The Bank of America is a multinational financial services company. The bank's headquarters are located in Charlotte, North Carolina. It is considered the second largest bank in the United States by assets. The bank was ranked 26th largest bank by total revenue in 2016. It is also the 9th worldwide in total assets. The financial institution operates vastly in business and personal banking, and corporate and insurance financing. The closure of branches in the United States since the financial crisis has affected banks and resulted in vulnerability and exclusion of members of the society. The Bank of America has been a victim and has seen the closure of many of its branches as mitigation for poor financial outcomes within the organization. The bank has removed about 1600 branches since the financial crisis to cut down on costs in times when the profits do not sustain the organization.
A combination of issues is the cause of the current crisis facing the financial institution. The banking industry has undergone a lot of changes over the years, and this has rendered some of the services that banks depend on for revenue obsolete. Failure to adapt to current trends has resulted in losses from stiff competition in the market. Introduction of services similar to those offered by banks, and which have digitalized, has made the bank processes appear less efficient. The mobile money transactions and the use of the internet have also denied the banks the option to charge for services offered at the branches since the people can now carry out most functions at a remote location without the need to appear physically to a bank teller for transactions.
This advancement may have improved efficiency for the customers but at the same time, eliminated services that form a crucial part of the banks business model hence stifling the bank's source of revenue. Reduction in the profits of the bank will affect its ability to operate several branches, and this precipitates closure to minimize costs of running them.
Technology has been a factor that resulted in the closure. Innovation in this sector has improved a lot, and various advancements introduced in how services are offered including security. This has had both a positive and negative effect and, in this case, has contributed to the crisis facing the bank. The introduction of banking services on electronic devices has improved the ease of carrying out transactions. The clients can now view their credit status and banking details on their smartphones. The customers can make money transfers through the internet and even functions such as deposit and withdrawal made from a remote location. This has negated the need for branches that offer this services. Failure of the bank to predict market changes has led to the poor transition to the current trends and exposed the bank to losses. The lack of a unit that focuses on market changes and ensures the bank can foresee changes and respond appropriately results in situations where the bank is not up to date and continues with practices that are unsustainable and in time losses dictate actions that hurt the finances and growth of the organization.
Social factors are responsible for the crisis facing the bank. The effect of social activities on banking market and the performance of the bank is significant. The culture of a society and the manner in which actions are carried out impacts the environment of any organization within that society. Common attitudes, trends, and beliefs influence the relationship between the banks' marketers and their customers.
Social features should be analyzed by the leadership of the bank to ensure continuous positive achievements include the population demography, hierarchical structure of the society, societal class and power structure, gender roles, attitudes of the members of that society, and societal conventions. The trends in society dictate how banking services are structured.
The banks must design services offered to match societal needs. In the current competitive market, failure to achieve this has resulted in poor performance by the bank and precipitated the financial crisis. For instance, the branches have changed the manner in which customers receive services at the counters. Paperwork has reduced, and the banks have transitioned to digital systems that receive information. Retention of paperwork in the banks, which is relatively less efficient results in loss of customers. The introduction of current trends saves the business from loss of customers in a competitive market.
Leadership within the organization significantly affected the performance and resulted in the financial crisis and closure of the branches. The failure of the bank was a process of continued operational losses. Leadership that cannot promptly respond to issues within the organization precipitate such occurrences. Leaders are tasked with managing the institution's finances and closely monitoring performance, and in case of any changes, they are expected to respond by adjusting the shortcomings and eliminating the causes of the deviations to ensure that the bank does not continuously experience losses to a point where they are unsustainable.
Mismanagement of the bank resulted in the crisis. The disregard for procedure and poor practices cost the bank its finances and growth and over time resulted in the collapse. The financial problems were due to a dysfunctional internal culture. The system's culture includes selling questionable financial commodities without looking into the possible risks that would arise from the sale of those products.
The deviation from right practice was encouraged, and actions were not carefully considered to protect the bank from unnecessary risks. The bank further developed recklessly, as it overpaid for other banks which it acquired. This growth by unqualified managers who had limited direct banking experience and who did not have a vision for the institution.
The main reason behind its demise, therefore, was therefore created by its mismanagement. The risks taken by the management resulted in its collapse.
The organization lacked in motivated behavior. The problems that resulted in financial crisis continuously affected the bank for a while and no effort was made to counter the poor performance. Personal motivation is necessary for ensuring an employee gives their best to an organization. The motivation is the catalyst for quality delivery of services and consequently success of an organization. Several factors affect the drive of workers in a given institution. The bank has a responsibility to motivate the employees to ensure they deliver. Motivation succeeds through the creation of goals and rewarding achievements which gives the employees a reason to work hard beyond the minimum requirements. The lack of motivation, therefore, is a factor that contributed to the financial crisis in the bank (P. Hersey, 2007).
The concept of desire for involvement elaborates how every employee is actively seeking opportunities to get involved in decision-making when handling institutional problems. They thirst for the chance to share what they know and to learn from the experience (JL Bowditch, 2001). The organization should encourage them to express their opinions and suggestions when critical decisions are made. This also improves the problem-solving ability of the bank as they include variety and quality in decisions taken on crucial matters.
The knowledge of employees on their sectors or fields is better than that of policymakers as they are in the field and have hands-on knowhow on operations and if appropriately utilized will enable the organization to come up with efficient solutions to problems facing the institution. The banks' failure results from poor decision making secondary to uninformed or ineffective plans that lacked inclusion of employees dealing with the fields within the bank (S Altman, 2013).
The concept of a social system explains the need for the organization to interact with other firms and the customers. The benefits of interaction include gaining knowledge and understanding what customers need. The institution socialization with other firms enables them to get current information and trends which help the bank stay up to date. The communication with other players in the market allows combined efforts in controlling markets and enables the different institutions to work together with a common aim of growing the sector and the organization's revenues as well. The failure of the bank signals a disconnect with its customers. Communication with customers enables the institution to understand problems the customer's experience and design solutions and also allows the clients to give feedback which allows the bank to improve and provide efficient services (R.W. Griffin, 2011).
The bank can make some changes that could assist it to reduce losses and sustainably build an institution in the future. Leadership and management need an overhaul. The replacements should include persons with experience, vision, and integrity. They act as the anchor of an organization and presence of the right leadership means the institution's future is secure and the bank will grow against stiff competition and still succeed (Yukl, 2013).
The bank should introduce a team to monitor market trends as well communicate with the firms related to it and the customers. This unit should receive feedback from the employees and customers and use information gathered to design advances in the bank's operations. This will protect the bank from losses associated with delayed changes to match market needs. The organization should also introduce strict policies to guide the use of its resources to ensure money is not unnecessarily spent and that employees misusing or mismanaging the institution's funds will be held responsible and punitive measures taken.
JL Bowditch, A. B. (2001). A Primer on Organizational Behavior.
P. Hersey, K. B. (2007). Management of Organizational Behavior. Pearson.
R.W. Griffin, G. M. (2011). Organizational Behavior. South-Western Cengage Learning.
S Altman, E. V. (2013). Organizational Behavior: Theory and Practice. Academic Press Inc.
Yukl, G. (2013). Leadership in Organizations. Pearson Education India.
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