Organizational Structure Options

Jove Tapiador MABS Regional Manager, Luzon 2009 RBAP-MABS National Roundtable Conference May 12-13, 2009 Hyatt Hotel and Casino Manila

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

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

 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  McKinsey’s 7S focus on the their Framework behavior or their  Shared Vision staff’s behavior.  Strategy  At other times,  Structure managers look at their  Systems staff’s skill sets.  Skills  Sometimes, they  Staffing assume that a vision and clear strategy will  Style take them through.

 But often what is  McKinsey’s 7S ignored is how an Framework organization’s  Shared Vision structure and systems  Strategy affect implementing  Structure activities.  Systems  Without subsequent  Skills modification, people  Staffing revert to their old Style habits, become  frustrated, or find themselves facing inflexible policies and procedures.

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/Sup  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 Clients  Less than 5,000  No. of AOs  Less than 38  Organiza:on  • Integrated with branch opera:ons.    • MF account officers usually report directly    to the branch manager or loan officer.  • For larger opera:ons, MF supervisor    oversees day‐to‐day opera:ons over MF  opera:ons.  • Clear lines of repor:ng 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 Clients  5,000 to 15,000  No. of AOs  32 ‐ 105  Organiza:on  • Integrated with branch opera:ons.    • Usually have an MF supervisor overseeing MF    opera:ons and repor:ng directly to the branch  manager.  • MF opera:ons spread over a number of    branches requiring MF Head Office unit  supervision.  • Consolida:on of reports at head office.    • MF opera:ons s:ll supported by head office    units. 

CASE 2: FROM GROWTH TO MATURITY

CASE 3: MATURITY TO … Clients  15,000 to 25,000  No. of AOs  105 to 168  Organiza:on    • Begins to affect bank culture.  • Greater senior management aVen:on and resources.     • Majority of MF opera:ons s:ll integrated with branch    opera:ons, but MF lending offices being established.  • Usually have an MF area supervisor overseeing MF    opera:ons repor:ng directly to head office.  • MF account officers have supervisors who report to the    branch manager.  • MF opera:ons supported by dedicated head office    units. 

CASE 3: MATURITY TO …

CASE 4: NEXT GROWTH STAGE OR DECLINE Clients  Greater than 25,000  No. of AOs  Greater than 160  Organiza:on    • Splintered culture between regular bank and  microfinance opera:ons.  • Establishment of dedicated senior management team    for microfinance.  • Mix of MF opera:ons aVached to the bank branches    and MF opera:ons aVached to dedicated lending offices.  • Usually have an MF senior officer overseeing bank‐wide    MF opera:ons at head office.  • Branch managers or MF area supervisors have oversight    over MF opera:ons.  • MF opera:ons supported by dedicated head office    units. 

CASE 4: NEXT GROWTH STAGE OR DECLINE Branch Head Office Manager Head Office Cash Accounting Loans Support Depts Microfinance Microfinance Support Depts

 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 activities  More clients leading to more staff and support people  More people leading to more management time, attention, and resources  More management time, attention, and resources leading to more management specialization and control.

CONCLUSIONS  A 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.

 Thestudy revealed the following key strategies to organizational effectiveness:  Clear vision and strategy  Accountability  Openness and trust, basis of performance culture

Thank you.

Organizational Structure Options

by MABSIV on May 26, 2009

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