Managing Organizational Transformation
(The Case of Kasikorn Bank)
In the presence of globalization and the broader understanding of business, organizational changes have become the topic that caught the interest of many business practitioners. It has been realized that the world of business is changing in a more rapid rate than we have ever seen. Technology is mentioned as the most powerful catalyst that generates such rapid changes in business and economy. Human minds and cultures have also played significant role to create such a condition. People are now more receptive to changes that ever before.
Changes are no longer seen as a threat but instead as a tool of progress. In previous eras, it took decades and even ages for a society to leap from a certain technological era to another. Today technological and social revolution occurs much more often. It takes years and not decades for medical experts to launch new generations of medical treatments, it takes a few months and not years to gave birth and market new generations of airplanes, trains and automobiles, and it takes weeks and not months to witness the coming of a new trend in communication technology.
Change however, has never been seen as an easy process. In previous times, changes in business and economy are generally characterized by the death of powerful organizations and the rise of others (Ackerman, 1984.). This describes what an awful process ‘change’ could be. Nevertheless, organizational breakdowns are no longer the characteristic of business and economy today, especially with ‘revolutions’ taking place each week. Today, managers and business owners are more determined to survive from all changes in business and economy, no matter how fundamental they could be and how often they could take place.
In this paper, I am discussing the case of Kasikorn Bank, an organization who has been and still struggling to survive the environmental changes by initiating organizational changes. The paper will discuss theories of organizational changes from various perspectives and how it is implemented in Kasikorn’s effort of managing its organizational changes.
II. Theories on Managing Organizational Transformation
There are various theories that guide managers in managing organizational transformation. In this paper, I will mention some of the core principals in organizational transformation as a guideline to evaluate how Kasikorn has managed their transformation projects.
II.1. Nature of Organizational Transformation
The modern business environment has a tendency of making managers and business owners preparing for small and large organizational transformation most of the time. This generates the image that modern business people are accustomed to changes and they are no longer bothered by it. This is by far an over estimated assumption. Spiritually speaking, the principal characteristic of human psychology is resistant to changes.
According to experts in business psychology, changes, whether they are small or fundamental, are never voluntary. The nature of human behavior is to seek comfort from stability and familiar conditions. Changes disrupt such process and generate personal discomfort for most people (Adams, 1984; Bolman, 1995).
Both personal and organizational changes are performed as necessities rather than voluntary options. The presence of threats is the catalyst of transformation. Organizationally speaking, these threats can be in the form of:
· Financial or legal distress
Companies choose to perform organizational changes rather than facing disappointed shareholders or suffering from continued losses and slowly loosing the business. This is the most apparent form of threats that leads to business transformation.
Companies facing cutthroat competitions generally choose to restructure their organization. In this case, changes are performed in order to re-fit organizational focus and strengthen organizational competitive advantages.
· The Need for Growth
There is a famous saying which is often used to describe the character of business: ‘expand (grow) or die’. Successful companies do not stop restructuring their organization because they want the business to grow continuously.
In the light of this nature of human and organizational psychology, managers and business owners must understand that they will always face resistance when promoting an organizational reformation project. Strategic planning are required to market such project internally and make such changes less disruptive or easier to accept.
II.2. Managing Changes
As mentioned, it would be easier to manage organizational transformation when managers have a proven strategy or structured method that guides them in their actions. These are the general steps taken by professional managers when undertaking organizational transformation:
· Evaluating existing problems
This includes examining the business internally and externally. Managers must have a thorough understanding of the problem before performing any other action. The help of external specialist is very much recommended in this step.
· Developing a plan
After getting the sufficient knowledge regarding the business and its internal or external challenges, managers should share their thoughts with shareholders, other managers, staff and important third parties to generate a plan that would receive everyone’s support.
· Realign teams
This means reorganizing the entire corporate human resources. The process generally starts with evaluating existing teams and their performance. The next step is replacing weak members of the team and eliminating unnecessary positions.
· Restructuring debts
Next, the company should evaluate their capital arrangements. This particular step usually constitutes massive external cooperation, whether as consultative assistance or capital contributing assistance. In addition to restructuring internal capital, aggressive marketing and good promotional campaign are sometimes necessary to gain new partnership relations.
· Executing the vision
The biggest concern in managing organizational transformation is generally cost-related. Some suggestions in executing the project are: building intimate relationship with a number of investors and vendors to lower costs; do not hesitate to shift financial resources and personnel to posts that generates the most money; maintain high customer service standards, especially when answering questions regarding the transformation process; consider partnering with other companies; create an entirely new policies and procedures to generate an atmosphere of changes (Banner, 1995).
II.3. Important Factors in Managing Strategic Initiatives
Besides the steps elaborated above, there are other principles that will make the transformation process comes easier. Some of them are:
· Adopting a disciplined process
Due to unexpected events, companies generally fail to comply with their theoretical guidelines in practice. It is important to avoid such occurrences to ensure the achievement of corporate strategic objectives at the lowest expenses possible, whether they are financial or human resource expenses.
· Avoid Complexity
Most strategic change initiatives are considerably complex. However, to plan and control the process effectively, complex initiatives must be decomposed to achievable measurable and work packages.
· Empower Teams
Together with the strategic initiatives, managerial and operational teams are all corporate investments. There must be a capable implementation manager, whose job is to ensure that corporate teams all well supplied and supported within their workings.
· Establish, Measure and Monitor Vital Signs
A good way to measure the progress of transformational processes is by defining vital signs of the project. They can be in the form of milestones, costs, apparent issues, variances, etc. Once these vital signs are identified, they must provide managers with warnings when the project is off course or behind schedule.
· Transparency to Shareholders
There are many causes of failure in transformation processes; one of them is being stopped before completion. This is why communicating to shareholders is as crucial as achieving the goal itself.
· Institutionalize the process
Promoting the transformation project to all members of organization and placing them as a necessary and integral part of daily operations will help the project to gain support from employees. Placing the project as an ‘additional program’ will generate the image that management is adding weight to an already burdensome workload.
(Bounds, 2000; ‘Success Factors’, 2007)
III. Organizational Background
Kasikorn bank is the one of the four largest banks in Thailand in terms of assets. The company started in 1945 with a registered 5 million as capital, but was not registered in the Stock Market of Thailand (SET) until 1976. The company was established by a family named Lamsam, who posses approximately 5% stake of the company today, but remain an active spokesperson for the company. The company provides a broad set of banking services to individual and corporate consumers, like lending and investment. Today, the company operates more than 500 branches, including branches in 76 provinces of Thailand and overseas branches like Los Angeles, Cayman Islands, Hong Kong, Shenzen, Beijing, Shanghai and Kunming.
Despite its current reputation, the company has had quite a struggle in its earlier years on the business, especially in the late 90’s. The Asian Economic Crisis in 1997 was affecting the Thai economy like most of other Asian economies. It causes degradation of the banking and other businesses in the region, causing even some of the largest banks in Asia to go out of business. For the surviving businesses however, the economic crisis has seem to be seen as a motivational tool toward reformation and advancement. Along with the economy, after the crisis, Kasikorn bank undertake quite a reform action which involves internationalization, internal restructuring, collaboration, branding and positioning and a number of other changes in order to rebuild the business.
In this paper I will discuss the organizational transformation steps performed by the Kasikorn banks in different aspects of its business and evaluate each of them based on theories of organizational changes and transformation. The result will be an overall review of how Kasikorn banks manage the organizational transformation processes within its organization.
IV. Kasikorn Bank and External Environment
As mentioned previously, the economic crisis in Asia generated a harsh condition for Kasikorn bank and its neighboring local banks. Most of these local banks were dragged to a desperate fight for business survival, characterized by cost cutting debt restructuring and capital calls. Nevertheless, the surviving banks entered a new environment starting from the year 2000. Starting from the new millennium, Thailand banks entered another phase within the industry which includes periods of expansions, repositioning and internal restructuring (‘Major Changes’, 2004).
Along with the rise of the industry, competitions have increased significantly. Government enacts new regulations and laws that impose new implications for the Thailand banking industry. New and old companies were racing to take advantage of new opportunities generated by these new rules. There was even a time when analysts believed that Thailand has gone overbanked. Not only locals, but foreign banks have flooded the market with new and attractive offerings toward Thailand customers, despite the fact that Thai economy was not yet capable to absorb such amount of capital supply. This condition has not stayed for long (‘Major Changes’, 2004).
The present condition represents robust economic growth but with high competition in the markets also. New lines of services emerged and new ways of expanding the business have created a condition where competitive advantages are of crucial importance. For instance, the consulting services are gaining increasing share of the service lines. The foreign companies also offer licensing agreements which allowed local businessmen to establish branches in the local markets (‘Major Changes’, 2004).
Kasikorn responded to this change by developing their line of services and performing aggressive local and international marketing campaigns to get both funding and clients. The company also performs major restructuring projects, employing advanced IT platforms to compete with foreign banks. Internally, the company also transformed their corporate governance to include greater focus in providing better services toward customers and better outcomes for shareholders.
V. Kasikorn Bank and Internal Transformation
During and after the crisis, Kasikorn bank has been initiating a vast range of internal transformation. This includes structural transformation, corporate governance transformation, new service strategies, etc. Structurally, Kasikorn change by making a better IR management under the corporate communication department. Previously, corporate IR was simply managed by senior managers and overseen by the financial planning department. Kasikorn bank’s IR has also been enhanced by the presence of the Balance Scorecard, which represent a better evaluation of performance and better conformance to corporate strategy (How They Do It, 2004). In 2005, Kasikorn group completed and announced the new structure of its business segments, which are also its business subsidiaries: Kasikorn Securities, Kasikorn Factoring, Kasikorn Asset management, Kasikorn Leasing and Kasikorn Research Centre.
In 2006, the company perform further improvement of internal service system by introducing the K-transformation project, which aimed to enhance efficiency and competitiveness to improve overall service deliveries. The process was performed with the support of an integrated IT platform to ensure customer satisfaction and success in much larger undertakings. The K-transformation project includes:
· Knowing the customers
This represents Kasikorn’s commitment in providing products and services that meet the financial needs of all customers, in various ranges of time and pricing.
· Establishing multi-channel sales and services
Kasikorn improves dependability of its services by upgrading effectiveness of various service channels like electronic banking channels, the K-contact center and corporate branches.
· Taking advantage of existing IT capital
Kasikorn allocates sufficient resource to support a core banking system where a complete link of IT platforms is provided to meet various types of business requirements.
· Developing high-tech financial system
Kasikorn develops its financial reporting system even further to enable shareholders and especially managers to access different dimensions of financial information
(‘Management Discussions’, 2006)
VI. Kasikorn Bank Branding and Business Internationalization
In line with internal transformation, Kasikorn also enhanced its promotional effort to include global marketing schemes. Due to the internal transformation after the crisis, most of the services provided by Kasikorn have fulfilled international banking standards and eligible for servicing multinational companies.
Therefore, the company performed international road shows to gain international recognition and gaining new investors and clients. The first road show after the crisis was to visit three continents with five to eight meetings a day for 20 days in 1998. Analysts and management of Kasikorn stated that the road show generated sufficient capital to support the company in performing further transformations. Afterwards, road shows have become a routine program of the company (‘How They Do it’, 2004).
In the spirit of getting the services to gain international recognition, Kasikorn enhanced its operational transparency toward shareholders and enhanced its customer service quality. Both clients and shareholders are given easy access to corporate executives through websites and real time connections. Investors and clients that has not have the opportunity to meet personally with the executives are provided with detailed quarterly information of corporate achievements and corporate financial conditions Most of them are quite satisfied with Kasikorn’s commitment to provide the best services toward customers and to create transparency for shareholders (‘How They Do It’, 2004).
VII. Evaluation and Discussion
Evaluating Kasikorn’s organizational process, we can conclude that the company has performed most of the steps carefully and resulted notable rate of corporate growth during the decade. Nevertheless, this does not mean that the company has applied to all standards of managing organizational transformation. The positive aspects of Kasikorn’s organizational transformation project are as follows:
· Adopting Disciplined Process
Kasikorn Bank made the project as an official strategy of the company. In a sense, management has made it clear to all members of the company that organizational transformation is crucial for corporate survival and growth. All projects like the balance scorecard system installment are performed in accordance to existing standards
· Empowering Human Resource
In order to face the challenges of the environment, Kasikorn manage to change its corporate governance standard to reach international standards. The company empower its employees and managers by creating new rules and regulations that supported their effort toward quality improvement.
· Restructuring Debt and Corporate Resources
Kasikorn perform road shows that generate funding from new partners. The company also performed massive restructuring programs that realigns corporate resources and generate more effective effort toward higher profitability.
· Maintain High Customer Service Standards
Customers are satisfied by the new quality of services provided by Kasikorn. Customer service personnel are empowered by advanced IT instruments, and the presence of multi-channel services.
· Transparency to Shareholders
Shareholders are pleased by the level of transparency and access provided by management. This generates massive support toward further restructuring programs initiated by the company.
· Institutionalize the Process
Successful programs are made routine by the company. Furthermore, profitable segments and necessary processes are supported by enhanced funding and technology.
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