Macquarie Bank Business Strategy
UNIVERSITY OF SUNDERLAND
School of Business, Law and Psychology
Assignment Paper
INSTRUCTIONS:
Section A: Answer all questions - Case Study 3000 words (40 marks)
Section B: Answer TWO questions from FOUR - essay and report questions - 3500 words (60 marks)
Section A
Compulsory Questions
Answer All Parts – Section A is worth 40 marks, 3000 words in total
Macquarie Bank
Macquarie Bank is an excellent example of a highly successful organization which has been able to maintain its success using an incremental adjustment process while operating in a rapidly changing environment. During the 1980s and 1990s changes occurred in the environment of Australian financial institutions. These included rapid deregulation of the financial services sector by the Australian Labour Government. The critical moves involved were the floating of the Australian dollar; progressive removal of restrictions on competition between banks, building societies, merchant banks and other institutions which offer financial and financially related services; approval of new banking licences including licences to 16 foreign-owned banks to operate in Australia.
From its inception as Hill Samuel Australia in the early 1970s, the bank's strategic focus was merchant banking (investment banking). In 1980 the bank commenced a process of diversification. But with deregulation in the 1980s it diversified further, building up strength in specialist markets, particularly in high value-added niches (market segments) like corporate services, bullion and commodities. The pace of diversification quickened by the mid 1980s with the bank entering a range of new areas including retail domestic banking, equity investments, property and leasing. Growth was both by development and by acquisition. Macquarie remains one of Australia's most successful and profitable banks. So how was the needed organizational change managed by Macquarie executives?
Change in Macquarie has been a process of constant adjustment. One executive described it this way: 'We never stay still, but we don't change in quantum leaps - our corporate culture would preclude that - running a business on partnership concepts means that policy decisions are not dramatic, they evolve.' The rapid growth in Macquarie's product range was accompanied by a quadrupling of staff numbers in the 1980s. Business product units, or 'clusters', grew in number to almost 30 by the late 1980s, presenting an increasing problem of co-ordination in a collegial/partnership system where unit heads nominally report to the managing director.
The greater size and complexity created problems of co-ordination. The obvious answer was to create additional structures, systems and controls, but this was foreign to the collegial values of the bank which is staffed mainly by highly qualified professionals. The answer actually chosen was to produce a 'goals and values' statement, an articulation of deeply held values about cultural and business behaviour, including how the process of change should be managed. The values statement is essentially a set of values and norms; internal controls, that substitute for external control systems. This was supplemented by developing business units into highly autonomous profit centres and then creating cross-functional synergies through more systematic communication by management across these centres.
But what were the methods adopted at Macquarie to bring about these changes? There was increasing convergence on a consultative style of management. The consolidation of the style reflects the frequent use of the executive committee as a forum for discussion of major issues and decisions. The collegial style was symbolized by the fact that the managing director shared the same open-plan office.
Interestingly enough, when first-line and middle-level managers were asked for their perceptions of the bank's leadership style, they saw it as substantially more directive than consultative. All 15 respondents who rated the managerial style this way indicated that they thought this directive style was appropriate. 'We need strength and decisiveness at the top', one commented. Consistently, some who rated the leadership style as consultative believed that the style was not directive enough for the present environment. This is an interesting comment because it challenges one of the basic assumptions of the organizational development movement, which is that people want consultation about organizational strategies. In a turbulent external environment, however, they may prefer decisive leadership.
Macquarie does not have the all-encompassing human resource systems typical of some organizations. It follows an organic, developmental approach, aptly summarized by one executive as follows: 'We recruit the best from universities and graduate schools; train on the job and pay top money - we are a meritocracy. We try to provide a flexible organizational environment where people can achieve.' The policies are well suited to a flat organizational structure where specialist skills can be developed within small work teams, closely related to the product-market interface. It is not expected that Macquarie will change the basic tenets of the meritocracy system. However, there was sufficient evidence during the study to indicate that the bank may need to consider more systematic approaches to its human resource policies in the future.
The priority areas in human resources practice were:
recruitment and selection (corporate image as an employer is important; use of psychological tests, and policy of 'growing our own' from graduate trainees is a key strategy);
performance appraisal (an essential mechanism for tracking goal achievement and help in determining rewards);
rewards and compensation ('We pay well');
organization and development (goals and values statement, team building, monthly newsletter).
In such a dynamic environment how was the bank able to maintain an incremental strategy and achieve such outstanding performances? Its success appears to have been mainly a function of its small size relative to other banks and its combination of diversified niche strategies with a loosely coupled flexible organization. Its short communication chains and collegial workforce culture led to considerable flexibility in responding to changing market demands. These are strengths which in any larger organizations seek to emulate through the formation of decentralized, strategic business units.
Macquarie Bank has been successful in operating this way so far. As the bank grows further the executives will have to assess whether these strategies can continue to work. Nevertheless the case demonstrates that participative evolution can be an effective change strategy even in a turbulent environment, at least for a relatively small, highly specialized and successful niche player such as Macquarie.
© This extract was taken from a book of case studies edited by John Storey
Question 1.1
Draw up a short report evaluating the nature of the business strategy being adopted by the Bank in the changing business context. Assess the extent to which you believe that the Bank is adopting a strategic approach to the management of its human resources. (20 marks) 1500 words.
Question 1.2
Using as a reference starting point the current policy priorities identified in the case to draw up a comprehensive framework for making a strategic HRM intervention utilising ideas and practices from a across the module . Also outline what you would include in an SHRM evaluation and how you would implement this in the organisation. (20 marks) 1500 words.
Section B
Answer two questions – Section B is worth 60 marks (30 marks for each question), 3500 words in total
Question 2
You have been asked to address a regional audience from a management institute on the subject of ‘Getting the most from your Human resources function – A cost effective value added service for the 21st Century ‘ prepare a briefing discussion paper as to what you would recommend and how you would go about this acknowledging the challenges you might face. (30 marks) 1750 words
Question 3
For developmental activity to be deemed strategic organisations need to shift the focus from a training to a learning approach. Discuss this proposition in the context of development activity supporting individual and organisational change (30 marks) 1750 words
Question 4
In what ways can organisations develop strategically useful performance management systems? What is the nature of the link to SHRM thinking? (30 marks) 1750 words
Question 5
Why is reward management potentially so problematic for SHRM? In what ways can organisations integrate reward management in to the HRM strategy? (30 marks) 1750 words
