Commonwealth Bank: A Case Study
Considered as one of the leading institutions in Austraklian financial world, the Commonwealth bank is worth taking a look at. With a successful financial institution having various branches abroad such as those in new Zealand, Asia, United States of America or in 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.
To fully understand the business and its organization, its structure and design must be evaluated with close scrutiny. The issues directly or indirectly concerning the bank, both cultural and society-related will be also put into view, investigated, and if possible will be recommended with possible solutions.
I. Commonwealth Bank Overview
Founded in 1911 through the Commonwealth Bank Act of the Australian government, the Commonwealth Bank is currently one of the most successful financial institutions Australia has with wide business reach as far as New York, Hanoi, Beijing, Shanghai, Tokyo, Bangalore and London, among others.(About us, 2008) The bank is actually aiming for further growth and targeting to provide very convenient banking and financial services to all Australians, both for clients and affiliates: imbedding accessibility, safety, fairness to all services for clients; affording a challenging and rewarding working environment for employees; and a rewarding investments in parts of shareholders through dividend payouts.
Aside from banking, which is the main focus of the organization, it as well provides investment and superannuating products through its asset management division. Furthermore, the Company provides various insurance products to Australian customers. It offers 24-hour banking services whether through phone, EFTPOS or ATM Networks in Australia. It is also a leading online provider for financial needs of its customers online.
II. Organizational Structure and Design
Excellent management, administrative or operational efforts are not alone in meeting success. In the case of Commonwealth Bank (or the Buisness, or the Company or the Bank for brevity), its design and structure is one big part why it stayed long in the market and is stilll gaining stronger clouts in the fonancial market. For the Bank, it has four customer-facing divisions all throughout that are aimed and designed to parallel the Company’s products improvement and growth as well as convenient service deliveries to all its customer segments. Moreover, it has another four divisions in the support segments to assist its booming operation and continued success. The following are included in the Commonwealth Bank’s structure, which, according to Walter (2004) have a “solid, centralized, and highly integrated organizational setup”.
a. Retail Banking Services for personal and small-scale businesses seeking a convenient way and affordable manner of having their financial needs
b. Premium Business Services, which are aimed to provide wealth management and relationship administration for premium customers, whether personal, business, corporate or institutional, including the on-line broker services brand, CommSec.
c. Wealth Management, which are services that take all together the bank’s, funds management manufacturing and distribution capacity together with the insurance and the financial advisory business support groups. Brands associated with these divisions include Colonial First State Global Asset Management, Colonial First State and CommInsure.
d. International Financial Services are for worldwide expansion strategies of the bank and these services focus on developing offshore growth prospects in the areas of Asia-Pacific. Currently, this division is represented in thirteen countries with key markets in China, Indonesia as well as Vietnam and India. Moreover, it further reaches retail banking expansions and life insurance operations in New Zealand, Fiji, Indonesia and another two in cities of China with the respective brands, ASB/Sovereign, Colonial Fiji Group, Commonwealth Bank/Commonwealth Life and Jinan and Hangzhou investments.
e. Financial Services and Risk Management offer professional services such as specialist advisory, strategy-related solutions, financial-related information and policies, risk and capital management concerns and comprehensive investor relations.
f. Enterprise Information Technology and telecommunications (IT&T) assure the banks delivery of best IT&T services as well as for its strategic planning services helping the business units implement new project initiatives while retaining the maximization of the on-going operations.
g. Human Resource is rendering strong assistance to the business in terms of recruiting employees, managing relations among employees, human resource administration, determining and managing remuneration and benefits given by the business, securing the occupational health and safety of those connected to the business together with trainings on leadership and development.
h. Marketing and Communications put up together the bank’s marketing activities, sponsorship-related transactions, employee communication, media and public relations, brand and customer insights teams tin order to provide strategic support and advice to various Group’s leaders.
III. The Importance of the Existing Structure
The previously mentioned divisions of the bank is centralized in nature. The significance of the current structure of the bank enables it to operate in a harmonious way with a focus on customers with its first four divisions and another four equally strong support divisions. In fact, one of the most notable support is that found in IT&T’s performance. This is how the business responds to far-reaching regulatory and technological changes and advances that happen, especially in the financial industry, its functions and markets. With the current globalization and linkages between and among borrowers and lenders, issuers and investors, risks and risk takers around the world, according to Walter, (2004) it is important to have a strong IT support or division. Moreover, the IT division of the bank is observed to be more integrated, efficient and cost control-oriented (Walter 2004) and with a centralized structure and a tight management approach, the goals of the bank is not so difficult to achieve through its reinforcement of these highly technological expertise and high standard, dominant IT architecture reflecting its “in-house expertise” (Walter 2004) unlike other financial institutions that commission these services externally. At Commonwealth Bank, IT staffing was mainly through internal recruitment, training and promotion, and rewarded for loyalty and length of service producing a prudent and risk-averse management style, which is well suited to its relatively stable business environment allowing management to have better control upon, which, in another part, a good indication of its human resource support division.
It has been observed that diversified financial firms exhibit better performance than those that are narrowly defined” in terms of geographies, product range and client groups” (Walter 2004). This is actually observable in the operational results of Commonwealth bank having four client-based divisions with another four support divisions to ensure that clients are properly served in a safe and satisfactory manner. It has been explained how the various divisions function and only the IT&T division was given emphasis due to its versatility and growing importance in the financial market. For the human resource part, the Company is chosen as the best place to work for women in Australia strictly adhering the “specific equal opportunity legislation that requires organizations to address gender inequity has existed since 1986” (Strachan & Frenach, 2007). In fact, health, sustainability and equal opportunity are “issues that were perceived to be top priorities for the companies as corporate citizens.”(Pitt-Catsouphes & Googins, 2005, p. 472) Commonwealth Bank has “65% women in its workforce and has been Employer of Choice for Women by the Federal Government’s Equal Opportunity for Women in the Workplace Agency (EOWA) since 2001” (Our Workplace 2008) trying to give equal opportunities to everyone as possible.
IV. Assessing the Structure
Quantitatively, there is no question as to the immense milestone Commonwealth Bank has created. Reaching its centennial in three years, and with a growing reach internationally, the bank is obviously a huge success. Another measure to assess its operation is on the qualitative side using the balanced scorecard that lessens the inadequacies of traditional performance measurement systems.. In this case, a balanced scorecard with the Company’s objectives and targets aiming “to improve the quality, performance and accountability” (Stevens, Stokes & O’Mahony, 2006) of the Company can be assessed together with some initiatives it make to reach its vision, which is to be the” finest financial services organization through excelling in customer service.” (Strategy 2008) Stated in its strategy, the Bank aspires to:
1. have people that are engaged, passionate and valued
2. provide a service experience our customers appreciate
3. deliver top quartile returns to our shareholders and
4. be respected and admired in our community.
Only with the mentioned aspirations, if poperly implemented, the bank will have a real balanced scorecard. In fact, it is observable that the Company is performing at its best to achieve all its goals from all perpectives. Moreover, in any measurement for the scorecard, the Company is not performing bad, be it compared to any benchmark, assess the customer level objectives and performance, to financial measures, internal business processes and in growth or to any measures, the bank is doing well.
1. Customer – provision of excellent service and up to date technological support for banking needs with a wide variety of services for various financial needs
2. Financial – high returns and profits to investors; excellent market tract performance
3. Internal business Processes – continuos improvement to serve the clientele as well as investors, employees and the community in general
4. Growth—global expansion and continuous international development
In fact all that is needed to have a good or a balanced score card, the Bank has already embeded these goals in its strategic aspirations that were previously enumerated.
V. Relevant Issues Associated with the Bank
Commonwealth bank is attentive with the growing issues around it, either it is directly involved or affected or not. One of these issues is the question on sustainability and environmental risks. Although if taken at a single glance, the Company is not directly affected with these issues because it is a financial institution. However, with 35,000 employees and milions of investments Commonwealth Bank may become susceptible to these issues and risks and it has actually acknowledged these possibilities. One of the initiatives the bank has made in 2007 was its involvement in Climate Clever Program of the Government. Another way to support sustainability is through its provision of sustainability investment fund, named General Global Sustainability Fund by its Colonial First State brand. Furthermore, it has its own environmental policy and energy saving initiatives by implementing water and energy conservation as well as through its involvement in Greenhouse Challenge Program and Greenhouse Friendly Program to reduce environmental risks and by funding related projects.(Sustainability 2008)
To develop a successful community of drug-free and healthy youth, the bank has its own set of sponsorships claiming that it has a big reponsibility to play a key role in the lives of Australians. Sponsorships include health, art, social welfare, environment, sports and national awards program aimed to make a difference in the daily lives of Australians. (Sponsorships and Partnerships 2008)
Another way to thank the Australian community is the bank’s foundation of the Staff Community Fund generating at least $1 million each year for the health and well being of the Australian youth. This fund is distributed to local organizations, to the Humor Foundation and to Midnight Basketball program. (Staff Community 2008)
With regards to operational issues of the Bank, it is on its privatization. Although it has plumetting profits since its privatization, reaching as high as the “abnormal 50% returns”, (Otchere & Chan 2003) it is still a different case if the bank is government owned.
VII. Conclusion and Final Recommendation
It may be a prejudiced judgment but it is difficult to look for shortcomings from the achievement of Commonwealth bank. From its organizational structure up to its community participation or it the way it can be measured qualitatively, the bank has it. Its structure is not very complex, yet it is not simplified as well; it is highly innovated yet clients are the primary concern; it is financially successful but it dives back to its people. The bank may not be operating perfectly because no business organization is without flaws, but if these flaws may come out, they can only be overshadowed by the bank’s excellent performance both with its qualititive and quantitative records.
Indeed the bank has attained its vision, to be the finest financial service provider to the Australian nation but it never stops there. It is continuing to reach more, to expand and to be better, even outside its home country. The Commonwealth bank is a model of success, in structure, in application, in community and public service and many things that may be asked of an organization.
With the issues on privatization, the bank is making an excellent performance as high as 50% returns as well as increased profitability since it became private thereby restoring the trust of its investors and clientele.Other top issues concerning the Bank such as sustainability, equal opportunities, health which it manage to provide solutions before they became any problem in the workplace and of the organization in general.
Books and Journals
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, Vol. 27, pp. 949-975.
Pitt-Catsouphes, M., & Googins, B. (2005). 21 Recasting the Work-Family Agenda as a Corporate Social Responsibility. In Work and Life Integration: Organizational, Cultural, and Individual Perspectives, Kossek, E. E. & Lambert, S. J. (Eds.) (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]
Strachan, Glenda and French, Erica L. (2007) Equal Opportunity: Disentangling
Promise from Achievement. In Proceedings Gender, Work and Organisation: 5th
Biennial International Interdisciplinary Conference, pp. 1-22.
Walter, I. (2004). Mergers and Acquisitions in Banking and Finance: What Works, What Fails, and Why. New York: Oxford University Press.
Commonwealth Bank Auxiliary Sources
Commonwealth Bank. (2008). Our Workplace. [online]. Available from < http://www.commbank.com.au/careers/ourworkplace.asp > [1 June 2006]
Commonwealth Bank. (2008). Sponsorships and Partnerships. [online]. Available from <http://about.commbank.com.au/group_display/0,1922,CH2042,00.html > [1 June 2006]
Commonwealth Bank. (2008). Staff Community Fund. [online]. Available from <http://about.commbank.com.au/group_display/0,1922,NI2663%255FCH2663,00.html> [1 June 2006]
Commonwealth Bank. (2008). Strategy. [online]. Available from <http://about.commbank.com.au/group_display/0,1922,CH2396,00.html > [1 June 2006]
Commonwealth Bank. (2008) Sustainability. [online]. Available from <http://about.commbank.com.au/group_display/0,1922,CH2044%255FTS17825,00.html> [1 June 2006]