Bank Julius Baer Case Essay

Before the arrival and lead of Stuart Adam (Adam), Bank Julius Baer, North America (BJB-NA or the Company), the largest independently-owned European confidential believe in the United States, faced financial difficulties. By mid-2001, a worldwide market downturn caused a earthshaking decline in Julius Baer Groups (JB or the Parent) performance. In 2001, JBs crinkle price was down by over 40% while the Parent take cared a 39% decline in net profits, 9% increase in operating expenses and an increase of 14% in employee headcount.BJB-NA, the crown jewel of JB, was barely bankable yet no one inside the Company knew its avowedly financial condition. JB had always been take by a member of the Baer family until January 2001. Despite significant family ties at JB, BJB-NA did not welcome a strong leader to drive the company. There was a lack of clear quite a little or direction for the Company. BJB-NA did not focus on profitability as a measurement of success. The side around BJB- NA was to a greater extent about keeping the peace than creating any conflict or hostility. Even with a passive work environment, employee morale was low.Employees tended to blame other parts of the Company for their problems. The competitive environment in the High Net Individual (HNI) esoteric banking sector increased dramatically during the 1990s. BJB-NA was a boutique hush-hush bank in a business where bulge bracket loyals dominated the competitive landscape. As such, the backbone factors for success in the HNI market were now recognized as specialism (not cost leading), improved thickening relationship management, broad product range and strong knob-responsiveness.BJB-NA undertaked to be a quisling organization that distinguish itself from the competition by avengeing the needs of its clients. The existing organization social organisation consisted of BJB-NA organized into four regionally-based teams. unequal communication existed throughout the Company as the s taff didnt know what was going on and thither was little cohesion among units. BJB-NA operated on a need to know behind. aggroup leaders were not liable for their own budgets, as it was not known if their teams were profitable or not. To further support the lack of office at BJB-NA, the Company did not pass on a systematic performance valuation system and lacked a compensation system tied to customer addition and returns. Bonuses were virtually guaranteed and all bonus decisions were made by Banks top leadership. Most likely, there were employees who flew under the radar if they underperformed since the Company never pose anyone off. Adams Changes and Evaluation Adam arrived at BJB-NA and immediately laid out an action design to turn around the Company. One of Adams best early moves was his selection of Denise Downey to head the divider Study Team.Downey was well respected by the employees that she led and was able to thoroughly evaluate the organization and give results to the Company and Adam. Based on the Segmentation Study, Adam wanted BJB-NA to really stand-behind its promises to be a partner organization. He encouraged full transparency and a strong focus on measurable results and accountability. Specifically, he focused on the following three initiatives Refocus the Company strategy Adam emphasized that BJB-NA alternate its focus to Europeans, Asians, Canadians and Latin Americas who live outside the U. S. who had U. S. based asset management needs.By targeting specific geographicalal and customer segments, it allowed the Company to specifically focus its strategy and resources rather than spread itself too thin to satisfy a larger, diverse customer base. In addition, he asked some longstanding personal clients who were not profitable to close their accounts. Not solitary(prenominal) did this change the Companys customer focus, but also, it signaled to employees that Adam had potency and high expectations for BJB-NA. Establish new perform ance expectations Adam developed productivity assumptions that would hold employees to a greater extent accountable.He established measurable criteria related to book value, relationships and accounts. Previously, Company employees truly did not know their clients. As a result, it was difficult for management to identify top and low performers. Adams established criteria that pushed Relationship Managers past tense their comfort zone. Before Adam took the helm at BJB-NA, almost everyone received bonuses regardless of their performance. Tying a bonus program with a structure performance evaluation system incentivizes those who bring success and growth potential to the Company.Modify the organization structure Adam slightly altered the structure of BJB-NA by having a client-segment focus within existing geographic areas. As such, the decision making processes were now decentralized to individually of the regional teams. Previously, the consultive and product services departments wo rked with all regions. After Adam took charge, he assigned advisory teams to each of the different regions to further strengthen customer relationships. Recommendations BJB-NA recognizes that its future success hinges on one essential factor its clients.Our consulting firm wants the Company to further expand and tinge its clients beyond what Adam has already planned. Our procession is a client-centric strategy that focuses on two key initiatives (1) Aggressively recruiting top talent to enhance client erudition and performance (2) Overhauling the compensation scheme and performance measures. Each initiative, accompanied by supporting tactics, get out align to elevate the client experience, resulting in deepening wallet share, increasing warm referrals, and building the BJB-NA punctuate in supreme customer service. I.Recruiting the Right Talent. Recruiting the right people to manage and advise BJB-NAs clients go forth be critical to sustaining long-term growth and increasing a ssets-under-management. Recruiting leave alone align with the Companys geographic approach to segmentation by adopting three tactics Local talent recruitment a happy private banker needs an outgoing, service-orientated personality, and the ability to connect with potential and existing clients. In connecting with clients, it becomes mandatory that future private bankers will be recruited from local regions.This strategy will generate bankers who know the local customs and assimilations, articulate the language, and are involved in the community. As a result, it creates comfort and familiarity for potential clients. Recruit from bulge bracket private banks Company acquisition is not a feasible option at this time. However, employee/talent acquisition is an even better method to help improve the Company. Bulge bracket private banks are typically a part of a lot larger conglomerates, often weighed down high-level corporate strategies and red tape. To retract bulge bracket priv ate bankers, BJB-NA should promote an entrepreneurial environment that offers autonomy and flexibility while unflurried offering resources found at larger firms.Recruit from ultra-boutique private banks BJB-NA should actively target private bankers from smaller, boutique firms that have larger books, but have a need for a more global reach. buck private bank clients are becoming more global, and with that, have a specific need for banks that have an worldwide presence. BJB-NA provides a solution with offices in Asia, Western Europe, Eastern Europe, and the United States.At the same time, by precipitously recruiting boutique bankers, BJB-NA will be able to expand its presence by acquiring the books of these bankers who may have a strong presence in untapped markets within the targeted regions. II. Restructuring Compensation and Performance Measures BJB-NA should introduce a compensation scheme that will not only be more beneficial for keeping clients interests first, but also off er higher potential incentives for the Companys bankers. First and foremost, bankers will be stipendiary based on client portfolio performance. No one will be paid on the basis of commission.While this tactic may seem counter-intuitive in the short-term, especially in the midst of a struggle economy, it acknowledges BJB-NAs long-term commitment to its clients. Other positive externalities resulting from a new compenstation structure include differentiation from competition, potential referrals from clients, and attention to BCB-NAs innovative thinking. In short, BJB-NAs message is We make money only when our clients make money. Second, standard annual bonuses will be foregone. Employees would be accountable for their performance and correct accordingly.BJB-NA will incentivize bankers by the value they add to their clients and related portfolio performances. This compensation structure ultimately rewards bankers who take of their clients and strive to grow their assets under manag ement. Finally, BJB-NA should revise the position title of its company leaders. To accurately reflect the duties of the position, the title Team Leader should be changed to Managing Director (MD). MDs would have full P&L and people-management responsibilities of his/her respective(prenominal) branch. In addition, MDs could receive an additional bonus based on the branchs bottom-line performance.This change will push decision-making down to MD level, promoting entrepreneurship and autonomy. III. Management and Leadership Since Adam decided to unblock from his position as the leader of BJB-NA, it is vital for the Board of Directors to select a successor that will be able to implement the changes initiated under Adams tenure. As discussed, BJB-NA needs to aggressively put its clients forwards anything else in its business. The new successor should be an experienced professional who deeply understands the Companys clients and industry. victorious these requirements into consideration, we recommend that the Board of Directors pick Adams successor from a list of internal nominees only. Currently, the firm is in a state of fragility. Employees are stressed and morale is low. With the initial round of layoffs that included sextuplet people, any move will be highly scrutinized and may have a long-term impact on the organization. Employees were already caught off guard with Adams resignation, especially after he led the restructuring efforts at an off-site meeting that seemed to build positive momentum.To replace Adams with an external candidate may put the Company in a state of flux. An external candidate would not have attended the restructuring meetings and participated in the Segmentation Study. He/she may have different views of how the organization should be changed. In addition, the HNI private banking industry is built around relationships. To bring on a new leader who hasnt built a strong rapport with a majority of the Companys clients would make the leader ship transition a difficult process. One potential internal candidate BJB-NA should consider is Denise Downey.Downey is currently the issue of U. S. Domestic Clients, but more importantly she led the Segmentation Study that evaluated areas of improvement needed at BJB-NA. Employees viewed Downey as a strong, effective leader who always delivers results. As a sign of trust, Adam gave Downey significant autonomy during her time leading the study. Elevating Downey to the C-suite level would be a fairly seamless transition. Downey has significant experience understanding the clientele of BJB-NA since she already leads U. S. client group.With all of the client-focused changes that need to be implemented by Adam, Downey will be best candidate to effectively communicate the steps needed during the transition period. For example, during her time as the Segmentation Study leader, Downey took the initiative to send updates to the entire bank. Alternate Approaches Deviating from a client-cent ric strategic plan could negatively impact BCB-NAs future success. Nonetheless, two other alternate approaches were considered. The first approach considered a compensation system where bankers would be paid variable commissions based on fee-based transactions.The variable in commissions would depend on the type of investment vehicles clients would invest in. This viable approach guarantees cash flows from transactions with no dramatic culture change. However, after careful consideration, this alternative was rejected since bankers would be incentivized more by selling a vicissitude of investment vehicles to clients rather than working for clients best interests. The second approach considered but rejected involved an hap of the organization structure.After the Segmentation findings, Adam seemed adamant about moving away from the geographic-focused organizational structure of the Company. As such, an alternative approach considered was to eliminate geographic departments and imple ment an organizational structure focused on client-type. One of the key success factors for companies in the private banking industry is to customize services based on the needs of customers. A BJB-NA client-focused structure based on client characteristics (such as wealth, age, income level) may be more advantageous, especially with raised expectations now required by Adam on bankers book of clients.Additionally, within a geographic organization, conflict may occur between local regional management and the executives at corporate. As such, this may hurt the opportunity for knowledge sharing and collaboration, value emphasized by the Baer family. However, as much as a client-focused structure might have its advantages, a geographic organizational structure all the same is the most effective for BJB-NA.Communication is much more personal in geographic organizational structures. alternatively of calling or videoconferencing with olleagues across the globe, it forces employees to sit next to each other to form collaborative teams, values preached by the Baer family. In addition, it allows employees to understand each others personalities and work styles. Besides the human detonating device element, geographic work teams allow BJB-NA to hire leaders familiar with the local business environment, something vital for the relationship-focused private banking industry. Not only will employees understand the client better but the clients will be more comfortable around employees who share similar interests and culture.