WBA Assessment: Gulf Investment Bank Bahrain - Essay Example

WBA Assessment: Gulf Investment Bank – Bahrain BY YOU YOUR ACADEMIC ORGANISATION HERE HERE HERE Gulf Investment Bank – Bahrain Introduction The business and socio-cultural environment in today’s Bahrain points out several opportunities for business growth. As an emerging economy, Bahrain maintains a wide variety of consumer demographics who are willing and able to buy products as well as the existence of foreign direct investment which occurs in the establishment of new technologies and new corporate headquarters for a variety of businesses. The Gulf Investment Bank (GIB), one of the largest wholesale lenders and investment firms in Bahrain (Manama, 2008), has experienced high profitability due to a solid business model, excellent human capital and human resources focus, and a flexible business model which recognises the external environmental conditions and builds appropriate strategic goals. However, the current global economic recession appears to be impacting the Gulf Investment Bank in terms of earnings. This report highlights the current state of GIB in Bahrain, discussing issues of human resources, management development, communications, and strategic decision-making. The business environment In 2006, GIB recorded a record profit of $203 million (USD), which was a 35 percent increase from the previous year (Arab News, 2006). Interestingly, in the same year, Gulf Investment Bank also experienced an increase in total assets from $3.6 billion to $22.9 billion the end of 2005 (Arab News). This represents a business which had been thriving in the banking environment due to a quality business focus and business investment model. Today, however, Azzam (2009) offers that traditional business models which were built around proprietary trading, leverage, and borrowing money in unstable assets will no longer be competitive models for business success. The author suggests that in order to survive, investment institutions should let themselves be acquired by commercial banking companies or simply stop resisting change. It is essentially suggested that banks in this region will either have to adapt internally to external conditions or simply be shut down in the short-run (Azzam). How does a large-scale banking institution, which had experienced record profit only two to three years ago, redevelop a business model for an environment which has changed radically in such a short period of time? First, The Gulf Investment Bank must restructure the internal management hierarchy in order to flatten out existing layers of management, provide better training for workers in the banking firm, and refocus on training in areas which are impacted by external events. This suggests that GIB should adopt several human resources models, such as taking a soft approach to HR, which essentially suggests that people and their developmental needs should be priority over other hard issues such as profitability and how to leverage human capital to build a solid bank brand. Managers and generic workers at the bank must understand that external business conditions have changed, which gives opportunities to adjust internal business functions and job roles to meet the demands of a changing investment world. The Gulf Investment Bank in Bahrain has also just recently been bailed out with a significant cash infusion by governmental leaders and shareholders (Thegulfonline.com, 2009). For a company which had only recently experienced record profit, receipt of a cash bailout would represent a loss of assets of approximately $22 billion (USD) in just over two years. Clearly, there is a need at GIB to make changes quickly in order to prevent the collapse of the organisation. Management issues Flattening out layers of management at the investment bank appears to be the best solution, short-term, for cost-reduction and for improving the motivation of workers at GIB. According to Manama (2008), today’s banking institutions in the Gulf region are lacking internal transparency and leaders do not like to admit that they have invested too heavily in subprime loans and other business losses. This represents the culture at Gulf Investment Bank in which leadership remains focused on the hard approach to management in which people are merely assets to build profitability. It also represents a leadership style which will not be effective in gaining investor confidence at a time where people consider how they invest their funds carefully before selecting the right bank for their personal or investment needs. Interestingly, in this region of the globe, business leaders have been cited as having a very high level of power distance between managers and workers, which represents the inequality of power between superiors and subordinates (Mathis and Jackson, 2005). In countries like the United Kingdom and the United States, there are much flatter areas of control between managers and generic workers, which give these workers opportunities to work in autonomous work environments or act as decision-makers within the organisation. High power distance in Bahrain also speaks highly of the need to flatten out layers of management at GIB, provide workers with more authority in providing business solutions, and let workers be more individualistic in order to help the business come up with internal solutions to external problems. Instead, at GIB, there are leaders who are not transparent in their business dealings and seem to abide by their poor decision-making even when bank profits are down. This business requires a new system of management and authority which better utilises workers and will likely motivate their performance toward the achievement of organisational goals in the process. Research also did not uncover the existence of any form of performance appraisal in use at Gulf Investment Bank, which also shows the business’ lack of focus on motivating workers to perform. A performance management system would be appropriate to maintain focus on the external business environment and also motivate staff and management performance. These systems are used to “identify, encourage, measure, evaluate, improve and reward employee performance” (Mathis and Jackson, 2005, 338). This system links organisational objectives to individual staff and manager performance and also sets a strict set of criteria necessary to achieve higher performance-related pay or managerial bonuses. For instance, in the case of Gulf Investment Bank, managers under the new performance management system would be given specific goals requiring achievement in order to be compensated and recognised. This system develops various appraisals and feedback required to achieve success in individual job role. This system also identifies development needs and provides the necessary training to achieve. Because there appears to be a motivational issue at GIB, managers must understand what drives subordinate behaviours. Employees are looking for a sense of personal belonging, which is a basic human need under Abraham Maslow’s Hierarchy of Needs, which describes the steps a person must move through in order to attain their fullest potential (Morris and Maisto, 2005). It is theorised that if a person is lacking fundamental needs, such as a stable job environment, they cannot succeed in areas of self-esteem development or high-level job role achievement. This is a fundamental understanding of business in which the employee needs are considered paramount and internal business structures should be designed to favour these needs. If leaders are misrepresenting earnings and failing to make amends for their poor decision-making, this clearly speaks to the need for a performance management system to regulate the management and decision-making skills of top managers at GIB. The end result would be a system which reviews management behaviours and also rewards/chastises based on their efforts at meeting company goals. One expert in business consulting suggests that “global banks must execute an organic growth strategy to expand their footprint in India” (IBM Business Consulting Services, 2008, 9). What these professionals are offering is that businesses must establish the appropriate identity to local consumers and investors rather than attempting to further expand businesses into multi-national territories during difficult or unpredictable economic times. Organic growth strategies suggest understanding the specific cultural and behavioural attitudes/values of those customers most likely to utilise GIB banking and investment services and applying quality customer service and team-focused work groups in order to build a positive brand image. Organic growth strategies also identify areas in the local community or surrounding national culture which can strengthen the short-term image of the company brand and lure more customers. This also appears to be an element missing from the management design at Gulf Investment Bank: A forward-focused strategy on becoming top market players in international banking and investment environments whilst failing to adopt more organic-focused opportunities to build consumer, shareholder and internal investor loyalty. This would highlight the importance of GIB in connecting with local communities and attempting to use marketing and promotion to let local investors understand that Gulf Investment Bank considers their needs and is working on a flexible business model to assist these needs. There seems to be a great deal of competition in this particular industry today, with many banks and other investment organisations forced to receive governmental or shareholder bailouts in order to stay in business. Rather than denying that international investments were poor and spell losses for GIB, the business should create a new focus on customer service management by establishing community involvement, community values and principles, and then using the strategic marketing tools available for GIB to withstand the current economic conditions. Strengthening local relationships can start with volunteerism programmes with internal workers and managers or simply redesigning promotional and advertisement materials to send a local message. Further research evidence In order to measure the management view of current performance at GIB, a small-scale questionnaire was developed and distributed to one middle-layer manager and two workers in support functions at the bank. This was a qualitative approach to research in which worker opinion was measured based on secondary literature findings to uncover the true dimensions of what is driving decision-making at Gulf Investment Bank. These surveys were distributed, on an appointment call, under the guidance of an assistant manager at a local branch of GIB in Bahrain. A copy of this research instrument is in Appendix A. The questions briefly highlighted areas of authority (power distance), the external environment, internal change processes, and management style. The results of the returned questionnaires uncovered significant differences in opinion between managers and workers regarding the importance of change as well as the importance of external customers to long-term profitability. Employees believed that the client was the key to success at GIB whilst managers believed that identifying investment potential was most vital. Employees believed that they did not have an active voice in the company whilst management believed in strict job role function and adherence to that goal only. In the brief discussion with the research respondent, there was clearly no indication of a soft view toward human resources but a focus on the hard human capital provided by worker achievement. The evidence provided which focused on the external and internal business environment at Gulf Investment Bank was highly relevant to making recommendations for improving the bank’s business practices and human resources focus. Reliable research information comes from current business leaders, financial and investment experts, and various regulatory agencies which report on the activities of businesses. It was already established that GIB leadership maintains the ability to be both deceptive and without transparent business practices, in an environment which is already losing significant cash and asset resources, therefore the provided research evidence gives a clear picture of how the bank has performed in recent years compared to the inflexible models of business which exist currently at Gulf Investment Bank. Professional and expert opinion in this industry and in banking (in general) provide a detailed SWOT Analysis, strengths, weaknesses, opportunities, and threats, which exist for GIB. Clearly, the largest weaknesses were uncovered which showed lack of soft approach for developing and empowering employees and a management structure which is, due to cultural values, too focused on keeping a high level of power distance between workers and even the shareholder. Because GIB leadership lacks both transparency and flexibility, the research evidence provided was reliable. It is a likely assessment that GIB leaders, if they are unwilling to admit high levels of losses being attributed to bad investment decisions, it is likely that the senior-level administration of Gulf Investment Bank would be far less likely to publicise their internal failings related to management, human resources, and forward strategic decision-making. Therefore, developing a picture of the current external environment, the professional acknowledgement of the weaknesses at GIB, and the fact that a record profit-breaking company could suddenly shift to receiving bail-outs clearly illustrates that a wide variety of failures exist at this investment and banking firm. Conclusion and recommendations Because the volume of problems at Gulf Investment Bank are so significant, there are a wide variety of potential solutions for the business to achieve success in both people management and in creating products and solutions which fit the unique cultural values of local investors and consumers. The aforementioned performance management system will deal with poor internal leadership and also identify those which are not effective for GIB in the short- and long-term. This system could be enhanced by offering a 360 degree feedback system, in which the thoughts and opinions of customers, colleagues and senior-level administration is utilised when determining worker value toward meeting goals. This would give unique insight into what investors really want and how they perceive the Gulf Investment Bank brand name. Because there is no flexibility in the current banking model at GIB, this would be a win-win situation for the external investor, employees, and strategic focus for the bank. Clearly, the business is not finding success with international investments and has seen its profitability erode in recent years to the point of needing billions of dollars of government and shareholder cash infusions. The organic strategy of using marketing tools and positioning tactics is the best course of action for GIB in building stronger community relationships and partnership agreements with workers as part of a new, adaptable business model. Since competition in this environment appears to be quite high, with many large-scale firms losing significant cash resources in this difficult economic environment, focusing on basic community banking services could be a strategic option for long-term value. Giving employees more authority in offering solutions toward organic growth would also remove the layers of power distance and improve internal motivation to perform to strategic goals and performance criteria. The most significant problem at GIB is the power distance between workers and managers which was justified by the short primary study and the secondary literature which describes both the internal and external business environment affecting Gulf Investment Bank. Workers do not feel that they are given enough authority to be decision-makers in the business, however management seems to feel that this is a natural business evolution where employees are numbers toward achieving profit goals. Most management and human resources experts will likely agree that this is an outdated business and management model which might be some of the reason behind why the company has lost so much of its assets in such a short period of time. The hard approach to human resources is important because people contribute to financial success, however they will not be motivated to perform better or with more dedication until they are given more flexibility in work design and in offering solutions to real-world business problems. The lack of transparency and the inability to publicise bad decision-making clearly shows that there are management problems at GIB. It is recommended that senior-level administrators at GIB create a new developmental model for training managers, based on UK or US training and coaching models, to build a more positive organisational culture and improve the company brand in the organic, local communities. The business is not ready to expand further and should redevelop strategies in order to avoid further bail-outs or erosion of company brand image in Bahrain. It also does not seem that the business leaders at Gulf Investment Bank are using modern, Westernised theories of marketing to build a stronger community and international brand image. Part of managing a successful company is in differentiating one company from another competitor by highlighting specific investment options and creating a lifestyle connection with customers based on their unique values and social principles. Gulf Investment Bank has not adjusted or adapted its marketing focus for organic growth nor do its current marketing efforts seem to be bringing any value by differentiating the company. As part of short-term strategic focus, it is recommended that the business leaders consult with marketing professionals to set up a new marketing focus for organic growth development and to redesign the company to look more contemporary in service and product. Bibliography Azzam, Henry. (2009). ‘Gulf investment banks must adapt or die’, FT.com. London 18 Mar. Arab News. (2006). ‘GIB Reports Record Profit’. 21 Feb. http://www.arabnews.com/?page=6§ion=0&article=78173&d=21&m=2&y=2006&pix=business.jpg&category=Business. (accessed 22 Mar 2009). IBM Business Consulting Services. (2008). ‘Seize High Growth Indian Banking Opportunities Through Focus and Execution’. An IBM Institute for Business Value executive brief. http://images.forbes.com/ibm/pdfs/G510_3985_00.pdf. (accessed 20 Mar 2009). Manama, Bahrain. (2008). ‘Banking system operates with transparency’. http://www.bahraingateway.org/index.cfm?fuseaction=document.home&id=661. (accessed 21 Mar 2009). Mathis, R. and Jackson, J. (2005). Human Resource Management, 10th ed. United Kingdom, Thomson-South Western: 582-584. Morris, M. and Maisto, A. (2005). Psychology: An Introduction. 6th ed. Pearson Prentice Hall. Thegulfonline.com. (2009). ‘GIB gets bailed out’. The Gulf Business and News Analysis. http://www.thegulfonline.com/Invalid.aspx?artID=1626. (accessed 20 Mar 2009). Appendix A – GIB Management and Worker Questionnaire 1. To what extent are you involved in business decision-making. 1 2 3 4 5 6 7 8 9 10 2. To what extent do you believe the external business environment, today, has impacted GIB success positively? 1 2 3 4 5 6 7 8 9 10 3. How much are you involved in the change processes at GIB? 1 2 3 4 5 6 7 8 9 10 4. Circle which of these you feel are most important to GIB success? External clients Identifying investment potential Marketing Management Competition Write no more than 50 words….Why did you select your chosen item? 5. How effective would you say is the management style at GIB? 1 2 3 4 5 6 7 8 9 10 Write no more than 50 words….Why did you say this? Reflective Diary Search for secondary sources on GIB Gathering secondary research information about Gulf Investment Bank has been difficult because there seems to be a focus on hiding bad decision-making at the firm. One research article suggested that banking leaders in Bahrain (and the surrounding Gulf region) fail to accurately report internal and external business decisions when they are shown to be bad decisions. Researchers suggest lack of transparency at the company and a focus on outcompeting rather than focusing on building stronger organic growth. This represents a company which does not publicise its failures, making it difficult to paint a picture of how GIB is operating in today’s environment. In order to build enough information about the current state of GIB, primary research (in a small form) is necessary to provide valid and reliable research results. The study design Interestingly, Gulf Investment Bank has record profit in 2006 but in 2009 the company had to receive cash bailouts by government and investors in order to stay in business. This is a huge shift in profitability, so there must be internal or external problems leading to this. When the questionnaire is developed, it must have questions dealing with process and policy as well as how the work groups perceive the internal environment. To uncover what the problems really are at Gulf Investment Bank, a small sample of workers and managers (if possible) are necessary. There should be room for comments to be added as part of a qualitative research design. After-thoughts on study administration A larger sample group should be recruited for a study like this as it builds more reliable research results. For future studies, when secondary resources which highlight failures of a business are not available (due to management style), a more formal research study using more respondents will be necessary. The point of the primary research was to establish whether or not GIB worked as an authority-driven organisation or as a workplace with a focus as a learning environment. This study uncovered unique perceptions from workers and a manager, however in order to find correlations, more respondents are necessary. In future studies, there should be a brief, informal interview process set-up which compares results with those discovered in the questionnaire. GIB does not operate as a learning organisation but rather it is managed in a strict hierarchy of control. This was observed when the manager was interacting with staff members for their participation in the study. It was given to two workers and they were expected to simply comply with participation, though this is not how it was presented. This also represents observed behaviours toward heavy control of subordinate workers which was suggested by the secondary research given. This justifies the primary research results. In future studies similar to this one, more in-depth questions regarding communications styles and management style should be inquired. GIB is not a learning organisation and does not value its people as significant assets other than their contributions toward building profit and adhering to business policies. Read More