The organization structure design of Banks in the UK: before and after the great recession?

The organization structure design of Banks in the UK: before and after the great recession?

Chapter 1: Introduction

1.1 Background information:

With the increasing importance of project on economic development, project management has become more complex in the actual business world. In order to maintain the market share and improve performance, the company have to design an appropriate organisation structure for facing keen competition, and prevent failure in the financial crisis. Organisational structure has become one of the most important factors in project management. Many types of research and studies have paid more attention to organisation structure design of project management and explored the factors of effect on project performance in various fields.

The history of organisation structure is originated from ancient time, the organisation structure was considered as a matter of choice. Until the 1960s, According to Mohr (1983), organisation structure can be seen as a phenomenon, not an artefact. Lim, Griffiths, and Sambrook (2010) holds the same statement and propose that several factors are able to effect on organisation structure, such as strategies and behaviour of the management, or environment and team members.

According to Mintzberg (1979), organisation structure can be defined that the labour was divided into distinct tasks by organisation, and then achieves co-ordination amongst them. There are many types of organisation structures within project management, According to the paper of Lechler and Dvir (2010), organisational structures can be divided into bureaucratic structure, functional structure, divisional structure and matrix structure. The organisation structure that was firstly mentioned is based on product or function. (Oliveira & Takahashi, 2012). And then Kuprebas (2003) reveals that the matrix structure crossed these two ways of organising, and it has become more popular in project management in order to adapt rapid development of economy and market, it has many advantages to improve the project performance. The bureaucratic structure usually has strict hierarchical, and it is very organized with a high degree of formality. The functional structure is divided into smaller groups due to their different functions, and it pays more attention to the efficiency of the work. Moreover, the divisional organisation structure that includes many different separate groups that are contains all necessary functions and resources. Each structure could bring different influences to project management. Therefore, the organisation should choose the appropriate structure by considering the actual situation; it should include all external and internal factors about the corporation. However, the project team might break down, and the project might fail if without an appropriate organisation structure. (Tsung-Hsien and Yen-Lin 2010).

The U.S. housing bubble occurred in 2007 and reached a peak. And then the sub-prime crisis break out in the U.S., the funding strand breaks, and more and more banks go bankrupt. Many countries were affected by these sub-prime problems, the national financial systems were damaged in different parts of the world and then the financial crisis arise. (Moshirian, 2011). The Global Financial Crisis (GFC) can be seen as the worst financial crisis since the Great Depression of the 1930s. The International Monetary Fund (IMF) refer it as ‘‘the Great Recession.” The great recession brings negative effects on the economy of UK, especially on banks in the UK.  For example, the market value of Barclay’s has a large decline, decrease from 17.4 billion pounds to 7.4 billion pounds. More specifically, there are many factors contribute to the financial crisis in 2008 and 2009, such as Macroeconomic issues, unhealthy financial market and regulatory and policy failures. The cause of the financial crisis and the effect on the economy in The United Kingdom will be analysed in the literature review. Due to the unhealthy economic environment, the government wants to improve the economic situation and decrease the risk from the great recession. Thus it takes some actions to rescue their banks and economy, the organisation structure of bank was changed during the financial meltdown.

The importance of organisation structure has been proved and mentioned in existing literature. An increasing number of people to pay attention to whether an appropriate organisation structure is able to optimise the project performance and promote the project success. But, the specific filed of organisation structure have not analysed deeply. It is worthy to discuss and analysis the organisation structure design in the banks of The United Kingdom before and after the great recession.

1.2 Aim and Objectives:

The aim of this thesis is main focus on the effects of organisation structure design on project performance. It goes without saying the importance of organisation structure, which is able to influence the project results. Using the organisation structure of banks as the case study to prove the hypothesis that an appropriate structure is essential for optimum the project performance, and whether it is able to help banks to prevent the financial problems and crisis. In this dissertation, all the contents will pay more attention to the importance of organisation structure; the relevant reference value will be offered to further research. To achieve aim of this research, it contains following objectives below:

  1. To introduce the basic concept of organisation structure, and then to Carry out deeply research to argue whether the organisation structure design has a close relationship with project performance.
  2. To analyse the organisation structure of banks in the United Kingdom before and after the financial crisis. The effect of organisation structure design and their strategies on UK’s banks will be demonstrated. The case studies will make this paper more convinced.
  3. To figure out what are the extra factors are related to effects on the success of project before and after the financial crisis. And this objective will be achieved by the conclusion and critical review of the related literature.
  4. To conclude the way of adjusting organisational structure designs with the change in project management, and also search for the method of choosing correct organisation within project management filed.

1.3 Hypothesis:

The hypothesis of this paper is that an appropriate organisation structure design is able to improve the project performance and help the UK’s bank to get through the financial problems.

1.4 The Scope and limitation

The scope of this thesis will focus on the effects of organisation structure design for project management.  To make this research more convincing, the organisation structure of banks in the United Kingdom before and after the financial crisis will be used as case study to prove that an appropriate organisation structure can optimum project management. There is no doubt that the financial crisis has brought huge impacted to the economy of UK, the UK’s banks has large denomination shrunk and heavily indebted. At the same time, the British accuracy was devaluation and the British Corporate’s profits were decreased rapidly during the financial crisis, and then the British companies have become more difficult to survive. Such as the British Supermarket- Mark Spencer, which announced the closure of 25 retail stores. Due to those facts, this thesis will develop to gather the information about ‘’ The Great Recession’’ and impacts on the banks in the UK, and then to analyse the changes in the organisation structure of the banks in the UK before and after the financial crisis. It also will select two banks to prove the hypothesis, the one describes the history and concept of Baring banks before the financial crisis, another is analysed the changes and adjustments of Royal Bank of Scotland (RBS) after the Great Recession.

There is also some limitation exist on this thesis. Firstly, it is difficulties to collecting the appropriate data information about the Great Recession. This is due to the fact that a large number of data only can search from the economic newspaper, which without an accurate date for the financial crisis. Therefore, the reliability and accuracy of the data might be a problem with this research. Secondly, selecting two banks in the UK as a case study, the sample size is such small to represent and prove the hypothesis. Thus, it cannot present the whole bank industry in the UK, it will lack any support to prove the hypothesis. Finally, the research is mainly focused on the effects of organisation structure within project management; it will ignore effects of some other extra factors on project performance.

1.5 Overview of contents:

Chapter 2 Methodology:

The methodology of this paper will include key words and references of this dissertation field, search engines for the references, the process of collecting information, method and choice of methodology and its limitations.

Chapter 3 Organisation structure in Project management

This chapter will pay attention to introducing the entire organisation structure. Firstly, the concepts of organisation structure and project management will be discussed. And then, the four types of organisation structures and their own features will be mentioned.

Chapter 4 the organisation structure of Banks in UK before the financial crises

This chapter will focus on the organisation structure of Banks in the UK. It will divide into two period intervals to analyse the organisation structure: before the financial crisis and after the great recession. Firstly, the background of the organisation structure of banks in the UK will be mentioned at the beginning of this chapter. It make readers to learn the history of UK’s bank structure and then to analyse the organisation structure of banks in the United Kingdom before the financial crisis, it will provide unique background to analyse the organisation structure design. The organisation structure and strategies of Baring banks will be used as a case study to analyse the effects of their structure and strategies on the project performance.

Chapter 5: Organisation structure design of UK’S Banks after the great recession

This chapter will state the organisation structures of Banks in the UK after the financial meltdown. This chapter will compare that how the organisation structure of Banks in the United Kingdom changed through the financial crisis. The relationship between organisation structure and financial meltdown can be concluded. And also it will introduce the strategies and organisation structure of Royal Bank of Scotland in detailed in order to reveal the changes and adjustments of Royal Bank of Scotland after the financial crisis.

Chapter 6: Causes and Effect of the Great Recession

This chapter will introduce the causes and effects of the Great Recession on the UK’s Economy and their bank. In terms of causes of the financial crisis, it will explore some factors which contribute to the financial crisis. At the same time, it also will clearly to explore the effects of the financial meltdown on the UK.

Chapter 7 Conclusion

In conclusion chapter, it summarises all the research results about organisation structures on project management. The importance of organisation structures on projects is proved. Meanwhile, the factors that influence the type of organisational structure are listed.


This chapter introduces the background, the aim and objective of this research. At the same time, the hypothesis, the scope and limitation and overviews of content were described as well. The aim of this chapter is to help the reader has a “big picture” for this paper, which is able to make reading more easily. The next chapter will describe the “methodology”, which includes research method, search engines and some key words related to the topic of the thesis. It is useful to have a clearly understanding on aim and objective for the reader.











Chapter 2: Methodology:

2.1 Introduction:

This Methodology chapter will analyse the methods that used in this research. “Methodology” can be seen as a way of finding and solving the problems of research. (Industrial Research Institute, 2010). It means that research methodology is a systematic way to address the problems but it should have correct research strategies used in different research. There are many research methods can be applied to study, such as the qualitative analyse method and quantitative analyse methods. These two analyse methods also have their own strengths and weaknesses, using the integration qualitative method and quantitative method might be better for this research. This is because that mixing these two analyse methods is able to help researcher get a clear understanding for their study, and share the same goal to prove the hypothesis and assumption of this paper.

With the aim to have a comprehensive understanding of the relationship between organisation structure and project performance, the literature review and case study will be used to this paper. Using the literature review is able to critically summarise the current knowledge about organisation structure, and help the researcher to identify the strengths and weaknesses of the previous study. In addition, the finding from literature review can relate to essential information and support objective knowledge, and then improve the investigation.

On the other hand, the case study about the organisation structure of banks in the UK will make this thesis more convincing. The background about the organisation structure and the financial crisis be explicitly stipulated in this thesis, the two case studies is able to make the research topic specific and unique, the reader might feel safe with regard to data and statistics. (Wisker, 2007) Therefore, the adoption of theoretical basis and case studies will make the dissertation professional and forceful.

Moreover, this chapter also includes any section to explain how the research conducts their work. It will describe the entire description and explanation about process of research in order to get the same result when another replicates the work. The sources and key words, search engine, limitation of methodology and key references will be mentioned.

2.2 Research Design:

The mission of research design is to ensure the evidence gained are able to address the initial questions. The research design can be seen as the overall strategy of the research, it describes a set of guidelines as a theoretical paradigms to obtain the information, which it consists of data collection, measurement and analysis (Yin, 1994). It deals with the logical problem rather than the logistical problem. (Yin, 1984). Every research needs a rational structure for obtaining the necessary data and information. In the beginning, the researcher are struggled about the title of this study, and then narrow the title and make the research unique and specific, and finally confirm the working title “the organisation structure design of banks in the UK: before and after the great recession”.

The data collection is needed when the title was confirmed. The key words and sources will focus on the central topic, such as organisation structure and great recession; it will be illustrated in section 2.3. The google scholar and Ethos British Library will be used as research engine to collect the information and related literature (further discussed in section 2.4). It will observe the literature reviews directly, and case studies will be used as well. According to Bell (1999) states that case studies offer an opportunity to help an individual researcher to analyse the problem in deeply.

2.3 Sources and Key Words:

Appropriate key words and phrases can be effective in collecting useful and relevant information. This thesis will focus on the effects of organisation structure design on project performance. The literature review and case study will be applied to this study. In terms of literature review, there are many academic papers to describe the concepts and theoretical basis about organisation structure. There are several key words are included in this research: organisation structure, project performance, banks in the UK, and the great recession. “Organisation structure” is the main aspect in this research, which is used to collect information and academic paper. Besides, the related word, such as organisation strategy is also used to collect references.

The mission of this paper is to explore the importance of appropriate organisation structure, and the relationship between the organisation structure and project performance. Therefore, “project performance” will be applied to the second key word to research; it is also able to research the peer-reviewed articles and related information. The project performance and its influences will depend on the use of the organisation structure under the project management. The related words, such as “influence and effect” also can be used to research the literature.

Meanwhile, this thesis will use the organisation structure design of UK’s Banks as a case study. Therefore, “the banks in the UK” will be treated as the choice of specific direction. This is because that there are many papers describe the organisation structure, but in order to make this research more specific and unique, the thesis is based on the hypothesis that an appropriate organisation structure had the positive effect on the UK’S banks when the financial problems occurred. ‘’The banks in the UK’’ is essential for searching the relative academic paper.

Finally, “the great recession” can be seen as the specific background for this study. Some related words are also can be used, for example “financial crisis”. The publication date of the journal also needed to narrow to obtain the information. Since the aim of this dissertation is to explore the relationship between organisation structure and project performance, the background of the case study will also use to search the literature.

2.4 Methods:

The resource of the library of the University of Manchester, Google Scholar and Ethos British Library Website will be used as the main search engines to select journal and articles, and identify the relevant information. Making good use of library resources can be more convenient in effectively collect relevant peer-reviewed articles. Google Scholar has won the popularity in the world, which is another way to collecting useful information for this research. It provides professional articles and convincing viewpoints on all filed. Ethos British Library Website is also helpful to collect the relative data for this study. For example, the relevant information about the case study of UK’s banks was chosen from Ethos Website. More specially, the key words were combined into different groups for searching the information. For example, “organisation structure” and “banks in the UK” could be connected to search, “banks in the UK” and “the great recession” is also can be linked to find the literature. Furthermore, the references were restricted in the Peer-reviewed article to make sure that the literature are reliable. When it comes to the great recession, the financial newspaper and website is essential to utilize in order to gain the financial information. However, many information was not appropriate for this research during the research procedure.

2.5 Data collection:

Data collection can be seen a process of gaining and measuring information on research, and also it has played a vital role during the research. It means that the accurate data collection is necessary for research. The data can be intangible or tangible, which is able to generate or collect from literature reviews, observation and interviews. This research decides to observe the literature reviews to gathering the secondary data, and select two case studies to gain primary data. It will help the research improves the quality evidence of information, and then enhance the effectively on the process of data analysis. And finally, it will make the observation more convincing and reliable.


2.6 Choice of the methodology: Qualitative and quantitative method

The aim of this paper is to analyse the influence of an appropriate organisation structure on project performance and whether is able to help banks prevent the financial problems. Regarding to the aim of this thesis, it selects the mixed qualitative and quantitative methods in this paper. An increasing number of people and researchers are discussing the integration of qualitative and quantitative methods (Östlund et al., 2011). Mixing these two analysis methods has excited much interest and debate. (e.g., Greene & Caracelli, 1997a; Sandelowski,1995; Swanson, 1992; Tashakkori & Teddlie,1998).This is because of the fact that the qualitative and quantitative are correlative dependence with each other (Niglas, 2000; Thomas, 2013).

The use of qualitative and quantitative method has played an important role in product development, these types of methods are both useful for this research. Qualitative method is one of social science method in order to analyse subjective understanding and qualitative analyse, which is based on the vest range of literature reviews.  For this paper, it can use this method to research the literature about the relationship between organisation structure and project performance, such as gain the information from the peer-reviewed article or empirical research. Quantitative analysis method is a way to collect accurate data and then conduct statistical analysis and testing of the research process, and the data and measurement always rely on the questionnaire, surveys. According to Nock and Marsh (1983), quantitative method may provide adequate information and explanations. The quantitative method will be used to analyse the data and financial information about the two case studies from the banks in The United Kingdom, it will be further explored in the Section 2.5.4.

However, these both type analyse methods are also exist some weaknesses. For example, the qualitative method is time-consuming to collect the relevant information, and it might difficult to make systematic comparison due to the different subjective opinions. Quantitative method, which is a way to reflect the opinion of research rather than interviewee. Therefore, it is necessary to combine these two methods, which is able to make research extremely effective. Morse (1996) asserts that qualitative analysis method is incomplete if without quantitative research. More specially, it can use qualitative analyse method to identify the factors that influence the project performance under research, and then use the quantitative method to collect the figures and relative information from company’s annual report in order to assess how these factors would effect on project performance, it will increase the reliability of this research. Moreover, according to (Sandelowski, 2000), Mixed-method research can be used to expand the scope and to improve the analytic power of research. This is because that the mixed- method is able to combine the data collect and analyse techniques. Therefore, this paper will combine these two methods to conduct the research.

2.7 Key references:

The key references of this paper mainly rely on a book, which is written by Mintzberg (1983), the “Structure in Fives: designing effective organisation”, which provides the “big picture” about the organisation structure. It describes the concept of organisation structure and how to design the effective organisation, and the Chapter 6 of that book is analyse the various situation factors into the structure design, which is useful for further research. Meanwhile, many kinds of literatures and journals are based on the knowledge of “Structure in Fives”. In addition, according to Lechler and Dvir (2010), who write a paper named ‘An Alternative Taxonomy of Project Management Structures: Linking Project Management Structures and Project Success’ to introduce the basic concept of organisation structure, and states that organisation structure is able to bring positive influences on the result of project. It is easier to explore the relationship between the organisation structure and project result. So, these two literatures were used as key references.

2.8 Criteria of references:

The criteria of references is a part of the methodology, which was divided into several parts. Firstly, there are many types of resources, which includes books, journal and literature reviews. The references of topic mainly focus on organisation structure and project performances, and it will select from the United Kingdom or Europe. Besides, the language of references will be written by English.

2.9 Limitation:

During the process of finding information and collecting data about this study, there are also exist some limitation. This section will briefly to summarise the limitation and threats to the results. Firstly, this study mainly focuses on the peer-reviewed journals and evaluation. It will be lacking some information from other sources. At the same time, due to the lack of time constrains, some of observation questionnaire and interview cannot be proved and conducted. Thus, the information and data are often not so reliable. Secondly, the sample size is too small, choosing that two UK’s banks could not represent whole bank industry in the UK. This is because that it is difficult to explore the significant relationships form the data due to the smaller sample size. Finally, the perception of the researcher might influence the result of the study.


Chapter 3: Organisation structure in Project management

3.1 Introduction

The review of the current literature shows that the organisational form of any entity determines its profitability and its ability to carry out its function. According to Kloppenborg and Opfer (2002), the project has become more importance on human’s economic activities. An increasing number of people want to find an effective way to improve the project performance and promote project success. Meanwhile, the organisation structure can be seen as an integral part of project management. The organisational structure that is used by financial institutions is important to show how the institutions manage risk and whether the organisation structure enhances or decreases the level of returns for the owners. According to Lechler and Dvir (2010), organisation structure is able to promote the success of project. The literature review has focused on the theory knowledge about the organisation structure, and it also pays attention to understanding the past research on the organisational structure of banks in the United Kingdom before the occurrence of the great recession and after the occurrence of the great recession. There is also the review of the literature that has focused on financial crisis such as the causes and the reforms that have been implemented to ensure that a similar crisis is not witnessed in the future.

3.2 Theories of organisation structure

According to Mintzberg (1983), organisation structure can be defined that the labour was divided into distinct tasks by organisation, and then achieves co-ordination amongst them. All the members have the same goal to achieve within the organisation, and all the works depend on the mission of the project. At the same time, there are many different types of organisation structures within the project management. According to Culpepper and Reinke (2014), the organisation can be divided into two main theories: the centralisation concept and decentralised concept. According to Csaszar (2013), the organisational structure of any institution may be vertical or horizontal. In a vertical structure, the organisation establishes different departments that implement different functions and have a clear chain of command. The vertical structure is also referred as a centralised organisational structure. There is also a horizontal structure where every employee is allowed to make a decision on their place of work. The horizontal structure creates a hierarchy that is flatter and highlight decentralised. According to Culpepper and Reinke (2014), the centralisation and the decentralisation concepts are the two main theories that explain the organisation structure that is adopted by any organisation

Moreover, Lechler and Dvir (2010) holds the views that there are several types of organisation structures such as bureaucratic structure, functional structure, matrix structure and divisional structure. However, due to the different characteristics of project, the institutions might have different organisation structures within its operation. Thus, the project manager and project board would need to choose an appropriate organisation structure to improve its efficiency and control the risk of project.

3.2.1 The Centralisation concept

Acharya et al. (2009) assert that centralised organisations are defined by the flow of information between the management and the employees of an organisation. In a centralised structure the information flows vertically where consultations between employees or managers of the same level may be non-existent or minimal. According to Desrochers and Fischer (2005) the flow of information in a centralised structure where the division managers spread information in a vertical manner rather than sharing the information with the different division is among the challenges that are associated with the structure. It means that the organisation centralisation might help the project manager to control the project easily. Moreover, the managers of different divisions are not inclined to communicate with other divisions even when the information that is being shared may be important to the other divisions.

The questions on whether the centralised organisation structure design is the best structure has created many divisions among numerous management scholars. Those in support of a centralised structure system have argued the importance of having a clear chain of command in an organisation where all activities are implemented with the view of realising the organisation goals and missions (Rudolph and Schwetzler 2014). However, many researchers hold different views about the centralised organisation structure. This is because the fact that the centralised system creates a bureaucratic system, which might bring the negative effect on the creativity within the team and influence the sharing their ideas during the implementation of project.

One aspect that has been utilised in defining an organisation with a central structure design is the decision making function. In a centralised organisation, there is a hierarchy of authority when the decisions that affect the organisation are made centrally by the members of the entity who have a high authority. According to Suresh, Kumar and Gowda (2010) the benefits of using a centralised structure are realised due to the decision-making function where the decision makers should take responsibility for their decision and their authority are known by others. However, the centralised way of making an organisational decision may also affect the ability to make important decisions in a quick way.

3.2.2 The decentralised concept

On the other hand, a decentralised organisation is characterised by the flow of information in a horizontal manner. Unlike a centralised organisation where there is no sharing between employees and managers of the same level, a decentralised organisation is defined by the flow of information between members in a similar organisation position. According to Culpepper and Reinke (2014), the project manager has low influence over other employees within an entity in centralised organisation structure. They are required to understand the contribution of all members in determining the direction that the organisation should take. The lack of clear authority among the top management has led to the criticism of the decentralised structure as it lacks the implementation of clear goals that may define the direction of an organisation.

Cummins et al. (2004) demonstrate that a decentralised organisation structure design is beneficial to the organisation performance. They explain how the structure enhances the innovation and contribution of all members who are involved in the organisation processes. According to Earle (2009), there is sharing of information between managers of different divisions and a high flow of information in a vertical manner. It means that the efficiency of operation will be improved, and operation of project will be more smoothed. The opinion of Wickesberg (1969) support that views, it asserts that effective communication could make employees coordinate efficiently. The use of a decentralised structure also eliminates the red tapes that are associated with the centralised structure. According to Karabay (2014), there is no relationship between the bureaucracy and a decentralised structure form of an organisation.

In decentralised organisations, there is no clear entity that is tasked with making the decisions that affect the organisation. There is no chain of command where different members are given a different level of authority. There are also some weaknesses to utilise the decentralised organisation structure. For example, Ferris and Yan (2009) hole the view that a decentralised organisation structure may increase the time that is taken in making important decisions. The time taken to consult employee within an entity may slow down the decision making function of the entity. This is because that sharing the information and negotiate between the different divisions will be used a lot of time. According to Fratianni and Marchionne (2013) in a decentralised organisation, there is a high possibility of conflicting decisions being made by different members of an entity. There is no single individual or body that is tasked with the decision making. Another criticism that is offered on the use of decentralised structure is the lack of individuals or bodies that are responsible for the decisions that are made by an entity.

3.3 Four types or organisation structure

3.3.1 Bureaucratic structure

In terms of the history of Bureaucratic structure, which was occurred in ancient time. The government uses it to control the risk of the society and keep the stability. According to Morgan (1996), the term “bureaucracy” refers to a typical organisation that emphasizes the formal hierarchy, rules and centralisation within the project management. At the same time, Mintzberg (1979) holds the view that a bureaucratic organisation structure can be seen as a high degree of centralization, formalization and red tape. Meanwhile, Rainey and Bozeman (2000) have the same opinion with Mintzberg. Centralization can represent the level of authority, and to define which members is able to participate the decision making. According to the Weber (1948), each organisation should have a certain form of authority to control and manage their organisation. This is because that an appropriate level of authority can improve the stability of the organisation. The term “formalization” mainly refer to the display of procedures, regulation and policy manuals within the organisation (Hall, 1996). It means that there are many strict rules in organisation. Turning to the red tape, it concerns the negative effects of these strict rules (Bozeman & Scott, 1996). In other words, the formalization might a cause of the red tape.

Figure 1. Bureaucratic structure was taken from Mintzberg (1983)

The bureaucratic form of organisation based on the power and authority (Mansfield, 1973). The number of employees will decrease the level of power. Thus, it has clear hierarchies within the organisation. Meanwhile, each position has a clear description of their work. In some cases, the bureaucratic organisation structure related to the stability, which is less responsive to the demand of environment (Moon, 1999). Therefore, this structure might keep the organisation in a stable condition. However, due to the formalization and red tape, it might have the negative effect on the organisation. This is because that the formalization and red tape requires lots of paperwork or rules, it will take the amount of time. Therefore, it might influence the flow of information, and cause the poor communication and project delay.

3.3.2 Functional structure

Turning to the functional structure, which has won the popularity around the world. It can be seen as the one of the most common organisational structure on project management. A functional structure includes many departments and activities, such as the task allocation and coordination. In generally, this structure is usually determined by the different functions from employees. Thus, there are many different department for marketing, accounting or production. However, all the departments must follow the decision of their project board.

Figure 2. Functional structure was taken from Mintzberg (1983)

This kind of organisation structure is able to optimise the efficiency of tasks and project. It will lead to the employees become the specialists in their own area, and then the workers could share their expertise and experiences with their teammates. It is an effective way to finish tasks quickly and effectively, and also it might decrease the possibility occurrence of mistakes during their work.

However, the communication issues might occur in this organisation structure due to the high level of formalization. It might increase the time about communication and decision making. Moreover, the functional structure could not coordinate the different units in the organisation because of the poor vertical coordination within the department.

3.3.3 Matrix structure

Matrix Structure is a part of organisation structure, which has won the popularity in project management filed since from the 1970s. (Larson and Gobeli, 1987). The Matrix structure can be defined that the organizational lines are set up a grid of matrix, rather than traditional hierarchy. This kind of organisation structure puts the different functions in the vertical axis, and then to allocates the various tasks in horizontal axis in the project management system (Sayles, 1976). Every employee has to follow two managers: functional manager and product manager. It has some advantages and disadvantages for using this type of organisation structure.

Figure 3. Matrix structure was taken from Mintzberg (1983)

For example, According to Kuprebas (2003), the project performance is improved when operating under a matrix structure. Due to the fact that some past programs were delays and cost overruns of the Bureau of engineering’s, which is a public work. The Bureau selects a hybrid matrix structure to improve the effectiveness of their project management. More specifically, matrix structure can promote inherent control of client group projects; and improve the project delivery. According to Laslo (2010), the manager is able to get information quickly and respond with flexible in making decision. However, there are many problems and challenges might occur when the project implementation. Such as the conflict between the functional manager and project manager about their role and responsibility, and strong communication skills and the ability to work in teams were required.

3.3.4 Divisional Structure

According to Mintzberg(1983), the divisional organisation structure has become the one of most widely used structure in the private sector within project management. This kind of organisation structure can be called as “product structure”. Due to the fact that the divisional structure relies on the market basis, and the division sectors was divided according to the market needs and control over the operating functions, and employees also will be placed on the different types of product and services. Every division includes their own function, such as purchasing, manufacturing, engineering and marketing, the interdependence was eliminated between these divisions, it is able to increase the flexibility of the operation of the project. Therefore, each group is able to finish their tasks by themselves without any support from another department.

Figure 4. divisional structure (Typical organigram from Mintzberg)

As shown in this organigram, it is clearly that each division has their own function. It is able to conduct the various project at the same time, and then improve the efficiency of the organisation. Mintzberg (1983) holds the view that a large number of “Fortune 500” and American largest companies used this type of organisation structure. There are many advantages for utilising this structure. Firstly, the employees’ performance will be measured directly by their own work, which is able to increase the motivation and high employee morale for each group. Moreover, it is more easily to coordinate tasks between the different divisions. Thus, it is an effective way to response the change of market and increase the flexibility. However, using this structure also exist some weaknesses. More specially, the divisional organisation structure might lead to unhealthy competition due to the measurement of performance among the divisions. Furthermore, it will cause some conflicts between the different divisions in terms of the rare communication within the corporations. (Zannetos, 1965). Besides, the divisional structure might increase the cost of company, this is because that each division have to hire more qualified manager.


Chapter 4 Organisation structure design of banks

While the use of a devolved structure has been adopted by different organisations in the modern world, most of the financial institutions still utilise the centralised structure of carrying out their functions. Vyas and Singh (2010) asserts that the sensitive nature of finances requires the existence of a central decision making the body that is not only tasked with making decisions but also in supervising the different functions to ensure they comply with the decisions that are made. However, some of the aspects of decision making can be considered as decentralised as individual employees are allowed to make decisions that affect day to day operations of the banks that they are involved with. The most common functions that contribute to the structure of most of the banks in the world include the retail and commercial banking, investment banking, securities trading, house financing and fund management. While most banks utilise a centralised structure in the enforcement and the establishment of policies and guidelines that drive their operations, Helfat and Karim (2014) asserts that they have a decentralised structure when it comes to day to day activities.

One of the major considerations in the research on bank structure is to understand the role of a bank structure in influencing the level of risk and profitability within the entity. Holmes et al. (2015) explain how the involvement of many banks in non-banking activities such as security trading and house financing is credited with the increasing the levels of risks that banks are exposed to. However, it is impossible for banking institution to operate without being involved in the banking activities (Rudolph and Schwetzler 2014). The question has been on the level of integration of the different banking and non-banking functions that should be adopted to ensure a bank remains competitive and has a low level of risk. Where there is separation between different activities that are implemented by the bank, a central structural issue organisation structure is utilised. However, where the level of integration is high, a conglomerate or integrated organisation system design is used.

4.1 The organisation structure design in the United Kingdom banks before the great recession

In determining whether a conglomerate or a centralised issue organisation structure should be used, bank organisation policy makers are concerned about the financial regulation that exists in a region. In some jurisdictions, there are laws that prevent banks from engaging in the activities that are not central to their operations. Before the 2008 crisis, there are many significant changes within the bank industry. (Goddard et al., 2007). The banking reforms in the United Kingdom and other parts of Europe were focused in deregulating the financial sector. The rise of international banks and the spread of technology encouraged the United Kingdom government to lower the regulatory requirements of the local banks to ensure they were not disadvantaged by the international banks that had operations in countries with little financial regulation.

Kleinnijenhuis et al. (2014) explains how the perceived benefits of having a conglomerate structure contributed to the rise of an integrative structure among banks in the United Kingdom. In 1990s, there was a strong support for banks to diversify their activities as a way of reducing the level of risks and gaining high profits. Köhler (2014) asserts that among the perceived benefits that were used in encouraging banks to have a conglomerate structure include the use of the existing reputation in starting new services. Li and Zinna (2014) explains how it is easier for an operating company to diversify to a different functions in comparison to the costs and time that are utilised in coming up with a new company. The new functions that were adopted by the bank could gain from the reputation that existed before the functions were adopted.

The use of a conglomerate structure also allowed the eradication of start-up costs that could have been experienced if the banks had started new entities to carry out the non-banking functions. The banks that were able to successfully diversify were able to avoid the management problems of starting a new business as they could utilise their own management functions in carrying out businesses. Massey (2010) explains how the use of a diversified bank portfolio increases their competitiveness as they are able to utilise their excess capital in carrying out business operations.

The deregulation of the banking sector that was experienced before the banking crisis had a great influence in the changing of the organisational structure such as the creation of new financial instruments, chain of commands and capital structures took centre stage. (Rudolph and Schwetzler 2014). According to Gardener (1991), the aim of deregulation is to gain the profits from the allocation of resources. And also, Berger and Humphrey (1997) holds the view that the deregulation of the banking sector is able to improve the bank performance of the industry. In addition, Matsuoka (2011) explains how the organisation structural change was defined by the erosion of the traditional boundaries that distinguished the different operations that were being implemented in a banking institution. The demarcations of the boundaries that had existed showing the different operations that a banking entity was involved with were eroded leading to institution and security integration.

Traditionally, each bank concentrated in offering specific services such as the offering of credit and saving facilities (Rudolph and Schwetzler 2014). There were institutions that were involved in the offering of mortgages while investment banks concentrated in the offering of capital and trading securities in the financial markets. Neuenkirch (2013) explains that before the integration of the financial industry, most of the insurance services were offered by the insurance companies. However, after the deregulation a new conglomerate structure where the different activities were offered by a single bank was formed as shown in the figure 5 below:

Figure 5: A conglomerate banking structure

Among the major examples of United Kingdom banking institutions that had adopted conglomerate organisational structure before the 2008 crisis include the Barclays Bank and Lloyds TBS bank. Despite the benefits of the adoption of the conglomerate structure of banking institutions, the structure had major weaknesses such as the exposure of customers deposit to risks of non-banking activities. It was also difficult for bank supervisors to efficiently control the activities of the departments that were established (Rudolph and Schwetzler, 2014). The conglomerate structure also created avenues for conflict of interest to the different departments of the bank where there was no focus on protecting the customer deposits. The bank employees were focused on gaining higher commissions rather than focusing on the efficient ways of protecting the customers’ deposit and the shareholder wealth. Nissen (2014) asserts that the rise of conglomerates is credited with the increase in the level of risks as financial institutions aimed at carrying out the functions that could generate more revenues rather than focusing on their core activities of offering secure loans and protecting the deposits that they were given by their customers.

4.1.1 The collapse of Baring Bank before the great recession:

The collapse of Baring Bank can be seen as a representative event of banking world in last 20th century. (Greener, 2006). Barings Bank, which was the oldest investment bank in the United Kingdom. In the beginning, it was established in 1762, and remains the independent and private controlled. And then it went through the changed of partnership and became the parent company of Barings Group. The group was divided into the four parts, which included Barings Brother& Co, Barings security company, Baring Asset Management Ltd and owns a 40 percent stock equity of an investment bank of The United States. Baring Bank has been very positive to expand their financial operation and then gained a lot of profits in early 20th century, and further to develop overseas business, extensive investment activities from the 1990s. However, the Baring banks were collapsed in 1995 and the organisation structure and strategy of Baring bank will be analysed.

Firstly, Different parts of Barings Group has different functions, the conglomerate structure was used in Barings Group. Firstly, Baring Brothers Company pays their attention to corporate finance, banking and capital market events. The securities company mainly focus on stock exchange transaction; the Asset management Ltd. is mainly to deal with the asset management and personal assets. However, Baring banks are different with other bank due to the fact that it does not deal with normal customer deposit. Therefore, the related funding resource was limited. The Baring bank has to seek survival and development by themselves. Before the 2008 crisis, the banking reforms in the United Kingdom and other parts of Europe were focused in deregulating the financial sector. And then the project board and employees of Baring banks were paid over attention to obtain higher profits not activities that were offered to customers. There is no doubt that it will bring the negative influence on the operation of banks, the reputation will be influenced and no one will give the trust to the bank. Thus, it might increase the level of potential risks for financial institutions.

Moreover, due to the background of bank industry, diversify forms of banks has become more popular in bank industry. There are some advantages and disadvantages. For example, it is able to avoid the management problems of starting a new business in order to rely on utilising their own management function to conduct businesses. At the same time, it also might increase the flexibility of operation and adopt different situation. However, it brought risks as well. It was also difficult for bank supervisors to efficiently control the activities of the departments that were established (Rudolph and Schwetzler, 2014). The failure of internal controls made the Baring bank went to bankrupt. There has a rough trader needs to introduce; this is because that the rough trader has changed the history of Baring Banks. Nick Leeson, which was an employee of Morgan Stanley bank before he entered Baring Banks. He has great talent on financial filed, and he also has clear understanding of the derivatives market, and he was authorized to deal with the derivatives transactions and arranged to the Barings Future Singapore, and to work as a manager, betting on the market around the world. However, the rough trader manipulates the internal system and uses the secret Barings account to deal with the transaction and hide his own transaction failures. According to Howells and Bain (2008), the expected return might not be same with the actual return, the Nick Leeson misjudges the stock market in Tokyo and results in the huge losses of transaction failure. And finally, the Baring bank losses $ 1.4 billion and went to bankrupt. The failure of internal controls contributes the collapse of Baring bank.  More specially, Lesson uses his rights to deal with the transaction at Singapore International Monetary Exchange (SIMEX) without unauthorised. And due to the absence of managerial supervision over Leeson, Leeson has the rights on transaction and monitoring filed in Baring Futures Singapore. The rough trader requests funds from London without having provided any details about the related account. And it will increase the risk of internal control, the rough trader is easy to manipulate the transaction rely on their right. Secondly, in 1994, the annual report has pointed out the inherent risks and recommends that the department need to reorganisation. But the strategy of Baring bank has not changed, and advice failed to be implemented. Furthermore, the management control system also exists another weakness. The project manager did not take a timely and appropriate action to the warning from the Baring Futures Singapore. If the manager can take action immediately, the collapse might not occur. Moreover, the internal audit also might be a reason for the collapse of Barings bank. The auditor has not detect the crime of Leeson on timely, it has not use the internal audit system to check and monitor the behaviour of Leeson.


Chapter 5: The organisation structure: UK’s banks after the great recession

5.1 The organisation structure design in the United Kingdom banks after the great recession

After the occurrence of the financial crisis of 2008, there was a great focus that aimed at establishing the causes of the crisis. According to Pareja-Eastaway and Sánchez-Martínez (2016) the agreement between the stakeholders of the financial industry was that the banks had played a central role in influencing the occurrence of the crisis in the United Kingdom. Some of the banks that had collapsed during the crisis such as the HBOS and RBO had conglomerated structures where they were involved in both the commercial banking services and non-commercial banking services. Pareja-Eastaway and Sánchez-Martínez (2016) explains how the HBOS bank had combined with Halifax Building society in its expansion in the mortgage market. The risks in the mortgage and security markets is credited with the collapse of the banks that were operating in the United Kingdom during the great recession crisis

After the crisis, it is clearly evident that most of the banking institutions aimed at adopting a central structure issue where there was a focus on the development of specialised banks rather than a having an integrated structure (Rudolph and Schwetzler 2014). The disintegration of the banks after the financial crisis is credited with the increase in the regulation of the banking sector due to the fear of the repeat of the financial crisis. There was a public outcry that banks were left to operate on their own and that they catered to the interests of a few individuals who are involved in their operations rather than focusing on the interests of their customers and owners. Prabhakar (2015) explains how the financial crisis was a wakeup call to many governments on the need of strict regulations on their banking sectors to ensure the customers were protected at all times.

Rudolph and Schwetzler (2014) explain how the regulation focused on reforming the banking sector with the aim of reducing the different forms of risks that the bank institution faced. In the United Kingdom, the Basel 111 guidelines were adopted to ensure the capital structure and the management function was being implemented in a right way. There was also a focus on changing the organisational structures of the banks to ensure they were not operating in the industries that have high levels of risk. Slinger and Morrison (2014) explain how the financial regulations aimed at controlling the activities that bank capital and deposits could be utilised in the industry. The limited on the level of debt that the banks could have when compared to their assets and capital explains why it is untenable for some of the banks to be involved in non-banking activities. According to Rudolph and Schwetzler (2014) the regulation on the number of businesses that a bank can be involved with in the United Kingdom was an informal activity that was influenced by the change in capital structure requirement and a strident supervision region.

The analysis of most of the United Kingdom banks shows that they have undergone a tremendous organisational structural change after the crisis. Stella et al. (2008) asserts that the Finance Act of 2013 was the major contributor to the changing structure of the United Kingdom banks. The act required banks to separate retail banking from investment banking. Most of the banks have formed lean structures where they have formed different entities that are involved in carrying out specialised financial services. HSBC, Barclays and Co-operative Banks are some of the banking institutions that have changed their structure, where they have separated their retail and commercial segments from the investment segments.

The aim of creating separate structures separating the commercial and non-commercial activities that the bank is involved with is due to the need of protecting the interests of consumers in case of a crisis. Suetin (2009) explains how the adoption of new structure aimed at reducing an instance where a different set of financial activities that are carried out by the bank could affect other activities that are implemented by the entity. By disintegrating the bank function, the new banking structures after the 2008 crisis aimed at reducing the level of risk that is exposed to customers of a banking institution. The big banks had to establish distinct institutions to deal with the different functions that they are involved in implementing.



5.1.1 The RBS bank after the great recession:

After the financial crisis, the development strategies of banks have gone through the huge changes and adjustments in order to adapt the change of the economic environment. The top management aims to ensure their firm to adapt the external environment and to remain viable and survive. (Lenz, 1980; Chaffee, 1985). At the same time, the support and intervention from the government were strong needed. (Chabal, 2013). The British Government proposed a series of regulatory reforms and new financial regulatory system in terms of the supervision of the bank industry. According to the Calomiris (2009), the regulatory reform strategy may improve the risk management and banking system to avoid the financial problems in the future.

Royal Bank of Scotland (RBS), which was initially founded in 1727 and the headquarters was located in Edinburg. With the financial development of London, RBS began their business in London in the late 19th century. Until the late 20th century, RBS has become the international bank organisation from a little-known British regional bank. And the top management proposed some strategies for their company. According to Quinn (1980), the strategy can be defined as a process of decision-making. There has a representative event in 2000 of RBS, the bank spends 210 million pounds to take over the National Westminster Bank (NatWest). The successful complementation of acquisition made the RBS takes over more shares in the market. However, with the financial crisis occurred, the acquisition was regarded as a major strategic mistake. More specifically, the RBS’s funds have become intense due to the financial crisis and the acquisition, and exist the high level of risk within its bank, the stock price was significantly decreased 90 percent. And then the government announced to save the RBS and inject 20 billion pounds.

In 2009, the RBS proposed a five year strategic and reorganisation plans in order to modify the mistakes and adjust the operations. According to Chakravarthy and Doz (1992), the strategy can be seen as a process. Under high tension economic environment, they made three objectives for their bank: firstly, the operation will mainly focus on the customer services and promote the quality of customer services and then increases the customer’s satisfaction.  The aim of RBS is to become the most trusted bank in the United Kingdom before 2020. It might be an effective way to earn the reputation from the outside. Secondly, the bank will pay attention to recovering the ability of independent and strengthen the primary industry. Since the financial crisis, many banks have to face the capital shortages and the pressure which from the Basel III guidelines.   RBS reduce their size of the construction front, and put effort into their major services and traditional services. This might decrease risks within the operation due to the efficiency of operation was improved. (Allen and Rai, 1996). According to (Koetter and Porath, 2007), enhancing the efficiency of operation is able to defend the market shares. Finally, the bank needs take their responsibility to create the sustainable values for their shareholders and earn the profits. Besides, RBS reorganised their internal structure to reduce the risk of the particular asset, such as establish the non-core sector within the bank.

Moreover, the bank has to face the significant challenges in terms of the financial regulation. (Casu et al., 2006). The British Government also proposed some useful actions in order to prevent the financial crisis in the future. The Eisenstadt (2000) asserts that the regulation was always put forward after the disaster event. According to Fernandez and Gonzalez (2005), many restrictions to reduce the risk of the bank. Firstly, Basel Committee proposed the Basel III guidelines to set up some new requirements and methods in order to strengthen the supervision of the capital and risk management of bank. The RBS have to adapt the requirement of Basel III, and then to enrich their core capital and meet the leverage standards to improve its transparency within the operation. According to Karpoff et al., (2008), enhanced the organisation transparency can be seen as a method to promote the corporate valuation. Secondly, the British Authority suggests that the bank should to take “Risk Appetite” as a core regulatory form. It requires the bank to set up comprehensive plan which based on the actual situation. In addition, the regulatory forms also shows that it is necessary to set up a firewall between the retailing services and investment activities. It is able to protect the consumers and investors with regard to the opportunistic behaviour of the banks. (Llewellyn, 1999). Therefore, the RBS have to follow the requirements and enhances the risk management and control.

The organisation structures and strategies of bank has been through a tremendous changes after the Great Recession. This is not only follow the requirement of government, but also its own need to be reformed.

Chapter 6: Causes and Effects of the 2008 and 2009 financial crisis

6.1 Causes of the 2008 and 2009 financial crisis

The 2008 and 2009 financial crisis is also referred to as the great recession. The crisis is characterised by the collapse of financial and on financial institutions. According to Adrian and H.S. (2007), the financial crisis of 2008 had a huge impact on the United Kingdom economy as it decreases the disposable income among the individuals and the institutions within the country. In their research on the causes of the financial crisis, Tse et al. (2014) found out that the inaction of the Bank of England in dealing with the crisis in a timely manner was a great contributor to the crisis in the United Kingdom. Other researchers credit macroeconomic issues as the causes of the crisis. The analysis of the causes of the crises also focuses on the financial market failures and the regulatory failures in causing the crisis

6.1.1 Macroeconomic issues

From the perspectives of Galbraith (1955), the macroeconomic issues might impacts on the microeconomic developments. According to Berkmen, et al (2009) the economic crisis that affected most of the western world was influenced by macroeconomic factors such as low interest rates and inflation that were being experienced in the country. The low interest rates and inflation were influenced by the fall of the communist regime that led to opening up of former communist to the world market. There was increase in low cost labour supply leading to a significant reduction of the production costs in the developed countries. In the United Kingdom and other countries in Western Europe, the bargaining power of workers union was reduced and hence the wages remained low. The low inflation rate also influenced the central banks to set lower interest rates that encouraged individuals to seek for debts with the aim of acquiring residential houses. The high demand increased the value of houses leading to individuals acquiring high levels of debts that they were unable to pay.

The analysis of the pre-crisis period shows that the society in general underestimated risk that existed in the economy. (Hodges and Lapsley, 2016). Most of the banks increased the level of debt without a corresponding increase in the level of saving. According to Coco and Ferri (2010) the pre-crisis period is also characterised by a high level of liquidity risk among the financial and non-financial institutions as there was the reliance on short term funding. Stella et al. (2008) credits the macroeconomic imbalances as some of the factors that led to the rise of the financial crisis in the United Kingdom.

6.1.2 Financial market causes

Kheinman (1981) stated that the market economic situation is closely related to the construction of the organisation structure.

Suetin (2009) asserts that the financial market issues were the main cause of the financial crisis in 2008. The external environment lacks stability might create barriers to company. (Duncan, 1972). According to Prabhakar (2015), the current unpopularity of large financial institutions is due to the public perception that they played a central role in creating the great recession. Among the financial market causes of the crisis include the rise of financial innovations that aimed at making the financial organisations to be more profitable and retain low levels of risk. According to Stella et al. (2008) the risks of the new financial instruments was not well understood by the banking institutions and the regulators in the financial markets. While the innovation has aimed at diversification of risk, the occurrence of risk showed that the financial innovation was inadequate in meeting its objectives.

The underestimation of the system wide risk is also credited with increasing the occurrence of the crisis. Most of the banks become dependent on the operations of other institutions such as the funding markets for their financing. Despite the notion that if the banking institutions remained sound the financial system could be sound, there were system wide risks that affected the financial markets. According to Acharya et al. (2009) even when the banks were stable, their interconnectedness with the firms in the fund and security markets implied that the financial market could be unstable.

Mertzanis (2013) indicated some key issues in risk management about the financial crisis. According to Aweda et al. (2014) the inadequate risk management by financial institutions was also a major factor in influencing the occurrence of the financial crisis. And his assertions are supported by Beaupain and Durré (2013) who explains how the banks and other financial institutions utilised risk models that were inadequate in showing the risk that they were facing. The stable macroeconomic factors also contribute to many of the players in the financial sectors to under-price the risks they were facing and implement inadequate stress testing models. The stress testing model did not take into account the risks that emanated from the United Kingdom financial system and the interconnectedness of the financial players that could spread in the whole financial sector.

The credit agencies in the financial sectors are also accused of having played a significant role in influencing the occurrence of the financial crisis. Without their input, it could have been impossible for different stakeholders in the financial market to trust the new innovations and engage in their investments. The credit rating agencies that were considered as the gatekeepers of the credit markets were unable to fully understand the financial implications of the debts that were created through innovations in the financial markets. The fact that the credit ratings are financed by the issuance of securities and the financial services also created a conflict of interest situations where it was impossible to understand whether the credit rating were working in the interests of the customers or the interests of the banks that were paying them.

Other financial factors that played a central role in influencing the occurrence of the crisis include the huge bonuses that were given to the management employees of the financial institutions. The financial institutions implemented a remuneration strategy where one was rewarded by the volume of loans or security that they incurred rather than the quality of the assets that was being used. Crespi, Garcia-Cestona and Salas (2004) asserts that the remuneration strategies that were implemented by most of the financial institutions encouraged employees to take a high level of risks rather than focus on strategies that could eliminate the risk occurrence. Another cause of risk is the circumvention of capital requirements, regulations by the financial institutions. Despite the creation of SPVs that were tasked with managing loans, the debt responsibilities still remained with the banks. With the creation of the investment banks and hedge funds that were guaranteed by the banks, the financial institutions were able to increase the level of debts but still retain the same risk that they were facing.

6.1.3 Regulatory and policy failures

In the United Kingdom, the government and the Bank of England failed in regulating the financial markets and the financial institutions is credited with the occurrence of the crisis. (Berger and Mester, 1997). The Labour government initial response to the crisis is also credited with the great depression in the country. According to Beaupain and Durré (2013) the liberalisation of the United Kingdom financial sectors ensured that the government left the financial institutions to regulate themselves on their own. The financial policies that were implemented in the country had a great role in causing the crisis. An example is the housing policies that aimed at encouraging most of the United Kingdom residents to own a house. The policies encouraging the lenders to establish ways in which they could extend deposits to low income families with a focus of enabling them to acquire adequate housing.

Mortgage lenders utilised the government goodwill in housing finance to offer exotic types of loans and mortgages to low income earners. The United Kingdom government was also unable to understand the system wide risk using their supervisory structure. According to Betschinger (2014) the United Kingdom structure, efficiency and coherency that is required in supervising the financial institutions was non-existent. The Bank of England was also slow in dealing with the crisis of the Northern Rock Bank that could have helped the bank in establishing that something was amiss in the United Kingdom economy. The regulatory institutions did not implement the strategies that are aimed at regulating

6.2 Effects of the financial crisis in the United Kingdom

This section reviews the current literatures that have focused on the effects of the financial crisis in the United Kingdom. According to Blundell-Wignall et al. (2009) the financial crisis had a huge impact as it led to the collapse of financial and non-financial institutions that were considered as operating in a healthy way. The crisis also led to the development of new guidelines such as the establishment of the Financial Act of 2013 in the United Kingdom that aimed at controlling the actions of the banks that were operating in the country.


6.2.1 Decrease in house prices

One of the greatest impacts of the crisis was the decrease in the house prices to unstable levels in 2008. According to Chang et al. (2010) the crisis occurred due to the explosion of the housing bubble that led to the decrease in the housing prices as shown in the table below:

Table 1: Decrease in the housing prices after the 2008 financial crisis

From the table 1.1 above, it is clear that the Northern Ireland housing price index decreased by 19.6% in 2008 and continued to decrease even in 2011. The financial crisis had a huge impact on the value of houses in the Northern Ireland.

6.2.2 Collapse of the United Kingdom banks

The crisis was characterised by the collapse of numerous banks in the United Kingdom such as the Northern Rock bank that faced liquidity problems in 2007 (Crook 2016). The near collapse of the Royal Bank of Scotland and HBOS was a major indicator that the crisis was at its peak in the United Kingdom. The Labour Government had to intervene and bail out the two banks as their collapse could have affected the United Kingdom economy in a negative way. The collapse of the Northern Rock Bank also affected the operations of NatWest Bank that was connected the payment systems within the United Kingdom economy. According to Copp (2006) most of the Banks such as the Barclays Banks shares lost their value due to the investors’ concerns on their exposure to the financial crisis.

Other bank institutions and building societies that collapsed during the financial crisis include the Alliance and Leicester Bank, Lloyds TBS, Bradford & Bingley financial company. The figure 1.2 below shows the decrease in the number of financial institutions due to the financial crisis

Figure 6. Number of banks in the United Kingdom

As shown in the figure 2.1 the number of decreased substantially after 2008 as the crisis led to the acquisition of struggling banks by the stable banks.

The crisis is, however credited as the bases for the introduction of financial reforms in the banking sector. The regulators were focused on ensuring a similar crisis does not occur in future. According to Stella et al. (2008) the banking reforms aimed in showing the United Kingdom government was focused in ensuring that taxpayer funds are not used to bail out financial institutions in future. The Bank of England becomes focused in supervising the capital structure requirements among the banking institutions to ensure they did not risk the funds of the customers due to their engagement with non-financial services. The focus on the banking culture and the professional standards that are implemented by the financial organisations explains why the United Kingdom government is keen in ensuring that banking professionals behave ethically.

6.2.3 Economic recession

One of the great effects of the financial crisis of 2008 in the United Kingdom was its influence in creating economic recession. Stella et al. (2008) explains how the production of different good slowed down significantly in the United Kingdom economy as there were few individuals with purchasing ability. Even the service industry such as the transport industry was hit hard as they lacked funds that were required in keeping them afloat. According to Prabhakar (2015) the level of tax that is collected in the United Kingdom also decreased as the number of workers decreased. There was also the decrease in consumption among the residents of the United Kingdom lowering the tax that was charged to the services or good sold in the market.

6.3 Conclusion

The review of the current literature that has aimed in understanding the change of organisational structure design prior and after the 2008 financial crisis shows that there was a great change from the trend of bank integration.  Unlike in the past where the banks had a conglomerate structure, the United Kingdom banks had to create separate entities to deal with different business functions after the crisis. The evaluation of the literature on the financial crisis has clearly shown the importance of the financial sector in the well-being of any economy. It is clear that the problems that are experienced in the banking sector have a great bearing on how the financial institutions operate. Despite the research on the changes of banking structure, the current literature is limited in impact of the organisational structure design that is adopted by the banks to the United Kingdom economy. There is the need for further research in identifying the benefits that are associated with each structure and the future expectations on the changes of the structure.


Chapter 7 Conclusion and Recommendation

7.1 Introduction:

This chapter presents the summary of the findings and deductions discussed in Last chapter, the conclusion and recommendation will be based on such finding and evidence. This chapter will consist of the five parts: summary of main findings, objective fulfilment, and research limitation, recommendation for organisation and advice for further research. With the increasing furious economic environment and competition, the appropriate organisation structure and strategies are quite important for the success of the corporation. Many researchers and practitioners have investigated the importance of organisation structure for many years. This is because that the organisation structure is a valuable factor for improving the project performance. Therefore, whether to choose the suitable organisation structure and strategies can be seen as a necessary debate which is worthy for future research. An appropriate organisation structure is able to help employees to work together effectively, and make a close relationship between employees and departments and make a clear classification about power and accountability. A strategy is generating from the decision of project board, the suitable strategies are necessary and important to the organisation. As the mentioned in chapter 5, the Royal Bank of Scotland relies on their actual situation and economic environment to change their strategies after the financial crisis.

There were six chapters contained in this study. The first chapter stated the research background, aim and objectives of this paper. The Chapter 2 explained which methodology was used, and the reason why to choose the integration of qualitative and quantitative analyse methods, and introduce the progress of the research, and then to illustrate the limitation of research. The next chapter described the history and basic concept of organisation structure, the centralisation and the decentralised concept were mentioned firstly, and then to demonstrate the main four types of organisation structure.  The Chapter 4 indicted the overall views about organisation structure of the banks in the UK, and then to analyse the organisation structure of the UK’s bank before the financial crisis. And the Baring banks was used as a case study. The following chapter describe the organisation structure of the banks in the United Kingdom after the great recession, the Royal Bank of Scotland was selected as a case study to reveal that the changes and adjustments in the organisation structure and strategies after been through the financial meltdown. The last chapter mainly focuses on the finding and summary from the previous analyses and observations, the limitation of this study was mentioned as well. It also proposed some recommendations and suggestion for the organisation and further research.

7.2 Main findings:

Based on findings and evidences, the paper reviews the history of the organisation structure and its importance in the project management, and organisation structure was divided into two parts at the beginning: centralisation concept and decentralised concept. The centralised organisation might be useful for project manager to control the employees and projects concerning the vertical information system, but it might create the bureaucratic system and influences the creativity within the organisation. The decentralised organisation might beneficial to the project performance due to the efficiency of operation may be increased. However, it also will increase the time that is taken in making important decision. And then described the concept of Bureaucratic structure, Functional structure, Matrix structure and Divisional Structure, and demonstrated that the main four types of organisation structure have different functions, and different structures are suitable for different projects. Therefore, the project manager and project board have to choose an appropriate organisation structure based on their actual situations and external environment.

In terms of the organisation structure of the bank in the United Kingdom, the conglomerate structure has won the popularity in the United Kingdom before the financial crisis. This structure is able to increase their competitiveness as they can use their excess capital to conduct other businesses. However, the conglomerate structure makes project manager is difficult to control the activities within the project. The findings from the case study “the collapse of the Baring banks” support the view of Rudolph and Schwetzler, it is clearly that the conglomerate structure results in the serious supervision problems. Since the financial crisis occurred, the most of the banks in the United Kingdom have undergone tremendous changes in their structure due to the fear of the occurrence of financial crisis. Many banks adopt the centralised organisation structure rather than conglomerate structure. This is due to the fact that centralised structure could provide the opportunity to control the operation and employees easily for manager. Many banks mainly focus on their customer services and aim to increase the reputation and satisfaction from their customer, and strengthen their own primary services at the same time.  Through respective brief discussion on Royal bank of Scotland, it proposed a five year strategic and reorganisation plans in order to modify the mistakes and adjust their operations. Mainly focus on the customer services and improve their independent ability to prevent the financial problems in the future.

Moreover, the regulation policies from government also impact on the organisation structure changes and strategies adjustments of the bank in the United Kingdom. Before the 2008 financial crisis, with the rising of international banks and spread of technology motivated the United Kingdom to lower their regulatory requirements, therefore the banking reforms were paid attention to the deregulating the financial sector. The United Kingdom government was also unable to understand the system-wide risk using their supervisory structure. Thus, the financial policies failed had a great role in causing the crisis. By comparison, the Government of the United Kingdom proposed a series of regulatory reforms, and also put forward the comprehensive reforms on the financial regulatory system after the financial meltdown. It has played a vital role in changing the organisation structure and strategies of the bank. More specifically, Finance Act of 2013 was the major contributor to the changing structure of the United Kingdom banks. The act required banks to separate retail banking from investment banking. It made the bank go through the financial crisis as soon as possible. Thus, the policies and regulations that were implemented by the government are great important to the organisation. In addition, this paper also provided the evidence to prove that some extra external factors also impact on the financial crisis and bank performance. Such as Macroeconomic issues, financial market causes.

7.3 Objective fulfillment:

The aim of this paper is to explore the effects of organisation structure on the project performance, and whether an appropriate organisation structure design is essential to bank industry for preventing the financial crisis. This research based on the basic concepts and theories about the organisation structure from the literature and the knowledge and theories about the financial crisis from economic and business perspectives. It firstly mentioned that the impact of the financial crisis on the bank industry in the United Kingdom was enormous and explored the significance of organisation structure and strategies of the banks before and after the Great Recession for this sector. At the same time, the Baring Banks and Royal bank of Scotland were selected to illustrate their organisation structure and strategies, and then to analyse the other factors which might cause the financial crisis and its effects on the United Kingdom. It not only to consider the importance of organisation structure design and strategies, but also the external factors were taken into account for this paper. Such as the economic factors, Kheinman (1981) holds the views that the organisation structure has close relationship with market economic situation.

7.4 Personal comments about the information:

Based on the findings and evidences from the research, it is apparent that organisation structure design and their strategies have great impacts on the project performance. From my own perspectives, organisation structure is able to influence the success of the project, an appropriate organisation structure and strategy could improve the efficiency of operation and promote the possibility of success. According to Kwan and Eisenbeis (1995), the high levels of inefficiency might effect on the imperfect bank. In case of Baring bank before the financial crisis, their inappropriate organisation structure and their strategies and their inefficiency control systems result in the failure. And also, the low capital adequacy might a factor cause the failure as well. The capital adequacy is important to ensure the safety of the bank. (Molyneux et al., 1996). According to the case of Royal bank of Scotland, the corporation has been transferred their organisation structure and strategies rely on their actual situations before the financial crisis to prevent the financial crisis occurred again. Reorganisation and made a five years plan can be seen as an effective way to overcome losses from the financial meltdown. Meanwhile, the control system is also important for corporation. The effective internal supervision is able to realise the performance of each department, and make good control the day to day work to avoid the mistakes and frauds within the project. It can increase the efficiency and effectiveness of operation. Except for the significance of organisation structure and strategy, the control system and the audit system should be considered as well for project manager. It is able to decrease the risks within the company, for example, many Germany banks aims to sound their control system in order to decrease the risks. (Koetter and Porath, 2007).

Furthermore, the external factors which are also have Impacts on the project performance. Firstly, the policies and regulations of government also important for every corporation. The government could propose requirements to force the organisation follows their decision. For example, the guidelines were implemented to control that the organisation was not operating with high levels of risk. In addition, the organisation also to have a clearly understanding of the environment and financial market. The project manager has to arrange the employees to investigate the situation of external. The adequate market research is a necessary part of project’s success.

Except for the factors which have already discussed, I think that project manager should to make a plan to motivate the employees and increase their belongings. Besides, the project board should pay attention to cultivating loyal managers and employees. And then to hire a professional supervisor to control the operation within the company. According to Beck et al. (2006), the supervisor can monitor the bank and then to improve the project performance. The views from Pasiouras (2007) support the importance of supervisor. It asserts that the power supervision has positive effects on technical efficiency and performance. In addition, the bank also can enhance their technical ability, this due to the fact that the technical ability is able to reduce operation cost for the bank. (Altunbas et al., 2001)

7.5 Implication:

7.5.1 Validity

The purpose of this study is to examine the relationship between organisation structure and success of the project. Even though this paper only adopts literature review and case study as the methods, but we also keep the critical attitudes to investigate from different perspectives. At the beginning, the paper gives the overall view of the organisation structure, and critically analyse the centralised organisation structure and decentralisation structure concepts of organisation structure. And then to explored the advantages and disadvantages of the four types of organisation structure. A large number of studies research about the organisation structure based on the book of Mintzberg, this paper also used some theories from that book. It could provide the exhaustive picture to the reader, and it is apparent that different organisation structures might bring the different results and functions to company. In order to make the research unique and special, it mainly focuses on the organisation structure of the banks in the United Kingdom, the Baring banks and Royal Bank of Scotland was used as case studies to explore the significance of organisation structure within the bank industry. It would make this research has a special direction, and give some useful information for future research. Furthermore, the before and after the great recession was picked as a particular time period. It is easily to explore the change of organisation structure and strategy during that time period. And also the other causes factors and its effect were analysed as well. Finally, analyse of each part was based on positive side and negative side. The further researcher is able to find some useful information to improve their study.

7.5.2 Potential transferability:

The finding of this paper is that different organisation structures could make different impacts on the success of the project. Not all the types of structures make good impacts on the project performance. Project board and project manager have to use the different functions of different organisation structure to determine which type of organisation structure should be adopted, and then to assess whether it is suitable for the current situation and external environment. It there is some factors which might cause the project failure and influence the project performance, and then project manager can transform its weaknesses part into strength part.

7.6 Research limitation:

The paper has provided an evaluative perspective on organisation structure and strategies for banks in the United Kingdom before and after the financial crisis. As analysed in Section 2.9, the researcher pointed out some limitations exist in this research. Firstly, the sample size is too small with regards to select only two banks. This situation of two banks could not represent whole bank industry. Then, the limited period also might make errors within the research. Due to the limited time, the research could not have enough time to make investigations from outside. Moreover, this paper mainly focuses on exploring the effects of organisation structure on project performance, and it is not to analyse how to choose an appropriate organisation structure in detail. Besides, concerning the methodology of this paper, it also exists weakness. The integration of qualitative and quantitative analyse method is complex for the researcher to used. At the same time, it will take more time for investigations. Therefore, this paper might be improved in the future research, and then to enhance the empirical results.

7.7 Suggestions for organisation:

Relying on the research findings and limitations accounted, it is expected to give some suggestions to organisations that aimed at to improve their effectiveness and efficiency for their project, and avoid financial problems. In the beginning, the organisation should put their safety concerns as a top consideration, and conduct effective control system. This is due to the fact that not every employee is loyal, such as leeson in the Baring Banks. And the effective control system is able to avoid fraud within the internal organisation. Furthermore, all organisation should have made their own contingency plan when the problems occur. It will provide the method to deal with the irregularities and problems. Meanwhile, the organisation should strengthen their strategic auditing system. Auditing can be seen as an indispensable part of an organisation. According to Van Horne (1977), the different aspects of project needs the accurate financial analysis. The auditor should take their responsibility to check the accounts, reports and financial analyses in order to ensure the organisation is able to operate under healthy environment. The auditor should take care of the financial analysis. In addition, the company should hire the employee who has professional skills and honest characters. The project manager could get useful and loyal recommendation from the employee and then make a better decision for the company. Finally, according to Dunne, Stahl and Melhart (1978), the project manager has played a vital role in the designing of the organisation structure. This is because that the cognition of manager could affect their decision. (Bukszar, 2009). The project board and project manager should have a comprehensive understanding of their organisation structure and strategies, it is obvious that the project board and manager could rely on their understanding to find problems from their organisation structure and then to avoid the mistakes in the future, and make suitable strategies to attract customers and gain the competitive advantages. (Ruekert, Walker and Roering, 1985). Meanwhile, the project board also can transfer and change the disadvantages of organisation structure and strategies within their company. And finally, it make these weaknesses become useful part for the corporation.

7.8 Recommendation for further research:

The limitations of this paper have been discussed above, there are some recommendation to get more accurate results for further research. Firstly, the further research should increase the size of the sample. This is because that every researcher has their own subjective bias, utilising more sample size is able to decrease the research errors. More specifically, choosing Baring banks and Royal bank of Scotland is depending on the subjective bias of the researcher. It might get different results if the researcher selects other banks. Thus, increase the sample size could make theoretical results more professional and convincing. Secondly, there are many pieces of literatures about organisation structure, but it is not many knowledge about organisation structure design of the banks in the United Kingdom. The further research is able to use function of banks to deeply analyse the relationship between the bank structure and their performance. Moreover, the data about the financial information is difficult to collect. The financial data only can search for the financial and economic newspaper and journal, and the veracity of data could not be convinced due the data of financial crisis is too big. In terms of the method, the further research is able to utilise other methods to conduct their paper, the questionnaires and interviews are also useful for investigation. Finally, this paper was mainly focuses on investigating importance of the organisation structure within the bank industry. The future research can investigate other industry to explore the topic, such as the Construction Industry in the United Kingdom.


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