case exercise: banca san giovanni – What do you consider to be the benefits and challenges posed by the new structure?

Case Exercise:Case Exercise: Case Exercise:Case Exercise: Case Exercise:Case Exercise: Banca San Giovanni Banca San Giovanni Banca San Giovanni Banca San Giovanni Banca San Giovanni Banca San Giovanni Banca San Giovanni Banca San Giovanni Banca San Giovanni Banca San Giovanni Banca San Giovanni Banca San Giovanni
Detailed Questions
1. Compare and contrast the existing and new Payment Operations structures.
2. What do you consider to be the benefits and challenges posed by the new structure?
Service Concept in Brief
Banca San Giovanni (BSG’s) service concept was changing from the inward-looking concept of providing best-in-class financial products, to a customer orientation based on a comprehensive service solution tailored to their needs, delivered by a trusted partner through a personalized relationship.
Concerns for the Traditional Operations
(Explanation to the role of operations is mentioned in the case.)
With customer confidence at an all time low, Banca San Giovanni (BSG) sought to strengthen customer relationships, as well as enhancing transparency and communication. At the same time, internal efficiencies would be pursued through scale economies and consolidation of operations.
This case study explores the challenge of meeting the following apparently conflicting objectives:
i. Cost efficiency versus service differentiation
ii. Scale economies versus product customisation
iii. High volume processing with high-variety service delivery.
Banca San Giovanni (BSG’s) strategy of re-organising the branch network and introducing a Middle Office appears to be based on a move away from the volume–variety diagonal (refer to volume–variety matrix (VVM), Figure 8.1 in the text book).

Assessment
This raises the queries: i) whether this is a successful example of the application of mass customisation in financial services?
ii) whether this repositioning will lead to unwanted costs and/or disadvantages associated with its drifting toward the top right corner of the volume–variety diagonal?
 Questions for Assessment
1. Compare and contrast the existing and new Payment Operations structures.
The following table summarises the key differences in service delivery in the ‘as is’ and new model.
 Table 1: Comparison of traditional branch network and redesign based on mass customisation strategy

Traditional branch network: “as-is” model
New model
Client contact
Multiple client contact points make for relationship complexity with customers
Fewer sales contact points and simpler interfaces
Specialist skills
Located in the large branches
Located in medium and large branches and in Middle Office Client Facing (MOCF)
Staff discretion
RMs and specialists have discretion in the large branches.
High discretion given to Middle Office Client Facing (MOCF) staff.
A reduction in discretion levels given to former specialists in the large branches.
Lower skilled branch staff in the smaller branches now have more discretion, supported by flexible information technology
Personalisation of service
Client perceives highly personalised service
Perceived reduction in personalisation because many decisions are referred to the back office remote from customers
Expertise
Accumulation of local regional knowledge
Less scope for development of local knowledge
Organisational learning
Difficult to spread learning local expertise across the organisation
More scope for organisational learning through centralisation of expertise
Consistency of service
Can vary between branches due to accumulation of different local expertise
Higher level of consistency across branch network
Perceived quality of service
High in branches which deploy specialists; but low in the large number of small branches where there are no specialists
Higher in the branches which previously had no specialists
Lower in the much small number of branches which did

2. What do you consider to be the benefits and challenges posed by the new structure? The intended benefits of the new structure can be summarised as follows: Reduced cost:
 Scale economies gained through reduction in the number of Centralised Territorial Back Offices decreased from 24 to 6.
 Reduced number of specialists in the branches.
 Reduced skill levels, discretion and expertise deployed in branches.
 Centralisation of specialist expertise in the Middle Offices to gain scale economies.
 Simplification and streamlining of the product line. The rationalisation of the product line led to a 51% decrease of products offered to customers without affecting the coverage of the product line. Improved service delivery:
 Greater consistency in service delivery across the regions.
 Perceived customisation of products and services delivered by branch staff with the support of modularised Internet-based products.
 Higher level of expertise developed in Middle Offices.
However, the new structure also posed many challenges in terms of implementation.
 The costs and time take to train staff in their new roles and responsibilities were seriously underestimated. Front-line personnel were required to develop communication and relational aptitudes, in addition to increasing ‘technical’ competence.
 Staff attitudes towards the changes in roles and responsibilities met with considerable resistance to change. For Product Specialists who were asked to move into the Middle Office, there were frustrations involved in changing their roles from selling and managing public relations to the more limited and sporadic contact with customers, which was always mediated by the Relationship Manager (RMs) and subject matter specialists.
 Product Specialists would move into Operations, while they were expected to perform a critical role in supporting both Sales and Marketing functions. The idea was that their knowledge could be fed into product conception and development processes, while delivery outcomes would be reported back to product designers so as to refine product development and marketing mix decisions.
 The re-organisation implied relocation of many staff across Italy was perceived as unwelcome change (because this meant moves of staff’s homes and/or they need to take long commutes). There was considerable resistance from staff to relocate to/from branches to the Middle Office Client Facing (MOCF) since the bank had previously already undergone a major re-organisation.
 From a business and social perspective, the provision of providing customer service from remote centres potentially endangered the distinctive capabilities related to deep territorial roots and local insights. Customers would be faced by both Local Relationship Manager (RMs) and remote Product Specialists who might indeed provide highly specialized services but may well be unaware of specific requirements for cultural rather than technical reasons.

 

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