How could this cultural change be managed differently?

MIDLANDS BUILDING SOCIETY The origins of Midlands Building Society (MBS) can be traced back to the beginning of the last century. MBS developed through a series of mergers into being a respected if not highprofile regional building society. The society employs 1,000 staff, of which 500 staff work part-time. Staff work either at one of the 80 branches or at head office. The society is able to provide customers with a range of financial services, from deposit accounts through to loans and mortgages. It is proud to have remained a mutual building society despite overtures from a number of large financial services institutions. Although the building society has experienced mergers and has recently changed the fascias of all the branches, in other ways little has changed in MBS. Their motto, ‘Community Banking: Banking on the Community’, has remained the same for as long as anyone can remember. Against this backdrop of quiet inertia Patrick Fitzgerald has joined MBS as the new chief executive. Mr Fitzgerald was deliberately headhunted by the board of MBS from a senior management position in one of the high street banks. The board had impressed upon Mr Fitzgerald that mutual status was not negotiable, but that MBS was ready for ‘some radical change’. The board never expanded upon what they had in mind by this last phrase, but it was apparent that part of Mr Fitzgerald’s role would be to act as a change agent. Upon his arrival, in a short message to staff he announced he would spend the first 100 days visiting every branch and meeting as many staff as possible. He was true to his word, and at the end of a gruelling schedule he felt well prepared to report to the board. As they had anticipated, he confirmed their suspicions. Everything he had seen and heard suggested that MBS was flourishing. There was a low turnover of staff and high levels of staff commitment were apparent. Staff really did believe that they were providing a service to the community, which had been repeatedly demonstrated by the actions of staff, particularly in the branches. He had been unable to access any marketing information because there was no marketing department as such. However, the impression gained was of a loyal elderly customer base who felt assured when they deposited their savings with MBS. There had been a few rumblings from customers about the new branch fascias. In having a content workforce and a content customer base, Mr Fitzgerald as chief executive could have been regarded as being in an enviable position. However, Mr Fitzgerald was very troubled by what he had learned. The finance function at the head office was antiquated yet very competent. They showed him forecast information, which suggested that MBS would be experiencing large and growing deficits within two more years. When he explored the reasons for the deficits, it was very apparent that costs were escalating but revenues were static. In particular, staff costs were proving to be a large drain upon resources and the rents on the high street premises were making many of the branches uneconomic to run. On the revenues side the building society gained from its large deposit base, but in potentially profitable areas – such as the provision of credit facilities – business was weak. This troubling report did not surprise the board. Mr Fitzgerald’s recommendations did, however, surprise the board. He warned that there needed to be a dramatic cultural change if MBS was to survive, and he advised that even if there was cultural change he could not guarantee the survival of MBS. In order to ‘wake up’ the building society he recommended the immediate announcement of plans to close eight branches (10% of the branch network). The rationale for these closures would be presented to staff as vital cost-cutting and part of a wider project, referred to internally as Project Phoenix. Project Phoenix aimed to encourage a sales culture while maintaining the high-quality customer service that typified MBS. All branch managers would be required to attend the ‘Sales through Service’ management development workshops. These workshops would be deliberately challenging, and at the end of the workshop each branch manager would be required to sign a promise to deliver sales at a specified amount. Any branch manager who failed to sign the promise would be offered career counselling. A less intense version of ‘Sales through Service’ would be cascaded through MBS to the effect that all employees would be required to make a verbal pledge to deliver sales, on every day of every week of every year. Again, if the pledge was not made, staff would be encouraged to rethink their future with MBS. The Phoenix facilitators would visit branches at six-monthly intervals to check that the new attitudes, values and beliefs had been adopted through a series of questionnaires and interviews. The facilitators would also ensure that sales targets had been exceeded. All the data would be gathered to establish the six-monthly branch grading that might be ‘Sales Competent’, ‘Sales Confusion’ or ‘Sales Incompetent’. An urban myth was deliberately spread throughout the branches that any branch graded as ‘Sales Incompetent’ would be top of the list in the next anticipated wave of closures. The board was shell-shocked at the end of the presentation. Three board members walked out of the room mumbling that this was the death of the society as they knew it. The remaining members were more philosophical, arguing for an evolution rather than a revolution. They argued quite persuasively that the change would be too radical for both staff and customers. Certain board members felt uneasy with a sales culture that they saw as contradicting the long-established service culture MBS had developed. However, Mr Fitzgerald was adamant that either the board adopted Project Phoenix or he would resign because he was otherwise unable to envisage a future for MBS.


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