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Problems Facing in Common Wealth Bank of Australia Report

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Executive Summary

Common Wealth Bank of Australia is a leading bank in Australia which also provides financial services in the US, UK, Asia and Far East. The paper tackles organization theory through analyzing the different aspects of the bank. The introduction is an overview on the different perspectives of organization theory that includes somewhat comprehensive definitions of symbolic interpretive, modern and post modern theories.

A brief introduction of the CBA is tackled in section two. An overview of the bank’s services and area of operations are tackled giving way for the actual analysis of the organization.

Modern analysis tackles the problems CBA is facing in terms of environment, social structure, culture and technology. The problem statement summarizes the problems as identified through the modern analysis while suggested solutions and recommendations on what needs to be done conclude the section.

The following section concentrates on the critique of the modern view of the organization through symbolic interpretive perspective. Here the, the paper takes a swipe at the views of modernity as being subjective by asserting that the stakeholders of organizations like CBA are better placed to understand why they engage in business and why the organization is structured as such. Post modernism on the other hand concentrates on the irrationality and seemingly selfish models and polices that characterize the contemporary corporate setting.

The section in-depthly critiques the modern aspect of organization theory through assertion that the corporations including CBA don’t have employee interest at heart and that the managerial structures in place at modern organizations are informed by irrationality and profit maximization principles. Post modernity also critiques modern organizations as using managerial award gimmicks to attain the loyalty of the employees while in the real sense stock holders and special interest are gaining.

Introduction

An organization is a collection of people working for a common purpose to achieve common goals through division of labour. Through collective efforts, people achieve more than what solo efforts would do. Organizations are classified according to the nature of activities they are involved in. the core activities of business organizations for instance is the delivery of goods and services to make profits from the prices they charge.

Every business organization is different and unique in its own way. The workings of business organizations are complex and need in-depth research and study to understand the driving force behind their workings. Over time, scholars including economists and academic researchers have come up with theories aimed at explaining the dynamic nature in business organizations which include decision-making distribution of power and control, conflict resolution and organizational change (Parnell & Lester 2006, p. 23).

Among the theories that have been formulated to explain the nature of organizations, are the theories of modernity, symbolic interpretive theory and postmodernism.

These theories help in explaining the nature organizations through different perspectives that include the environment, the technology that they are using, the social environment they operate in and the type of business that they do. Additionally, organizational theory is applied in strategy and finance, marketing, information technology, operations, human resources and communication.

In the modernist approach, organizations are theorized and analyzed as constituents of a larger environment, and entities that have social structures that help in ensuring the order of activities of their members.

Organizations through the modernist approach are also viewed as consumers of technology in the production of goods and services for the society and the clients they serve. They are also seen as entities with distinct cultures that form the symbolic world that the organization represents. Through the modernist approach organizations are also seen as physical structures with capabilities to support and constrain activity and meaning in their contexts as well as areas of operation.

The modernist approach also views organization as arenas where conflict and power plays are staged for control of the organization. Though the above concepts are related in different ways, each contributes something unique to the running and functioning of an organization.

Organization

This paper will analyze the Common Wealth Bank of Australia using the modernist theory approach. Later, there will be critiques of the modernist approach of the said organization through symbolic interpretivism and postmodernism. The Common Wealth Bank of Australia is an Australian multinational bank which is one of the biggest four banks in the country and with operations in different territories including New Zealand, Fiji, UK and US (Fleming, 2000, p. 48).

The financial services it provides covers a wide range including retail products, business, and institutional banking. Additionally, it includes insurance services, funds management, investment and broking and superannuation. The modern perspective analysis will focus on the bank through the areas identified in the introduction.

Modern analysis

Environment

The structuralist theories especially fronted by Burns and Stalker emphasized mechanistic forms of organizations that operated in stable environments and organic forms or organizations that operated in dynamic environments. According to Lawrence and Lorsch, organizations have to achieve a balance between differentiation and integration (Cunliffe & Hatch 2006, p. 300).

The banking environment in which the Common Wealth Bank of Australia operates has always been caught up in the economic fluctuations that characterize the free market economy (Fleming, 2000, p. 54). The environment is therefore characterized by both organic and mechanistic environmental qualities that the bank needs to maneuver through.

There have always been shocks emanating from both the financial and political sectors of the banking environment. To some extent, the upheavals the bank has faced since its establishment to the current world financial crisis makes it possible to classify its operating environment as uncertain. Thus its operations can be analyzed through the theory of environmental uncertainty.

The CWBA has operated in many territories and subjected to many political decisions that have characterized its operations since its formation. For instance the bank was conferred upon the powers of the central bank between 1920 and 1960. This was a largely political decision that will haunt it after the spat that existed between the bank and the government during the Great Depression. There bank also went through periods characterized by diversification, deregulation and privatization (Fleming, 2000, p. 60).

Politics and financial market factors underpinned these events. It’s therefore safe to conclude that the bank through has not been well insulated from politics and the existing subtle connection between its operations and politics presents a challenge that threatens its standing as well as core business. There is sufficient reason to believe that the bank’s structure is vulnerable to manipulation and offers little protection from external forces such as politics.

Social structure

The social structure of organizations varies greatly depending on the nature of business and location of the organization. The social structure of the CBA for instance can be analyzed through contingency theory which argues that there is neither a best way nor structure to manage an organization (Fleming, 2000, p. 57). Structure and management are contingent or dependent on the nature of the surrounding where the organization is situated.

The CBA serves a heterogeneous community that comprises young and old people as well as people of all economic classes. The bank finances literacy through community education support programs which in 2007 alone benefited more than 30,000 young Australians. The bank also supports sports and other activities such as music (Fleming, 2000, p. 68).

As such, it’s not easy to clearly identify the social structure that CBA belongs to. However, given that it’s the biggest of the four leading banks of Australia, it’s a safe assumption that the bank attracts top tier individual and corporate clients. It’s highly likely that middle-income individuals will seek services at the bank especially with numerous regional small banks.

That, though subtle may be a problem for CBA which somehow may be out of its reach since the bank carries out operations depending on the nature of business and the surrounding.

Culture

The modern aspect of corporate culture was mainly fronted by Schein. According to him, corporate cultures involve the basic patterns of shared assumptions people in an organization learn when they jointly solve problems. Solving problems are geared towards solving problems of internal integration and external adaptation of the organization.

In pursuit of corporate culture, the theory of symbolic management by Bolman and Deal comes out where it stresses on the importance of unraveling the meaning of what is happening in organizations (Sapru 2006, p. 124).

In keeping up with symbolic management, the CWBA has sought to create a culture of teamwork and collaboration where the people who are responsible for the bank’s success get rewarded for their achievements (Fleming, 2000, p. 63). Symbolic management as said earlier ensures organizations deal with internal management problems rather than problems that affect the industry.

In the respect, the bank’s culture aims at attracting passionate and engaged employees who are valued by the organization through the provision of a safe working environment. The bank as arrange of programs and work practices through which professional development is achieved by training and leadership. Additionally there are programs to ensure wellness and safety of the employees that is implemented through occupational health and safety initiatives and flexible working options.

The culture of training and rewarding employees that is pursued by the CWBA is a good one. Despite the emphasis on the incentives, there is no mention of profit sharing and share allocation to the outstanding employees. It’s a vital element of symbolic management that is lacking in the otherwise perfect corporate culture of the bank. Failure to provide or stress on the importance of proving employees with a path to bank ownership can be considered a weakness.

Technology

Banking has been characterized by rapid technological changes that have revolutionalized the ways services are provided. In the current 21st century situation, banking services are offered online as automation increases and manual operations reduced. Technology in organizations especially banks can be explained through the socio-technical systems theory.

According to theory, the interaction between people and technology in an organization creates a socio-technical a system setting that is difficult to separate. There is a complex interaction between human behavior and technological infrastructure put in place. This theory therefore is about the social aspects of people and society and the technical aspects of organizations’ structure and processes (Jones 2001, p. 236).

In April of 2011, the NAB bank of Australia experienced a major technical hitch that messed payroll accounts of its clients. Experts cited the problem to be widespread and common in all the four major banks in the country including CBA. In fact, the experts approximate such technological hitches will be common for the next ten years and customers should brace themselves for the repercussions. CBA and NAB are cited to be spending money to amounting to two billion dollars to upgrade their core banking softwares (Fleming, 2000, p. 70).

The failures associated with IT infrastructure are may be as a result of system malfunction or human error or both. This is the complexity that is cited in the socio-technical systems theory. Being a wide spread problem, CBA is not exempt even on the backdrop of spending such huge amounts of money. There is still a risk for CBA in within the context of socio-technical systems theory.

Problem Statement

The modern analysis above on CBA brings out the following problems:

  • Exposure and insufficient protection from political manipulation and control
  • Lack of diversification to net both low end and high end customers
  • Failure to implement strategies that will help employees own part of the bank
  • Uncertainty in the performance of IT infrastructure and the need for constant upgrading

Solution

The risk to political manipulation has significantly reduced over time. There have been laws put in place to guide bank operations and to ward off vested interests. However, to overlook the possibility of political interference in the bank as it has been before will be a gross miscalculation.

The bank therefore needs to put in place measures that limit special interests at the bank. That can be through implementation of provisions of banking laws that specifically deal with that. Such measures will help the bank avoid the negative impacts associated with politics.

There is also need to enhance the diversification that the bank has gone through since its formation. Its size and position as earlier said can easily be an alienation factor in the pursuit of customers. It’s important for the bank to put in place measures that will be aimed at netting small and middle-income clients so as to maximize on profit making.

Profit sharing is a phenomenon that is fast catching pace with many organizations. A plan to share profits of the bank needs to be put in place that will help employees share the revenues the bank makes and also put them on the path to owning a stake of the bank. That way, the bank will ensure loyalty on from its employees and its will also boost their morale to work harder for better results.

There is a need to implement a state of the art core banking system that will significantly speed up bank operations. Additionally, the IT systems in place should be upgraded or replaced to ensure services rendered by the bank are reliable. It’s important to take advantage of the bank’s IT policy which compared to other banks is stable.

Recommendations

Some of the solutions above are tough and to achieve. It will therefore take some sacrifice and willingness to implement the recommendations below.

Implementing rules based on provisions of the banking laws that limit people with explicit political connections and interest from holding positions as employees or directors. Political influence as a result will be diminished and manipulation from special interest will recede.

The bank should consider launching partnerships with other organizations that have wide coverage in an agency-banking format that will expose it to the middle class. People are likely to appreciate such a move and the client base of the bank will rise.

The bank should develop a framework where it’s possible to share its profits with its employees. The framework will also spell out the way through which employees will be part of the bank in form of shares. It’s a sure way of ensuring loyalty from the banks workers.

The bank should contract an Information Communication Technology (ICT) firm to make and continuously update the core banking software. That way the dedicated firm will be able to understand the needs of the bank and to make products that suit it and their customers.

Symbolic Interpretive Critique

When looked at from the symbolic interpretive lens, it’s safe to acknowledge that organizations are continuously undergoing changes. They are constructed and reconstructed by the members through interaction that is underpinned by symbolic interaction.

The organizations are realities that are constructed socially where the meanings attached to them promote and are promoted by the self and other stakeholders that make up the organization. In essence therefore, people give meanings and order to the experiences they experience within the organization and the organization’s area of operation. The meanings are interpretive of the symbolic acts, forms and processes in an organization (Mouzelis 2003, p. 257).

The Common Wealth Bank of Australia for instance has been operating in an environment where politics and banking have a long history of mixing. It’s also important to note that the political leadership plays a crucial role in the formation and implementation of monetary policies.

It’s therefore not fair to judge and conclude that political and special interest involvement is not good for the bank. Additionally, the bank has managed to growth in the system that has an outsider can easily label politically involving. The people who run the bank understand the importance of involving the political class and the through the ideal situation may campaign against their involvement, management is better placed to decide on that.

Similarly, the management of the bank is better placed to identify the niche markets where they feel comfortable in investing. Diversifying is a sure way for many banks and other business organizations. However, the banks knows the value of engaging with the every class, how to engage with them and what to expect from such ventures. There is a meaning attached to the class of people they engage in and whey they do so.

It’s a common assumption that employees nowadays are the most important assets that a firm can have. Every expert will always be of the opinion that employee issues be given priority so that loyalty and morale can be booted. However, any policies that banks like CBA implements regarding employees are solely their own decisions.

The management of CBA knows the value of their human resource and any decisions that they make are for their best interests. Profit sharing may be an attractive idea but to the merits of implementing or not lies with the management of the bank. It’s safe to assume that the CBA knows the true value of its employees and treats then as such. Any other second opinion is just speculation.

The system that is in operation at the bank may not deliver according to an observer’s expectation. However, there are many more advantages known to CBA management that the system does that makes it important to them. The value of maintaining the system or upgrading it in the pace they are doing is only known to CBA.

Postmodernism

Postmodernist views organizations as sites where enacting power relations, oppression, irrationality communication distortion are rampant (Daft 2009, p. 169). Additionally, postmodernism considers organizations as arenas where fun and playful irony takes place.

The postmodernist approach asserts that organizations are texts produces by language that are holding human beings in captive. The organizational theory thinking that is underpinned by postmodernism alludes that there is need to destabilize managerial ideologies and modernist modes of organization to free the oppressed people in those contexts.

In CBA for instance politics and special interest domination is just meant to consolidate the grip on power and resources that the bank represents. Through this approach, it’s not important to look at CBA as a captive of the politics and special interest but as a part of it. The postmodern approach will assume that the people working as employees of the bank are captives who have whose livelihoods have been captured by the owners of the business hence have little control over what happens to them or the business.

Closely related, the managerial ideologies that are in place cannot offer part of their control machine to the people they have held captive. It’s safe to assume that such moves are thought as ceding too much ground to the people who are supposed to do the donkeywork to the bank.

It’s therefore almost impossible that such programs of profit sharing will be implemented and even if they are, the owners of the banks will always take the majority share. More often than not, rationality informs such decisions. Such a move will therefore amount to irrationality on their part given the policies organizations like CBA pursue.

Information technology is a tool that is used by the bureaucrats to govern organizations while keeping tight control over people. In the bank’s case, it is going to improve service delivery as well as help management to keep tabs on employee activities.

When looked at objectively, IT elements are used by management for spying and for maximizing profits. In fact, the primary reason why IT is implemented is not to give customers better service, but to give the business consolidation over its niche and to give it a platform to further economic dominance.

Diversification of bank products may be a good approach for many banks. However, any expansion is done with the profit motive in mind. It’s therefore unlikely that CBA will implement such initiatives given the returns it gets from its current niche. Furthermore, organizations have class which is rarely acknowledged in their PR exercises. They are unlikely to venture outside of their areas of operation because the main stakeholders don’t see a need. Besides they can’t risk losing high profile clients who may not appreciate such kind of expansion.

References

Cunliffe, L.A. & Hatch, J. M. (2006) Organization theory: modern, symbolic, and postmodern perspectives. NY: Cengage Learning.

Daft, R. (2009) Organization Theory and Design. NY: Routledge.

Fleming, L. (2000) Excel Preliminary Business Studies. Sydney: Pascall Press.

Jones, R. G (2001) Organizational theory: text and cases. NJ. McGraw Hill.

Mouzelis, N. (2003) Organization and bureaucracy: an analysis of modern theories. London: Thomsons Learning.

Parnell, J.A & Lester, D. (2006) Organizational Theory: A Strategic Perspective. London: Sage Publications.

Sapru, R.K. (2006) Administrative Theories and Management Thought. Burlington: John Wiley & Sons.

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