Change Management and Restructuring at First Bank

Introduction: First Bank's Operational Crisis

First Bank is a family enterprise that has, for three decades, been the town's only bank. Mr. First, the founder, originally established it as a small lending shop; over time, this modest business grew into the town's sole financial services organization, providing small loans and over-the-counter cash facilities to clients. The town's growth, however, has led to a tremendous increase in the bank's client base, challenging the organization's current operational structure.

The core problem is a threat to the organization's continued existence: the bank is no longer capable of meeting the town's growing demands. Bank management, comprising chiefly of family members, is unwilling to alter the existing operational structure, improve service quality, or increase the number of personnel employed. This has been a major factor in the bank's inefficient, stagnated, and outdated structure. Beyond hiring fresh talent, expansion through a broader product range and automation of existing services is necessary. Change management is required for an organization to move from its current state to a desired future state. Consequently, at First Junior's (Mr. First's son) insistence, management has appointed Transform Consultants to aid them in effecting organizational development and change.

Change Management Theory

Change, in general terms, is described merely as "a new state of things" that differs from the state of things previously (French & Bell, 1999). By employing this definition, organizational change can be explained as a transition from an existing state to a future state that the enterprise wishes to reach (Cummings et al., 1985). The simplest way to understand change in the organizational context is through comparison with other forms of change, rather than through a strict definition. The term "organizational change" deals with a transformation in the activities of an organization; however, this definition does not fully suffice, as it fails to specify the kinds of activities undergoing change. A comparison of organizational and operational change reveals that the former has a broader scope — covering all operational practices, manufacturing, logistics, and customer service — while the latter deals exclusively with individuals in the organization, their values, and their roles (Salminen, 2000).

According to Schoonover and Dalziel (1988), change is either an unplanned or planned organizational response to external and internal pressures emerging from various sources. For instance, external factors can include competing firms, technological advancements, and regulatory bodies, while internal change forces may include product or service obsolescence, increased workforce diversity, new market opportunities, and new strategic aims (Lanning, 2001). Numerous strategic factors drive change processes (Schilling & Steensma, 2001); these include the requirement for greater organizational-task-related integration (Rugman & Hodgetts, 2001) and the necessity to bring about better enterprise performance (Balogun & Hope, 2008). Adler and Shenbar (1990) assert that all changes necessitate revision and transformation in organizational processes, methods, human skills, culture, and strategy.

The term "change management" is customarily used to describe the management of organizational change — change in company structure, leadership, culture, job structure, values, and roles (Salminen, 2000). Change can broadly be categorized as radical or incremental. The former (also called revolutionary change, turnaround, or transformation) denotes an extensive, major alteration in organizational strategy and culture, while the latter relates to evolutionary modifications, problem-solving, and fine-tuning. In short, incremental change involves improvements to company performance without fundamentally altering the company (Lanning, 2001).

SWOT Analysis of First Bank

To comprehend the specific reasons why change is needed and to understand what changes must be effected in a cost- and time-efficient way, a SWOT analysis of First Bank was carried out. SWOT analysis refers to an assessment of a firm's internal weaknesses and strengths, and external threats and opportunities. Strengths represent current organizational elements contributing to exceptional performance (such as a highly qualified workforce, a focus on quality enhancement, and employees' thorough understanding of company objectives). Weaknesses denote company factors that contribute to lower service quality or increased operational costs. Opportunities represent noteworthy novel business initiatives open to a company, whereas threats are elements capable of adversely affecting organizational performance (Gretzky, 2010).

Strengths: sound client base; bank credibility with clients; good client-company interpersonal bonds; a small hierarchical arrangement that facilitates speedy decision-making; favorable loan repayment terms; and flexibility in interest rates.

Weaknesses: untrained workforce; family-dominated management; limited range of financial services offered; inadequate company premises; obsolete technology (including the absence of even one ATM); a poor and depleting capital base due to lack of service diversity; and an absence of clear operational procedures, leading to resource wastage and reactive decision-making.

Opportunities: the presence of innovative, lucrative products in the market; the town's growing demand for service diversification; and the availability of competent individuals in the labor market.

Threats: the potential entry of larger, more dynamic banking firms; un-serviced loans resulting from the absence of established operational methods and over-reliance on client familiarity; and treasury regulation triggered when the client base exceeds 2,000, which will influence lending and repayment rates.

Conclusion

Transform Consultants recommended three key modifications to drive First Bank's development and change. With regard to conflict management, major shareholders need to clearly and jointly support change implementation, which would result in both resource and time savings. With regard to group formulation, process ownership was recommended to reduce resistance to change; this would lead to complete organizational transformation in a single phase, rather than in parts wherein some departments lag behind, because all members are included. Lastly, in the context of cultural change — incorporating corporate concerns alongside client service — the enterprise can balance the achievement of company objectives with customer requirements. A culture that embraces corporate aims and goals will enable the recruitment of competent staff, the introduction of new services and products, the development of strategies, the establishment of processes and policies that safeguard the enterprise, and the implementation of technological changes that ensure smoother functioning for both personnel and clients. This would result in a more successful and efficient bank with the capacity to expand beyond a single branch.

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