Organisational Theory and Practice Credit Suisse Case Study Assessment Answer

Introduction

Credit Suisse is a worldwide investment bank and financial facilities company founded in Switzerland. It intends to maintain offices in all main financial centres across the world and offers services in private banking, investment banking, shared services and asset administration. It was founded in 1856 to finance the development of the rail systems of Switzerland (Zhang and Huang 2023). It advance loans that assisted in creating the electrical grid of Switzerland and the European rail structure. The CEO of the company is Ulrich Korner, Axel Lehmann is the Chairman and Francesca McDonagh is the COO.

Moreover, Credit Suisse is a well-known financial institution that provides a wide array of financial services to clients. However, it has encountered its fair share of challenges, one of which was bankruptcy. The bankruptcy of Credit Suisse Bank is a notable event that has influenced the financial sector and the clients of the bank (Ozili 2023). The main purpose of this research is to analyze the managerial style followed in the bank, the leadership style of its CEO, the motivational strategies followed and its culture and structure and suggest some recommendations to improve its performance.

The Managerial Style followed by Credit Suisse

The bankruptcy of Credit Suisse was caused by the involvement of its management in highly risky investments that resulted in substantial losses. This signifies that the CEO of Credit Suisse followed the autocratic style of management. This managerial style follows the top-down approach, with one-way communication from top management to employees (Dinesen 2020). The CEO has made all the decisions without actually consulting with the group. With autocratic leadership, fewer levels of administration are kept informed of every decision. This enables fast decisions. At times, the finest ideas arrive from group debates. One suggestion flow into the next until it is sophisticated into an adequate course of action (Hogg 2021). Autocrats do not get to advantage from such kinds of breakthroughs. These leaders undertake decisions autonomously which indicates that they risk sendoff great thoughts on the table. One of the major factors that contributed towards the bankruptcy of Credit Suisse was inappropriate risk management procedures. Risk management is regarded as the procedure of determining, evaluating, and governing legal, financial, security and planned risks to the capital and income of the company (Turgaeva et al. 2020). The management of the bank failed to determine and manage risk linked to high-risk investment, leading to substantial losses. The CEO of Credit Suisse lacked adequate risk management protocols which made it vulnerable towards investment risks.

The management of the bank made various questionable investment decisions that were not in the best interest of the clients or the bank. Such a decision directed the losses amounting to billions of dollars that substantially influenced the financial stability of the bank. One of the substantial investments that directed to its bankruptcy was the Archegos Capital Management scandal (Dahlquist et al. 2022). Archegos Capital was a hedge fund that borrowed billions of dollars from numerous banks to make investments in greatly volatile stocks. Credit Suisse was one of the banking firms that lent money to hedge funds. However, when the worth of its stock plummeted, Archegos could not make repayment of its loans, resulting in substantial losses for banks.

The insolvency of Credit Suisse had a substantial impact on clients. They suffered losses because of their investments in funds of banks that were impacted by the bankruptcy of the bank. Clients lost their funds, and few were not able to access their funds, resulting in a loss of confidence in the bank. As an outcome of this, UBS took over Credit Suisse in a deal orchestrated by the Swiss government, followed by the collapse in confidence at the lender that threatened to trigger a wider financial crisis (Swifte 2023).

Current Structure and Culture of the Organization

Organizational structure is regarded as the group of roles, rules, responsibilities and relationships that highlight how the activities of the company are directed to fulfil its objectives (Kondalkar 2020). Credit Suisse follows a divisional organizational structure wherein divisions of the company have control over their resources, specifically operating like their company within the huge corporation. This type of structure works well for huge companies as it encourages various divisions to make decisions without reporting to everyone. The company is organized into 4 divisions – Investment bank, wealth management, asset management and Swiss bank. In addition, it also has 4 geographic regions – Europe, Switzerland, Asia Pacific and Americas and the Middle East and Africa (Credit Suisse 2023). The regions intend to have the accountability for their market existence, coverage and client directing strategy to drive cross-division teamwork and strengthen the legal entity administration oversight and supervisory associations at the locally aligned level. This structure helps Credit Suisse in promoting independence and autonomy. However, it led to duplication of resources and there seems to be insufficient communication among the headquarters and its divisions.

Organizational culture is considered as the assortment of expectations, morals and practices that act as guide and notify the actions of all the team associates. The culture of the company encourages risk-taking and innovation (Asatiani et al. 2021). They trust their personnel to arrive with innovative and brilliant ideas. It places efforts and attention to detail when it arrives to designing new products or policies for personnel to build a positive culture. However, the major issue for Credit Suisse in relation to organizational culture is adapting to the culture of host nations when they extend their processes to new sites.

Both administrative culture and structure have dependent relationships with each other. Management structure constitutes to determine the attitudes, behaviours, morals and dispositions that produce work culture. As the administrative structure is hierarchical in the case of Credit Suisse, with decision-making power centralized at the top, the culture of the company has greatly reflected a lack of autonomy and freedom (Credit Suisse 2023).

CEO aids in succeeding in the transformation by collaborating its consequence, modelling the anticipated changes, establishing a robust top team and getting personally engaged (Men et al. 2020). The management of Credit Suisse has not designed and maintained any effective culture to acquire the support of all its employees. It is believed that the right culture formed by CEO can enhance the day-to-day interactions of employees and may aid in creating a smoother and highly streamlined workplace. However, such a bad environment at Credit Suisse adversely impacts the employees by making them feel disengaged and demoralized.

Entrepreneurial Strategy and Corporate Governance Policies

Entrepreneurial strategy act as the means through which the firm creates and re-establishes the primary set of associations with its setting. It is the strategy featured by the extensive and more or less concurrent change in the outline of decisions undertaken by the firm (Chiagozie et al. 2022). The CEO of Credit Suisse has formed a strategy based on the strengths of the company. The strategy is grounded on a long-term vision and focuses on the combined model, with a well-framed 3-year plan, making investments in supportable growth across businesses of Credit Suisse, while putting risk administration and culture that strengthens the significance of personal answerability and accountability at the core.

Corporate governance is regarded as how corporations are administered. It is the system of practices, rules and procedures that the company uses to direct the company towards accomplishing its inclusive goals. The corporation followed the Anglo-US model which is more of the shareholder-oriented model. The company is majorly run by executives having insignificant ownership risks and directors are infrequently autonomous of management (Aureli et al. 2020).

The corporate governance at Credit Suisse regulates the relationship between its shareholders, executive board and board of directors. Its corporate governance procedures and policies are laid out in a series of documents governing the management and organization of Credit Suisse (Credit Suisse 2023). The Board of Directors has acquired a set of corporate governance guidelines aimed at promoting and explaining the understanding of corporate structure. Its substantial corporate governance documents include organizational regulations and guidelines, articles of association, the charter of the board of directors, and a code of conduct.

The bank aims at driving justifiable growth and economic profit driven by 3 major pillars –

1. Strengthening the core – by everchanging capital to value-creating industries and exiting non-core businesses and markets.
2. Simplifying operational model with united, worldwide wealth management dissection, worldwide investment bank and central processes and technology function, pouring organizational cost discipline to finance the planned investments (Credit Suisse 2023).
3. Investing for progress in businesses, clients, technology and talent where it believes it has a sustainable competitive edge.

However, the Archegos Capital issues revealed substantial risk management failures at Credit Suisse that materialized in a loss in 2021. The deficiencies in risk management in the company's asset management business are directed to the additional regulatory capital requirements. The current period seems challenging for Credit Suisse Group from the perspective of governance and risk management.

Leadership Style of the CEO of Credit Suisse

Leadership is the art of inspiring individuals to work and emphasis towards the deliberate objective. Also, it inspires them to take up responsibilities and cultivate both professionally and personally. In any business, leadership act as the crucial management function that makes sure about the improved efficiency and accomplishment of business goals. Competent leadership offers clarity of purpose and directs the company towards its mission. Leadership style is the reflection of the behavioural pattern of leaders that allows them to manage the employees by motivating and directing them towards the shared mission (Alblooshi et al. 2021). It also recognizes the approach of the leader to strategize and execute methods while meeting the business expectations and laying focus on the growth of the overall team. Transformational leadership is considered the leadership approach that causes a change in social systems and individuals. Using this approach, the executives tend to give trusted employees, the power to take decisions and support new problem-solving tactics (Schiuma et al. 2022). Koerner is a transformative and experienced leader with excellent judgement and has depicted to the board of directors that he completely understands the urgency of the task and the requirement to rebuild trust (Press Release 2021). He is a robust leader and planned thinker with recognized ability in profitable growth and business progress in asset administration, as well as in corporate transformation. The CEO aims to reinforce its world-class worldwide wealth management franchise, directing universal bank in Switzerland and multi-specialist asset administration business.

While he is highly responsive to concerns and issues as they arise, he is more proactive in encouraging new approaches and ideas on an ongoing basis. He focuses on long-term and aspirational objectives that are tough to quantify. However, transformational leaders place more traditional, quantifiable objectives. He aims at transforming the investment bank into a capital-light, advisory-led banking firm and more emphasized markets business that balances the development of wealth administration and Swiss bank contracts (Press Release 2022). Having an idea for the future project aids all associates of the firm understand its worth, which can enhance inspiration and encourage obligation. However, as here in the case of Credit Suisse, CEO lay emphasis on the long-term goals of the project. It might emphasis less on accomplishing short-term goals. It indicates that the tactic might be less organized in how it operates towards long-term objectives. Though it allows for suppleness with how players move towards goals, leaders might require to stabilize their focus using supervision tactics in amalgamation with transformational headship.

Various Forms of Motivation Strategies

Motivation is the level of drive, energy and commitment that the workforce of the company brings to the role every day. In the absence of motivation, corporations experience reduced productivity, and a lower degree of output and the corporation will probably fall short of reaching those all significant goals (Loor-Zambrano et al. 2022).

Credit Suisse strongly believes that making investments in its personnel is vital towards accomplishing its strategic objectives and making delivery of higher value to its clients. It follows a comprehensive approach towards the development of employees that includes various major elements. These include –

1. Performance management – Credit Suisse follows a performance management process that lay emphasis on establishing clear performance objectives, offering regular feedback and coaching personnel to aid them in developing their skills and achieving their objectives (Michalik 2023).
2. Learning and development – The company provide a wide arrange of learning and development programs to aid personnel in building knowledge and skills in areas like technical skills, leadership and personal development. These programs cover classroom-based training, on-the-job learning opportunities and e-learning courses.
3. Talent management – Credit Suisse has a talent management process that determines highly potential employees and offers them targeted development prospects, including mentoring and exposure to senior leaders (Sharma and Shukla 2020).
4. Career development – The company has a career development framework that aids employees in planning and managing their careers. This framework includes resources and tools to aid employees in identifying their interests, strengths, and career goals as well as guidance on job rotations, career paths and promotion opportunities.

These strategies act as a helpful instrument in the hands of management in attracting and retaining the workforce. It raises the willingness of workers to work, thereby, raising the effectiveness of the company. Motivated personnel are persuaded to be highly productive as compared to non-motivated personnel. Unmotivated personnel are probable to devote little or very fewer effort in their occupations, evade the workplace as much as likely, leave the company in the case provided the opportunity and generate lower-quality work. Whereas, personnel who feel inspired to work are probable to be determined, productive and creative, revolving out high-quality work that they eagerly undertake. It is substantial to involve personnel in the process of decision-making but create accurate outlooks in the procedure.

Corporate Instances and Literature Review

Credit Suisse, the 2^nd major bank in Switzerland, distorted in March 2023 and was bought by the rival firm UBS for 3 billion. The bank has encountered various dishonors in current years, including eavesdropping scandals, the failure of 2 investment funds wherein the bank was largely engaged and the revolving group of executives (Bou-Daher 2023). In 2021, in the mid of the outbreak, the collapse of US family asset fund Archegos Capital and British finance company Greensill Capital activated a pretax loss of close to $1 billion for Credit Suisse (The Economic Times 2023). Following the failure of Archegos, the CEO and Chief risk and compliance officer of Credit Suisse investment bank left the corporation. The independent research on the role of Credit Suisse in the Archegos scandal recognized that the bank had been unsuccessful to competently manage the risk. After a few months, in 2022, Chairman Antonio-Osorio reconciled from the board of the bank after 9 months in designation over the scandal in relation to the breaking of Swiss and British COVID-19 quarantine procedures. By late summer 2022, new CEO Ulrich Koerner revealed the tactical review that was delayed by the unconfirmed rumour that Credit Suisse was encountering an imminent failure. The impact of the takeover of Credit Suisse by UBS is broad (Johnson 2023). For the offices of banks across the ecosphere and its 50000 personnel, the future stays uncertain, as UBS could engross few or all of them and lay off others.

Recommendations

As the outcome of the inability of Credit Suisse to adapt to the new normal and retain top talent, the operations of Credit Suisse suffered. By failing to adopt changing nature of work, Credit Suisse missed out on the opportunities to collaborate, innovate and stay competitive. Its collapse had a ripple impact on the financial industry and served as a cautionary tale for other companies. The demise of the bank acted as a wake-up call for leaders globally, laying focus on the significance of embracing change and prioritizing the well-being of employees.

The acquisition of Credit Suisse by UBS outlines the stark contrast between the corporation that understood the necessity of change and one that remained clung to outdated practices (Hauf and Posth 2023). To improve the organisational performance of the company, the following measures can be taken -

1. Prioritize employee wellness – The wellness of personnel must be at the forefront of any corporate decision. Leaders should consider the impact of their decision on the satisfaction of personnel, mental health, and work-life balance, as such factors straightly influence the productivity and overall performance of the company.
2. Communication and engagement – Open communication and continuous engagement with stakeholders are vital towards gaining an understanding of their requirements and preferences. By fostering transparent dialogue, Credit Suisse can undertake informed decisions on work arrangements that best suit its business goals and workforce (Ruoslahti 2020).
3. Regularly reassess and adapt – The nature of work is continuously evolving, and Credit Suisse must constantly re-evaluate its work arrangements and policies to make sure that they stay effective and relevant. By remaining agile and receptive towards change, the company can maintain its competitive edge and cultivate a resilient workforce.
4. Make an investment in infrastructure and technology – Supporting the hybrid and remote work culture needs a robust technological infrastructure and adequate tools to make sure of seamless collaboration and communication among the members of the team (Saatci et al. 2019). Credit Suisse should make investments in essential systems to facilitate a new way of working.

Conclusion

It can be concluded that there were some material weaknesses in the inner controls over the financial reporting of the company. The reporting weaknesses arrive as Credit Suisse is looking at a string of scandals that have undermined the trust of clients and investors. The bankruptcy was caused by various factors in Credit Suisse, including the involvement of banks in highly risky investments, inappropriate risk management procedures, and regulatory and legal issues. This impacted the clients of the bank. The bankruptcy of banks outlines the significance of adequate risk management procedures and the requirement for financial institutions to prioritize the interest of clients.

The failure of Credit Suisse serves as a stark prompt of the significance of adaptability and responsiveness in the business world of today. By embracing hybrid work and prioritizing the well-being of employees, the corporation can evade the downfalls of stationary culture and position itself for victory in the ever-changing nature of work. Failure to adopt might not just direct to the loss of top talent and declined productivity but can also result in highly serious consequences, as can be looked with the demise of Credit Suisse.

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