Report on Commercial Customar Service at Bank One
Subject: Management | Topics:

INTRODUCTION:

In every country, banks serve a very important role in the development of its economy. It not only provides the opportunity for people to take loan and do some kind of business but also it creates employment for many people in different way. Bank One is the sixth largest bank in the United States. A banks success mainly comes from its customer service. A bank is surely going to loose its reputation if customers are not satisfied with its service. Jamie Dimon took over as Bank One’s Chief Executive Officer in 2000. Seven weeks after that he met with Bank One shareholders. He faced questions and complaints with customer service. Clearly, they had more concern about weak customer service than the share price. They were asking that what he was doing to improve the customer service at Bank One, the sixth largest bank in United States. They forced him to move quickly to solve the problem. He agreed that customer service was his first priority, along with integration of systems, breaking down bureaucracy and streamlining operations with a leaner, meaner bank.

The year 2000, the bank went through a huge transformation in its core infrastructure especially in the field of customer service. This all happened because of the arrival of one person name Jamie Dimon. This charismatic leader took over as Bank One’s Chief Executive Officer in 2000. Seven weeks after that he met with Bank One shareholders. He faced questions and complaints with customer service. The stoke holders made it very clear that, they are more concern about weak customer service than the share price. They had queries about what his views and future plans to improve the customer service at Bank One which is the sixth largest bank in United States. They forced him to move quickly to solve the problem. He agreed that customer service was his first priority, along with integration of systems, breaking down bureaucracy and streamlining operations with a leaner, meaner bank.

Dimon found out that at the beginning of 2000, Midwestern giant Bank One was suffering from customer service problems as well as rocky financial times. To solve those problems he identified four immediate priorities for that bank, they are;

Customer service,
Financial discipline,
System conversion and
Building the management team.

Dimon made considerable progress in building the bank’s core and infrastructure, especially in the customer service department, by the first year. Their process was tracking, measuring and rewarding the quality customer service. Jamie Dimon put much effort into improving its customer service through better systems and appropriate compensation plans.

Dimon utilized his hard work, intelligence, experience and dedication to over come the problems that the bank was facing. He made some major changes in the bank. In that time, he cut expenses by 1.8 billion, which is 16.6 percent of the total expense. In 2001, the bank earned 2.6 billion with a return on equity of 13%, in contrast to the $511 million loss the bank suffered in 2000. The stock price of Bank One leaped 34% to $38.

This is case talks about the contribution made by Dimon in order to change and improve its condition. It talks about how Dimon boosted the customer service with an emphasis on quality and excellence and especially in the field of customer service. This case also examines the customer service of the middle market segment of the commercial banking line of business of Bank One’s southeast region.

ORIGIN OF BANK ONE:

Bank One is considered to be the sixth largest bank holding company in the United States, which has it’s headquarter in Chicago. The bank has assets over $260 billion. It has 2000 branches with 74,000 employees at 14 states. Bank One is serving as a leading provider of lending, treasury management and capital markets products to Middle Market businesses and corporations. The retail bank serves over 2.7 billion households.

STARTING OF ITS JOURNEY:

Commercial National and City National Bank of Commerce of Columbus, Ohio, merged to form City National Bank and Trust, in 1929. Starting the family dynasty, John H McCoy became president in 1935. His son John G McCoy took over for him in 1958. City National Bank hired Phyllis Diller for advertisements purpose, which launched her career and made the bank famous.

BEING THE PIONEER

In 1964, City National Bank offered the first Visa Credit Card outside of California. This also created the first drive up bank. It has a reputation of being one of the first banks to use ATMs. Afterwards McCoy formed a holding company called the first bank group of Ohio, which became Banc One in 1979. The bank moved into Indiana, Kentucky, Michigan and Wisconsin because of interstate barriers to banking fell.

THE FORMATION OF THE BANK ONE:

In 1984, the third generation of the banking family, John B. McCoy, became the CEO. He acquired over 100 banks in the Midwest during his 15 years at the helm. He also acquired over twenty failed banks and expanded into Texas in 1989 the bank moved to Illinois two years after that. Then it entered to Arizona and Utah, in a stock-swap acquisition process. Its first international venture comes with a development alliance with Banco National De Mexico in 1992. In 1996, Banc One bought Premier Bancorp, which was considered as the number three bank of Louisiana. One year after that, it added Liberty Bancorp, located in Oklahoma City. Banc One became the third largest credit card issuer behind Citicorp and MBNA.

Bank One formed after a $29 billion merger in 1998. The merger was between Banc One of Columbus, OH and the first Chicago NBD. Previously Banc One had a large retail operation located primarily in the Midwest and southwest. On the other hand, first Chicago NBD has a strong reputation in its history of corporate lending to medium-size manufacturer. So the combined Bank One was 40% owned by first Chicago stockholders and 60% owned by Banc one. The first Chicago NBD had almost all their business in Chicago and Detroit.

ARISE OF CONFLICTS:

McCoy usually let the local manager stay on and continue running the bank at the way they were doing in the past he preferred to avoided centralizing the management. After the merger of Banc One and First Chicago NBD merged, he though that it would be a merger of equals. So, he decided to the banks headquarter in Chicago.

There is no merger without conflicts. Most of the merger and acquisition do not work for some internal reasons. And Bank One did not have a different story. From the beginning there was battled over who is going to manage the business and which side is going to get the resources, retail or the corporate. Both banks resulted from multiple mergers in the past. Therefore, the regional practices prevailed. In order to grow revenue quickly, the bank took on two many risky loans to large corporation. Then the stock lost half of its value in two years.

The bank was facing problems in some of the service they provided, like credit card option, Credit card facility that Bank One bought for $8 billion in 1997. After the merger, the First USA abused its customers by increasing rates from 4.5% to 19.9%; if they had paid late within six months. Subsequently, a large number of customers left the bank.

ARRIVAL OF JAMIE DIMON:

Jamie Dimon took over as the CEO at the Bank One in the year 2000. He had a mention worthy experience. Dimon came to Bank One after serving as president of City group Inc., and Chairman and co-CEO of Salomon Smith Barney Holdings Inc. Dimon was a tough, loud, charismatic New Yorker who was the achiever. People knew him as a manic, whirling dervish who was into everything. His hands-on style shook up the Staid Middle Western bank and made things happen.

When he came to Bank One he did not have a favorable condition to work. He was introduced to a badly managed, poorly organized bank, and energetically set to work to turn the bank around. He had to make lots of afford to make a change in the organization. The first thing he did was buy $2million shares of Bank One stock, investing $56M, half of his personal fortune. He wanted to take the risk of leading the bank with his own money on the line.

THE CHANGES MADE BY DIMON:

Dimon wanted to give the company a new and strong shape. He eliminated about 8000 jobs in the first year, cutting the workforce to 75,800. He also scaled back an auto-leasing unit. Then he closed the Wingspan, which was the first online bank launched two years previously. The venture cost the bank between $100 and 150 million by only the first year. After that, Dimon replaced twelve of the top thirteen executive managers at the bank. To enhance the finance department he hired former Citigroup Chief Financial Officer (CFO) Heidi Miller to take on the same job at Bank One. In other words, we can say that, Dimon was trying to build an efficient workforce, which can work efficiently under his leadership.

After developing a very good workforce Bank One concentrated to develop it’s marketing strategy and customer service. They got the result of their effort very soon. Many First USA credit card customers were getting back. In 2001, new managers got rid of about seven million inactive accounts at First USA and cut the number of new accounts that were opened (Weber and Popper, 2001). Attrition declined from a dismal 20% to about 10%, the industry average. Earnings of the company, which was hovered around zero in the year 2000, reached $946 million in 2001. Bank One’s management was not dumb enough to stay satisfied with this success. Therefore, to expand their business, the company bought Wachovia’s consumer credit card portfolio, which added about 2.8 million customers.

THE WORSE NIGHTMARE:

One of the greatest nightmares that Dimon had was the computer system which was supporting the banking system in all the branches. There was the twisted mix of computer systems left over from dozens of mergers with regional banks. The bank had to blend seven deposit system and work hard to avoid service problems that could frustrate customers to the point of leaving.

Bank One’s goal was for customers to receive services seamlessly and efficiently, no matter where they were and their banking needs. Dimon decide to bring the diverse system into one platform. After a long-term process, the bank underwent conversions to one unified system, State by state. The process was so vigorous that many employees at the organization thought that it would be next to impossible. However, Dimon was determined. He stated:

“Unless the computer talks to each other, you can’t do acquisition. You can’t build a great bank.”

THE EFFECT OF RECESSION:

In banking sector the biggest threat is recession. Recession is something unavoidable in every business. So, Dimon wanted a worst case scenario planning after analyzing the major weaknesses of Bank One. This is the state of the economy which cannot be controlled by any bank. The success of the bank highly depends on the proper assessment and calculation of recession. In order to face the problem of recession Dimon wanted a full proof plan which would be able to safeguard the bank even in the worst case scenario.

Dimon wanted this plan to be built the plan to be made after the major weaknesses of Bank One. According to him,

“You don’t run a business hoping you don’t have a recession.”

Under Dimon’s leadership bank assessed the profitability of each loan on its books. John E. Neal, the domestic corporate banking chief, reviewed a list of about 1800 borrowers and gave warning to those whose loans might not be renewed. Many of them, which considered as cheap loan, were losing the bank money. The bank offered those commercial customers the opportunities to buy other products such as asset management, treasury services, derivatives and bond writing from Bank One, or they can find another bank. In this process, those customers became profitable or potential for the bank or they left without causing the bank any more losses.

STORY OF JAMIE DIMON:

Dimon was a tough, loud, charismatic New Yorker who was the achiever, a manic, whirling dervish who was into everything. He had mentioned worthy educational as well as work experiences. He graduated from Harvard Business School and began his career in 1982. He began his career by working for Sandy Weill, who was his father’s boss at Shearson Heidon Stone. Weill sold his brokerage firm to the American Express and later became president of Amex. After a conflict with CEO James Robinson, Weill left the company withhis protégé, Dimon.After that, Dimon worked with Weill for a long period. All the time he was learning many types of business strategy from Weill. In 1998, Travelers merged with Citicorp and became Citigroup, the largest global financial services organization. Nevertheless, the two leaders had a falling out and his mentor Weill threw out Dimon. By that time, Dimon was well experienced about the strategies of saving a troubled company. He applied all his knowledge and experience in Bank One.

After that Weill took over Commercial Credit in Baltimore, an Insurance company. Here most of the management team left their jobs because they hated bureaucracy. They were nonconformists who wanted to do things differently. The family-style atmosphere at work was boisterous. The partnership lasted for 16 years and together they grew a powerful brokerage, investment-banking and insurance kingdom.

In 1993, Commercial Credit bought Financial Service Group. After that they acquired Shearson Lehman Brothers and Travelers Insurance Group. They together did a great job in achieving the success. In era of economic Weill used his strategies and Dimon executed accordingly. But very unfortunately in the year 1998, Dimon was ousted by his own mentor. Much of what he had learned from Weill about saving trouble companies he applied to Bank One.

CHANGING CULTURE:

Under the leader ship of Dimon the bank went though lots of changes. The culture of the organization took place in a large scale. The success of organizational broadly depends on the organizational culture. Dimon successfully change the culture to build a positive attitude among the employees. This change helped the bank to adapt the new technology and new organizational structure. He inform the stockholders about this through the 2001 annual report.

He explained that the employees are acting with great openness, passion and urgency. As a dynamic quality leader, he always encourages the employees to ask questions and solve problems. Recently, in a rally he asked the group of 500 employees, “How many people think that we are slow and bureaucratic?” a number of employees raised their hands. Then he asked, “who is responsible for fixing what is bureaucratic?” The audience responded, “We are” This proved the cultural change in the Bank One.

ELIMINATING BUREAUCRACY:

Dimon implemented a Bureaucracy Blaster program in order to reduce bureaucracy. It is paid system for getting money saving ideas from the employees. In 2002, Bank One renamed the bureaucracy Program to The Idea Center to encourage more suggestions from the employees on how to improve the internal processes of the bank. This process got a huge response from the employees. They send thousands of recommendations and Bank One used many of them. These kinds of steps taken by Dimon indeed brought a change in the banking culture.

In order to improve the efficiency of the retailers, the management centralized its operations and decided to give people in the field more authority and responsibility. The decision taking authority help to increased the feeling of ownership in the company by giving a grant of $300 in Bank One to the 401(K) plans of almost 40,000 of its lower-paid employees. Bank One employees at 1,800 branches had given the opportunity to share profits if they met earning targets. This type of profit sharing plans increases the drive to work hard and produce innovative ideas among the employees. Then they started to believe themselves as a part of the Bank and tried at their level best for the welfare of it.

TEAM BUILDING:

Among many managerial tools, building teamwork and group dynamics are the modern concepts of management. There for, Dimon encourages teamwork across and within business line to the point that Corporate Bankers began to join Investment Managers on customer calls. This new atmosphere was build through this. Dimon created a culture of integrity inside the bank. To appreciate Dimon’s contributions in the bank, Arthur Leavitt, former chairperson of the Securities and Exchange Commission, states, “Jamie Dimon is the un-Enron.” In the industry everyone believed that integrity is hallmark of Jamie Dimon’s management style.

ORGANIZATIONAL STRUCTURE OF BANK ONE:

Bank One operated its business in fourteen states in four regions; the West South, Midwest and East. Its south region included Louisiana, Oklahoma and Texas. The West included Arizona, Colorado and Utah. The Midwest covered Illinois, Indiana, and Wisconsin, and the Eastern part consists of Kentucky, Michigan and Ohio.

Bank One’s business activities mainly included investment management, retail, commercial, and credit card. According to the management of Bank One, small business is the one with the revenues of $10 million or less. Its commercial customers had annual revenue of over $10 million. The bank divided its commercial line of business into Middle market and Corporate. Middle market customers generally ran over from $10 million to $ 500 million in annual sales, while corporate customers ranged from over $500. The middle market group generally provides services in depository accounts (checking and savings and all variations), treasury management products, and commercial loans.

It can be said that, Bank One has a very good organizational structure, which covered a wide geographical location. They are not satisfied in only expanding the business in different areas, rather than that; they are trying to give people varieties of services.

COMPETITORS IN THE SOUTHWEST REGION:

Getting competitors is an unavoidable part of any type of business. As Bank One is successful in its business, they have potential competitors too. Bank One has many different competitors, depending on the market. The competitors of Bank One varied according to the market, in the Southern regions Commercial line. For example, we can mention the competitors in Louisiana were local banks like Whitney National Bank and Hibernia. In Dallas, the competitors were Chase, Bank of America, Wells Fargo, and Comerica. In Oklahoma, the major competitors of Bank One were Bank of America, Bank of Oklahoma, and Bank First.

Having competitors have many positive sides. It creates competition in the industry. When the companies are competing against each other, they are actually creating different types of business ideas. New business ideas produce opportunities of expanding business, which creates employments for general people. When a company can earn a good reputation as a good company, its employees feel proud of it. Then, other employees of other companies and fresh graduates find it prestigious to do job in that reputable company. So it becomes easy for the company to hire potential employees. Because of its reputation, Bank One is getting all these benefits.

CUSTOMER SERVICE IN THE BANKING INDUSTRY:

Bank industry is a service oriented industry. A bank’s reputation mostly comes from the service it is providing to its customers. This is because the financial activities done in any bank is more or less same, the offers may differ but not in a greater way. This is the customer service that makes a difference. If the bank can satisfy its customer with high quality service the customers will repeatedly come back.But we found out that the banking industry was not putting much emphasis on this area. In this case we find that at All First Bank in Baltimore, only top customers had the access to a service agent. Less-profitable customers did not have that option.

Different bank used different tools in order to identify their top class customer. In the First Union, they coded their Credit card customers with small colored squares that flashed when the Service Consultants brought up their accounts. A green square refers that the customer was profitable and should be given special care and attention. Red square told that the customer lost money for the bank and had little power to negotiate. Yellow refers to a discretionary category somewhere in between. This type of classification made works easy for the service consultant. If he/she has to serve a customer with special facilities, those squares will reflect the reputation of that customer. Service consultant will not have to search his past history or record.

Though there were some techniques the banking industry those was not that effective. According to the Gartner Group Inc. 68% of banks with over $4 billion in deposits divided customers into segments based on their profitability for the bank. Market Line Associates said that the top 20% of most commercial banks’ produce up to six times the revenue that they cost. Whereas the bottom fifth often cost three to four times more than they generate for the bank.

As we said earlier the banks that use tiring run the risk of failing to determine the true potential customers. This is because these tiring processes are made based on the past information of transaction. These programs used to tier typically are not capable of collecting information from different business units within the company.

COMMERCIAL CUSTOMER SERVICE AT BANK ONE:

After the formation of Bank One the bank was not doing very well. The level of customer satisfaction went to very low. In such a critical time Jamie Dimen came as a rescuer. Under his leadership the bank made sufficient about of progresses. He tried to solve the problems by getting into it. Over the first two years of his leadership, customer service of Bank One improved in a steady way. The reasons behind the bank’s success were given bellow:

DESIRE TO HELP PEOPLE:

According to Dimon one of the most important characteristics of the service consultant should be having the desire to help people. Dimon believed that this will make the bank succeed. He told some system analyst, loan officers, and branch manager in Chicago,

“Winning isn’t about parents or your IQ or where you went to school. It’s about one thing –Who much you want it!”

According to Dimon it was the desire that will push the employee to perform beyond the expectation.

TEAM BUILDING:

In today’s world team building is very much in the spot light. Dimon highly encouraged the teamwork inside his organization. According to him it was the key to excellent delivery of services. Customer service consultant needed to work closely with people in other areas of the bank to resolve problem. Teamwork always generates work efficiency and innovative ideas. Bank One was also practicing the employee empowerment. So, this teamwork proved to be helpful for them.

BUILDING UP COMMITMENT:

Building up commitment into both employees and customers is very important. Dimon took that into consideration and put emphasis on it. Bank One developed strategies and guidelines to help them in maintaining improving service quality. The more important thing is that, Bank One made a promise to its employees and customers concerning its commitment to service.

Moreover, Bank One promised its 60 million customers that they would receive individual answers to their requests and enquiries. It this way they made it clear that they value their customers and are always ready to serve.

THE ESSENTIAL SERVICES:

Bank One developed Service Essentials in fall 2000; they develop this program by recognizing that the overall quality of the experience keeps customers coming back. It identified the following customer needs:

Accuracy
Quick response time
Fast problem resolution
Proactive, empowered, knowledgeable, trustworthy employees
Personal attention

STRUCTURE OF COMMERCIAL CUSTOMER SERVICE:

After identifying the customer needs, the most important job was to make a structure of customer service departments duties and trainings. Bank One developed its customer service structure in a very organized way. Each market of Bank One has a Service Consultant who deals with the Underwriter, Bankers, Treasury Management Sales Officers, and Division Managers.

Depending only on the service consultant in each market was not enough. So, Bank One established Service Centers in Milwaukee and Chicago to handle calls from middle Market Customers nationwide. Customers had a tendency to expect help from a person in their won city. The national service center was serving for the longer hours, from 7 a.m. to 7 p.m. central time.

RECOGNITION OF OUTSTANDING CUSTOMER SERVICE:

Generally employees work for money. There is also a matter of motivation. It is not possible to motivate all the employees by giving money or some Tangible reward. Intangible benefits like service recognition is extremely important for the employees in banking industry.

Bank One gives recognition to the outstanding performance of their employees in many ways. For example, the National Commercial Client Services Recognition Program rewards the achievements of Service Consultant in the Middle Market, Large Corporate, and the Service Centers. The program began on January 1 2001, to reward the employees who received engraved recognition plaques with emblems to reflect their individual achievements. Among the 26 emblem categories were Service star, Best Overall Service Star, Sales Star, Client Applause, Leadership, Fraud Detector, and Lemon-2-Lemonade. Emblems were awarded monthly, quarterly and annually depending on the criteria of emblem. These emblems were selected through several processes. These were earned by course completion, supervisory, customer and business partner recognition, as well as team and peer nominations. They mainly have three types of recognition program.

SOME NON-MONETARY REWARDS:

It is a fact that money is the greatest incentives, but there are some other non-monetary awards that can be meaningful to the employees and can motivate the employees. To some of the employees those are more than monetary rewards. The employees of the bank One received some of these –

Service Excellence E-cards were launched in March 2002 to provide an avenue for employees to show their appreciation to internal colleagues or external customers.

The Commercial Banking Senior Management Recognition Program, where employees in commercial banking were rewarded by sending a complementary letter or memo from an Executive Vice Precedent. This reward was given to the employee who had received written compliments from internal or external customers.
Corporate Service Excellence began the Service Heroes program to celebrate service and spotlight employees who provided outstanding service to both the internal and external customers.

QUALITY IMPROVEMENT MEASURES:

When Dimon received the company it was in a bad condition. It was not only loosing money but also loosing its reputation. After the strong and systematic leadership of Dimon with timely implementation of all the rules and regulation Bank One has able to regain it profitability and reputation.

In order to perfectly implement the leadership and commands of Dimon, it was important to have ways to measure the performance of employees. Dimon implemented a variety of measures to monitor and continuously improve customer service. He wanted to ensure that all the issues were resolved to the customer satisfaction. They practiced customer care reports, conference calls, performance reports, monthly customer satisfaction survey, and business own and lost survey.

CHALLENGES IN CUSTOMER SERVICE:

By nature people are innovative. Every next day they will come up with some new ideas. In the customer service sector maintaining a good customer service is not an easy thing to do. To maintain a quality customer service two main challenges are technical knowledge and teamwork..Since the banks products and services changes frequently, Service Consultants are required to upgrade their skills and technical knowledge continuously. Customer Service Consultants are required to be familiar with every parts of the banking system as they navigate the different systems.

And again team work is very important as in the organizational culture. For different activities they have to depend on other people in other areas of the bank to get help in resolving any problems. To maintain the customer service the management will face these problems. In order to be effective and efficient in this sector they have to be more careful and focused.

FUTURE DIRECTION IN COMMERCIAL CORPORATE SERVICE:

After Dimon took over the CEO’s office in Bank One the bank did tremendous job in improving its reputation. The bank almost achieved its goals in the customer service sector. But in competitive industry like banking, they just have to continuous with the good job in order to survive. For this purpose the bank can develop the three following areas:

1. Empowerment of Service consultants
2. Professionalism of customer service
3. Customer service technology.

Efficiency will improve much

Efficiency will improve much if the empowerment of the Service Consultant is practiced more. The bank can increase the limits on transactions that the consultant could complete. The management can increasingly deliberate the authority in problem solving.

Professionalism is must in any given organization. Therefore in Bank One the job of the Service Consultants needed to be viewed within the bank more as a professional position.

We live in the age of technological advancement.

Every day there is some new technology which is taking over the primitive system. For this reason Bank One needed to use advance technologies when ever needed, that was specific to customer service. They needed a front-end system allowing the customers to access information.

Another technology they needed was the one to give Customer Service Consultants the ability to do call tracking. This will help the Service Consultants to see what was done previously for a particular customer and track how often the customer had called.

At the end it can be said that Jamie Dimon made effective use of his talents and experience to improve the condition of the bank. And the management team of his has succeeded in most of the area of banking. But in order to survive in the global and competitive market they have to come up with a better strategic plan.

THEME:

When it bought First USA in 1997, Bank One became the third largest credit card issuer behind Citicorp and MBNA. When acquiring banks to add to Banc One’s portfolio, McCoy usually let the local managers stayon and continue running the bank the way they had in the past. He avoided centralizing the management of his new acquisitions. By regional practices prevailed wanting to grow revenues quickly, the bank took on too many risky loans to large corporations. Bank One’s board asked Jamie Dimon to take over as CEO in 2000 and he did was buy two million shares of Bank One stock, investing $56 million, half of his personal fortune. He wanted to lead the bank with his own money on the line. Dimon eliminated about 8,000 jobs in his first year on the job, cutting the workforce to 75,800.

Under Dimon’s leadership, Bank One’s culture underwent important changes

MAIN ISSUE:

How Bank One can use its existing as well as additional compensation strategies to make their employees motivated and how that will help it to sustain its trend of success as well as growth rate to safeguard its historic glories in this highly competitive commercial banking industry?

SWOT ANALYSIS:

SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It is one of the cornerstone analytical tools to help an organization develop a preferred future. It is one of the time-tested tools that have t he capacity to enable an organization to understand itself, to respond effectively to changes in the environment. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective.

Effective and efficient planning process for Human Resource Management requires the perfect and specific information from the internal and external environment. The benefits of a SWOT analysis are that it provides learning and knowledge vital to the organization’s survival and prosperity. So SWOT is very important part for any company to be successful in the long run. Thus, the assessment of strengths, weakness, as well as opportunities, and threats become an essential task for management. Here. In this case study we have also divided SWOT in to external and internal factors and done analysis of the case:

INTERNAL FACTORS:

The strengths and weaknesses are internal factors in to an organization.

STRENGTH:

Strength determines an organisation’s strong points. Strength is a resource advantage relative to competitors and needs of the markets a company serves or expect to serve. It is a distinctive competence when it gives the company a comparative advantage among other competitors. Strengths arise from the resources and competencies available to the company. Here are some of the important strengths what Berre chimique has and we found in this case study:

THE BANK MADE CONSIDERABLE PROGRESS IN THE FIRST YEAR IN BUILDING ITS CORE AND INFRASTRUCTURE, PARTICULARLY IN CUSTOMER SERVICE.

In early 2000, Midwestern giant Bank One struggled with customer service problems, as well as rocky financial times. Jamie dim on identified four immediate priorities for the bank: customer service, financial discipline, system conversions, and building the management team. In the first year the bank made considerable progress in building its core and infrastructure, particularly in customer service. It tracked, measured, and rewarded the quality of customer service.

Better systems and appropriate compensation plan made improve the bank one in customer service. The employee of the customer service gave 100% effort to give maximum output. So the customer service improved a lot.

THE MANAGEMENT OF BANK ONE CENTRALIZED ITS OPERATIONS AND GIVES THE PEOPLE MORE AUTHORITY AND RESPONSIBILITY.

The management of Bank One reduces principle agent problem. It increased the feeling of ownership in the company by giving a grant of $300 in Bank One stock to the 401 plans of almost 40,000 of its lower-paid employees. Employees at 1,800 branches were given the opportunity to share profits if they met earnings targets.

The employees of Bank One had given authority and responsibility. So they will lead their Bank with their own money on the line. Obviously they will work very hard to gain the profit. So it is strength for the Bank One. No one will give any loose effort as if they can met with the target they will get share of the profit.

OVER THE FIRST TWO YEARS OF DIMON’S LEADERSHIP, BANK ONE’S CUSTOMER SERVICE HAS STEADILY IMPROVED.

One of the most important characteristics of a service consultant is a sincere desire to help people. This related to Jamie Dimon’s belief about what it takes to make the Bank succeed. Dimon told a crowd of systems analysts, loan officers, and branch managers in Chicago, “winning isn’t about patents or one’s IQ or where one went to school. It’s about one thing- how much you want it!” To Dimon, desire to do the job well is critical to success.

Another key to excellent customer service was teamwork. Customer service consultants needed to work closely with people in other areas of the bank to resolve problems

DIMON ENCOURAGED TEAMWORK AND INTEGRITY IN THE BANK ONE.

Dimon encouraged teamwork across and within business lines to the point that Corporate Bankers began joining Investment Managers on customer calls. Demon’s culture of integrity pervaded the bank. In the industry integrity is widely recognized as the hallmark of Jamie Dimon’s management style. Warren Buffett was so impressed by Dimon’s letter to the Stockholders in the 2000 Annual report that he wrote Dimon that it was one of the best he’d ever seen.

Ethics in the business is an important factor. Because ethics can boost up employees productivity. Thus which effectively and efficiency is increased. The Bank One set a target which is fulfilled by employees.

BANK ONE’S SHAREHOLDERS HAD MORE CONCERN ABOUT WEAK CUSTOMER SERVICE RATHER THAN STOCK PRICE.

Jamie Dimon took over as Bank One’s Chief Executive Officer in 2000. He met with Bank One shareholders. Shareholders bound him with questions and complaints about customer service. Clearly they had more concerns about weak customer service rather than stock price. They pushed him to move quickly to resolve the problem.

The main destination of a shareholder is to increase company’s stock price. But the shareholders of Bank One had more concerns about customer service. Customer service is an important factor for increasing the stock price for a company. If a company can give very good customer service than their brand value will also increases. So more shareholders will buy more share of that company. “Shareholders had more concerns about weak customer service”- it’s strength for Bank One. That’s why Bank One’s Chief Executive Officer gave higher priority to the customer service.

THE BANK ONE IS A LEADING PROVIDER OF LENDING, TREASURY MANAGEMENT AND CAPITAL MARKET PRODUCTS TO MIDDLE MARKET BUSINESSES AND CORPORATIONS.

With headquarters in Chicago, Bank One is the sixth largest bank holding company in the United States with assets worth over $260 billion. The Bank has 74,000 employees at 2,000 branches in 14 states. The retail bank serves over 7.2 million households. That’s why they are the leading provider of lending, treasury management and capital market products.

As Bank One is a leading provider of lending, treasury management and capital market products to middle market businesses and corporations. So it is strength for the company. As we know that customers normally love to have their services from a best organization or bank like Bank One and other customers of the company will also provide them idea about these banks so the new customers eventually get a faith on these kind of banks. In that case its one kind of strength for the company.

JAMIE DIMON INHERITED A BADLY MANAGED, POOR ORGANIZED BANK, SET TO WORK TO TURN THE BANK AROUND.

Mr. Dimon came to Bank One after serving as president of Citigroup Inc., Chairman and CO-CEO of Salomon Smith Barney Holdings Inc. Dimon was a tough, loud, charismatic New Yorker. People recognized him as a manic, whirling dervish who was into everything.

One of the first things he did was buy two million shares of Bank One stock, investing $56 million, half of his personal fortune. He wanted to lead the bank with his own money on the line. He fired about 8,000 jobs in his first year on the job, cutting the workforce to 75,800.

DIMON ENCOURAGED EMPLOYEES TO ASK QUESTION AND SOLVE PROBLEMS AND

EMPLOYEES WERE ACTING WITH GREATER OPENNESS, PASSION AND URGENCY.

Employees were acting with greater openness. The participation in the Bank One was increased. That’s why employees let the management know about their thought, knowledge. Basically the input made into output by the lower and middle level workers. So they can find the problems and solve the problems. Dimon asked the group of 500 employees, “How many people think we are slow and bureaucratic?” A number of employees raised their hand.

Bank One implemented a suggestion box that paid employees for money saving ideas. In 2002, the Bureaucracy program was renamed The Idea Center to encourage more suggestions on how to improve the bank’s internal process. In response, employees sent in thousands of recommendations, and the bank put many of them in place.

BANK ONE DEVELOPED STRATEGIES AND GUIDELINES TO HELP EMPLOYEES.

Bank One developed strategies and guidelines to help employees maintain and improve service quality. They can improve their service quality thus company will get a huge name value. So it will be a free promotion for the Bank One.

The bank made a promise to its customers and employees concerning its commitment to service. Bank One promised its 60 million customers that they would receive individual answers to their request and inquiries.

Bank One developed Service Essentials in fall 2000, recognizing that the overall quality of the experience keep customer coming back.

It identified the following customer needs:

Accuracy

Quick response time

Fast problem resolution

Proactive empowered, Knowledgeable, trustworthy employees.

Personal attention.

The Bank One analyzed all the requirements of improving in customer service. They also surveyed for finding the essentials to keep customer coming back.

THE STRUCTURED COMMERCIAL CUSTOMER SERVICE IN BANK ONE IS INCREASING THE ATTENTION OF THE CUSTOMER.

Each market has a Service Manager and Service Consultants who work with the underwriters, Bankers, Treasury Management Sales Officers, and Division Managers. Bank One has this sub post in their organization.

As the Bank One’s structured commercial customer service is increasing the attention of the customers so the company is getting new customers for their better customer service facilities and the current customers is giving other customers better knowledge or advise to go for Bank One for

their better services. By this way Bank One is getting more and more customers day by day which is a strength for the company.

IDENTIFICATION OF FOUR IMMEDIATE PRIORITIES BROUGHT CLARITY IN OPERATIONS

Bank One had struggled with customer service problems from as early as the year 2000, and they had even struggled with rocky financial times. Thus, Dimon identified four priorities of the bank which needed to be dealt with as soon as possible. These were:

Customer Service,
Financial Discipline,
System Conversions, and
Building the management team.

Even though these can represent the areas of weaknesses the bank needed to develop, it also highlights a key point, that the new CEO was aware of the areas which needed to be developed, thus his management technique would start with the most important ones first.

BANK ONE IS WIDELY SPREAD WITH MANY BRANCHES IN U.S

Bank One has its headquarters in Chicago. It has almost over 2000 branches in 14 states of U.S. It’s retail bank serves over 7.2 million household. Since Bank One’s operations are widely spread this in fact gives them an opportunity to earn as much revenue as possible from different locations with different population size. It has its branches in the west, south, Midwest and east. The states include Louisiana, Texas, Illinois, and Ohio etc.

As Bank One’s different branches is spread over different location of USA so they can easily cover a large portion of market of USA which is one kind of benefit for the company. Cause they can easily attract more customers and target a large amount of customers toards their products and services and it can increase their profitability in the long run for the company. So it’s a strong strength for the company.

MERGERS OF BANK ONE GAVE IT STRONG HOLD IN THE MARKET

Bank one had started with the 1929 merger of Commercial National and City National Bank of Commerce of Columbus, Ohio. They formed the City National Bank and Trust, of which John H. McCoy was the president in 1935.In 1958, his son took over, and hired the comedienne Phyllis Diller in 1960s to do radio and TV commercials, launching the bank’s career and making it famous.

In 1966, City National offered the first Visa credit card outside of California. It created the first drive-up bank, and was one of the first banks to use ATMs. Eventually, McCoy formed a holding company called First Bank Group of Ohio, which later became known as Bank One in 1979. The bank moved to other states such as Indiana, Kentucky, Michigan and Wisconsin as the state barriers to banking fell.

With the mergers of such banks, Bank One had started out with the involvement of many experienced banks already established in the market, and by merging, their forces jus became stronger. Along with the mergers came the employees of the banks, who of course required little training compared to the new employees the bank would have to hire if not for the mergers.

WEAKNESS:

It determines an organisation’s weaknesses, not only from its point of view, but also more importantly, from customers. A weakness is a limitation or deficiency in one or more resources or competencies relative to competitors that impedes a company’s effective performance. Here are some of the important weaknesses that Bank One has and we found in this case study:

WEAK CUSTOMER SERVICE AND STOCK PRICE ARE THE FACTORS THAT CAUSES BANK ONE LESS EFFECTIVE IN CUSTOMER SERVICE.

After Jamie Dimon took over as Bank One’s Chief Executive Officer in 2000, he met with Bank One shareholders. The group barraged him with questions and complains about customer service. Clearly they had more concerns about weak customer service than stock price. What did he intend to do to improve customer service at Bank One? Bank One is the sixth largest bank in the U.S. They pushed him to move quickly to resolve the problem. He agreed that Customer service was a top priority along with integration of systems, breaking down bureaucracy, and streamlining operations with a leaner, meaner bank.

The bank One had a weak customer service and stock price. So the share value of Bank One was decreasing day by day. If a company can do well in customer service then it will be a free promotion for them. The brand name or image will go up. But the absence of 100% effort Bank One looses their positions. So it is weakness for Bank One.

TWISTED MIX OF COMPUTER SYSTEMS LEFT OVER IN BANK ONE FROM DOZENS OF MERGERS WITH REGIONAL BANKS.

The bank had to blend seven deposit systems, and worked hard to avoid service problems that could frustrate customers to the point of leaving. Bank one’s goal was for customers to receive services seamlessly and efficiently, no matter where they were or their banking needs are. Dimon insisted on integrating the diverse system into one platform. Slowly, painfully, the bank underwent conversions to one unified system, state by state.

The conversions required a huge effort that many at the bank thought was impossible. But as Dimon said, “Unless the computers talk to each other, one can’t do acquisitions. One can’t build a great bank.” Twisted mix of computers systems left over in Bank One from Dozens of mergers with regional banks. So it is weakness for Bank One.

WEAK RECRUITMENT PROCESS GAVE BANK A GREATER LOSS.

Dimon eliminated about 8,000 jobs in his first year of the job, cutting the workforce to 75,800. he scaled back an auto-leasing unit. He closed wingspan, the online bank launched two years previously. The venture cost the bank between $100 and $150 million during its first year along. Eventually, Dimon replaced twelve of the top thirteen executive managers at the bank. He hired former Citigroup Chief Financial officer (CFO) Heidi Miller to take on that same job at Bank One.

Dimon eliminated some jobs in his first year. So the employee felt no job security in Bank One.Dimon eliminated about 8,000 jobs in his first year of the job, cutting the workforce to 75,800. He scaled back an auto-leasing unit. So employee had a tension that there is no job security in Bank One. Some employees took it negatively. Thus, it affected the output of bank One a lot. Because of the recruiter, the employees of Bank One suffered a lot. So it is weakness for the Bank One.

PREVIOUSLY THE EMPLOYEES OF BANK ONE HAD LESS AUTHORITY AND RESPONSIBILITY TO THEIR WORK.

Basically the input made into output by the lower and middle level workers. So they can find the problems and solve the problems. They actually know what the things that should be implemented are effective. They can figure out all the problems. No one had much authority.

So they didn’t take their responsibility to solve the problems. That’s why the Bank One loses a lot. Because of decentralization there is a dissatisfaction among employees .If it is present among employees, it is not possible for them to work hard, efficiently or effectively.

BANK ONE HAD NOT SUFFICIENT TECHNOLOGY FOR THEIR CUSTOMER SERVICE.

Bank One needed technology that was specific to customer service. They needed a front-end system that would allow them to access information, without having to go through different program applications. New technology was being developed in phases.

Another needed technology was one to give customer service consultants the ability to do call tracking. This would allow service consultants to see what was done previously for a particular customer and track how often the customer had called.

IDENTIFICATION OF FOUR IMMEDIATE PRIORITIES

Bank One had struggled with customer service problems from as early as the year 2000, and they had even struggled with rocky financial times. Thus, Dimon identified four priorities of the bank which needed to be dealt with as soon as possible. These were:

Customer Service,

Financial Discipline,

System Conversions, and

Building the management team.

Even though this identification can be viewed as strength, representing that the CEO was actually aware of the situation at Bank One, it also goes to show how much work was actually waiting to be attended to and how many areas Bank One lacked in.

DIMON’S NIGHTMARE:

There was a twisted mix of computer systems left over in Bank One from dozens of mergers with regional banks. This was one of the worst nightmares Dimon had to face. This mix of computer system would mean having to blend seven deposit systems, and they would have to work hard to avoid service problems that could frustrate customers to the point of leaving.

The goal of Bank One was to provide customers with services seamlessly and efficiently, no matter what their needs were or where they were. Dimon had insisted on integrating the diverse systems into one platform, which therefore meant that the bank would have to undergo slow, painful conversions to one unified system, state by state. This conversion would require a huge effort that many at the bank thought was impossible.

REQUIREMENT FOR WORST-CASE SITUATION PLANNING:

After analyzing the major weaknesses of Bank One, Dimon required a worst-case scenario planning. The bank was being run hoping that they don’t face a recession. As a result of this, the bank assessed the profitability of each loan on its books. There was a list of about 1,800 borrowers and the Domestic Corporate Banking Chief gave warning to those whose loans which might not be renewed after reviewing them.

The bank offered these customers the opportunity to purchase other products from Bank One, such as asset management, treasury services, derivatives, and bond underwriting, or simply to find another bank. In this way, the relationship with the customers became strong with Bank One, or the customers just left for another bank.

BANK ONE MADE TOO MANY RISKY LOANS:

After the merger when Bank One was suffering huge losses, they took an initiative to give away loans to large corporations. This was mainly with the aim to make a quick revenue generation.

Though the bank wanted to earn as much revenue as possible within a very short time frame, it was not possible as they gave out loans to corporations, which proved to be risky ventures.

THE STOCK LOST HALF ITS VALUE IN TWO YEARS:

This mainly arose when customer service at Bank One arose as a big issue. This affected their reputation in the financial market. More over the risky loans that they were giving out to large corporations was also an issue.Hence investors did not want to invest at Bank One any more. As a result Bank One’s share price plummeted and the stock lost its value in two years.

INTERNAL CONFLICT MAY ARISE DUE TO SHARED OWNERSHIP:

After the merger in the year1998, the confusion of ownership arose as big issue. Questions whether the retail or the corporate sector should get the ownership, get to make decisions regarding the company. However in the end they agreed on the 60-40 ownership criteria. That is Banc One will own 60% by First Chicago stockholders will own 40% of equity ownership.

The two separate banks have different practices to operate. Whenever a dispute would arise in the banking system of Bank One then for the agreement on a single decision would be a very big problem. This is for the banking practice and the share of the ownership.

INCREASED INTEREST RATES LEAD TO LOSING CUSTOMERS:

Bank One, just after the merger made some changes in the organizations policy regarding giving out loans to customers. This time they increased the interest rates from 4.5% to 19.9% in the credit card section if only the customers made paid a day late only twice within a time frame of six months.

This led to customer abuse and as a result many of the customers made no further transactions with the bank. If they do not lower interest rates down to 4.5% or somewhat lower than 19.9% it is unlikely that they will get their customers back.

HIGHLIGHTING ONLY IN THE MIDDLE MARKET SEGMENT IN SEPARATE ZONES:

Bank One has many different operations to execute. The Various branches offer many types of service to the valued customers. Focusing on one particular region for developing better service like in the Middle Market segment of the Southwest region would make them vulnerable and questionable to service in other regions or countries.

THE MANAGEMENT BELIEVING IN DESIRE TO DO JOB:

The Bank considers that Service Consultants would be compelled to do their jobs, as they would be having a desire to help people. These types of individuals are the ones who like to listen and influence others. By solely depending on this characteristic trait would not make the quality service.

There has to be a minimum level of motivation from the management level in order to keep these Consultants from moving with their desire.

CHANGES IN THE BANK’S PRODUCTS AND SERVICES FREQUENTLY:

Bank One changes its products and services frequently. This product and service are very interrelated as one helps to foster other to the customers. Adaptation to this changing environment by a Service consultant imposes restrains.

The technological and teamwork knowledge changes every time and consultants start from Scratch. This changing nature not only makes the consultants stressed to work but also every time makes a new approach to an existing customer. All this changes the Bank’s image.

HANDLING OF THE SERVICE FOR THE MIDDLE MARKET CUSTOMERS FROM NATIONWIDE:

In addition to the various service departments in the regions Bank One has a setup of Service Centers in Milwaukee and Chicago. The valued customers would like to deal with their problems with an individual with local knowledge.

Communicating across nations not only makes it time consuming, expensive but also due to differences in time may even expire the validity of certain proposals. Since the local consultants know the various behavioral aspects of the customers of the different states the local customers and so delivering better service would more easily accept them.

NO PROPER TRAINING AND PROFESSIONAL HELP FOR SERVICE CONSULTANTS:

The service consultants are empowered to exercise their authority. They are not provided with any sound training for adapting to the changing environment of the business. Every time the service consultants need to learn new technology for enhancing their customer service. However, these people are not given any professional support or motivation for doing so.

This style of learning on their own would be a bigger problem when many customers would require the service. They should streamline the service and make the job of Service consultants follow guidelines in addition to their style of doing work.

INTERNAL CONFLICT MAY ARISE:

At Bank One they have of around 2000 branches in 14 states with 74000 employees. More over in these fourteen different states they operate locally as per the customer’s requirements since customers prefer to receive help from a person in their own city. Bank

One has such a diversified work force with employees from different corners of United States that they have different ideas and views which in turn may create problems at times by arising internal conflicts among employees.

EXTERNAL FACTORS:

The opportunities and threats represent the external environment of an organization.

OPPORTUNITIES:

External conditions those are helpful to achieving the objective. Opportunities may occur suddenly. Opportunities come from factors outside of anyone’s control. These are in the environment that surround the business and should be tried to capitalize on. There are several opportunities are available for Bank One and in this case study:

EXPANSION IN OTHER AREAS OF UNITED STATES:

Up till now Bank One has been operating its commercial line of business in fourteen states in four regions. These regions are the West, South, Midwest, and East. Bank One can further expand their line of business in other states of U.S. This will in fact help them generate enough revenues to cover the losses they have faced earlier.

After Dimon joined in as the new CEO, he was very keen in improving customer service at Bank One, and he also made bank undergo various conversions to one unified system. That is he focused mainly on networking, making the computers talk to one another. This is what boosted their productivity in terms of customer service. If Bank One can further improvise on networking facility, they will be able to spread their services in many other countries through out the world

BANK ONE CAN ADD NEW PORTFOLIOS OF SERVICES TO ITS EXISTING LINE OF BUSINESS:

Bank One currently is operating its line of business in investment management group, commercial, credit card, and retail. Apart from these four lines of business operations, Bank One can start operating in other areas of the service industry such as they can open up a non governmental organizations. This will allow them to do something for the welfare of the society, and also add value to the organization.

The main lines of business for Bank One includes Investment management, Retail, commercial, and credit card. The identification of the Middle Market and the Corporate market helps Bank One categorize the different mainlines according to the Market they operate. The financial standings of the institutions also help Bank One develop new strategies for operation.

CREATING PLATFORM FOR DOING GLOBAL BUSINESS:

Bank One has succeeded in getting many businesses across the regions. One of which is the building up of the credit card customers. This Credit card cluster of individuals in an area can create a huge market in the various regions of the United States and the global market. The Bank One can have an option to develop a platform for the credit card business. Being globally spread over the regions they have an opportunity to do Global business.

Bank One has developed an extensive customer service-delivering unit. This not only has been operating in the specified region but also has a Central department. The extensive distribution of the customer service and recognition of it as a professional position makes Bank One develop Customer relations. They are always concerned for giving better quality and this creates opportunity for them to prosper with their service in the global arena.

THE MANAGEMENT TEAM OFFERS EXPERTISE TO BE CONSULTED

The Management team of Bank One consists of personnel from various well-reputed institutions. These are the expert panel of people who has a major role in the success story of Bank One.

With such expertise available they can offer banking service other than the traditional one, which would help in earning extra revenue. Not only this offers new business for the bank but also the inclusion of more human resource.

CHANCES OF GLOBALIZATION:

After Dimon joined in as the new CEO, he was very keen in improving customer service at Bank One, and he also made bank undergo various conversions to one unified system. That is he focused mainly on networking, making the computers talk to one another. This is what boosted their productivity in terms of customer service. If Bank One can further improvise on networking facility, they will be able to spread their services in many other countries through out the world.

Bank One has succeeded in getting many businesses across the regions. One of which is the building up of the credit card customers. This Credit card cluster of individuals in an area can create a huge market in the various regions of the United States and the global market. The Bank One can have an option to develop a platform for the credit card business. Being globally spread over the regions they have an opportunity to do Global business.

EXCELLENT COMMERCIALIZATION OF CUSTOMER SERVICE:

Over the first two years of Dimon’s leadership, customer service of Bank One improved in a steady way. The main reason behind this success was the quick identification of the most important characteristics of a service consultant; that is, “sincere desire to help people”.

Dimon told some system analyst, loan officers, and branch manager in Chicago that, winning does not come from Patent of Your IQ or educational background. It comes from one thing, “how much you want it”. According to Dimon, the desire to do the job well is critical for success.

FASTER GROWTH WITH TECHNOLOGY:

Bank One is an institution where technology has a greater impact for delivering service. They have been adopting new technology for every phase of their transformation. This resulted in having a state of the art technology with their system of Banking. Bank One there would be able to deliver a faster response to the questions for day-to-day business. This provides them an opportunity for becoming the global Bank partner for large transactions worldwide.

Bank One use advance technologies that was specific to customer service. They used a front-end system allowing them to access information. Another technology that Bank One used was the one to give Customer Service Consultants the ability to do call tracking. This helps the Service Consultants to see what was done previously for a particular customer and track how often the customer had called.

REENGINEERING LEADS TO COST SAVINGS:

When Dimon became the new CEO of Bank One, he eliminated about 8000 jobs in his first year on the job. This elimination of jobs led to the cutting down of workforce from 83,800 to 75,800. He basically carried out this act solely for cost savings.

Since Bank One was suffering huge losses in terms of costs, so in order to save the organization from making further losses he cut the work force. They also scaled back on the auto-leasing unit to minimize cost.

UNIFIED NETWORKING SYSTEM AT BANK ONE:

After the merger of Banc One and First Chicago NBD, Bank One was formed. These two banks were formed from previous mergers of many different banks, which used different computer systems to provide customer service. As a result the newly formed Bank One was having grave problems to serve their customers properly.

However Dimon their new CEO focused integrating the diverse systems into one unified system, which in fact proved to be an opportunity for Bank One and as a consequence pushed its productivity even further. More over this gives the employees a clearer and simpler idea of how the bank operates, and therefore makes it easier for them to work as well.

CONTINUOUS GROWTH IN THE SEVERAL STATES OF USA:

Up till now Bank One has been operating its commercial line of business in fourteen states in four regions. These regions are the West, South, Midwest, and East. Bank One can further expand their line of business in other states of U.S.A. This will in fact help them generate enough revenues to cover the losses they have faced earlier; and also give the opportunity to compensate the suffering of one state by the improvement of other states.

It can be said that, Bank One has a very good organizational structure, which covered a wide geographical location. Also, Bank one is not satisfied in only expanding the business in different areas, rather than that; they are trying to give people varieties of services. This will recognize as an opportunity for them.

NEW PORTFOLIO OF PRODUCT TO EXPAND THE BUSINESS LINE:

Bank One currently is operating its line of business in investment management group, commercial, credit card, and retail. Apart from these four lines of business operations, Bank One can start operating in other areas of the service industry such as they can open up a non governmental organizations. This will allow them to do something for the welfare of the society, and also add value to the organization.

The main lines of business for Bank One includes Investment management, Retail, commercial, and credit card. The identification of the Middle Market and the Corporate market helps Bank One categorize the different mainlines according to the Market they operate. The financial standings of the institutions also help Bank One develop new strategies for operation.

EXECUTIVE COMPENSATION SCHEMES CAN HELP ALLEVIATE THE AGENCY PROBLEM IN PUBLICLY TRADED COMPANIES.

Executive compensation schemes can help alleviate the agency problem in publicly traded companies. Executive compensation is how top executives of business corporations are paid. The compensation of every employee is decided by the company owners through the board of directors (in the case of the most highly compensated executive positions) and the management team or management committee. Many people believe that CEOs are paid too much for the services they provide, while others believe that a good CEO can have a positive effect on the company’s performance and, therefore, that high compensation is needed to attract the best talent. The board of directors may have a personnel and compensation committee that deals specifically with labor compensation.

Executive compensation has long attracted a great deal of attention from financial economists. Indeed, the increase in academic papers on the subject of CEO compensation during the 1990s seems to have outpaced. Much research has focused on how Executive compensation schemes can help alleviate the agency problem in publicly traded companies. To understand adequately the landscape of executive compensation, one must recognize that the design of compensation arrangements is also partly a product of this same agency problem.

OPTIMAL CONTRACTING APPROACH REFERS TO DESIGN THE COMPENSATION SCHEMES TO PROVIDE MANAGERS WITH EFFICIENT INCENTIVES TO MAXIMIZE SHAREHOLDERS VALUE.

Management should first and foremost consider the interests of shareholders in its business decisions. Optimal contracting approach refers to design the compensation schemes to provide managers with efficient incentives to maximize shareholders value. Shareholders value to refer to the concept that the primary goal for a company is to enrich its shareholders (owners) by paying dividends and/or causing the stock price to increase.

The more specific concept that planned actions by management and the returns to shareholders should outperform certain bench-marks such as the cost of capital concept. In essence, the ideas that shareholders money should be used to earn a higher return then they could earn themselves by investing in risk free bonds. Under optimal contracting view, the board, working in shareholders’ interest, attempts to provide cost-effectively such incentives to managers through their compensation packages.

COMPENSATION ARRANGEMENT THAT IS LIKELY TO BE SHAPED BY BOTH MARKET FORCES THAT PUSH TOWARD VALUE-MAXIMIZING OUTCOMES.

Compensation arrangement that is likely to be shaped by both market forces that push toward value-maximizing outcomes. Markets include the market for corporate control, the market for capital and the labor market for executives. Management should first and foremost consider the interests of shareholders in its business decisions. Shareholders value to refer to the concept that the primary goal for a company is to enrich its shareholders (owners) by paying dividends and/or causing the stock price to increase.

The more specific concept that planned actions by management and the returns to shareholders should outperform certain bench-marks such as the cost of capital concept. In essence, the idea that shareholders money should be used to earn a higher return then they could earn themselves by investing in risk frees bonds.

EXECUTIVE COMPENSATION HAS HISTORICALLY BEEN CORRECTED WITH MARKET CAPITALIZATION AND AS RESULT THE RISING STOCK MARKETS OF THE 1990S, PROVIDED A CONVENIENT JUSTIFICATION AT MOST FIRMS FOR SUBSTANTIAL PAY INCREASE.

Executive compensation has historically been corrected with market capitalization. Market capitalization refers to the sum derived from the current stock price per share times the total number of shares outstanding. Although the market capitalization of a company is an indication of the value of the company, it is only a temporary metric based on the current stock market.

The true value of the company, its profits, product positioning, balance sheet, etc, may not be reflected in the market capitalization. A company can be doing well, but still have a low market capitalization if its products and reputation have not caught the fancy of the masses. The rising stock markets of the 1990s that carried along with them even many poorly performing companies, provided a convenient justification at most firms for substantial pay increase

THE PRESENCE OF A LARGE OUTSIDE SHAREHOLDER IS LIKELY TO RESULT IN CLOSER MONITORING AND IT CAN BE EXPECTED TO REDUCE TOP MANAGERS’ INFLUENCE OVER THEIR COMPENSATION.

The presence of a large outside shareholder is likely to result in closer monitoring and it can be expected to reduce top managers’ influence over their compensation. Doubling the percentage ownership of the outside shareholder reduces non-salary compensation by 12-14 percent.

CEOs in firms that lack a 5 percent or larger external shareholder tend to receive more “luck-based” pay-pay associated with profit increases that are entirely generated by external factors rather than by managers’ efforts. A firm that is lacking large external shareholders, the cash compensation of CEOs are reduced less when their option-based compensation is increased.

THREATS:

Threats are negative external environmental factors, which influences an organization’s decision. External factors are not controlled by the organization and to survive every organization needs to be very alert about its threats and how they can overcome this problem. Organizations should be proactive rather than reactive and should be aware of what are the competitors’ moves and should take necessary action in advance to face those moves.

MARKET FORCES ARE NOT SUFFICIENTLY STRONG AND FINE-TUNED TO ASSURE OPTIMAL CONTRACTING OUTCOMES.

Market forces are not sufficiently strong and fine-tuned to assure optimal contracting outcomes. Markets-including the market for corporate control, the market for capital and the labor market for executives- impose some constraints

On what directors will agree to and what managers will ask them to approve. The market for control might impose some costs on managers who are especially aggressive in extracting rents. The important point is that the market for corporate control fails to impose tight constraints on executive compensation.

COMPENSATION CONSULTANTS HAVE STRONG INCENTIVES TO USE THEIR DISCRETION TO BENEFIT THE CEO, EVEN IF THE CEO IS NOT FORMALLY INVOLVED IN THE SELECTION OF THE COMPENSATION CONSULTANT, THE CONSULTANT IS USUALLY HIRED BY THE FIRM’S HUMAN RESOURCES DEPARTMENT, WHICH IS SUBORDINATE TO THE CEO.

Companies typically employ outside consultants to provide input into the executive compensation process, but they can also play an useful role that they can help in camouflaging rents. Compensation consultants have strong incentives to use their discretion to benefit the CEO, even if the CEO is not formally involved in the selection of the compensation consultant, the consultant is usually hired by the firm’s human resources department, which is subordinate to the CEO. Providing advice that hurts the CEOs pocketbook is hardly a way to enhance the consultant’s chances of being hired in the future by this firm or indeed, the any other firms. Pay consultants can favor the CEO by providing the compensation data that are most useful for justifying a high level of pay.

WHEN OWNERSHIP AND MANAGEMENT ARE SEPARATED THEN THE MANAGERS MIGHT HAVE SUBSTANTIAL POWER AND THE PROBLEM OF MANAGERIAL POWER AND DISCRETION HAS BEEN ANALYZED IN MODERN FINANCE AS AN “AGENCY PROBLEM” BECAUSE MANAGERS MAY USE THEIR DISCRETION TO BENEFIT THEMSELVES PERSONALLY IN VARIETY OF WAYS.

Agency problem refers to a conflict of interest arising between creditors, shareholders and management because of differing goals. An agency problem exists when management and stockholders have conflicting ideas on how the company should be run. When ownership and management are separated then the managers might have substantial power and the problem of managerial power and discretion has been analyzed in modern finance as an “agency Problem” because managers may use their discretion to benefit themselves personally in variety of ways. They may engage in empire building. They may fail to distribute excess cash when the firm does not have profitable investment opportunities.

THOUGH OPTIMAL CONTRACTING APPROACH REFERS TO DESIGN THE COMPENSATION SCHEMES TO PROVIDE MANAGERS WITH EFFICIENT INCENTIVES TO MAXIMIZE SHAREHOLDERS VALUE, THE MAIN FLAW WITH EXISTING PRACTICES SEEMS TO BE THAT, DUE TO POLITICAL LIMITATIONS ON HOW GENEROUSLY EXECUTIVES CAN BE TREATED, COMPENSATION SCHEMES ARE NOT SUFFICIENTLY HIGH-POWERED.

Management should first and foremost consider the interests of shareholders in its business decisions. Optimal contracting approach refers to design the compensation schemes to provide managers with efficient incentives to maximize shareholders value. Shareholders value to refer to the concept that the primary goal for a company is to enrich its shareholders (owners) by paying dividends and/or causing the stock price to increase. The more specific concept that planned actions by management and the returns to shareholders should outperform certain bench-marks such as the cost of capital concept. In essence, the ideas that shareholders money should be used to earn a higher return then they could earn themselves by investing in risk free bonds.

Financial economists have done substantial work within the optimal contracting model in an effort to understand executive compensation practices; recent survey of this work include that to some researchers working within the optimal contracting model, the main flaw with existing practices seems to be that, due to political limitations on how generously executives can be treated, compensation schemes are not sufficiently high-powered.

THE MANAGERIAL POWERS HAVE AN IMPORTANT INFLUENCE ON THE DESIGN OF COMPENSATION ARRANGEMENTS AND MANAGERS’ INFLUENCE OVER THEIR OWN PAY MIGHT IMPOSE SUBSTANTIAL COST ON THE SHAREHOLDERS-BEYOND THE EXCESS PAY EXECUTIVES RECEIVE-BY DILUTING AND DISTORTING MANAGERS’ INCENTIVES AND THEREBY HURTING CORPORATE PERFORMANCE.

Managerial power approach refers to studying executive compensation focuses on a different link between the agency problem and executive compensation. Under this approach, executive compensation is viewed not only as a potential instrument for addressing the agency problem but also as a part of the agency problem itself. The managerial powers have an important influence on the design of compensation arrangements and managers’ influence over their own pay might impose substantial cost on the shareholders-beyond the excess pay executives receive-by diluting and distorting managers’ incentives and thereby hurting corporate performance.

Narrow SWOT

Strength

Sixth largest holding company in the USA: With headquarters in Chicago, Bank One is the sixth largest bank holding company in the United States, with assets worth over $260 billion. The bank has 74,000 employees at 2,000 branches in 14states. The bank is a leading provider of lending, treasury management, and capital markets products to Middle Market businesses and corporations. The retail bank serves over 7.2 million households.

The third largest credit card issuer: City National offered the first Visa credit card outside of California in 1966. It also created the first drive-up bank, and was one of the first banks to use ATMs. Eventually, McCoy formed a holding company called First Bank Group of Ohio, which became Banc One in 1979. As interstate barriers to banking fell, the bank moved into Indiana, Kentucky, Michigan, and Wisconsin.

Weaknesses:

Are constraints that hinder movements in certain directions.

PREVIOUSLY THE EMPLOYEES OF BANK ONE HAD LESS AUTHORITY AND RESPONSIBILITY TO THEIR WORK: Basically the input made into output by the lower and middle level workers. So they can find the problems and solve the problems. They actually know what the things that should be implemented are effective. They can figure out all the problems. No one had much authority.
So they didn’t take their responsibility to solve the problems. That’s why the Bank One loses a lot. Because of decentralization there is a dissatisfaction among employees .If it is present among employees, it is not possible for them to work hard, efficiently or effectively.

Opportunities

Primarily arise from the external environment, and refer to the chances of gaining competitive advantages.

More chance to make profit because of merging and different business line: Bank One has merged and acquired many other financial institutions as a result they can diversify their business and increase their profitability. These merging also helped the bank to increase its geographical areas for its branches. John B. McCoy, third generation of the banking family, became CEO in 1984. During his fifteen years at the helm, he acquired over 100 banks in the Midwest. He also bought over twenty failed banks and expanded into Texas in 1989. Two years later, the bank moved into Illinois. After that, it entered Arizona and Utah, mostly through stock-swap acquisitions. Its first international venture came with a development alliance with Banko Nacional de Mexico in 1992. In 1996, Bank One purchased Premier Bankorp, the number three bank in Louisiana. A year later, it added Liberty Bankorp, based in Oklahoma City.

Bank One was formed after a $29 billion merger in 1998 between Bank One of Columbus, OH and First Chicago NBD. Bank One had a large retail operation located primarily in the Midwest and Southwest. In contrast, First Chicago NBD’s strength lay in its long history of corporate lending to medium-sized manufacturers.

Bank One’s Commercial line of business operated in fourteen states in four regions: the West, South, Midwest, and East. The South region included Louisiana, Oklahoma, and Texas; while the West covered Arizona, Colorado, and Utah. The Midwest consisted of Illinois, Indiana, and Wisconsin, and the Eastern region covered Kentucky, Michigan, and Ohio.

The external uncontrollable variables that can create problems on organizational performances pose as Threats to business firms.

Many competitors against Bank One: Bank One had many different competitors, depending on the market. The competitors of Bank One in the Southern region’s Commercial line of business varied according to the market. For example, the competitors in Louisiana were local banks such as Whitney National Bank and Hibernia. In Dallas, the competitors were Chase, Bank of America, Wells Fargo, and Comerica. In Oklahoma, major competitors included Bank of America, Bank of Oklahoma, and Bank First. These were big companies in America which provides excellent service to the customers and can compete with the Bank one.

HUMAN RESOURCE ISSUES:

The HR department is the most essential department for any given organization. The human resources in other word employees are the key elements of any organization for any success that any organization wants to achieve. This is why if any organization is to function properly and look for the efficiency at the highest level, there is no alternative of establishing the HR department. Moreover, it is the responsibility of the human resource department to best utilize the human resources of the company.

BANK ONE:

Bank One is the sixth largest bank in the U.S and has been operating in the banking industry since 1998. Jamie Dimon, the 2000’s newly appointed 44-year-old CEO of Bank One was faced with tremendous pressure and needs to improvise the customer services of the firm, his concerns regarding the company’s customer services exceeded than that of stock price.

Customer service was a top priority at Bank One, along with the following,

Financial discipline

System conversions

Building the management team

Integration of systems

Breaking down bureaucracy

Streamlining operations

At Bank One, after the new CEO was appointed, extensive progress was made in about 12-months time regarding building and renewing the infrastructure of customer services. The quality of customer services was appropriately tracked, measured and rewarded. And finally in 2001, the company improved their customer services through better systems and appropriate

THE AFTERMATH OF LAYING-OFF LABOR:

In the early stage after Dimon was appointed as the CEO of Bank One he removed about 8,000 jobs from the firm, cur down on labor and replaced twelve of the top-level HR Executives

To improvise the badly managed and poorly organized bank, Dimon eliminated about 8000 jobs. As a result, a large number of people became unemployed and if the bank does not compensate them well then those employees may bring the bank to court, which may affect the company’s image as well as be expensive for the company to deal with the problem. Even worse the fact that the bank is just simply laying off employees without any payment, which is against the employment law, may result in an order from the court to shut off the entire business.

EMPOWERMENT OF EMPLOYEES AND ITS POSITIVE EFFECTS ON THE FIRM:

It is vital for a firm’s employees to feel that they are being heard and their opinions and views are given equal importance to in the firm. The employees should be given an opportunity to prove themselves; they should be given enough space and room for growth and development. To boost their confidence they might as well participate in the company’s decision making process.

At Bank One there is some amount of delegation of authority. The employees in the field are given more authority and responsibility to work with their full potential. This gave the employees a sense of responsibility. They also promoted a feeling of ownership by giving a grant of $300 in Bank One stock to the 401(k) plans of almost 40,000 of its lower paid employees. As a result employees perform at their best.

Under Dimon’s leadership, employees were encouraged to be more open and passionate about their responsibilities. The employees were allowed to give their own opinions and ask questions if they had any to the management. Dimon made it a practice in the firm for the employees to know about their rights properly and practice them where necessary. Empowerment of the employees resulted in a great deal of employee motivation:

EMPLOYEE MOTIVATION:

At Bank One the employees shared a culture of integrity that is the moral principle, the fact of being honest and true to the organization. Integrity is widely recognized as the hallmark of the new CEO’s management style. The new CEO Jamie Dimon has been able to promote the organizational value by building in the employees a positive attitude towards Bank One. The employees all work but with honesty and complete dedication.

Management of the firm always strived to motivate the employees through:

An attractive profit sharing plan

An appropriate compensation package

Promoting communication

Teamwork

Empowering the employees

At times, people from different level of management or departments will have to work closely in order to resolve certain problems. Such teamwork built a bridge of communication all throughout the firm between the employees and the management.

EMPLOYEE PARTICIPATION IN THE BUREAUCRACY BUSTERS PROGRAM:

To establish a proper management within the firm bureaucracy was immediately needed to be reduced, along with which, employees learnt to be more efficient and responsible too.Soon after Dimon was appointed, Bank One formulated and introduced a Bureaucracy Busters Program. Under this program, employees were to invest money-saving ideas for the firm in an online suggestion box and were paid in return.

Later on, the program was renamed as The Idea Centre and more suggestions were encouraged to be put in order to improve the bank’s internal procedures which resulted in high employee participation and thus helped the management to communicate better with the workforce of the company.The employee participation in the Idea Centre resulted in greater employee dedication and they strived to be as competitive and hard-working and continuously providing with better performance.

THE COMPANY’S NEW PROFIT SHARING PLAN:

The management strived to assign more authority and responsibility to the workforce. Through an appropriate profit sharing plan this was possible to do so. Underpaid employees were given bonus to and most employees within other branches were allowed to share profits if earnings targets were met as instructed.

There are several reasons for linking employee compensation so closely with performance based compensation. First, because competencies must be demonstrable to serve as the basis for pay, they are closely linked to performance in order to be measurable. Second, competency based pay plans must have a performance element in order to motivate employees to demonstrate and develop competencies. Third, the design adds flexibility to employee benefits and increases the opportunities for other types of employee recognition and rewards.

Performance expectations are communicated among all the employees of the organization and evaluated in terms of critical competencies identified in the competency performance guidelines. Once this performance based profit sharing can be established, an employee’s productivity can increase a lot to the benefit of the organization itself.

TEAMWORK AND DECENTRALIZATION OF THE MANAGEMENT:

Integration and decentralization of the management were given prior importance too at Bank One and teamwork across departments and within business lines was encouraged and took place. At time, Corporate Bankers began to join Investment Managers on customer calls, which goes to show integration of authority from all levels was being practiced.

Team work was also efficient in providing the more satisfactory customer care services and solve all the problems more accurately. Mainly consultants work in team to solve customers’ problem and Bank One made a promise to its customers that they would receive individual answers to their requests and inquiries. Teamwork also helps better communication in a firm. It was a smart move for Bank one to encourage employees to

RECOMMENDATION:

After a rigorous analysis of the case from various perspectives, it is now time to recommend activities that will support the efforts of quality enhancement of customer service at Bank One. With a specific focus on Human Resource related issues for this report, here, actually the implications of human resource management in regard to compensation tools and techniques are discussed with more emphasis.

In this recommendations part, the scope of discussion is mostly confined within the ‘What’ and ‘Why’ (reason) parts of mentioned activities that the organization must undertake in order to operate successfully with a supportive human resource base for its customer service. That means, first it will be mentioned ‘what’ are to be done, and ‘why’ those are necessary. Later on, in the subsequent implementation section of the report, it will be discussed elaborately ‘how’ that can be done, along with ‘what else’ will be necessary to make them successful and effective.

However, along with recommendations for additional compensation tools, the intended compensation and reward plans that Bank One authority already planned to initiate is also covered within the plan. In such cases, recommendations are made to enhance their effectiveness.

RESTRUCTURING THE COMPENSATION PACKAGES:

Bank one needs to restructure its compensation packages for employees in order to get better performance. Performance comes first, could be the best strategy for current situation. Salary should be tied with performance. All types of increment and bonuses need to be based on performance. Merit based payment can encourage employees to work more to achieve more. Bank one should make their employees realize the greater benefits of company in order to get their personal benefits. Thus the employees will work hard and sincere to attain their personal goal. As their personal goal is a part of company goal, it would be a two way advantage or benefits.

BASIC CRITERIA OF CREATING COMPENSATION PACKAGE:

According to Patton, Compensation needs to satisfy eight characteristics. Those are given in the flow chart:

· Provident Fund: Provident fund can also be implemented in Bank One.Provident fund (PF) is the collective account of employee’s contribution and employer’s contribution. To be entitled for PF an employee has to work for full time continuous basis for minimum years, for example 7 years. For PF the bank will deduct a certain percentage, for example 15% of the basic salary from each employee and save it to PF account. When an employee is terminated or he retires from Bank One will be bound to pay the amount that are saved from the employee’s salary multiply the time he worked plus the equal amount from Bank One as employer’s contribution plus the current interest rate.
For example if an employee gets Tk.25, 000 basic salary then every month Bank One will deduct 15% of the basic salary means Tk.3750 and save it to PF and at the end of the month the employee will get Tk.21250 as his basic salary. If after 9 years the employee retires or terminated he will get Tk.3750*108(9years*12months) =Tk.405000 as employees contribution plus again Tk.405000 as employer’s contribution plus the present interest rate (suppose it is 10%) on the total amount means (405000+405000)*10%=Tk.81000.

It means he will get Tk.369600 from PF. If the employee leaves only one day before 7 years then he will only receive the employee’s contribution plus the interest rate for deposit. From the PF fund the employee will be able to take loan on the present interest rate. The interest that will earn by Bank One by lending the employee can be distributed among all the employees.

· Gratuity: For gratuity again Bank One can offer one-gratuity, two-gratuity or three-gratuity which are the different types of gratuity. An employee will entitle with gratuity if he works for a certain period of time for example 5 years. The amount of gratuity an employee will receive when he retires or terminated from Bank One will be last basic salary multiplied the number of years the employee worked. For example, if an employee retires after 7 years with a last basic salary of Tk.20000 then for gratuity he will receive (Tk.20000*7=) Tk.140000. For two-gratuity or three-gratuity the employee will get double or triple amount of the gratuity money.
· Medical care: Medical care should be available for all employees. Bank One can appoint a doctor permanently to check up the employees’ health on regular basis. Bank One can also facilitate a policy that after every three months each employee has to go through drug and alcohol test, which may keep away the employees from taking drugs and alcohol.
· Life Insurance: Bank one can provide life insurance facility for the managerial and executive people as well as the customer service

consultants. Bank One can deposit the insurance premium on behalf of the employees from their salaries.

· House-rent: It is an allowance for the employees. Bank One can provide a certain percentage of the house rent. For example, if the house-rent is Tk.20, 000 Bank One may provide 35% of the house-rent as allowance.
· Leaves: Bank one can offer different types of paid leaves to the employees. An employee can get 15 days casual leave in a year but not more than 3days continuously. If an employee will not be able to add unused casual leaves with the next year. Bank One should provide minimum 3 months maternity leave. The employee should have the right to choose when she wants to get the maternity leave is it before or after the delivery. Bank One should give annual leave for one day after every 11 days-generally this is the rule. If an employee does not use the leave then he can adjust with next year or he will be able to convert the leave into money. For example if an employee does not use 8 days annual leave his leave can be cashed by dividing the basic salary by 30 days and multiply by 8 days. For sick leave bank one can provide 100% treatment fees if it is a short time treatment but for the long term treatment an employee can negotiate with Bank One and can get a percentage of the total cost.
PURPOSE OF BENEFITS:

To promote better employer-employee relations
To promote employee loyalty to the company
To promote employee welfare
To meet legal requirements

CONSIDERATIONS WHILE MAKING COMPENSATION PLAN:

THE BASIC SALARY SHOULD BE ONLY A NOMINAL PART OF REWARD PLAN

The basic salary should only be a nominal part of the compensation package. Thus, if base salary is high at present, they can be lowered. This will help to reduce the fixed HR support cost over the longer period. That savings will give way to introduce other short term incentives and bonus payments. Also, this will help to reduce the possibility for basic salary to work as the sole instrument for employee retention without directly motivating performance.

INCREMENT SHOULD BE BASED ON MERIT PAY

Along with the reduction in basic salary, the rate of increment in basic salary over time should be based on merit pay. After completing certain performance goals or completing some specific experience point or extraordinary contribution as well as completion of any training program can result into salary increase. However, in some cases, it can only amount to a onetime payment of a fixed sum.

The increment should not largely depend upon Cost of Living Adjustment (COLA) which is required to neutralize the downsizing pressure on income due to economic inflation. However, specific exception might apply. COLA should be generally avoided because in case of COLA there are chances the basic salary of an employee becomes overvalued in comparison with his/her individual contribution.

INTRODUCE GOAL ACHIEVEMENT INCENTIVE/BONUS:

To compensate for reduction in basic salary and increment, and at the same time, to encourage enhancement and timeliness of performance, such payment provisions for payment should be introduced that will become due upon achievement of assigned goals. However, it must be ensured that this payment method is applied upon those who are given specific objectives to attain from time to time within short periods.

INTRODUCE TEAMWORK REWARD AS GROUP INCENTIVES:

In most cases, banking tasks require teamwork. Therefore, employees must be motivated to practice team cohesion while working in projects. Teamwork rewards may effectively come into play to build and maintain team cohesion among them.

LONG TERM EMPLOYEE LOYALTY REWARD:

Employees who continue their job at Bank One for longer periods along with demonstrating desired performance level will receive such reward. This will help to boost their loyalty towards their employers.

FLEXI TIME:

Some consultancy jobs do not necessary need full time attendance from employees. Employees in such positions can be offered with flexi time benefits. However, they should be present in work for a core time period on workdays. This will help employees to schedule their personal involvements during off times. On the other hand, if more people are present in workplace at the same time, more utilities and resource are used by idle employees which may involve huge utilities expense without bringing in any significant return. Therefore, sorting their active times in more organized manner can help cut cost on such expenses on the part of the employers.

COMPENSATORY TIME OFF AND BONUS LEAVES:

Employees may be rewarded with compensatory time off and bonus leaves while at a particular time their contribution is not required by the firm. This will help them perceive that their employers hold a high level of empathy for them, which, in turn, will motivate them to a great extent. Also, banking professionals, especially consultants, possess such skill that they can utilize to work on part time basis in other organization during their off time and earn a good deal of money. This will offer them additional satisfaction from their jobs.

JOB SHARING AND TIME SHARING:

These can be another technique to accommodate employees with less supporting resources and at a lower cost. These arrangements will mostly work on the concept of part time job. These provisions will even encourage some workers to work as part time workers as support staff. This provision will attract competent employees who prefer flexibility in job arrangement, who otherwise would not join full time jobs at the bank.

ENHANCE THE EMPOWERMENT OF THE SERVICE CONSULTANTS:

To continue building quality into customer service, Bank One can improve the efficiency with the empowerment of service consultants. The Bank needs to raise the restrictions on transactions that how much or what amount a consultant can complete. Bank One should increase the autonomy of the consultants in problem solving. Consequently, the consultants will be able to fix the customer’s problems as quick as possible with proper consideration.

SERVICE CONSULTANTS SHOULD PRESENT THEMSELVES MORE PROFESSIONALLY:

Many organization give less importance to customer service consultants, in fact they are the most important link between the customer and the organization. To improve the customer service, at Bank One service consultants need to be viewed more as professional position like other employees of the bank. Service consultants should dress formally rather than casually, to differentiate them by their performance not by their dress-up. In today’s world, first impression is the most crucial thing that counts most.

TECHNOLOGY SHOULD IMPROVE TO SUPPORT THE CUSTOMERS MOST:

Bank One requires technology that is specific to customer service. They can execute front-end system, which will help them to access information of any customer without go through the different program applications of different branches. The newly developed technologies about this segment should adopt by the bank. The bank should provide the technology to the service consultants the ability to do the call tracking which would allow them to see the overall information of a particular customer and how many times the customer had called up the consultants. The bank can improve the customer service by adopting the new technology, which will help the consultants in doing their job.

The ‘quality’ culture will help Bank One in various ways. It will help to increase the morale of the employees and give them a strong feeling of belongingness, which will thereby in course of time become their collective identity. It is strongly believed that this, in turn, will encourage employees to put forth higher commitment to the quality of their work and due attachment to the company. Also, the cultural bonding will tie the employees together. It will lead them to hold more attentive attitude towards their quality of work of their co-workers. Thus, a collective accountability can be established.

Again, a culture of openness and proper communication will accelerate the free flow of information, knowledge and experience. Also, delegation of authority and decentralization should work up to their fullest extent.

EFFICIENT COMMUNICATION AND FREE FLOW OF INFORMATION:

The free flow of information and ideas among individuals and between the management and the employees is really necessary for an organization to work effectively and efficiently as well to progress and succeed in this competitive age of the business arena; especially it is essential in banking. It is crucial for TQM.

Without communication and mutual support among colleagues it is impossible for TQM to work properly. In that that the dream for quality will only remain in blueprints and will never turn out into reality. Reward and recognition for successful ideas and for facilitating smooth communication can be good means to encourage the employees to share their views and ideas with the management.

DECENTRALIZATION AND NEUTRALIZING STATUS QUO CONFLICTS:

Decentralization and delegation of authority is also needed to enable accountability and responsibility among the employees for TQM to be effective. This kind of empowerment is also needed to implement contingent work procedures and ideas, which can increase work efficiency, save cost and time.

Necessary power and authority should be delegated to the supervisors so that they can take important and urgent decisions without the feedback from the management on their own responsibility for which they will remain accountable. It can minimize the downtime, increase quality and productivity, and thus help to save cost.

Also, when people from different level of management will work together with free flow of communication, an invisible status quo will be maintained. Supervisors will automatically be held accountable for their juniors’ work and mistakes. Again, senior-junior relationship will work for reducing the status quo.

Along with previously mentioned considerations, the following compensation methods should be followed as basic guideline of the overall compensation planning. They are discussed

RECRUITING THE BEST EMPLOYEES BY FAIR RECRUITING PROCEDURE:

Bank One should follow a systematic recruitment process for hiring new employees. The bank should follow the following steps-

First, do employee planning and forecasting to determine the duties of the positions to fill. Then prepare job description and job specification.

Then build a pool of qualified candidates for jobs by recruiting internal and external candidates.

Fill out application forms and undergo initial screening process. For initial screening process, the bank can assign recruiting agencies or they can do it by their own HR department.

Utilize various types of selection test, such as, written test, background record checking, medical check-up etc.

Send the selected candidates after screening to the supervisor who is responsible for the job.

Arrange one or more interviews to find out the right person.

After selecting the right person create a record folder for the newly hired person and entry his educational background, job experience, background record, personal information etc.

INTRODUCING SIX SIGMA TO EVALUATE CUSTOMER SERVICE:

Six Sigma was originally developed as a set of practices designed to improve manufacturing processes and eliminate defects, but its application was subsequently extended to other types of business processes as well. In Six Sigma, a defect is defined as anything that could lead to customer dissatisfaction.

The particulars of the methodology were first formulated by Bill Smith at Motorola in 1986. Six Sigma was heavily inspired by six preceding decades of quality improvement methodologies such as quality control, TQM, and Zero Defects, based on the work of pioneers such as Shewhart, Deming, Juran, Ishikawa, Taguchi and others.

Like its predecessors, Six Sigma asserts that –

Continuous efforts to achieve stable and predictable process results (i.e. reduce process variation) are of vital importance to business success.
Manufacturing and business processes have characteristics that can be measured, analyzed, improved and controlled.
Achieving sustained quality improvement requires commitment from the entire organization, particularly from top-level management.
Features that set Six Sigma apart from previous quality improvement initiatives include –

A clear focus on achieving measurable and quantifiable financial returns from any Six Sigma project.
An increased emphasis on strong and passionate management leadership and support.
A special infrastructure of “Champions,” “Master Black Belts,” “Black Belts,” etc. to lead and implement the Six Sigma approach.
A clear commitment to making decisions on the basis of verifiable data, rather than assumptions and guesswork.

SIGMA LEVELS:

Taking the 1.5 sigma shift into account, short-term sigma levels correspond to the following long-term DPMO values (one-sided):

One Sigma = 690,000 DPMO = 31% efficiency

Two Sigma = 308,000 DPMO = 69.2% efficiency

Three Sigma = 66,800 DPMO = 93.32% efficiency

Four Sigma = 6,210 DPMO = 99.379% efficiency

Five Sigma = 230 DPMO = 99.977% efficiency

Six Sigma = 3.4 DPMO = 99.9997% efficiency

This is actually a critical calculation which needs to be trained the employees. Sigma specialists can take an important role while implementing six sigma strategies.

IMPLEMENTATION

RECRUITMENT PROCESS

Bank One should follow a systematic recruitment process for hiring new employees. The bank should follow the following steps-

First, do employee planning and forecasting to determine the duties of the positions to fill. Then prepare job description and job specification.

Then build a pool of qualified candidates for jobs by recruiting internal and external candidates.

Fill out application forms and undergo initial screening process. For initial screening process, the bank can assign recruiting agencies or they can do it by their own HR department.

Utilize various types of selection test, such as, written test, background record checking, medical check-up etc.

Send the selected candidates after screening to the supervisor who is responsible for the job.

Arrange one or more interviews to find out the right person.

After selecting the right person create a record folder for the newly hired person and entry his educational background, job experience, background record, personal information etc.

By following these steps, Bank One can find appropriate person for any position in any states for any branch.

For forecasting, the supply of inside candidates, qualifications inventories can be used. Qualifications inventories is the manual or computerized systematic records listing employees’ education, career and development interests, language, special skills, and so on to be used in forecasting inside candidates for promotion.

For internal recruiting Bank One can also follow personal replacement chart or position replacement card type of instruments. Personal replacement chart shows the present performance and promo ability of the employees for the most important positions. Position replacement card prepared for every position of the company to show possible placements of candidates and their qualifications.

By all these steps, they can get a potential workforce from inside the organization. It is always better to recruit people from inside the organization. The current employees are aware of the organizational goals and objectives. They already know the rules and regulation and working systems of the company. They seem to be more loyal than newly hired employee is. Morale and performance enhance with the rewards. Employees are less likely to leave. Orientation and training need is less than the external recruiting. The disadvantage of internal recruiting is groups of employees might not be satisfied when candidates chosen from their own groups, jealousy may occur.

The supply of external candidates is forecast by the general economic conditions, local market conditions, and occupational market conditions. General economic conditions reflect the unemployment rate of the country. Local market conditions reflect the local labor market. Occupational market conditions show the demand and supply for a particular occupation; for example, demand and supply for BBA graduates.

The sources of external recruiting are advertisement on TV, online, newspapers etc, employment agencies, executive recruiters, college recruiting, referrals and walk-ins etc.

The advantages of external recruiting are variety of new skills, good for economy. If the bank goes for external recruiting they will get new skilled people who are aware of the new business concepts. Though external recruiting is expensive but it is good for the economy as it lowers the unemployment rate. A survey shows that shows that external recruiting cost about $13,000 where as internal recruiting cost much less than that.

The bank should not go for the temporary employees because they may not follow the working system as well as the morals of the bank. Business secretes may be disclosed to the competitors if part-time employees are hired. So, the bank should always go for stable employees.

Bank One should recruit either once in a year or twice in a year. The recruiting process should not be done frequently because it is very expensive. If all the employees work with full dedication for the recruiting process then it’s sure that the bank will get the right person for the right job.

TRAINING AND ORIENTATION PROGRAM:

Bank One should arrange training and development program for the whole workforce in the modern training process to keep improving their customer service quality.

Orientation is the first basic program that the new employees’ had to go through. In orientation the new employees get introduced with the goals, objectives, values, morals, missions and the basic background of the bank.

Training is the process of teaching new employees the basic skills they need to perform their job. Training is important because this is the basic program through which the management can make the employees work their way and not their own way. There are five steps of training process.

INSTRUCTIONAL DESIGN:

In instruction design the objectives of the training programs set up. In this step all the materials and required facilities are organize to provide the employees.

VALIDATION:

Before implementing any training program it’s validity must be checked through the respective authority, whether the training program is going to be successful or not.

IMPLEMENTATION:

After checking the validity of training program the training program must be implemented in reasonable time.

EVALUATION AND FOLLOW UP:

Evaluation of the training process can be done in the following ways:

REACTION — Response of the employees’ immediate reaction to the training

LEARNING — Human resource department has to identify what the employees had learned.

BEHAVIOUR — HR mangers have to measure the degree to which learners apply new skills and knowledge to their job.

RESULTS — The improvement in performance after the training should be measured.

Besides all these, Bank One has to settle on whether the current employees need any type of training or not. Those training can be both on the job and off the job training

On the job training is about training a person to learn a job while working on it.

On the other hand, off the job training is the training outside the office but about how to improve the performance.

CUSTOMER SERVICE TRAINING:

Customer service training program will help the employees of Bank One to improve the customer service. Customer service training trains about how to deal with and solve problems for unhappy customers. This training should also provide along with the standard training program.

DIVERSITY TRAINING:

With an increasingly diversified workforce, many firms identify the need of diversity training. Diversity training is required not only for the new employees but also for the employers. Diversity training aims to create better cross-cultural sensitivity, with the aim of fostering more harmonious working relationships among a firm’s employees. According to one survey of HR directors, diversity based training programs include; improving interpersonal skills, understanding and valuing cultural differences, improving technical skills, socializing employees into the corporate culture; reducing stress, introducing new workers, improving English proficiency and improving basic bilingual

skills for English-speaking employees. Diversity training should be given at the beginning of the financial year.

BALANCE AND MAINTAIN INTERNAL AND EXTERNAL EQUITY

The sense of equity is the balancing factor between contribution and compensation. If people find inequality between their compensation and performance, there are scopes for dissatisfaction. If they find inequity between their rewards and others’ for performing the same job, then again, there are scopes for conflict. Therefore, it is necessary to maintain a steady level of equity among the internal factors already mentioned.

On the other hand, if an organization pays substantially lower than industry average for a specific job, disloyalty may arise from the sense of external equity and employee turnover rate might soar. Therefore, focus should not only be on internal but also on external equity.

At Bank One, jobs should be ranked against relevant benchmark jobs both internally and externally. The performance standards should also be in place to benchmark performances. And after all, the bank employees must be motivated enough to achieve their benchmarked performance at least. The motivation process has to work on continuous basis rather than discrete. The sense of equity is such a motivating factor. As in the sense, when people get ‘more’ for doing ‘more’ they start believing that the more they give (contribution) the more they get (reward).

Salary Survey: In order to evaluate external equity regular salary survey for similar jobs must be conducted in regular intervals, within the commercial banking industry. Such survey can be passive secondary survey, moderate telephone and mail survey, or rigorous interactive survey depending on formal, standard and structured questionnaires or interviews. The feasibility of the involvement levels to be applied in such surveys will depend on budget constraints. As the survey is complete, redesign and modify the existing salary structure

PERFORMANCE APPRAISAL:

This is foundation for establishing internal equity. Within the organizational setup of Bank One, regular and formal (structured) appraisal must be carried out. The feedback should be also made available as quickly as possible. Feedback from employees must be collected to determine their level of job satisfaction, loyalty and motivation. Also, the appraisal process must be timely and accurate and free from bias or unfair favoritism. And the feedback should be in the form of corresponding reward as well as suggestions for corrective actions.

IMPLEMENT TQM CULTURE IN ALL ASPECTS OF COMMERCIAL CUSTOMER SERVICE AT BANK ONE

What is Total Quality Management?

Total Quality Management is a management approach that originated in the 1950’s and has steadily become more popular since the early 1980’s. Total Quality is a description of the culture, attitude and organization of a company that strives to provide customers with products and services that satisfy their needs. The culture requires quality in all aspects of the company’s operations, with processes being done right the first time and defects and waste eradicated from operations.

Total Quality Management (TQM) is a comprehensive and structured approach to organizational management that seeks to improve the quality of products and/or services through ongoing refinements in response to continuous feedback. TQM requirements may be defined separately for a particular organization or may be in adherence to established standards, such as the International Organization for Standardization’s ISO 9000 series.

TQM can be applied to any type of organization; it originated in the manufacturing sector and has since been adapted for use in almost every type of organization where quality of product or service is the core competence for attracting customer and the only means of business success, which is the case for Bank One. Indeed, as a current focus, TQM is based on quality management from the customer’s point of view.

TQM processes are divided into four sequential categories: plan, do, check, and act (the PDCA cycle):

In the planning phase, people define the problem to be addressed, collect relevant data, and ascertain the problem’s root cause.

In the doing phase, people develop and implement a solution, and decide upon a measurement to gauge its effectiveness.

In the checking phase, people confirm the results through before-and-after data comparison;

In the acting phase, people document their results, inform others about process changes, and make recommendations for the problem to be addressed in the next PDCA cycle.

To be successful implementing TQM, management as well as employees at Bank One will have to concentrate on eight key elements of TQM:

Ethics
Integrity
Trust
Training
Teamwork
Leadership
Recognition
Communication

The detailed description of these eight elements and their implication at Bank One are given next –

TQM is built on a foundation of ethics, integrity and trust. It fosters openness, fairness and sincerity and allows involvement by everyone. This is the key to unlocking the ultimate potential of TQM. These three elements move together, however, each element offers something different to the TQM concept.

1.Ethics

Ethics is the discipline concerned with good and bad in any situation. It is a two-faceted subject represented by organizational and individual ethics. At Bank One, management needs to focus more on establishing ‘organizational ethics’. They need to establish the business code of ethics that outlines guidelines that all employees of the bank, and especially direct customer service representatives, are to adhere to in the performance of their work. Individual ethics, however, include personal rights or wrongs and should be left out upon on the part of employees themselves.

2.Integrity

Integrity implies honesty, morals, values, fairness, and adherence to the facts and sincerity. The characteristic is what customers (both internal and external) expect and deserve to receive from the banking operations. People see the opposite of integrity as duplicity. TQM will not work in an atmosphere of duplicity.

3.Trust

Trust is a by-product of integrity and ethical conduct. Without trust, the framework of TQM cannot be built. Trust fosters full participation of all members in team work. Bank One management must carefully establish trust in the form of employee empowerment that encourages pride ownership as well as commitment.

Trust will allow decision making at appropriate level of Bank One’s organizational hierarchy, fosters individual risk-taking for continuous improvement and helps to ensure that measurements focus on improvement of process and are not used to contend people. Trust is essential to ensure customer satisfaction. So, trust builds the cooperative environment essential for TQM.

1.Training

Training is very important for employees to be highly productive. Supervisors are solely responsible for implementing TQM within their departments in order to suggested alignment strategy to succeed and prosper, and teaching their employees the philosophies of TQM.

Training that employees will require at Bank One to deal with TQM are interpersonal skills, the ability to function within teams, problem solving, decision making, job management performance analysis and improvement, business economics and technical skills. During the creation and formation of TQM, employees are trained so that they can become effective employees for the company.

5.Teamwork

To become successful in business, teamwork is also a key element of TQM. With the use of teams, the business will receive quicker and better solutions to problems. Teams also provide more permanent improvements in processes and operations. In teams, people feel more comfortable bringing up problems that may occur, and can get help from other team members to find a solution and put into place. There are mainly three types of teams that TQM process at need to adopt in its organizational culture of operations:

A. Quality Improvement Teams or Excellence Teams (QITS)

These are temporary teams with the purpose of dealing with specific problems that often re-occur. These teams are set up for period of three to twelve months.

B. Problem Solving Teams (PSTs)

These are temporary teams to solve certain problems and also to identify and overcome causes of problems. They generally last from one week to three months.

C. Natural Work Teams (NWTs)

These teams consist of small groups of competent and multiskilled employees who share tasks and responsibilities. These teams use concepts such as employee involvement teams, self-managing teams and quality circles. These teams generally work for one to two hours a week.

6.Leadership

It is possibly the most important element of TQM Bank One management need to focus on carefully to make the alignment strategy a success. Leadership in TQM will require managers to provide an inspiring vision, make strategic directions that are understood by all and to instill values that guide their subordinates.

For TQM to be successful at Bank One, the supervisors must be committed in leading their employees. The supervisors must understand TQM, believe in it and then demonstrate their belief and commitment through their daily practices of TQM. They are the people who will make sure that strategies, philosophies, values and goals are transmitted down through out the organization to provide focus, clarity and direction.

A key point is that TQM has to be originated among and led by top management of Bank One. Commitment and personal involvement is required from top management in creating and deploying clear quality values and goals consistent with the objectives of the company and in creating and deploying well defined systems, methods and performance measures for achieving those goals.

7. Communication

Communication is very important for TQM to be successful. Communication helps to bind everything together. Starting from foundation to roof of the TQM house at Bank One, everything will be bound by strong mortar of communication. It acts as a vital link between all elements of TQM.

Communication means a common understanding of ideas between the sender and the receiver. The success of TQM demands communication with and among all the organization members, suppliers and customers. Supervisors must keep open airways where employees can send and receive information about the TQM process. Communication coupled with the sharing of correct information is vital. For communication to be credible the message must be clear and receiver must interpret in the way the sender intended.

There are different ways of communication such as:

A. Downward communication

This is the most dominant form of communication in an organization. Presentations and discussions basically do it. By this the supervisors need to make their subordinates clear about TQM.

B. Upward communication

By this communication process the lower level of employees are able to provide suggestions to upper management of the effects of TQM. The more employees will provide insight and constructive criticism, the more vibrant the entire TQM process will be. Also, supervisors must listen effectively to correct the situation that comes about through the use of TQM. This forms a level of trust between supervisors and employees. This is also similar to empowering communication, where supervisors keep open ears and listen to others.

C. Sideways communication

This type of communication is important because it breaks down barriers between departments. It also allows dealing with customers in a more professional manner.

D. Inward and Outward communication

This is the communication process that is generated by the customers toward the employees (inward), and vice versa (outward). This will help to find out and overcome any existing loopholes in the service system that may give way to any form of customer dissatisfaction

8.Recognition

Recognition is the last and final element in the entire system. It should be provided for both suggestions and achievements for teams as well as individuals. Employees strive to receive recognition for themselves and their teams. Detecting and recognizing contributors is the most important job of a supervisor. As people are recognized, there can be huge changes in self-esteem, productivity, quality and the amount of effort exhorted to the task at hand. Recognition comes in its best form when it is immediately following an action that an employee has performed. Recognition comes in different ways, places and time such as,

Ways: It can be by way of personal letter from top management. Also by award banquets, plaques, trophies etc.
Places: Good performers can be recognized in front of departments, on performance boards and also in front of top management.
Time: Recognition can be given at any time like in staff meeting, annual award banquets, etc.
The Result

It can now be said that these eight elements are key in ensuring the success of TQM in an organization and that the supervisor is a huge part in developing these elements in the work place. Without these elements, the business entities cannot be successful TQM implementers. It is very clear from the above discussion that TQM without involving integrity, ethics and trust would be a great remiss, in fact it would be incomplete. Training is the key by which the organization creates a TQM environment. Leadership and teamwork go hand in hand.

Lack of communication between departments, supervisors and employees create a burden on the whole TQM process. Last but not the least, recognition should be given to people who contributed to the overall completed task. Hence, lead by example, train employees to provide a quality product, create an environment where there is no fear to share knowledge, and give credit where credit is due is the motto of a successful TQM organization.

COMPENSATION PACKAGE

Bank One can offer pensions, provident fund, gratuity, medical care, house rent and life insurance in the job description when they decide to recruit people. Bank One must have to set the policy for these benefits; such as minimum working hours, what percentage of basic salary should be kept for Provident Fund, what type of employees are suitable for life insurance etc.

· Pensions: To avail pensions the employees must have to be in Bank One for a minimum time, for example 10 years. After 10 years if an employee get termination or he retires, Bank One has to give them a certain percentage, for example 20% of the employee’s last basic salary. If the employee dies the pensions will give to his or her family till his or her spouse is alive.
· Provident Fund: Provident fund can also be implemented in Bank One. Provident fund (PF) is the collective account of employee’s contribution and employer’s contribution. To be entitled for PF an employee has to work for full time continuous basis for minimum years, for example 7 years. For PF the bank will deduct a certain percentage, for example 15% of the basic salary from each employee and save it to PF account. When an employee is terminated or he retires from Bank One will be bound to pay the amount that are saved from the employee’s salary multiply the time he worked plus the equal amount from Bank One as employer’s contribution plus the current interest rate.
For example if an employee gets Tk.25, 000 basic salary then every month Bank One will deduct 15% of the basic salary means Tk.3750 and save it to PF and at the end of the month the employee will get Tk.21250 as his basic salary. If after 9 years the employee retires or terminated he will get Tk.3750*108(9years*12months) =Tk.405000 as employees contribution plus again Tk.405000 as employer’s contribution plus the present interest rate (suppose it is 10%) on the total amount means (405000+405000)*10%=Tk.81000.

It means he will get Tk.369600 from PF. If the employee leaves only one day before 7 years then he will only receive the employee’s contribution plus the interest rate for deposit. From the PF fund the employee will be able to take loan on the present interest rate. The interest that will earn by Bank One by lending the employee can be distributed among all the employees.

·Gratuity: For gratuity again Bank One can offer one-gratuity, two-gratuity or three-gratuity which are the different types of gratuity. An employee will entitle with gratuity if he works for a certain period of time for example 5 years. The amount of gratuity an employee will receive when he retires or terminated from Bank One will be last basic salary multiplied the number of years the employee worked. For example, if an employee retires after 7 years with a last basic salary of Tk.20000 then for gratuity he will receive (Tk.20000*7=) Tk.140000. For two-gratuity or three-gratuity the employee will get double or triple amount of the gratuity money.
·Medical care: Medical care should be available for all employees. Bank One can appoint a doctor permanently to check up the employees’ health on regular basis. Bank One can also facilitate a policy that after every three months each employee has to go through drug and alcohol test, which may keep away the employees from taking drugs and alcohol.
· Life Insurance: Bank One can provide life insurance facility for the managerial and executive people as well as the customer service consultants. Bank One can deposit the insurance premium on behalf of the employees from their salaries.
·House-rent: It is an allowance for the employees. Bank One can provide a certain percentage of the house rent. For example, if the house-rent is Tk.20, 000 Bank One may provide 35% of the house-rent as allowance.
·Leaves: Bank One can offer different types of paid leaves to the employees. An employee can get 7 days casual leave in a year but not more than 2 days continuously. If an employee will not be able to add unused casual leaves with the next year. Bank One should provide minimum 3 months maternity leave. The employee should have the right to choose when she wants to get the maternity leave is it before or after the delivery. Bank One should give annual leave for one day after every 11 days-generally this is the rule. If an employee does not use the leave then he can adjust with next year or he will be able to convert the leave into money.
For example if an employee does not use 8 days annual leave his leave can be cashed by dividing the basic salary by 30 days and multiply by 8 days. For sick leave bank One can provide 100% treatment fees if it is a short time treatment but for the long term treatment an employee can negotiate with Bank One and can get a percentage of the total cost.

BENEFITS AND SERVICES

· Councilor: Bank one can have a councilor who will visit the office weekly and will assist the employees to solve their problems regarding personal and professional life.
·Care Centre: Bank one can start up a childcare and an old care centre beside the office to support the employees and they can charge a token amount for that service from the employees. If the childcare centre and old-care centre are beside the office then the employee can work tension freely. They can take their children or old parents with them and can leave them with the centre for the whole day and pick them up at the end of the day.

COMPENSATION OF THE LAID-OFF WORKFORCE

Bank One can compensate the employees whom they are going to lay-off by giving them the next 3 months’ salary along with severance package at one shot during the time of lay-off. Bank can also try to transfer those employees in other departments by giving them the proper training but that policy is not cost saving.

FIXED STANDARD PERFORMANCE TO ACHIEVE THE DESIRED AMOUNT OF SUCCESS

According to Jamie Dimon, desired percentage of success should be decided at the beginning of the year. To achieve the desired amount of success the standard performance level need to be set-up. A performance matrix system should be set up at the very outset; so that the success of each particular effort at improvement can be measured.

TRAINING TO EMPOWER THE SERVICE CONSULTANTS

In the coming years Bank One can empower their service consultants to some extents where they can make decision on their own in serving potential customers, who have been helping them to generate more revenue over the previous years.

They can implement programs such as Worker Involvement program. This can help them to empower the service consultants. This is a program aims to boost organizational effectiveness by getting employees to participate in planning organizing and managing their jobs. An increasing number of firms and organization use work teams and empowerment to improve their effectiveness. They adopt teamwork as a value and then organize work around close-knit work teams empowered to get their job done, which means they have been given the authorization and the ability to do their jobs. Both the teams approach and worker empowerment are components of what many firms call worker involvement programs.

If Bank One wants to empower the employees they must always require extensive training. It is rarely enough to just tell group members that they are empowered to provide the customers with efficient service. Instead extensive training is required to ensure they have the skills to do the job. They can conduct some survey to identify their training needs at Bank One after every six months.

If any kind of training is required it can be provided then, where they can set some training objectives based on the current training needs of the service consultants. They can design the training program that may include lecture, Case study, and role-playing, and instruction to use latest financial soft wares. In case studies they can give the service consultants certain dilemmas relating to real life situations and asked them to solve it.

TRAINING TO DEVELOP PROFESSIONALISM

After the completion of graduation program like an MBA or postgraduate degree from any discipline they learn a lot of theoretical knowledge. They do not get enough knowledge about how to deal with customers in the real situation professionally while they are working in an organization. It is the professionalism of these service providers or consultants that will attract customers towards their organization and hold on to them for longer periods of time. So Bank One could implement such a program that would help make their service consultants more professional towards dealing with customers.

Since they change their products very frequently, as well go for merging frequently. So they need to train their employees on professionalism after every six months. By professionalism Bank One tried to mean that service consultants would distinguish themselves by the way they performed, and not the way they dressed. Bank One could make their service consultants attend a special lecture, and also use audiovisual techniques to let the service consultants have a clearer idea on how to behave with the customers.

TRAINING ON NEW TECHNOLOGY

Bank One has already earned a very good reputation of serving the customers properly. But the use of advance technology will enhance the way they could serve their customers. This type of technology can be used in security inside the bank, which will make the customers feel safe in the bank. They can also promote the use of software that is designed to develop the financial statements of the customers. As Bank One is used to merge with other banks frequently, they must be careful about their technology and should conduct proper training to use them. After every six months they can upgrade their security systems and relevant software like finger or Palm Scanning etc. As all the banking soft ware is developing frequently it will be wise for Bank One to train all the service consultants on the new soft ware.

IMPLEMENTATION OF CUSTOMER SERVICE INDEX:

CSI or customer satisfaction index is the measure of the satisfied customers among all the customers of a certain company. A customer can better say that whether he or she is satisfied or not. To know about the customers are satisfied or not, it’s better to make them answer of some predetermined question which is actually a quantitative market research. By this research a company can come to know how many customers are satisfied and how many are not. Basically those questions not only determine the percentage but also the specific criteria for which customers seem to be dissatisfied.

Many large companies are utilizing this strategy in order to know their customer satisfaction. In this case, as Bank one is losing its customer base because of their customer service, they should determine the reason behind it. Thus they can also through challenge to their customer service agents to overcome the problems. As this process is measurable, employees can feel the fairness of the procedure. Moreover by applying this survey, bank one may also know the position of other competitors.

The main advantages of this index are:

Knowing customer dissatisfaction criteria

Knowing the competitors situation

Measurable and very fair

Individual level improvement can be measured etc.

To implement CSI, first we need to hire a third party market research company who will help Bank One to get the result of market survey. They will conduct such kind of research once in a month. This result would be confidential and only Bank One official can observe and interpret this. This type of task could be done by, Nielsen or any other market research company.

This is really helpful to identify the present situation of the company. It is measurable and this procedure is also very equitable. So the employees can get the right direction of improving their service. Top management should come forward to take such an initiative. This is now high priority for the company. We see in the case that, their stock price is decreasing because of their customer dissatisfaction. So this index will help them out to tress the right problem and its necessary solution.

IMPLEMENTING SIX SIGMA SERVICE STANDARD AT BANK ONE:

Six Sigma is a business management strategy, initially implemented by Motorola that today enjoys widespread application in many sectors of industry.

Six Sigma seeks to improve quality of process outputs by identifying and removing the causes of defects (errors) and variation in manufacturing and business processes. It uses a set of quality management methods, including statistical methods, and creates a special infrastructure of people within the organization (“Black Belts” etc.) who are experts in these methods. Each Six Sigma project carried out within an organization follows a defined sequence of steps and has quantified financial targets (cost reduction or profit increase).

HISTORICAL OVERVIEW:

Six Sigma was originally developed as a set of practices designed to improve manufacturing processes and eliminate defects, but its application was subsequently extended to other types of business processes as well. In Six Sigma, a defect is defined as anything that could lead to customer dissatisfaction.

The particulars of the methodology were first formulated by Bill Smith at Motorola in 1986 Six Sigma was heavily inspired by six preceding decades of quality improvement methodologies such as quality control, TQM, and Zero Defects, based on the work of pioneers such as Shewhart, Deming, Juran, Ishikawa, Taguchi and others.

Like its predecessors, Six Sigma asserts that –

Continuous efforts to achieve stable and predictable process results (i.e. reduce process variation) are of vital importance to business success.
Manufacturing and business processes have characteristics that can be measured, analyzed, improved and controlled.
Achieving sustained quality improvement requires commitment from the entire organization, particularly from top-level management.

Features that set Six Sigma apart from previous quality improvement initiatives include –

A clear focus on achieving measurable and quantifiable financial returns from any Six Sigma project.
An increased emphasis on strong and passionate management leadership and support.
A special infrastructure of “Champions,” “Master Black Belts,” “Black Belts,” etc. to lead and implement the Six Sigma approach.
A clear commitment to making decisions on the basis of verifiable data, rather than assumptions and guesswork.
The term “Six Sigma” is derived from a field of statistics known as process capability studies. Originally, it referred to the ability of manufacturing processes to produce a very high proportion of output within specification. Processes that operate with “six sigma quality” over the short term are assumed to produce long-term defect levels below 3.4 defects per million opportunities (DPMO). Six Sigma’s implicit goal is to improve all processes to that level of quality or better.

Six Sigma is a registered service mark and trademark of Motorola, Inc. Motorola has reported over US$17 billion in savingsfrom Six Sigma as of 2006.

Other early adopters of Six Sigma who achieved well-publicized success include Honeywell (previously known as AlliedSignal) and General Electric, where the method was introduced by Jack Welch. By the late 1990s, about two-thirds of the Fortune 500 organizations had begun Six Sigma initiatives with the aim of reducing costs and improving quality.

In recent years, Six Sigma has sometimes been combined with lean manufacturing to yield a methodology named Lean Six Sigma.

ORIGIN AND MEANING OF THE TERM “SIX SIGMA PROCESS

Graph of the normal distribution, which underlies the statistical assumptions of the Six Sigma model. The Greek letter σ marks the distance on the horizontal axis between the mean, µ, and the curve’s inflection point. The greater this distance is, the greater is the spread of values encountered. For the curve shown in red above, µ = 0 and σ = 1. The other curves illustrate different values of µ and σ.

Sigma (the lower-case Greek letter σ) is used to represent the standard deviation (a measure of variation) of a statistical population. The term “six sigma process” comes from the notion that if one has six standard deviations between the process mean and the nearest specification limit, there will be practically no items that fail to meet specifications. This is based on the calculation method employed in process capability studies.

In a capability study, the number of standard deviations between the process mean and the nearest specification limit is given in sigma units. As process standard deviation goes up, or the mean of the process moves away from the center of the tolerance, fewer standard deviations will fit between the mean and the nearest specification limit, decreasing the sigma number and increasing the likelihood of items outside specification.

ROLE OF THE 1.5 SIGMA SHIFT:

Experience has shown that in the long term, processes usually do not perform as well as they do in the short. As a result, the number of sigmas that will fit between the process mean and the nearest specification limit is likely to drop over time, compared to an initial short-term study. To account for this real-life increase in process variation over time, an empirically-based 1.5 sigma shift is introduced into the calculation. According to this idea, a process that fits six sigmas between the process mean and the nearest specification limit in a short-term study will in the long term only fit 4.5 sigmas – either because the process mean will move over time, or because the long-term standard deviation of the process will be greater than that observed in the short term, or both.

Hence the widely accepted definition of a six sigma process is one that produces 3.4 defective parts per million opportunities (DPMO). This is based on the fact that a process that is normally distributed will have 3.4 parts per million beyond a point that is 4.5 standard deviations above or below the mean (one-sided capability study). So the 3.4 DPMO of a “Six Sigma” process in fact corresponds to 4.5 sigmas, namely 6 sigmas minus the 1.5 sigma shift introduced to account for long-term variation. This is designed to prevent underestimation of the defect levels likely to be encountered in real-life operation.

SIGMA LEVELS

Taking the 1.5 sigma shift into account, short-term sigma levels correspond to the following long-term DPMO values (one-sided):

One Sigma = 690,000 DPMO = 31% efficiency

Two Sigma = 308,000 DPMO = 69.2% efficiency

Three Sigma = 66,800 DPMO = 93.32% efficiency

Four Sigma = 6,210 DPMO = 99.379% efficiency

Five Sigma = 230 DPMO = 99.977% efficiency

Six Sigma = 3.4 DPMO = 99.9997% efficiency

METHODS

Six Sigma has two key methods: DMAIC and DMADV, both inspired by Deming’s Plan-Do-Check-Act Cycle. DMAIC is used to improve an existing business process; DMADV is used to create new product or process designs.

DMAIC

The basic method consists of the following five steps:

Define high-level project goals and the current process.
Measure key aspects of the current process and collect relevant data.
Analyze the data to verify cause-and-effect relationships. Determine what the relationships are, and attempt to ensure that all factors have been considered.
Improve or optimize the process based upon data analysis using techniques like Design of experiments.
Control to ensure that any deviations from target are corrected before they result in defects. Set up pilot runs to establish process capability, move on to production, set up control mechanisms and continuously monitor the process.
DMADV

The basic method consists of the following five steps:

Define design goals that are consistent with customer demands and the enterprise strategy.
Measure and identify CTQs (characteristics that are Critical to Quality), product capabilities, production process capability, and risks.
Analyze to develop and design alternatives, create a high-level design and evaluate design capability to select the best design.
Design details, optimize the design, and plan for design verification. This phase may require simulations.
Verify the design, set up pilot runs, implement the production process and hand it over to the process owners.
DMADV is also known as DFSS, an abbreviation of “Design For Six Sigma”.

IMPLEMENTATION ROLES:

One of the key innovations of Six Sigma is the professionalizing of quality management functions. Prior to Six Sigma, quality management in practice was largely relegated to the production floor and to statisticians in a separate quality department. Six Sigma borrows martial arts ranking terminology to define a hierarchy (and career path) that cuts across all business functions and a promotion path straight into the executive suite.

Six Sigma identifies several key roles for its successful implementation.

¨ Executive Leadership includes the CEO and other members of top management. They are responsible for setting up a vision for Six Sigma implementation. They also empower the other role holders with the freedom and resources to explore new ideas for breakthrough improvements.

¨ Champions are responsible for Six Sigma implementation across the organization in an integrated manner. The Executive Leadership draws them from upper management. Champions also act as mentors to Black Belts.

¨ Master Black Belts, identified by champions, act as in-house coaches on Six Sigma. They devote 100% of their time to Six Sigma. They assist champions and guide Black Belts and Green Belts. Apart from statistical tasks, their time is spent on ensuring consistent application of Six Sigma across various functions and departments.

¨ Black Belts operate under Master Black Belts to apply Six Sigma methodology to specific projects. They devote 100% of their time to Six Sigma. They primarily focus on Six Sigma project execution, whereas Champions and Master Black Belts focus on identifying projects/functions for Six Sigma.

¨ Green Belts are the employees who take up Six Sigma implementation along with their other job responsibilities. They operate under the guidance of Black Belts.

LACK OF ORIGINALITY:

Noted quality expert Joseph M. Juran has described Six Sigma as “a basic version of quality improvement,” stating that “there is nothing new there. It includes what we used to call facilitators. They’ve adopted more flamboyant terms, like belts with different colors. I think that concept has merit to set apart, to create specialists who can be very helpful. Again, that’s not a new idea. The American Society for Quality long ago established certificates, such as for reliability engineers.”

ROLE OF CONSULTANTS:

The use of “Black Belts” as itinerant change agents is controversial as it has created a cottage industry of training and certification. Critics argue there is overselling of Six Sigma by too great a number of consulting firms, many of which claim expertise in Six Sigma when they only have a rudimentary understanding of the tools and techniques involved.

The expansion of the various “Belts” to include “Green Belts,” “Master Black Belts” and “Gold Belts” is commonly seen as a parallel to the various “belt factories” that exist in martial arts.

POTENTIAL NEGATIVE EFFECTS:

A Fortune article stated that “of 58 large companies that have announced Six Sigma programs, 91 percent have trailed the S&P 500 since.” The statement is attributed to “an analysis by Charles Holland of consulting firm Qualpro (which espouses a competing quality-improvement process).” The gist of the article is that Six Sigma is effective at what it is intended to do, but that it is “narrowly designed to fix an existing process” and does not help in “coming up with new products or disruptive technologies.” Many of these claims have been argued as being in error or ill-informed.

A Business Week article says that James McNerney’s introduction of Six Sigma at 3M may have had the effect of stifling creativity. It cites two Wharton School professors who say that Six Sigma leads to incremental innovation at the expense of blue-sky work.

Training Program for the Bank One officials:

Six Sigma Yellow Belt
Three days Training Program. Yellow Belt typically has basic knowledge of Six Sigma, but does not lead projects on his or her own. The person, participates as a core team member on a project.
Six Sigma Green Belt
10 days training Program, followed by an exam. hese are trained Six Sigma professionals who work part time on improvement projects. They also lead process improvement projects.
Six Sigma Black Belt
10 days training Program, followed by an exam. Black belt certified personnel usually train other Six Sigma aspirants and Green Belt holders. Black belts usually take up responsibility as Six Sigma team leads on high impact six sigma projects.
Six Sigma Master Black Belt
An experienced six sigma individual who works on the six sigma strategy and roll out for an organization, and helps in project selection.

Here are some advantage of Implementing Six Sigma in Bank One:

Ensure world class service standard

Keeping promise of customers

Challenging for the customer service employees

Pure Satisfaction of the customers

Sigma standard service affiliation

Increase of stock price

The very best way of benchmarking customer service

INTRODUCTION:

In every country, banks serve a very important role in the development of its economy. It not only provides the opportunity for people to take loan and do some kind of business but also it creates employment for many people in different way. Bank One is the sixth largest bank in the United States. A banks success mainly comes from its customer service. A bank is surely going to loose its reputation if customers are not satisfied with its service. Jamie Dimon took over as Bank One’s Chief Executive Officer in 2000. Seven weeks after that he met with Bank One shareholders. He faced questions and complaints with customer service. Clearly, they had more concern about weak customer service than the share price. They were asking that what he was doing to improve the customer service at Bank One, the sixth largest bank in United States. They forced him to move quickly to solve the problem. He agreed that customer service was his first priority, along with integration of systems, breaking down bureaucracy and streamlining operations with a leaner, meaner bank.

The year 2000, the bank went through a huge transformation in its core infrastructure especially in the field of customer service. This all happened because of the arrival of one person name Jamie Dimon. This charismatic leader took over as Bank One’s Chief Executive Officer in 2000. Seven weeks after that he met with Bank One shareholders. He faced questions and complaints with customer service. The stoke holders made it very clear that, they are more concern about weak customer service than the share price. They had queries about what his views and future plans to improve the customer service at Bank One which is the sixth largest bank in United States. They forced him to move quickly to solve the problem. He agreed that customer service was his first priority, along with integration of systems, breaking down bureaucracy and streamlining operations with a leaner, meaner bank.

Dimon found out that at the beginning of 2000, Midwestern giant Bank One was suffering from customer service problems as well as rocky financial times. To solve those problems he identified four immediate priorities for that bank, they are;

Customer service,
Financial discipline,
System conversion and
Building the management team.

Dimon made considerable progress in building the bank’s core and infrastructure, especially in the customer service department, by the first year. Their process was tracking, measuring and rewarding the quality customer service. Jamie Dimon put much effort into improving its customer service through better systems and appropriate compensation plans.

Dimon utilized his hard work, intelligence, experience and dedication to over come the problems that the bank was facing. He made some major changes in the bank. In that time, he cut expenses by 1.8 billion, which is 16.6 percent of the total expense. In 2001, the bank earned 2.6 billion with a return on equity of 13%, in contrast to the $511 million loss the bank suffered in 2000. The stock price of Bank One leaped 34% to $38.

This is case talks about the contribution made by Dimon in order to change and improve its condition. It talks about how Dimon boosted the customer service with an emphasis on quality and excellence and especially in the field of customer service. This case also examines the customer service of the middle market segment of the commercial banking line of business of Bank One’s southeast region.

ORIGIN OF BANK ONE:

Bank One is considered to be the sixth largest bank holding company in the United States, which has it’s headquarter in Chicago. The bank has assets over $260 billion. It has 2000 branches with 74,000 employees at 14 states. Bank One is serving as a leading provider of lending, treasury management and capital markets products to Middle Market businesses and corporations. The retail bank serves over 2.7 billion households.

STARTING OF ITS JOURNEY:

Commercial National and City National Bank of Commerce of Columbus, Ohio, merged to form City National Bank and Trust, in 1929. Starting the family dynasty, John H McCoy became president in 1935. His son John G McCoy took over for him in 1958. City National Bank hired Phyllis Diller for advertisements purpose, which launched her career and made the bank famous.

BEING THE PIONEER:

In 1964, City National Bank offered the first Visa Credit Card outside of California. This also created the first drive up bank. It has a reputation of being one of the first banks to use ATMs. Afterwards McCoy formed a holding company called the first bank group of Ohio, which became Banc One in 1979. The bank moved into Indiana, Kentucky, Michigan and Wisconsin because of interstate barriers to banking fell.

THE FORMATION OF THE BANK ONE:

In 1984, the third generation of the banking family, John B. McCoy, became the CEO. He acquired over 100 banks in the Midwest during his 15 years at the helm. He also acquired over twenty failed banks and expanded into Texas in 1989 the bank moved to Illinois two years after that. Then it entered to Arizona and Utah, in a stock-swap acquisition process. Its first international venture comes with a development alliance with Banco National De Mexico in 1992. In 1996, Banc One bought Premier Bancorp, which was considered as the number three bank of Louisiana. One year after that, it added Liberty Bancorp, located in Oklahoma City. Banc One became the third largest credit card issuer behind Citicorp and MBNA.

Bank One formed after a $29 billion merger in 1998. The merger was between Banc One of Columbus, OH and the first Chicago NBD. Previously Banc One had a large retail operation located primarily in the Midwest and southwest. On the other hand, first Chicago NBD has a strong reputation in its history of corporate lending to medium-size manufacturer. So the combined Bank One was 40% owned by first Chicago stockholders and 60% owned by Banc one. The first Chicago NBD had almost all their business in Chicago and Detroit.

ARISE OF CONFLICTS:

McCoy usually let the local manager stay on and continue running the bank at the way they were doing in the past he preferred to avoided centralizing the management. After the merger of Banc One and First Chicago NBD merged, he though that it would be a merger of equals. So, he decided to the banks headquarter in Chicago.

There is no merger without conflicts. Most of the merger and acquisition do not work for some internal reasons. And Bank One did not have a different story. From the beginning there was battled over who is going to manage the business and which side is going to get the resources, retail or the corporate. Both banks resulted from multiple mergers in the past. Therefore, the regional practices prevailed. In order to grow revenue quickly, the bank took on two many risky loans to large corporation. Then the stock lost half of its value in two years.

The bank was facing problems in some of the service they provided, like credit card option, Credit card facility that Bank One bought for $8 billion in 1997. After the merger, the First USA abused its customers by increasing rates from 4.5% to 19.9%; if they had paid late within six months. Subsequently, a large number of customers left the bank.

ARRIVAL OF JAMIE DIMON:

Jamie Dimon took over as the CEO at the Bank One in the year 2000. He had a mention worthy experience. Dimon came to Bank One after serving as president of City group Inc., and Chairman and co-CEO of Salomon Smith Barney Holdings Inc. Dimon was a tough, loud, charismatic New Yorker who was the achiever. People knew him as a manic, whirling dervish who was into everything. His hands-on style shook up the Staid Middle Western bank and made things happen.

When he came to Bank One he did not have a favorable condition to work. He was introduced to a badly managed, poorly organized bank, and energetically set to work to turn the bank around. He had to make lots of afford to make a change in the organization. The first thing he did was buy $2million shares of Bank One stock, investing $56M, half of his personal fortune. He wanted to take the risk of leading the bank with his own money on the line.

THE CHANGES MADE BY DIMON:

Dimon wanted to give the company a new and strong shape. He eliminated about 8000 jobs in the first year, cutting the workforce to 75,800. He also scaled back an auto-leasing unit. Then he closed the Wingspan, which was the first online bank launched two years previously. The venture cost the bank between $100 and 150 million by only the first year. After that, Dimon replaced twelve of the top thirteen executive managers at the bank. To enhance the finance department he hired former Citigroup Chief Financial Officer (CFO) Heidi Miller to take on the same job at Bank One. In other words, we can say that, Dimon was trying to build an efficient workforce, which can work efficiently under his leadership.

After developing a very good workforce Bank One concentrated to develop it’s marketing strategy and customer service. They got the result of their effort very soon. Many First USA credit card customers were getting back. In 2001, new managers got rid of about seven million inactive accounts at First USA and cut the number of new accounts that were opened (Weber and Popper, 2001). Attrition declined from a dismal 20% to about 10%, the industry average. Earnings of the company, which was hovered around zero in the year 2000, reached $946 million in 2001. Bank One’s management was not dumb enough to stay satisfied with this success. Therefore, to expand their business, the company bought Wachovia’s consumer credit card portfolio, which added about 2.8 million customers.

THE WORSE NIGHTMARE:

One of the greatest nightmares that Dimon had was the computer system which was supporting the banking system in all the branches. There was the twisted mix of computer systems left over from dozens of mergers with regional banks. The bank had to blend seven deposit system and work hard to avoid service problems that could frustrate customers to the point of leaving.

Bank One’s goal was for customers to receive services seamlessly and efficiently, no matter where they were and their banking needs. Dimon decide to bring the diverse system into one platform. After a long-term process, the bank underwent conversions to one unified system, State by state. The process was so vigorous that many employees at the organization thought that it would be next to impossible. However, Dimon was determined. He stated:

“Unless the computer talks to each other, you can’t do acquisition. You can’t build a great bank.”

THE EFFECT OF RECESSION:

In banking sector the biggest threat is recession. Recession is something unavoidable in every business. So, Dimon wanted a worst case scenario planning after analyzing the major weaknesses of Bank One. This is the state of the economy which cannot be controlled by any bank. The success of the bank highly depends on the proper assessment and calculation of recession. In order to face the problem of recession Dimon wanted a full proof plan which would be able to safeguard the bank even in the worst case scenario.

Dimon wanted this plan to be built the plan to be made after the major weaknesses of Bank One. According to him,

“You don’t run a business hoping you don’t have a recession.”

Under Dimon’s leadership bank assessed the profitability of each loan on its books. John E. Neal, the domestic corporate banking chief, reviewed a list of about 1800 borrowers and gave warning to those whose loans might not be renewed. Many of them, which considered as cheap loan, were losing the bank money. The bank offered those commercial customers the opportunities to buy other products such as asset management, treasury services, derivatives and bond writing from Bank One, or they can find another bank. In this process, those customers became profitable or potential for the bank or they left without causing the bank any more losses.

STORY OF JAMIE DIMON:

Dimon was a tough, loud, charismatic New Yorker who was the achiever, a manic, whirling dervish who was into everything. He had mentioned worthy educational as well as work experiences. He graduated from Harvard Business School and began his career in 1982. He began his career by working for Sandy Weill, who was his father’s boss at Shearson Heidon Stone. Weill sold his brokerage firm to the American Express and later became president of Amex. After a conflict with CEO James Robinson, Weill left the company withhis protégé, Dimon.After that, Dimon worked with Weill for a long period. All the time he was learning many types of business strategy from Weill. In 1998, Travelers merged with Citicorp and became Citigroup, the largest global financial services organization. Nevertheless, the two leaders had a falling out and his mentor Weill threw out Dimon. By that time, Dimon was well experienced about the strategies of saving a troubled company. He applied all his knowledge and experience in Bank One.

After that Weill took over Commercial Credit in Baltimore, an Insurance company. Here most of the management team left their jobs because they hated bureaucracy. They were nonconformists who wanted to do things differently. The family-style atmosphere at work was boisterous. The partnership lasted for 16 years and together they grew a powerful brokerage, investment-banking and insurance kingdom.

In 1993, Commercial Credit bought Financial Service Group. After that they acquired Shearson Lehman Brothers and Travelers Insurance Group. They together did a great job in achieving the success. In era of economic Weill used his strategies and Dimon executed accordingly. But very unfortunately in the year 1998, Dimon was ousted by his own mentor. Much of what he had learned from Weill about saving trouble companies he applied to Bank One.

CHANGING CULTURE:

Under the leader ship of Dimon the bank went though lots of changes. The culture of the organization took place in a large scale. The success of organizational broadly depends on the organizational culture. Dimon successfully change the culture to build a positive attitude among the employees. This change helped the bank to adapt the new technology and new organizational structure. He inform the stockholders about this through the 2001 annual report.

He explained that the employees are acting with great openness, passion and urgency. As a dynamic quality leader, he always encourages the employees to ask questions and solve problems. Recently, in a rally he asked the group of 500 employees, “How many people think that we are slow and bureaucratic?” a number of employees raised their hands. Then he asked, “who is responsible for fixing what is bureaucratic?” The audience responded, “We are” This proved the cultural change in the Bank One.

ELIMINATING BUREAUCRACY:

Dimon implemented a Bureaucracy Blaster program in order to reduce bureaucracy. It is paid system for getting money saving ideas from the employees. In 2002, Bank One renamed the bureaucracy Program to The Idea Center to encourage more suggestions from the employees on how to improve the internal processes of the bank. This process got a huge response from the employees. They send thousands of recommendations and Bank One used many of them. These kinds of steps taken by Dimon indeed brought a change in the banking culture.

In order to improve the efficiency of the retailers, the management centralized its operations and decided to give people in the field more authority and responsibility. The decision taking authority help to increased the feeling of ownership in the company by giving a grant of $300 in Bank One to the 401(K) plans of almost 40,000 of its lower-paid employees. Bank One employees at 1,800 branches had given the opportunity to share profits if they met earning targets. This type of profit sharing plans increases the drive to work hard and produce innovative ideas among the employees. Then they started to believe themselves as a part of the Bank and tried at their level best for the welfare of it.

TEAM BUILDING:

Among many managerial tools, building teamwork and group dynamics are the modern concepts of management. There for, Dimon encourages teamwork across and within business line to the point that Corporate Bankers began to join Investment Managers on customer calls. This new atmosphere was build through this. Dimon created a culture of integrity inside the bank. To appreciate Dimon’s contributions in the bank, Arthur Leavitt, former chairperson of the Securities and Exchange Commission, states, “Jamie Dimon is the un-Enron.” In the industry everyone believed that integrity is hallmark of Jamie Dimon’s management style.

ORGANIZATIONAL STRUCTURE OF BANK ONE:

Bank One operated its business in fourteen states in four regions; the West South, Midwest and East. Its south region included Louisiana, Oklahoma and Texas. The West included Arizona, Colorado and Utah. The Midwest covered Illinois, Indiana, and Wisconsin, and the Eastern part consists of Kentucky, Michigan and Ohio.

Bank One’s business activities mainly included investment management, retail, commercial, and credit card. According to the management of Bank One, small business is the one with the revenues of $10 million or less. Its commercial customers had annual revenue of over $10 million. The bank divided its commercial line of business into Middle market and Corporate. Middle market customers generally ran over from $10 million to $ 500 million in annual sales, while corporate customers ranged from over $500. The middle market group generally provides services in depository accounts (checking and savings and all variations), treasury management products, and commercial loans.

It can be said that, Bank One has a very good organizational structure, which covered a wide geographical location. They are not satisfied in only expanding the business in different areas, rather than that; they are trying to give people varieties of services.

COMPETITORS IN THE SOUTHWEST REGION:

Getting competitors is an unavoidable part of any type of business. As Bank One is successful in its business, they have potential competitors too. Bank One has many different competitors, depending on the market. The competitors of Bank One varied according to the market, in the Southern regions Commercial line. For example, we can mention the competitors in Louisiana were local banks like Whitney National Bank and Hibernia. In Dallas, the competitors were Chase, Bank of America, Wells Fargo, and Comerica. In Oklahoma, the major competitors of Bank One were Bank of America, Bank of Oklahoma, and Bank First.

Having competitors have many positive sides. It creates competition in the industry. When the companies are competing against each other, they are actually creating different types of business ideas. New business ideas produce opportunities of expanding business, which creates employments for general people. When a company can earn a good reputation as a good company, its employees feel proud of it. Then, other employees of other companies and fresh graduates find it prestigious to do job in that reputable company. So it becomes easy for the company to hire potential employees. Because of its reputation, Bank One is getting all these benefits.

CUSTOMER SERVICE IN THE BANKING INDUSTRY:

Bank industry is a service oriented industry. A bank’s reputation mostly comes from the service it is providing to its customers. This is because the financial activities done in any bank is more or less same, the offers may differ but not in a greater way. This is the customer service that makes a difference. If the bank can satisfy its customer with high quality service the customers will repeatedly come back.But we found out that the banking industry was not putting much emphasis on this area. In this case we find that at All First Bank in Baltimore, only top customers had the access to a service agent. Less-profitable customers did not have that option.

Different bank used different tools in order to identify their top class customer. In the First Union, they coded their Credit card customers with small colored squares that flashed when the Service Consultants brought up their accounts. A green square refers that the customer was profitable and should be given special care and attention. Red square told that the customer lost money for the bank and had little power to negotiate. Yellow refers to a discretionary category somewhere in between. This type of classification made works easy for the service consultant. If he/she has to serve a customer with special facilities, those squares will reflect the reputation of that customer. Service consultant will not have to search his past history or record.

Though there were some techniques the banking industry those was not that effective. According to the Gartner Group Inc. 68% of banks with over $4 billion in deposits divided customers into segments based on their profitability for the bank. Market Line Associates said that the top 20% of most commercial banks’ produce up to six times the revenue that they cost. Whereas the bottom fifth often cost three to four times more than they generate for the bank.

As we said earlier the banks that use tiring run the risk of failing to determine the true potential customers. This is because these tiring processes are made based on the past information of transaction. These programs used to tier typically are not capable of collecting information from different business units within the company.

COMMERCIAL CUSTOMER SERVICE AT BANK ONE:

After the formation of Bank One the bank was not doing very well. The level of customer satisfaction went to very low. In such a critical time Jamie Dimen came as a rescuer. Under his leadership the bank made sufficient about of progresses. He tried to solve the problems by getting into it. Over the first two years of his leadership, customer service of Bank One improved in a steady way. The reasons behind the bank’s success were given bellow:

DESIRE TO HELP PEOPLE:

According to Dimon one of the most important characteristics of the service consultant should be having the desire to help people. Dimon believed that this will make the bank succeed. He told some system analyst, loan officers, and branch manager in Chicago,

“Winning isn’t about parents or your IQ or where you went to school. It’s about one thing –Who much you want it!”

According to Dimon it was the desire that will push the employee to perform beyond the expectation.

TEAM BUILDING:

In today’s world team building is very much in the spot light. Dimon highly encouraged the teamwork inside his organization. According to him it was the key to excellent delivery of services. Customer service consultant needed to work closely with people in other areas of the bank to resolve problem. Teamwork always generates work efficiency and innovative ideas. Bank One was also practicing the employee empowerment. So, this teamwork proved to be helpful for them.

BUILDING UP COMMITMENT:

Building up commitment into both employees and customers is very important. Dimon took that into consideration and put emphasis on it. Bank One developed strategies and guidelines to help them in maintaining improving service quality. The more important thing is that, Bank One made a promise to its employees and customers concerning its commitment to service.

Moreover, Bank One promised its 60 million customers that they would receive individual answers to their requests and enquiries. It this way they made it clear that they value their customers and are always ready to serve.

THE ESSENTIAL SERVICES:

Bank One developed Service Essentials in fall 2000; they develop this program by recognizing that the overall quality of the experience keeps customers coming back. It identified the following customer needs:

Accuracy
Quick response time
Fast problem resolution
Proactive, empowered, knowledgeable, trustworthy employees
Personal attention

STRUCTURE OF COMMERCIAL CUSTOMER SERVICE:

After identifying the customer needs, the most important job was to make a structure of customer service departments duties and trainings. Bank One developed its customer service structure in a very organized way. Each market of Bank One has a Service Consultant who deals with the Underwriter, Bankers, Treasury Management Sales Officers, and Division Managers.

Depending only on the service consultant in each market was not enough. So, Bank One established Service Centers in Milwaukee and Chicago to handle calls from middle Market Customers nationwide. Customers had a tendency to expect help from a person in their won city. The national service center was serving for the longer hours, from 7 a.m. to 7 p.m. central time.

RECOGNITION OF OUTSTANDING CUSTOMER SERVICE:

Generally employees work for money. There is also a matter of motivation. It is not possible to motivate all the employees by giving money or some Tangible reward. Intangible benefits like service recognition is extremely important for the employees in banking industry.

Bank One gives recognition to the outstanding performance of their employees in many ways. For example, the National Commercial Client Services Recognition Program rewards the achievements of Service Consultant in the Middle Market, Large Corporate, and the Service Centers. The program began on January 1 2001, to reward the employees who received engraved recognition plaques with emblems to reflect their individual achievements. Among the 26 emblem categories were Service star, Best Overall Service Star, Sales Star, Client Applause, Leadership, Fraud Detector, and Lemon-2-Lemonade. Emblems were awarded monthly, quarterly and annually depending on the criteria of emblem. These emblems were selected through several processes. These were earned by course completion, supervisory, customer and business partner recognition, as well as team and peer nominations. They mainly have three types of recognition program.

SOME NON-MONETARY REWARDS:

It is a fact that money is the greatest incentives, but there are some other non-monetary awards that can be meaningful to the employees and can motivate the employees. To some of the employees those are more than monetary rewards. The employees of the bank One received some of these –

Service Excellence E-cards were launched in March 2002 to provide an avenue for employees to show their appreciation to internal colleagues or external customers.

The Commercial Banking Senior Management Recognition Program, where employees in commercial banking were rewarded by sending a complementary letter or memo from an Executive Vice Precedent. This reward was given to the employee who had received written compliments from internal or external customers.
Corporate Service Excellence began the Service Heroes program to celebrate service and spotlight employees who provided outstanding service to both the internal and external customers.

QUALITY IMPROVEMENT MEASURES:

When Dimon received the company it was in a bad condition. It was not only loosing money but also loosing its reputation. After the strong and systematic leadership of Dimon with timely implementation of all the rules and regulation Bank One has able to regain it profitability and reputation.

In order to perfectly implement the leadership and commands of Dimon, it was important to have ways to measure the performance of employees. Dimon implemented a variety of measures to monitor and continuously improve customer service. He wanted to ensure that all the issues were resolved to the customer satisfaction. They practiced customer care reports, conference calls, performance reports, monthly customer satisfaction survey, and business own and lost survey.

CHALLENGES IN CUSTOMER SERVICE:

By nature people are innovative. Every next day they will come up with some new ideas. In the customer service sector maintaining a good customer service is not an easy thing to do. To maintain a quality customer service two main challenges are technical knowledge and teamwork..Since the banks products and services changes frequently, Service Consultants are required to upgrade their skills and technical knowledge continuously. Customer Service Consultants are required to be familiar with every parts of the banking system as they navigate the different systems.

And again team work is very important as in the organizational culture. For different activities they have to depend on other people in other areas of the bank to get help in resolving any problems. To maintain the customer service the management will face these problems. In order to be effective and efficient in this sector they have to be more careful and focused.

FUTURE DIRECTION IN COMMERCIAL CORPORATE SERVICE

After Dimon took over the CEO’s office in Bank One the bank did tremendous job in improving its reputation. The bank almost achieved its goals in the customer service sector. But in competitive industry like banking, they just have to continuous with the good job in order to survive. For this purpose the bank can develop the three following areas:

1. Empowerment of Service consultants
2. Professionalism of customer service
3. Customer service technology.

Efficiency will improve much

Efficiency will improve much if the empowerment of the Service Consultant is practiced more. The bank can increase the limits on transactions that the consultant could complete. The management can increasingly deliberate the authority in problem solving.

Professionalism is must in any given organization. Therefore in Bank One the job of the Service Consultants needed to be viewed within the bank more as a professional position.

We live in the age of technological advancement.

Every day there is some new technology which is taking over the primitive system. For this reason Bank One needed to use advance technologies when ever needed, that was specific to customer service. They needed a front-end system allowing the customers to access information.

Another technology they needed was the one to give Customer Service Consultants the ability to do call tracking. This will help the Service Consultants to see what was done previously for a particular customer and track how often the customer had called.

At the end it can be said that Jamie Dimon made effective use of his talents and experience to improve the condition of the bank. And the management team of his has succeeded in most of the area of banking. But in order to survive in the global and competitive market they have to come up with a better strategic plan.

THEME

When it bought First USA in 1997, Bank One became the third largest credit card issuer behind Citicorp and MBNA. When acquiring banks to add to Banc One’s portfolio, McCoy usually let the local managers stayon and continue running the bank the way they had in the past. He avoided centralizing the management of his new acquisitions. By regional practices prevailed wanting to grow revenues quickly, the bank took on too many risky loans to large corporations. Bank One’s board asked Jamie Dimon to take over as CEO in 2000 and he did was buy two million shares of Bank One stock, investing $56 million, half of his personal fortune. He wanted to lead the bank with his own money on the line. Dimon eliminated about 8,000 jobs in his first year on the job, cutting the workforce to 75,800.

Under Dimon’s leadership, Bank One’s culture underwent important changes

MAIN ISSUE:

How Bank One can use its existing as well as additional compensation strategies to make their employees motivated and how that will help it to sustain its trend of success as well as growth rate to safeguard its historic glories in this highly competitive commercial banking industry?

SWOT ANALYSIS:

SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It is one of the cornerstone analytical tools to help an organization develop a preferred future. It is one of the time-tested tools that have t he capacity to enable an organization to understand itself, to respond effectively to changes in the environment. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective.

Effective and efficient planning process for Human Resource Management requires the perfect and specific information from the internal and external environment. The benefits of a SWOT analysis are that it provides learning and knowledge vital to the organization’s survival and prosperity. So SWOT is very important part for any company to be successful in the long run. Thus, the assessment of strengths, weakness, as well as opportunities, and threats become an essential task for management. Here. In this case study we have also divided SWOT in to external and internal factors and done analysis of the case:

INTERNAL FACTORS:

The strengths and weaknesses are internal factors in to an organization.

STRENGTH

Strength determines an organisation’s strong points. Strength is a resource advantage relative to competitors and needs of the markets a company serves or expect to serve. It is a distinctive competence when it gives the company a comparative advantage among other competitors. Strengths arise from the resources and competencies available to the company. Here are some of the important strengths what Berre chimique has and we found in this case study:

THE BANK MADE CONSIDERABLE PROGRESS IN THE FIRST YEAR IN BUILDING ITS CORE AND INFRASTRUCTURE, PARTICULARLY IN CUSTOMER SERVICE.

In early 2000, Midwestern giant Bank One struggled with customer service problems, as well as rocky financial times. Jamie dim on identified four immediate priorities for the bank: customer service, financial discipline, system conversions, and building the management team. In the first year the bank made considerable progress in building its core and infrastructure, particularly in customer service. It tracked, measured, and rewarded the quality of customer service.

Better systems and appropriate compensation plan made improve the bank one in customer service. The employee of the customer service gave 100% effort to give maximum output. So the customer service improved a lot.

THE MANAGEMENT OF BANK ONE CENTRALIZED ITS OPERATIONS AND GIVES THE PEOPLE MORE AUTHORITY AND RESPONSIBILITY.

The management of Bank One reduces principle agent problem. It increased the feeling of ownership in the company by giving a grant of $300 in Bank One stock to the 401 plans of almost 40,000 of its lower-paid employees. Employees at 1,800 branches were given the opportunity to share profits if they met earnings targets.

The employees of Bank One had given authority and responsibility. So they will lead their Bank with their own money on the line. Obviously they will work very hard to gain the profit. So it is strength for the Bank One. No one will give any loose effort as if they can met with the target they will get share of the profit.

OVER THE FIRST TWO YEARS OF DIMON’S LEADERSHIP, BANK ONE’S CUSTOMER SERVICE HAS STEADILY IMPROVED.

One of the most important characteristics of a service consultant is a sincere desire to help people. This related to Jamie Dimon’s belief about what it takes to make the Bank succeed. Dimon told a crowd of systems analysts, loan officers, and branch managers in Chicago, “winning isn’t about patents or one’s IQ or where one went to school. It’s about one thing- how much you want it!” To Dimon, desire to do the job well is critical to success.

Another key to excellent customer service was teamwork. Customer service consultants needed to work closely with people in other areas of the bank to resolve problems

DIMON ENCOURAGED TEAMWORK AND INTEGRITY IN THE BANK ONE.

Dimon encouraged teamwork across and within business lines to the point that Corporate Bankers began joining Investment Managers on customer calls. Demon’s culture of integrity pervaded the bank. In the industry integrity is widely recognized as the hallmark of Jamie Dimon’s management style. Warren Buffett was so impressed by Dimon’s letter to the Stockholders in the 2000 Annual report that he wrote Dimon that it was one of the best he’d ever seen.

Ethics in the business is an important factor. Because ethics can boost up employees productivity. Thus which effectively and efficiency is increased. The Bank One set a target which is fulfilled by employees.

BANK ONE’S SHAREHOLDERS HAD MORE CONCERN ABOUT WEAK CUSTOMER SERVICE RATHER THAN STOCK PRICE.

Jamie Dimon took over as Bank One’s Chief Executive Officer in 2000. He met with Bank One shareholders. Shareholders bound him with questions and complaints about customer service. Clearly they had more concerns about weak customer service rather than stock price. They pushed him to move quickly to resolve the problem.

The main destination of a shareholder is to increase company’s stock price. But the shareholders of Bank One had more concerns about customer service. Customer service is an important factor for increasing the stock price for a company. If a company can give very good customer service than their brand value will also increases. So more shareholders will buy more share of that company. “Shareholders had more concerns about weak customer service”- it’s strength for Bank One. That’s why Bank One’s Chief Executive Officer gave higher priority to the customer service.

THE BANK ONE IS A LEADING PROVIDER OF LENDING, TREASURY MANAGEMENT AND CAPITAL MARKET PRODUCTS TO MIDDLE MARKET BUSINESSES AND CORPORATIONS.

With headquarters in Chicago, Bank One is the sixth largest bank holding company in the United States with assets worth over $260 billion. The Bank has 74,000 employees at 2,000 branches in 14 states. The retail bank serves over 7.2 million households. That’s why they are the leading provider of lending, treasury management and capital market products.

As Bank One is a leading provider of lending, treasury management and capital market products to middle market businesses and corporations. So it is strength for the company. As we know that customers normally love to have their services from a best organization or bank like Bank One and other customers of the company will also provide them idea about these banks so the new customers eventually get a faith on these kind of banks. In that case its one kind of strength for the company.

JAMIE DIMON INHERITED A BADLY MANAGED, POOR ORGANIZED BANK, SET TO WORK TO TURN THE BANK AROUND.

Mr. Dimon came to Bank One after serving as president of Citigroup Inc., Chairman and CO-CEO of Salomon Smith Barney Holdings Inc. Dimon was a tough, loud, charismatic New Yorker. People recognized him as a manic, whirling dervish who was into everything.

One of the first things he did was buy two million shares of Bank One stock, investing $56 million, half of his personal fortune. He wanted to lead the bank with his own money on the line. He fired about 8,000 jobs in his first year on the job, cutting the workforce to 75,800.

DIMON ENCOURAGED EMPLOYEES TO ASK QUESTION AND SOLVE PROBLEMS AND

EMPLOYEES WERE ACTING WITH GREATER OPENNESS, PASSION AND URGENCY.

Employees were acting with greater openness. The participation in the Bank One was increased. That’s why employees let the management know about their thought, knowledge. Basically the input made into output by the lower and middle level workers. So they can find the problems and solve the problems. Dimon asked the group of 500 employees, “How many people think we are slow and bureaucratic?” A number of employees raised their hand.

Bank One implemented a suggestion box that paid employees for money saving ideas. In 2002, the Bureaucracy program was renamed The Idea Center to encourage more suggestions on how to improve the bank’s internal process. In response, employees sent in thousands of recommendations, and the bank put many of them in place.

BANK ONE DEVELOPED STRATEGIES AND GUIDELINES TO HELP EMPLOYEES.

Bank One developed strategies and guidelines to help employees maintain and improve service quality. They can improve their service quality thus company will get a huge name value. So it will be a free promotion for the Bank One.

The bank made a promise to its customers and employees concerning its commitment to service. Bank One promised its 60 million customers that they would receive individual answers to their request and inquiries.

Bank One developed Service Essentials in fall 2000, recognizing that the overall quality of the experience keep customer coming back.

It identified the following customer needs:

Accuracy

Quick response time

Fast problem resolution

Proactive empowered, Knowledgeable, trustworthy employees.

Personal attention.

The Bank One analyzed all the requirements of improving in customer service. They also surveyed for finding the essentials to keep customer coming back.

THE STRUCTURED COMMERCIAL CUSTOMER SERVICE IN BANK ONE IS INCREASING THE ATTENTION OF THE CUSTOMER.

Each market has a Service Manager and Service Consultants who work with the underwriters, Bankers, Treasury Management Sales Officers, and Division Managers. Bank One has this sub post in their organization.

As the Bank One’s structured commercial customer service is increasing the attention of the customers so the company is getting new customers for their better customer service facilities and the current customers is giving other customers better knowledge or advise to go for Bank One for

their better services. By this way Bank One is getting more and more customers day by day which is a strength for the company.

IDENTIFICATION OF FOUR IMMEDIATE PRIORITIES BROUGHT CLARITY IN OPERATIONS

Bank One had struggled with customer service problems from as early as the year 2000, and they had even struggled with rocky financial times. Thus, Dimon identified four priorities of the bank which needed to be dealt with as soon as possible. These were:

Customer Service,
Financial Discipline,
System Conversions, and
Building the management team.

Even though these can represent the areas of weaknesses the bank needed to develop, it also highlights a key point, that the new CEO was aware of the areas which needed to be developed, thus his management technique would start with the most important ones first.

BANK ONE IS WIDELY SPREAD WITH MANY BRANCHES IN U.S

Bank One has its headquarters in Chicago. It has almost over 2000 branches in 14 states of U.S. It’s retail bank serves over 7.2 million household. Since Bank One’s operations are widely spread this in fact gives them an opportunity to earn as much revenue as possible from different locations with different population size. It has its branches in the west, south, Midwest and east. The states include Louisiana, Texas, Illinois, and Ohio etc.

As Bank One’s different branches is spread over different location of USA so they can easily cover a large portion of market of USA which is one kind of benefit for the company. Cause they can easily attract more customers and target a large amount of customers toards their products and services and it can increase their profitability in the long run for the company. So it’s a strong strength for the company.

MERGERS OF BANK ONE GAVE IT STRONG HOLD IN THE MARKET

Bank one had started with the 1929 merger of Commercial National and City National Bank of Commerce of Columbus, Ohio. They formed the City National Bank and Trust, of which John H. McCoy was the president in 1935.In 1958, his son took over, and hired the comedienne Phyllis Diller in 1960s to do radio and TV commercials, launching the bank’s career and making it famous.

In 1966, City National offered the first Visa credit card outside of California. It created the first drive-up bank, and was one of the first banks to use ATMs. Eventually, McCoy formed a holding company called First Bank Group of Ohio, which later became known as Bank One in 1979. The bank moved to other states such as Indiana, Kentucky, Michigan and Wisconsin as the state barriers to banking fell.

With the mergers of such banks, Bank One had started out with the involvement of many experienced banks already established in the market, and by merging, their forces jus became stronger. Along with the mergers came the employees of the banks, who of course required little training compared to the new employees the bank would have to hire if not for the mergers.

WEAKNESS:

It determines an organisation’s weaknesses, not only from its point of view, but also more importantly, from customers. A weakness is a limitation or deficiency in one or more resources or competencies relative to competitors that impedes a company’s effective performance. Here are some of the important weaknesses that Bank One has and we found in this case study:

WEAK CUSTOMER SERVICE AND STOCK PRICE ARE THE FACTORS THAT CAUSES BANK ONE LESS EFFECTIVE IN CUSTOMER SERVICE.

After Jamie Dimon took over as Bank One’s Chief Executive Officer in 2000, he met with Bank One shareholders. The group barraged him with questions and complains about customer service. Clearly they had more concerns about weak customer service than stock price. What did he intend to do to improve customer service at Bank One? Bank One is the sixth largest bank in the U.S. They pushed him to move quickly to resolve the problem. He agreed that Customer service was a top priority along with integration of systems, breaking down bureaucracy, and streamlining operations with a leaner, meaner bank.

The bank One had a weak customer service and stock price. So the share value of Bank One was decreasing day by day. If a company can do well in customer service then it will be a free promotion for them. The brand name or image will go up. But the absence of 100% effort Bank One looses their positions. So it is weakness for Bank One.

TWISTED MIX OF COMPUTER SYSTEMS LEFT OVER IN BANK ONE FROM DOZENS OF MERGERS WITH REGIONAL BANKS.

The bank had to blend seven deposit systems, and worked hard to avoid service problems that could frustrate customers to the point of leaving. Bank one’s goal was for customers to receive services seamlessly and efficiently, no matter where they were or their banking needs are. Dimon insisted on integrating the diverse system into one platform. Slowly, painfully, the bank underwent conversions to one unified system, state by state.

The conversions required a huge effort that many at the bank thought was impossible. But as Dimon said, “Unless the computers talk to each other, one can’t do acquisitions. One can’t build a great bank.” Twisted mix of computers systems left over in Bank One from Dozens of mergers with regional banks. So it is weakness for Bank One.

WEAK RECRUITMENT PROCESS GAVE BANK A GREATER LOSS.

Dimon eliminated about 8,000 jobs in his first year of the job, cutting the workforce to 75,800. he scaled back an auto-leasing unit. He closed wingspan, the online bank launched two years previously. The venture cost the bank between $100 and $150 million during its first year along. Eventually, Dimon replaced twelve of the top thirteen executive managers at the bank. He hired former Citigroup Chief Financial officer (CFO) Heidi Miller to take on that same job at Bank One.

Dimon eliminated some jobs in his first year. So the employee felt no job security in Bank One.Dimon eliminated about 8,000 jobs in his first year of the job, cutting the workforce to 75,800. He scaled back an auto-leasing unit. So employee had a tension that there is no job security in Bank One. Some employees took it negatively. Thus, it affected the output of bank One a lot. Because of the recruiter, the employees of Bank One suffered a lot. So it is weakness for the Bank One.

PREVIOUSLY THE EMPLOYEES OF BANK ONE HAD LESS AUTHORITY AND RESPONSIBILITY TO THEIR WORK.

Basically the input made into output by the lower and middle level workers. So they can find the problems and solve the problems. They actually know what the things that should be implemented are effective. They can figure out all the problems. No one had much authority.

So they didn’t take their responsibility to solve the problems. That’s why the Bank One loses a lot. Because of decentralization there is a dissatisfaction among employees .If it is present among employees, it is not possible for them to work hard, efficiently or effectively.

BANK ONE HAD NOT SUFFICIENT TECHNOLOGY FOR THEIR CUSTOMER SERVICE.

Bank One needed technology that was specific to customer service. They needed a front-end system that would allow them to access information, without having to go through different program applications. New technology was being developed in phases.

Another needed technology was one to give customer service consultants the ability to do call tracking. This would allow service consultants to see what was done previously for a particular customer and track how often the customer had called.

IDENTIFICATION OF FOUR IMMEDIATE PRIORITIES

Bank One had struggled with customer service problems from as early as the year 2000, and they had even struggled with rocky financial times. Thus, Dimon identified four priorities of the bank which needed to be dealt with as soon as possible. These were:

Customer Service,

Financial Discipline,

System Conversions, and

Building the management team.

Even though this identification can be viewed as strength, representing that the CEO was actually aware of the situation at Bank One, it also goes to show how much work was actually waiting to be attended to and how many areas Bank One lacked in.

DIMON’S NIGHTMARE:

There was a twisted mix of computer systems left over in Bank One from dozens of mergers with regional banks. This was one of the worst nightmares Dimon had to face. This mix of computer system would mean having to blend seven deposit systems, and they would have to work hard to avoid service problems that could frustrate customers to the point of leaving.

The goal of Bank One was to provide customers with services seamlessly and efficiently, no matter what their needs were or where they were. Dimon had insisted on integrating the diverse systems into one platform, which therefore meant that the bank would have to undergo slow, painful conversions to one unified system, state by state. This conversion would require a huge effort that many at the bank thought was impossible.

REQUIREMENT FOR WORST-CASE SITUATION PLANNING:

After analyzing the major weaknesses of Bank One, Dimon required a worst-case scenario planning. The bank was being run hoping that they don’t face a recession. As a result of this, the bank assessed the profitability of each loan on its books. There was a list of about 1,800 borrowers and the Domestic Corporate Banking Chief gave warning to those whose loans which might not be renewed after reviewing them.

The bank offered these customers the opportunity to purchase other products from Bank One, such as asset management, treasury services, derivatives, and bond underwriting, or simply to find another bank. In this way, the relationship with the customers became strong with Bank One, or the customers just left for another bank.

BANK ONE MADE TOO MANY RISKY LOANS:

After the merger when Bank One was suffering huge losses, they took an initiative to give away loans to large corporations. This was mainly with the aim to make a quick revenue generation.

Though the bank wanted to earn as much revenue as possible within a very short time frame, it was not possible as they gave out loans to corporations, which proved to be risky ventures.

THE STOCK LOST HALF ITS VALUE IN TWO YEARS:

This mainly arose when customer service at Bank One arose as a big issue. This affected their reputation in the financial market. More over the risky loans that they were giving out to large corporations was also an issue.Hence investors did not want to invest at Bank One any more. As a result Bank One’s share price plummeted and the stock lost its value in two years.

INTERNAL CONFLICT MAY ARISE DUE TO SHARED OWNERSHIP:

After the merger in the year1998, the confusion of ownership arose as big issue. Questions whether the retail or the corporate sector should get the ownership, get to make decisions regarding the company. However in the end they agreed on the 60-40 ownership criteria. That is Banc One will own 60% by First Chicago stockholders will own 40% of equity ownership.

The two separate banks have different practices to operate. Whenever a dispute would arise in the banking system of Bank One then for the agreement on a single decision would be a very big problem. This is for the banking practice and the share of the ownership.

INCREASED INTEREST RATES LEAD TO LOSING CUSTOMERS:

Bank One, just after the merger made some changes in the organizations policy regarding giving out loans to customers. This time they increased the interest rates from 4.5% to 19.9% in the credit card section if only the customers made paid a day late only twice within a time frame of six months.

This led to customer abuse and as a result many of the customers made no further transactions with the bank. If they do not lower interest rates down to 4.5% or somewhat lower than 19.9% it is unlikely that they will get their customers back.

HIGHLIGHTING ONLY IN THE MIDDLE MARKET SEGMENT IN SEPARATE ZONES:

Bank One has many different operations to execute. The Various branches offer many types of service to the valued customers. Focusing on one particular region for developing better service like in the Middle Market segment of the Southwest region would make them vulnerable and questionable to service in other regions or countries.

THE MANAGEMENT BELIEVING IN DESIRE TO DO JOB:

The Bank considers that Service Consultants would be compelled to do their jobs, as they would be having a desire to help people. These types of individuals are the ones who like to listen and influence others. By solely depending on this characteristic trait would not make the quality service.

There has to be a minimum level of motivation from the management level in order to keep these Consultants from moving with their desire.

CHANGES IN THE BANK’S PRODUCTS AND SERVICES FREQUENTLY:

Bank One changes its products and services frequently. This product and service are very interrelated as one helps to foster other to the customers. Adaptation to this changing environment by a Service consultant imposes restrains.

The technological and teamwork knowledge changes every time and consultants start from Scratch. This changing nature not only makes the consultants stressed to work but also every time makes a new approach to an existing customer. All this changes the Bank’s image.

HANDLING OF THE SERVICE FOR THE MIDDLE MARKET CUSTOMERS FROM NATIONWIDE:

In addition to the various service departments in the regions Bank One has a setup of Service Centers in Milwaukee and Chicago. The valued customers would like to deal with their problems with an individual with local knowledge.

Communicating across nations not only makes it time consuming, expensive but also due to differences in time may even expire the validity of certain proposals. Since the local consultants know the various behavioral aspects of the customers of the different states the local customers and so delivering better service would more easily accept them.

NO PROPER TRAINING AND PROFESSIONAL HELP FOR SERVICE CONSULTANTS:

The service consultants are empowered to exercise their authority. They are not provided with any sound training for adapting to the changing environment of the business. Every time the service consultants need to learn new technology for enhancing their customer service. However, these people are not given any professional support or motivation for doing so.

This style of learning on their own would be a bigger problem when many customers would require the service. They should streamline the service and make the job of Service consultants follow guidelines in addition to their style of doing work.

INTERNAL CONFLICT MAY ARISE:

At Bank One they have of around 2000 branches in 14 states with 74000 employees. More over in these fourteen different states they operate locally as per the customer’s requirements since customers prefer to receive help from a person in their own city. Bank

One has such a diversified work force with employees from different corners of United States that they have different ideas and views which in turn may create problems at times by arising internal conflicts among employees.

EXTERNAL FACTORS:

The opportunities and threats represent the external environment of an organization.

OPPORTUNITIES

External conditions those are helpful to achieving the objective. Opportunities may occur suddenly. Opportunities come from factors outside of anyone’s control. These are in the environment that surround the business and should be tried to capitalize on. There are several opportunities are available for Bank One and in this case study:

EXPANSION IN OTHER AREAS OF UNITED STATES:

Up till now Bank One has been operating its commercial line of business in fourteen states in four regions. These regions are the West, South, Midwest, and East. Bank One can further expand their line of business in other states of U.S. This will in fact help them generate enough revenues to cover the losses they have faced earlier.

After Dimon joined in as the new CEO, he was very keen in improving customer service at Bank One, and he also made bank undergo various conversions to one unified system. That is he focused mainly on networking, making the computers talk to one another. This is what boosted their productivity in terms of customer service. If Bank One can further improvise on networking facility, they will be able to spread their services in many other countries through out the world

BANK ONE CAN ADD NEW PORTFOLIOS OF SERVICES TO ITS EXISTING LINE OF BUSINESS:

Bank One currently is operating its line of business in investment management group, commercial, credit card, and retail. Apart from these four lines of business operations, Bank One can start operating in other areas of the service industry such as they can open up a non governmental organizations. This will allow them to do something for the welfare of the society, and also add value to the organization.

The main lines of business for Bank One includes Investment management, Retail, commercial, and credit card. The identification of the Middle Market and the Corporate market helps Bank One categorize the different mainlines according to the Market they operate. The financial standings of the institutions also help Bank One develop new strategies for operation.

CREATING PLATFORM FOR DOING GLOBAL BUSINESS:

Bank One has succeeded in getting many businesses across the regions. One of which is the building up of the credit card customers. This Credit card cluster of individuals in an area can create a huge market in the various regions of the United States and the global market. The Bank One can have an option to develop a platform for the credit card business. Being globally spread over the regions they have an opportunity to do Global business.

Bank One has developed an extensive customer service-delivering unit. This not only has been operating in the specified region but also has a Central department. The extensive distribution of the customer service and recognition of it as a professional position makes Bank One develop Customer relations. They are always concerned for giving better quality and this creates opportunity for them to prosper with their service in the global arena.

THE MANAGEMENT TEAM OFFERS EXPERTISE TO BE CONSULTED:

The Management team of Bank One consists of personnel from various well-reputed institutions. These are the expert panel of people who has a major role in the success story of Bank One.

With such expertise available they can offer banking service other than the traditional one, which would help in earning extra revenue. Not only this offers new business for the bank but also the inclusion of more human resource.

CHANCES OF GLOBALIZATION:

After Dimon joined in as the new CEO, he was very keen in improving customer service at Bank One, and he also made bank undergo various conversions to one unified system. That is he focused mainly on networking, making the computers talk to one another. This is what boosted their productivity in terms of customer service. If Bank One can further improvise on networking facility, they will be able to spread their services in many other countries through out the world.

Bank One has succeeded in getting many businesses across the regions. One of which is the building up of the credit card customers. This Credit card cluster of individuals in an area can create a huge market in the various regions of the United States and the global market. The Bank One can have an option to develop a platform for the credit card business. Being globally spread over the regions they have an opportunity to do Global business.

EXCELLENT COMMERCIALIZATION OF CUSTOMER SERVICE:

Over the first two years of Dimon’s leadership, customer service of Bank One improved in a steady way. The main reason behind this success was the quick identification of the most important characteristics of a service consultant; that is, “sincere desire to help people”.

Dimon told some system analyst, loan officers, and branch manager in Chicago that, winning does not come from Patent of Your IQ or educational background. It comes from one thing, “how much you want it”. According to Dimon, the desire to do the job well is critical for success.

FASTER GROWTH WITH TECHNOLOGY:

Bank One is an institution where technology has a greater impact for delivering service. They have been adopting new technology for every phase of their transformation. This resulted in having a state of the art technology with their system of Banking. Bank One there would be able to deliver a faster response to the questions for day-to-day business. This provides them an opportunity for becoming the global Bank partner for large transactions worldwide.

Bank One use advance technologies that was specific to customer service. They used a front-end system allowing them to access information. Another technology that Bank One used was the one to give Customer Service Consultants the ability to do call tracking. This helps the Service Consultants to see what was done previously for a particular customer and track how often the customer had called.

REENGINEERING LEADS TO COST SAVINGS:

When Dimon became the new CEO of Bank One, he eliminated about 8000 jobs in his first year on the job. This elimination of jobs led to the cutting down of workforce from 83,800 to 75,800. He basically carried out this act solely for cost savings.

Since Bank One was suffering huge losses in terms of costs, so in order to save the organization from making further losses he cut the work force. They also scaled back on the auto-leasing unit to minimize cost.

UNIFIED NETWORKING SYSTEM AT BANK ONE:

After the merger of Banc One and First Chicago NBD, Bank One was formed. These two banks were formed from previous mergers of many different banks, which used different computer systems to provide customer service. As a result the newly formed Bank One was having grave problems to serve their customers properly.

However Dimon their new CEO focused integrating the diverse systems into one unified system, which in fact proved to be an opportunity for Bank One and as a consequence pushed its productivity even further. More over this gives the employees a clearer and simpler idea of how the bank operates, and therefore makes it easier for them to work as well.

CONTINUOUS GROWTH IN THE SEVERAL STATES OF USA:

Up till now Bank One has been operating its commercial line of business in fourteen states in four regions. These regions are the West, South, Midwest, and East. Bank One can further expand their line of business in other states of U.S.A. This will in fact help them generate enough revenues to cover the losses they have faced earlier; and also give the opportunity to compensate the suffering of one state by the improvement of other states.

It can be said that, Bank One has a very good organizational structure, which covered a wide geographical location. Also, Bank one is not satisfied in only expanding the business in different areas, rather than that; they are trying to give people varieties of services. This will recognize as an opportunity for them.

NEW PORTFOLIO OF PRODUCT TO EXPAND THE BUSINESS LINE:

Bank One currently is operating its line of business in investment management group, commercial, credit card, and retail. Apart from these four lines of business operations, Bank One can start operating in other areas of the service industry such as they can open up a non governmental organizations. This will allow them to do something for the welfare of the society, and also add value to the organization.

The main lines of business for Bank One includes Investment management, Retail, commercial, and credit card. The identification of the Middle Market and the Corporate market helps Bank One categorize the different mainlines according to the Market they operate. The financial standings of the institutions also help Bank One develop new strategies for operation.

EXECUTIVE COMPENSATION SCHEMES CAN HELP ALLEVIATE THE AGENCY PROBLEM IN PUBLICLY TRADED COMPANIES.

Executive compensation schemes can help alleviate the agency problem in publicly traded companies. Executive compensation is how top executives of business corporations are paid. The compensation of every employee is decided by the company owners through the board of directors (in the case of the most highly compensated executive positions) and the management team or management committee. Many people believe that CEOs are paid too much for the services they provide, while others believe that a good CEO can have a positive effect on the company’s performance and, therefore, that high compensation is needed to attract the best talent. The board of directors may have a personnel and compensation committee that deals specifically with labor compensation.

Executive compensation has long attracted a great deal of attention from financial economists. Indeed, the increase in academic papers on the subject of CEO compensation during the 1990s seems to have outpaced. Much research has focused on how Executive compensation schemes can help alleviate the agency problem in publicly traded companies. To understand adequately the landscape of executive compensation, one must recognize that the design of compensation arrangements is also partly a product of this same agency problem.

OPTIMAL CONTRACTING APPROACH REFERS TO DESIGN THE COMPENSATION SCHEMES TO PROVIDE MANAGERS WITH EFFICIENT INCENTIVES TO MAXIMIZE SHAREHOLDERS VALUE.

Management should first and foremost consider the interests of shareholders in its business decisions. Optimal contracting approach refers to design the compensation schemes to provide managers with efficient incentives to maximize shareholders value. Shareholders value to refer to the concept that the primary goal for a company is to enrich its shareholders (owners) by paying dividends and/or causing the stock price to increase.

The more specific concept that planned actions by management and the returns to shareholders should outperform certain bench-marks such as the cost of capital concept. In essence, the ideas that shareholders money should be used to earn a higher return then they could earn themselves by investing in risk free bonds. Under optimal contracting view, the board, working in shareholders’ interest, attempts to provide cost-effectively such incentives to managers through their compensation packages.

COMPENSATION ARRANGEMENT THAT IS LIKELY TO BE SHAPED BY BOTH MARKET FORCES THAT PUSH TOWARD VALUE-MAXIMIZING OUTCOMES.

Compensation arrangement that is likely to be shaped by both market forces that push toward value-maximizing outcomes. Markets include the market for corporate control, the market for capital and the labor market for executives. Management should first and foremost consider the interests of shareholders in its business decisions. Shareholders value to refer to the concept that the primary goal for a company is to enrich its shareholders (owners) by paying dividends and/or causing the stock price to increase.

The more specific concept that planned actions by management and the returns to shareholders should outperform certain bench-marks such as the cost of capital concept. In essence, the idea that shareholders money should be used to earn a higher return then they could earn themselves by investing in risk frees bonds.

EXECUTIVE COMPENSATION HAS HISTORICALLY BEEN CORRECTED WITH MARKET CAPITALIZATION AND AS RESULT THE RISING STOCK MARKETS OF THE 1990S, PROVIDED A CONVENIENT JUSTIFICATION AT MOST FIRMS FOR SUBSTANTIAL PAY INCREASE.

Executive compensation has historically been corrected with market capitalization. Market capitalization refers to the sum derived from the current stock price per share times the total number of shares outstanding. Although the market capitalization of a company is an indication of the value of the company, it is only a temporary metric based on the current stock market.

The true value of the company, its profits, product positioning, balance sheet, etc, may not be reflected in the market capitalization. A company can be doing well, but still have a low market capitalization if its products and reputation have not caught the fancy of the masses. The rising stock markets of the 1990s that carried along with them even many poorly performing companies, provided a convenient justification at most firms for substantial pay increase

THE PRESENCE OF A LARGE OUTSIDE SHAREHOLDER IS LIKELY TO RESULT IN CLOSER MONITORING AND IT CAN BE EXPECTED TO REDUCE TOP MANAGERS’ INFLUENCE OVER THEIR COMPENSATION.

The presence of a large outside shareholder is likely to result in closer monitoring and it can be expected to reduce top managers’ influence over their compensation. Doubling the percentage ownership of the outside shareholder reduces non-salary compensation by 12-14 percent.

CEOs in firms that lack a 5 percent or larger external shareholder tend to receive more “luck-based” pay-pay associated with profit increases that are entirely generated by external factors rather than by managers’ efforts. A firm that is lacking large external shareholders, the cash compensation of CEOs are reduced less when their option-based compensation is increased.

THREATS:

Threats are negative external environmental factors, which influences an organization’s decision. External factors are not controlled by the organization and to survive every organization needs to be very alert about its threats and how they can overcome this problem. Organizations should be proactive rather than reactive and should be aware of what are the competitors’ moves and should take necessary action in advance to face those moves.

MARKET FORCES ARE NOT SUFFICIENTLY STRONG AND FINE-TUNED TO ASSURE OPTIMAL CONTRACTING OUTCOMES.

Market forces are not sufficiently strong and fine-tuned to assure optimal contracting outcomes. Markets-including the market for corporate control, the market for capital and the labor market for executives- impose some constraints

On what directors will agree to and what managers will ask them to approve. The market for control might impose some costs on managers who are especially aggressive in extracting rents. The important point is that the market for corporate control fails to impose tight constraints on executive compensation.

COMPENSATION CONSULTANTS HAVE STRONG INCENTIVES TO USE THEIR DISCRETION TO BENEFIT THE CEO, EVEN IF THE CEO IS NOT FORMALLY INVOLVED IN THE SELECTION OF THE COMPENSATION CONSULTANT, THE CONSULTANT IS USUALLY HIRED BY THE FIRM’S HUMAN RESOURCES DEPARTMENT, WHICH IS SUBORDINATE TO THE CEO.

Companies typically employ outside consultants to provide input into the executive compensation process, but they can also play an useful role that they can help in camouflaging rents. Compensation consultants have strong incentives to use their discretion to benefit the CEO, even if the CEO is not formally involved in the selection of the compensation consultant, the consultant is usually hired by the firm’s human resources department, which is subordinate to the CEO. Providing advice that hurts the CEOs pocketbook is hardly a way to enhance the consultant’s chances of being hired in the future by this firm or indeed, the any other firms. Pay consultants can favor the CEO by providing the compensation data that are most useful for justifying a high level of pay.

WHEN OWNERSHIP AND MANAGEMENT ARE SEPARATED THEN THE MANAGERS MIGHT HAVE SUBSTANTIAL POWER AND THE PROBLEM OF MANAGERIAL POWER AND DISCRETION HAS BEEN ANALYZED IN MODERN FINANCE AS AN “AGENCY PROBLEM” BECAUSE MANAGERS MAY USE THEIR DISCRETION TO BENEFIT THEMSELVES PERSONALLY IN VARIETY OF WAYS.

Agency problem refers to a conflict of interest arising between creditors, shareholders and management because of differing goals. An agency problem exists when management and stockholders have conflicting ideas on how the company should be run. When ownership and management are separated then the managers might have substantial power and the problem of managerial power and discretion has been analyzed in modern finance as an “agency Problem” because managers may use their discretion to benefit themselves personally in variety of ways. They may engage in empire building. They may fail to distribute excess cash when the firm does not have profitable investment opportunities.

THOUGH OPTIMAL CONTRACTING APPROACH REFERS TO DESIGN THE COMPENSATION SCHEMES TO PROVIDE MANAGERS WITH EFFICIENT INCENTIVES TO MAXIMIZE SHAREHOLDERS VALUE, THE MAIN FLAW WITH EXISTING PRACTICES SEEMS TO BE THAT, DUE TO POLITICAL LIMITATIONS ON HOW GENEROUSLY EXECUTIVES CAN BE TREATED, COMPENSATION SCHEMES ARE NOT SUFFICIENTLY HIGH-POWERED.

Management should first and foremost consider the interests of shareholders in its business decisions. Optimal contracting approach refers to design the compensation schemes to provide managers with efficient incentives to maximize shareholders value. Shareholders value to refer to the concept that the primary goal for a company is to enrich its shareholders (owners) by paying dividends and/or causing the stock price to increase. The more specific concept that planned actions by management and the returns to shareholders should outperform certain bench-marks such as the cost of capital concept. In essence, the ideas that shareholders money should be used to earn a higher return then they could earn themselves by investing in risk free bonds.

Financial economists have done substantial work within the optimal contracting model in an effort to understand executive compensation practices; recent survey of this work include that to some researchers working within the optimal contracting model, the main flaw with existing practices seems to be that, due to political limitations on how generously executives can be treated, compensation schemes are not sufficiently high-powered.

THE MANAGERIAL POWERS HAVE AN IMPORTANT INFLUENCE ON THE DESIGN OF COMPENSATION ARRANGEMENTS AND MANAGERS’ INFLUENCE OVER THEIR OWN PAY MIGHT IMPOSE SUBSTANTIAL COST ON THE SHAREHOLDERS-BEYOND THE EXCESS PAY EXECUTIVES RECEIVE-BY DILUTING AND DISTORTING MANAGERS’ INCENTIVES AND THEREBY HURTING CORPORATE PERFORMANCE.

Managerial power approach refers to studying executive compensation focuses on a different link between the agency problem and executive compensation. Under this approach, executive compensation is viewed not only as a potential instrument for addressing the agency problem but also as a part of the agency problem itself. The managerial powers have an important influence on the design of compensation arrangements and managers’ influence over their own pay might impose substantial cost on the shareholders-beyond the excess pay executives receive-by diluting and distorting managers’ incentives and thereby hurting corporate performance.

Narrow SWOT

Strength

Sixth largest holding company in the USA: With headquarters in Chicago, Bank One is the sixth largest bank holding company in the United States, with assets worth over $260 billion. The bank has 74,000 employees at 2,000 branches in 14states. The bank is a leading provider of lending, treasury management, and capital markets products to Middle Market businesses and corporations. The retail bank serves over 7.2 million households.

The third largest credit card issuer: City National offered the first Visa credit card outside of California in 1966. It also created the first drive-up bank, and was one of the first banks to use ATMs. Eventually, McCoy formed a holding company called First Bank Group of Ohio, which became Banc One in 1979. As interstate barriers to banking fell, the bank moved into Indiana, Kentucky, Michigan, and Wisconsin.

Weaknesses:

Are constraints that hinder movements in certain directions.

PREVIOUSLY THE EMPLOYEES OF BANK ONE HAD LESS AUTHORITY AND RESPONSIBILITY TO THEIR WORK: Basically the input made into output by the lower and middle level workers. So they can find the problems and solve the problems. They actually know what the things that should be implemented are effective. They can figure out all the problems. No one had much authority.
So they didn’t take their responsibility to solve the problems. That’s why the Bank One loses a lot. Because of decentralization there is a dissatisfaction among employees .If it is present among employees, it is not possible for them to work hard, efficiently or effectively.

Opportunities

Primarily arise from the external environment, and refer to the chances of gaining competitive advantages.

More chance to make profit because of merging and different business line: Bank One has merged and acquired many other financial institutions as a result they can diversify their business and increase their profitability. These merging also helped the bank to increase its geographical areas for its branches. John B. McCoy, third generation of the banking family, became CEO in 1984. During his fifteen years at the helm, he acquired over 100 banks in the Midwest. He also bought over twenty failed banks and expanded into Texas in 1989. Two years later, the bank moved into Illinois. After that, it entered Arizona and Utah, mostly through stock-swap acquisitions. Its first international venture came with a development alliance with Banko Nacional de Mexico in 1992. In 1996, Bank One purchased Premier Bankorp, the number three bank in Louisiana. A year later, it added Liberty Bankorp, based in Oklahoma City.

Bank One was formed after a $29 billion merger in 1998 between Bank One of Columbus, OH and First Chicago NBD. Bank One had a large retail operation located primarily in the Midwest and Southwest. In contrast, First Chicago NBD’s strength lay in its long history of corporate lending to medium-sized manufacturers.

Bank One’s Commercial line of business operated in fourteen states in four regions: the West, South, Midwest, and East. The South region included Louisiana, Oklahoma, and Texas; while the West covered Arizona, Colorado, and Utah. The Midwest consisted of Illinois, Indiana, and Wisconsin, and the Eastern region covered Kentucky, Michigan, and Ohio.

The external uncontrollable variables that can create problems on organizational performances pose as Threats to business firms.

Many competitors against Bank One: Bank One had many different competitors, depending on the market. The competitors of Bank One in the Southern region’s Commercial line of business varied according to the market. For example, the competitors in Louisiana were local banks such as Whitney National Bank and Hibernia. In Dallas, the competitors were Chase, Bank of America, Wells Fargo, and Comerica. In Oklahoma, major competitors included Bank of America, Bank of Oklahoma, and Bank First. These were big companies in America which provides excellent service to the customers and can compete with the Bank one.

HUMAN RESOURCE ISSUES:

The HR department is the most essential department for any given organization. The human resources in other word employees are the key elements of any organization for any success that any organization wants to achieve. This is why if any organization is to function properly and look for the efficiency at the highest level, there is no alternative of establishing the HR department. Moreover, it is the responsibility of the human resource department to best utilize the human resources of the company.

BANK ONE

Bank One is the sixth largest bank in the U.S and has been operating in the banking industry since 1998. Jamie Dimon, the 2000’s newly appointed 44-year-old CEO of Bank One was faced with tremendous pressure and needs to improvise the customer services of the firm, his concerns regarding the company’s customer services exceeded than that of stock price.

Customer service was a top priority at Bank One, along with the following,

Financial discipline

System conversions

Building the management team

Integration of systems

Breaking down bureaucracy

Streamlining operations

At Bank One, after the new CEO was appointed, extensive progress was made in about 12-months time regarding building and renewing the infrastructure of customer services. The quality of customer services was appropriately tracked, measured and rewarded. And finally in 2001, the company improved their customer services through better systems and appropriate

THE AFTERMATH OF LAYING-OFF LABOR:

In the early stage after Dimon was appointed as the CEO of Bank One he removed about 8,000 jobs from the firm, cur down on labor and replaced twelve of the top-level HR Executives

To improvise the badly managed and poorly organized bank, Dimon eliminated about 8000 jobs. As a result, a large number of people became unemployed and if the bank does not compensate them well then those employees may bring the bank to court, which may affect the company’s image as well as be expensive for the company to deal with the problem. Even worse the fact that the bank is just simply laying off employees without any payment, which is against the employment law, may result in an order from the court to shut off the entire business.

EMPOWERMENT OF EMPLOYEES AND ITS POSITIVE EFFECTS ON THE FIRM:

It is vital for a firm’s employees to feel that they are being heard and their opinions and views are given equal importance to in the firm. The employees should be given an opportunity to prove themselves; they should be given enough space and room for growth and development. To boost their confidence they might as well participate in the company’s decision making process.

At Bank One there is some amount of delegation of authority. The employees in the field are given more authority and responsibility to work with their full potential. This gave the employees a sense of responsibility. They also promoted a feeling of ownership by giving a grant of $300 in Bank One stock to the 401(k) plans of almost 40,000 of its lower paid employees. As a result employees perform at their best.

Under Dimon’s leadership, employees were encouraged to be more open and passionate about their responsibilities. The employees were allowed to give their own opinions and ask questions if they had any to the management. Dimon made it a practice in the firm for the employees to know about their rights properly and practice them where necessary. Empowerment of the employees resulted in a great deal of employee motivation:

EMPLOYEE MOTIVATION:

At Bank One the employees shared a culture of integrity that is the moral principle, the fact of being honest and true to the organization. Integrity is widely recognized as the hallmark of the new CEO’s management style. The new CEO Jamie Dimon has been able to promote the organizational value by building in the employees a positive attitude towards Bank One. The employees all work but with honesty and complete dedication.

Management of the firm always strived to motivate the employees through:

An attractive profit sharing plan

An appropriate compensation package

Promoting communication

Teamwork

Empowering the employees

At times, people from different level of management or departments will have to work closely in order to resolve certain problems. Such teamwork built a bridge of communication all throughout the firm between the employees and the management.

EMPLOYEE PARTICIPATION IN THE BUREAUCRACY BUSTERS PROGRAM:

To establish a proper management within the firm bureaucracy was immediately needed to be reduced, along with which, employees learnt to be more efficient and responsible too.Soon after Dimon was appointed, Bank One formulated and introduced a Bureaucracy Busters Program. Under this program, employees were to invest money-saving ideas for the firm in an online suggestion box and were paid in return.

Later on, the program was renamed as The Idea Centre and more suggestions were encouraged to be put in order to improve the bank’s internal procedures which resulted in high employee participation and thus helped the management to communicate better with the workforce of the company.The employee participation in the Idea Centre resulted in greater employee dedication and they strived to be as competitive and hard-working and continuously providing with better performance.

THE COMPANY’S NEW PROFIT SHARING PLAN:

The management strived to assign more authority and responsibility to the workforce. Through an appropriate profit sharing plan this was possible to do so. Underpaid employees were given bonus to and most employees within other branches were allowed to share profits if earnings targets were met as instructed.

There are several reasons for linking employee compensation so closely with performance based compensation. First, because competencies must be demonstrable to serve as the basis for pay, they are closely linked to performance in order to be measurable. Second, competency based pay plans must have a performance element in order to motivate employees to demonstrate and develop competencies. Third, the design adds flexibility to employee benefits and increases the opportunities for other types of employee recognition and rewards.

Performance expectations are communicated among all the employees of the organization and evaluated in terms of critical competencies identified in the competency performance guidelines. Once this performance based profit sharing can be established, an employee’s productivity can increase a lot to the benefit of the organization itself.

TEAMWORK AND DECENTRALIZATION OF THE MANAGEMENT:

Integration and decentralization of the management were given prior importance too at Bank One and teamwork across departments and within business lines was encouraged and took place. At time, Corporate Bankers began to join Investment Managers on customer calls, which goes to show integration of authority from all levels was being practiced.

Team work was also efficient in providing the more satisfactory customer care services and solve all the problems more accurately. Mainly consultants work in team to solve customers’ problem and Bank One made a promise to its customers that they would receive individual answers to their requests and inquiries. Teamwork also helps better communication in a firm. It was a smart move for Bank one to encourage employees to

RECOMMENDATION:

After a rigorous analysis of the case from various perspectives, it is now time to recommend activities that will support the efforts of quality enhancement of customer service at Bank One. With a specific focus on Human Resource related issues for this report, here, actually the implications of human resource management in regard to compensation tools and techniques are discussed with more emphasis.

In this recommendations part, the scope of discussion is mostly confined within the ‘What’ and ‘Why’ (reason) parts of mentioned activities that the organization must undertake in order to operate successfully with a supportive human resource base for its customer service. That means, first it will be mentioned ‘what’ are to be done, and ‘why’ those are necessary. Later on, in the subsequent implementation section of the report, it will be discussed elaborately ‘how’ that can be done, along with ‘what else’ will be necessary to make them successful and effective.

However, along with recommendations for additional compensation tools, the intended compensation and reward plans that Bank One authority already planned to initiate is also covered within the plan. In such cases, recommendations are made to enhance their effectiveness.

RESTRUCTURING THE COMPENSATION PACKAGES:

Bank one needs to restructure its compensation packages for employees in order to get better performance. Performance comes first, could be the best strategy for current situation. Salary should be tied with performance. All types of increment and bonuses need to be based on performance. Merit based payment can encourage employees to work more to achieve more. Bank one should make their employees realize the greater benefits of company in order to get their personal benefits. Thus the employees will work hard and sincere to attain their personal goal. As their personal goal is a part of company goal, it would be a two way advantage or benefits.

BASIC CRITERIA OF CREATING COMPENSATION PACKAGE:

According to Patton, Compensation needs to satisfy eight characteristics. Those are given in the flow chart:

· Provident Fund: Provident fund can also be implemented in Bank One.Provident fund (PF) is the collective account of employee’s contribution and employer’s contribution. To be entitled for PF an employee has to work for full time continuous basis for minimum years, for example 7 years. For PF the bank will deduct a certain percentage, for example 15% of the basic salary from each employee and save it to PF account. When an employee is terminated or he retires from Bank One will be bound to pay the amount that are saved from the employee’s salary multiply the time he worked plus the equal amount from Bank One as employer’s contribution plus the current interest rate.
For example if an employee gets Tk.25, 000 basic salary then every month Bank One will deduct 15% of the basic salary means Tk.3750 and save it to PF and at the end of the month the employee will get Tk.21250 as his basic salary. If after 9 years the employee retires or terminated he will get Tk.3750*108(9years*12months) =Tk.405000 as employees contribution plus again Tk.405000 as employer’s contribution plus the present interest rate (suppose it is 10%) on the total amount means (405000+405000)*10%=Tk.81000.

It means he will get Tk.369600 from PF. If the employee leaves only one day before 7 years then he will only receive the employee’s contribution plus the interest rate for deposit. From the PF fund the employee will be able to take loan on the present interest rate. The interest that will earn by Bank One by lending the employee can be distributed among all the employees.

· Gratuity: For gratuity again Bank One can offer one-gratuity, two-gratuity or three-gratuity which are the different types of gratuity. An employee will entitle with gratuity if he works for a certain period of time for example 5 years. The amount of gratuity an employee will receive when he retires or terminated from Bank One will be last basic salary multiplied the number of years the employee worked. For example, if an employee retires after 7 years with a last basic salary of Tk.20000 then for gratuity he will receive (Tk.20000*7=) Tk.140000. For two-gratuity or three-gratuity the employee will get double or triple amount of the gratuity money.
· Medical care: Medical care should be available for all employees. Bank One can appoint a doctor permanently to check up the employees’ health on regular basis. Bank One can also facilitate a policy that after every three months each employee has to go through drug and alcohol test, which may keep away the employees from taking drugs and alcohol.
· Life Insurance: Bank one can provide life insurance facility for the managerial and executive people as well as the customer service

consultants. Bank One can deposit the insurance premium on behalf of the employees from their salaries.

· House-rent: It is an allowance for the employees. Bank One can provide a certain percentage of the house rent. For example, if the house-rent is Tk.20, 000 Bank One may provide 35% of the house-rent as allowance.
· Leaves: Bank one can offer different types of paid leaves to the employees. An employee can get 15 days casual leave in a year but not more than 3days continuously. If an employee will not be able to add unused casual leaves with the next year. Bank One should provide minimum 3 months maternity leave. The employee should have the right to choose when she wants to get the maternity leave is it before or after the delivery. Bank One should give annual leave for one day after every 11 days-generally this is the rule. If an employee does not use the leave then he can adjust with next year or he will be able to convert the leave into money. For example if an employee does not use 8 days annual leave his leave can be cashed by dividing the basic salary by 30 days and multiply by 8 days. For sick leave bank one can provide 100% treatment fees if it is a short time treatment but for the long term treatment an employee can negotiate with Bank One and can get a percentage of the total cost.
PURPOSE OF BENEFITS:

To promote better employer-employee relations
To promote employee loyalty to the company
To promote employee welfare
To meet legal requirements

CONSIDERATIONS WHILE MAKING COMPENSATION PLAN:

THE BASIC SALARY SHOULD BE ONLY A NOMINAL PART OF REWARD PLAN

The basic salary should only be a nominal part of the compensation package. Thus, if base salary is high at present, they can be lowered. This will help to reduce the fixed HR support cost over the longer period. That savings will give way to introduce other short term incentives and bonus payments. Also, this will help to reduce the possibility for basic salary to work as the sole instrument for employee retention without directly motivating performance.

INCREMENT SHOULD BE BASED ON MERIT PAY:

Along with the reduction in basic salary, the rate of increment in basic salary over time should be based on merit pay. After completing certain performance goals or completing some specific experience point or extraordinary contribution as well as completion of any training program can result into salary increase. However, in some cases, it can only amount to a onetime payment of a fixed sum.

The increment should not largely depend upon Cost of Living Adjustment (COLA) which is required to neutralize the downsizing pressure on income due to economic inflation. However, specific exception might apply. COLA should be generally avoided because in case of COLA there are chances the basic salary of an employee becomes overvalued in comparison with his/her individual contribution.

INTRODUCE GOAL ACHIEVEMENT INCENTIVE/BONUS:

To compensate for reduction in basic salary and increment, and at the same time, to encourage enhancement and timeliness of performance, such payment provisions for payment should be introduced that will become due upon achievement of assigned goals. However, it must be ensured that this payment method is applied upon those who are given specific objectives to attain from time to time within short periods.

INTRODUCE TEAMWORK REWARD AS GROUP INCENTIVES:

In most cases, banking tasks require teamwork. Therefore, employees must be motivated to practice team cohesion while working in projects. Teamwork rewards may effectively come into play to build and maintain team cohesion among them.

LONG TERM EMPLOYEE LOYALTY REWARD:

Employees who continue their job at Bank One for longer periods along with demonstrating desired performance level will receive such reward. This will help to boost their loyalty towards their employers.

FLEXI TIME:

Some consultancy jobs do not necessary need full time attendance from employees. Employees in such positions can be offered with flexi time benefits. However, they should be present in work for a core time period on workdays. This will help employees to schedule their personal involvements during off times. On the other hand, if more people are present in workplace at the same time, more utilities and resource are used by idle employees which may involve huge utilities expense without bringing in any significant return. Therefore, sorting their active times in more organized manner can help cut cost on such expenses on the part of the employers.

COMPENSATORY TIME OFF AND BONUS LEAVES:

Employees may be rewarded with compensatory time off and bonus leaves while at a particular time their contribution is not required by the firm. This will help them perceive that their employers hold a high level of empathy for them, which, in turn, will motivate them to a great extent. Also, banking professionals, especially consultants, possess such skill that they can utilize to work on part time basis in other organization during their off time and earn a good deal of money. This will offer them additional satisfaction from their jobs.

JOB SHARING AND TIME SHARING:

These can be another technique to accommodate employees with less supporting resources and at a lower cost. These arrangements will mostly work on the concept of part time job. These provisions will even encourage some workers to work as part time workers as support staff. This provision will attract competent employees who prefer flexibility in job arrangement, who otherwise would not join full time jobs at the bank.

ENHANCE THE EMPOWERMENT OF THE SERVICE CONSULTANTS:

To continue building quality into customer service, Bank One can improve the efficiency with the empowerment of service consultants. The Bank needs to raise the restrictions on transactions that how much or what amount a consultant can complete. Bank One should increase the autonomy of the consultants in problem solving. Consequently, the consultants will be able to fix the customer’s problems as quick as possible with proper consideration.

SERVICE CONSULTANTS SHOULD PRESENT THEMSELVES MORE PROFESSIONALLY:

Many organization give less importance to customer service consultants, in fact they are the most important link between the customer and the organization. To improve the customer service, at Bank One service consultants need to be viewed more as professional position like other employees of the bank. Service consultants should dress formally rather than casually, to differentiate them by their performance not by their dress-up. In today’s world, first impression is the most crucial thing that counts most.

TECHNOLOGY SHOULD IMPROVE TO SUPPORT THE CUSTOMERS MOST:

Bank One requires technology that is specific to customer service. They can execute front-end system, which will help them to access information of any customer without go through the different program applications of different branches. The newly developed technologies about this segment should adopt by the bank. The bank should provide the technology to the service consultants the ability to do the call tracking which would allow them to see the overall information of a particular customer and how many times the customer had called up the consultants. The bank can improve the customer service by adopting the new technology, which will help the consultants in doing their job.

The ‘quality’ culture will help Bank One in various ways. It will help to increase the morale of the employees and give them a strong feeling of belongingness, which will thereby in course of time become their collective identity. It is strongly believed that this, in turn, will encourage employees to put forth higher commitment to the quality of their work and due attachment to the company. Also, the cultural bonding will tie the employees together. It will lead them to hold more attentive attitude towards their quality of work of their co-workers. Thus, a collective accountability can be established.

Again, a culture of openness and proper communication will accelerate the free flow of information, knowledge and experience. Also, delegation of authority and decentralization should work up to their fullest extent.

EFFICIENT COMMUNICATION AND FREE FLOW OF INFORMATION:

The free flow of information and ideas among individuals and between the management and the employees is really necessary for an organization to work effectively and efficiently as well to progress and succeed in this competitive age of the business arena; especially it is essential in banking. It is crucial for TQM.

Without communication and mutual support among colleagues it is impossible for TQM to work properly. In that that the dream for quality will only remain in blueprints and will never turn out into reality. Reward and recognition for successful ideas and for facilitating smooth communication can be good means to encourage the employees to share their views and ideas with the management.

DECENTRALIZATION AND NEUTRALIZING STATUS QUO CONFLICTS:

Decentralization and delegation of authority is also needed to enable accountability and responsibility among the employees for TQM to be effective. This kind of empowerment is also needed to implement contingent work procedures and ideas, which can increase work efficiency, save cost and time.

Necessary power and authority should be delegated to the supervisors so that they can take important and urgent decisions without the feedback from the management on their own responsibility for which they will remain accountable. It can minimize the downtime, increase quality and productivity, and thus help to save cost.

Also, when people from different level of management will work together with free flow of communication, an invisible status quo will be maintained. Supervisors will automatically be held accountable for their juniors’ work and mistakes. Again, senior-junior relationship will work for reducing the status quo.

Along with previously mentioned considerations, the following compensation methods should be followed as basic guideline of the overall compensation planning. They are discussed

RECRUITING THE BEST EMPLOYEES BY FAIR RECRUITING PROCEDURE:

Bank One should follow a systematic recruitment process for hiring new employees. The bank should follow the following steps-

First, do employee planning and forecasting to determine the duties of the positions to fill. Then prepare job description and job specification.

Then build a pool of qualified candidates for jobs by recruiting internal and external candidates.

Fill out application forms and undergo initial screening process. For initial screening process, the bank can assign recruiting agencies or they can do it by their own HR department.

Utilize various types of selection test, such as, written test, background record checking, medical check-up etc.

Send the selected candidates after screening to the supervisor who is responsible for the job.

Arrange one or more interviews to find out the right person.

After selecting the right person create a record folder for the newly hired person and entry his educational background, job experience, background record, personal information etc.

INTRODUCING SIX SIGMA TO EVALUATE CUSTOMER SERVICE:

Six Sigma was originally developed as a set of practices designed to improve manufacturing processes and eliminate defects, but its application was subsequently extended to other types of business processes as well. In Six Sigma, a defect is defined as anything that could lead to customer dissatisfaction.

The particulars of the methodology were first formulated by Bill Smith at Motorola in 1986. Six Sigma was heavily inspired by six preceding decades of quality improvement methodologies such as quality control, TQM, and Zero Defects, based on the work of pioneers such as Shewhart, Deming, Juran, Ishikawa, Taguchi and others.

Like its predecessors, Six Sigma asserts that –

Continuous efforts to achieve stable and predictable process results (i.e. reduce process variation) are of vital importance to business success.
Manufacturing and business processes have characteristics that can be measured, analyzed, improved and controlled.
Achieving sustained quality improvement requires commitment from the entire organization, particularly from top-level management.
Features that set Six Sigma apart from previous quality improvement initiatives include –

A clear focus on achieving measurable and quantifiable financial returns from any Six Sigma project.
An increased emphasis on strong and passionate management leadership and support.
A special infrastructure of “Champions,” “Master Black Belts,” “Black Belts,” etc. to lead and implement the Six Sigma approach.
A clear commitment to making decisions on the basis of verifiable data, rather than assumptions and guesswork.

SIGMA LEVELS

Taking the 1.5 sigma shift into account, short-term sigma levels correspond to the following long-term DPMO values (one-sided):

One Sigma = 690,000 DPMO = 31% efficiency

Two Sigma = 308,000 DPMO = 69.2% efficiency

Three Sigma = 66,800 DPMO = 93.32% efficiency

Four Sigma = 6,210 DPMO = 99.379% efficiency

Five Sigma = 230 DPMO = 99.977% efficiency

Six Sigma = 3.4 DPMO = 99.9997% efficiency

This is actually a critical calculation which needs to be trained the employees. Sigma specialists can take an important role while implementing six sigma strategies.

IMPLEMENTATION:

RECRUITMENT PROCESS:

Bank One should follow a systematic recruitment process for hiring new employees. The bank should follow the following steps-

First, do employee planning and forecasting to determine the duties of the positions to fill. Then prepare job description and job specification.

Then build a pool of qualified candidates for jobs by recruiting internal and external candidates.

Fill out application forms and undergo initial screening process. For initial screening process, the bank can assign recruiting agencies or they can do it by their own HR department.

Utilize various types of selection test, such as, written test, background record checking, medical check-up etc.

Send the selected candidates after screening to the supervisor who is responsible for the job.

Arrange one or more interviews to find out the right person.

After selecting the right person create a record folder for the newly hired person and entry his educational background, job experience, background record, personal information etc.

By following these steps, Bank One can find appropriate person for any position in any states for any branch.

For forecasting, the supply of inside candidates, qualifications inventories can be used. Qualifications inventories is the manual or computerized systematic records listing employees’ education, career and development interests, language, special skills, and so on to be used in forecasting inside candidates for promotion.

For internal recruiting Bank One can also follow personal replacement chart or position replacement card type of instruments. Personal replacement chart shows the present performance and promo ability of the employees for the most important positions. Position replacement card prepared for every position of the company to show possible placements of candidates and their qualifications.

By all these steps, they can get a potential workforce from inside the organization. It is always better to recruit people from inside the organization. The current employees are aware of the organizational goals and objectives. They already know the rules and regulation and working systems of the company. They seem to be more loyal than newly hired employee is. Morale and performance enhance with the rewards. Employees are less likely to leave. Orientation and training need is less than the external recruiting. The disadvantage of internal recruiting is groups of employees might not be satisfied when candidates chosen from their own groups, jealousy may occur.

The supply of external candidates is forecast by the general economic conditions, local market conditions, and occupational market conditions. General economic conditions reflect the unemployment rate of the country. Local market conditions reflect the local labor market. Occupational market conditions show the demand and supply for a particular occupation; for example, demand and supply for BBA graduates.

The sources of external recruiting are advertisement on TV, online, newspapers etc, employment agencies, executive recruiters, college recruiting, referrals and walk-ins etc.

The advantages of external recruiting are variety of new skills, good for economy. If the bank goes for external recruiting they will get new skilled people who are aware of the new business concepts. Though external recruiting is expensive but it is good for the economy as it lowers the unemployment rate. A survey shows that shows that external recruiting cost about $13,000 where as internal recruiting cost much less than that.

The bank should not go for the temporary employees because they may not follow the working system as well as the morals of the bank. Business secretes may be disclosed to the competitors if part-time employees are hired. So, the bank should always go for stable employees.

Bank One should recruit either once in a year or twice in a year. The recruiting process should not be done frequently because it is very expensive. If all the employees work with full dedication for the recruiting process then it’s sure that the bank will get the right person for the right job.

TRAINING AND ORIENTATION PROGRAM:

Bank One should arrange training and development program for the whole workforce in the modern training process to keep improving their customer service quality.

Orientation is the first basic program that the new employees’ had to go through. In orientation the new employees get introduced with the goals, objectives, values, morals, missions and the basic background of the bank.

Training is the process of teaching new employees the basic skills they need to perform their job. Training is important because this is the basic program through which the management can make the employees work their way and not their own way. There are five steps of training process.

INSTRUCTIONAL DESIGN:

In instruction design the objectives of the training programs set up. In this step all the materials and required facilities are organize to provide the employees.

VALIDATION:

Before implementing any training program it’s validity must be checked through the respective authority, whether the training program is going to be successful or not.

IMPLEMENTATION

After checking the validity of training program the training program must be implemented in reasonable time.

EVALUATION AND FOLLOW UP

Evaluation of the training process can be done in the following ways:

REACTION — Response of the employees’ immediate reaction to the training

LEARNING — Human resource department has to identify what the employees had learned.

BEHAVIOUR — HR mangers have to measure the degree to which learners apply new skills and knowledge to their job.

RESULTS — The improvement in performance after the training should be measured.

Besides all these, Bank One has to settle on whether the current employees need any type of training or not. Those training can be both on the job and off the job training

On the job training is about training a person to learn a job while working on it.

On the other hand, off the job training is the training outside the office but about how to improve the performance.

CUSTOMER SERVICE TRAINING

Customer service training program will help the employees of Bank One to improve the customer service. Customer service training trains about how to deal with and solve problems for unhappy customers. This training should also provide along with the standard training program.

DIVERSITY TRAINING:

With an increasingly diversified workforce, many firms identify the need of diversity training. Diversity training is required not only for the new employees but also for the employers. Diversity training aims to create better cross-cultural sensitivity, with the aim of fostering more harmonious working relationships among a firm’s employees. According to one survey of HR directors, diversity based training programs include; improving interpersonal skills, understanding and valuing cultural differences, improving technical skills, socializing employees into the corporate culture; reducing stress, introducing new workers, improving English proficiency and improving basic bilingual

skills for English-speaking employees. Diversity training should be given at the beginning of the financial year.

BALANCE AND MAINTAIN INTERNAL AND EXTERNAL EQUITY:

The sense of equity is the balancing factor between contribution and compensation. If people find inequality between their compensation and performance, there are scopes for dissatisfaction. If they find inequity between their rewards and others’ for performing the same job, then again, there are scopes for conflict. Therefore, it is necessary to maintain a steady level of equity among the internal factors already mentioned.

On the other hand, if an organization pays substantially lower than industry average for a specific job, disloyalty may arise from the sense of external equity and employee turnover rate might soar. Therefore, focus should not only be on internal but also on external equity.

At Bank One, jobs should be ranked against relevant benchmark jobs both internally and externally. The performance standards should also be in place to benchmark performances. And after all, the bank employees must be motivated enough to achieve their benchmarked performance at least. The motivation process has to work on continuous basis rather than discrete. The sense of equity is such a motivating factor. As in the sense, when people get ‘more’ for doing ‘more’ they start believing that the more they give (contribution) the more they get (reward).

Salary Survey: In order to evaluate external equity regular salary survey for similar jobs must be conducted in regular intervals, within the commercial banking industry. Such survey can be passive secondary survey, moderate telephone and mail survey, or rigorous interactive survey depending on formal, standard and structured questionnaires or interviews. The feasibility of the involvement levels to be applied in such surveys will depend on budget constraints. As the survey is complete, redesign and modify the existing salary structure

PERFORMANCE APPRAISAL:

This is foundation for establishing internal equity. Within the organizational setup of Bank One, regular and formal (structured) appraisal must be carried out. The feedback should be also made available as quickly as possible. Feedback from employees must be collected to determine their level of job satisfaction, loyalty and motivation. Also, the appraisal process must be timely and accurate and free from bias or unfair favoritism. And the feedback should be in the form of corresponding reward as well as suggestions for corrective actions.

IMPLEMENT TQM CULTURE IN ALL ASPECTS OF COMMERCIAL CUSTOMER SERVICE AT BANK ONE

What is Total Quality Management?

Total Quality Management is a management approach that originated in the 1950’s and has steadily become more popular since the early 1980’s. Total Quality is a description of the culture, attitude and organization of a company that strives to provide customers with products and services that satisfy their needs. The culture requires quality in all aspects of the company’s operations, with processes being done right the first time and defects and waste eradicated from operations.

Total Quality Management (TQM) is a comprehensive and structured approach to organizational management that seeks to improve the quality of products and/or services through ongoing refinements in response to continuous feedback. TQM requirements may be defined separately for a particular organization or may be in adherence to established standards, such as the International Organization for Standardization’s ISO 9000 series.

TQM can be applied to any type of organization; it originated in the manufacturing sector and has since been adapted for use in almost every type of organization where quality of product or service is the core competence for attracting customer and the only means of business success, which is the case for Bank One. Indeed, as a current focus, TQM is based on quality management from the customer’s point of view.

TQM processes are divided into four sequential categories: plan, do, check, and act (the PDCA cycle):

In the planning phase, people define the problem to be addressed, collect relevant data, and ascertain the problem’s root cause.

In the doing phase, people develop and implement a solution, and decide upon a measurement to gauge its effectiveness.

In the checking phase, people confirm the results through before-and-after data comparison;

In the acting phase, people document their results, inform others about process changes, and make recommendations for the problem to be addressed in the next PDCA cycle.

To be successful implementing TQM, management as well as employees at Bank One will have to concentrate on eight key elements of TQM:

Ethics
Integrity
Trust
Training
Teamwork
Leadership
Recognition
Communication

The detailed description of these eight elements and their implication at Bank One are given next –

TQM is built on a foundation of ethics, integrity and trust. It fosters openness, fairness and sincerity and allows involvement by everyone. This is the key to unlocking the ultimate potential of TQM. These three elements move together, however, each element offers something different to the TQM concept.

1.Ethics

Ethics is the discipline concerned with good and bad in any situation. It is a two-faceted subject represented by organizational and individual ethics. At Bank One, management needs to focus more on establishing ‘organizational ethics’. They need to establish the business code of ethics that outlines guidelines that all employees of the bank, and especially direct customer service representatives, are to adhere to in the performance of their work. Individual ethics, however, include personal rights or wrongs and should be left out upon on the part of employees themselves.

2.Integrity

Integrity implies honesty, morals, values, fairness, and adherence to the facts and sincerity. The characteristic is what customers (both internal and external) expect and deserve to receive from the banking operations. People see the opposite of integrity as duplicity. TQM will not work in an atmosphere of duplicity.

3.Trust

Trust is a by-product of integrity and ethical conduct. Without trust, the framework of TQM cannot be built. Trust fosters full participation of all members in team work. Bank One management must carefully establish trust in the form of employee empowerment that encourages pride ownership as well as commitment.

Trust will allow decision making at appropriate level of Bank One’s organizational hierarchy, fosters individual risk-taking for continuous improvement and helps to ensure that measurements focus on improvement of process and are not used to contend people. Trust is essential to ensure customer satisfaction. So, trust builds the cooperative environment essential for TQM.

1.Training

Training is very important for employees to be highly productive. Supervisors are solely responsible for implementing TQM within their departments in order to suggested alignment strategy to succeed and prosper, and teaching their employees the philosophies of TQM.

Training that employees will require at Bank One to deal with TQM are interpersonal skills, the ability to function within teams, problem solving, decision making, job management performance analysis and improvement, business economics and technical skills. During the creation and formation of TQM, employees are trained so that they can become effective employees for the company.

5.Teamwork

To become successful in business, teamwork is also a key element of TQM. With the use of teams, the business will receive quicker and better solutions to problems. Teams also provide more permanent improvements in processes and operations. In teams, people feel more comfortable bringing up problems that may occur, and can get help from other team members to find a solution and put into place. There are mainly three types of teams that TQM process at need to adopt in its organizational culture of operations:

A. Quality Improvement Teams or Excellence Teams (QITS)

These are temporary teams with the purpose of dealing with specific problems that often re-occur. These teams are set up for period of three to twelve months.

B. Problem Solving Teams (PSTs)

These are temporary teams to solve certain problems and also to identify and overcome causes of problems. They generally last from one week to three months.

C. Natural Work Teams (NWTs)

These teams consist of small groups of competent and multiskilled employees who share tasks and responsibilities. These teams use concepts such as employee involvement teams, self-managing teams and quality circles. These teams generally work for one to two hours a week.

6.Leadership

It is possibly the most important element of TQM Bank One management need to focus on carefully to make the alignment strategy a success. Leadership in TQM will require managers to provide an inspiring vision, make strategic directions that are understood by all and to instill values that guide their subordinates.

For TQM to be successful at Bank One, the supervisors must be committed in leading their employees. The supervisors must understand TQM, believe in it and then demonstrate their belief and commitment through their daily practices of TQM. They are the people who will make sure that strategies, philosophies, values and goals are transmitted down through out the organization to provide focus, clarity and direction.

A key point is that TQM has to be originated among and led by top management of Bank One. Commitment and personal involvement is required from top management in creating and deploying clear quality values and goals consistent with the objectives of the company and in creating and deploying well defined systems, methods and performance measures for achieving those goals.

7. Communication

Communication is very important for TQM to be successful. Communication helps to bind everything together. Starting from foundation to roof of the TQM house at Bank One, everything will be bound by strong mortar of communication. It acts as a vital link between all elements of TQM.

Communication means a common understanding of ideas between the sender and the receiver. The success of TQM demands communication with and among all the organization members, suppliers and customers. Supervisors must keep open airways where employees can send and receive information about the TQM process. Communication coupled with the sharing of correct information is vital. For communication to be credible the message must be clear and receiver must interpret in the way the sender intended.

There are different ways of communication such as:

A. Downward communication

This is the most dominant form of communication in an organization. Presentations and discussions basically do it. By this the supervisors need to make their subordinates clear about TQM.

B. Upward communication

By this communication process the lower level of employees are able to provide suggestions to upper management of the effects of TQM. The more employees will provide insight and constructive criticism, the more vibrant the entire TQM process will be. Also, supervisors must listen effectively to correct the situation that comes about through the use of TQM. This forms a level of trust between supervisors and employees. This is also similar to empowering communication, where supervisors keep open ears and listen to others.

C. Sideways communication

This type of communication is important because it breaks down barriers between departments. It also allows dealing with customers in a more professional manner.

D. Inward and Outward communication

This is the communication process that is generated by the customers toward the employees (inward), and vice versa (outward). This will help to find out and overcome any existing loopholes in the service system that may give way to any form of customer dissatisfaction

8.Recognition

Recognition is the last and final element in the entire system. It should be provided for both suggestions and achievements for teams as well as individuals. Employees strive to receive recognition for themselves and their teams. Detecting and recognizing contributors is the most important job of a supervisor. As people are recognized, there can be huge changes in self-esteem, productivity, quality and the amount of effort exhorted to the task at hand. Recognition comes in its best form when it is immediately following an action that an employee has performed. Recognition comes in different ways, places and time such as,

Ways: It can be by way of personal letter from top management. Also by award banquets, plaques, trophies etc.
Places: Good performers can be recognized in front of departments, on performance boards and also in front of top management.
Time: Recognition can be given at any time like in staff meeting, annual award banquets, etc.
The Result

It can now be said that these eight elements are key in ensuring the success of TQM in an organization and that the supervisor is a huge part in developing these elements in the work place. Without these elements, the business entities cannot be successful TQM implementers. It is very clear from the above discussion that TQM without involving integrity, ethics and trust would be a great remiss, in fact it would be incomplete. Training is the key by which the organization creates a TQM environment. Leadership and teamwork go hand in hand.

Lack of communication between departments, supervisors and employees create a burden on the whole TQM process. Last but not the least, recognition should be given to people who contributed to the overall completed task. Hence, lead by example, train employees to provide a quality product, create an environment where there is no fear to share knowledge, and give credit where credit is due is the motto of a successful TQM organization.

COMPENSATION PACKAGE:

Bank One can offer pensions, provident fund, gratuity, medical care, house rent and life insurance in the job description when they decide to recruit people. Bank One must have to set the policy for these benefits; such as minimum working hours, what percentage of basic salary should be kept for Provident Fund, what type of employees are suitable for life insurance etc.

· Pensions: To avail pensions the employees must have to be in Bank One for a minimum time, for example 10 years. After 10 years if an employee get termination or he retires, Bank One has to give them a certain percentage, for example 20% of the employee’s last basic salary. If the employee dies the pensions will give to his or her family till his or her spouse is alive.
· Provident Fund: Provident fund can also be implemented in Bank One. Provident fund (PF) is the collective account of employee’s contribution and employer’s contribution. To be entitled for PF an employee has to work for full time continuous basis for minimum years, for example 7 years. For PF the bank will deduct a certain percentage, for example 15% of the basic salary from each employee and save it to PF account. When an employee is terminated or he retires from Bank One will be bound to pay the amount that are saved from the employee’s salary multiply the time he worked plus the equal amount from Bank One as employer’s contribution plus the current interest rate.
For example if an employee gets Tk.25, 000 basic salary then every month Bank One will deduct 15% of the basic salary means Tk.3750 and save it to PF and at the end of the month the employee will get Tk.21250 as his basic salary. If after 9 years the employee retires or terminated he will get Tk.3750*108(9years*12months) =Tk.405000 as employees contribution plus again Tk.405000 as employer’s contribution plus the present interest rate (suppose it is 10%) on the total amount means (405000+405000)*10%=Tk.81000.

It means he will get Tk.369600 from PF. If the employee leaves only one day before 7 years then he will only receive the employee’s contribution plus the interest rate for deposit. From the PF fund the employee will be able to take loan on the present interest rate. The interest that will earn by Bank One by lending the employee can be distributed among all the employees.

·Gratuity: For gratuity again Bank One can offer one-gratuity, two-gratuity or three-gratuity which are the different types of gratuity. An employee will entitle with gratuity if he works for a certain period of time for example 5 years. The amount of gratuity an employee will receive when he retires or terminated from Bank One will be last basic salary multiplied the number of years the employee worked. For example, if an employee retires after 7 years with a last basic salary of Tk.20000 then for gratuity he will receive (Tk.20000*7=) Tk.140000. For two-gratuity or three-gratuity the employee will get double or triple amount of the gratuity money.
·Medical care: Medical care should be available for all employees. Bank One can appoint a doctor permanently to check up the employees’ health on regular basis. Bank One can also facilitate a policy that after every three months each employee has to go through drug and alcohol test, which may keep away the employees from taking drugs and alcohol.
· Life Insurance: Bank One can provide life insurance facility for the managerial and executive people as well as the customer service consultants. Bank One can deposit the insurance premium on behalf of the employees from their salaries.
·House-rent: It is an allowance for the employees. Bank One can provide a certain percentage of the house rent. For example, if the house-rent is Tk.20, 000 Bank One may provide 35% of the house-rent as allowance.
·Leaves: Bank One can offer different types of paid leaves to the employees. An employee can get 7 days casual leave in a year but not more than 2 days continuously. If an employee will not be able to add unused casual leaves with the next year. Bank One should provide minimum 3 months maternity leave. The employee should have the right to choose when she wants to get the maternity leave is it before or after the delivery. Bank One should give annual leave for one day after every 11 days-generally this is the rule. If an employee does not use the leave then he can adjust with next year or he will be able to convert the leave into money.
For example if an employee does not use 8 days annual leave his leave can be cashed by dividing the basic salary by 30 days and multiply by 8 days. For sick leave bank One can provide 100% treatment fees if it is a short time treatment but for the long term treatment an employee can negotiate with Bank One and can get a percentage of the total cost.

BENEFITS AND SERVICES:

· Councilor: Bank one can have a councilor who will visit the office weekly and will assist the employees to solve their problems regarding personal and professional life.
·Care Centre: Bank one can start up a childcare and an old care centre beside the office to support the employees and they can charge a token amount for that service from the employees. If the childcare centre and old-care centre are beside the office then the employee can work tension freely. They can take their children or old parents with them and can leave them with the centre for the whole day and pick them up at the end of the day.

COMPENSATION OF THE LAID-OFF WORKFORCE:

Bank One can compensate the employees whom they are going to lay-off by giving them the next 3 months’ salary along with severance package at one shot during the time of lay-off. Bank can also try to transfer those employees in other departments by giving them the proper training but that policy is not cost saving.

FIXED STANDARD PERFORMANCE TO ACHIEVE THE DESIRED AMOUNT OF SUCCESS:

According to Jamie Dimon, desired percentage of success should be decided at the beginning of the year. To achieve the desired amount of success the standard performance level need to be set-up. A performance matrix system should be set up at the very outset; so that the success of each particular effort at improvement can be measured.

TRAINING TO EMPOWER THE SERVICE CONSULTANTS:

In the coming years Bank One can empower their service consultants to some extents where they can make decision on their own in serving potential customers, who have been helping them to generate more revenue over the previous years.

They can implement programs such as Worker Involvement program. This can help them to empower the service consultants. This is a program aims to boost organizational effectiveness by getting employees to participate in planning organizing and managing their jobs. An increasing number of firms and organization use work teams and empowerment to improve their effectiveness. They adopt teamwork as a value and then organize work around close-knit work teams empowered to get their job done, which means they have been given the authorization and the ability to do their jobs. Both the teams approach and worker empowerment are components of what many firms call worker involvement programs.

If Bank One wants to empower the employees they must always require extensive training. It is rarely enough to just tell group members that they are empowered to provide the customers with efficient service. Instead extensive training is required to ensure they have the skills to do the job. They can conduct some survey to identify their training needs at Bank One after every six months.

If any kind of training is required it can be provided then, where they can set some training objectives based on the current training needs of the service consultants. They can design the training program that may include lecture, Case study, and role-playing, and instruction to use latest financial soft wares. In case studies they can give the service consultants certain dilemmas relating to real life situations and asked them to solve it.

TRAINING TO DEVELOP PROFESSIONALISM:

After the completion of graduation program like an MBA or postgraduate degree from any discipline they learn a lot of theoretical knowledge. They do not get enough knowledge about how to deal with customers in the real situation professionally while they are working in an organization. It is the professionalism of these service providers or consultants that will attract customers towards their organization and hold on to them for longer periods of time. So Bank One could implement such a program that would help make their service consultants more professional towards dealing with customers.

Since they change their products very frequently, as well go for merging frequently. So they need to train their employees on professionalism after every six months. By professionalism Bank One tried to mean that service consultants would distinguish themselves by the way they performed, and not the way they dressed. Bank One could make their service consultants attend a special lecture, and also use audiovisual techniques to let the service consultants have a clearer idea on how to behave with the customers.

TRAINING ON NEW TECHNOLOGY:

Bank One has already earned a very good reputation of serving the customers properly. But the use of advance technology will enhance the way they could serve their customers. This type of technology can be used in security inside the bank, which will make the customers feel safe in the bank. They can also promote the use of software that is designed to develop the financial statements of the customers. As Bank One is used to merge with other banks frequently, they must be careful about their technology and should conduct proper training to use them. After every six months they can upgrade their security systems and relevant software like finger or Palm Scanning etc. As all the banking soft ware is developing frequently it will be wise for Bank One to train all the service consultants on the new soft ware.

IMPLEMENTATION OF CUSTOMER SERVICE INDEX:

CSI or customer satisfaction index is the measure of the satisfied customers among all the customers of a certain company. A customer can better say that whether he or she is satisfied or not. To know about the customers are satisfied or not, it’s better to make them answer of some predetermined question which is actually a quantitative market research. By this research a company can come to know how many customers are satisfied and how many are not. Basically those questions not only determine the percentage but also the specific criteria for which customers seem to be dissatisfied.

Many large companies are utilizing this strategy in order to know their customer satisfaction. In this case, as Bank one is losing its customer base because of their customer service, they should determine the reason behind it. Thus they can also through challenge to their customer service agents to overcome the problems. As this process is measurable, employees can feel the fairness of the procedure. Moreover by applying this survey, bank one may also know the position of other competitors.

The main advantages of this index are:

Knowing customer dissatisfaction criteria

Knowing the competitors situation

Measurable and very fair

Individual level improvement can be measured etc.

To implement CSI, first we need to hire a third party market research company who will help Bank One to get the result of market survey. They will conduct such kind of research once in a month. This result would be confidential and only Bank One official can observe and interpret this. This type of task could be done by, Nielsen or any other market research company.

This is really helpful to identify the present situation of the company. It is measurable and this procedure is also very equitable. So the employees can get the right direction of improving their service. Top management should come forward to take such an initiative. This is now high priority for the company. We see in the case that, their stock price is decreasing because of their customer dissatisfaction. So this index will help them out to tress the right problem and its necessary solution.

IMPLEMENTING SIX SIGMA SERVICE STANDARD AT BANK ONE:

Six Sigma is a business management strategy, initially implemented by Motorola that today enjoys widespread application in many sectors of industry.

Six Sigma seeks to improve quality of process outputs by identifying and removing the causes of defects (errors) and variation in manufacturing and business processes. It uses a set of quality management methods, including statistical methods, and creates a special infrastructure of people within the organization (“Black Belts” etc.) who are experts in these methods. Each Six Sigma project carried out within an organization follows a defined sequence of steps and has quantified financial targets (cost reduction or profit increase).

HISTORICAL OVERVIEW:

Six Sigma was originally developed as a set of practices designed to improve manufacturing processes and eliminate defects, but its application was subsequently extended to other types of business processes as well. In Six Sigma, a defect is defined as anything that could lead to customer dissatisfaction.

The particulars of the methodology were first formulated by Bill Smith at Motorola in 1986 Six Sigma was heavily inspired by six preceding decades of quality improvement methodologies such as quality control, TQM, and Zero Defects, based on the work of pioneers such as Shewhart, Deming, Juran, Ishikawa, Taguchi and others.

Like its predecessors, Six Sigma asserts that –

Continuous efforts to achieve stable and predictable process results (i.e. reduce process variation) are of vital importance to business success.
Manufacturing and business processes have characteristics that can be measured, analyzed, improved and controlled.
Achieving sustained quality improvement requires commitment from the entire organization, particularly from top-level management.

Features that set Six Sigma apart from previous quality improvement initiatives include –

A clear focus on achieving measurable and quantifiable financial returns from any Six Sigma project.
An increased emphasis on strong and passionate management leadership and support.
A special infrastructure of “Champions,” “Master Black Belts,” “Black Belts,” etc. to lead and implement the Six Sigma approach.
A clear commitment to making decisions on the basis of verifiable data, rather than assumptions and guesswork.
The term “Six Sigma” is derived from a field of statistics known as process capability studies. Originally, it referred to the ability of manufacturing processes to produce a very high proportion of output within specification. Processes that operate with “six sigma quality” over the short term are assumed to produce long-term defect levels below 3.4 defects per million opportunities (DPMO). Six Sigma’s implicit goal is to improve all processes to that level of quality or better.

Six Sigma is a registered service mark and trademark of Motorola, Inc. Motorola has reported over US$17 billion in savingsfrom Six Sigma as of 2006.

Other early adopters of Six Sigma who achieved well-publicized success include Honeywell (previously known as AlliedSignal) and General Electric, where the method was introduced by Jack Welch. By the late 1990s, about two-thirds of the Fortune 500 organizations had begun Six Sigma initiatives with the aim of reducing costs and improving quality.

In recent years, Six Sigma has sometimes been combined with lean manufacturing to yield a methodology named Lean Six Sigma.

ORIGIN AND MEANING OF THE TERM “SIX SIGMA PROCESS”

Graph of the normal distribution, which underlies the statistical assumptions of the Six Sigma model. The Greek letter σ marks the distance on the horizontal axis between the mean, µ, and the curve’s inflection point. The greater this distance is, the greater is the spread of values encountered. For the curve shown in red above, µ = 0 and σ = 1. The other curves illustrate different values of µ and σ.

Sigma (the lower-case Greek letter σ) is used to represent the standard deviation (a measure of variation) of a statistical population. The term “six sigma process” comes from the notion that if one has six standard deviations between the process mean and the nearest specification limit, there will be practically no items that fail to meet specifications. This is based on the calculation method employed in process capability studies.

In a capability study, the number of standard deviations between the process mean and the nearest specification limit is given in sigma units. As process standard deviation goes up, or the mean of the process moves away from the center of the tolerance, fewer standard deviations will fit between the mean and the nearest specification limit, decreasing the sigma number and increasing the likelihood of items outside specification.

ROLE OF THE 1.5 SIGMA SHIFT:

Experience has shown that in the long term, processes usually do not perform as well as they do in the short. As a result, the number of sigmas that will fit between the process mean and the nearest specification limit is likely to drop over time, compared to an initial short-term study. To account for this real-life increase in process variation over time, an empirically-based 1.5 sigma shift is introduced into the calculation. According to this idea, a process that fits six sigmas between the process mean and the nearest specification limit in a short-term study will in the long term only fit 4.5 sigmas – either because the process mean will move over time, or because the long-term standard deviation of the process will be greater than that observed in the short term, or both.

Hence the widely accepted definition of a six sigma process is one that produces 3.4 defective parts per million opportunities (DPMO). This is based on the fact that a process that is normally distributed will have 3.4 parts per million beyond a point that is 4.5 standard deviations above or below the mean (one-sided capability study). So the 3.4 DPMO of a “Six Sigma” process in fact corresponds to 4.5 sigmas, namely 6 sigmas minus the 1.5 sigma shift introduced to account for long-term variation. This is designed to prevent underestimation of the defect levels likely to be encountered in real-life operation.

SIGMA LEVELS:

Taking the 1.5 sigma shift into account, short-term sigma levels correspond to the following long-term DPMO values (one-sided):

One Sigma = 690,000 DPMO = 31% efficiency

Two Sigma = 308,000 DPMO = 69.2% efficiency

Three Sigma = 66,800 DPMO = 93.32% efficiency

Four Sigma = 6,210 DPMO = 99.379% efficiency

Five Sigma = 230 DPMO = 99.977% efficiency

Six Sigma = 3.4 DPMO = 99.9997% efficiency

METHODS:

Six Sigma has two key methods: DMAIC and DMADV, both inspired by Deming’s Plan-Do-Check-Act Cycle. DMAIC is used to improve an existing business process; DMADV is used to create new product or process designs.

DMAIC:

The basic method consists of the following five steps:

Define high-level project goals and the current process.
Measure key aspects of the current process and collect relevant data.
Analyze the data to verify cause-and-effect relationships. Determine what the relationships are, and attempt to ensure that all factors have been considered.
Improve or optimize the process based upon data analysis using techniques like Design of experiments.
Control to ensure that any deviations from target are corrected before they result in defects. Set up pilot runs to establish process capability, move on to production, set up control mechanisms and continuously monitor the process.
DMADV

The basic method consists of the following five steps:

Define design goals that are consistent with customer demands and the enterprise strategy.
Measure and identify CTQs (characteristics that are Critical to Quality), product capabilities, production process capability, and risks.
Analyze to develop and design alternatives, create a high-level design and evaluate design capability to select the best design.
Design details, optimize the design, and plan for design verification. This phase may require simulations.
Verify the design, set up pilot runs, implement the production process and hand it over to the process owners.
DMADV is also known as DFSS, an abbreviation of “Design For Six Sigma”.

IMPLEMENTATION ROLES:

One of the key innovations of Six Sigma is the professionalizing of quality management functions. Prior to Six Sigma, quality management in practice was largely relegated to the production floor and to statisticians in a separate quality department. Six Sigma borrows martial arts ranking terminology to define a hierarchy (and career path) that cuts across all business functions and a promotion path straight into the executive suite.

Six Sigma identifies several key roles for its successful implementation.

¨ Executive Leadership includes the CEO and other members of top management. They are responsible for setting up a vision for Six Sigma implementation. They also empower the other role holders with the freedom and resources to explore new ideas for breakthrough improvements.

¨ Champions are responsible for Six Sigma implementation across the organization in an integrated manner. The Executive Leadership draws them from upper management. Champions also act as mentors to Black Belts.

¨ Master Black Belts, identified by champions, act as in-house coaches on Six Sigma. They devote 100% of their time to Six Sigma. They assist champions and guide Black Belts and Green Belts. Apart from statistical tasks, their time is spent on ensuring consistent application of Six Sigma across various functions and departments.

¨ Black Belts operate under Master Black Belts to apply Six Sigma methodology to specific projects. They devote 100% of their time to Six Sigma. They primarily focus on Six Sigma project execution, whereas Champions and Master Black Belts focus on identifying projects/functions for Six Sigma.

¨ Green Belts are the employees who take up Six Sigma implementation along with their other job responsibilities. They operate under the guidance of Black Belts.

LACK OF ORIGINALITY:

Noted quality expert Joseph M. Juran has described Six Sigma as “a basic version of quality improvement,” stating that “there is nothing new there. It includes what we used to call facilitators. They’ve adopted more flamboyant terms, like belts with different colors. I think that concept has merit to set apart, to create specialists who can be very helpful. Again, that’s not a new idea. The American Society for Quality long ago established certificates, such as for reliability engineers.”

ROLE OF CONSULTANTS:

The use of “Black Belts” as itinerant change agents is controversial as it has created a cottage industry of training and certification. Critics argue there is overselling of Six Sigma by too great a number of consulting firms, many of which claim expertise in Six Sigma when they only have a rudimentary understanding of the tools and techniques involved.

The expansion of the various “Belts” to include “Green Belts,” “Master Black Belts” and “Gold Belts” is commonly seen as a parallel to the various “belt factories” that exist in martial arts.

POTENTIAL NEGATIVE EFFECTS:

A Fortune article stated that “of 58 large companies that have announced Six Sigma programs, 91 percent have trailed the S&P 500 since.” The statement is attributed to “an analysis by Charles Holland of consulting firm Qualpro (which espouses a competing quality-improvement process).” The gist of the article is that Six Sigma is effective at what it is intended to do, but that it is “narrowly designed to fix an existing process” and does not help in “coming up with new products or disruptive technologies.” Many of these claims have been argued as being in error or ill-informed.

A Business Week article says that James McNerney’s introduction of Six Sigma at 3M may have had the effect of stifling creativity. It cites two Wharton School professors who say that Six Sigma leads to incremental innovation at the expense of blue-sky work.

Training Program for the Bank One officials:

Six Sigma Yellow Belt
Three days Training Program. Yellow Belt typically has basic knowledge of Six Sigma, but does not lead projects on his or her own. The person, participates as a core team member on a project.
Six Sigma Green Belt
10 days training Program, followed by an exam. hese are trained Six Sigma professionals who work part time on improvement projects. They also lead process improvement projects.
Six Sigma Black Belt
10 days training Program, followed by an exam. Black belt certified personnel usually train other Six Sigma aspirants and Green Belt holders. Black belts usually take up responsibility as Six Sigma team leads on high impact six sigma projects.
Six Sigma Master Black Belt
An experienced six sigma individual who works on the six sigma strategy and roll out for an organization, and helps in project selection.

Here are some advantage of Implementing Six Sigma in Bank One:

Ensure world class service standard

Keeping promise of customers

Challenging for the customer service employees

Pure Satisfaction of the customers

Sigma standard service affiliation

Increase of stock price

The very best way of benchmarking customer service.

Commercial Customar Service at Bank One

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