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BANKING MANAGEMENT.   Term Paper ID:25110 Click to get this paper

Essay Subject: Duties of bank's business administrator, relationship banking, marketing, customer contact, strategy, financial services, profit, personnel performance.... More...

8 Pages / 1800 Words 8 sources, 17 Citations, TURABIAN Format $32.00 Return to List of Papers

Paper Abstract: Duties of bank's business administrator, relationship banking, marketing, customer contact, strategy, financial services, profit, personnel performance. Paper Introduction: BUSINESS ADMINISTRATION IN BANKING The purpose of this research is to examine the practice of business administration in the field of banking. “Banking,” as the term is used in this research, refers to the commercial banking sector of the financial services industry. “The successful banker in time finds that he or she is a manager …. In effect this individual is no longer really a banker in the sense of the functions which he or she performs …. The successful bank manager must be far more than a prudent custodian of the public’s money, financial advisor and source of capital, wise investor, and keen analyst … the banker must take into account the social milieu in which he or she functions and the people he or she serves. The banker must be sensitive to the trends of the economy … and … be aware of many other aspects of the environ Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. Fassett, "14 Companies Share Success Tips," Bank Management67 (July 1991), 11. [ix]Ibid. [xi]Ibid., 121. Kotler, Marketing Management 1 th ed. H. Advocates of relationship banking contend that a bank's best customersshould be rewarded, and that relationship pricing helps achieve that end by"adapting the prime rate concept to preferred retail customers."[xiv]Retail banks in the New York City area , as an example, implemented a two-tiered pricing system, with lower prices for preferred customers.Generally, preferred customers in this instance were defined as those whichconcentrated their banking business in a single institution. In such an instance, the bank would want to assure only aminimum level of profit. H., and Walker, C. A minimum profit level goal istypically employed in those instances where profitability is not the keygoal of an operation. Thompson, MarketingFinancial Services: A Strategic Vision 3rd ed. These profit goal typesneed not necessarily be mutually exclusive. [vii]P. L. Performance appraisal also plays a vital role in the selection ofindividuals for management responsibilities within commercial bankinginstitutions. Onefactor that is found in most selection procedures, however, is theperformance evaluation. Whilethe proponents of relationship banking claim that all segments may betargeted, the criteria for the selection of segments results in a de factoexclusion from consideration of this customer group. In addition to developing, implementing,and operating an effective relationship information system, communicationsmanagement has an educational dimension. This history, in most instances, follows an individualthroughout her or his career. L. [iii]J. "Social Context of Performance Evaluation Decisions." Academy of Management Journal 36 (January 1993), 8 -1 5.Kotler, P. S. In the long-run, therefore,it is possible that relationship banking could be interpreted as aviolation of civil rights statutes. Ferris, "Social Context of PerformanceEvaluation Decisions," Academy of Management Journal 36 (January 1993), 81. The focus is on attracting new customers in the moretraditional approach to banking. Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1997.McMahon, S. (Englewood Cliffs, NewJersey: Prentice-Hall, Inc., 1997), 319. E. Both identification of core service requirements and developmentof appropriate product offerings are essential for effective relationshipbanking.[xi] Pricing for relationship banking is a process whereby services arepriced in ways which encourage clients to consolidate financial services ina single institution.[xii] There are four general types of profit goals-maximization, target, satisfactory, and minimum. [iv]L. "The Process of Bank Management." In Baughn, W. Relationship banking may be as equally rewarding for consumers, if thequality of financial services received is improved, while, at the sametime, the cost of those services is reduced. This latter eventuality could behastened, if, in any general move toward relationship banking, few if anyinstitutions target the less affluent and less profitable accounts. Bycontrast, the marketing concept-identifying and satisfying as many customerneeds as is feasible-tends to provide the primary focus in relationshipbanking.[vii] 3. P. H. Allorganizations, however, also rely on business management, and commercialbanking, again, is no exception. "Banking," as the term is used inthis research, refers to the commercial banking sector of the financialservices industry. Berry, and T. Thus, effective performance appraisal is one ofthe critical factors which contributes to the on-going success of acommercial banking institution and represents one of the more important ofthe business management functions of bank management. S. McMahon, "Setting Retail Prices," Bank Management 68(January 1992), 47. Jr., Berry, L. The validity of performance evaluations hasbeen challenged in recent years, and some commercial banks havediscontinued their use. Banker's Handbook 1993. With respect to strategic emphasis, theprimary focus is on sales in the more traditional approach to banking. W. The selection of individuals within organizations forleadership positions and for other forms of organizational reward isaccomplished by a variety of methods, most of which depend upon thecomposite results of several factors-recommendations of organizationalsuperiors, educational background, past performance, and so forth. [xiii]W. [x]Ibid., 115. Profitability measurement. Primary customer contact. Personnel turnover also exactsorganizational costs through the effects it has on those employees whoremain with the organization. R. Bycontrast, bank management pursues a cohesive, holistic strategy inrelationship banking.[ix] 5. This combination, of course,is the consumer promise of relationship banking. Focus. Marketing concept. The many and complex responsibilities of the manager in a commercialbanking institution may be grouped into nine classifications. A. Within the context of business administration, managers in commercialbanking institutions also must discharge human resource managementresponsibilities. Commercial banking institutions do not differ from other types oforganizations in their need for individuals capable of performing businessmanagement-related functions. Nevertheless, consumersmay back away from relationship banking, in order to avoid the developmentof too great a financial dependency upon a single financial institution. A., and Ferris, G. Judge and G. Therefore, most commercial banks, ratherthan discontinuing the use of performance evaluations, have attempted toimprove them. L. Business Administration in Banking The purpose of this research is to examine the practice of businessadministration in the field of banking. The only real difference between the two is that target profitsare measured against invested capital, while satisfactory profits aremeasured against the costs of production. [v]Donnelly, Berry, and Thompson, 112. P. be aware of many other aspects of theenvironment-ecological, sociological, and political.[i] Managers in banking environments always must remain aware of thetechnical banking functions related to their responsibilities; however, thecontemporary commercial bank manager, particularly as he or she advances inthe organizational hierarchy, must be concerned intimately with factors andfunctions other than the technical aspects of banking. Berry, and T. Ineffective performance evaluation is acontributing factor to high levels of personnel turnover.[xvii] Performance appraisals build a history of an individual's life withinan organization. A concern with organizational performance (productivity) is one of themore significant of the many problems which confront managers in commercialbanks. (Eds.). In the 199 s, a major concept affecting the provision of bank productsis relationship banking.[ii] Within the relationship banking concept,customers are viewed as clients.[iii] Where the customary emphasis is onthe acquisition of new clients, client retention and improvement receivesequal attention in relationship banking. (Homewood, Illinois: DowJones-Irwin, 1996), 112. Marketing Management 1 th ed. W. Walker, (Eds.), Banker's Handbook 1993 (New York: McGraw-HillCompany, 1993), 87. The costs to a commercial bank of sub-standard performance involve(1) profit deterioration, (2) the diversion of financial and humanresources from productive to diagnostic and corrective activities, and (3)the introduction of discontinuity into organizational operations. ENDNOTES BIBLIOGRAPHYBerry, L. L., and Thompson, T. New York: McGraw-Hill Company, 1993.Judge, T. Baughn andC. As important to an organization as the task of personnel performanceevaluation or appraisal is, there are indications in the literature that asignificant proportion of the supervisors, managers, and administrators areeither ill prepared for this task, or that they are reluctant to performthe task in an effective manner. With respect to education, boththe relationship banking staff, and an institution's customers requireeducation in what is required to make relationship banking effective.[xvi] There are obvious advantages to the banking institution to be derivedfrom a successful implementation of the relationship banking concept.Stability of the client base is enhanced. Hayes, "The Process of Bank Management," in W. [xv]Donnelly, Berry, and Thompson, 125. L., and Thompson, T. In many instances, however, target profits oninvested capital will not be consistent with profit maximization.Therefore, target profit goals and satisfactory profit goals are similar incharacter. The costs of personnel turnover are not limited to thoseincurred directly in relation to those employees leaving the organization,such as the loss of productive workers, lost training costs, the necessityto train replacements, and so forth. H. "14 Companies Share Success Tips." Bank Management 67 (July 1991), 1 -12.Hayes, J. [xii]Ibid., 128. [xvii]T. "Relationship Banking: The Art of Turning Customers into Clients." Journal of Retail Banking (June 1992), 64-65.Donnelly, J. An appreciation of the businessadministration responsibilities of banking management may be gained througha consideration of the relationship banking concept that is widely appliedin commercial banking in the decade of the 199 s. Although the proponents of relationshipbanking claim that restricting access to an institution to the targetsegment is not an intent of relationship banking, in fact, relationshippricing tends to accomplish exactly that end. [xiv]S. [viii]Donnelly, Berry, and Thompson, 114. Donnelly, Jr., L. [ii]"Exploring the Frontiers of Superior Customer Service-TurningCommitment Into Action," Bank Management 23 (November 1991), 34. The second of these two factors is an inadequate knowledge onthe part of supervisors, managers, and administrators of the proceduresrequired for the conduct of effective personnel performance evaluations. L. W. W. While relationship pricing may be effective as a means of promotingrelationship banking, and while it may prove to be legal in the short-run,long-run difficulties may result. Further, profitability is improved by concentratingoperations in the most profitable marketing segments. Thompson, "Relationship Banking: The Art ofTurning Customers into Clients," Journal of Retail Banking (June 1992), 64. [vi]Donnelly, Berry, and Thompson, 112. R. Homewood, Illinois: Dow Jones- Irwin, 1996."Exploring the Frontiers of Superior Customer Service-Turning Commitment Into Action." Bank Management 23 (November 1991), 34-35.Fassett, W. The primary focus is on the productconcept in the more traditional approach to commercial banking. "The successful banker in time finds that he or she is a manager ....In effect this individual is no longer really a banker in the sense of thefunctions which he or she performs .... Marketing Financial Services: A Strategic Vision 3rd ed. The literature indicates that two majorfactors may contribute to the development of such a situation within anorganization. All types of organizations have uniquemanagerial requirements, and commercial banking is no exception. Theseclassifications are (1) planning, (2) organization, (3) coordination, (4)negotiation, (5) motivating, (6) communicating, (7) decision-making, (8)directing, and (9) controlling. The first of these factors is an absence on the part of manysupervisors, managers, and administrators of an awareness of thesignificance to the organization of the process of personnel performanceevaluation. and ... An especially important aspect of human resourcemanagement that must be addressed by managers in commercial bankinginstitutions is personnel performance evaluation. As an example, a commercial banking institution maybe willing to sacrifice some profitability, as a means of maximizingbusiness volume. Profitability is improvedthrough client base stability, because the extension of additional servicesto existing clients is a more cost effective process than the acquisitionof new customers. Thus, relationship banking may besaid to be attracting clients, and maintaining and enhancing clientrelationships.[iv] The best way of explaining relationship banking is to compare it tomore the more traditional approach to banking. The focus of profitabilitymeasurement is on individual services in the more traditional approach tobanking. In fact, some sortof systematized approach to business administration and management isrequired, if the commercial bank manager is to effectively and efficientlydischarge both the technical (banking specific) and the non-technical(general business administration) aspects of the position. By contrast, bankmanagers function as marketing professionals in relationship banking.[viii] 4. thebanker must take into account the social milieu in which he or shefunctions and the people he or she serves. [xvi]Donnelly, Berry, and Thompson, 131. The generally acceptedcontention for all types of firms is that profits should be maximized overthe long-term as a means of maximizing a bank's value to itsshareholders."[xiii] A target profit goal seeks to earn a planned returnon invested capital. Personnel turnover is one factor that leads to sub-standardperformance, and it is one of the most costly problems that afflictcommercial banks. By contrast, the focus is placed on the total client relationshipin relationship banking.[x] In relationship banking, the core service is the financial service, orgroup of financial services, identified as the primary need of a targetsegment. "Setting Retail Prices." Bank Management 68 (January 1992), 46-49.----------------------- [i]J. Most commercial banks, however, regard performanceevaluations as a valuable tool. E. Strategic emphasis. By contrast, considering the attractionof new customers is just a first step in relationship banking.[vi] 2. The banker must be sensitive tothe trends of the economy ... Communications management recognizes that relationship banking is aninformation-intensive activity. The personal account representative within a relationship bankingstructure establishes a stable personal liaison between bank andclient.[xv] Through the use of personal account representatives, aninstitution attempts to maximize customer satisfaction levels. Bank managers function as processclerks in the more traditional approach to banking. The more traditionalapproach to commercial banking is called either order-taking banking andtransaction banking.[v] There are a number of points of comparison, ofwhich the most significant are as follows: 1. The successful bank manager mustbe far more than a prudent custodian of the public's money, financialadvisor and source of capital, wise investor, and keen analyst ... 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