Banco de Iberia - Teaching Note
The case presents the changes that take place in Banco de Iberia between 2003 and 2008 and the decisions the CEO must adopt in order to deal with the economic crisis. Between 2003 and 2007 the economic environment is one of sustained growth, with an increasing GDP (3% per year), low interest rates and a steady increase in turnover and margins in absolute terms. The main drivers are real estate development and construction. The strategy of Banco de Iberia, like that of most other banks, is to expand geographically (8,000 new branches, an increase of 20%) in order to capture a larger market share, while pursuing very aggressive sales policies and allowing risk control to take a back seat. By the end of the five years, 40% of the bank's business comes from new branches. This means that it has to hire large numbers of new, young managers, many poached from the competition by offering higher remuneration than is paid to existing staff, along with fast-track promotion in the sales area. As the new employee profile is heavily sales-oriented, employees matching the classic profile are offered early retirement. With the drastic change in the business cycle, the growth strategy gives way to efforts to manage delinquency and default, and reduce costs. Management must decide whom to lay off and what new human resource management policies should be adopted to support the new strategy. There is a paradox in that the managers that received the most favorable assessments and the highest pay between 2003 and 2007 are the ones that cause the greatest problems for the bank from 2008 onward.
What material is included in this case:
Description
Leave your rating
"Banco de Iberia - Teaching Note"