Decision Problem Overview
Capital One Bank’s retail banking division is five years old, after acquiring North Fork Bank in 2007. Capital One needs to decide whether its retail banking division, or local distribution as they call it, desires to achieve a brand leadership position or a “just another bank” position in the plethora of retail banking enterprises. The nature of the decision problem relates to the strategic vision for local distribution. In Capital One’s case, the triggering events for the decision problem is the acquisition of North Fork Bank, the reluctance to change the personnel, and the lack of clarity from senior most leaders as to the identity of the bank. Capital One hired some senior executives initially from Bank of America and currently from Wells Fargo (formerly Wachovia) to, I guess, build a banking franchise. But questions remain about Capital One Bank’s value. I have first-hand account of local distribution problems.
Capital One Bank’s challenge involves intrinsically and extrinsically defining its value through identity, as the bank pursues its nationalization strategy with recent acquisition of ING Direct. How can Capital One Bank live up to it professed values of Excellence and Do The Right Thing ? Why are Capital One Bank employees afraid of winning ? How does Capital One Bank place its talent in the right place at the right time to produce the right results ? How can Capital One Bank establish co-branding communications and activities, where employees learn and know entire enterprise capabilities? What are the best ways to improve the effectiveness of Capital One Bank’s coaching culture?
The aforementioned problems all culminate to the main problem Capital One Bank faces—How to achieve “brand leadership” (Joachimsthaler, 2012) given its current capabilities? Currently, as a bank, Capital One Bank has no identity, despite it’s parent brand, Capital One, that has strong brand recognition. Identity is the most important aspect of achieving brand leadership (Joachimsthaler, 2012). Capital One Bank has not clearly defined what it stands for (Joachimsthaler, 2012). There is no profile of the client Capital One Bank specializes in serving.
Capital One Bank is not clear what business it is in. Is it a national retail chain? Is it regional? Is it an online bank (with recent acquisition of INGDirect)? Is it a promotion retailer? Does the bank cater to mass consumers, students, doctors, lawyers, small businesses, middle market firms, large corporate firms? In its current state, Capital One Bank just exists. Internally, there is a branding and identity crisis occurring. Local distribution managers and employees do not have a clear value proposition to tell new and existing customers. Lastly, Capital One Bank has not clearly, publicly or internally, expressed what it aspires to be. In this article, I will discuss the key decision elements-objectives, alternatives, constraints, consequences, and uncertainties facing Capital One Bank.
Objectives Statement
Fundamental and Means Objectives
Fundamental objectives are primary decision-making pointers used to assess the alternatives presented, identify what is most important, and act as criteria to evaluate alternatives (Kopeikina, 2005). Means objectives or sub-objectives are used to support fundamental objective and are used to brainstorm alternatives (Kopeikina, 2005). In Capital One Bank’s case, there are three objectives related to the decision problem:
Achieving Brand Leadership
Means objective: Achieve brand equity (Joachimsthaler, 2012) or value of Capital One Bank brand through awareness, brand image, perceived quality, and customer loyalty.
Adopting a Winning Mindset
Means objective: In local distribution, there is healthy competition by having teams compete in achieving key performance indicators. Minimizing friendly competition minimizes the growth of franchise, shareholder return on investment, and performance based incentive payout to employees.
Maintain effective coaching climate
Means objective: Managers and leaders need to treat coaching as a necessary part of their job function. Coaching should not be used as a performance management tool alone, but it should be used to develop employees and establish high impact teams.
Alternatives
Alternatives are solutions that can be adopted to the defined problems. Corresponding alternatives for the identified objectives for Capital One Bank are — Who can help Capital One Bank achieve brand leadership? How can a winning mindset be adopted and communicated as part of corporate values of Excellence? How can coaching be improved in such a way to improve overall employee productivity and engagement? Who can help Capital One Bank achieve brand leadership differs from the other alternatives because it focuses on accountability with achieving the decision problem. How can a winning mindset be adopted given the existing culture differs from other alternatives because this option focuses on creating paradigms within Capital One Bank to encourage healthy competition. How can coaching be improved in such a way to improve overall employee productivity and engagement differs from the other alternatives because it focuses on tactical solutions to improve shareholder value, employee engagement and satisfaction, and customer service.
Consequence Table Analytics
This consequence table has values of 1 to 5 where 1 is worst, 2 is better, 3 is good, 4 is best, 5 is excellent. The formula for converting values to proportional scores is 100* (actual value-lowest value) / (highest value-lowest value) where the values fall within range of 0 to 100. Proportional scoring compares objectives with varying measures. The alternatives 1) brand equity 2) competition, 3) improved behaviors were derived from the means objectives to support the fundamental objectives. The alternatives represent options or solutions for the defined decision problem. The corresponding values attributed to the alternatives reflect how closely, from experience, each alternative will help achieve the desired objective.
For Brand Equity-Achieving Brand Leadership-100*(5-3)/ (5-3) = 100
For Brand Equity-Adopting Winning Mindset- 100*(3-3)/ (5-3) = 0
For Brand Equity-Maintain Effective Coaching Climate- 100*(4-4)/ (5-4) =0
For Competition-Achieving Brand Leadership-100*(4-4)/ (5-4) = 0
For Competition-Adopting Winning Mindset-100*(5-4)/ (5-4)= 100
For Competition-Maintain Effective Coaching Climate-100*(4-4)/ (5-4)= 0
For Improved Behavior-Achieving Brand Leadership-100*(4-4)/ (5-4) = 0
For Improved Behavior-Adopting Winning Mindset-100*(4-4)/ (5-4) = 0
For Improved Behavior-Maintaining Effective Coaching Climate-100*(5-4)/ (5-4) = 100
Proportional Scored Consequence Table Analytics
Weighted Score Model Analytics
The information above is enough to decide on the course of action to meet the decision problem. Accordingly, Capital One Bank would benefit to concurrently focus its resources on 1) establishing brand equity or identity and 2) maintaining an effective coaching climate in order to solve the decision problem.
Decision Tree Analytics
Uncertainty
The uncertainty with Capital One Bank pursuing the brand leadership model arises from its hierarchy structure. From experience, senior most leaders do not listen to advice from front-line managers or local leaders. In addition, there have been instances where great ideas were overlooked due to politics. Capital One Bank is not decentralized. Major strategic changes come down from senior-most leaders to front-line managers. Unfortunately, there is infrequent follow through to ensure flawless execution of strategy. One uncertainty that arises with achieving the payoffs include managers not leading from the front and embracing the change. Adopting a winning mindset can occur through managers creating a climate for this to occur.
Implementation Plan
Solving the decision problem depends on 1) Capital One Bank admitting there is an identity problem 2) Capital One Bank following a strategy to achieve brand leadership, instituting a paradigm shift where employees adopt a winning mindset, and maintaining effective coaching with the goal of improved employee engagement and increased productivity and 3) Capital One Bank desiring to win by focused execution.
Below is a practical action plan for Capital One Bank, highlighting the opportunity, providing ideas and suggestions for seizing the opportunity, and ways to monitor business impact.
Alternative: Focus on Brand Equity
Opportunity: The key to achieving brand equity is identity. Capital One Bank has the opportunity to shape and reshape its identity to shareholders, customers, and employees.
Approach: Senior leaders at Capital One would be responsible for resource allocations and creating a custom strategy to be executed locally and nationally. Capital One Bank needs its own brand management.
Control: It is important to correlate achieving brand equity to the amount of new profitable clients acquired for the bank. How to measure this? One way introduced is to use the customer life value approach to measuring ROI on marketing campaigns.
Alternative: Foster healthy internal competition
Opportunity: Capital One Bank has a huge opportunity to improve productivity and employee engagement by implementing meaningful performance based competition among teams. Local managers can be accountable for implementing this approach.
Approach: Capital One Bank can use the dashboard of performance to allow teams to compete based on sales, operations, and service. In addition, employee engagement is directly related to employee productivity. To engage employees to do more than what their role calls for, Capital One Bank needs to make doing the basics easier for employees. One way this can be achieved is creating a sharepoint site, for example, that employees in retail and middle market can reference that educates, enables, and eases doing their job, so the focus can be on building relationships, profiling, referring, scheduling appointments, and sales.
Control: Voice of the Associate annual surveys is a strong way to monitor and measure employee engagement with meeting the company’s grand strategies for growth.
Alternative: Focus on High Impact Behaviors across enterprise
Opportunity: Capital One Bank human capital is a valuable resource. Yet, the quality of employee skills in local distribution is average. Many employees in local distribution just follow meetings-in-a-box and read internal posts on information. There is little innovation.
Approach: To achieve high impact behaviors for local distribution employees, a teaching climate needs to be instilled primarily by local distribution leaders (Regional Executives and District Managers). In addition, the old saying “no need to reinvent the wheel” needs to be given up. To create and sustain a high impact behavior culture, a climate that encourages new ideas to existing challenges and that celebrates creative solutions to existing and new problems needs to be fostered. Further, documented coaching needs to occur. Incorporating coaching into performance management for leaders will directly influence the volume of coaching sessions.
Control: To drive employee engagement, a mix of mystery shops, customer service surveys with questions that ask specific questions on experience, products, and services, and sales per banker per customer session, in the short-term, a good suite of control metrics to use to measure the execution of high impact behaviors.
Conclusion
This exhaustive analysis examined a decision problem of Capital One Bank, which is how to achieve brand leadership? Objectives of the decision problem included 1) achieving brand leadership 2) adopting a winning mindset and 3) maintaining an effective coaching climate. Alternatives were analyzed to achieve the desired objectives. Consequences, tradeoffs, payoff, expected value were all examined related to objectives and alternatives. Lastly, a pragmatic action plan for Capital One Bank was introduced, highlighting opportunities, approaches and controlling methods.
References:
Joachimsthaler. E. (2012). Retrieved December 15, 2012 from, http://www.quisic.com/cgi-bin/ic/ic_article_display.pl?nav=2&channel_id=4&content_id=50
Kopeikina, L. (2005). The Right Decision Every Time: How to Reach Perfect Clarity on Tough Decisions. Upper Saddle, NJ: Pearson Prentice Hall
Kimble Lewis & Company 