Managing the Future in Financial Institutions

A book by Julie Mabberley

It is popular to describe managing a company as similar to flying an aircraft. There are a variety of dials and indicators in the cockpit providing information without which piloting the plane could be dangerous, if not fatal. Yet many managers do attempt to pilot their own organisation using a very limited number of indicators (mainly financial).

As the world becomes more competitive and more sophisticated, the need to monitor a wider range of indicators becomes more important and this need for focused management information based on a consistent base of cost effective, timely data is becoming one of the keys to competitive advantage within any business and especially in the financial sector.

This book suggests that some managers in financial institutions manage the business on autopilot, setting the dials once each year as part of the planning process and assuming that performance will continue to meet or come close to budget with minimal management input. Unfortunately, the world now changes too quickly for annual fine tuning to be sufficient to maintain or improve performance. They need to monitor the external environment and know when to turn off the autopilot and take the controls making changes to the flight plan and monitoring the impact of the changes on the performance of the plane. Turning off the autopilot is a deliberate act. It requires courage and the knowledge that you can pilot the plane.

Why does it sometimes feel that managing a financial institution is like flying a plane through clear air turbulence with the radar out of action? It can be very difficult to remain aware of the constant changes affecting the global financial markets of today and the reactions of competitors. The challenge facing management is to gain this awareness and guide the organisation towards competitive advantage. This book provides a comprehensive guide to the types of information necessary to enable managers to survive, guiding their organisations though the changing environment to greater achievements in the future.

The indicators in any cockpit will provide three different types of information.

  • Firstly, through external communication, information about the world around the plane that may affect its ability to fly where it wants; weather, position of other planes, availability of landing slots and level of customer demand
  • Secondly, about the plane in relation to the world outside; air speed, direction, altitude, wind direction and position in relation to the ground.
  • Finally, information about the plane; the amount of fuel available, the fuel mixture, oil pressure, temperature, air pressure and engine speed.

Similar types of information are required to pilot a financial institution. The external factors that affect the organisation (that affect its ability to fly) include the environmental factors relating to physical location, behavioural patterns created by national culture and history, social influences, the state of the economies, the strength and persuasion of political power and the potential for growth in the industry; the position, size and activity of competitors; and, the changing needs of customers. The factors within the organisation that relate to the world outside are the relationship with customers and the products and services offered to customers. Finally, information about the organisation includes the resources available, the financial assets, the people and the underlying infrastructure.

A good information system provides the performance measures and targets necessary to monitor the actions of the organisation in relation to market. It provides the navigation systems necessary to pilot the organisation through the changes facing today's financial world. The use of activity-based information and activity based management techniques are vital. These tools form the core of any multidimensional information system and will provide the internal information necessary to monitor progress.

This book reviews the types of information required to support decision making in all areas and how to manage in a changing environment. The book is divided into four parts:

  • Part One (The outlook) peels off the external layers discussing the need for information about the position of the organisation in relation to the competitive environment in which it operates
  • Part Two (Defining direction) defines the inner circles looking into the future and plotting a course
  • Part Three (Improving performance) looks at the implications of the overlaps between the circles and considers ways of achieving the goals and objectives and finally
  • Part Four (The tools for change) fills in the gaps, describing some of the tools available to support the management of the organisation in the constantly changing world.

Without some of these tools to support the decision making process in the changing world, management in financial institutions may find life becoming increasing difficult. This book provides an overview of the tools and techniques available to enhance the skills and expertise of management and to enable them to survive in the highly competitive environment that exists today.

Pilots must keep their skills up to date, learning about the new instruments and indicators available to help them to fly faster, safer and more effectively. Managers should do the same. In the same way that new dials and indicators need to be installed in the cockpit to provide information to the pilot, new systems and reports need to be made available to management. The remainder of this book highlights the need for better information, describes how it can be used to create opportunities to improve performance and shows how many of these opportunities can be exploited by optimising the internal resources of people, customers, products, delivery capabilities and financial resources.

Managing the Future in Financial Institutions - Meeting the Challenge with Better Information by Julie Mabberley
Copyright 1997 Price Waterhouse. ISBN 0 273 61975 6, published by Pearson Professional Publishing. All rights reserved.

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