Managing Change in the Excellent Banks

Frontmatter

1. The Winds of Change

Abstract

This book is about change in the banking world and how well-managed institutions have coped with it. Like its forerunner, Excellence in Banking, this volume attempts to identify common themes in successful management practice and synthesize them to enable bankers and bank watchers to spot winners and losers on the global banking battlefield.

Steven I. Davis

2. Risk: Some New Dimensions

Abstract

As befits an industry built on risk assessment, the issue of risk is at the forefront of the concerns of the excellent banks. Whereas the focus of risk in Excellence in Banking was on strategies to manage risk in the traditional commercial banking loan products, it is now on two quite different challenges. Firstly, the advent in the early 1980s of the wholly new array of rate risk management products such as interest rate swaps has posed challenges of product understanding and control. Secondly, replacing prime loans lost to securitization with Leveraged Buyouts (LBO) and other so-called leveraged products raises not only issues of risk reward but also one of strategic choice for those not prepared to accept the risks of corporate lending as defined in the late 1980s.

Steven I. Davis

3. Geographic and Product Expansion: Building a New Franchise

Abstract

A universal challenge for the excellent banks is to extend their reach outside their traditional franchise on a profitable basis. The negative argument for such an extension can be heard in almost every language spoken in the banking world: ‘we’ve achieved the limits of market share expansion in our domestic market, margins are under pressure from competition and rising costs so we have to look to new markets’. A more positive motivation is expressed by banking institutions with product capability in a global or at least international market: ‘unless we extend our reach abroad, we can’t be competitive with those who are’.

Steven I. Davis

4. Managing Technology

Abstract

The revolution in information technology for the banking sector has confronted bank management with an issue which has vast but uncertain consequences for costs, product quality and management information. It was foreshadowed in Excellence in Banking, where our focus was on product innovation. It was then, as now, a central concern of management in all the excellent banking institutions.

Steven I. Davis

5. Managing Different Cultures

Abstract

One of the themes of Excellence in Banking was the strength provided by shared values in dealing with a variety of management challenges. Managements were quick to focus on the virtues of a single culture which facilitated communication, created a sense of identity and focussed on strategic priorities. But a minority view acknowledged that market challenges would force management to deal with more than one culture. That minority view has now become received wisdom. Moving into diverse businesses, buying into overseas markets and recruiting outside specialists for key functional tasks has persuaded even the excellent banks with the strongest unitary system of shared values that something has to change. The focus of this chapter is how the excellent banks are dealing with this challenge.

Steven I. Davis

6. Strategy: Competitive Advantage in an Uncertain World

Abstract

A chapter in Excellence in Banking on strategic planning concluded — perhaps surprisingly — that such planning did not rank very high on the agendas of the excellent institutions. Virtually all had a strong sense of who they were and where they were going. Planning for some was therefore delegated to operating units; for others it took the form of one-off scenario analysis or an extended budgeting process — hardly an exercise in strategic positioning.

Steven I. Davis

7. Critical Mass: The Reality Behind the Conventional Wisdom

Abstract

Management consultancy is a jargon-filled business. Amidst this jargon, however, are a few nuggets, and one of them is the phrase ‘critical success factor’. Asking a businessman what separates the sheep from the goats in his business often has a remarkable impact in focussing in on a limited number of distinguishing characteristics and wiping away the jargon that inevitably is used to mystify the outsider.

Steven I. Davis

8. People: Towards the Global Meritocracy

Abstract

The relevant chapter in Excellence in Banking waxed rhapsodically about the care and feeding of human resources: senior management commitment to recruitment and training, strong communications, recruiting the best and brightest, moving people around to broaden their vision and improve communication, and a reward structure that reflected cultural goals as well as performance.

Steven I. Davis

9. The Management Factor

Abstract

The third factor which will differentiate excellent banks in the future from their less successful peers will be the quality of management. In one sense this is a truism, a statement of the obvious. But management quality underlies all of the other success factors — building critical mass, attracting and retaining the right people, and setting the institution on the right strategic course. It is, in effect, what this book has been all about. And it is the pace of change and management’s ability to deal with it which is separating the banking sheep from the goats.

Steven I. Davis

10. Strategic Positioning: The Shape of Things to Come

Abstract

The fourth, and last, vital success factor for banks in a changing world is the quality of their strategy. This chapter will summarize the author’s views on what will constitute the essential elements of such a strategy. It will also address some of the central issues faced by banks in making strategic choices and, finally, paint a picture of the likely banking horizon which will emerge from these strategic decisions.

Steven I. Davis

11. Banking Excellence Revisited: Winners and Losers in an Environment of Competition and Change

Abstract

The four critical success factors discussed in Chapters 7–10 should serve as an analytical framework to identify those banking institutions best able to prosper in a dynamic environment of change. Yet there are still nagging doubts in applying them to specific banks — particularly when comparing the panel’s list of excellent institutions over the four year period between 1984 and 1988. As was pointed out in Chapter 2, half of the select few in 1984 did not reappear four years later. More specifically, three banks which received over half of the panel’s votes for Excellence in Banking — Security Pacific, Sumitomo Bank and Swiss Bank Corporation — received only a scattering of votes for this volume.

Steven I. Davis

Backmatter