Building and sustaining strategy in banking: the case of Santander

Santander

Company Culture and Strategic Orientation of Santander Bank

The general thrust in today's banking industry is either toward strategic expansion or eventual merger under the auspices of another bank's strategic expansion. As one of the top-tier performers and holders of capital in the financial industry and as the single largest banking entity in the Eurozone, Banco Santander finds itself in the former strategic category. As the discussion hereafter will show, Santander continues to grow even in spite of the recession that has crippled so many European banks and lending institutions. As the discussion here shows, this strategic orientation continues to define actions and initiatives taken by Santander.

Origins:

The company culture at Santander is sharply defined according to the age, prestige and traditionalism in place at the bank. As one of the older and larger-scaled banks in Europe, and in the world at large, Santander has a highly ingrained pattern of leadership hierarchy, proceduralism and personnel expectation. As its new subsidiary, the North American-based Sovereign Bank reports, "founded in Northern Spain in 1857, Santander has a successful history in retail and commercial banking, and has grown to become one of the five largest banks in the world by profit." (SB, p. 1) With more than 14,000 branches and 35,000 ATMs all over the world, Santander serves 80 million customers in 40 countries, employs more than 180,000 employees and boasts 3 million shareholders. (SB, p. 1)

This enormity has precipitated what many have described as a highly rigid internal culture based on a pointedly centralized mode of leadership. Indeed, even as the international growth which has come to define the banking industry also drives Santander, the Spanish bank maintains strictly central controls over its subsidiaries and operations all over the world. The result is a proclivity within individual branches, regions and countries to limit managerial autonomy in favor of more concentrated decision-making approaches. The text by Rumsey (2011), indicates as much in an article regarding Santander's merger with ABN in Brazil this past year. Here, there is cited a concern that Santander's tendency toward centralized authority may be incompatible with the corporate banking culture in Brazil. Accordingly, Rumsey observes that "Santander's corporate culture is seen as providing less freedom for senior managers in the regions, says the senior head-hunter. ABN's collegiate approach emphasises getting the majority on board before making a decision; Santander has a top-down approach, with Madrid playing a key role in decision-making and granting less autonomy to overseas units." (Rumsey, p. 1)

This denotes that while Santander's corporate culture is largely connected to the bank's early origins and its current enormity, such an orientation may well require considerable reconsideration as the company continues its push into the furthest reaches of the global economy.

Strategic Orientation:

Quite to this point, Santander runs a certain risk of stagnancy if it should fail to make cultural adjustments based on the needs demonstrated in its various forays into the global community. The condition in Brazil reflects the threat of strategic drift, quite an irony considering the torrid pace at which the firm has continued to court and aggressively seize on growth opportunities. To this end, Santander has largely pursued such mergers and acquisitions under a singular strategic mold for a decade of steady growth since its merger with and eventual consumption of Banco Central Hispano. And in doing so, the company has most certainly experienced growth. But its strategy has failed to acclimate to the demands implicated by a global economic culture. Johnson et al. (2011) describe strategic drift as a reliance upon a way of conducting business which has remained static even as forces such as the economy, global free trade laws and industry norms have shifted. (Johnson et al., p. 24)

This denotes that where Santander is concerned, new ventures and acquisitions should be supplemented with a greater focus on cultural adaptation. Santander's first foray into the North American banking industry with its acquisition of Sovereign Bank is an appropriate starting point for this new strategic step. At present, however, there is little evidence that such an approach is planned. To the contrary, Santander intends still to continue its approach of acquisition and elimination. As Wallack (2011) reports, "Banco Santander SA, which bought Sovereign in 2009, plans to replace the Sovereign brand with Santander as early as next year, according to executives briefed on the decision. The move is significant because of Sovereign's size: The bank has nearly $77 billion in assets and 723 branches in nine states. The name change is part of a broader strategy for Santander to become a truly global brand." (Wallack, p. 1)