STRATEGIC MANAGEMENT AND ORGANIZATIONAL PRODUCTIVITY IN THE BANKING SECTOR

STRATEGIC MANAGEMENT AND ORGANIZATIONAL PRODUCTIVITY IN THE BANKING SECTOR, (A CASE STUDY OF UNITED BANK FOR AFRICA PLC.)

TABLEOFCONTENT

Title page    –        –        –        –        –        –        –        –                  –        i

Approval     –        –        –        –        –        –        –        –        –        –        ii

Certification-        –        –                  –        –        –        –        –        –        iii

Dedication- –        –        –        –        –        –                  –        –        –        iv

Acknowledgement-         –        –        –        –        –        –        –        –        v

Abstract      –        –        –        –        –        –        –        –        –        –        vii

Table of contents  –        –        –        –        –        –        –        –        –        vi

CHAPTER ONE

Introduction

1.1    Background of study –       –       –       –       –       –       –       1

1.2     Statement of problem     –        –        –        –        –        –        –        3

1.3     Objectives of study         –        –        –        –        –        –        –        5

1.4     Research questions        –        –        –        –        –        –        –        5

1.5     Formulation of hypotheses      –        –        –        –        –        –        6

1.6     Significance of the study          –        –        –        –        –        –        7

1.7     Scope of the study          –        –        –        –        –        –        –        7

1.8     Definition of terms         –        –        –        –        –        –        –        8

1.9     Development of banking in Nigeria    –        –        –        –        –        9

1.9.1  Profile of UBA       –        –        –        –        –        –        –        10

Chapter References        –        –        –        –        –        –        –        –        13

CHAPTER TWO

Review of literature

2.1     Introduction         –        –        –        –        –        –        –        –        14

2.2     Historical development of strategic management  –        –        –        14

2.2.1  From corporate planning to strategic management-       –        15

2.3     The concept of strategy  –        –        –        –        –        –        –        19

2.4      The strategy hierarchy   –        –        –        –        –        –        –        23

2.5     Strategic management process –        –        –        –        –        –        25

2.5.1  Situation analysis –        –        –        –        –        –        –        25

2.5.2  Strategy formulation      –        –        –        –        –        –        31

2.5.3  Strategy implementation         –        –        –        –        –        33

2.5.4  Strategy evaluation        –        –        –        –        –        –        35

2.6 Techniques for evaluating the impact of strategic management  –        40

2.6.1 Quantitative measures of evaluating the impact of strategic

Management         –        –        –        –        –        –        –        39

2.6.2 Qualitative methods of measuring the impact of

strategic management    –        –        –        –        –        –        40

2.6.3  Features of a good evaluation system         –        –        –        43

2.6.4  Reasons why strategic plans fail       –        –        –        –        43

2.7     The concept of productivity     –        –        –        –        –        –        45

2.7.1  The meaning of productivity    –        –        –        –        –        46

2.7.2  Productivity measurement       –        –        –        –        –        48

2.7.3  Determinants of organizational productivity         –        –        52

2.7.4  Factors influencing productivity        –        –        –        –        55

2.7.5  Importance of productivity       –        –        –        –        –        58

2.8     Strategic management and organizational productivity –        –        61

2.9     Strategic management in the banking industry   –        –        –        63

2.10   Strategies for improving banking operations        –        –        –        65

Chapter references         –        –        –        –        –        –        –        –        67

CHAPTER THREE

Research Methodology

3.1     Introduction         –        –        –        –        –        –        –        –        71

3.2     Method of data collection         –        –        –        –        –        –        71

3.2.1  Primary Sources of Data –        –        –        –        –        –        71

3.2.2  Secondary Source of Data        –        –        –        –        –        71

3.3     Population of Study       –        –        –        –        –        –        –        72

3.4     Sample Size –        –        –        –        –        –        –        –        –        72

3.5     Data Collection Instrument     –        –        –        –        –        –        73

3.6     Data Analysis Techniques        –        –        –        –        –        –        73

Chapter References        –        –        –        –        –        –        –        –        76

CHAPTER FOUR

Data Presentation and Analysis

4.0     Introduction         –        –        –        –        –        –        –        –        77

4.1     Questionnaire Administration           –        –        –        –        –        77

4.2.    Data Analysis       –        –        –        –        –        –        –        –        78

4.3     Test of Hypotheses         –        –        –        –        –        –        –        88

CHAPTER FIVE

Summary, Conclusion and Recommendation

5.0     Introduction         –        –        –        –        –        –        –        –        99

5.1     Summary of findings     –        –        –        –        –        –        –        99

5.2     Conclusion –        –        –        –        –        –        –        –        –       101

5.3     Recommendations          –        –        –        –        –        –        –       102

Bibliography         –        –        –        –        –        –        –        –        –       105

Appendix I   –        –        –        –        –        –        –        –        –        –       109

Appendix II           –        –        –        –        –        –        –        –        –       110

ABSTRACT

The study is on the impact of strategic management on organizational productivity in the banking sector, with UBA as the case study. The study is done with a view of identifying the major benefits of managing strategically and also highlights the challenges faced by organizations as a result of not applying strategic planning into its management process. The methodology adopted involved the use of primary data, through structured questionnaire collected from 160 respondents, randomly selected and determined through Yaro Yam en’s rule. The data obtained were analysed and further subjected to Chi-square statistical tool in testing the hypothesis. The result obtained showed that productivity in the banking sector can be improved by the application of strategic management. We can therefore conclude that strategic management, if properly applied can be a major booster of organizational productivity.

CHAPTER ONE

INTRODUCTION

1.1    BACKGROUND OF STUDY

The spate of competition among organizations has necessitated the need for improved performance if they are to realize their corporate goals. The socio-political environment of businesses is also ever changing and thus imposes upon these entities the challenges of managing that change in order to sustain performance. Resources are limited, consumer demands are primarily directed by prices, and as such businesses and firms could not sell everything they produced. Little attention being paid to competitors and relative competitive strength of the business, mainly due to the perception of the environment as being relatively stale and simple. “During and after the oil crises of 1973, the world economy virtually collapsed with both inflation and stagnation at the same time, leading consumer demands to change to high quality good and services, which in turn led to fierce international competition. (Garth, Andrea & Podolny, 2001: 25). This trend in the socio-economic environment unfortunately continued into the 1980s where western corporations could only look as their Japanese counterparts proved capable of combining high performance in areas of productivity, timeline and quality with a high degree of motivation and commitment from their employees. These developments resulted in both technological and economic changes that were difficult to predict with common forecasting methods. Techniques to explain product/market cost behaviour and the dynamics of international business competition were developed and refined. One of such techniques for overcoming such problems posed by strategic changes is strategic management. Management researchers have maintained that at the heart of organizational performance and productivity are three determinants: Strategy, capacity and the environment. Strategy management harnesses these elements and thus provides organizations with a tool for managing and improving performance. Strategic management is simply a set of management decision and actions that determines the long-run performance of an organization that includes environmental scanning, strategy formulation, strategy implementation and evaluation and control. Wheelen and Hunger (2002) in Onodugo, (2002).

Strategic management is a process for developing and enacting plans to reach a long term goal that takes into account internal variable and external factors. It encompasses an integrated, future-oriented managerial perspective that is:

1. Outwardly focused
2. Forward thinking and
3. Performance based, (Kiggundu, 1996).

Strategic managers identify long-range targets, scan their operating environments, evaluate their organization’s structures and resources, match these to the challenges they face, identify stakeholders and build alliances, prioritize and plan actions, and make adjustments to fulfill and improve productivity/performance objectives overtime.

According to Brinkerhoff (1994), strategic management is characterized as looking out, looking in and looking ahead. “Looking out” means exploring beyond the boundaries of the organization to set feasible objectives, identify key stakeholders and build constituencies for change. “Looking in” implies critically assessing and strengthening the organization’s systems and structures for managing personnel, finances and other essential resources. Finally, “looking ahead” entails melding your strategy with structures and resources to reach your policy goals, while monitoring your progress and adjusting your approach as needed. Balancing strategic management outward, inward and forward looking functions helps you develop a vision and a strategy for where and how to move the organization forward. Balancing these different perspectives is the essence of managing strategically. (Brinkerhoff, 1994).

1.2    STATEMENT OF PROBLEM

The Nigerian business environment like others, the world over, is very dynamic. Intense competition within industries coupled with on-going government reforms that affects the economic and socio-political life of the nation has put organizations on the threshold of managerial innovation to surmount the enormous environmental challenges on its productivity. It is common knowledge that organization must strategize in order to remain in business amidst stiff competition such as is witnessed in the banking industry. Many organizations, especially in the banking industry, have spent significant human, financial and technical resources on planning, planning processes, environmental scanning, and all. Yet what effects have these plans and planning processes had on the productivity of the organization at the end of the day? Organizations need to be able to assess whether their planning efforts have been beneficial as it relates to productivity.

There is an underlying assumption that strategic management is good for an organization; and that by engaging in strategic planning, an organization can change and thereby, enhance both its effectiveness and culture. The question is why is there absence of literature on evaluating strategic plans? Is it because organizations have not integrated the strategic plan into its operations thereby making the strategic planning process sterile?

United bank for Africa embraces strategic management in running its operations. Strategy is at the heart of the banks competitive drive, but whether these strategic efforts are of any relevance to the bank’s productivity and performance present an opportunity for this inquiry. It is against this back-drop that this paper examines the relationship, if any, between strategic management and organizational productivity.

1.3    OBJECTIVES OF STUDY

This study aims to achieve the following:

1. To ascertain the existence of strategic management policies and procedures in United Bank for Africa Plc.
2. To assess the extent of employee involvement in strategic management process.
3. To examine the extent to which strategic plans are implemented.
4. To evaluate the impact of strategic management on organizational performance.
5. To identify the challenges faced by management in managing strategically.

1.4    RESEARCH QUESTIONS

The following research questions are raised to guide the study:

1. Are there strategic management policies and procedures existing in United Bank for Africa Plc.?
2. To what extent are employees involved in the strategic management process of the bank?
3. To what extent are the strategic plans of United Bank for Africa Plc. implemented?
4. To what extent does strategic management impact on organizational performance?
5. What are the challenges faced by management in managing strategically?

1.5    FORMULATION OF HYPOTHESES

The following hypotheses were formulated to guide this study:

Hypothesis one

H₀:     There are no strategic management policies and procedures existing in United Bank for Africa Plc.

H₁:     There are strategic management policies and procedures existing in United Bank for Africa Plc.

Hypothesis two

H₀:     Employees are not significantly involved in the strategic management process.

H₂:     Employees are significantly involved in the strategic management process.

Hypothesis three

H₀:     The strategic plans of United Bank for Africa Plc. are not fully implemented.

H₃:     The strategic plans of United Bank for Africa Plc. are fully implemented.

Hypothesis four

H₀:     The major impact of strategic management is not customer satisfaction.

H_4:      The major impact of strategic management is customer satisfaction.

Hypothesis five

H_0:      Insufficient financial resource is not a challenge faced by management in managing strategically.

H_5:      Insufficient financial resource is a challenge faced by management in managing strategically.

1.6    SIGNIFICANCE OF THE STUDY

This study is significant in the following ways

1. Findings made herein would be of much relevance to managers in providing direction for improved practices in a dynamic business environment.
2. This paper is expected to add to the body of knowledge on the topic.
3. It is expected to offer recommendations based on the findings and conclusions of the study and to instigate further research in the subject area.

1.7    SCOPE OF THE STUDY

For the purpose of this research study, the researcher’s efforts will be concentrated on the relationship and impact of strategic management on organizational productivity.

The research data, (questionnaire) will be limited to management and staff of the case organization, United Bank for Africa; with questions drawn to reflect the key variable to evaluate the relevance of strategic management.

1.8    DEFINITION OF TERMS

The following t  erms are defined within the context of usuage in this work:

1. Strategy: According to Robbins and Barnwell (2002:138), strategy is the adoption of courses of action and the allocation of resources necessary to achieve organizational goals. It is simply a means through which the organization’s goals and objectives are achieved.
2. Strategic management: This is the formulation, implementation and evaluation of strategies to achieve the goals of an organization. It is the bundle of decision and acts which a manager undertakes and which decides the result of the firms’ performance.
3. Resources: The things needed by an organization for the achieving its objectives and goals.
4. Strategic objectives: It is the defined targets or goals that an organization must achieve to make its strategy succeed.
5. Mission statement: This defines the fundamental purpose of the Organization. It talks about an organization present (i.e. where we are now). It describes why an organization is operating and thus provides a framework within which strategies are formulated.
6. Vision statement: This identifies where the organization wants to be in the future or where it should be to best meet the needs of the stakeholders.
7. Goals: A goal is a desired future state that an organization tries to achieve. It specifies in particular what must be done if the organization is to attain its mission or vision.
8. Objectives: Objectives are the goals that the organization wants to achieve over a period of time.

1.9    DEVELOPMENT OF BANKING IN NIGERIA

Prior to the 17^th century, rudimentary banking activities have become wide-spread in several parts of the world. Banking activities in Nigeria evolved to serve the interest of the colonial government, especially in the distribution of sterling coins. However, with the influence of European trading activities and the presence of colonial government, the Africa bartering gradually gave way to the use of currency to facilitate exchange (Odozi, 2000).

Commercial banking activities commenced in Nigeria in 1892 when African banking corporation (ABC) started business in Lagos. In 1894, the bank of British West Africa which later changed to Standard bank and now known as First bank of Nigeria plc. replaced African banking corporation and monopolized the banking scene. The Barclays bank (DCO) opened a branch in 1971. Before then Bank of Nigeria (formally Anglo African bank), which was established in 1905 had been sold out to bank of British West Africa (BBWA) while the British and French bank, now United Bank for Africa (UBA) became the 3^rd expatriate bank to commence business of banking in Nigeria in 1949.

1.9.1 PROFILE OF UNITED BANK FOR AFRICA (UBA)

United Bank for Africa Plc. (UBA) is one of the leading financial service institutions in West Africa. Listed on the Nigerian stock exchange, UBA has evolved into a pan-African full service financial institution.

Its vision is “to be the undisputed leading and dominant financial services institution in Africa. UBA mission is “to be a role model for African businesses by creating superior value for all our stakeholders; abiding by the utmost professional and ethical standards and building an enduring institution.

History of UBA

UBA history dates back to 1949 when the British and French bank limited (BFB) commenced business in Nigeria. Following Nigeria’s independence from Britain, UBA was incorporated in 1961 to take over the business of BFB. UBA was the first Nigerian bank to list on the Nigerian stock exchange in 1970. In August 2005, UBA merged with standard trust bank and acquired continental trust bank. The consolidated UBA was borne out of the desire to lead the domestic market to a new era of global relevance by championing the creation of the Nigeria consumer finance market, leading a private/public sector partnership, supporting the acceleration of Nigeria’s economic development, and growing the institution into a one-stop financial services institution.

Strategy: UBA’s strategy is

1. Increase market share to 25% – 30% over the medium term.
2. Good deposits by 20% loans by 15% and achieve OE of 20% in 2012.
3. presence in major global financial centres
4. Dominate retail baking in Nigeria
5. Achieve cost to income ratio of 65%-70% by 2012
6. Deploy risk management standards in key areas of its operations.

UBA’s Strengths

The creation of a corporate culture founded upon strong organizational values and performance-driven operating norms, has meant that the people of UBA find their unique careers in the group as one of the most challenging, rewarding and exciting opportunities there is within their areas of operation, enabling them to give their best. The strength as a group lies primarily in our diverse people and their limitless capacity to bring their passion to bear on the development and delivery of innovative products and services, creation of excellent customer experience and delivery of result. Other attributes are:

• Widest reach in Nigeria, presence in the regional and international financial markets.
• Diverse customer base of leading large corporates, high net worth individuals and wide coverage of the retail market.
• Strong, reputable financial relationship with most state government and the federal government.
• Experienced management team with a proven track record.
• Strong profitability.
• Strong corporate social responsibility.
• Competitive advantage in the industry on bases of the bank’s information technology platform which allows the bank to achieve faster customer service, greater centralization of back-office functions and increased process automation. 

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Barry & Straussman, J. (1990): “Public Management Strategies: Guideline for Managerial Effectiveness”. Oxford: Jossey-Bass Publishers.

Brinkerhoff, Derrick (1994): “Looking Out, Looking In, Looking Ahead”. PA Times, Vol 17, No 12 p.11.

Bradford & Duncan (2000): “Simplified Strategic Planning”. Chandler House Publishing Inc.

Hunger D, Wheelen T. L (2000): Strategic Management. Prentice Hall. 7^th Edition.

Kiggundu, M. (1996): Integrating Strategic Management Tasks Into Implementing Agencies: From Firefighting to Prevention: World Development Journal. Vol 24, No 07, pp 1417-1430.

Mintzberg, H. (1994): The Rise and Fall of Strategic Planning. New York: The Free Press.

Robbins S and Barnwell R. (2002): “Organizational Theory: Concept and Cases”. Prentice-Hall.

UBA Corporate Fact Sheet, 2010.

www.ubagroup.com