Choose a case study of your choice from those used in terry hill's book, analyse the service delivery process or the manufacturing process identifying what should be done to improve the processes and discuss why the case study company is successful (or not successful).
Overview of Lloyds Bank plc
Lloyds Bank plc is a UK based retail and commercial bank with a vast network of branches and ATMs across England and Wales. It offers a wide range of services to its customers including a 24 hour telephone and internet banking services, business banking, wealth management, cash machines and stockbroking. Founded in Birmingham in 1765 by John Taylor and Sampson Lloyd II, the London headquartered bank has seen a steady growth in assets over the years becoming Britain’s largest retail bank with close to 16 million customers as of May 2016. In addition to the over 1300 operational branches, the bank has agreements with other banks such as Halifax in Northern Ireland and the Bank of Scotland in Scotland to offer services to its customers. The bank further has wholly owned subsidiaries Lloyds Bank Gibraltar Limited and Lloyds Bank International Limited that operates branches in Gibraltar and Jersey respectively. The bank’s growth over the years has been coupled with a number of mergers and acquisition of other small financial institutions the most recent being the acquisition of HBOS in 2009. Lloyds Bank is a member of among other bodies, the British Bankers’ Association, Financial Ombudsman Service and Financial Services Compensation Scheme.
Despite the tremendous growth observed, things have not always been rosy for the company which has had its fair share of problems over the years. For instance, in early 1980s the bank found itself in a challenging situation whereby it was struggling to even meet its financial goals and the shareholders expectations. The management was faced with the difficult task of making decisions and implementing policies that could turn around the bank’s fortunes and make it competitive in the years to come. One area that needed improvement was the service delivery process of which a number of actions were undertaken to improve it. These actions included setting of clear objectives for the company, selecting the right market, creating the right organizational culture, implementing the necessary changes and planning for the company’s future.
- Setting of clear objectives for the company. Objectives are what the company aims to achieve both in the short and long run. Objectives should always be realistic and achievable and should include a clearly set out plan for achieving them (Weber, et al., 2012). Furthermore, they should be specific in order to have an effect on the employees’ performance. Objectives are important in guiding the employees and the management on what needs to be done. Lloyds bank management aimed to create a single well-defined performance measure to replace the numerous objectives that already existed. They came up with the objective of improving shareholder value with the return on equity as the measure.
- Selecting the right market to operate in. an organization should only operate in a market which creates value. For instance, Lloyds bank could not compete in the California market with the larger brands such as the Bank of America hence it was not economical to continue operating there (Crocco, et al., 2010). They decided to close down and concentrate on the UK financial services market which was creating value for their brand.
- Creating the right organizational culture. Organizational culture is a set of guiding principles that controls how the management and employees of an organization behave and which manifests itself in the delivery of services and give value to customers (Schein, 2010). A positive culture improves service delivery process and vice versa. Generally, it is always difficult to implement culture change in an organization due to the resistance expected from employees. In Lloyds case it was important to convince people on the need to concentrate only on those areas of business that created profit and closing down the rest. The need to emphasize profitability rather than business expansion.
- Implementing the changes. The first stage in implementing a change is to convince people that the change is beneficial as employees are generally resistant to change (Gilley, et al., 2008). It is important to outline the probable positive impacts expected from the implementation of the change. Lloyds successfully implemented the change when they closed their Californian branch and concentrated on the UK market. Lloyds Bank also added the lucrative mortgage, insurance and investment segments to their products portfolio to complement retail banking which was not doing fine at the time.
- Planning for the future. An organization should always have continuity whereby if the current leaders leave the scene the brand does not go into total decline (Antrop, 2005). The business decisions being implemented in an organization should consider the future too. In Lloyds’ case, although Brian Pitman has retired, the service delivery values he developed are still being used by the new crop of leaders like Marten van den Bergh.
These actions were successful in turning around the fortunes of the company by increasing the market capitalization and achieving an average annual shareholder return of 26%, marching big brands such as Coca-Cola and Gillet. However, there are still a number of actions that if considered can further increase the service delivery process of the company hence its profitability. They include;
- Employee engagement. It involves the general employee attitudes in relation to the HR and leadership actions. Without people engagement, even the best designed processes and procedures will fail (Albrech, 2011). Higher engagement will most likely result in proper implementation of the processes. In the service industry like banking, employees are also important because they interact a lot with customers directly hence can easily influence the customers’ decisions. Lloyds bank should always strive to engage their employees. And maintain their motivation.
- Service quality. It involves ensuring the clients fulfill their mission by providing services that meets their needs and expectation. Customers also prefer to get their services from a supplier therefore Lloyds should include a wider range of financial services to their portfolio (Kumar & Gulati, 2009).
- Customer experience. Customers are important players in both the creation and delivery of services. Their perception of a product which is created by brand experience is therefore important especially when aiming to attract and retain more customers. There are a number of ways of improving the customer experience. The most common method being the provision of quality services. It is important that Lloyds constantly monitor and evaluate their customer’s and other service end users’ perception of their brand and devising ways of improving.
Considering brand performance metrics such as social media presence, brand awareness, percentage market share and percentage usage metrics, Lloyds Bank is a successful business. This success can be attributed to a number of factors which include;
- Diversification creates different sources of income hence when one area of business is experiencing a crisis; the company can remain afloat by utilizing profits from other ventures (De Paula, 2002) (Jensen, 2001). For example, when retail banking was not doing fine, Lloyds Bank ventured into other segments such as mortgage, insurance and investment, international banking and wholesale markets.
- Sound management decisions. Over the years, Lloyds Bank management has taken decisions that have proved beneficial to the company. For instance, the decision to exit the California market was not popular at the time but at the end it was beneficial as it enabled the company to concentrate only on the UK market where it had a chance (Silva, et al., 2016). After the 2008 financial crisis which led to being bailed out by the UK government, the bank made losses for two consecutive years until a sudden and an unexpected turnaround saw it make profits of about 2.6 billion pounds. This turnaround is being attributed to the decisions by the chief executive officer Antonio Horta-Osorio who took over in 2011. For example, the operating costs reduced from 11 to 9.2 million pounds.
- Mergers and acquisitions. Since its inception, Lloyds bank has acquired several financial institutions in the UK. Some of the acquisitions include, the 2008 acquisition of its competitor HBOS, the 1918 takeover of Capital and Counties Bank and the 1914 takeover of Dorset Bank. There are a number of benefits of mergers and acquisitions which include increased value generation whereby the shareholder value goes up after merger as compared to individual companies; cost efficiency due to the economies of scale brought by mergers and acquisitions and higher market share to the smaller company being acquired or merged with (Goyal & Joshi, 2011) (Stovel & Savage, 2006).
In conclusion, although Lloyds Bank is a successful brand mainly due to good management decisions taken in the past, a lot still needs to be done to ensure that the brand remains competitive many years to come. Policies should be put in place to deal with a possible future financial crisis like the one in 2008 that led to the company recording losses for two consecutive years.
Albrech, S.L., 2011. Handbook of employee engagement: Perspectives, issues, research and practice. Human Resource Management International Digest, 19(7).
Antrop, M., 2005. Why landscapes of the past are important for the future. Landscape and urban planning, 70(1), pp.21-34.
Crocco, M., Figueiredo, A.T.L. and Santos, F.B.T., 2010. Differentiated banking strategies across the territory: an exploratory analysis. Journal of Post Keynesian Economics, 33(1), pp.127-150.
De Paula, L.F.R., 2002. Expansion strategies of European banks to Brazil and their impacts on the Brazilian banking sector. Latin American Business Review, 3(4), pp.59-91.
Gilley, A., Dixon, P. and Gilley, J.W., 2008. Characteristics of leadership effectiveness: Implementing change and driving innovation in organizations. Human Resource Development Quarterly, 19(2), pp.153-169.
Goyal, K.A. and Joshi, V., 2011. Mergers in Banking Industry of India: Some Emerging Issues. Asian Journal of Business and Management Sciences, 1(2), pp.157-165.
Jensen, M.C., 2001. Value maximization, stakeholder theory, and the corporate objective function. Journal of applied corporate finance, 14(3), pp.8-21.
Kumar, S. and Gulati, R., 2009. Measuring efficiency, effectiveness and performance of Indian public sector banks. International Journal of Productivity and Performance Management, 59(1), pp.51-74.
Schein, E.H., 2010. Organizational culture and leadership (Vol. 2). John Wiley & Sons.
Silva, T.C., Guerra, S.M., Tabak, B.M. and de Castro Miranda, R.C., 2016. Financial networks, bank efficiency and risk-taking. Journal of Financial Stability, 25, pp.247-257.
Stovel, K. and Savage, M., 2006. Mergers and Mobility: Organizational Growth and the Origins of Career Migration at Lloyds Bank 1. American Journal of Sociology, 111(4), pp.1080-1121.
Weber, Y., Drori, I. and Tarba, S.Y., 2012. Culture-performance relationships in mergers and acquisition: the role of trust. European Journal of Cross-Cultural Competence and Management, 2(3-4), pp.252-274.
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