beyond his expectations every time he comes for a service or a product. Banks and Financial services operate in an oligopolistic market and availability of mundane unit/division level information on the objectives is of no use to customers or potential customers. On the contrary such disclosures may aid competition by having information available in advance and draw up its strategies and plans to counter the moves of HSBC. This could create problems to mangers at operational level to achieve their business goals and targets. Overall there does not seem to be any advantages for HSBC to disclose its unit level and division level medium and short term objectives. Any communication to the public at large on such issues should be done as a promotional issue. Would you recommend that HSBC use the MBO process to reward investment bankers and analysts according to results, even though key factors influencing performance can't be precisely predicted or controlled Explain The typical investment banking functions of an organization is to provide advisory services related to the finance of the company, which are strategic in nature. This includes services such as mergers, acquisitions and divestures, management of public issues, management of cross border funds, fund management, fund rising. "Investment banking is frequently used as a catch-all term. In reality, banks are made up of many divisions and investment bankers perform a range of different functions. Traditionally, investment banking incorporates corporate finance and mergers and acquisitions (M&A). The definition has blurred in recent years and may also include trading bonds and shares". (Investment banker, corporate finance) The Investment Banking at HSBC is divided into Sector Groups and Product Coverage, ensuring that it offers in-depth market knowledge and an efficient level of execution to its clients. HSBC offers these services across sectors (Consumer Retail, Health Care, Real Estate, Financial Institution groups, Diversified Industries group, Financial Sponsors, Global Finance Company and Resources and Energy) and Products (Mergers and Acquisitions, International Equity, Equity Capital Markets Special Advisory, and Cross Border business group. (www.hsbcnet.comhrcareersanalyst). This group also works closely with Corporate Banking and Global Markets divisions by leveraging their corporate clients in these sectors. The very nature of services offered by HSBC indicates that the offer of services of HSBC is a large coordinated team effort. There will be cross functional interactions and transactions. Analysts and others in this division work more as a team not only within IB but beyond it, collaborating with their colleagues in Corporate Banking. This kind of work will call for a large amount of information and knowledge sharing, trust and team work. There will be a need for synergy in the working of individuals in this team. Analysts working here are normally highly motivated, determined and capable of hard work over late office working hours and weekends. Investment banking division many times work with the spirit of entrepreneurs, described as "The flashy entrepreneurial world of investment banking" (Ringshaw). MBO is a method of operatizonalizing the goal setting process in an organization. It assumes that an overall objective of the organization can be precisely broken down to precise objectives and desired outputs of managers, and once managers deliver as per their output the organization will achieve its goals. It may be fine in an organization working in a well defined atmosphere of inputs and outputs, especially when these are physical. Investment bankers work in an environment where the inputs are knowledge and information and where there is a need for considerable amount of team work and where output depends on synergy. Investment banking services often operate in an environment which is dynamic. It must have the capacity to quickly respond to changes, adapt, and innovate for being successful. "MBO represents the danger of inflexibility in the organization, particularly when the objectives need to be altered. In a dynamic environment, a particular objective may not be valid for ever. "(Principles of Management, p-58) There is no doubt that the IB works with a lot of external uncertainties. But at the same time it also works as any other service organization, acquiring and servicing clients. It is necessary, no doubt, to set goals and targets for the IB whatever the challenge they work under and have suitable rewards system for achievement. But MBO will not be the appropriate process to do this. Which stakeholders might be affected by HSBC's plan to invest $50 million in environmental conservation Should the company continue this plan, regardless of short-term financial performance When a company spends US $50 million for a cause which apparently is in no way related to the business, the stakeholders most affected would be the share holders and the employees. Even its customers would like to ask why they have to pay for this extravaganza of the company. But it will have to be seen whether this sort of action of HSBC in any way contribute towards attaining its corporate goals. Corporate goals, it must be remembered are set by the company always keeping in mind the interests of stakeholders in mind. The questions asked with regard to such expenditure by the stakeholder may be therefore two levels. One, if the policy of supporting environmental issues is right and two if the money spent in sponsoring is being done wisely. HSBC's actions follows from its plans to increase its business in the areas of sustainable development sector. Stephen Green, HSBC's Group Chief Executive, said: "As our understanding of the sustainability issues in various industry sectors has improved, it has become clear that there is a substantial market in environmental services, particularly in respect of climate change related technologies and the projects that deliver them, water infrastructure and sustainable forestry. We want to embed sustainability into our business approach and build a profitable business that positions the HSBC brand as a leader in these new and exciting markets. Sustainable Business Development is an essential element in our commitment - set out in our Managing for Growth strategy - to ensure that corporate social responsibility (CSR) is integral to our brand." (hsbc global site, 12 Dec 05). Clearly HSBC wants to be seen as a brand which is synonymous with services in this sector. HSBC clearly perceives that there is a growing market in green business and would like to cash in on it by being there first. It is a strategy through which it would be able to give value to its stakeholders through corporate social responsibility. There is evidence to show that companies have been able to add value to its stakeholders through such CSR acts. In their book Environmental Protection and the Social Responsibility of Firms: Perspectives from Law, Economics, and Business. the authors say companies can work beyond required legal laws to save environment and that they can do without getting hurt (Salls). Business leaders must respond to growing concerns about pollution, but both the environment and corporate coffers can be green, says Harvard Business School professor Forest Reinhardt. (Lagace) It therefore seems that there is good business sense in the company investing money in environmental protection. It would serve its current goal of projecting an image that will set aside profits for environmental concerns and long term goal of building an image of a company that offers services in the expected lucrative markets related to environment. However HSBC will have to ensure that the money is spent purposefully and the impact created is measurable and positive. Appendix HSBC global site www.hsbc/hsbc-establishes-sustainable-development-team.htm, accessed 31 October 2008 HSBC global site, www.hsbcnet.comhrcareersanalyst-opportunitiesinvestment-banking.htm, accessed 31 October 2008 Investment banker (corporate finance) http://www.prospects.ac.uk, accessed 31 October 2008 Lagace, Martha, Going Green Makes good business sense, published July 15 2002, http://hbswk.hbs.edu/item/3015.html, accessed 31 October 2008 Principles of Management, www.rocw.raifoundation.org/computing/BCA/Principlesofmanagement/lecture-notes/lecture-31.pdf, p-57, accessed 31 October 2008 Ringshaw, Grant, Is HSBC losing the plot, 3 August 2002, http://www.telegraph.co.uk/finance/2769800/Is-HSBC-losing-the-plot.htmltelegraph.co.uk, accessed 31 October 2008 Sals Manda, Corporate Responsibility and Environment: Q&A Forest L.ReinHardt and Richard H.K. Vietor published October 10, 2005, http://hbswk.hbs.edu/item/5036.html, accessed 31 October 2008 Read More