Bank of America: Managerial Economics and Analysis Essay

The Bank of America began its business in the mid-20^th century. Currently, the organization has more than 300 branches in the US and 8 branches abroad. As one of the largest banks in the world, the organization is said to be among the most diverse global companies. The article below focuses on the Bank of America with respect to managerial economics and strategic analysis.

Through this, the article will highlight on the type of strategic control, organizational structure, and the need to stabilize rewards, culture, and boundaries in the organization. Similarly, the article will highlight on elements of effective leadership exhibited by the managers, bank’s ethic programs, and the bank’s risk management plan. The article also integrates how the economic situation of today affects the strategic decisions made by the company and the managerial economics exhibited in the company.

Organization’s type of strategic control

The current economic situations in the banking sector are characterized by increased competition and reduced profits. Faced with the above situations and the need to enhance managerial efficiency, the Bank of America has adopted and implemented a strong strategic control. According to managerial economists, an effective strategic control system is an important part of management and a basis for the safe and rigorous operation of financial institutions (Volberda, 2012).

With its strong in-house controls, the bank has been able to meet its objectives, meet lasting profitability goals, and uphold dependable fiscal and managerial reporting. For example, the bank’s strategic control comprises of five interconnected features.

The features are management oversight and the control principles, risk acknowledgment and evaluation, control activities and separation of duties, information and communication, and monitoring undertakings and amending insufficiencies. An understanding of the above features in today’s corporate structure is very vital because it is a prerequisite to achieving an organization’s operation, information, and compliance purposes

The Bank of America’s organizational structure

The organizational structure of the bank displays a divisional corporate order. The divisional order is predominant in the diverse service sections of the organization. The sections include retail segment, commercial segment, investing segment, and the asset management segment. For instance, the big segments of the corporate enterprise are separated into semi-autonomous bodies. The smaller segments are apportioned to a specific field of service.

Every semi-autonomous segment has a group head. As such, the group head is selected as the management officer or deputy president of that specific segment. The top manager of a particular segment only manages the overall undertakings like hiring and making financial arrangements of that specific segment only.

The present-day economic conditions in the banking sector are characterized by increased competition and reduced returns. In this regard, the bank has adopted the above organizational structure to save on the cost of operation. The organizational structure has a number of advantages. Through this structure, every section functions effectively for the reason that they are centered on certain precise task. By doing so, the bank has been able to enhance the output of every section.

With every functional group under the leadership of a top manager, the bank has been able to use the resources of the company efficiently as advocated in managerial economic concepts. Managerial economists assert that an understanding of the above subject in today’s business is very vital in restructuring an organizational structure to enhance its productivity. Below is a figure showing the organizational structure of the Bank of America.

How the Bank of America stabilizes rewards, culture, and boundaries

In a bid to stabilize rewards, culture, and boundaries, the Bank of America has executed a behavioral control strategy. For example, the bank has a strong, positive, and unique culture. The culture has enabled the bank to achieve its goals. The bank’s culture of enthusiasm and honesty offers the employees with a feeling of specialness encouraging them to increase their productivity.

The present financial situations in the banking sector are characterized by increased operating costs. Recruitment and hiring of new employees contributes to the increase in operating costs. Therefore, the bank has adopted a competitive reward scheme to reduce on the employee turnover.

Being among the top banks in America, the Bank of America’s reward systems is competitive in the banking sector. As such, the bank’s reward scheme indicates the individuals to be awarded and the reason behind the rewards. The practice acts have enhanced individual performance and general firm outcomes. The reward scheme balances with the organization’s culture. If the rewards were not in accordance with the supported standards and beliefs, the scheme could act as a de-motivator.

At the Bank of America, boundaries are being used cautiously. The bank’s executives understand that extreme regulations or rules imposed with poor verdict are counterproductive. As such, the company’s vision, mission, and strategic objectives are some of the boundaries guiding the bank’s employees. The features offer all employees boundaries to aim at during their daily chores.

Elements of effective leadership exhibited by the Bank of America managers

Currently, financial organizations are in need of visionary, innovative, and inspiring leaders. If organizations are to overcome their current economic challenges such as increased operating cost, reduced profits, increased turnover, and increased competition, their leaders should motivate employees and come up with quality management measures. The above imply that an understanding of effective leadership styles is very important in today’s corporate structure.

In the Bank of America, managers portray transformational leadership styles. Transformational leaders recognize transactional desires among their employees and try to inspire them to achieve their full potential. The bank’s managers are determined to influence the culture of their organization through this type of leadership style. Their ultimate wish is to see the employees enhance their self-esteem, become more creative, become more flexible, and accept changes with ease.

For example, the managers allow their subordinates to discuss their issues with them whenever possible. Through training, motivation, reflection, and admiration, the bank has been able to come up with an ideal organizational culture in their programs.

By practicing transformational leadership styles, the managers have been able to enhance the commitment and productivity of the employees as advocated by managerial economics. Based on the above, it is apparent that the types of leadership styles exhibited by the bank’s managers are of importance to the organization.

Bank’s ethic programs

The Bank of America has emphasized the significance of ethics among its employees. The current economic situations in the banking sector are characterized by increased operating costs as more resources are utilized in fighting fraud. With increased cases of bank fraud among employees, banks have formulated appropriate code of ethics and code of conduct to prevent the vice.

The code of ethics articulates the accepted standards. An understanding of the code of ethics is very important in today’s corporate structure. For example, in the Bank of America managers encourage the employees to be informed about the organization’s code of ethics (Siegel, 2015). The managers have noted that being aware of ethical issues and integrating them into daily decision-making processes decreases the likelihoods of committing costly mistakes.

Adhering to the code of ethics is very important in the Bank of America because it reduces unethical practices. Unethical practices affect the morale of employees. With respect to managerial economics, ethical wrongdoings have the potential to harm the bank’s associations with customers, clients, shareholders, suppliers, and the public.

Bank of America’s risk management plan

The Bank of America agrees that risk-taking is an intrinsic component of the institution. The organization believes that profits are an incentive for positive risk taking. Following the current economic situations in the aftermath of 2008-2009 recessions, the bank noted that undue and poorly controlled risk could result in damages and thus jeopardize the safety of a bank’s investors (Siegel, 2015).

In this respect, the bank has come up with a custom-made risked management system. The program comprises of risk documentation, risk evaluation, risk monitoring, and risk control.

An understanding of risk management strategies is very important in today’s corporate structure (Dess & Lumpkin, 2014). Risks are necessary when they are comprehensible, quantifiable, manageable, and within the financial institution’s ability to readily endure opposing results. According to managerial economics experts, comprehensive risk management plans permit executives of financial organizations to take risks knowledgeably, decrease risks where suitable, and endeavor to plan.

Conclusion

In conclusion, it should be noted that the Bank of America is one of the largest banks in the world. The current economic situations in the banking sector are characterized by increased competition and reduced profits.

Faced with the above situations and the need to enhance managerial efficiency, the bank has adopted a strong strategic control, appropriate organizational structure, and stabilized rewards, culture, and boundaries in the organization. The bank has also encouraged its leaders to exhibit desirable leadership skills and come up with an effective risk management plan.

References

Dess, G., & Lumpkin, G. (2014). Strategic management: Creating competitive advantages (7^th ed.). Boston: McGraw-Hill/Irwin.

Siegel, D. (2015). Special Issue of Strategic Organization. Strategic Organization Journal, 13(2), 163-165.

Volberda, H. (2012). Strategic Flexibility Creating Dynamic Competitive Advantages. Oxford Handbooks Online, 14(3), 23-34.