Bancolombia: Talent, Culture, And Value Creation Management in Mergers
Supporting evidence
BIC
Banco De Colombia
Conavia
Confinsura
Change leader
Analysis of case data
- Efficiency
Profitability
Alternatives
Alternative 1-Focus profitability and reducing cost-of-operations
Alternative 2- Recreating source of competitive advantage
Alternative 3- Franchising the rural branches
Decision criteria
Analysis of alternatives
Selection of alternative
Implementation
Exhibit I
Manifesto for Integration of Banco Colombia, Corfinsura, and Conavi
Exhibit II
Non-consolidated financial statements of Bancolombia Group
Bancolombia Group was successfully led by the outgoing CEO Jorge Londorio until his retirement in January 2011. Required by the terms of governance to get retired on reaching the age of superannuation, Londorio as well as the rest of the organization was anxious as to what direction will the company head towards under the leadership of incoming CEO Carlos Raul Yepes having a background cement industry. Although Londorio led the group into two biggest mergers of Colombia, mergers of Banco Colombia, Corfinsura, and Conavi and an unprecedented market share and reach for the group, the financial statements of the company, at the time of Londorio's retirement did not pose healthy signs. Having one of the weakest efficiency and profitability ratios in the industry, Yepes now had the responsibility of keeping the company intact culturally and administratively, as had been marvelously done by his predecessor, and also to increase profitability and efficiency of the company.
Three alternatives have been chalked as a strategic road-map for the incoming CEO. The first alternative requires Yepes to focus on profitability and reducethe cost-of-operations. Second alternative requires that the company recreatesthe source of competitive advantage by shifting to quality of operations rather than quantity. The third alternative for the management will be to franchise the rural branches of the bank, particularly the branches that underperform fromminimum profitability threshold. Third alternative has been identified as an optimal option as this would allow the company to maintain brand perception, employee morale, and strategic direction and still attain greater profitability and operational efficiency along with upfront cash-securities frompotential franchisees. An elaborate and phased implementation plan of the alternative has also been provided at the end of the report.
Problem statement
Bancolombia Group is a group is of companies comprised of Banco Colombia, Corfinsura, and Conavi. The group has undergone significant changes during the past one decade and has always pursued a growth strategy. With a multi-banking structure that offers corporate, commercial, and mortgage banking services, the group operates 741 offices across 186 municipalities and an elaborate workforce of 6300 people. The group also acquired Banco Agricola in 2007 that is leading financial conglomerate in El Salvador. With operational network now spread across Colombia, Spain, Brazil, Miami, Peru, Puerto Rico, Cayman, and Panama, Group Bancolombia is faced with a pressing issue of change in top leadership of the company following the corporate governance directive of Antiquian Entrepreneurial Group (AEG), the leading shareholder of Bancolombia that top executives should retire on reaching the superannuation age. Thus, the current CEO of Bancolombian Group, Jorge Londorio is required to retire in January 2011, the person that has turned the group into 10th largest financial institute of the world.
With such backdrop of AEG corporate governance requirement for Londorio to retire, 'the company is faced with the challenge of change in top leader of the company and accompanying uncertainty of change management with regards to leadership and compulsion of increasing efficiency and profitability of the company'. The company requires anticipating how the process of change may keep the company on track of change that Londorio has so successfully maintained during the last few years. There remain pressing issues for the expansion and operational efficiency of Bancolombian that the incoming CEO Carlos Raul Yepes is expected to address and keep the path of change management smooth as ever.
Justification
During the merger process, which Bancolombian called the 'integration' process, the Golden rules of Integration laid down by the executive team comprising of top managers of all three companies placed 'Employees' as the category at top of others for change management. It is the employees of an organization, top executives as well as middle and line managers thatexecute the mission plan. Employee talents, knowledge, aptitude, and attitude were regarded as most crucial part of integration. Since the group continuously pursues a growth policy to effectively compete in financial services market, it is expected that mergers and acquisitions as well...
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