Leadership and Performance Beyond Expectations - Essay Example

What do you think were the main reasons for the success of yes bank, though it was a late entrant in a overcrowded market? Comment on the strategies adopted by the firm. Do you think the banks concept of "Knowledge banking" has helped it in differentiating itself from other players in the sector? Introduction The time of entry is more relevant than the point of entry. Markets always work between the continuum of monopolies and perfect competition and in the Indian Banking sector overcrowding became evident with government policy changes in the nineties. The biggest reason of the success of Yes Bank was serving the niche market that was looking for personalized service. By positioning themselves in this segment Yes Bank quickly rose to become number 3 in services within a very short time. They also relied on the fact that knowledge is power and appropriately used this as a ploy to gain market share. They offered specialized service in six specific knowledge sectors to satisfy the needs of their target market. Defining Strategies It has been stated by Hamel and Prahalad that companies that desist from competing for future market opportunities are doomed and forgo corporate value creation that they had achieved in the past. (Hamel and Prahalad 1990). Yes Bank was founded on the basis of the personal achievements of its founders who realized that personalized banking was a niche area that would create high value. Corporate strategies have been divided into Five Ps by Mintzberg and they are Plan, Ploy, Position, Pattern and Perspective. While each is a separate type of strategy with its attendant qualifications, yet they are usually present in all strategies to some degree. The real difference lies in the fact that one of them will be dominant and others will play a supportive role. (Mintzberg 1987). The Plan is the basis of any strategy and has to be worked out well before commencement and its implementation is by execution of the various steps of the Planned Strategy. A Ploy is radically different in as much that it is a tactic to force the competition to re-think its own strategy. It is a plan that is usually divertive or subversive and may be used or not used as a direct strategy but as an indirect threat to the rival’s plan. At best these are short term strategies aimed at specific situations. The Positioning is a long term objective of corporate operations and requires more attention to detail and a firm commitment to accept the consequences and to overcome roadblocks. It is an assertive policy that will require total cooperation of all stakeholders otherwise it might fail. The stakes are huge but results are very rewarding. Pattern is a kind of strategy that was not really planned but which materializes out of repeated similar occurrences that came to be accepted by the company as a strategy by default. A company becomes known by the pattern it employs although it had never had the intention of using it as strategy. It is more accidental by nature and if found useful may be adopted as a corporate strategy. The advantage is that a change in pattern causes no harm as its benefits were not really factored in. The perspective is the shared concepts that have materialized and adopted as a policy hence converted into strategy. This is the way a company as a whole looks out and perceives the world around it and forms is actions according to this perspective. This is more in the realm of behaviours and applicable in knowledge based companies. This is what brings about innovations and new thinking in the marketplace. It is significant to mention here that although the 5Ps of strategy expounded by Mintzberg is a one-dimensional method for analyzing strategies there are other views that have been developed offering more accurate reasons and analysis. For instance Hamel and Prahalad have argued that core competencies are the route to future developments and that they define the inventive and transformational aspect of business today that looks for future positioning. (Hamel and Prahalad). Without development of these competencies, that have to be extensively deliberated upon prior to planning, the idea of positioning will be superfluous. Yes Bank did exactly this and considered the factors that will have a lasting influence on their customers. The strategic decision was to adopt the core competency of personalized service that was more enamoring for the customer. There is another theory, a “fitness to landscape” theory from Kaufmann explaining that all companies work hard to achieve glorious heights that can be viewed like a mountainous landscape with high and low peaks. In this case the height of a feature is a measure of its fitness. It is further explained that these are not static highs and lows but are dynamic and companies change positions to gain maximum advantage. (Kaufmann). In actuality when a company embarks on a positioning strategy, it is beset with several roadblocks en-route. It is able to surmount them but within these attempts it sometimes prolongs the effort and at times is able to quickly realize its goals. The sum total of efforts is quite dynamic and results in highs and lows. Its endeavour is to achieve the maximum in the quickest possible time to prove to its customers that its success rate is high. This is how Porter explains these efforts as “jockeying for position”. (Porter 1996). Critically analyse whatever the banks focus on the most advance technology and emphasis on the competent human capital would lead to success of the bank. Do you think the banks strategy of concentrating on a niche segment of the market, unlike other private banks in the country; will succeed in the long run? Why or why not? Strategies The heart of strategy lies in its competitive advantage (Porter M.E. 1980). Strategies are made by leaders who have a vision and a mission to accomplish. For achieving this they need to change the organization’s focus to the future that is more profitable, productive and provides a better quality of life to its stakeholders. The value and possibilities of information technology for creating competitive strategy and positioning was identified by Porter (1985). He recognised the impact of information technology as the compelling force for steering competition. But information technology spending are considered as optional expenditure and hence subject to scrutiny (Antonucci and Tucker, 1998) whereas indeed this is an investment and the Return on Investment depends on how it is used by the organization. In a knowledge-based era, market-related information and access are crucial factors to success. These are, however, manageable only through the existence of information technology backed by a skilled and knowledgeable workforce. Banks must be able to manage and control risks in a manner that would allow them the capacity to absorb any related losses that may eventuate without jeopardizing their financial soundness and stability. When deciding on the adoption of alternative controls and security measures, management needs to be conscious of costs and effectiveness in respect of the risks being treated or mitigated. Conversely, it is also important that the bank does not offer a product or service if the necessary controls and security measures cannot be adequately implemented. Banks need to have several controls to exercise effective risk management through use of technology. They must establish objectives and goals, set targets and then monitor them continuously to evaluate performance. Technology risks relate to any adverse outcome, damage, loss, disruption, violation, irregularity or failure arising from the use of or reliance on computer hardware, software, electronic devices, on line networks and telecommunications systems. These risks can also be associated with systems failures, processing errors, software defects, operating mistakes, hardware breakdowns, capacity inadequacies, network vulnerabilities, control weaknesses, security shortcomings, malicious attacks, hacking incidents, fraudulent actions and inadequate recovery capabilities. Outsourcing An important question that arises is whether the Banks or Financial Institution should carry out all work of developing systems, designing software and performing monitoring and audit, all by themselves or should they outsource these jobs. In this era of specialization there are specialists who can perform these jobs better but the argument against them is that the controls then become either too rigid or too lax and the bank and its customers loose the close connection between themselves. In recent times we have seen the case of JP Morgan who had outsourced their activities to IBM but even after 2 years it was considered a disaster and they both parted ways (IDB News Service). This is not to say that per se such an outsourcing is not beneficial to either party, but these must be considered very carefully before a major decision is taken. A lot of Human Resource problems occur and insecurities of changeover dominate the minds of the existing workers which lead to fall in quality of service. The HR Factor Companies should not be overwhelmed with technology. In service companies like Banks the Human factor is equally important. Customers expect and rely upon the human touch and expertise more than technologies. A good leader ensures that the employees are responsive to these needs. At the end of the day most people are not motivated by being pushed. The motivation comes out of the desire to meet their own needs, to achieve something that holds value for them, to be in control, to be recognized, to have self esteem and the satisfaction of having achieved their personal objectives. A successful leader connects with these human values and excites people with his vision that will help them achieve their personal objectives through his visionary strategies. This involvement must be real and for this the leader has to formulate a vision that takes these aspirations into account. The results of this vision come out in the shape of recognition and reward for the people. There are some typical leadership behaviour patterns that are very critical. Jerry Porras and Susan Hoffer (1986) opine that open communication meaning sharing of intentions; listening and collaborating through making team decisions were most relevant for success in organisational development efforts. Similar conclusion was drawn by Teresa Covin and Ralph Kilmann (1990) when they surveyed several individuals. They noted two more traits of leaders. One, that they demonstrated discernible and unfailing support for the change programs, and secondly, they related the change to business needs. This calls for building of teams towards the effort and communicating the expected results in terms of profits, productivity, quality, performance, quality of work life etc. The Contemporary Scene The new age companies also see the importance of values and relationships with stakeholders as a critical part of their ongoing success. They have found convincing answers to the two core questions posed by stakeholder theory, which underscore the moral assumptions of managing. Finally human relationships have also become a purpose of successful business. The separation thesis had so far held that ethics and economics can be neatly and sharply separated. The Stakeholder theory now begins with unequivocal statement that values are necessarily and explicitly a part of doing business, and rejects the separation thesis (Freeman 1994). Even if it is argued that the objective of business is profit then it has to be understood that a successful business is about collaboration under which the suppliers, customers, employees, communities, managers, and shareholders are all involved as beneficiaries. It has been concluded by Venkataraman (2002) that at some level, stakeholder interests have to be joint, they must be working for the same purpose, otherwise business will come to an end and new collaborations will be formed. Another way to look at HR is Hard and Soft HR. Hard HR looks at profit as the central need of the organization and Soft HR holds that human capital is more important. The management chooses either of these approaches when they are formalizing their strategies and work around one central focus and develop the other around it. Surprisingly practice does not match the theory. Legge (1995) finds that the focus of the enterprise is still profitability. She finds a gap between what she calls Rhetoric and Reality (1995) and fails to find empirical evidence to prove that the soft HR, or the people centric HR, is really being practiced. Indeed Legge (2005) finds that in actuality hard HR is still dominating soft HR which is facing slow diffusion or dispersal. In other words, the reality is that companies are predominantly profit centric instead of people centric. Yes Bank has successfully averted the Hard HR and has blended its workforce and technology to serve its customers as a result of which it has already created a place for itself in the competitive Indian market. What are the future growth prospects and threats for YES Bank? What Strategies should YES Bank adopt in the future to further its growth objectives? Looking Ahead This is just the beginning for Yes Bank. From its present status of 60 branches it intends to have more than 200 in the next 3 years. For this phenomenal growth it requires to evolve new strategies and move up the value chain. The India Banking sector is to see yet another major change in 2009 when norms will be relaxed for foreign banks and they are waiting to take the buoyant Indian market to new heights by offering innovative and extensive services. They will bring in fierce competition for Yes Bank, which is after all a small player even now in terms of size. Indeed it could be a takeover target for these predators that would pay top price to get its customer base. They are also well versed in technology as well as knowledge banking and will bring with them rich experience in this field. There are two distinct strategies that Yes Bank should pursue to face future threats and convert them into opportunities. One is to empower its employees further to make them an integral part of the organization and the second is flexibility towards collaborations with the foreign banks when they come in full force in the near future. Empowerment Empowerment means offering flexibility to the worker. It also means power sharing, information sharing, upward problem solving, task autonomy, shaping of attitudes and self management (Wilkinson 1998). Legge (1995) sees it as a promoter of trust and collaboration between managers and workers. This relates to relationship between manager/worker as well as promotes motivation for improved performances. The perception of empowerment becomes meaningful only when it is perceived as an enabler by the worker. The psychological advantage is phenomenal as he perceives it as power, self-control, efficacy and competence (Psoinos and Smithson 2002). The four dimensions explained by Lee and Koh (2001) elucidate this concept further. Meaningfulness, competence, self determination and impact are the results and can bee seen as powerful measures to improve performance. The real test of the individual fitting the organization, or the person-organization fit, is tentative at best and has been defined as the similarity of patterns of the organizational values and individual values. These may be further defined as those things that the individual values in an organization, such as being team-oriented or innovative (Chatman, 1989). Values are fundamental building blocks in most definitions of organizational culture (Barley, Meyer, and Gash, 1988), and culture plays a key role in determining how well an individual fits into an organizational framework (Rousseau, 1990). When individual values and priorities match the values and priorities of a particular organization the individual is happier and more likely to maintain an association with that organization. Value systems offer detailed and comprehensive justifications both for suitable associate behaviour and for the activities and functions of the system (Enz 1988). Organisational values are often considered as a group or collective product (Schein 1985: 7), and while all members of the group may not hold the same values they will support a given value. A central value system exists when a number of key values concerning behaviours and the way things are done or are shared in an organisation across units and levels. However, strong organizational values are those that are both intensely held and widely shared. There is however great disagreement on the level at which value is considered to be meaningful to individuals (Enz 1988). These values have been theoretically measured by Hofstede et al. (1990) at the subunit level and OReilly, Chatman, and Caldwell (1991) have done the same at the organization level. Within the organisational context, an individual has to understand that he has to uphold the organizational values and therefore these values guide his actions, attitudes and judgments beyond the immediate or distant goals (Rokeach, 1973: 18). Both the organisations and people influence each other’s behaviour and attitudes; the person-organisation fit is a therefore a consequential way of evaluating the person-situation interaction. This then becomes the limiting factor of the worker’s empowerment. In other words the empowerment is organisation led and oriented. If the organisation culture is overpowering then the workers’ creativity is curbed and the organisation will loose an opportunity to gain from it. This becomes relevant in creative jobs that abound today. Empowerment therefore becomes a subjective issue. Indeed it may be said that the worker is coerced into a situation of compliance with the organisational demands. Environments have a great impact on companies. In current thinking organisations are socially constructed systems that share values and meanings (Burrell & Morgan, 1979; Pfeffer, 1981; Weick, 1979), and the mission of the management is to promote and develop these shared meanings in order to achieve their objectives of fitting the organisation in its environment. It is this fitting act that is strategy, and it is the leader that formulates the strategy that will result in his organisation becoming both fit and competitive in the current environment. In a different approach to leadership an interesting proposition was made by Burns (1978) and was further developed by Bass (1985). He made a distinction between transactional and transformational types of leadership. He stated that transactional leadership was the traditional leadership which involves the leadership-subordinate roles where the subordinate is rewarded for compliance with the leader’s wishes (Doherty and Danylchuk, 1996). As against it in case of transformational leadership the subordinate is encouraged or motivated by the leader to improve him, raise his bar in order to serve the organisation better. (Doherty and Danylchuk, 1996; Soucie, 1994; Yukl, 1989). Conclusions It was daring on the part of Yes Bank to have entered the Indian Banking sector at a time when major players of both private and public sector had embarked on a new trend of retail banking. This had enticed the average and general customer who was getting services that he had not been offered before. Yet there was a segment of small focused business groups as well as wealthy customers who required more personalized services and advice for which they were willing to pay. Yes Bank boldly entered the market to cater to this segment which was being served to a small extent and in an exclusive fashion by few foreign banks. This paid rich dividend as it not only filled a gap but it also provided the customer with knowledge based banking relevant to the Indian markets. Despite it grand success in a short period of time, Yes Bank will face a tough future and the way to growth and success is in wider and deeper commitment to its customers by strengthening its core competency of service. The entry of foreign banks with larger resources and experience will pose a challenge that may even threaten its survival. It can stave of this threat and convert this into an opportunity and this can be achieved not by just adding branches and having a wider reach, but by becoming employee centric and practicing soft HR. Profits come naturally for such companies. The twin pillars of employee and knowledge management should always form the core for Yes Bank. Here is where the transformation leadership of the founder and his management team will be tested. Bibliography Antonucci, Yvonne Lederer and Tucker, James J., III. 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