Assessing Organizational Performance Of Platinum Habib Bank

Overview of the organisation

An organizational performance evaluation is a systematic procedure to gain important information regarding performance of the organization as well as the factors that can affect performance. It differs from the types of evaluations as the evaluation emphasizes on the enterprise as the basic unit of analysis. One of the major ways for measuring success of the organization is encountering or achieving the strategic objectives is to assess performance of the employees. In order to describe the impact that performance management system can have on the specific areas of human resource management. It is essential in defining relationship between performance management system as well as human resource management.  In the present paper, Platinum Habib Bank has been selected as case study organization where overview of the organisation, organizational performance, hierarchical structure, relationship between culture and organizational performance and SWOT analysis are discussed. It helps to identify the issues and provide recommendations to mitigate the issues.

Platinum Habib Bank was one of the most successful commercial banks based on Nigeria. At the time of acquisition, Bank PHB has an asset of over US$6 billion.  The inception of this bank was possible because of a successful merger between two of the most renowned bank i.e Platinum Bank Plc along with Habib Nigeria Bank Plc. The year that followed was economically very regressive to the private banks in Nigeria. This was also the main reason why as soon the merger took place in 2005, Bank PHB started the expansion and various acquisition while creating many subsidiaries of this commercial bank. Many of the subsidiaries were based out of Nigeria (Boxall, Guthrie and Paauwe 2016). Although in later years due to management crisis in the Bank and many other internal issues that are also a part of our study, the license of Bank PHB was revoked by Central Bank Of Nigeria because of the fact that the bank. It was not able to recapitalize their bank before the deadline of 30 September 2011 that was given by the Central Bank. On 5 August 2011 i.e the same day when the license of PHB Bank was revoked, Keystone Bank was formed which took over all the acquired assets along with all the offshore subsidiaries of PHB bank. This case study has been written to properly understand all the organizational performances and structure along with the issues that led to revoking of the license of Bank PHB. The working of Keystone Bank and the process of its structure works to deal with the recapitalization of the Bank is also a part of this study.

There have been many theories that have been put forth by many leading management firms on the importance of communication and its implication of the organizational performance. This aspect of business not only is valid for the major commercial banks but also holds true in terms of the quality of life (Carlos Pinho et al. 2014). The meaning of communication can be written as the way in which the management is able to convey the messages and the objective of an organization to its employees which can be of assistance while getting the work done and achieving a goal by the related corporate structure. Let it is discussed about the various assumptions that might be taken when considering all the communication that is done in PHB Bank in Nigeria.

1. Among the first assumption is the fact that communication in an organization takes place through the proper flow of information by two or more than two people in an organization. It is just written for the sake of understanding the process of initiation of communication in a corporate structure.
2. Aristotle said that for proper medium and passage of communication, there has to be a speaker along with a speech and a willing number of participants listening (Alharbi 2017).  This has become much more complex considering all the technological advancement that has been seen in our world.
3.  There are altogether three routes where a communication might take in an organisation. This can be lateral, diagonal as well as vertical.

Organizational Performance

Now, that there has been an inquiry on the different models of communication, we will now shift our focus towards the organizational performance and communication channels that are there in Bank PHB Plc.

Bank PHB, an organisation is involved in the universal business of banking and finances in Nigeria. The net worth of this bank in Nigeria has been found out to be around N368 Billion which is the figure that was quoted by the Reuters.  The organizational structure is very defined in nature. The main aim and objective of the different organizational structure has always been to divide the whole banking structure in several subunits that will then be given individual responsibility (Lo et al. 2015). This is done to for effective resource allocation in the bank considering the wide range of function that they perform. The values of effective communication in an organisation like the Bank PHB can be seen in the way they are able to their objective and goal for the fiscal year to their respective employees.

Bank PHB was a bak of wide and tall hierarchical structure that was inducted into their working during the time of the banking merger in 2005. The Bank PHB has as much as six layer of interlinked managerial post in the entire banking system which ranges from their MD(managing Director) or CEO to the last managerial post of executive assistant. Their as a internal banking crisis in the Bank PHB in the initial years which could be seen as an example of how to communicate and convey a message to the working employees of the bank. There was a vision that was dreamt by the MD of the bank in few years down the line, in which he wanted to see his bank to go from the present ranking of ninth position in the overall bank ranking issued by the central bank of Nigeria to 5th position at the end of the fiscal year. However, in spite of climbing the ladder in the fiscal year, Bank PHB saw a major fall in their ranking half year down the line (Shollo and Galliers 2016). This compelled the CEO of the bank at that time to call for an emergency meeting in which he expressed his dissatisfaction to the employees of the firm. In addition, the organization did not hesitated to issue a warning to the top bosses of the bank to either work according to the target or should be ready to be exited from the bank. Here, it is seen that the Bank PHB has an issue of communication with their employees which was one of the main reason why there were no steps taken by the management of the bank to resolve the issue of the liquidity crisis of the bank.

The above issued threat by the MD instead of creating an efficient workplace demotivated and dampened the morale of the employees, which head the staggering threat from the top management of the company.  The threat that was given by the MD had a ripple effect in reality creating job dissatisfaction among the young bank professions. They started looking for alternative jobs because of the insecurity they began to have after receiving emails from the company (Gerschewski et al. 2015). This did destabilize the company because not only the normal employees started resigning from the company, the top management also wanted started looking for other alternative. This was followed by the enormous loss of workforce of the company that created a vacuum in the company for fresher, which demanded a lot of attention in their initial phases.

Hierarchical Structure

The prism of value and belief system, customs and behaviour can define the culture of a bank. PHB’s corporate organization culture has been a major source of motivation for its employees; they have imbibed and transformed its workplace. Organized culture has been gaining ground in recent times due to the strong work ethics that it emanates. An organized culture also results in better organizational financial performance (Migdadi et al. 2018). There exists a positive relationship between an organization’s corporate culture and its performance. Corporate Culture can be explained in different ways, they are Schein, Hofstede, O’Reilly, etc. When it is observed that the growth trajectory of Platinum Habib Bank, it can be found that it is steadily going upward. One of the contributing factors is organizational effectiveness that is the direct by-product of Effective corporate culture.

Organizational effectiveness can be measured by how fast an organization can reach to its goals. In another way, it can be said that organization effectiveness determines the degree to which an organization achieves its goals (Katou 2015). Thus, to know about Platinum Habib Bank’s organizational effectiveness, we have to analyse various parameters like dimensions, characteristics, key effective areas. By relating Competing Values Framework (CVF) with the Organizational effectiveness models is important.

1. Model involving human relations like dialogue, openness and contribution that will lead to increase in commitment and morality.
2. Model involving internal processes like documentation, measurements and information management will lead to continuity, control as well as stability.
3. Model involving open systems comprises of innovation, adaptation and vision, these will lead to better support, external respect, development and lastly achievement.
4. Model involving rational goals includes goals as well as directions to achieve productivity and profit.

Corporate Culture of Platinum Habib Bank has made its organizational performance effective. The corporate culture has achieved this by bringing change in four parameters:

1. Involve Members: It helps Platinum Habib Bank making their employees gaining a part of the corporate culture. It is achieved through putting emphasis on development of human capabilities of each tier of hierarchy (Alfalla-Luque et al. 2015). If a sense of ownership can be imbibed in the employees towards the organization. There is a major change in the quality of work of managers, senior level employees if there suggestion is appreciated and put to work.
2. Being Consistent: Consistency is the key to organizational effectiveness. Integration and coordination of culture is important. Principles and core values of the Platinum Habib Bank has resulted in its top class attitude towards work. Conflicting opinions between leaders and employees can be channelized to reflect a very healthy workplace.
3. Staying Adaptable: One of the reasons for Platinum Habib Bank to staying not only afloat but managing its business well is staying adaptable. The economic turmoil in the world economy has affected all the major banks of the world. In addition, without doubt it has hit PHB too, so they are dealing with this adverse situation by hiring the best analyst and preparing for bad and good times with the same gusto.
4. Setting Goals: Having a clear goal sets Platinum Habib Bank helps to gain competitive benefits. The bank has clearly charted out both its long term and short term goals clearly, it seems (Bal and Dorenbosch 2015). Clear goals enable both the employees and the owners to align their day to day activities to the predetermined goals.

The above four characteristics evolve on a day-to-day basis and these will help the Platinum Habib Bank to move ahead. Hence, it will look into the different moderation that have an impact in this relationship between organizational performance and the corporate culture of the bank.

1. Values of Top Management: the Platinum Habib Bank top management took some wrong decisions during the time of economic crisis, which led to serious problems in the bank. This is how the values of top management can affect or impede the performance of a bank.
2. Environment: Any bank is susceptible to the changes that are occuring in the economy. The 2005 economic crisis, is the prime example how it influenced the bank adversely.

Thus, these factors give us a picture of the reasons that led to the downfall of the Platinum Habib Bank and led to its license being cancelled by Central Bank of Nigeria. Eventually Keystone Bank took over all the assets of Platinum Habib Bank.

An in-depth SWOT analysis of PHB Bank( presently known as Keystone Bank ) has to be done in order to understand the reason as to why the former Bank PHB license was revoked by the central bank of Nigeria. Apart from that, it can also tell us the various strength of the bank as a commercial bank and lender and what was the effect of their expansion policy after 2005 till 2011 (Su et al. 2015). Bank PHB followed an extension policy soon after its merger n 2005 and succeed. This can also be said because of the fact they did had many subsidiaries and offshore banking system.  Let us now observe the SWOT analysis of Bank PHB Plc in Nigeria.

The major strength in terms of the functioning of the PHB Bank can be seen by the fact that it was willing to give much higher competitive fee than its main competitor was. This made the bank to announce to the customers about their intention and attracted many high-value customers who were willing to avail the attractive offers. These high-value customers deposited a large amount of capital in the Bank PHB (Rehman et al. 2016). Along with this, Keystone Bank was benefited by the economic activities that were happening locally.  There was a surge in economic activity in Nigeria that also led to most high as well as moderate value customer to use the attractive schemes of the Bank to deposit money in their account. This surge in economic activity in Nigeria also becomes very beneficial for the bank, as they would now have many borrowers from the banks (Augusto et al. 2014). These borrowers mostly belonged to the member of the business community who wanted to expand their businesses in a happening Nigerian economy. This also helped the bank in its initial stages of inception.

There was much weakness of both the Bank PHB as well as its successor Keystone Bank. Most of these weaknesses were due to mismanagement of liquidity risk, interest rate and credit risk that was imposed due to many have called as overambitious nature of these banks. The credit risk of the bank was because of the large number of money that was borrowed by the bank, which was not paid to different lenders. Both the PHB Bank as well as the Keystone bank were victims of this risk which was the due to many managerial decisions that were taken by the bank.  

Another important weakness that needs to be discussed is the liquidity risk of the bank that might be a problem for both a commercial bank as well as their shareholders. The liquidity risk is the risk associated with the inability of the bank to convert its belonging assets and subsidiaries into cash as and when required by the bank at a very reasonable market value (Beneke et al. 2016). The banking system of Nigeria has witnessed many cases where there is an immediate liquidity crunch issue in a private and commercial bank. Apart from an economic point of view, these liquidity risk if comes out in the open, there is also a loss of brand image in the minds of the customer. This leads to various actions by the customers that mostly include taking out the cash and capital that they might have deposited in the bank. This is what happened in the great depression of 1928 and the recession of 2008 (Heffernan and Dundon 2016). Bank PHB has also seen this issue. Keystone Bank is also not been able to convert its assets into cash at a reasonable market price in Nigeria.

Despite a Bank that is considered by many as one of the many risk-averse banks in Nigeria, there is many opportunities by the banks that are based in Nigeria to cash on the economic environment that is created by the country. The interest rates of the bank might be higher than ever but that has also not persuaded by many businesses to ask for a loan from the commercial bank in Nigeria (Maitland, Hills and Rhind 2015). There have been also many cases where the Central Bank had to intervene from time to time on the working of the banks in Nigeria in terms of the CRR (cash reserve ratio). This was done by the Central Bank in order to ensure that the banks in Nigeria do have a surplus of liquidity and in-hand cash in their respective banking system.  Bank PHB and its successor were accused of having a liquidity crisis that was also found in our case study.

The majority of the banks in Nigeria have a stiff competition among them in terms of their revenue and Cash reserve. Since Bank PHB was in business for about 6 years since its inception in 2005, and the fact that the bank merger was done because of the liquidity crunch, many of the top banks were licensed by the Central Bank of Nigeria was perceived as the immediate threats (Kuo and Tsai 2017). Many of the high-value customers of the bank were moving their cash and asset to other banks. There are many threats to the Bank PHB (Keystone Bank) by its peer especially in term of the liquidity ratio (Mohelska and Sokolova 2015). It is very low and have been commented by any economist that when the time like emergency come the Keystone Bank will not be able to solve their liquidity crisis, in other words, they would not be able to convert their assets into cash as a fair market value that will result on enormous loss to the bank.

However, the Platinum Habib Bank was the fifth largest bank of Nigeria but still they could not avoid the economic downturn of 2005. They suffered heavily, as they could not recapitalize before the proposed deadline (Esfahbodi, Zhang and Watson 2016). It led to their licenses being cancelled by the Central Bank of Nigeria by the “Bridge Bank “concept. “Bridge Bank” means the original bank can continue its operation but there assets will be handled by another organisation.

The successor of the PHB Bank i.e Keystone Bank will have to fight the liquidity crisis that was the primary cause of concern in the present economic space in Nigeria. The bank could not afford to charge larger interest rate to its customers as they might have any newer and attractive alternative in terms of other commercial banks in Nigeria. There has to be efforts made by the management of the bank to try to retain its customers (Bakotic 2016). Even in the case of an economic crisis, the company has to prepare a plan and try to deal with the issue under the directives of the Central Bank of Nigeria. This was done during the recapitalization order by the central bank in 2011 that led to the turmoil in banking system of Bank PHB Plc.

Conclusion

This is precisely the reason why there were many liabilities of the Bank PHB on its balance sheet. It is also seen that there was 25% annual difference in terms of total loan amount along with leases on the Keystone Bank.  These factors were enough to assume that in cases of a liquidity crisis in the banking system of Nigeria, the PHB, as well as Keystone Bank, would not be able to all their investment into in-hand cash in a stipulated time and at a fair price of their principal cost. However, because of the expanding economic sphere of Nigeria and the policies of the Nigerian Government to have an open economy, there is a viable chance for banks like Keystone to grow exponentially.

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