Case Studies - Return to the Index

The First Atlantic Bank is a local Chinese bank in Hong Kong established since 1954. It has been operating under a very conservative policy laid down by its founders after having gone through the difficult time in the Banking Crisis in 1963. This policy has proved effective and the Bank has survived from other two Banking Crises in 1978 and 1989. Mr. Johnny Sung, the President of the First Atlantic Bank, was very concerned with the recent situations.

Recently, there were wars among banks in such service areas as presenting gifts to credit card applicants and lowering interest rates on mortgages. The First Atlantic Bank was no exception. All these sales promotional efforts not only involved a cost burden but also hurt the below average profit level. There were pressures for increased competitiveness sweeping the banking industry in the early 1990s. 'De-regulation' was allowing many types of business to offer service previously considered the exclusive domain of commercial banks. Savings and loan associations, credit unions, investment companies and even larger department stores and estate developers had been competing to provide many types of banking services, including credit accounts and loans.

Mr. Johnny Sung had sent memos to various departments to address the concern and has asked the staff to suggest some measures which could:

1. improve personnel efficiency and do this by working better, not harder;
2. implement procedures to reduce operating costs and generate new fee income;
3. establish internal accountability for results.

Mr. Alex Lung, Chief of the Consumer Credit Section of the First Atlantic Bank, having given some thoughts, had submitted a proposal to Mr. Johnny Sung to set up an internal management development programme in the Bank.

He had got the idea from an article by Mr Ben Dung and Ms Jean Bau of the National Atlantic Bank in Taiwan. Their management development programme for management trainees had won them international recognition and an Excellence Award from the Asian Institute of Training and Development. In fact, the President of National Atlantic Bank had singled out the programme in his annual report to the shareholders:

"A management development programme, begun at mid-year, has prepared the bank for further earnings growth. The programme, based on industrial engineering principles, is designed to improve the productivity of employees, equipment and facilities. By year end, the bank had reduced costs by 6 percent, yet expanded its services and maintained quality and rapid delivery. Future improvements in quality, cost and working conditions are expected from the programme."

Traditionally, most banks in Taiwan (including those in Hong Kong) that had recognized the need to become more productive had responded by hiring outside consultants. Mr. Dung and Ms. Bau reasoned, however, that they could do better without outsiders. Instead, their programme was designed to arm the bank's managers with consulting skills, on the grounds that improvements were more likely to be accepted and sustained if they were initiated by, and credited to, the efforts of department managers rather than to outside consultants. The programme was designed so as to use no consultants or outside trainers.

Mr. Alex Lung had modified the programme and adapted to the Hong Kong's banking environment. He had designed to implement the programme by four sequential steps: workshops, follow-up, management presentation and results tracking.

Due to its unique features, the Board of Directors of the First Atlantic Bank had eventually approved the proposal. After having implemented the management development programme in the First Atlantic Bank for a year, the result is astonishing. The efforts of 12 programme participants had helped streamline departmental procedures and thereby yielded more than HK$ 1,280,000 in cost reductions and new fee incomes. Staff reductions had come through normal placement- nobody had lost his job. Total investment in the programme was HK$ 33,600 or HK$ 2,800 per participant, including facilitator/co-ordinator training. The benefit-cost ratio was estimated at 26 to 1, based on the HK$ 1,280,000 in savings and new fee incomes. This figure represented 8 percent of the National Atlantic Bank's net profit in 1995.

Suggested solution:

1. Analyze the case in terms of the suggested Management Development Cycle:
   1. The problem was defined in terms of the need for the bank to respond to new competitive pressures.
   2. The aims were to generate new fee income and reduce costs through better procedures.
   3. The training need was defined as helping managers acquire industrial engineering type consulting skills.
   4. The results were generated by using workshops to produce projects that were supported by a co-ordinator, and leading to a payoff in terms of recognition through presentations to senior management.
   5. The internal marketing included the senior management presentations, the publicity to the stockholders as well as other corporate management and by the personnel officers for a national award.

2. Evaluate the case in terms of: Attendance, Response, Learning, Application and Results.
   1. Twelve people attended the programme.
   2. There is insufficient information as to whether they liked to or not.
   3. The application of learning was enhanced by simulations; however, the participants were required to apply their learning in projects designed to get results through increased sales or reduced costs.