ANZ and Its Recurring Issues
Question:
Analyze the case of Australia and New Zealand Banking Group Limited (ANZ) and identify the problems concerning it.
Change is the nature of life and nothing in life stays the same way forever. Organizations in particular have to make changes from time to time in order to manage business successfully. Change management refers to the transformation of any business to comply by the changing trends in the business environment that may help it grow and achieve required target (Cameron and Green, 2015). Many theorists have developed various models of change management that help managers apply change effectively in their organizations. In case of banks, change becomes an added responsibility for leaders and managers as banks belong to a sector where interaction with public is probably the most. Lewin, Kubler-Ross, Kotter, McKinsey, Bridges and many other theorists have proposed several models of change management that are applicable even today (Bloom et al., 2012).
The given report focuses on the Australia and New Zealand Banking Group Limited (ANZ) and its recurring issues and applies McKinsey’s 7S model to identify the possible reasons. ANZ had faced problems since its inception and various changes were made to its organizational structure and departments to improve its performance (Alshaher, 2013). The organization now stands at a respectable position with the tag of being one of world’s most trusted banks. It ranks 92 on the Forbes List of 2000 as of May 2017.
The report also analyses the problems that have arisen at the organization and tries to provide reasons for the problems using the change management theory.
One of the five most successful banking companies in the country of Australia is the Australia and New Zealand Banking Group Limited. The bank was first introduced in the industry almost 170 years back when it stemmed from the Bank of Australasia(Anz.com, 2017). The financial organization is, in the current market scenario, a publicly listed concern and has a staffing pool of about 35000 employees. The financial organization aims to serve a customer base of almost six million of the population of the world and has over 376813 shareholders. The organization is known to operate in more than 30 countries all over the world. The business of the bank is spread over five major divisions over the major areas like Asia-Pacific area, Australia, New Zealand, the institutional and the shared services.
According to Shanka,(2012)and De Grauwe,(2013)the bad debts and the low employee morale may pose to be potential threats to a financial organization. The company has been facing major issues regarding the poor organizations, customer dissatisfaction, bad debts and the low employee moral till the middle half of the 1990s. During the late 1990s, there had arisen a situation that led to a widespread distrust and ill-will among the customers of the major banks of Australia. The then CEO of the bank had criticized the retreat of the financial organizations from the rural communities. He did not allow the closure of any branch. He took an initiative to introduce female employees in the higher ranks of the financial institution. He took the concept of the ‘corporate social responsibility’ very seriously and had been one of the first among his peers to do so. The organization took the primary steps towards the transformation in an organizational scenario in the year 2000. On performing a study of the culture of the financial organization, a revelation about the many discrepancies that existed among the values of the bank, the personal values of the employees and their perception about the financial organization were brought to the forefront (Graetz et al., 2010).
McKinsey’s 7S Model analysis
During the recent times, the organization has been facing issues on the finance that the banks had been borrowing so that they could lend to their customers. The volatile nature of the debt and the equity market had led to the people curbing their expenditure and thereby eroding the confidence that the people need to place on the financial organizations. As proposed by Ogechukwu (2013), the breach of the ethical code of conduct may pose to be a serious issue within the banking sector.In the year 2008; the bank faced an issue that needed them to turn the commitments, which they had towards the responsible practices of business in to the business realities in their field of business. The bank had to face an issue of resignation of the staff who, according to an internal report had been involved with a broking house that had failed in its operations. The published report had stated that the concerned employees had broken the security code of the bank by getting themselves involved with the broking concern and holding accounts in an improper manner. The financial organization in discussion aims to bring about a growth in the presence of the organization in the Asia-Pacific region. It aims to maintain the business and the opportunities that it holds in the countries of New Zealand and Australia.
The change management theory that is best applicable for identifying the reasons for the problems that arose at ANZ is McKinsey’s 7S change model. In order to understand the possible causes of the problems through McKinsey’s model, reiterating the problems faced by the organization is necessary. In its initial phase, the bank faced problems of bad debts, reduced employee morale and so on as discussed above (Hayes, 2014). However, John McFarlane’s appointment as the CEO proved beneficial and the organization managed to recover from the slump. The 7S model of change management proposed by McKinsey states that any organization has to go through changes in seven areas. Out of these seven areas, three are easily recognizable and changeable as well whereas the other four areas are not easily noticeable but hold key to an organization’s success.
The first three recognizable and manageable areas include structure, strategy and systems. At ANZ, it was important to change the structure because the bank was facing issues related to low employee morale and unsatisfied customers during the early 1990s. The company decided to appoint John McFarlane as the new CEO in 1997 and initiated the first change. Prior to McFarlane’s appointment, ANZ was stuffed with unnecessary staff that hampered its organizational management and resulted in poor performance. This problem arose from poor organizational structure of ANZ. After McFarlane took over the responsibility of transforming the bank, he devised new strategies that were in line with the concurrent trends. However, the chief reason for surfacing of these issues can be attributed to poor strategies of the previous management. The managers needed to change the old worn out strategies to tackle the situation.
Applying McKinsey’s 7S Model to ANZ – The Seven Areas of Change Management
McFarlane noticed that the daily processes of the bank did not comply with the basic norms of an organization and that it lacked equal participation (Elrod, 2017). In addition, he also observed that the bank ignored rural communities in its system. Banks had lost trust of the people as it continued to increase fees and close branches putting customers into vulnerable positions. Looking at these problems from the McKinsey change theory perspective, change in the systems that is daily processes of the bank had resulted in these problems (Sikdar and Payyazhi, 2014). Banks cutting off from rural communities was also perceived as a reason for this problem, deemed McFarlane.
As per the McKinsey model, the next factor that is skill is a soft factor that is hard to recognize and change and that often leads to problems. In case of ANZ as well, the company lacked the necessary skills to address the changing trends in the sector and thus it faced grave problems. The company’s management too lacked skills to identify the actual causes that escalated the problems (Harorimana, 2012). McFarlane demonstrated exceptional skills of identifying these issues and immediately initiated changes. He cut the cost bore by banks by firing underperforming employees, bailed the bank out of investments in rising markets and thus transformed the bank’s financial status.
Other factors of the McKinsey’s 7S model include staff, style and shared values of the organization. These factors hold equal importance to an organization and any negative change in these factors are bound to attract problems, as was the case with ANZ. A year after McFarlane’s resignation from the post in 2007, the bank was confronted with another problem. This involved the breach of the bank’s moral code of conduct by two of its employees who illegally held accounts with Opes Prime, a failed broking house. A problem that might have arisen due to Michael Smith’s – who replaced John McFarlane as the new CEO- inability to manage his staff. One of ANZ’s most visible weaknesses was the absence of shared values.
There are many areas that need to be paid attention to in order to avoid the conditions that the financial institution has been facing since the conception of the organization. One of the problems that the organization had been facing was the condition of the bad debts that they have been incurring. This condition may be avoided by lowering the risks of the overdue payments that may turn into the bad debts. The banks must introduce tighter control in the areas of credit. The financial institutions must run a thorough check of the business as well as the references before offering credit to the new clients. The financial organization must set a reasonable yet fair credit limit and instruct the concerned employee to inform the management during the condition wherein the client expresses a desire to exceed the previously agreed credit limit. The staff of the financial institutions is the one of the most important assets. In order to achieve a high productivity and a low turnover, the management of the organization must aim to keep their staff motivated. The staff must be appreciated and recognized for the contributions that they produce towards the concerned organization. The employees should be awarded with perks and incentives in order to boost the employee morale. The management must allow flexibility in the schedules of the employees under genuine circumstances in order to maintain the morale of the staff. The employees must be allowed the freedom to voice their concerns to the management. The management may also help to boost the morale of the staff by paying heed to the suggestions of the employees.
The financial institutions may address the issues arising from the dissatisfaction of the customers by maintain the engagement with the concerned customers. The financial organization must aim to develop a realistic and deep understanding of the wants and needs of the clientele in order to improve their services towards the customers. The introduction of newer processes and systems provides them with a method of development of the long-term relationships with the customers of the bank. The financial institutions must employ female employees in the higher ranks in order to maintain the gender equality in the organization. The involvement of the women in the higher ranks may also lead to the diversification of the leadership behaviors. The banks must not shut down their rural branches as that might lead to the loss of potential clients of the institution. The rural population might contribute to the a huge part of the client base of the bank in the Asia-Pacific regions wherein the financial institution in discussion, Australia and New Zealand Banking Group Limited have been operating in. The employees of a financial institution should not breach the code of ethics that is set by the organization. In order to avoid such conditions, the management must acquaint the employees with the specific ethical code that is followed within the organization.
Conclusion
McKinsey’s model of change management thus can be said to be appropriate for identifying the reasons for the problems that arose at ANZ. The seven factors including structure, systems, strategies, staff, style, skills and shared values hold keys to a successful organizational management. When even one of these factors does not function the way it should, the organization faces unwanted problems and issues. In case of ANZ, this aspect is evident. Until the appointment of a new capable CEO, the company was on the verge of sinking. It lacked proper management, identification of core areas of improvement and skilled staff. The report elaborated the operations at ANZ, its history and gradual transformation. Further, the report identified the problems mentioned in the case study and elaborated the reasons for their occurrence. However, a detailed study of ANZ’s history and its current positioning in the market would provide a deeper insight into its relevant issues. Further readings are suggested in this regard. The report mainly focused on McKinsey’ 7S model of change management and its relevance in finding causes of the problems, although other change theorists were also mentioned in the early section of the report
References:
Alshaher, A.A.F., 2013. The McKinsey 7S model framework for e-learning system readiness assessment. International Journal of Advances in Engineering & Technology, 6(5), p.1948.
Anz.com 2017. About us | ANZ. [online] Anz.com. Available at: https://www.anz.com/about-us/ [Accessed 20 Dec. 2017].
Bloom, N., Genakos, C., Sadun, R. and Van Reenen, J., 2012. Management practices across firms and countries. The Academy of Management Perspectives, 26(1), pp.12-33.
Cameron, E. and Green, M., 2015. Making sense of change management: A complete guide to the models, tools and techniques of organizational change. Kogan Page Publishers.
De Grauwe, P., 2013. The European Central Bank as lender of last resort in the government bond markets. CESifo Economic Studies, 59(3), pp.520-535.
Elrod, M.C., 2017. Willingness to Participate in Greedy Behaviors: A Situational or Constant Construct? (Doctoral dissertation, Kaplan University).
Graetz, F., Smith, A., Rimmer, M. and Lawrence, A. 2010. MANAGING ORGANISATIONAL CHANGE. 3rd ed. Melbourne: Wiley, pp.314-325.
Harorimana, D., 2012. Impact of CRM Systems on Organizational Performance: A case study of ANZ Bank.
Hayes, J., 2014. The theory and practice of change management. Palgrave Macmillan.
Ogechukwu, A.D., 2013. The current ethical challenges in the Nigerian commercial banking sector. Global Journal of Management And Business Research.
Shanka, M.S., 2012. Bank service quality, customer satisfaction and loyalty in Ethiopian banking sector. Journal of Business Administration and Management Sciences Research, 1(1), pp.001-009.
Sikdar, A. and Payyazhi, J., 2014. A process model of managing organizational change during business process redesign. Business Process Management Journal, 20(6), pp.971-998
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