Total Quality Management in Banking Industry - Example

WORK PLACE REPORT WORK PLACE REPORT Insert name Insert grade course Insert instructor’s name October 7, 2011. Abstract Top management commitment as well as employees empowerment is among the most significant and crucial principle in implementing a new culture of in an organization total quality management (TQM), since it frequently assumes to have a strong relationship with customer satisfaction. In this report, I will show that TQM objective of quality improvement as well as customer satisfaction can be better attained if the top management is devoted to empower human resources to be accountable for the quality of their work along with empowerment in relation to decision making authority and process. I will also show that empowerment in TQM culture results to a flattened organizational chart where there is a shared responsibility between the executives and the workers. Although a number of researchers have put forward arguments criticizing employee empowerment, I will show that employees’ empowerment and enhanced level of job satisfaction can be facilitated by top management leadership as well as commitment to the goal of customer satisfaction in TQM organization. Table of Contents Abstract 3 Table of Contents 4 1.0 Introduction 5 2.0 Problem discussion 5 3.0 Total Quality Management (TQM) 6 3.1 The National Australia Bank and its operation 8 3.2 How banking sector was being managed without TQM 9 3.3 The quality management principles 10 4.0 Employee management or empowerment in NAB (in relation to TQM) 13 5.0 Organizational structure 14 6.0 Future challenges of NAB 14 7.0 Recommendation 15 8.0 Conclusion 15 References: 17 Appendix 19 1.0 Introduction Employee empowerment is creating a working environment where an employee is permitted to make his own decisions in particular work-related situations. The decisions can be large or minute, and the size and effect of the decision is up to the manager. The logic behind employee empowerment is to boost the employee’s responsibility, to build employee morale as well as to enhance the quality of an organization’s employee’s work life. Having the ability to delegate some duties to employees can give top management more time to focus on areas where their attention is needed more in the organization (Denham et al. 2002). In an employee empowerment organization, the manager-employee relationship is inverted. Rather than the employee working for the manager, the manager essentially will dealing with the requirements of the employees. In order for employee empowerment to be successful, the employees have to be properly trained and they ought to have access to any information related to their extra responsibility. This paper discusses how employee empowerment impacts on service quality and customer satisfaction in banking industry (NAB – National Australia Bank) (Sureshchander et al. 2002). 2.0 Problem discussion In banking organizations, the general offering in a specific industry is generally similar, although they might engage in different approaches to achieving a differentiation form the others, so as to gain more market share and customers in the industry. Gronroos (2001; p. 134) states that, “almost any retailing bank can provide an individual with retailing services, but not every bank manages to treat customers in a manner that they are pleased with”. Service providers thus seek to differentiate themselves from their rivals by offering customers higher quality of services than their competitors’, which makes the basis of their competition to be defined by their services. A bank is not able to inspect its services and products to weed out unsatisfactory ones before they are presented to the customer. Employees thus become the voice and face of the organization, but it is not enough that they be trained to offer quality service, that they know what to do and how to do it. It is as well significant that they have the necessary authority to make decisions concerning customer satisfaction. This is one of the arguments for employee empowerment because employees act as an interface between the customers and the organization (Pheng and Jasmine, 2004). In matters concerning financial commitments, investments and spending customers, not only need reassurance that their finances are safe, but also that they are valued for committing their stakes with a particular financial institution. Customers of a bank rely on the services delivered to them by the bank whether they are saving, depositing, taking loans, cashing cheques or buying funds, they count on the employees responsible for handling issues relating to them, to deliver high service quality in other to increase their satisfaction. Thus employee empowerment is vital in banking industry (Emerald Insight Staff (CB), 2005). 3.0 Total Quality Management (TQM) Total Quality Management (TQM) is a management strategy which is focused on integrating awareness of quality in all organizational processes (Savolainen, 2000). A large number of organizations are struggling for quality products and services that will meet or exceed client’s expectations and consequently, they are searching for strategies to managing people as well as production systems that will guarantee the transformation of inputs into quality output (Ugboro and Obeng, 2000). There is a lot of research that has been done concerning this new organizational culture of total quality management. For instance, according to Pheng and Jasmine (2004), the adoption of TQM would result to the benefits of higher customer satisfaction, better quality products as well as higher market shares. Customer satisfaction is among the fundamental objectives of TQM and it is the most widely discussed approach to directing organizational efforts towards the goal of customer satisfaction. Ugboro and Obeng (2000) notes that TQM theory is based on continuous improvement, top management leadership as well as commitment to the goal of customer satisfaction, employee empowerment and customer focus. Employees in a service organization and particularly, those who have frequent contacts with the customer usually serve as representatives of both the organization and their products or services to the customer at contact point. The quality of the service and the satisfaction the customer may derive will be an assessment of the entire service experience. Employees who are empowered in an organization can either portray a positive or negative picture to the customers. In TQM execution top management obligation in forming an organizational atmosphere that empowers employees is extremely essential. Therefore, this culture can be attained with top management commitment in training workers and giving workers chances to be accountable for the quality of their work. TQM strategy brings about a turn around in corporate culture as compared to the old traditional system of management in which the top management simply gives orders and the employees merely obey them. 3.1 The National Australia Bank and its operation The National Australia Bank (NAB) is one of the four pillars of banking in Australia. With the adoption of the TQM, the bank is coming up and doing considerably well. Currently, their international relationships coupled with their knowledge of local market environments enable them to deliver results for their customers efficiently and effectively. NAB is currently ranked 17th largest bank in the world measured by market capitalization. It operates across ten countries serving 8.3 million consumer and banking customers and over 2.3 million wealth management customers. NAB’s overriding strategic priority is to expand and develop leverage its Australian business, while extracting value from the off-shore operations where appropriate. The focus is squarely on NAB's profitable Australian franchises, where earnings and ROE are strong, and importantly, there remains further long-term upside potential and growth opportunities across the key business bank, retail bank and wealth management businesses. NAB currently generates more than 80% of its cash earnings from its Australian businesses whilst they account for 60% of the group's risk weighted assets. National Australia Bank reported NPAT up 15.9% to $2.43bn for the half-year ended 31 March 2011. Revenues from ordinary activities were $8.29bn, down 4.5% from the same period last year. Diluted EPS was 108.3 cents compared to 95.1 cents last year. Net operating cash flow was $4.53bn compared to $5.40m last year. The interim dividend declared was 84 cents compared with 74 cents last year. Cash earnings of $2.67bn for the 2011 half-year increased by $475m (or 21.7%) on the March 2010 half-year. Underlying profit increased by $432m or 9.9%. The banking operations in Australia were key contributors to the improvement in earnings, together with mark-to-market gains in Specialized Group Assets and lower charge to provide for bad and doubtful debts (Hughes, 2004). 3.2 How banking sector was being managed without TQM Under the current management system, the top management is not committed in their responsibilities, which results to poor quality management. The role of management in the current system is planning, organizing, leading and controlling the resources and the work of members of the organization so as to reach a common goal. However, there are some loopholes that result from the channel of communication and hierarchy in the banking sector. This makes the employees so powerless to an extent that they cannot make crucial decisions while serving customer. Consequently, the customers are not satisfied, and in the end there is poor performance in these organizations. There is normally a lot of competition among employees to outdo one another and in the end, they are not dedicated to accomplish one common goal of satisfying the customer. The managers literally give orders and employees merely obey them (Looy et al. 2003). The culture that is operational is disempowering where employees are focused on time off as well as their own agendas. In case of a mistake, the employee fear opening to the top managers in fear of retrenchment or penalties. Here, decisions are largely based on opinions of high-status leaders, and other input is discounted. Whenever there is poor performance, it is commonly ignored or handled inconsistently. This is how this bank (NAB) was operating before the implementation of culture or theory of Total Quality Management (TQM) and employee empowerment (Lin, 2002). 3.3 The quality management principles When the executives of NAB bank started using all the quality management principles, there has been great change in the achievement of goals in the retail banking. The management is now goal-oriented and result oriented. Furthermore, the management is working to the best to improve all systems, processes, customers’ satisfaction and employees’ satisfaction. Bothe employees and managers are involved and regard quality as an ongoing, integral part of the business to achieve a total quality management. The success of this bank has resulted from the way the top management is now fully involved in work process, with follow-ups and free flow of information or communication (Emerald, 2005). Te embedding of TQM has promoted a logical innovation with shared values that assists in nurturing organizational culture where entrepreneurial spirit is consciously buffered and it supports business environment challenges. The top management offers quality leadership which forms the basis for suitable implementation of TQM so as to achieve customer satisfaction, quality service in bank, continuous improvement as well as job satisfaction (Looy et al. 2003). Unlike before, with the advent of TQM the organizational structure of NAB bank has changed dramatically. The organization no longer has the one way or pyramidal hierarchical structure but have a more flattened structure which allows for multi skilled workforce. The managers now take the role of coaching and leadership by offering the employees with the required resources and conditions they require so as to achieve their goals. The bank has adopted the perspective of Braymer (1991) of empowerment as a process of decentralizing decision making in the organization, where managers give more discretion and autonomy to the front line employees. Through TQM, employees have been empowered by delegating to them responsibility for functions that were formerly within management’s domain. EXPECTED ACTUAL DIFFERENCE EFFECTIVE TEAMWORK According to the research done by Ugboro and Obeng, (2000), co-operation is better than rivalry in encouraging effective accomplishment and efficiency in teams. Concerning the banking sector, (NAB in this case), Savolainen (2000) also noted that co-operation in banking sector teams was most prominent when the teams were rewarded as such, instead of the individuals in those teams. Also, the employees were most effective when given power to make decisions concerning critical conditions facing them while serving customers. Although it is not consistent, the top management endorses co-operation in teams by rewarding teams rather than individuals. Moreover, the process is not consistent in all divisions. There is no any significant variation on the surface as well as in comparison with official policy. However, there are a number of differences which may have disadvantageous effects in future due to inconsistent rewarding of teams in various departments. EFFECTIVE CONTROL Emerald Insight Staff (CB), (2005) found out that for effective strategic control, particularly in the banking sector, managers are required to focus on long-term structures such as quarterly, semi-annual and annual reporting cycles or longer. Managers in the all departments of the organization prepare reports on quarterly, semi-annual, and annual cycles to support the effective strategic control. There is no any significant variation. CREATIVITY Looy et al. (2003) noted that in a variety of researches which connected creativity and productivity, the most creative organizations allow their employees to joke around and chat with the other colleagues. The organization does not encourage or allow jokes and chats in work. NAB deals with banking and finance service and it would be so odd for the employees to keep chatting while customers are waiting. The top manager and CEO are very serious and would not entertain jokes in work. 4.0 Employee management or empowerment in NAB (in relation to TQM) From the interview with the General Manager and the responses from some employees that I contacted, the employees are highly empowered too deliver quality services to customers. This is evident in the assignment of employees to customers, to make sure that they keep relationship personal with them (Hills, and Huq, 2004). Employees are given a high degree of independence, concerning decisions affecting customer service. From my enquiries, when employees are not able to deal with a certain situation or when they do not have knowledge concerning something they consult their fellow employees. They can also consult the bank manager or the general manager but this according to them is hardly the case at NAB (Lin, 2002). Concerning their personal work at the bank, the workers are not dictated to, rather they make out their schedule as seems fit to them, but in accordance with the organizational policy. The relationship between the employees and the top management is a very warm one. They have access to the management wherever they want and at all times. This according to the manager is to facilitate the bank to meet customers’ needs efficiently. The computer-aided systems are always upgraded to allow employees to be effective during service delivery. According to the general manager, the management perceives the empowerment of the employees as a positive influence to customers and a cheaper way for the bank to deliver services. The general manager is very satisfied with the concept and sees it as a way of saving costs lost to inefficiency of the contact employees (Emerald Insight Staff (CB), 2005). Finally, due to one of NAB’s goals is to have close relationships with their customers, some of whom are their insurance customers also, the employees handle delicate information concerning customers, and this demands that employees have the necessary authority and knowledge needed to do justice to their work (Denham et al. 2002). Therefore there is no difference between the theory of TQM and what the organization is practicing since it has put in place TQM principles in its operations. 5.0 Organizational structure The organizational chart of the firm is very flat. According to the General Manager, it is flattened so as to eliminate barriers to communication and enable creation of relationships both within the organization as well as with their customers (Looy, et al. 2003). Source: Looy, et al. 2003. 6.0 Future challenges of NAB The bank will be faced with high risk of transparency in several sectors and products since there are management of multiple risks, which may be difficult to quantify and change with market movement and time. Thus the bank requires identifying the firm’s key value and risk drivers, and assigning clear lines of accountability for each driver and reinforcing accountability (Chiang, 2005). 7.0 Recommendation Based on the impact of the employee empowerment on job satisfaction, and performance, I recommend that NAB continue to promote teamwork amongst the employees, so that every staff would work towards a common vision to achieve the objectives of the bank. I also recommend that, the organization practices of NAB regarding employee empowerment, and their customer focused activities which are part of the reasons for their higher rating in the retail banking sector be continued in the bank. 8.0 Conclusion Total quality management is a management approach that results into quality awareness in all organizational processes. For TQM to be effected in its whole it is important that the top management be devoted to empower the employees by delegating enough authority for them to make both personal and group decision. Irrespective of a number of criticisms to empowerment like lack of confidence for top management to delegate task to employees since they feel that they lack the managerial ability and appropriate skills, it has been shown in this study that of a full TQM program, the employees require training so as to have the skills and knowledge. When employees are fully empowered via training, it will in turn motivate them and will eventually lead to job satisfaction. When organizations are thinking of implementing empowerment programs, it is very important that the management develops and communicate definitions clearly. If definitions are not clearly stated, employees tend to develop their definitions and it may result to several inevitable ambiguities within organization. Empowerment programs ought to be designed in such a manner that employees who have very little or no power may have some powers to overcome some forms of dominations like the control of a number of fundamental resources within their domain and also having access to make decisions as well as questioning some imperatives concerning the organization. References: Denham Lincoln, N., Travers, C., Ackers, P. and Wilkinson, A., 2002. The meaning of Empowerment: The Interdisciplinary Etymology of a New Management Concept. International Journal of Management Reviews, Vol 4(3), pp. 271-290. Emerald Insight Staff (CB), 2005. Implementing effective TQM. Bradford, UK: Emerald Group Publishing Limited, p 2. http://site.ebrary.com/lib/boras/Doc?id=10149900&ppg=2. Grönroos, C. 2001. Service management and marketing: a customer relationship management approach. England: John Wiley and sons limited. 2nd edition. Hills, F and Huq, R., 2004. Employee Empowerment Conceptualization, Aims and Outcomes. Total Quality Management. Vol. 13 (8) pp 1025-1041. Lin, C. 2002. Journal of Psychology, 136(5), 555-560 Empowerment in the Service industry: an empirical study in Taiwan. Looy, B. Gemmel, P. & Roland Van D., 2003. Services management: an integrated approach. Great Britain: Pearson education limited. 2nd edition. Pheng, L.S., and Jasmine, A.T., 2004. Implementing Total Quality Management in Construction firms. Journal of management in Engineering. Vol. 20 (1). pp 1-9. Savolainen, T., 2000. Leadership strategies for gaining business excellence through total quality management: a Finnish case study. Sureshchander G. S, Chandrasekharan R, & Anantharaman, N. 2002. Determinants of customer perceived service quality: a confirmatory factor analysis approach. Journal of services marketing 1(16) 9-34 Ugboro, I.O., and Obeng, K., 2000. Top management leadership, employee empowerment, job satisfaction and customer satisfaction in TQM organization: an empirical study. Journal of Quality Management. Vol. 5 pp 247-272. Hughes, A., 2004, ‘NAB Clings On To No.1 As Shares Fall’ April 19, 2004 http://www.theage.com.au/articles/2004/04/18/1082226636145.html? Accesses October 10, 2011 Chiang, H. 2005. ‘An Empirical Study of Corporate Governance and Corporate Performance’. The Journal of American Academy of Business, Vol. 6, No 1, pp. 95-101. Appendix Organizational structure The organizational chart of the firm is very flat. According to the General Manager, it is flattened so as to eliminate barriers to communication and enable creation of relationships both within the organization as well as with their customers. Also according to the responses from the employees, there is maximum access to top management and even with employees of other branches in the bank, which enhances flow of information. The chart is designed to ft the goal of the bank; maximizing relationships. Between the lowest positioned employee and the General Manager is the Bank Manager, and there is no hindrance between the clients and the top management. They are easily accessible to both employees and clients alike. Information is available to everyone, and word is spread swiftly, which facilitates quick and effective adjustments or changes (Looy, et al. 2003). . Source: Looy, et al. 2003. The conceptual framework of the organizational structure will be shown to illustrate how employee empowerment influences the service performance of employees and how that affects the quality of services they deliver. The diagram below is the service-oriented organizational structure (conceptual framework (own diagram)). Read More