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A study into 2017 Wealth Plan for Westpac Private Bank
Australian Institute of Business Michael C Yule – A001322735 12th November 2013
Word Count – 2703
Westpac Banking Corporation is Australia’s oldest company that employs over 33,000 people. There are many structural and behavioural transformations required for Westpac to achieve its 2017 strategy, marking the companies’ 200 th anniversary. This study will critically analyse the implications of Strategic Human Resource Management, by discussing one specific goal within Westpac Private Bank. It is seen that the current strategy for Westpac’s most crucial assets – its people, currently lacks a definitive structure and direction. This study concludes by illustrating some recommendations to create increased synergy between Westpac Private Bank and the Human Resources department, to ensure that this goal is realised by Westpac Banking Corporations 200th anniversary.
Introduction Discussion Conclusion Recommendations References Appendix 4 5 11 12 14 15
Strategic Human Resource Management as defined by (Noe et al. 2013) is, “a pattern of planned human resource deployments and activities intended to enable and organisation to achieve its goals” Due to the effects of the recent Global Financial Crisis and the changing economic landscape, there has been heightened concentration on Strategic Human Resource Management by organisations, as the way in which the people within a firm are managed can be a central contributor to competitive performance. (Whipp, R 1991)
This study will analyse a specific goal of Westpac Private Bank, and the current strategies that have been put into place within the organisation to achieve this goal. The specific goal within Westpac Private Bank that will be used to form a critical analysis of the Human Resource strategy is;
By the year 2017, 40% of revenue generated by Westpac Private Bank will be derived from Wealth products, such as direct investments, managed funds and advice.
After critically analysing the current situation drawing upon multiple theories in relation to Strategic Human Resource Management, this report will then make several recommendations on how the strategy from Human Resources can be improved, for a more holistic approach from all relevant work units. This study into the strategies by Human Resource Management is of significant relevance as (Kalyani, M, & Sahoo, M 2011) states, “Organisation’s have come to realise, over the years that improving technology and cutting costs, enhance performance only up to a point. To move beyond that point, the organization’s people are its most important resource. In the end, everything an organization does depends on people ”
1.0 The 2017 Year Plan for Westpac Private Bank
Westpac Banking Corporation was established in the year 1817 as the Bank of New South Wales. The Bank of New South Wales changed to Westpac in October 1982 following the acquisition of the Commercial Bank of Australia. (Westpac Our History – 2013) The year 2017 will mark the 200th anniversary for Westpac. The year 2017 is not merely a milestone that will be celebrated throughout the company, as the current CEO Gaily Kelly is utlising this event as a catalyst for dramatic change and internal restructuring throughout the bank to propel the organisation forward.
Westpac Banking Corporation employs over 33,000 people in Australia, and in the 2012 reporting season announced a net profit of AUD 5.97 billion dollars. (Company Profile Westpac Banking Corporation SWOT ANALYSIS' 2013) With a large number of employees and a magnitude of different organisational roles and departments, Strategic Human Resource Management plays a crucial role in steering the organisation as a whole to achieve common goals across many diverse work units. Westpac Private Bank services HNW (High Net Worth) clients that have income in excess of $450,000 AUD pa, and assets of over 2,500,000 AUD. (Westpac Private Bank 2013) Westpac Private Bank offers its client’s exceptional service provide d by a uniquely skilled Private Banker and a dedicated team of Associates, tailored products and a n ongoing relationship through all the stages of the clients lives. In 2002 Westpac purchased BT Financial Group, a financial organisation that specialises in managed funds, superannuation and advice. BT Financial Group has approximately AUD 95 billion dollars under management. (Westpac Why Westpac – 2013) The strategy behind this merger was to increase the market share and product offering in the wealth management business, enabling a more holistic approach to clients across mass retail, mass affluent and HNW business segments.
In the Westpac Group, wealth revenue currently generated by fees and commissions currently attributes approximately 5% of total revenue for the organisation. The revenue income stream generated from wealth products is not as volatile as other balance sheet items, such as interest income from lending and Westpac’s insurance book. Westpac Private Bank is in an exceptional position with a large customer base of loyal HNW clients to increase the focus towards its Private Wealth offerings. By 2017 Westpac Private Bank aims to increase revenue generated from wealth from 5% to approximately 40%, an increase of 700% in just over 3 years. To achieve this courageous goal there are many changes that are required in a relatively short period of time. The role of Human Resources to provide training, development and to assist in overseeing this significant restructure is crucial. The basic process of change development from Strategic Human Resource Management is shown in Appendix 1.0. This study therefore will analyse the last two but arguably the most important steps, developing a HR strategy and communicating the strategy throughout the organisation.
1.1 Development of the HR Strategy
The specific goal of Westpac Private Bank to achieve 40% of its revenue generated from wealth products is part of an overall strategy to increase Westpac Banking Corporations competitiveness both domestically and globally. To reach this goal of significantly increasing the wealth revenue stream of Private Bank, an assessment and development of human resources was needed. This resulted in a decision to create a new position within Westpac Private Bank, which were established in each Private Banking office around the country. The new position was titled Director of Private Wealth. These positions were created as there was a labor shortage for employees with a specific skill set and knowledge base that had the capabilities to drive the wealth targets forward. The job specifications for the new roles were unique and due to this, talent in some instances had to be obtained from external sources. The role as Director of Private Wealth entails empowering and training Private Bankers and Associate Private Bankers to have the confidence and knowledge to discuss investment opportunities with their High New Worth clients, and to be a “subject matter expert”. Directors of Private Wealth also accompany the Private Bankers to client appointments when needed, drawing on their source of legitimate and expert power, to help increase wealth sales with the Private Bankers. Westpac Private Bank’s Human Resource department has modified its investments in the hiring process, to consciously and proactively determine the composition of the workforce that it will need to achieve its strategic objectives. (Koch, M, & McGrath, R 1996) Appendix 1.1 provides an example of some of the inputs a Human Resource department can control in an attempt to modify the outputs of an organisation. This rest of this report will focus on the independent variables that decide the quality of output in regards to Westpac Private Bank.
1.2 Organisational Structure
Westpac Bank, since acquiring BT Financial Group in 2002, has spent considerable time and money synergising the wealth offerings of BT Financial Group with other existing Westpac Group products and systems. As the systems and technologies are now in place, the attitudes, behaviours and structure of Westpac’s human assets had to be developed to capitalize on the merger. Specifically in Westpac Private Bank, human resources are arranged in a service orientated divisional structure, where the Associate Private Bankers and Private Bankers report to the Relationship Director, and the newly appointed Directors of Private Wealth have a direct reporting line to the head of Private Wealth. The divisional structure that is seen within Westpac Private Bank does not agree with the organisations goals, of having the Private Bankers and the Directors of Private Wealth work together towards a common vision – to achieve increased sales of private wealth products.
Appendix 1.2 clearly illustrates the current organizational structure within Westpac Private Bank. The Relationship Directors are responsible for the sales targets, and the management of behaviours of both the Private Bankers and the Associate Private Bankers. The Relationship Directors annual remuneration review is closely tied to the performance of the 10 Private Bankers and their Associates. Private Bankers manage all the needs of their clients, including normal servicing of accounts, lending requests and investments needs. There is a current misalignment in the Private Bank team, due to the Private Bankers not having the incentive to increase the wealth revenue, while the Directors of Private Wealth depend on this revenue to reach their monthly and annual sales targets.
1.3 Training and Development
Human Resources have also increased the importance of Private Banker and Associate Private Banker development planning within Private Bank, with a specific concentration on wealth and investments. Private Bankers are now asked to participate in an annual assessment , which aims to discover the weaknesses in the Private Bankers knowledge base, about economics, investments, and foreign exchange markets. Building rapport is a crucial stage in developing trust when building a relationship with Private Bank clients. It is therefore crucial for Private Bankers as well as Associate Private Bankers to have extensive knowledge in the various financial products the bank offers and to understand the current thematic in domestic and global economies. An important role in the job description for the Directors of Private Wealth is coaching both the Bankers and the Associate Private Bankers in the array of wealth products that Private Bank offers its clients, and bridging knowledge gaps that are discovered in the team. The Human Resources team has created a comprehensive Learning Management System which is called eAcademy. In addition to the one on one coaching, eAcade my provides online courses designed to teach and assess employees in different products and financial theories, while data is collected with a current report of completed courses for each individual is accessible at all times. The Learning Management System that Human Resources have created provides immediate feedback on areas in which the employees need to improve upon, and can be accessed at any time by Human Resources and the Relationship Directors. As general knowledge gaps and deficiencies are collated, specific online courses can be constructed easily allowing Human Resources to provide dynamic learning solutions to Private Bank, as well as its other 33,000 employees across the business.
1.3 Analysis of the Strategy As stated by (ASHKENAS, R 2012),”structural change usually drives behavioural change, not vice versa. In other words, training people in new ways of working - without modifying job responsibilities, reporting relationships and incentives - is often a prescription for failure. ” In relation to the current strategy that was discussed above in section 1.2, behaviours and attitudes in Westpac Private Bank take centre stage within the group, with little reflection on the importance of structural change to increase private wealth revenue. There has been a visible effort by Human Resources to influence the skills and behaviours of the team, however the current fundamental structure in place, does not succeed in producing a cohesive team environment. (Kochan, T, & Dyer, L 1993) suggest that “ma nagers are under many competing pressures from inside and outside the firm, and there is no reason to believe that employee and human resource considerations will tend to prevail in their strategic decision making and day-to-day actions ” At the same time Human Resource Managers approaching a strategic view to the organisation face a dilemma to the extent where they can hope to reconcile the needs of both employee and the employer. (Foote, D, & Robinson, I 1999) It is evident that there is a fine balancing act between Human Resources and general management, and while over the years there has been greater attempts at creating a harmonious relationship, as seen by the specific example of Westpac Private Bank this can be of great difficulty. The Learning Management System, ongoing coaching and immediate feedback to supervisors with regards to Private Bankers and Associates is of great value, as this study subscribes to (Villachica et al. 2011’s ) opinion that to be worth an organization’s investment in money, time, and resources, training should address performance gaps caused by skill and knowledge deficits. It is clear that the Learning Management System adopted by the Human Resource department clearly attempts to bridge knowledge gaps and increase the skills and knowledge of all employees within Westpac Private Bank.
Westpac Private Bank has an aggressive challenge ahead with the exceptional goal of increasing revenue from wealth sales by 700% in a matter of years. The current strategy that the Human Resource department has put into place was analysed and discussed, using current Strategic Human Resource theories.
During the discussion the training and development efforts were seen to be effective, though the structural makeup of the teams within Private Bank are not considered optimal, especially considering the expected role of the Directors of Private Wealth. Westpac Private Banks Human Resource professionals have developed a coherent and effective training and development program; however it appears other changes that have taken place as part of the business strategy have been executed without thorough consultation with organisational managers. The search for a direct business strategy/HR link can often neglect the vital role that an organisational change programme has on HR strategies (Stace, D, & Dunphy, D 1992) As discussed in this study Strategic Human Resource Management is vital in promoting organisational change, however needs to be executed in unison with the specific business strategies in mind to create a holistic approach, promoting innovation and growth within the organisation.
The change process that is currently taking place in Westpac Private Bank should be considered by all departments as an evolutionary process, as opposed to an immediate revolutionary process that has been identified in this case study.
The first recommendation to promote a more holistic approach to reach the goal for Westpac Private Bank is the organisational structure . The organisational structure that this report recommends attempts to create a more horizontally aligned structure between the sales team and the Directors of Private Wealth. Some advantages when organisations move towards horizontal management as opposed to vertical management structures include; increased speed of communication among diverse team members, encouragement of problem-solving ability and broadening of the skill base. (Hart, S 2008) The recommended organisational structure is illustrated in Appendix 1.3. The organisational structure displayed also attempts to move towards a more functional structure and an increase in team centralisation, which will result in a more cohesive team environment, while empowering the Directors of Private Wealth with greater control over the direction and results of private wealth revenue. The level of resistance from employees would be minimal, and this would create a more congruent relationship between the Private Bank sales team and the Directors, which after all is the intended purpose of the Directorship role. Referring once again to the organisational chart in Appendix 1.3, as the Private Banker and the Directors of Private Wealth now both report the Relationship Director, this allows the Relationship Director more control and oversight over the joint progress towards the wealth revenue goal. Another crucial point is that now the Relationship Director’s performance is also directly affected from the Directors of Private Wealth, the motivation to ensure the two different roles meet revenue targets and work effectively has significantly increased.
The Directors of Private Wealth were recently placed into the newly created roles due to a shortage of labor in the specific skill set and knowledge base. The Human Resources team realised that these skills were needed to intensify the urgency towards the wealth revenue target for Private Bank. To pass on this knowledge to the Private Bankers as well as the Associates, the Directors of Private Wealth need to be empowered to coach fellow team members, and the significance of being placed into the same “team” should not be understated.
The second recommendation involves adjustments to Private Banks Hiring Process .
As discussed in the report, there has been an ad hoc attempt to bring in talent within Westpac Private Bank to increase private wealth revenue amongst the team. Is it evident that while there would have been a thorough job analysis for this role from Human Resources, there should also be a fundamental shift towards selecting and obtaining future employees that meet the job specifications for future Bankers and Associate Private Bankers. Value would also be added to the organisation by having key management complete a job redesign for the current Bankers as well as the Associates. As management have concluded that the best way for the bank to remain competitive in the coming years is through an increase of wealth revenue that is generated, all future employees should be selected on the job specifications that are apparent after the current role is adjusted to have more of a key focus on wealth knowledge, instead of everyday banking and insurance skills. By re designing the Banker and Associates roles to place a larger emphasis on wealth, less time and resources would have to be spent by Private Bank on training and development. The current interview process, apart from the standard face to face interview also involves a series of personality tests to determine the applicants’ traits and attitudes. Greater utility would be added to the interview process if the applicants also underwent specific wealth knowledge tests, designed with the job specifications in mind. This would not only obtain employees with attitudes and personality traits that are favoured by Westpac Private Bank, but also the skill sets that are required for the bank to achieve its fundamental shift towards a more wealth focused Private Bank.
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1.0- Basic Process for HR Strategy
Noe, RA, Hollenbeck, JR, Gerhart, B and Wright PM 2013 P 689
1.1- Simplified Inputs into Labor Productivity
Koch, M, & McGrath, R 1996
1.2- Simplified Current Organisational Structure within Westpac Private Bank
1.3 – Recommended Organisational Structure Westpac Private Bank