Considered as one of the leading institutions in the Australian financial world, the Commonwealth Bank is worth taking a look at. As a successful financial institution with various branches abroad, such as those in New Zealand, Asia, the United States of America and the United Kingdom (UK), Commonwealth Bank must be utilizing its assets excellently and performing its operations carefully to gain not only profit but also the trust of its clients and investors in the long run.
In order to fully understand a business and its organization, it is necessary to evaluate its structure and design with close scrutiny. Additionally, any issues related to the bank – whether cultural or society-related – should be investigated and potential solutions recommended.
Overview of Commonwealth Bank
Founded in 1911 through the Commonwealth Bank Act of the Australian government, Commonwealth Bank is currently one of Australia’s most successful financial institutions. Its business reach extends to New York, Hanoi, Beijing, Shanghai, Tokyo, Bangalore and London among others (About us, 2008). The bank aims to achieve further growth and provide convenient banking and financial services to all Australians including clients and affiliates. It emphasizes accessibility, safety and fairness for all its clients while providing a challenging and rewarding working environment for its employees. Additionally, it offers rewarding investments in parts of shareholders through dividend payouts.
Aside from banking, which is the main focus of the organization, it also provides investment and superannuation products through its asset management division. Furthermore, the company offers various insurance products to Australian customers and 24-hour banking services via phone, EFTPOS or ATM networks in Australia. Additionally, it is a leading online provider for its customers’ financial needs.
Organizational Structure and Design
Excellent management, administrative, or operational efforts alone are not enough to achieve success. In the case of Commonwealth Bank (referred to as the Bank for brevity), its design and structure are significant factors that have contributed to its longevity in the market and continued growth in the financial industry. The Bank has four customer-facing divisions that aim to improve its products and services while providing convenient delivery options for all customer segments. Additionally, it has four support divisions that assist with its operations and overall success.
The Commonwealth Bank has a solid, centralized, and highly integrated organizational setup as described by Walter (2004). The following are included in its structure:
- Retail Banking Services are available for personal and small-scale businesses seeking a convenient and affordable way to meet their financial needs.
- Premium Business Services provide wealth management and relationship administration for premium customers, including personal, business, corporate or institutional clients. This division also includes the online broker services brand, CommSec.
- Wealth Management combines the bank’s funds management manufacturing and distribution capacity with insurance and financial advisory business support groups. Brands associated with this division include Colonial First State Global Asset Management, Colonial First State, and CommInsure.
- International Financial Services focus on developing offshore growth prospects in the Asia-Pacific region. Currently represented in thirteen countries with key markets in China, Indonesia as well as Vietnam and India. This division also includes retail banking expansions and life insurance operations in New Zealand, Fiji, Indonesia as well as two cities in China with respective brands ASB/Sovereign, Colonial Fiji Group Commonwealth Bank/Commonwealth Life Jinan & Hangzhou investments.
- Financial Services & Risk Management offer professional services such as specialist advisory solutions related to strategy development; financial information & policies; risk & capital management concerns; comprehensive investor relations.
- Enterprise Information Technology (IT) & Telecommunications (IT&T) ensure that the bank delivers best IT&T services while providing strategic planning services to help business units implement new project initiatives while retaining maximization of ongoing operations.
- Human Resources provides strong assistance to businesses by recruiting employees; managing employee relations; administering human resources; determining remuneration packages/benefits given by businesses; securing occupational health/safety of those connected to businesses along with leadership/development training programs
- Marketing & Communications bring together various teams such as marketing activities team,sponsorship-related transactions team ,employee communication team ,media/public relations team, brand and customer insights teams to provide strategic support and advice to various Group’s leaders.
The Importance of the Existing Structure
The divisions of the bank mentioned earlier are centralized in nature. The current structure of the bank is significant as it enables harmonious operations with a focus on customers through its first four divisions and four equally strong support divisions. One notable support division is found in IT&T’s performance, which helps the business respond to far-reaching regulatory and technological changes and advances that occur, particularly in the financial industry, its functions, and markets.
With the current globalization and linkages between borrowers, lenders, issuers, investors, risks, and risk takers around the world (Walter 2004), it is important to have a strong IT support division. The IT division of the bank is observed to be more integrated, efficient and cost control-oriented (Walter 2004). With a centralized structure and tight management approach, achieving the bank’s goals through its reinforcement of highly technological expertise and high standard dominant IT architecture reflecting its in-house expertise” is not difficult (Walter 2004). This sets it apart from other financial institutions that commission these services externally.
At Commonwealth Bank, IT staffing is mainly done through internal recruitment, training, and promotion. Loyalty and length of service are rewarded, which produces a prudent and risk-averse management style. This management style is well-suited to the bank’s relatively stable business environment, allowing for better control. This is also a good indication of the bank’s strong support for its human resource division.
According to Walter (2004), diversified financial firms perform better than those with narrow definitions in terms of geographies, product range, and client groups. This is evident in the operational results of Commonwealth Bank, which has four client-based divisions and four support divisions to ensure safe and satisfactory service for clients. The various divisions’ functions were explained, with emphasis given only to the IT&T division due to its versatility and growing importance in the financial market.
For the human resource part, the Company has been chosen as the best place to work for women in Australia. They strictly adhere to the specific equal opportunity legislation that requires organizations to address gender inequity, which has existed since 1986 (Strachan & Frenach, 2007). Health, sustainability and equal opportunity are issues that are perceived as top priorities for companies as corporate citizens (Pitt-Catsouphes & Googins, 2005, p. 472). Commonwealth Bank has a workforce consisting of 65% women and has been recognized as an Employer of Choice for Women by the Federal Government’s Equal Opportunity for Women in the Workplace Agency (EOWA) since 2001 (Our Workplace 2008). They strive to provide equal opportunities for everyone possible.
Assessing the Structure
Commonwealth Bank has achieved an immense milestone quantitatively. In just three years, the bank will reach its centennial, and it has already expanded its reach internationally. This success is undeniable. However, to assess the bank’s operation qualitatively, we can use a balanced scorecard that addresses the inadequacies of traditional performance measurement systems. The Company’s objectives and targets aim to improve the quality, performance and accountability” (Stevens, Stokes & O’Mahony, 2006), which can be assessed using a balanced scorecard along with initiatives taken by the company to achieve its vision of becoming “the finest financial services organization through excelling in customer service” (Strategy 2008). As stated in its strategy document, Commonwealth Bank aspires to:
- Have engaged, passionate, and valued people.
- Provide a service experience that our customers appreciate.
- Deliver top quartile returns to our shareholders.
- Be respected and admired in our community.
Only with the mentioned aspirations properly implemented, will the bank have a truly balanced scorecard. In fact, it is evident that the company is performing at its best to achieve all its goals from all perspectives. Furthermore, in any measurement for the scorecard, the company is not performing poorly when compared to benchmarks or assessed against customer level objectives and performance, financial measures, internal business processes and growth measures. The bank is doing well.
- Customers: Provision of excellent service and up-to-date technological support for banking needs, with a wide variety of services to fulfill various financial requirements.
- Financial: High returns and profits for investors; excellent market track performance.
- Internal Business Processes: Continuous improvement to serve the clientele as well as investors, employees, and the community in general.
- Growth: Global expansion and continuous international development.
In fact, all that is needed to have a good or balanced scorecard is already embedded in the Bank’s strategic aspirations, which were previously enumerated.
Relevant Issues Associated with the Bank
Commonwealth Bank is attentive to the growing issues surrounding it, whether directly involved or not. One of these issues is sustainability and environmental risks. Although at first glance, the company may not seem directly affected by these issues because it is a financial institution, with 35,000 employees and millions of investments, Commonwealth Bank may become susceptible to these risks. The bank has acknowledged this possibility and made an initiative in 2007 by becoming involved in the Climate Clever Program of the Government.
Another way to support sustainability is through investment in a sustainability fund. Colonial First State offers the General Global Sustainability Fund, which aligns with their brand’s commitment to sustainability. They also have their own environmental policy and energy-saving initiatives, including water and energy conservation measures. Additionally, they participate in programs like the Greenhouse Challenge Program and Greenhouse Friendly Program to reduce environmental risks and fund related projects (Sustainability 2008).
The bank has its own set of sponsorships aimed at developing a successful community of drug-free and healthy youth. It claims to have a big responsibility to play a key role in the lives of Australians. The sponsorships cover health, art, social welfare, environment, sports and national awards programs that aim to make a difference in the daily lives of Australians. (Sponsorships and Partnerships 2008)
Another way to thank the Australian community is through the bank’s foundation of the Staff Community Fund, which generates at least $1 million each year for the health and well-being of Australian youth. This fund is distributed to local organizations, as well as to the Humor Foundation and Midnight Basketball program. (Staff Community, 2008)
Regarding operational issues of the Bank, it is currently undergoing privatization. Despite experiencing plummeting profits since its privatization, with returns as high as an abnormal 50%” (Otchere & Chan 2003), the situation would be different if the bank were government-owned.
Conclusion and Final Recommendation
It may be a biased judgment, but it is challenging to find any shortcomings in the achievements of Commonwealth Bank. The bank excels in its organizational structure, community participation, and qualitative measurements. Its structure is not overly complex yet not oversimplified; it prioritizes innovation while keeping clients at the forefront; it has achieved financial success while also investing back into its people. While no business organization is perfect, any flaws that may exist are overshadowed by the bank’s excellent performance both qualitatively and quantitatively.
Indeed, the bank has attained its vision of being the finest financial service provider to the Australian nation, but it doesn’t stop there. The Commonwealth Bank is continuously striving to expand and improve, even outside of its home country. It serves as a model of success in structure, application, community and public service – embodying many qualities that one would expect from an exceptional organization.
The bank has been performing excellently, with returns as high as 50% and increased profitability since its privatization. This has restored the trust of investors and clients despite concerns about privatization. The bank has also addressed other important issues such as sustainability, equal opportunities, and health in the workplace before they became problems for the organization.
References
- Otchere, I. & Chan, J. (2003). Intra-industry Effects of Bank Privatization: A Clinical Analysis of the Privatization of the Commonwealth Bank of Australia. Journal of Banking and Finance, 27, 949-975.
- Pitt-Catsouphes, M., & Googins, B. (2005). Recasting the Work-Family Agenda as a Corporate Social Responsibility. In E.E. Kossek & S.J. Lambert (Eds.), Work and Life Integration: Organizational, Cultural and Individual Perspectives (pp.469-484). Mahwah, NJ: Lawrence Erlbaum Associates.
- Stevens P., Stokes L., & O’Mahony M.(2006). Metrics Targets and Performance.National Institute Economic Review [Online] (197),80+. Available from http://www.questia.com/PM.qst?a=o&d=5016613238 [1 June 2006]
- Walter I.(2004) Mergers and Acquisitions in Banking and Finance: What Works What Fails And Why.New York: Oxford University Press.
- Commonwealth Bank.(2008) Our Workplace.Available from http://www.commbank.com.au/careers/ourworkplace.asp
