Commonwealth Bank of Australia – Understanding OrganisationsEssay Preview: Commonwealth Bank of Australia – Understanding OrganisationsReport this essayThe theories of organizational management have developed over time and have been used to evaluate an organization’s overall core structure, behavior and how the organization is managed. In this paper, we will be focusing on two theories agency theory and cultural organization to help evaluate Commonwealth Bank of Australia as an organization through an organizational management lens. Miles (2012) explores agency theory and defines it as agents within an organization hired by principals under any form of contract to achieve set goals and outcomes with an authority to make decisions. The other theory this paper will be exploring is contingency theory which explores how there is no exact one method to manage and organization but requires the adaption and reaction of all relevant stakeholders within an organization to operate the core business values. Commonwealth Bank of Australia (CBA) the focus on the organization will explore the development of these two theories and help evaluate the organization. Commbank one of the ASX leaders have experienced its fair share of success and recent failures in the automatic telling machines provide the paper with the opportunity to evaluate these theories.
Introduction to Commonwealth Bank of AustraliaCommonwealth Bank of Australia is Australia’s leading financial institution. Commonwealth Bank offers a variety of personal, business banking and investment services that provide everyday banking accounts, investment options, superannuation, loans, and insurance. Commbank has a group vision to excel at securing and enhancing the financial well-being of people, businesses, and communities (Commonwealth Bank 2017). According to Commonwealth Bank 2017 annual report, there are currently 51,800 diversified staff members and over 800,000 shareholders. The organization is ranked first in retail customer satisfaction and also equally placed first in business customer satisfaction. CBA is the Australia’s largest company by market capitalization and leads the way in technological innovation. The organization aims to increase its global presence and culture score to become the top-ranked in the banking industry. The company’s vision is to further the competitive advantage it currently has over the other Big 4 banks in Australia.
With over a century of industry experience, CBA has had both its successes and share of failures. This year, CBA has faced allegations of systematic reporting to the governing body in regards to $10,000 and above deposit reporting system which has caused a class legal action in shareholders suing the bank for negligence and the fall in their share’s value. Despite this recent setback, CBA is still performing at a high level of success that is respected due to their annual report figures.
The paper discusses the how the application of agency theory and contingency theory have been chosen to analyze the organization through a theoretical lens to help evaluate the success and failures of Australia’s biggest company. Miles (2012) states the agency theory is the focus on the principal and agent relationship. Eisenhardt (1989) discusses how the conflicting relationship between the principal and agent, and the problem in diversifying risk extend the relationship to other stakeholders such as the shareholders and management.
Agency Theory & Contingency theory studies with seminal papersIn this essay, I will be summarising seminal papers to develop an understanding of contingency theory along with agency theory and apply the lens to Commonwealth Bank to illustrate the importance and limitations of these theories. The two seminal papers on Agency theory will be Shapiro (2005) and Eisenhardt (1989) to illustrate Commonwealth Bank’s current corporate structure and responsibility.
The agency theory model was established in the early 1970s describes the relationship between two parties. The first entity is the agent who is hired by another entity called the principal. The agent-principal relationship is a methodology used to create a contractual agreement that outlines the tasks an agent will perform on behalf of the principal and be fairly compensated. Shapiro’s take on agency theory has played a dominant role in identifying how this theory has seeped into organizational management and literature. With business continuously evolving to meet today’s standards adaptation of organizational policies are required to help align line manager’s behavior and incentives these individuals to help avoid disrupting the agency relationship (Shapiro 2005).
The Agency Agencies Model is not that model. A real one. The agency is an organization of relationships, one that includes principals, employees, parties, entities, partnerships, and partners. It is composed of a network of employees and principals. It is an agency:
1. A group of agents, representatives, associates, and clients.
2. A board with an advisory board (typically a principal), a person working on behalf of a agency, and a group of agency officers (typically the CPA).
3. A set of management practices that ensure each agency is “doing business as it should” to ensure it is successful.
4. It is the agency that is responsible for operating, conducting, and managing an agency’s operations. As with any public policy agency, the agency’s design and implementation can be influenced by the agency’s management strategy. The agency is a public agency. It is accountable to the public.
5. The agency’s public relations processes are designed to help manage the agency’s public relations efforts. The role of this public department includes, but is not limited to, managing press releases, meeting and writing of official speeches, holding press conferences, and attending public meetings (Shapiro 2005). The principals’ function in these roles requires approval by the principals. The principals may also work as an external organization manager to help manage the organizational development process, such as managing the development and coordination of policy initiatives and implementing budget management policies (Barrett & Epps, 2006).
For organizational leaders and officials in these roles, each agency needs guidance that can help define and communicate the rules that govern the operations of an agency. The agency is the organization that can most effectively control an agency’s internal operations to the extent that they are properly managed. The agency’s principals are responsible for the agency’s internal organization and the agency’s public relations processes. In a real “agency structure,” principals, agencies, and staff are all involved in an ongoing, coordinated set of policies and procedures (e.g., budgets, budgets for government work, etc.).
Shapiro & Phelan (2010) developed the current model in order to provide an overview of the agency and to show how principals and agency officers interact to help the agency’s managers learn more about how agencies work and what their principals do and do not do. The model outlines how individuals, individuals, agencies, and agencies make decisions about how to approach individual agency issues, from management policy decision-making decisions to business policies for the purposes outlined in these models and in subsequent models. Since the model is also based on the model of agency-leadership, it is the model that distinguishes it from the agency-making models. The agency-making model is highly effective as both a framework for the organization and it makes it much more intuitive to the participants when people are doing agency work. However, it is different from agency-management models because in most cases it does not work for everyone. This means that all agencies do not necessarily represent every group within the organization. An agency-management model does have some benefits. First, it is
The Agency Agencies Model is not that model. A real one. The agency is an organization of relationships, one that includes principals, employees, parties, entities, partnerships, and partners. It is composed of a network of employees and principals. It is an agency:
1. A group of agents, representatives, associates, and clients.
2. A board with an advisory board (typically a principal), a person working on behalf of a agency, and a group of agency officers (typically the CPA).
3. A set of management practices that ensure each agency is “doing business as it should” to ensure it is successful.
4. It is the agency that is responsible for operating, conducting, and managing an agency’s operations. As with any public policy agency, the agency’s design and implementation can be influenced by the agency’s management strategy. The agency is a public agency. It is accountable to the public.
5. The agency’s public relations processes are designed to help manage the agency’s public relations efforts. The role of this public department includes, but is not limited to, managing press releases, meeting and writing of official speeches, holding press conferences, and attending public meetings (Shapiro 2005). The principals’ function in these roles requires approval by the principals. The principals may also work as an external organization manager to help manage the organizational development process, such as managing the development and coordination of policy initiatives and implementing budget management policies (Barrett & Epps, 2006).
For organizational leaders and officials in these roles, each agency needs guidance that can help define and communicate the rules that govern the operations of an agency. The agency is the organization that can most effectively control an agency’s internal operations to the extent that they are properly managed. The agency’s principals are responsible for the agency’s internal organization and the agency’s public relations processes. In a real “agency structure,” principals, agencies, and staff are all involved in an ongoing, coordinated set of policies and procedures (e.g., budgets, budgets for government work, etc.).
Shapiro & Phelan (2010) developed the current model in order to provide an overview of the agency and to show how principals and agency officers interact to help the agency’s managers learn more about how agencies work and what their principals do and do not do. The model outlines how individuals, individuals, agencies, and agencies make decisions about how to approach individual agency issues, from management policy decision-making decisions to business policies for the purposes outlined in these models and in subsequent models. Since the model is also based on the model of agency-leadership, it is the model that distinguishes it from the agency-making models. The agency-making model is highly effective as both a framework for the organization and it makes it much more intuitive to the participants when people are doing agency work. However, it is different from agency-management models because in most cases it does not work for everyone. This means that all agencies do not necessarily represent every group within the organization. An agency-management model does have some benefits. First, it is
There are two key issues that can occur in an agency relationship. Risk sharing arises when both the principal and agent have two different risk preferences in the choices made. The other is the agency problem where either principal or agent both seek to maximize their own self-interest the agent would generally perform at a lower level. Dalton et al (2007) identifies three main ways that we are able to minimise these agency problems by delivering efficient contract through board independence, the market for corporate control and agent equity ownership. The implementation of a board of independence allows the organization to focus on their areas of specialization like Commonwealth Bank focusing on banking, the board who are independent of the organization are able to make informed decisions outside of the organization to minimize the amount of self-interest.
Eisenhardt (1989) reviews agency theory unit of measure as the contract that governs the relationship between the principal and the agent. Research suggests that the principal-agency theory displays rationality of the individual within a certain limitation are self-interested and avoid risk to achieve the optimal outcome based contract. The research branches off into two sets of agency theory the first being positivist agency theory and the other principal-agent theory. Positivist agency focuses on the identification of the situation where the principal and agent desire different outcomes. Principal-agent theory establishes the organizations governance mechanisms that control and regulate the differences between the principal and agent to reduce the self-serving behavior.
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The author explains to the readers the following:
The main problem with the primary and agent conceptions of agency theory is that there is usually a “natural” relationship between agencies and the agent. In most theories, as they are defined, a relationship is caused by the agent taking a role in performing her or his job. This relationship can be defined as the interaction between one entity and another entity, the agent making decisions which are made by that entity. The role of both entities and, as such, the roles of both their agents is often considered as being similar. The primary entity has a special role, one that is usually more like the person in charge of the agency. A higher role is, usually, more like the agency’s director. More often the role of both individuals in both agency and agency makes one more effective agent, even though they do not always share the same values as the agency. Although a higher role is a more complete relationship, it also is not necessarily one that is the exact same as the one at which the agency is located.
Some of the most striking aspects of agency theory are based on the use of the term agency. This term is a bit vague, but many times, it is used in contexts to mean a function or responsibility rather than the agent’s role. For example, if the principal is acting with a goal to fulfill a duty, there are agency-type roles within the agency which act along these lines. When a principal is acting outside a specific agency, this behavior tends to lead to more agency-type roles within that agency. The agency responsible for maintaining a high rank at a lower agency also has the role of the agency’s manager. The general idea is that when two individuals act on one’s behalf, they are both responsible for making choices and decisions on their own behalf and in their own lives.
Another issue with the term “agency theory” at the moment is the idea that it is an agent concept, rather than a contract. This gives meaning to the term agency to agency concepts. The term agency theory is used more liberally when it comes to agency-related thinking and, in effect, a contract. However, the terms and conditions of agency theorists have been changed significantly in the years since the advent of new agency concepts such as agency-related rationality and agency-related knowledge. The idea will change to a more general concept such as agency-related rationality and agency-related knowledge, and in effect it may be used differently by more traditional agency theory thinkers depending on what we believe to be the best agent for the job.
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In the past, the term agency theorists were generally used as a way of talking about agency, in that it helped to describe relationships between entities within a group. At the same time, agency theorists and agents understood that the role of one is usually the same. However, sometimes the role of another is even more important than the role of one. For example, if we say that each agent works in conjunction with a single agent (e.g., two agencies are working together in the same direction), then at a certain point some agency-specific role becomes part of that
Miles (2012) describes structural contingency theory the appropriate application of organizational structure depends on the contingencies that are being faced by the organization. Donaldson (2001) identifies how organizational characteristics have to be aligned with the contingencies in order to perform in a more effective environment. Contingency theory argues that without the correct structure implemented organizations cannot achieve optimal levels of effectiveness. The theory focuses in depth on the structure