Relationship and Resource Management in Operations

Chapter 2

Operations relationships in the

organization

Introduction

A

ny organization, however large or small, only thrives if there is a

sense of purpose, pride and contentment prevailing across it.

This idyllic situation is unlikely to be there on a constant or

permanent basis and will fluctuate as pressures and changes routinely

occur. Nevertheless a carefully structured organization that recog-

nizes the collective as well as individual input and issues is more likely

to be successful, and more likely to overcome short-term problems

than a disjointed group or business units however talented they may

be.

In the financial markets there is an environment that presents a very

real challenge to the managers. There is a mystique about money and

the financial markets in general often enhanced by both the positive

thought of being at the very heart of the financial process that drives

the domestic and global economy and the negative publicity of events

such as the Mirror Group pension scandal and rogue traders and

spectacular collapses of firms such as Enron. Then there are also the

highly publicized mega-salaries that can be earned. There is also a

variable level of business influenced by the economic outlook of

countries and continents that leads to often very long hours being

worked by many in what is a complex and diverse industry. Money,

and how it works, is intriguing to everyone so this volatile cocktail

makes the financial markets an exciting and potentially hugely

rewarding occupation and attracts recruits from a wide-ranging

background. In reality there is a lot of routine, some very tired people

and not always the golden egg everyone assumes there will be. This

environment described above also includes a whole plethora of mini-

challenges that make relationship management one of the most

important roles of the Operations manager.

Structures and relationships

As we have already said, there are no set structures for organizations

although different types of businesses will have generic structures. A

retail bank has a structure quite different from that of a merchant

bank and where financial markets are de-regulated and we have

investment banks there will be several different structures within the

same organization. Although structures may differ, the functions at a

high level do not and so we can have the type of generic structure we

looked at in Chapter 1.

Simplistically we have a dealing, investment or trading function or

functions and a support function. Within the dealing, investment and

trading function, or ‘front office’ as it is usually termed, we have

principal and client activity. The client activity may be further broken

down into institutional clients, private clients, corporate clients and

retail (see Figures 2.1 and 2.2).

Case study

We can look at a hypothetical structure in a global investment bank,

Global Bank Inc., to illustrate the complex nature of the business and

how the structure within the bank creates a series of support or

Operations functions. Structures are usually vertical or horizontal

and are related to considerations such as product, client, market,

Relationship and Resource Management in Operations18

Debt

Equity

Derivatives

Domestic

International

Corporate

debt

Government

debt

Junk

bonds

Domestic

Domestic

International

Money mkts/FX

Exchange

traded

OTC

Warrants

International

Figure 2.1 Principal trading structure

Retail

Domestic

institutions

International

institutions

Private

clients

Internet

brokerage

Funds

Corporate

clients

Funds

Offshore

funds

Corporate

clients

Relationship and Resource Management in Operations20

geographical location, etc. A head office or similarly termed function

will exist and, depending on the diversity of the company’s business

and its global reach, there will be one or more branch, subsidiary or

part-owned businesses in other locations. If you get hold of a copy of

a major bank’s Annual Report you will see just how many branch and/

or subsidiaries and part-owned businesses make up the ‘Group’.

Many of these companies are established for legal or tax reasons.

Some are directly controlled from the head office, others are semi-

autonomous and occasionally fully autonomous. The amount of

interaction between these various companies may be significant or

non-existent. The core business functions do interact: for instance,

the fund management business will often utilize various services and

products supplied by the principal trading arm of the group such as

research or administration.

Within Global Bank Inc. there are several key business areas:

䊏 Trading

䊏 Sales – Retail

䊏 Sales – Institutional

䊏 Corporate Finance

䊏 Operations and Administration

Figure 2.2 Client/retail structure