Last Updated 06 Jul 2020

First National City Bank A and B Case Study

Category Bank, Case Study, City
Essay type Case Study
Words 2126 (8 pages)
Views 531

1. Introduction:

       This paper seeks to demonstrate, in some detail, on how one could say that in City Bank A, the organization and its work and workers were organized on the basis of the divisional grouping (in a divisional structure) and that, in the City Bank B, the organization and its work and workers were re-organized on the basis of functional grouping (in a Functional structure). Simultaneously, this paper will also attempt to show how the text list of strengths and weaknesses for both Divisional and Functional structures respectively apply to what is going on the First National Bank before and after the reorganization of work based on the introduction of new technology. Thus such demonstration in some detail on how the text’s definitions, advantages and disadvantages for both Divisional and Functional structures apply on the cases “A” and “B” respectively above will also is made. The last part of the paper will make recommendations on how things should now be done in the light of the end of the case.

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2.  Demonstration in some details

2.1 Case A -First National City Bank

        Case facts (A) say the Operating Group (OG) was one of the six major divisions established in a reorganization of Citibank at the end of 1968, where the other five division are market-oriented divisions ones as shown in its organization chart. These five other divisions have varying demands for OG services and hence all of them want to have for continued growth in 1971 as all has been demanding for improved performance on the OG.

       The fact of varying demands for OP services by each of the other five divisions proves the existence of a divisional grouping or the presence of divisional organizational structure for Citibank. The other five divisions which are market oriented include the Personal Banking Group, the Investment Management Group, the Corporate Banking Group, the Commercial Banking Group and the International Banking Group (IBG) (Case facts - A). In theory, divisional grouping,  connotes  people are organized according to what the organization produces in terms of products or services to customer or clients and each division may have the elements or personnel coming from the different functional areas of expertise like marketing, manufacturing and sales which are grouped together under one executive  (Text on Fundamentals of Organizational Structure). Under the same concept of divisional grouping, the text on ‘Fundamentals of Organizational Structure’ asserts the possibility of independent business units in huge corporations but it would seem that in the case of Citibank A, the other five divisions are still dependent on the support and performance of the Operating Group, although there is a showing of some independence of each division as shown by the fact of having for each division its own employees.

      As further proof of divisional grouping, the different services or products handled by the other five divisions are as follows: For the Personal Banking Group (PBG) of Citibank, it has  181 branches and 6,000 employees and the groups provided a full range of services to customers and small business into the metropolitan New York Area.  PBG’s services are different from that of the Investment Management Group (IMG) which serves its own customers with 1,700 employees by managing assets for personal and institutional investors, and providing full banking services to wealthy individuals. As compared with PBG, IMG normally has normally a smaller quantity accounts which is presently carried at some 7,000 accounts, hence it is not surprising for the group to also have smaller number of employees (Case facts - A).

        Still another group offering different services from the rest includes the Corporate Banking Group which has its subdivisions into six industry specialist divisions, which render service to big business, financial institutions and government accounts within the US. This is further being made different from the services offered by the Commercial Banking Group which operated 16 regional centers in the New York area by serving medium-sized companies (Case facts - A). Most of the latter’s clientele-companies failed to employ their own professional finance executives and thus causing them to rely from the banks for advice about money matters as well as banking services.

     The fifth group is the International Banking Group (IBG) which also caters to different customers from the others by operating some 300 overseas branches. The group also managed several subsidiary units of First National City Corporation that dealt with foreign investments, services and leasing (Case facts - A).

     Some of the strengths of a divisional structure that may be confirmed in the case of City Bank A include the fact that the structure is good for organization with multiple products; that it suited for fast change and unstable environment; that it allows units to adopt to differences in products, regions and customers; that it is best in large organizations with several products and that it decentralizes decision making (Text on Fundamentals of Organizational Structure).

       A suitability of the divisional structure for Citibank A confirms the applicability of then mentioned strengths as provided by the case facts that that there were only few major changes in equipment or physical space as a result of implementing changes under the new organization. Case facts further provides that the approach used made the transition an easy one thus the claim that by the late 1969, OPG was running smoothly under four-area structure as briefly discussed as follows:  Area I was in charge of processing the transactions that mainly constituted the bank’s business. Areas II covered system design and software computer operations and was considered the intellectual side of OPG. Area III was made independent from OPG’s paper-oriented processing groups and was made in charge of the bank’s real estate, physical facilities, and building services. Area IV was focused to relatively low-volume, high- value transaction processing departments as those dealing with corporate bonds, stock transfer, mutual funds, and corporate cash management (Case facts - A).

       Among weaknesses of a divisional grouping that could be confirmed in Citibank A include the fact that it leads to poor coordination among product lines (between different divisions) and the fact that it eliminates in-depth competence and technical specialization (Text on Fundamentals of Organizational Structure). These weaknesses may be found by inflexibility of one division to make coordination with other division from the market oriented ones since each division is focused on attaining its own objective as a way showing performance.

2.2 Case B - First National City Bank

Citibank B follows the functional grouping as admitted by case facts (B) that the company’s processing has always been conceived of in functions, rather than in systems processes. This means that all the work flow into one pipeline of processing functions. Given as illustration includes the activities of processing, encoding, read-to-tape, sorting, reconcilement, repair, and dispatch which fall under the Operating Group’ function. Thus the existence of one pipe line of activities for Citibank B. Thus case facts also provide from the report of the consultant that the pipeline creaked and groaned under the strain until it eventually burst. This was not surprising as transactions could reach 2-3 millions per day (Case facts - B).

        Among the strengths of functional structure that may be confirmed by the circumstances of Citibank B include the following: that it allows economies of scale within the functional department that it enables in-depth knowledge and skill development; and that it enables organization to accomplish functional goals (Text on Fundamentals of Organizational Structure).   As to how the strengths of the functional grouping are applied in the case of Citibank may be found with company by the fact that having the work to flow into one pipeline of processing functions could result to economies of scale. With the repetitive nature of work flow, the people involved in the work flow would have an easier way to mastery of the knowledge that would result into more skill development as contrasted to that of divisional grouping.

          As for the weaknesses or disadvantages of the grouping; the following may be confirmed by Citibank B: that there is a slow response time to environmental changes; it may cause decision to file up on top; that it leads to poor horizontal coordination among departments; that it results in less innovation; and that it involves restricted view of organizational goals (Text on Fundamentals of Organizational Structure).

           These observations may be confirmed in the case facts which provide that in case one pipe breaks, all the work in the pipe before the break stops or spill out.  This actually happened with the bank when the pipeline reached the point of bursting and these created many backlogs for the company that was causing overtime work and increase employees. It was the very reasons also the Reed of the Operating Group implemented two phases of changes for the company with the objective of improved performance and reduced costs.

         The strategy of Citibank B was to break down that pipeline into smaller lines each carrying a different product and each supervised by a single manager who controlled every aspect of his process (Case facts - B). This strategy has the characteristics of divisional grouping as more focused now is made to the customer. Thus the aim of the changes was that from a time a customer originates a transaction all, a manager will be able to control all the way through a straight line until we dispatch the results back to the customer (Case facts - B).

3.3 Conclusion and Recommendations:

      The text on ‘Fundamentals of Organizational Structure’ provides that the organization structure of an organization must accomplish two things. First, is the need to provide a framework for responsibilities, reporting relationships and groupings, and it second is the need to must to provide mechanisms for linking and coordinating organizational elements in a coherent whole.

       City Bank A has the characteristic of the elements of well functioning divisional structure hence there are only few things to be done to improve the system. Theory however requires linking the organization into a coherent whole by the use of information systems and linkage devises in addition to the organizational chart to allow the effective working of the organization, hence the same must still be applied to City Bank A particularly as to the improvement of the processes in the operating group by still developing new computer systems for the use of Area I which was considered the operating part of the Operating Group in  processing checks for collection from other banks, posting the accounts for Citibank’ customers transferred funds from one customer to another, and preparing customer bank statements.

       At its present status, Citibank appears to be on the right track in the minor changes that the company is doing under the divisional grouping.  Thus its present structure is consistent with theory that gives importance to understanding the information–processing perspective on structure. It has therefore allowed its present design of organizational in providing information linkages on the basis of its defined goal. It has less emphasis on vertical linkages such as hierarchy and formal information systems and instead focused on the customer by grouping its people and work process while allowing greater communication and coordination as contrasted to a functional grouping

        As for Citibank B, the company is advised to continue with its Phase II of the changes desired for the company.  The company wanted to effect a performance criteria under the different approaches which included defining the products or services as given importance by the customer, developing a customer-to-customer flowchart and procedures for processing each product or service, and developing the organization to match and support the product definition and process flow and customer-to-customer basis.

Part of the approaches includes also developing its physical layout in closed-room, one-floor layout that matched the flows, procedures and organizations that could improve control and minimize movement, and fit in support functions into the responsible line organization. The plan of the company is closer to converting to divisional grouping. This is further evidenced by its plan to have a manager responsible in controlling transactions from the time it originates from all the way through a straight line until and the company dispatches the results back to the customer.

       It is found in the analysis of Citibank A and B that the type of the organizational structure is governed by the need of company in terms of its products and customers While one grouping may have some strengths which are the weaknesses of the other, still the company must determine the right combinations as it sees what is more important.  For Citibank which has different products and services, it was found that the divisional grouping was better than functional grouping.

Reference:

Text, Fundamentals of Organizational Structure

Case Facts- A (1974)- First National City Bank, Harvard Business School case 474-165.

Case Facts- B (1975)- First National City Bank, Harvard Business School case 474-166

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First National City Bank A and B Case Study. (2018, Feb 25). Retrieved from https://phdessay.com/first-national-city-bank-a-and-b-case-study/

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