A Sales Office for Incognito Financial Services A road to success

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A Sales Office for Incognito Financial Services A road to success

University of Groningen

Faculty of Management and Organisation

Landleven 5

9700 AV Groningen

Supervisors:

Prof. Dr. S.K.Th. Boersma Dr. B.J.W. Pennink

Groningen, April 2004

Author: Jan Willem Stapel (janwillemstapel@hotmail.com)

The author is responsible for the content of this report/thesis; the copyright is the authors.

This report is an amended and stripped version of the original, therefore the data in this report is fictional and names and organisations do not reflect reality. Also some paragraphs are shorter and therefore sometimes formulated in a rather bold way. For more information the reader can address the author on all issues. Nothing is to be copied without explicit authorisation of the author.

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Summary

This report is based on a case study of four months within Incognito Financial Services (IFS) after which this thesis on some of the success factors for the sales office has been written.

The goal of this report is to provide an analysis of the existing organisation of IFS in order to advise on some of the success factors for a sales office. The success factors discussed are the strategy, the structure and the systems.

The results of the analysis of the existing organisation

From an external perspective it can be seen that competitors are already present in the Asia, and in particular in Singapore.

The Asian market offers opportunities for IFS since Incognito Banking Services (IBS) is already present and IFS can therefore leverage on the existing facilities and clients of IBS.

The strategies of both organisations are in line with each other and communication lines will become shorter with the establishment of the new sales office.

The systems used within IFS are of a more formal nature. The information systems used at present probably need to be renewed due to the different role of the sales office compared to the operational financial services offices.

With regard to the three success factors

The strategy has been designed with the use of an outside-in perspective. The focus within this design is on the market and the development of sound relationships with partners, relevant parties of IBS, and clients. The strategic focus is one of the most important elements of the strategy for the sales office. Especially the relationship with area units of IBS should be further developed in the future.

The structure for the sales office should be designed according to the entrepreneurial configuration. This will lead to a flexible organisation that can act in a dynamic environment.

The co-ordinating mechanism to be used should be direct supervision, since there are only a few employees involved in the beginning.

The systems factor should focus on management information. Investments in vertical information systems and the creation of lateral relations are the key issues with this factor. A clear division has to be made between hard- and software and human ware. Good human ware is a prerequisite for good hard- and software.

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Issues on the implementation

With regard to the implementation of the success factors two are discussed. These are the strategy and the systems factor. On a macro level the results of the strategy are above expectation and it can be said that it is successful. On a micro level changes were made to the original plan due to time pressure and an overload of work. This has not damaged the strategy on a macro level.

With the implementation of the systems some new systems have been designed. The prospect database has been amended to the needs of the sales office. The sales office will work for all operational offices and therefore a more vertical system has been designed. The advisor database found a suitable solution in an existing product. Both databases are to be used in all offices of IFS.

The overall conclusion for the sales office for IFS is that the three success factors discussed should be designed in an entrepreneurial way. This will enhance the flexibility and therefore the sales office will be better prepared to external influences. This will provide a good foundation for the strategy, which is to focus on the market. The structure and the systems will also benefit from a flexible entrepreneurial design.

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Introduction

Most assignments carried out by students of the faculty of Management and Organisation are carried out within commercial organisations. This assignment is no exception to that standard. The report you will be reading after this short introduction is based on a case in which Incognito Financial Services opened a new sales office for its operational financial services offices in Singapore.

With the establishment of such a sales office many factors are of influence on the preparation and the process itself. There are external as well as internal factors that are present and there are more and less controllable factors. In this report the reader will find a discussion on some of the internal success factors of the sales office. This introduction will briefly guide you through the set-up of this report to create some understanding of the sequence of the chapters and what is to be expected.

In the first chapter the approach to the assignment is provided. In this chapter the main research question and the goal of the assignment are the backbone. They serve as the basis for the methodology and the theories and frameworks as discussed.

Chapter three covers the external and internal analysis of the organisation of IFS. Alongside some factors of Incognito Banking Services are discussed as well, as they prove to be of importance to the overall analysis. Therefore actually two levels are under discussion. This will be indicated where appropriate.

The third chapter deals with the lion share of this report. In this chapter three success factors of the sales office will be discussed in theory and designed accordingly. Even though the sales office initially will be a rather small office, this discussion is worth the effort since it can be of value to future exercises. Therefore these factors are discussed in detail.

Chapter four is more or less a logical follow up to chapter four. Since the author was present during the establishment of the sales office, elements of the process of implementation will be discussed.

The last chapter of this thesis will provide the conclusions on the separate sub-questions and integrate this in to one overall conclusion. Based on these conclusions some recommendations for the future will be given.

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Chapter 1 Approach to the assignment

This first chapter will provide the reader with the approach to the assignment. In the first paragraph the reasons for the assignment will be discussed, after which a problem statement is formulated with its relevant sub-questions. After the problem statement the methodology used within this report and the accompanying theories will be discussed. The final paragraph will deal with the methods of data collection.

1.1 Reasons for the assignment

IFS was not present in Asia at the beginning of this assignment. As mentioned above they have decided to change this by opening a sales office in Singapore. One manager and a very limited number of employees will initially run this sales office. The establishing of this sales office can therefore be seen as the establishing of a new organisation, with the note that it is within an existing organisation.

At present there is hardly any documentation on sales offices within IFS. This is due to the fact that they do not have any sales offices at the moment. Because of the involvement of several offices all over the world it is of importance to know what success factors can be with the establishing of a sales office. This is also useful for the future if more sales offices are to be opened. Therefore this assignment will lead to a report on some success factors of a sales office for IFS.

The above situation has led IFS to employ Jan Willem Stapel to co-operate within the process of establishing the sales office. The focus of this report will be on some of the success factors that are involved within the new sales office and how these success factors should be designed

1.2 Problem statement

The reasons for the assignment mentioned that hardly any documentation on the establishing of a sales office for IFS is available. Therefore this report will focus on some of the success factors of such a sales office and how these should be designed. This could then lead to some general conclusions on how sales offices for IFS could be established in the future.

In order to come to a sound overview of the issues involved in such a process, a clear problem statement needs to be formulated. The problem statement consists of a research goal and a research question.

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The research goal indicates the relevance of the research. This goal should make clear why it is useful and important to conduct this research¹. To achieve this goal a research question has to be formulated that covers all that needs to be answered. Below the research goal and question are posed.

Research Goal

To provide an analysis of the existing organisation of IFS in order to advise on some of the success factors for a sales office.

Research Question

What are the issues concerned with some of the success factors for the sales office for IFS?

It should be clear to the reader that the author does not have the pretension to be exhaustive in the elaboration on the success factors. Of the 7-s model of McKinsey only some will be discussed in-depth.

To answer the research question several sub questions are formulated. These sub questions are formulated in such a way that they are a basis for each chapter in this report. In the end the main research question will then be answered in the concluding chapter based on the information provided in all chapters.

Sub Questions:

Chapter two will combine an external and an internal analysis of the organisation of IFS. The external analysis will discuss some of the outside influences on IFS. The focus of this analysis will be on the Asian market since this is the most relevant for the establishing of the sales office. The internal analysis will discuss the organisation of IFS well as elements of IBS. This has as a consequence that the analysis will be on different levels, where applicable the level of analysis will be mentioned clearly. The sub questions for chapter three will are as follows:

1. What does the external environment of IFS look like in Asia?

2. Which elements of IFS are of influence on the sales office?

3. Which elements of IBS are of influence on the sales office?

1 Baarda and De Goede; Basisboek Methoden en Technieken, 3rd edition, 2001, p. 24

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Chapter three will funnel down on the results of chapter three and will have a closer look at the sales office. This chapter will discuss some of the success factors for the sales office and how these should be designed. After consultation of the academic supervisors the decision has been made to discuss three success factors. These are the strategy, the structure and the systems factors. More specific literature will be used and all paragraphs will therefore have a structure in which a general approach of the theory is provided which is followed by an overview on how the specific factor should look like. The sub questions for chapter four will therefore be:

1. What does the strategy factor look like in theory?

2. How can the strategy factor be designed for the sales office?

3. What does the structure factor look like in theory?

4. How can the structure factor be designed for the sales office?

5. What does the systems factor look like in theory?

6. How can the systems factor be designed for the sales office?

Chapter four will have a closer look on several tools that were being used or created during the process of establishing the sales office. This will be based on two of the three success factors mentioned in chapter four. Only two will be discussed because of the information and material available on these factors. The sub questions for chapter four will therefore look as follows:

1. Which success factors have already been implemented?

2. What did the process of implementation look like?

3. Which issues arose with regard to this implementation process?

All these sub questions should provide an overall answer to the main research question as posed above. This answer will be provided in chapter four which will probably also give recommendations for the future. In the next paragraph an overview of the theories and frameworks used will be given.

1.3 “Theoretical” framework

This paragraph will indicate how and by means of what theories this report will come to a solution for the research question. In this report the main framework used is the 7-s model of McKinsey. This framework is typically used for internal analysis of organisations. The parts of the model can be used in a coherent connection to each other, but also independent. This is of use for the design of some of the success factors, since these will be based on elements of the 7-s model.

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1.3.1 The 7-s model

The 7-s model is a well-known organisation model used by many managers and consultants.

The former McKinsey employees Pascale, Athos, Peters and Waterman designed the model in 1982. The original model is supposed to be born out of desperation. The story suggests that McKinsey had organised for Richard Pascale and Tracy Athos to spend a week with Tom Peters talking strategy. So alarmed were they at the prospect of a week with Peters that they decided they needed a way to manage him and came up with the idea of tackling a different subject for each of the seven days, hence the 7S model². This story looks a bit like the story of the Creation, and it could be true. What is true for sure is that Pascale used the model in his book “The Art of Japanese Management”, in which he compares American and Japanese organisations with the use of case studies. Peters and Waterman used the model in their bestseller “In Search of Excellence”, in which they speak of the excellence of famous American organisations.

The 7-s model acknowledges 7 main aspects that are mutual dependent. All these aspects start with an ‘S’, so therefore it is called the 7-s model. These 7 aspects are divided into three ‘hard’ aspects (strategy, structure, systems) and for ‘soft’ aspects (staff, skills, shared values, style). The three ‘hard’ aspects most of the times can be changed on a relatively short time. The four ‘soft’ aspects are also called the ‘slow-variables’, since they can only be changed within a longer period of time. Good care should be taken of the interrelations between the organisational factors. A successful organisation will look at the key factors as a sort of compasses, which, with the eye on purposeful integration, will all have to point in the same direction. In figure 2 the 7-s model is visualised, all 7 aspects of the model will be discussed shortly after the figure.

2 Talwar, 1997 at http://www.learning-org.com/97.10/0160.html

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Figure 1: The 7-s Model of McKinsey³

1.3.2 The 7 elements of the McKinsey model discussed

Strategy (Ten Have et al, 2002)

This aspect refers to the organisation’s objectives and the conscious choices it makes in order to achieve them, such as prioritising certain products and markets, and allocating resources.

Structure (ib.)

Structure refers to the organisational structure, hierarchy and co-ordination, including division and integration of tasks and activities.

Systems (ib.)

These are the primary and secondary processes that the organisation employs to get things done, such as manufacturing systems, supply planning, order taking processes, etc.

Shared Values (ib.)

Shared values are those that underlie the very reason for existence of the company. They include the core beliefs and expectations that people have of their company.

3 http://www.fractal.org/Bewustzijns-Besturings-Model/bbm-tim.htm

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Style (ib.)

Style refers to the unwritten yet tangible evidence of how management really sets priorities and spends its time. Symbolic behaviour and the way bosses relate to their workers are the indicators of the organisation’s style.

Staff (ib.)

The staff is comprised of the people in an organisation and, in particular, their collective presence.

Skills (ib.)

These are organisational capabilities that are independent of individuals, a concept that is often misunderstood. Pascale (1996) argues that skills are both ‘soft’ and ‘hard’. He sees them as distinctive capabilities that truly set a company apart. Skills are dependent on the other six Ss.

1.3.3 Other theories used

In chapter 2 a part of the STEEP (Fleisher and Bensoussan, 2001) method for macro- environmental analysis will be used to analyse the operating environment of IFS. This method serves as the basis for the elements discussed in the first part of chapter 2.

In chapter 3 more theories will be used to explain the success factors in more detail.

Theories from Mintzberg (1979, 1999) on how strategies are being formulated and on what the structures of organisations look like will be used. Also for strategy some concepts of De Witt and Meyer (1998) will be used to discuss this factor. The main theory used with regard to the systems factor will be the one of Galbraith (1973) on design strategies.

These theories are used to support the framework of McKinsey. This framework will be the basis and elements of this framework will be elaborated with the use of above-mentioned theories. Therefore they are secondary to the 7s framework of McKinsey.

1.4 Data collection

Looking at the problem statement, the theoretical framework and the other theories used, the assignment can bee seen as a descriptive and exploratory research. The case study is used for the research strategy, since for a longer time only IFS has been taken under review.

Qualitative data is the most common kind of data collected with a case study. This data is collected by means of open and informal interviews, discussions and participating observation.

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Besides this the researcher has participated in several meetings, had responsibility for several projects and had access to all kinds of documents within the whole organisation.

This all has led the researcher to become familiar with the organisation into detail and together with existing literature provides a sound basis for the necessary data required for this report.

To gathering of data went in a rather unstructured way and data was only structured after the case study. Therefore it can be said that virtually all kinds of methods have been used. Much information comes from conversations with employees of IFS. These conversations mainly took place in an informal environment.

Besides these conversations, reports, theories, extra literature, the inter- and intranet and e- mail discussion have been of use to gather data. In short it can be said that a diverse range of sources and methods have been used. Therefore it can be said that the data collection methods have been executed in a way other than usual.

This chapter has provided the reader with the background on why this assignment is fulfilled.

In the next chapter the first part of the assignment will be elaborated in the form of an external and internal analysis.

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Chapter 2 The external and internal environment

This chapter will deal with the factors that are of influence to some of the success factors of the sales office. It will function as the foundation for the next chapter which will design some of these success factors. An analysis of the operating environment and the organisation of IFS and IBS will provide the reader with a background on factors influencing the establishment of the sales office.

With regard to the operating environment the customers, competitors and suppliers as well as a global component and the location for the office will be discussed. After this more general discussion an analysis of the 7-s elements of IFS and IBS will be made. Finally a conclusion will be given to give a complete overview of the situation regarding the sales office.

2.1 The Operating Environment

In this paragraph an overview of the operating environment will be provided. The operating environment, sometimes called the competitive or market environment, is that level of the organisation’s external environment with components that normally have relatively specific and immediate implications for managing the organisation. This overview will include the customer, the competitor, the supplier and the global/international component. In addition the location for the sales office will be discussed.

2.1.1 Customers

The customer component of the operating environment reflects the characteristics and behaviour of those who buy or could potentially purchase the organisation’s goods and services.

The target clients for the sales office are within a large range. They can be small or medium sized enterprises (SME’s) but also small multinationals which are based in Asia, with international activities. Although IFS serves high net worth individuals as well, the focus of the sales office will be on these clients. The clients can be within all ranges of business within the Asian region. The other financial services offices will handle clients from other regions.

2.1.2 Competitors

The competitor component of the operating environment consists of rivals, present and prospective, that an organisation must overcome in order to reach its objectives.

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Competitors of IFS can be divided according to three criteria, which results in the following categories:

1. Competitors linked to a financial institution 2. Competitors linked to an audit/tax firm 3. Independent competitors

Below the main competitors active in Singapore and their form of presence will be discussed in the sub-paragraph. IFS sees these competitors as their main competitors in Singapore and therefore they are the ones discussed in this paragraph.

Competitor A is one of the largest providers of corporate and Financial Services in the world.

It is part of a large banking group which has it headquarters in the Netherlands. Severe competition from this competitor can be expected due to their presence in Singapore and their competitive fees.

A second competitor is Competitor B. Historically they have a strong performance in Asia (also with an office in Singapore) and a well-developed network of advisors to sustain their activities. B mainly focuses on mutual funds, though they are used for the establishing of traditional structures as well.

Competitor C is one of the more aggressive competitors of IFS and has representative offices in Singapore and Hong Kong. Marketing officers from these offices attract Asian business for their operations worldwide. C’s office in Singapore seems to bring substantial deals to their financial services offices.

2.1.3 Suppliers (Partners)

The supplier component of the operating environment includes the influences of non-labour resources to the organisation. With the case of IFS the suppliers are less concrete since other organisations supply the sales office with clients who want to make use of the services of IFS. These suppliers can be identified as intermediaries (partners) and are important to IFS in the sense that in most cases they deliver the business to the organisation. The main sources of business are the tax and legal firms.

Tax and legal firms

Since IFS does not want any conflict of interest it has the policy not to give tax or legal advice to clients, since there are tax and legal firms to give advice to clients. With regard to tax firms IFS mainly works with the largest tax firms. Some of these tax firms had their own financial services departments in the past, but these activities are mainly divested to prevent

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conflicts of interest within their own organisations, however the link is still there in some cases.

With regard to the legal firms there are many firms which serve as advisor for IFS. Some Dutch firms have an office in Singapore to advise regarding Dutch legal practices. Overseas firms such as Baker & McKenzie, Allen & Overy and Clifford Chance also refer clients to IFS because of relations that already exist.

These firms interact as advisers and refer business to financial services offices. Of course it is important to maintain close relationships with these advisors in order for them to continue referring business.

2.1.4 Global/International Component

The global/international component of the operating environment comprises all factors related to global issues. This sub-paragraph will focus on the developments in the market on a global level.

With regard to developments in the market several distinctions are possible. First of all it is possible to look at the product developments worldwide. It is of use to know what products are becoming of more and more interest to clients. Secondly one could look at the developments within the (main) jurisdictions the sales office will be working for. The developments worldwide are of most interest. This is mainly because the developments within the jurisdictions tend to be of more legal complexity⁴ and therefore less easy to combine with a more general overview.

2.1.5 Location

The choice for a location is not one of the components of the operating environment. In the view of the author this factor should be taken into account since it is more than just a location. It could have been placed under the competitor environment, though it is a bit too general to place it there. Therefore a separate sub-paragraph has been created to deal with the issue of location choices.

The choice of the location is important for the sales office because only one Asian based office will be established (for now) and therefore it needs to be in the right place. Besides this it is of importance that it can benefit from already existing structures of IBS where possible.

Singapore was the preferred choice of location for the establishment of the sales office. This is also due to the fact that Singapore is a large financial hub in Asia. As mentioned in the

4 This legal complexity is about the different structures within the jurisdiction and how they should be applied.

Furthermore it is also about specific treaties and rulings and all together it is beyond the scope of this report to.

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previous paragraph IBS already has a strong presence in Singapore and this presence probably has advantages for the establishment of the sales office. Many large sector groups of IBS are present in Singapore and the clients of these sector groups are the clients on which IFS wants to focus first to increase their sales.

Advisors also appreciate the presence of these representative offices dedicated to the Asian market, they experience these offices as a big competitive advantage. The success of this market approach also shows that establishing sales offices in specific markets is the future.

2.2 Internal Analysis

Several factors of the internal environment of the organisation of IFS influence the establishment of the sales office. These factors will be discussed with the use of the 7-s model of McKinsey. This analysis will be on two levels, the IBS level and the IFS level. At the beginning of each paragraph the level of analysis will be mentioned explicitly.

2.2.1 Strategy

“Strategy refers to the organisation’s objectives and the conscious choices it makes in order to achieve them, such as prioritising certain products and markets and allocating resources.”

(Ten Have et al, 2002)

IBS

The strategy of IBS is of influence on the design of the sales office in such a way that the strategy of the sales has to be in line with the strategy of IBS as well. The strategy of IBS governs the strategy of IFS and therefore that of the sales office as well.

The strategy of IBS will be discussed briefly and from a general perspective.

IBS’s business model is structured along the lines of five global area units. These are.

divided according to the continents around the world from a strategic perspective. These global area units all have their own strategies, but they are all governed by the strategy of IBS. The focus of IBS is on asset gathering.

Synergies arise from removing unnecessary overlaps between area units, more pooling of knowledge and skills and from taking combined initiatives. They cut costs and open the way for new products or marketing initiatives.

When looking at the strategy of IBS the establishment of a sales office for IFS does fit in this strategy. This will become clear when discussing the strategy for the sales office in the next chapter.

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IFS

The overall strategy for IFS is a result of the strategies of the nine different offices, with some basic guidelines from Head Quarters (HQ), in Geneva. The path they have chosen since two years is that they want to become ‘the best financial services office in the world”.

This is the main goal from which all activities should be derived. All separate financial services offices can formulate their strategy on their own, but these strategies have to be in accordance with the overall strategy of IFS.

Due to developments in the past years IFS wants to make use of marketing activities more and more. Therefore the establishing of a sales office to address the Asian market does fit in the strategy of IFS. In conclusion it can be said that the strategy of IFS is therefore a factor that is of influence on the establishing of the sales office since the establishing fits in the strategy. It has to be kept in mind though that the strategy of the sales office will have to be in line with the overall strategy of IFS.

2.2.2 Structure

“Structure refers to the organisational structure, hierarchy and co-ordination, including division and integration of tasks and activities.” (ib.)

The structure of IFS is of relevance to the sales office. However information on its structure is scarce and therefore this will not be discussed in detail within this internal analysis. The design for future use will be made in chapter 3 and an organisational chart of IFS can be found in chapter 3. What can be said is that the structure of IFS is rather flat since all offices have to report directly to the headquarters in Geneva. So the hierarchy between the offices is low. Co-ordination mechanisms as defined by Mintzberg (1979, 1992) are not defined explicitly within IFS and they are therefore not discussed in this section.

2.2.3 Systems

“Systems are the primary and the secondary processes that the organisation employs to get things done, such as manufacturing systems, supply planning, order taking processes, etc.”

(ib.)

Because the products and services of IFS are rather abstract it is useful to have a clear description of the activities performed by the employees of the organisation. In this paragraph procedures will be described that guide the employees in their activities and therefore set the boundaries for the processes. A distinction can be made between procedures that are related to the personnel of an office and procedures that are related to the clients of an office.

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Personnel Procedures

The most important guideline for employees is the handling of files and making sure that confidentiality regarding the content of client files is safeguarded. As can be seen in the structure of a financial services office (see the paragraph on skills) there are several stages in which client files and documents are handled. In the capacity as managing director employees are liable for the activities of the companies. Therefore they need to be aware of all transactions.

In the sales and deals department new client files are created and confidential documents of a client will be put in the file. It is of course of the utmost importance that these files will be kept safe. The procedure to safeguard this is to put all the client files back in the safe at the end of the day at the appropriate place.

Next to the filing policy all financial services office have written down their procedures regarding communication within the organisation as well as with external parties. They are all written down in Administration Manuals. These manuals are an obligation for every office to have. This means that an Administration Manual has to be written for the sales office as well.

Information Systems

To support the above-mentioned procedures IFS has several information systems. Most of the systems are client related ones and concern their progress in the screening process.

Before the client is accepted by the organisation the (potential) client is called a prospect. To keep track of the prospects IFS makes use of a prospect database. This is used in all offices in order to give an overview of potential clients for each month.

To support the Client Understanding (CU) policy IFS also has a document database in which they keep relevant forms and contracts that new clients have to sign. These contracts differ per product⁵ and therefore lots of different contracts and forms have to be available in this database. What is seen within the different offices is that they do not have a standard document databases and therefore have all different kinds of contracts and lay-outs. This is partly due to the fact that all offices offer different products, but it is also because they have never established one single database for all separate forms and contracts. It could therefore be said that every office has its own document database and uses different formats of forms and contracts for different products and procedures.

5 With product is meant a new to be established vehicle for the client.

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The procedures and systems mentioned above are relevant for the establishing of the sales office in such a way that they have to be implemented in the design of the office as well.

There are more procedures and systems within the different offices but within this report the goal is to look at the overall procedures and systems that will influence the design and the establishing of the sales office. All these procedures and systems need to be adapted for the sales office to function properly.

2.2.4 Shared Values

“Shared Values are those that underlie the very reason for existence of the company. They include the core beliefs and expectations that people have of their company.” (ib.)

The shared values of IFS are defined at the IBS level. The level of analysis will therefore be on the IBS level. In 2001 IBS formulated its business values, which are mentioned below.

These business values are the foundation for the principles to which every employee has to adhere.

Based on the six business values, IBS has formulated principles to guide all the employees in their daily work. Defining the business values into principles clarifies what IBS stands for.

Principles alone are not the answer to every problem, but they do challenge employees to translate their spirit into the daily practice and shift horizons beyond short-term profit to long- term value creation through sustainable development.

The business values and principles are woven into the fabric of the strategy of IBS. The employees of the sales office therefore have to act according to these principles. The strategy and all activities of the sales office have to be in line with these business values and principles too.

From origin the culture of IFS was very much internally oriented and marketing was not one of the main activities of the organisation. This was mainly due to the fact that clients were brought to the organisation by their extensive network and that clients came by themselves.

2.2.5 Style

“Style refers to the unwritten yet tangible evidence of how management really sets priorities and spends its time. Symbolic behaviour and the way bosses relate to their workers are the indicators of the organisation’s style.” (ib.)

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Much has been written on management and leadership. A good definition could be: the process of analysing, planning, organising, motivating and controlling (Van Esch, 1991; p.

185). Managing means dominating and controlling people. Leadership is more difficult to define. It is associated with charisma, which is, as beauty is, a subjective notion. Since this factor is so subjective it will not be discussed and defined within this thesis. The way the sales office is established is of course subject to the way the manager involved deals with certain issues, however it would become to complicated to make valid statements on this factor.

Keuning and Eppink (1990, p. 429) write about three characteristics of good leaders. This is the so-called ‘trait’ theory that looks at the capability of leadership with the use of three characteristics. These are:

• Physical characteristics. Research has shown that good leaders are taller in general than the people who they lead.

• Personality characteristics. Another research showed that good leaders are more self-confident and show more initiative than bad leaders. Good leaders also proved to have more understanding for the thoughts and feelings of their employees than less effective leaders.

• Intellectual qualities. According to research, good leaders appeared to be more intelligent than less capable leaders.

When using this perspective on the manager who is to establish the sales office it can be said that these characteristics do apply. He is tall, shows initiative by setting up this sales office, and it can be assumed that he possesses enough intelligence. Therefore it can be said that to the style of the manager will probably fit in some way to fulfil the job.

2.2.6 Staff

“The staff is comprised of the people in an organisation and, in particular, their collective presence.” (ib.)

This factor will be discussed on an IFS level. However it does have a close relation with IBS and when applicable this will be mentioned. Looking at the staff factor of IFS it can be seen that most of the staff is locally recruited. Some management staff is also recruited by IFS making use of the pool of managers of IBS. This mainly concerns the higher educated people, they all have to undergo a management training in the Switzerland at head quarters in the beginning of their career.

Staff is a very important factor of an organisation. This is the reason that IBS wants its staff to be well known with all the values and principles of the organisation. This is of influence on

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the staff factor of the sales office. It can be expected that the number of employees of the sales office has to be increased in the future due to the increase of sales and opportunities.

2.2.7 Skills

“Skills are organisational capabilities that are independent of individuals, a concept that is often misunderstood.” (ib.)

The core business of IFS is to provide clients with tax and non-tax driven products and services in the best possible way. The distinction between tax and non-tax driven can be seen in the following short elaborations.

Tax Driven:

Creating tax optimisation for global corporate structures means that, upon advice of the international tax advisor of the client, IFS establishes entities⁶ for clients in order to structure taxes efficiently. This means that they offer the products and services to clients and they organise and control the whole establishment of the entity from beginning to end. The structuring of activities has a close connection with the creating of tax optimisation. They structure all activities of clients in order to generate a favourable taxation for the client.

Ad Non-Tax Driven:

With regard to the outsourcing of non-core business, IFS offers clients, amongst others, to do administrations that are very costly for an organisation and do not directly contribute to the sales. The activities IFS undertakes result in a cost reduction for the client and therefore creates efficiency within their organisation.

Since the products and services of IFS are very abstract it is rather difficult to describe a supply chain that is relevant for the core business. Looking at the client as the input of the supply chain one could make an abstract figure on how the client is processed within IFS.

This is represented in figure 2.

The skills mentioned here are executed within a financial services office. The supply chain of such an office looks as follows:

6 Entities are the actual products IFS offers to clients.

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Figure 2: The “Supply Chain” of Incognito Financial Services

A client’s first contact with the organisation is with the Commercial Department. Within this department commercial officers will establish a relationship, with or without the use of an intermediary, with the client and they will make the offers to the client. Once the client has accepted the offer of IFS and has decided to go on with IFS, the client will be transferred to the Compliance Department.

This department screens the clients according to the CU policy before the client is finally accepted. Besides screening the client, a legal officer prepares all necessary documents for the establishing of the vehicles asked for by the client. This is done in close co-operation with the Commercial Department since they have handled all client contacts so far.

In the front office account managers handle all contacts with the clients and execute their orders and inform clients on relevant changes towards their vehicles. The back office prepares all monthly and annual reports and keeps track on all the financial mutations and other transactions related to the vehicles of clients. This is the main process within IFS regarding the progress of the client within a financial services office.

The main skill that is present within IFS is the knowledge to set up a diverse range of vehicles in many jurisdictions all over the world. This requires specific legal knowledge and managerial knowledge.

With regard to the legal knowledge most commercial and legal officers⁷ within the organisation have a background in law studies. This is useful, not to say necessary, in order to perform the activities that come with the job. Senior employees within IFS act as managing director, they can be corporate as well as personal directors. The proxy holders of the companies, a dual signing systems safeguards the liability of the proxy holders. Of

7 Officers are employees at the front end of the organisation and are mainly active in the front end of the organisation.

Compliance Department Commercial

Department

Client Relationship Department

Financial Services Office

Legal Office

CR Manager

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course this requires the trust of the client and therefore these clients can expect of the employees to be responsible and to have knowledge of the contents of contracts and documents in order to prevent mistakes.

As mentioned above the knowledge of an officer should not only involve legal knowledge but managerial knowledge as well. This is demonstrated with the fact that they can act on behalf of the clients. Furthermore they need to possess these skills to be able to set up a vehicle.

This requires the monitoring of the progress of all parties involved.

2.2.8 Conclusion

Some factors of the internal environment are of more influence to the sales office than others. There is an overlap between some of the S’s of the model between IFS and IBS.

Since IFS exists only to service the broader goals of IBS all factors should lead back to the intentions and strategy of IBS. Though the elements of IFS are of influence to the sales office as well, due to the fact that the sales office is a direct part of the organisation of IFS.

One of the most important factors discussed above is probably the strategy of IBS and IFS.

There is a close connection between the two and this creates opportunities for the sales office. IBS desires more cross-border activities. This smoothly fits in the strategy of IFS, who wants to become the best financial services office in the world. This indicates that co- operation between both could create synergies.

Another link could be found in the fact that IBS already has a very strong presence in Asia of which IFS could make use. With regard to systems and staff this could be an opportunity to be exploited.

One factor that has not been discussed in depth here is the structure factor. This factor is of importance when looking at the establishment of the sales office in practice. To give the sales office a proper position in the existing organisation a desired structure should be designed. This will be done in the next chapter.

2.3 Some closing contemplative words

In this chapter the operating environment and the internal environment of IFS with regard to the sales office have been discussed. Three levels of analysis have been used in this chapter. The first level is that of the sales office and its operating environment. The other two levels are those of IFS and IBS. These are used for the internal analysis of both organisations to come op with a better understanding of the background for the sales office.

In this conclusion the external and internal analysis will be integrated to give an overall overview of the factors that are of importance to the sales office. These two levels are

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different though they are complementing each other. Since IFS exists to service the intentions and strategy of IBS, some of the factors are only of influence from the level of the bank. This has been made clear where applicable. Vice versa some factors are specific to IFS and subsequently they have been discussed at the appropriate level.

An overall opportunity for IFS is the Asian market. This is why the sales office will be established and this is also one of the reasons why the sales office should be located in Singapore. Another reason can be the presence of IBS in Asia. It is preferable that the sales office is able to make use of existing facilities of IBS.

The strategy of IBS and IFS are in line and with regard to the sales office it can be said that the establishment is in line with these strategies too. Taken the customers and the partners into account this also fits, since after the establishment the communication lines between all parties will become shorter.

The systems have been described according to procedures existing within IFS. These procedures are of a more formal nature and they should be maintained within the new sales office. Information systems as used at present will probably have to be renewed since the sales office will have a different role than the operational offices.

The skills of the organisation are of such a nature that the sales office should be able to continue to work with the same quality level and maintain the standards of IFS. The skills are mainly about knowledge centred in jurisdictions and there is no specific knowledge needed in Asian jurisdictions.

The shared values and staff are two of the soft factors which are mainly being managed on a higher level. They do have an impact on the sales office in a way that they define what kind of people should be employed and that they do have to adhere to the business values and principles as formulated by IBS. However they will not be discussed in the next chapter on the possible design for some factors.

This ultimately brings us to the factors that will be designed. The factors strategy, structure and systems will be discussed in-depth in the next chapter. With the use of several theories and information available with the organisation, these three factors will be designed. These three factors can be seen as some of the success factors that are of influence on the sales office.

This chapter has discussed the external and internal elements that are of influence on the establishment of the sales office for IFS. In the next chapter the factors strategy, structure and systems will be elaborated and designed to fit the sales office.

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Chapter 3 Strategy, Structure and Systems defined

In the previous chapter all parts of the 7-s model of McKinsey have been discussed for IFS and IBS. Besides this an analysis of the operating environment has been made. This all has provided the reader with an overview of the context of the sales office. In this chapter three of the 7 factors will be highlighted for the sales office. These are the strategy, the structure, and the systems factors of the organisation. These are the so-called ‘hard’ parts of an organisation. For the sales office to function properly these are some of the minimum requirements which have to be met. They can therefore also be seen as some of the success factors of the sales office, and this is how they will be looked at in this chapter.

Paragraph 3.1 will deal with the strategy of the sales office. This will mainly be done with the use of ideas and concepts of Mintzberg (1992) and De Witt and Meyer (1998). Paragraph 3.2 will discuss the structure of the sales office. Again Mintzberg (ib.) will be the main provider of concepts. One should realise though that these concepts are ideal forms and that no organisation will exactly fit these concepts. However in this thesis an explicit choice has been made for the sake of clarity. In paragraph 3.3 the systems are discussed and designed.

The traditional theorists view has been used to make a choice between different systems and the design strategies of Galbraith have been used to define a clear approach on how the sales office should deal with its systems.

3.1 Strategy

Strategy is a term many people know and use. It is used in different contexts of the society and also with different meanings. This makes it a term which is rather ambiguous in nature.

In this paragraph strategy will be looked at from a perspective defined by De Witt and Meyer, the inside-out perspective. This will be discussed in paragraph 3.1.2. In the first paragraph a more general overview on strategy and the process involved with executing a strategy will be provided. In the final paragraph, the conclusion, a final strategy will be provided for the sales office of IFS.

3.1.1 Content and process of strategy

The term strategy has many meanings and has, amongst others, to do with the mission of an organisation, the (main) goals, the means and the actions. The concept of strategy originally comes from the science of warfare and within this science strategy is separated from tactics.

According to Sun Tzu, a well known warrior who live 500 B.C.;

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The conduct of war was the planning and carrying out of combat, where combat consisted of a number of individual fights. All the individual fights are joined together to achieve the objective of the war. Each fight is a tactical event, while the objective of the war is strategic in nature⁸.

So in war strategy is the knowledge of realizing the goals of war by means of battles, whereas tactics is the knowledge to win the battles.

For Business Administration the explicit difference between tactics and strategy is of importance as well. Businesses have numerous strategies, from corporate levels to department levels within divisions. If strategies exist at all these levels how do strategies and tactics differ, one could ask. Often the primary difference lies in the scale of action or the perspective of the leader. What appears to be a tactic to the chief executive officer (or general) may be a ‘strategy’ to the marketing head (or lieutenant) if it determines the ultimate success and viability of his or her organisation. In a more precise sense tactics can occur at either level. The difference between strategy and tactics depends on the level at which one focuses (Mintzberg 1999, European edition).

Quinn (1980) sees strategy as the pattern or plan that integrates an organisation’s major goals, policies, and action sequences into a cohesive whole. Mintzberg (1992) recognises a pattern of decisions and actions as a part of strategy as well. Strategic decisions dictate both the resources the enterprise will have accessible for its tasks and the principal patterns in which these resources will be allocated.

The science of management and organisation acknowledges three decision-making levels:

strategic, tactic and operational. These levels concern decisions with impact on, respectively, the long, medium and short term. The emphasis here is on the difference of the time-aspect. Anthony (1965) acknowledges these three levels as well and he divides them into strategic planning, management control and operational control. He sees them as separate processes, which are complementary, and all together the management function involves an integration of these processes. Obviously these three levels are not separated by sharply defined boundaries, one shades into another. Strategic planning sets the guidelines for management control, and management control sets the guidelines for operational control. In short these three levels can be defined as follows:

“Strategic Planning is the process of deciding on the objectives of an organisation, changes in these objectives, on the resources used to obtain these objectives, and

8 http://www.wallstraits.com/main/article.asp?id=560

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on the policies that are to govern the acquisition, use, and disposition of these resources.” (Anthony, 1965)

Strategic planning is mainly concerned with long-range, strategic, policy-type plans and cannot be scheduled according to a set timetable. With strategic planning management is working on problems according to the needs and opportunities of the moment. Strategic planning is more dependent on external data, such as market analyses, technological developments etc. In short it is dealing with the environment of the organisation in the most general sense.

“Management Control is the process by which managers assure that resources are obtained and used effectively and efficiently in the accomplishment of the organisation’s objectives.” (ib.)

Management control’s intention is to make possible the achievement of the planned objectives as effectively and efficiently as possible within the givens of the framework established by strategic planning. This process is more regular and does follow a timetable, since it is more concerned with current activities, month after month, year after year.

“Operational Control is the process of assuring that specific tasks are carried out effectively and efficiently.” (ib.)

With operational control the focus is on individual tasks and transactions. Another characteristic of operational control is the fact that most of its activities can be programmed, since it mainly concerns concrete inputs and outputs⁹.

As shown above strategy can thus be seen from two different angles, the first one is about the developments in the environment of the organisation and the second one about the internal views of management and the employees of the organisation. The actual strategy will then be a combination of managing anticipated changes within the market and the joint will and energy within the organisation.

9 Inputs are the resources the organisation consumes and outputs are the products, services, or other effects created by an organisation.

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Since this paragraph will describe what the strategy of the sales office should look like, it is useful to look at the discussion of Mintzberg on how a strategy is realised, also since the next chapter will deal the process of the implementation of the strategy.

Mintzberg (1999) distinguishes ten different views on strategy processes. All these views have their own approach and put emphasis on one important aspect of the process of strategy formulation. He has distinguished the following ten ‘schools of strategic thought’¹⁰:

- Design School: strategy Formation as a Process of Conception - Planning School: strategy Formation as a Formal Process - Positioning School: strategy Formation as an Analytical Process - Entrepreneurial School: strategy Formation as a Visionary Process - Cognitive School: strategy as a Mental Process

- Learning School: strategy as an Emergent Process - Power School: strategy as a Process of Negotiation - Cultural School: strategy as a Collective Process - Environmental School: strategy as a Reactive Process

- Configuration School: strategy as a Process of Transformation

These ten schools can be divided into three groups. The first group consists of the first three schools, design, planning and positioning, and are rather prescriptive of nature. They mainly discuss how strategies should be established and do not really look at how they come to existence.

The six following schools each look at a specific aspect of the process of strategy formulation, not so much to point out how a strategy ideally is established, but more to describe how this strategy is established. The first two schools, the entrepreneurial and the cognitive, focus on the individuals within an organisation. The other four schools (learning, power, cultural and environmental) look at it from a broader perspective and also take into account other factors.

The third and last group consists of only one approach, the configuration school. This school strives towards integration and clustering of the diverse elements of the process in well- defined stadiums. Some even say that this school combines all other schools.

All these strategies are developed during the several phases of development of strategic management and they are (or were) all present in the ‘real world’. As mentioned there is a

10 http://www.onepine.info/pminz.htm

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difference between planning and practice. Mintzberg has put this in a model to give a clear overview on how strategies are established (figure 3).

The process starts with an intended strategy, this is the strategy formulated by the organisation on how they envision getting things done. It is a plan for the future. Next to the intended strategy Mintzberg acknowledges the realised strategy. A realised strategy consists of a deliberate strategy, where intentions that existed previously are realised, in comparison to an emergent strategy, where patterns developed in the absence of intentions (or despite them). In figure 3 one can also see that a part of the intended strategy will not be executed and goes by as the unrealised strategy.

This difference between intended and emergent strategy has as an implication that a continuum can be designated in which a pure intended strategy is at the one end and a pure emergent strategy at the other. Mintzberg calls the one on the one end (intended), a

‘Planned Strategy’ in which exact intentions are formulated and articulated by central leadership within the organisation. These intentions are supported by formal controls to ensure their surprise-free implementation in an environment that is benign, controllable, or predictable. On the other end of the continuum Mintzberg recognises the ultimate emergent strategy as an ‘Imposed Strategy’ in which the external environment dictates patterns in actions. Within this continuum all different kinds of combinations are possible¹¹.

Figure 3: The process of strategy (Mintzberg, 1992; p. 14)

11 Although an unlimited set of combinations is possible, Mintzberg has defined a set of options that can be seen as ‘standard’ forms of a realized strategy. See Mintzberg, 1992 page 15 table 1.

Intended Strategy

Realised Strategy Deliberate

Strategy

Unrealised Strategy

Emergent

Strategy

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As said before, the next chapter will look at the process of implementing the intended strategy as described in this chapter. Below a definition of what the strategy should look like for the sales office will be provided, this will be done according to the inside-out perspective as discussed by De Witt and Meyer (1998).

3.1.2 Strategy defined with the outside-in perspective

De Witt and Meyer (ib.) discuss the inside-out and the outside-in perspective on strategy.

The inside-out perspective believes that organisations should focus on the development of difficult-to-imitate competences and/or on the acquisition of exclusive assets (De Wit and Meyer,1998). The core competencies model of Prahalad & Hamel (1990) is such an inside- out strategy that starts the strategy process with thinking about the core strengths of the organisation. According to them the starting point for the strategy process should be with the core competencies, of which any combination of specific, inherent, integrated and applied knowledge, skills and attitudes can be seen as examples¹². Only if the company is conceived of as a hierarchy of core competencies, core products, and market-focused business units will it be fit to fight.

The outside-in perspective believes that firms should not be self-centred, but should continuously take their environment as starting point when determining their strategy (De Wit

& Meyer, 1998). The organisation, or strategists within the organisation, should therefore try to identify opportunities within the market. They have to search for potential customers whose needs can be satisfied better by the organisation than competitors can do it. Another very well known example of an outside-in perspective on strategy is the Five Competitive Forces model of Michael Porter. This model can be used as a tool to analyse the attractiveness of an industry and is particular strong in thinking outside-in¹³.

The organisation has to choose a position in the market. Mintzberg refers to this as the positioning approach. By the definition of this approach, strategy becomes the mediating force between organisation and environment, that is, between the internal and the external context (Mintzberg, 1992). The emphasis is on the market and the developments within the market to which an organisation should react. It should outperform competitor(s) with regard to the chosen position.

12 http://www.valuebasedmanagement.net/methods_corecompetence.html

13 http://www.valuebasedmanagement.net/methods_porter.html

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The inside-out perspective focuses on the internal characteristics of an organisation. The outside-in perspective on the other hand, favours the market. In short it can be said that

‘resource base follows market position’ within this perspective. The first perspective does not fit with the way IFS envisions the sales office to work. Therefore the strategy for the sales office will be designed with the use of the outside-in perspective.

In the discussion below an overview of issues as defined by the outside-in perspective will be provided. After the issues have been elaborated, a strategy for the sales office will be provided.

The overall strategy of IFS is to become the best financial services office in the world. The strategy of the sales office should therefore be in line with this overall strategy to form a cohesive whole. This statement can be seen as a choice for a position within the market. In the next three pages the strategy will be formulated according to the issues involved with the outside in perspective¹⁴.

Orientation

The strategy of the sales office should be market/industry driven and therefore focus on the Asian market and on the potential customers within this market. In 2000 IFS choose to focus on SME’s within Asia, this has proven to be successful, so now the sales office should continue focusing on these prospects. Next to this the office should also look to find prospects to keep business in the future. Many small multinationals in Asia are also very interesting, so in the future the sales office could focus on these companies as well to create revenues. This is however not yet developed and to sell structures to these clients they need to be educated on the benefits of the use of IFS.

Starting Point

The starting point for the sales office has to be the market structure. Many of the prospects of the sales office would like to have their banking facilities with large banks. Since IBS already provides many banking services in Asia to target clients, the bank has partly defined the market structure already. Many organisations do have foreign operations however they have not structured all their activities in a tax efficient way. Another option is that they have structured their activities but with a competitor while they have their banking activities with IBS. The opportunities are in the market and not so much on side of the resources.

14 These issues are adapted from table 5.1 in the book of De Wit and Meyer (1998)

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Fit through

This is a rather ambiguous issue. With the outside-in perspective the strategy should fit to the environment. For the sales office this is true, however the environment will have to adapt to the strategy in some ways as well. The strategy should focus on the SME’s and small multinationals as well, this is mainly since IBS can be used as a distribution channel for its products and therefore there will be opportunities for the sales office. This means the strategy has to adapt to the environment.

Strategic focus

The strategy should focus on attaining an advantageous position. This can be done by continuously developing the products of the organisation, but more related to the sales office it should keep the clients satisfied. This means that relations with the clients are an important issue. Treacy and Wiersema (1995) acknowledge client partnerships as one of three value propositions an organisation can choose of. Characteristics of this value proposition are that the organisation knows everything about the organisation of the client and that they are experts in solving their problems. This proposition also requires the creation of sound relationships. The first contact not necessarily has to be generating profits.

In the case of the sales office investments should be made in relations with regard to the relevant departments of IBS, the intermediaries and the clients. If the sales office succeeds, both could be a remaining source of profits.

The strategic focus of the sales office should thus be on the creation and maintenance of relationships with partners and clients. This will eventually lead to more continuous profits and higher profit margins.

Strategic Moves

This issue is about the strategic positioning of a company. For the sales office this has to be in line with the overall strategic position chosen by IFS. This is to become the best financial services office in the world. The positioning is with respect to the main competitors in the Asian market as mentioned in chapter two.

Tactical Moves

The tactical moves are about attaining the necessary resources. In the sales office most of the essential resources are intangible resources. These can be divided into relational resources such as relationships and reputation, and competences such as knowledge and capabilities (De Wit and Meyer, 1998). With the strategy of the sales office the emphasis

A Sales Office for Incognito Financial Services A road to success