Organizational Structure Options

ORGANIZATIONAL STRUCTURE OPTIONS

2009 RBAP-MABS National Round table ConferenceMay 12-13, 2009

Hyatt Hotel and CasinoManila

Jove I. TapiadorMABS Regional Manager, Luzon

INTRODUCTIONOrganizational effectiveness and

efficiency is founded on the institution’s shared vision;clear strategy; and,a well-defined structure.

7S FRAMEWORKMcKinseys 7S Framework

Shared VisionStrategyStructureSystemsSkillsStaffingStyle

Organizational structure changes in response to changes in the shared vision and strategy as well as changes in the operating environment.

This is what it means to be flexible and adaptable.

Oftentimes, managers focus on the their behavior or their staff’s behavior.

At other times, managers look at their staff’s skill sets.

Sometimes, they assume that a vision and clear strategy will take them through.

McKinsey’s 7S Framework Shared Vision Strategy Structure Systems Skills Staffing Style

But often what is ignored is how an organization’s structure and systems affect implementing activities.

Without subsequent modification, people revert to their old habits, become frustrated, or find themselves facing inflexible policies and procedures.

McKinsey’s 7S FrameworkShared VisionStrategyStructureSystemsSkillsStaffingStyle

CASE STUDIES Cases show how three organizations adapt to

changes in the marketplace, increase in clients, increase in geographic scope, and greater regulation.

This also attempts to visualize next evolution of microfinance organizational structure.

CRYSTAL BALL EXERCISE Year Clients Account Officers/Supervisors Year 1 150 2 Year 2 300 3 Year 3 900 7 Year 4 1,800 13 Year 5 3,600 26 Year 6 7,200 52 Year 7 12,000 105 Year 8 17,000 117 Year 9 21,000 144 Year 10 25,000 170

Others would shrug it off. “I don’t believe we’ll reach that size.” (Lack of Vision.)

Others would say, “That’s great! That’s what I want. Now how will I go about it?” (Lack of Strategy.)

Then some would mutter, “I know that will happen, we’ll just do the same things we’ve been doing.” (Lack of flexibility.)

CASE 1: FROM START-UP TO NEAR GROWTH

Small BankClients Less than 5,000No. of AOs Less than 38Organization • Integrated with branch operations.

• MF account officers usually report directly to the branch manager or loan officer.• For larger operations, MF supervisor oversees day-to-day operations over MF operations.• Clear lines of reporting to the branch head.• Microfinance personnel supported by regular bank support units such as HR, Treasury, etc.

CASE 1: FROM START-UP TO NEAR GROWTH

CASE 2: FROM GROWTH TO MATURITY

Medium BankClients 5,000 to 15,000No. of AOs 32 - 105Organization • Integrated with branch operations.

• Usually have an MF supervisor overseeing MF operations and reporting directly to the branch manager.• MF operations spread over a number of branches requiring MF Head Office unit supervision.• Consolidation of reports at head office.• MF operations still supported by head office units.

CASE 2: FROM GROWTH TO MATURITY

CASE 3: MATURITY TO …Large Bank

Clients 15,000 to 25,000

No. of AOs 105 to 168

Organization • Begins to affect bank culture.• Greater senior management attention and resources. • Majority of MF operations still integrated with branch operations, but MF lending offices being established.• Usually have an MF area supervisor overseeing MF operations reporting directly to head office.• MF account officers have supervisors who report to the branch manager.• MF operations supported by dedicated head office units.

CASE 3: MATURITY TO …

CASE 4: NEXT GROWTH STAGE OR DECLINE

Another Large Bank

Clients Greater than 25,000

No. of AOs Greater than 160

Organization • Splintered culture between regular bank and microfinance operations.• Establishment of dedicated senior management team for microfinance.• Mix of MF operations attached to the bank branches and MF operations attached to dedicated lending offices.• Usually have an MF senior officer overseeing bank-wide MF operations at head office.• Branch managers or MF area supervisors have oversight over MF operations.• MF operations supported by dedicated head office units.

CASE 4: NEXT GROWTH STAGE OR DECLINE

Banks need to often re-align organizational structure and systems to meet the challenges of growth:More clients leading to more capital requirements More capital leading to more fund raising

activitiesMore clients leading to more staff and support

peopleMore people leading to more management time,

attention, and resourcesMore management time, attention, and resources

leading to more management specialization and control.

CONCLUSIONSA clear vision and detailed

strategies are not enough.At a certain scale, employee

behavior modification and management training have limited impact.

Accept reality of complexity in large organizations.

Therefore, attention to reporting structures and improving bank-wide management systems become critical.

McKinsey's Performance Leadership Survey:An in-depth questionnaire designed to

explore an organization's effectiveness. Set up in 2002, the database contains

information from almost 400 discrete business units of 231 global businesses in all major regions and industry sectors.

More than 115,000 individual managers and employees have participated.

The study revealed the following key strategies to organizational effectiveness:Clear vision and strategyAccountabilityOpenness and trust, basis of performance

culture

Thank you.