Introduction
OCBC Bank has been operating in Malaysia for more than seven decades and is today one of the top five foreign banks in the country. It has a staff strength of over 4,000 employees and a network of 29 conventional banking branches and five Islamic ones, offering a range of specialist financial services that includes consumer, corporate, investment, premier and transaction banking, as well as global treasury services to meet the needs of its customers across communities.
OCBC Bank, established in 1912, is the second largest financial services group in Southeast Asia by assets. It is among the world's highest rated banks, with a long term credit rating of Aa1 from Moody's. OCBC Bank and its subsidiaries offer a broad array of specialist financial services, ranging from consumer, corporate, investment, private and transaction banking to treasury, insurance, asset management and stock broking services.
OCBC Bank's key markets are Singapore, Malaysia, Indonesia and Greater China. It has a network of more than 530 branches and representative offices in 15 countries and territories, including 411 branches and offices in Indonesia operated by its subsidiary, Bank OCBC NISP.
OCBC Bank's insurance subsidiary, Great Eastern Holdings, is the largest insurance group in Singapore and Malaysia by assets, and its asset management subsidiary, Lion Global Investors, is one of the largest private sector asset management companies in Southeast Asia.
OCBC Bank offers Islamic banking products and services in Malaysia through its wholly-owned subsidiary, OCBC Al-Amin Bank Berhad.
OCBC Organization
OCBC Bank offers a comprehensive range of innovative banking services and financial solutions in consumer banking, business banking, investment banking, global treasury, and investment management, among others. In addition, the OCBC Group has diverse subsidiaries that are involved in insurance, financial futures; regional stock broking; asset management, trustee, nominee and custodian services; property development and hotel management.
Consumer Banking
Business Banking
Investment Banking
Islamic Banking
Transaction Banking
Treasury
Type of Business Strategy
The New Horizons strategy announced in February 2003, there are three-year plan to seek international growth via a build-and-transfer approach, and to build a high performance bank through a balanced business scorecard approach.
Seeking International Growth
OCBC Bank will strengthen its market position in two existing core markets of Singapore and Malaysia, and use this as a platform to transfer successful business models and product solutions to other ASEAN countries and China. The bank aim is to establish a presence in a third country in 2005, and be poised to add another country, by 2006.
Building a high performance bank
Customers
OCBC Bank aim to expand their consumer and SME customer base, and to become a Top 3 consumer and SME bank in the combined Singapore-Malaysia market by 2005.
Risk Management
OCBC Bank will build their consumer and business loan books prudently, and continually improve the credit processes to maintain a sound credit portfolio and a strong credit rating.
Product
OCBC Bank will build best-in-class products and target 15% revenue contribution from new products annually. In the combined Singapore-Malaysia market, The bank aim to be Top 3 in wealth management, transaction banking, treasury and investment banking.
Shareholder Value
OCBC Bank aim to achieve 10% earnings per share growth annually, a minimum dividend payout of 25% of core earnings, and a 12% ROE by 2005. The bank will seek to swap non-core assets for core financial services growth opportunities, and to return excess capital to shareholders via share buyback programmed.
People
OCBC Bank will develop and foster human capital, and seek to have at least 30% of the bank employees as shareholders by 2005.
Productivity
OCBC Bank will improve cross functional processes to lower the bank unit costs and become an efficient, low cost service provider.
Roles of Human Resource Department
HR is constantly looking for exceptional individuals to join the team in building a high performance bank.
The Bank provide employee with challenging and rewarding opportunities and create a work environment that support and help realize employee fullest potential.
Human Resources are a philosophy that nurtures the individual by recognizing employee unique worth and integrity. OCBC embody the shared values of treating each other with the greatest respect and supporting one another to achieve organization goals.
In the process, the bank recognizes, identify and reward talent for outstanding performance.
OCBC Bank offer:
Market Competitive Remuneration Package
Flexible Lifestyle Benefits Program
Comprehensive Training Program
Equity Ownership Program
Cross Border/Functional Exposure
Continuing Education Schemes
Analysis of the Business Strategies Adopted by an Organization
OCBC Bank has a dominant presence in both the consumer and business banking segments in Singapore and Malaysia. Its insurance subsidiary, Great Eastern Holdings, is the largest insurance group in Singapore and Malaysia in terms of assets and market share.
The bank's core banking (deposits and loans) operations have been exhibiting decent growth for the last five years ending 2007. Deposits registered a CAGR of 13.52% over 2003 to touch RM58.96 billion in 2007. Similarly, loans registered a CAGR of 15.6% over 2003 to touch RM47.36 billion in 2007.
OCBC Bank's NPL (non performing loans) have been continuously declining since 2003. The bank's NPL fell from RM2, 546 million in 2006 to RM899 million in 2007. In 2008, OCBC Bank reported a 4% fall in net profit to RM622 million for the first quarter, primarily due to its exposure to US sub-prime mortgage assets.
Customers
OCBC Bank will make their customers feel like they have a personal relationship with or are having a personalized experience when they use or speak with their bank can greatly improve bank customer satisfaction.
Long wait times on the phone or ATM and other banking fees may include some of the reasons that customers do not trust banks and are disgruntled. Bank surveys should aim to understand what aspects of their business they are doing well and what aspects of their business need improvement.
OCBC bank will earn from the best. Looking at competitors or even looking at other business service providers that show customers they care is a great way to begin to change a customer-business relationship.
Risk Management
The banking industry is clearly evolving to a higher level of risk management techniques and approaches than had been in place in the past. Yet, as this review indicates, there is significant room for improvement. Before the areas of potential value added are enumerated, however, it is worthwhile to reiterate an earlier point. The risk management techniques reviewed here are not the average, but the techniques used by firms at the higher end of the market. The risk management approaches at smaller institutions, as well as larger but relatively less sophisticated ones, are less precise and significantly less analytic. In some cases they would need substantial upgrading to reach the level of those reported here. Accordingly, our review should be viewed as a glimpse at best practice, not average practices. Nonetheless, the techniques employed by those that define the industry standard could use some improvement. By category, recommended areas where additional analytic work would be desirable are listed below.
Credit Risk
Interest/Profit Rate Risk
Foreign Exchange Risk
Liquidity Risk
Other Risks
Aggregation Risks
Product
OCBC Bank's consumer banking thrust will centre on distribution, product and portfolio management, customer engagement and expense control. In striving for a stronger distribution network, they will continue to focus on the productivity and redeployment of their sales force via a multi-channel distribution model and mobilize alternative channels and business partners to expand customer reach. To better manage of the products and portfolio, it will be even more critical about consumer product relevance with the goal of owning targeted segments and categories, innovate on product bundling, seeking opportunities for new fee-based income opportunities. It will move ahead with the branch transformation initiative to enhance customer experience, redefine and refine the business and customer engagement model to achieve higher product penetration and cross selling successes, leverage on the call centre capability, and enhance value proposition to focus on banking convenience to capture market share in the mass affluent segment. In view of the unfavorable economic climate, several expense controls measures would be put in place, including tightening management of direct expenses, assembling a task force to seek out expense-saving opportunities, working with business partners to optimize marketing and promotional spend, and spending smartly on new business investments and opportunities.
Shareholder Value
For a publicly traded company such as banks, Shareholder Value (SV) is the part of its capitalization that is equity as opposed to long-term debt. In the case of only one type of stock, this would roughly be the number of outstanding shares times current share price. Things like dividends augment shareholder value while issuing of shares (stock options) lower it. This Shareholder value added should be compared to average/required increase in value, aka cost of capital.
This management principle, also known under value based management, states that management should first and foremost consider the interests of shareholders in its business decisions, although this is built into the legal premise of a publicly traded company.
As shareholder value is difficult to influence directly by any manager, it is usually broken down in components, so called value drivers. A widely used model comprises 7 drivers of shareholder value, giving some guidance to managers:
Revenue
Operating Margin
Cash Tax Rate
Incremental Capital Expenditure
Investment in Working Capital
Cost of Capital
Competitive Advantage Period
People
In its effort towards shifting to a knowledge-based employee, OCBC main responsibility lies with the development of human and intellectual capital to produce adequate supply of, support and sustain a flexible, agile, and mobile workforce with relevant knowledge and skills. One important if not the most important variable of human capital is education and training which can be measured in several ways including expenditure on education and training, expenditure on education and training as a representative of human capital variable is significantly related to economic growth variable represented by Growth Domestic Product.
Productivity
OCBC Bank's payment and e-banking operations office has an impressively low staff turnover rate of 3% to 4% yearly.
It's constantly keeps track of the employees' overtime levels, as the bank believes "in proper work-life balance to keep employees satisfied". It's also ensure the organizational structure is "sustainable" is in putting the people, technology and processes together.
OCBC Banks offer many different channels to access their banking and other services:
ATM is a machine that dispenses cash and sometimes takes deposits without the need for a human bank teller. Some ATMs provide additional services.
A branch is a retail location
Call center
Mail: most banks accept check deposits via mail and use mail to communicate to their customers, e.g. by sending out statements
Mobile banking is a method of using one's mobile phone to conduct banking transactions
Online banking is a term used for performing transactions, payments etc. over the Internet
Relationship Managers, mostly for private banking or business banking, often visiting customers at their homes or businesses
Evaluation of the roles played by the company's HRD to support the business strategies
For HR to play significant role in business strategy, it must focus on longer term of implications of HR related issues. It requires high level of professional and business knowledge.
1. Enhancing Organizational Performance
It can be seen in how effectively the product and services of the bank are delivered to the customers. The department design, produce and delivers skill employee for those services.
2. Involvement in Strategic Planning
Human resource must be viewed in the same context as others managing department in the bank. For instance, the strategic planning for opening more numbers of branches in new areas, HR will provide the information on workforce availability and pay rates for each of the areas recommended consistence with the financial plans being considered.
3. Decision Making on Mergers, Acquisitions, and Downsizing
In many organizations today, banks are merging with or acquiring other firms. All of these mergers and acquisitions numerous HR issues are associated with combining organizational cultures and operations related.
4. Redesigning Organizations and Work Process
The bank structure follows strategic planning such as Al-Amin branches which the implications on how work is divided into jobs which drives toward its strategic plans and goals. Human Resource must work together with operating executives and managers to analyze and understand the strengths and weakness and must be able to revise the organization and its components.
5. Ensuring Financial Accountability for HR Results
A final part of the HR management link to bank performance is to demonstrate on a continuing basis that HR activities and efforts contribute to the financial results of the bank.
Recommendation: suggestions for improvement of HRD
1. Get the 'big picture'
Understand the business strategy.
Highlight the key driving forces of the business. What are they? e.g. technology, distribution, competition, the markets.
What are the implications of the driving forces for the people side of the business?
What is the fundamental people contribution to bottom line business performance?
2. Develop a Mission Statement or Statement of Intent
That relates to the people side of the business.
Do not be put off by negative reactions to the words or references to idealistic statements - it is the actual process of thinking through the issues in a formal and explicit manner that is important.
What do the people contribute?
3. Conduct a SWOT analysis of the organization
Focus on the internal strengths and weaknesses of the people side of the business.
Consider the current skill and capability issues.
Vigorously research the external business and market environment. Highlight the opportunities and threats relating to the people side of the business.
What impact will/ might they have on business performance?
Consider skill shortages?
The impact of new technology on staffing levels?
From this analysis, then review the capability of the personnel department. Complete a SWOT analysis of the department - consider in detail the department's current areas of operation, the service levels and competences of personnel staff.
4. Conduct a detailed human resources analysis
Concentrate on the organization's COPS (culture, organization, people, HR systems)
Consider: Where you are now? Where do you want to be?
What gaps exists between the reality of where you are now and where you want to be?
Exhaust the analysis of the four dimensions.
5. Determine critical people issues
Go back to the business strategy and examine it against the SWOT and COPS Analysis
Identify the critical people issues namely those people issues that must be address. Those which have a key impact on the delivery of the business strategy.
Prioritize the critical people issues. What will happen if you fail to address them?
Remember you are trying to identify where you should be focusing your efforts and resources.
6. Develop consequences and solutions
For each critical issue highlight the options for managerial action generate, elaborate and create - don't go for the obvious. This is an important step as frequently people jump for the known rather than challenge existing assumptions about the way things have been done in the past. Think about the consequences of taking various courses of action.
Consider the mix of HR systems needed to address the issues. Do you need to improve communications, training or pay?
What are the implications for the business and the personnel function?
Once you have worked through the process it should then be possible to translate the action plan into broad objectives. These will need to be broken down into the specialist HR Systems areas of:
employee training and development
management development
organization development
performance appraisal
employee reward
employee selection and recruitment
manpower planning
communication
Develop the action plan around the critical issues. Set targets and dates for the accomplishment of the key objectives.
7. Implementation and evaluation of the action plans
The ultimate purpose of developing a human resource strategy is to ensure that the objectives set are mutually supportive so that the reward and payment systems are integrated with employee training and career development plans.
There is very little value or benefit in training people only to then frustrate them through a failure to provide ample career and development opportunities.
Conclusion
This assignment has examined the strategic roles assumed by HRD functions that offer a key contribution to its organizations - the development of employee expertise that is vital to optimal business performance. HRD has been traditionally relied upon to serve in roles that are supportive of the strategies chosen to guide organizations. Although the supporting role of HRD is important for operational success in assuring the employee competence to meet present performance demands, HRD can offer even greater strategic value as a key determinant of business strategy. The centrality of information technology to business success and the potential for sustainable competitive advantage through employee expertise have underscored the increasing strategic value of HRD. HRD has been a key enabling force in strategies based on product innovation, quality and cost leadership, customized service, and strategies for global relocation based on workforce skills.
In summary, HRD that seeks to deliver employee expertise of genuine strategic value to the organization must adopt a systemic perspective of its role and demonstrate the strategic attributes discussed in this assignment. These strategic attributes are reflected in HRD that: (a) is performance-based; (b) demonstrates strategic capability; and (c) is responsive to the emergent nature of strategy.
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