Macquarie Bank: Business Strategy and SHRM Analysis

Introduction: Organizational Change at Macquarie Bank

This case study presents a particular process of organizational change at Macquarie Bank, making explicit the steps taken to manage that change. As Armstrong (2006) argued, a change process typically begins with an awareness of the need for change. An analysis of the situation and the factors that triggered change should follow, after which a preferred course of action can be identified and implemented.

There are many types of change, and it is important to understand them. Two important types have been identified (Armstrong, 2006): strategic and operational. Operational change refers to the implementation of new systems, procedures, structures, and technologies with an impact on the organization and its employees. Strategic change deals with "broad, long-term and organization-wide issues" (Armstrong, 2006, p. 344). This form of change involves moving to a future state defined in terms of strategic vision and objectives, and includes issues such as growth, quality, innovation, and values concerning people, customers, and technology.

This type of business strategy focused on change is evident in the case study. It reinforces the importance of competitive positioning and strategic goals for achieving and maintaining competitive advantage and for product-market development. With respect to the policies adopted, the case study focuses primarily on HRM practices. What is notable from the outset is the firm's capacity to identify environmental factors and forces that signal a need to change its business approach in order to remain — or become even more — competitive. Equally important is the bank's capacity to mobilize and manage the resources necessary to take effective action.

Various authors have recognized that effective strategic management requires a coherent yet flexible fit between organizational capabilities and environmental context. The ideas of dynamic fit and interdependencies between the organization and the environment are core issues in any business strategy. Various models emphasize one or both of these elements when developing theoretical frameworks for the process of change in business organizations (Wade, 2006).

Business Strategy and Diversification

In this case study, the business strategy adopted by the bank in a changing business environment is one of diversification aimed at adapting to that environment. The diversification consisted of designing and elaborating new corporate services in order to enter other market segments that appeared profitable at the time. Furthermore, the business strategy permitted innovation by acquiring new areas of expertise in retail domestic banking, equity investments, property, and leasing. The purpose of the strategy was to adapt to the business environment and gain a competitive advantage in the market.

The bank's business strategy was designed to include both horizontal and vertical development — which is why growth was defined to encompass both development and acquisition.

The business strategy established and implemented on these terms was successful because it also took into consideration structure, leadership, and human resources processes. The acquisition of new market share was accompanied by growth in products and in the number of employees. The greater size and complexity eventually created problems of coordination, and new internal structures and control systems needed to be created. Such issues are of major importance, since it is well established that the strategy adopted must be compatible with the structure.

The McKinsey "Seven S" model (1982), used as an organizational diagnostic tool, reinforces the fact that strategy, organizational subsystems, and leadership style should fit together and be compatible in order to be effective. For a diversification strategy, compatibility between the subsystems is essential. Many cases in business have become notable failures because they adopted a diversification strategy — for instance by developing a new product — while keeping the structure, other subsystems, and leadership style constant. Macquarie Bank succeeded by maintaining constant awareness of the process of change. Its outstanding performance was supported by the adoption of diversified niche strategies within a loosely coupled, flexible organization.

When organizational change prompted another major shift as a result of diversification, the bank entered a strategic planning process as the need for new goals and values became pressing. Mission and vision statements, as key parts of strategic planning, offered new opportunities for revising the organization's goals and values. On this basis, external control systems were replaced by internal control systems through the creation of highly autonomous profit centers and cross-functional synergies. Systematic communication by management across these centers became a dynamic force supporting the internal system of control.

Leadership, Structure, and Cultural Fit

Under these circumstances, the nature of the management style needed to be reconsidered. The bank's staff acknowledged that such a structure and these subsystems are best supported by a consultative management style. The methods adopted to consolidate this style included the frequent use of the executive committee as a forum for discussing major issues and decisions, and the fact that the managing director shared the same open-plan office. However, when first-line and middle-level managers were asked how they perceived the bank's managerial style, they rated it as directive. It appears that, contrary to people's desires to be consulted on organizational strategies, a decisive leadership style may prove more effective in a constantly changing environment. Nevertheless, such perceptions did not negatively affect the flexible structure facilitated by short communication chains and a collegial workforce culture.

The diversification strategy described above may be related to the broader concept of transformational change (Armstrong, 2006). Transformational change is business-led and aims to achieve greater efficacy; it is driven from within the organization, from the top. This shift from external to internal aspects of control is visible in this case study. To summarize the aspects related to the overall business strategy: the process of change occurred in the structure, processes, and culture of the organization, and the perceived leadership style shifted from collaborative to more authoritative.

With respect to the integration of business and HRM strategies, Armstrong (2006) noted the importance of understanding the direction in which the organization is heading by examining such factors as:

— The number of staff required in relation to projected activity levels;
— The skills required on the basis of product/market developments and strategies to enhance quality or reduce costs;
— The impact of organizational restructuring as a result of diversification;
— The plans for changing organizational culture in ways that indicate the need for people with different attitudes, beliefs, and personal characteristics.

Conclusion

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