Case Studies - Return to the Index

During his seventeen years as president, Mr. Robert Wang had seen Hong Nin Bank (HNB) grow and become one of the five largest local Chinese banks in Hong Kong. It had not been easy. HNB had become one of the most marketing-oriented banks in the areas while constantly seeking better ways to satisfy the broadening financial needs of its customers. HNB had to decide whether to computerize its services.

On his desk, Mr. Wang had a report from Mr. Johnny Sung, HNB's Director of Marketing. The report was concerned with HNB's plan to have automatic tellers services (ATs). Mr. Wang was very impressed by the report and had asked Mr. Sung to come by his office to discuss the proposal. It was a very positive meeting with both parties agreeing on the necessity of getting started. Mr. Sung pointed out:

"Mr. Wang, most experts believe that before the end of the decade, most bankers in Hong Kong will be faced with a decision concerning these machines. The decision will either be offensive - to install them in order to be the first in the areas, or defensive - to respond to a competitor's move. I believe for HNB to maintain the momentum it has built up when you serve as president, our move should be an offensive one."

"I don't think anyone would argue with you on that point." Mr. Wang said.

"In all of the research I have conducted, Mr. Wang, I believe we should move directly into automatic tellers without bothering with cash dispensing machines. It is true that ATs cost more ($5 million each) than cash dispensing machines ($2 million each), but the fully automated teller does everything; it handles deposits, payments, withdrawals, and even fund transfers between accounts. In addition, it can be available 24 hours a day. Believe me, Mr. Wang, electronic banking of which ATs are the first phase, is the wave of the future. If we were to install one machine outside each of our 26 branches we not only would get the jump on our competition but also accomplish the following:

1. Generate new accounts.
2. Increase average balances.
3. Reduce labour costs - we would be able to eliminate two tellers per branch (52 total).
4. Increase income from service charges.
5. Increase the number of credit-card holders and the dollar volume of credit-card services.
6. Increase service to present customers.

President Wang was extremely impressed and in general agreement with the Director of Marketing. He decided to take up the proposal at the next meeting of the board of directors and to strongly support it in front of the board. In addition, he sent a copy of the report to Mr. Dick Yam, Vice President of Branch Operations along with a memo supporting the proposal and asking Mr. Yam for any additional ideas he might have.

A week later, Mr. Yam asked to see Mr. Wang concerning the report. What he had to say came as a surprise to Mr. Wang.

"Mr. Wang, I have read carefully the report concerning ATs. Let me say that I am in total agreement with the philosophy of aggressive, electronic and consumer-oriented banking services at HNB. But I see one potential problem in implementing any decision in this direction. It involves the dismissal of 52 tellers. Second, for the tellers remaining, this decision could create morale problems. Third, among them, there might be a climate of resistance to change. They are our contact with customers, and, as you have always said, an unhappy, rude teller is an unhappy, rude bank to the customer. I believe this is a potential problem that was not addressed in the Mr. Sung's report."

That evening, President Wang thought about what Mr. Yam had said. It was certainly something he had never considered and it was a good thing Mr. Yam had brought it to his attention. He tossed around all the benefits, costs, and problems associated with the decision.

Suggested solution:

Decision should be thought of as means rather than ends. They are the organizational mechanisms through which an attempt is made to achieve a desired state. They are, in fact, an organizational response to a problem. Every decision is the outcome of a dynamic process which is influenced by a multitude of forces. The process is presented below. However, there is no fixed procedure. Instead, it is presented here as a sequential process rather than a series of steps. This enables us to examine each element in the normal progression that leads to a decision.

1. Establishing specific goals, objectives and measuring results.

   As in this case, the HNB is seeking better ways to satisfy the broadening financial needs of its customers by installing automatic tellers. The results will be measured by accomplishment of:
   

   1. Generate new accounts.
   2. Increase average balances.
   3. Reduce labour costs - we would be able to eliminate two tellers per branch (52 total).
   4. Increase income from service charges.
   5. Increase the number of credit-card holders and the dollar volume of credit-card services.
   6. increase service to present customers.

2. Identifying problem.

   As in this case, the problem is the dismissal of 52 tellers which will deteriorate morale among tellers.

3. Developing alternatives.

   As in this case, the potential solutions to the problem are:

   Alternative 1	Do nothing: dismiss the 52 tellers as required.
   Alternative 2	Internal transfer: fill other positions with these redundant tellers.

4. Evaluating alternatives.

   As in this case, the alternative 1 "Do nothing" will result in the dismissal of 52 tellers which will deteriorate morale among tellers. From the standpoint of social responsibility, it would be very irresponsible and might subject us to much criticism in the community which would also hurt our established image among customers.

   The alternative 2 "Internal transfer" will achieve the objective of seeking better ways to satisfy the broadening financial needs of its customers by installing automatic tellers. Other vacancies within the bank can be filled with these redundant tellers without laying off a single teller. This will keep all parties concerned happy.

5. Choosing an alternative.

   As in this case, obviously, the alternative 2 "Internal transfer" will attain an organizational objective and will not be at the expense of a societal objective.

6. Implementing the decision.

   As in this case, the management should inform all the tellers of the arrangement of redundancy and provide appropriate training to those affected in order to settle into new position skilfully.

7. Controlling and evaluating.

   As in this case, The actual results can be measured by the actual accomplishment of:
   

   1. Generate new accounts.
   2. Increase average balances.
   3. Reduce labour costs - we would be able to eliminate two tellers per branch (52 total).
   4. Increase income from service charges.
   5. Increase the number of credit-card holders and the dollar volume of credit-card services.
   6. Increase service to present customers.