November 18, 2005
The Learning Process in Banking Organizations
by Mihaela Popa Chraif
Graduate master - DAFI (Financial Management and Capital Markets) - A.S.E. (Bucharest)
Student at the University of Bucharest- Faculty of Psychology and Educational Sciences
"The strongest principle of growth lies in human choice."
(George Eliot, Daniel Deronda)
Abstract
We live in an organizational world. Organizations play a major and continuing role in our lives especially with the business and technology development. These organizations have different forms and become a necessary part of our society and serve many important needs.
Organizational behavior is concerned with the study of people’s behavior matching an organization’s settings. It is necessary to understand interrelationships with other variables which together comprise the total organization.
In the firsts tow chapters I defined the concepts of organization and learning process in interaction with the dynamic environment represented by the customers of the banks, new technology of work and the financial market. Groups and individuals as part of banking organization have to obtain a consensus on the meaning of the information and its consequences for action-outcome relationships must end by achieving the financial organizational goals. Therefore, in chapter three, I conceived a virtual work-shop about a specialized training in banking organizations. The training course will go intensively and is length a too weeks period. The main goal of the work-shop (besides providing the credit techniques, financial instruments and financial policies) is involving the participants (the employee of the human resources and credit departments) in interactive sessions, simulations and role-plays (character plays) with video feed-back.
1. THE ORGANIZATION AND THE LEARNING PROCESS
Every work organization is focused on efficiency and effectiveness, especially in today’s difficult economic environment and in the face of fierce world competition. The business organization is an open system and in continual interaction with the external environment through multiple channels of interactions. The systems approach focuses on the organization as a whole, as a socio-technical system, and considers the interrelationships between the different sub-systems and the importance of environmental influences. . Doing this involves consideration of interactions among the formal structure, the technology and methods of carrying out work, the process of management and the external environment. Organizations are made up of their individual members. Each individual member is a central feature of organizational behavior and a necessary part of any behavioral situation. When the needs of the individual and the demands of the organization are incompatible, this can result in conflict and frustration. Organizational learning is complex, occurs at different cognitive levels and involves multiple cognitive processes as perception, thinking, memory and imagination. The information acquisition does not only involve bringing information about the external environment into the organization, but must be extended to the use of existing knowledge within the organization. But when information is widely distributed in an organization, so that more and more varied sources for it exist, retrieval efforts are more likely to succeed and individuals and units are more likely to be able to learn.
There are at least five main interrelated sub-systems as a basis for the analysis of work organizations: task (the goals and objectives of the organization); structure (patterns of organization); technology (the materials, systems, procedures and equipment used); people (the nature of the organizational members); the management (co-ordination of task, structure, technology and people) (Mullins, 1999).
There are four factors in any organization determining the organizational effectiveness: people, structure, objective and management.
All organizations have some functions to perform: providing a source of employment and of income, the production and supply of goods and more than these. The goals of the organizations are the reasons for its existence. A goal is a future expectation, a desired accomplishment providing a standard of performance, justification for action taken and providing guidelines for decision-making.
1.1. THE BANK AS FINANCIAL AND ORGANIZATIONAL ENTITY
The goal of this article is to evidence the importance of learning in financial organizations (banks) in the way of organizational development and environmental competition. The banks have an important role in the financial market economy and also in the human resources field as organization. Both fields interact and “survive” in a mutual dependence, therefore, a mistake in human resources field could deteriorate the right financial flux of the financial field and also, a destabilized on the financial market could “hit” in the human resources field.
Modern banking has its origin in the finance of foreign trade. In the great medieval trading states of Venice, Genoa and later Florence a need arouse to exchange one currency with another and the early changers also begin the practice acceptance of deposits of cash and safekeeping. They also undertook the financing of commerce at the great medieval trade affairs, and they also called upon to provide finance of the rulers of the states in which they were establish, and they often become involved in financing the running of their own and other countries. Further developments took place as legislation and other changes brought about a restructuring in the supply of financial services. Increasing overseas competition and the freedom of building societies offered a much wider range of financial service. Today, there are many types of banks: the central bank (execute monetary policy, act as a banker to the Government, act as a note-issuing authority, exercise a prudential supervision over and to provide banking facilities for the banking system); the commercial banks (lend money for investment, exchange money for currency); merchant banks (finance the international trade, issue and underwrite securities, deal with takeovers). No matter the type of bank it is, either merchant, or commercial the human resources department faces almost the same situations: using learning programs for developing flexible behavior in the interaction situations with the bank’s customers; using I.T. and WEB-based technology for sharing information and foster learning; problems of managing knowledge-encouraging the organizations to become learning organizations, and more over.
The bank as organization is a form of social stratification with a pattern of relationships among positions in the organization and among the members of the organization. The structure (the pattern of the organization) makes possible the application of the process of management and creates a framework of order and command, through which the activities of the organization can be planned, organized, directed and controlled (Mullins, 1999). For a bank as organization the most important goals are: defining the formal structure, the distribution of the tasks, the relationship between the members of the organization, the culture and the values of the company adapted to the new competitive environment, the level of resource utilization and the economic and efficient performance for increasing the level of productivity and gaining high position on the competitive market.
The structure of the organization affects not only the productivity and economic efficiency but also the job satisfaction of the employee. The structure should be designed to encourage the willing participation of members of the organization and effective organizational performance. Personalities are important parts of the working of the organization, therefore the actual operation of the organization and success in meeting its objectives will depend upon the behavior of people who work within the pattern (the structure of the organization) and who give shape and personality to the framework. Thus, the operations of the organization will be influenced by the style of the personalities of members and the informal organization. Determining the policy of an organization is the main goal of the manager because people could modify the working of the formal organization in the way of developing a culture of value and satisfaction.
1.2. THE CONCEPT OF LEARNING PROCESS IN BANKING ORGANIZATIONS
Today, organizations are faced with permanently changing markets, global competition, decreasing cycles of technological innovations, worldwide availability of information, and considerable changes in their cultural, social, and political environments. The ability of enterprises to achieve competitive advantages and to continuously survive in dynamic, sometimes even hostile environments largely depends on their organizational flexibility. From research on organizational networks and virtual organizations it has been revealed that one of the most important problems in such settings is how to efficiently co-ordinate sequences of activities which are under decentralized local control. Moreover, business process (re)engineering not only (re)designs organizational processes but also involves a significant shift of tasks from human workers to so-called computational agents. As a consequence, whenever business process (re)engineering is affected, there are increasingly concerned with adapting and combining software-based sequences of organizational procedures instead of modeling these procedures as “the theory” learning us.
An organization should establish a learning environment by offering opportunities for training, giving support, and rewarding for efforts in the right direction its employee. Job descriptions and rewards could be linked to the learning behavior of an employee by incorporating learning in the yearly review about an employee’s performance. Moreover, a good organizational learning environment is a competitive advantage that is hard to imitate by competitors.
Banks are also learning organizations where people continually expand their capacity to create the results they truly desire, where collective aspiration is set free, where new patterns of thinking are nurtured and (the most important) where the people learn how to learn together (Mullins, 1999).
Learning involves an examination of how changes take place. It is a highly significant area for psychologist to study how the individuals differ in their learning capabilities, their style and their creative responses and further to match those with the right part of the structure of the organization.
Banks should stimulate cross-functional interfaces as these encourage the exchange of ideas. Therefore, cross-functional cooperation should be supported via regular cross-functional meetings. Project teams should involve experts from different departments so that knowledge sharing can happen. Organizational diversity is another important factor as various specialists can exchange their expertise. When recruiting personnel, managers should select employees with different backgrounds and skills so that other employees can profit from their knowledge. In the order of organizational goals achieving, the most important strategy is involving people from different departments in group project, opening up boundaries that lead to a stimulating working atmosphere.
Learning is not only an individual process, it is a social process also, and brings employees into contact with each other. Consequently, they can develop an organizational identity through shared values and meanings that will diminish misunderstandings. Participative decision-making also stimulates learning behavior that is crucial for the motivation of the employees. Through participating, they can achieve self-fulfillment and are more satisfied. Decisions that are worked out together are easier implemented as employees support the decision. Thus, the employees’ motivation to engage in information processing activities is enlarged. These activities are essential in an innovative setting and service innovations are indispensable in the dynamic financial service environment. Project learning is fundamental as it enhances organizational performance.
Learning oriented innovation management may improve the financial organization (bank) reputation, which is an important factor in the financial service industry where customer decision-making depends to a large extent on the financial image of an institution. Moreover, having a reputation for being innovative facilitates the introduction of radical innovations (new credit lines, new transaction facilities), as consumers are more eager to accept such introductions and be tempted by its. The competitive position is also augmented which is indispensable in the highly dynamic financial service industry. Thus, through learning the organization is able to maintain competitiveness also in unstable environments and is prepared to adapt to new eroding circumstances in a fast and effective manner. Furthermore, the cost position of an organization is improved as learning leads to dynamic efficiency that can be exploited especially during information acquisition. Lower costs are always an important issue as the savings can be invested in other projects and return on investment is higher. Moreover, the institution is able to catch new customers that could become customers of their exiting products leading to an increase in turnover. The organization acquires and disseminates new knowledge about customers and competitors through cross-selling activities that can be incorporated in existing services. Additionally, the company can increase its service delivery capacity, which expands the abilities and competences of the employees. Thus, the organization invests in its future position. An increased service delivery capacity also results in an enhancement of customer satisfaction. Customer satisfaction is a prerequisite for a market-oriented organization that wants to sustain in the competitive environment. Consequently, learning is crucial in its contribution to organizational performance.
Both individuals and groups are the resources that have to be managed towards organizational effectiveness. Thus, individual performance will contribute to group performance and this will in turn into organizational performance (Gibson, 1987). As a result, understanding group behavior as well as individual behavior is critical for effective innovation management. In our research our focal unit of analysis is the innovation project and the importance of team working projects group. Individual’s actions are based on a set of shared mental models. For this reason groups can be viewed as a collective individual with their own set of mental models contributing to the shared mental models and hence learning of the organization (Kim, 1993). Through the learning process, the various experiences of the individuals in the innovation group are bundled through information exchange and organizations are able to exploit the new insights. Learning should be seen as a necessary process involving reciprocal exchanges between individual employees having the same organizational goals. Thus, from a system's perspective we need insight into the organizational knowledge creating processes to explain the information processing behavior at the individual or group level. Moreover, if we take the view that learning is a cumulative process, individual, group and organizational learning strongly overlap. A shared language is created by which individuals within the organization can communicate because learning is not possible without communication as communication is a prime factor for learning. Without information exchange, employees cannot learn from other experts and the process of knowledge acquisition and sharing could be inhibited.
2. THE NECESSITY OF TEAM AND INDIVIDUAL CASE STUDIES IN LEARNING PROCESS
An organization that is capable of reacting to environmental changes in a fast manner is able to surpass competitors that rarely learn from past behavior. As a consequence learning will improve organizational performance in the future and the impact of learning should be assessed using various performance measures. Several specific performance outcomes have been conceptualized within previous research of financial service industries. These performance measures include bank reputation, competitive position (on the financial market), cost position and service delivery capacity (loans, commercial credit lines, deposits, money transfers and transactions).
The bank reputation is of major importance in the financial service sector as the service itself is difficult to differentiate and easy to imitate. Therefore, financial organizations are able to differentiate their service via its corporate and banking reputation. In the increasingly dynamic financial environment, financial organizations should have a reputation for being well informed and up-to-date. An organization can also benefit from promoting a reputation for innovativeness. As good learning capabilities are the basis for reacting quickly to environmental changes, learning can serve the purpose to broaden or improve the financial organization (in our case the bank) reputation. The learning rate of an organization should at least equal the learning rate of competitors and the rate of environmental change in order to maintain a competitive position in the market. A competitive position guarantees that the new service provides superior customer value. Thus, the organization can differentiate itself from competitors through the new service thereby creating a competitive advantage that is hard to imitate by competitor organizations. An organization that pursues an active learning strategy is more likely to demonstrate dynamic product development and a better customer orientation to their products: new credits portfolio, special loan lines, and so one. The organization is able to develop distinctive capabilities via the diffusion of learning and the integration of knowledge. The focus on learning should help an organization to develop core competencies and a high degree of flexibility. If learning is successful, its effects can be exploited in the market and will improve the competitive position.
In relation to an improvement of the competitive position, institutions can also enhance their cost position via learning. As learning includes the building of a knowledge base, information that has already been acquired can be stored in the organizational memory. Learning from the experience of innovation team members and using materials that have already been effective, improves the quality and speed of problem solving. Communication networks and organizational memories increase the mobility of information and knowledge so that stored information can be easily retrieved throughout the whole organization without incurring major time delays. Therefore, information acquisition of already known problems is faster and thus more efficient, double-efforts can be avoided and already existing knowledge can be used more effectively preventing ” re-discovering” what the others already done. Moreover, through project learning employees get to know where to find necessary information, which colleague to ask for a specific problem, resulting in efficiencies in the problem-solving process. By embedding learning, companies can moreover reduce the information overload of employees, thus, enhancing the consistency and effectiveness of knowledge use throughout the organization. Therefore, learning encourages the development of new services. These new services may attract new customers who might become users of other services provided by the same organization. As the project innovation team is involved in information processing activities, the group members learn more about their customers and competitors. These new insights can be exploited when dealing with customers for existing products, too. Therefore, the cross-selling opportunities are expanded as the innovation team obtains more expertise. Consequently, cross-selling is another benefit of learning.
As I related above, the human personality is unique and spectacular. We could not find two persons with the same structure of the personality. This is the reason that makes the learning process to be different from a person to another. But, what would happen if we have group learning in a banking organization? How could they gain experience and perform their job effectively being so different and trying doing as one?
For answering these questions is basically to underline the importance of the individual case study, team case study and team training courses at the working place. Also is very important to underline the role of learning as a mediator concerning the nature of the link antecedents (situations had happened in the past) and the impact of learning on performance. New study methods can be implemented in an organizational setting in order to capture and diffuse knowledge anchored on business processes and serve as a learning medium for the knowledge employee. The emerging digital economy is characterized increasingly by knowledge intensive organizations, which require that specialized knowledge employee developing unique knowledge competences. The learning organizations comprise companies where most work is said to be of an intellectual nature and where well-educated, qualified employees form the major part of the work force. The characterization of a firm as knowledge intensive implies that learning process has more important role than all the other production factors in the way of market competition and income increasing. People gain knowledge through learning and also translate their knowledge into organizations’ routines and competences, job descriptions and business processes, plans, strategies, and cultures. This work paper discusses an innovative approach for the convergence of knowledge management and organizational learning theories and practices, comprising of the appropriate methods and tools underlining the role of the team studied and team trainings in learning, developing positive relation ships between the employee and providing the financial organization main goals. The set, which is the main component of action learning structure, is a group of employee from the credit department of a bank working with real problems with the intention of getting things right. The set is not a formal meeting. The main purpose of the whole procedure that takes place is to support individuals and teams in reflecting on their past action (in our case the way they were talking on the phone with the customers and treating them) in order to learn from experience and to construct their next actions (improving the phone conversation in order to gain more customers) concerning new problems they face. Everyone in the set can present an issue (there are simulated role plays) or a problem and must be given attention of the other set members.
One of the basic assumptions by adopting action learning methods and providing this training work shop is that people are most motivated to learn when they tackle a problem which is close to their work. Relying on action teaching knowledge, employee (team workers) can take the opportunity to: focus on particular areas of professional life and to discuss at various levels; gain new perspectives on such areas based on the experience of others; develop and practice new skills in a relatively safe environment. A crucial question that emerges before moving on is what practical methods from an educational, psychological and pedagogical point of view are appropriate in order to test and implement the basic theoretical constructs and assumptions into specific methods and tools. This work shop –team training tool and strategies proposes the individual and team study method as an appropriate means to operational action learning strategy in an organization. So, in each financial company in our case banks beside the daily work employee has to complete, it has to be settled a weekly learning program consisting in daily courses, applications, tests, and the most important learning the right methods and strategies providing high efficiency and effectively.
3. PLANNING AND IMPLEMENTING THE LEARNING PROCESS IN BANKING ORGANIZATIONS - WORK-SHOP FOR LEARNING EFFECTS
This case study consists in creating a work-shop for “credit department employee” in the design of team training but also based on individual study. Usually, the banks’ employees from credit departments have to settle down credit agreements for the credit contracts by phone conversation with customers they could not see (they have not video phones). The most important thing in their job is the self control in special situations: screaming customers on the phone, problems with the debit and credit cards putting the bank image in bad position, aggressive clients and much more. For a better understanding, I conceived the course plan and action plans they should apply in the order of achieving the banks’ goals. The theoretical courses and practical interactive sessions are planned according the weekly training stages as you can see in table 1.
As you may notice, there are theoretical financial courses followed by individual studies for better learning and approaching the financial instruments, strategies and policies. But in a banking organization the main objective is the employee education and development according the organizational goals (in our case credit lines, increasing the phone credit selling’s by developing employees’ knowledge, abilities and attitudes).
Each credit department “customer’s relations” has a place “phone calls platform” where the employees interact by phone with these customers. The goal of this work-shop team training is how to learn by “phone conversations-methods and strategies” to satisfy the customers, to control the critical situations and the most important how to serve the bank organization for better results. This training program is specialized in teaching new methods and strategies of interaction with: the customers, the other employee and the management of the bank organization and also theoretical courses of financial and economic instruments, calculation and financial law. In fact is a multidisciplinary educational aspect of the learning process in the banks. Each theoretical course is followed by an individual project and valuation test in the order of analyzing apprehensive levels of the employee after attending those theoretical courses. The stages of evaluation are centralized in table 2.
As you may notice, there are financial tests for the financial analyze of performance and behavior and personality tests, role-plays (character plays) in the order of verifying the telephone selling abilities and techniques assimilation.
In the following tables and formation syllabus, I intended to perform the training program presenting theoretical courses and tests verifying the knowledge basement of the employee and their abilities and skills in different working situations and technical conversation support for phone conversation with the customers. The promotion of services/products on the phone is one of the main parts of the selling strategy. Therefore, is important from the staff of this department to represent the company to the highest standards, in a friendly and professional manner, throw a clear and efficient communication to value the clients to the maximum and to contribute to the business development.
We may notice in the table below (table 3) the plan of the Telephone Selling Techniques Course. The objectives of the course perform the development of the telephone communication abilities, practicing the steps of the telephone selling chat and the assimilation by the participants of per formant telephone selling abilities and techniques of services-cross-selling and up-selling. After the course ends, the participants will meet for test paper evaluation. The instruments for valuating the employees’ knowledge and abilities apprehended during the courses session are presented in Table 4 and 5 as follows:
Those instruments of valuation are very important in the way of verifying the level of knowledge and phone conversations abilities because the employee must approach the clients, they must determine them accept the banks’ services in the order of getting mortgages, loans, and credit lines for goods and so one. There is a Follow-up session during a day, when the participants will meet again for analyzing whether the action plan they decided to apply was successful or not and will resume a few of the main subjects that had been discussed in class for better understanding.
A major role is performed by the role-play or the character play. This is an application on groups simulating the real estate phone conversation. The participants, after listening recorded phone conversations they will execute the character plays as exercising their abilities and evaluating their performances.
Project teams are seen primarily as information processing systems. In line with our definition on communication and communication effectiveness, we have to consider the effect of communication to be cognitive, equivalent to the creation of a knowledge base. As a result project teams gain knowledge and consequently learn as they exchange information.
The simulation of phone conversation between the employees is very important in achieving the selling techniques, developing positive relations with the clients on the phone in the way of performing the banks’ goals and also building a professional image in the phone conversations. The employee must learn to value the clients even if they could not see them and must understand that best promotion the companies could have is through their satisfied clients!
Conclusion and Suggestions for Future Research
This work shop team training demonstrates the crucial relationship between learning and project performance as well as organizational performance. As learning during innovation comprises a process, future research should consider a longitudinal study that could provide more insight into the different stages and its interaction with the nature of communication necessary to ensure continuous learning. The longitudinal design could also pay attention to a possible iterative relationship between coordinative communication and project learning. Project learning may have a positive effect on coordinative communication in subsequent new service development projects.
The organizational context is an important determinant of the level of project learning. A supportive, harmonious, and participative climate offers the best conditions for learning to take place. In our research we modeled both communication and organizational design as antecedents of learning. Future research should probe more deeply into the relationship between the nature of communication and organizational design. Some design contingencies may be more favorable to innovative than to coordinative communication:
1. The experience and learning we gain in this project proved to be essential for the successful creation and completion of subsequent projects.
2. The knowledge acquired during the innovation process of this project served as an essential input for other new service developments.
3. The development of this new financial service created a general development expertise that eased the development and introduction of subsequent new services.
4. The expertise of developing and launching this new financial service lead to an enhanced know-how for future innovation projects.
5. through the development and launch of this new service, project members learned a lot on new financial service innovation.
Moreover, the focus of this “virtual study” with respect to the nature of communication is limited to internal communication. However, external communication is very important for project learning because through boundary spanning activities with external stakeholders the organization can acquire important information that does not exist within the organization. Thus, a future study should consider the impact of external communication on project learning during new service development.
References
- ALDRICH, H.E.(1999), Organizations Evolving, Sage Publications, London.
- ARGYRIS, C.(1992), On organizational learning. Blackwell Publisher, UK.
- GIBSON, J.L.(1997), Ivancevich, J. M., Donnelly, J. H. Jr., Organizations. Behavior, Structure, Processs. Irwin, McGraw-Hill, Boston, 1997.
- GOLEMAN, D.(1998) Working with Emotional Intelligence, Bantam Books, New York.
- KIM, DANIEL H.(1993), The Link between Individual and Organizational Learning. Sloan Management Review, 35,(Page 37-50).
- MEYEN, J.P.; ALLEN, N.J.(1997), Commitment in the workplace, (Sage Publications, Thousand Oaks, 1997).
- MALLOW, P.MICHAEL(1994), Banking, Law and Regulation, Little Brown &Co Law &Business.
- MALLOW, P. MICHAEL(2003), Principle of Bank Regulation, Hornbook Series Edition, 2003.
- MORGAN, G.(1986), Images of Organizations, Sage Publications, London, 1986.
- MULLINS, J. LAURIE(1999), Management and Organizational Behavior, Pitman Publishing, London.