An Analysis of Leading Innovation and Cultural Changes at ICBC Bank

This report provides a comprehensive analysis of Industrial and Commercial Bank of China (ICBC), examining its management structure, organizational culture, financial performance, leadership, and growth strategies. The report delves into the bank's mission, vision, and values, highlighting its commitment to customer service, shareholder returns, and societal contributions. It reviews the bank's financial performance, including key metrics such as net profit, return on assets, and operating income, and analyzes its growth in assets, loans, and investments. The report also explores ICBC's leadership approach and its strategies for innovation and market competitiveness, referencing relevant theories such as managed-growth and innovative-growth strategies. Furthermore, the report discusses benchmarking strategies and concludes with recommendations for ICBC's management, summarizing the key findings and providing an overview of the bank's operations and industry position.

Running head: LEADING INNOVATION AND CULTURAL CHANGES
Leading Innovation and Cultural Changes
Name of the Student
Name of the University
Author’s Note

1LEADING INNOVATION AND CULTURAL CHANGES
Executive Summary
Industrial and Commercial Bank of Chine Limited is the largest bank in China; and its
management structure, leadership style, organizational culture and growth strategies
have helped it to register good performance over the years. The bank has also
performed well in terms of financial performance perspectives.

2LEADING INNOVATION AND CULTURAL CHANGES
Table of Contents
1. Introduction...............................................................................................................3
2. Literature Review......................................................................................................4
3. Management Structure and Cultural Perspective....................................................6
3.1 Management Structure.......................................................................................6
3.2 Cultural Perspective............................................................................................7
4. Financial Performance..............................................................................................7
5. Leadership and Growth Strategy..............................................................................8
5.1 Leadership..........................................................................................................8
5.2 Growth Strategy..................................................................................................9
6. Theoretical Framework and Its Application..............................................................9
7. Benchmarking and Strategy...................................................................................11
8. Recommendation....................................................................................................12
9. Conclusion and Summary......................................................................................12
10. References...........................................................................................................14

3LEADING INNOVATION AND CULTURAL CHANGES
1. Introduction
Industrial and Commercial Bank of Chine Limited (ICBC) is a multinational
bank in China and it is regarded as the largest bank of the country. ICBC was
established on January 1, 1985 and it went into complete restructuring to a joint-
stock limited company on October 28, 2005 (icbc-ltd.com 2020). ICBC has its name
listed in two major stock exchange; they are Shanghai Stock Exchange and The
Stock Exchange of Hong Kong Limited. ICBC has been able in registering its name
among the leading banks all over the world with the help of its continuous effort and
stable development; and the whole world knows ICBC for its diversified business
structure, excellent customer base, strong capabilities of innovation and market
competitiveness (icbc-ltd.com 2020). The management of ICBC believes that
providing better services is the most important mean to ensuring further business
developments; and thus, it prefers to create value through providing better services
while providing wide-ranging financial products to 7,033 thousands corporate
customers and 607 million personal customer. Another major positive side of ICBC is
the continuous integration of corporate social responsibilities with the assistance of
its development strategy along with its operation as well as management strategies
(icbc-ltd.com 2020). In addition, ICBC has been receiving major recognition in
different aspects such as the promotion of inclusive finance, providing support to the
reduction of poverty, protecting the environment as well as resources and
participating in different public welfare related initiatives and programs. The
management of ICBC always keeps in mind its mission and vision to serve the real
economy with the core business so that the economy of the country can grow. The
bank has been continuously improvising its capability to control and mitigate risks
through undertaking a risk-based approach. Major commitment of ICBC can be seen
in looking for innovation while maintaining the stability of the overall business
operations (icbc-ltd.com 2020).
The main aim of this report is the analysis and evaluation of different aspects
associated with ICBC. There are certain sections of this report. The first section
provides the introduction of ICBC by discussing its operations, industry and other
activities. The next section of the report provides a short literature review on the
associated topics of report such as management structure, corporate culture,
financial performance, leadership strategy of business, growth strategy,

4LEADING INNOVATION AND CULTURAL CHANGES
benchmarking strategy and others. The next part sheds light on the management
structure of ICBC; this part of the report also discusses about the corporate cultural
perspective in the chosen bank. The next part of the report discusses about the
recent financial performance of ICBC through the analysis of the provided financial
information in the annual report. After that, this report analyses crucial aspects of the
leadership of the company and discusses about the strategies adopted by it to
ensure business growth. The next part involves in theoretical framework of the
related topics along with its application in the context of ICBC. The next part
discusses about the benchmarking strategy of ICBC for the purpose of business
development. Lastly, the report ends with suitable recommendation to the
management of ICBC while providing a conclusion as well as overall summary of the
report.
2. Literature Review
Selection of appropriate organizational structure leads to organizational
success. Four types of theories are there for explaining the management structure in
the companies; they are classical organisation theory, neoclassical organisation
theory, contingency theory and systems theory. Classical organization theory was
developed for bringing together scientific management, bureaucratic theory and
administrative theory. The main focus of this theory is to get the best people and
equipment while scrutinizing each task associated with production (Bybee 2013). As
per the concept of neoclassical theory, organizational success depends on a
cohesive environment where the subordinates accept the managerial authority; and
it is needed to maintain the equilibrium. As per contingency theory, it is not possible
to avoid the conflicts but these conflicts can be managed effectively (Van de Ven,
Ganco and Hinings 2013). Systems theory states that there is interrelation among all
part of an organization and the changes in one area can affect multiple parts of the
same organization.
In a business organization, leadership can be assessed with the help of five
major theories; they are great man theory, trait theory, contingency theory,
situational theory and behavioural theory. As per the concept of great man theory,
leaders are born with jut the appropriate abilities and traits to lead; and some of
these traits are charisma, confidence, communication skills, social skills and
intellectual skills (Sethuraman and Suresh 2014). Therefore, the best leader are not

5LEADING INNOVATION AND CULTURAL CHANGES
made, they are born. Similarity of this theory can be seen with trait theory which is
established on the characteristics of both successful and unsuccessful leaders.
Utilization of this theory can be seen in effectively predicting leadership. Contingency
theory is developed on the principle that the same leadership is not applicable in all
the situations (McCleskey 2014). This theory is also similar with the situational theory
which states that no one leadership style replaces others. This theory is based on
the belief that leadership largely depends on the present situations in hand. As per
the concept of behavioural theory, effective leadership is the outcome of different
learned skills; and thus, theory is based on the actions and behaviours of the
leaders.
Managed-growth theory and innovative-growth theory are two key theories
that explain the business growth of the companies. The prime focus of managed-
growth is to achieve market and cost position superior to the competitors by
employing better management and planning for achieving the shareholders’ value
(Kowalkowski et al. 2015). Innovative-growth strategy influences strategic innovation
for driving profitability growth. Innovative businesses are specialized to be different
from the competitors, either strategically, or product wise, or both (Bello 2014).
Four types of benchmarking strategies can be seen within the business
organizations; they are internal benchmarking, competitive benchmarking, functional
benchmarking and generic benchmarking. Internal benchmarking is a common
practice where the superior performance of a branch or department of a company is
used as an example for all others doing likewise (Claro and Kamakura 2017). In
competitive benchmarking, the business practices of a company are re-evaluated by
using the performance of its primary competitors as example (Attiany 2014).
Functional benchmarking involves in evaluating a company’s performance by using
the performance of its non-competitor organization as example. Under generic
benchmarking, business performance of an organization is decisively compared with
the other companies in the same industry having superior performance.
Organizational culture includes behaviours and values that lead to unique,
social and psychological environment of a company. Organizational culture creates
key influence on the way of interaction, creation of knowledge, resistance of changes
and knowledge sharing (Jerome 2013). The presence of different models can be

6LEADING INNOVATION AND CULTURAL CHANGES
seen for assessing the culture of an organization; such as Hofstede model, Edgar
Schein model, Daniel Denison model, Gerry Johnson model and others. These
models provide different theories on organizational culture that are applicable in
different organisations. Organizations tend to adopt different corporate cultures
based on their business aims, objectives and core operations (Weare, Lichterman
and Esparza 2014). These aspects are required to be considered while assessing
the organizational culture of a company.
3. Management Structure and Cultural Perspective
3.1 Management Structure
Figure 1: Management Structure of ICBC
(Source: v.icbc.com.cn 2020)
It can be seen from the above table that the organizational structure of ICBC
is divided into two parts under the shareholders’ general meeting; they are Board of
Directors and Board of Supervisors; and these two together forms the senior
management team of the bank (icbc-ltd.com 2020). There are six committees under
the Board of Directors; they are Risk Management Committee, Nomination
Committee, Strategy Committee, Compensation Committee, Audit Committee and
Related Party Transactions Control Committee. Board of Directors of ICBC
segregate the responsibilities into six departments; they are Marketing Management

7LEADING INNOVATION AND CULTURAL CHANGES
Department, Profitability Units, Risk Management Departments, Comprehensive
Administration Departments, Supporting Departments and Directly Controlled
Institutions (icbc-ltd.com 2020). The main departments under Board of Supervisors
are Corporate Banking Promotion Committee, Retail Banking Promotion Committee,
Institutional Banking Promotion Committee, Investment Banking Promotion
Committee, Internet Finance Promotion Committee, Asset and Liability Management
Committee, Risk Management Committee, Business and Product Innovation
Management Committee, Information Technology Management Committee and
Financial Assets Service Management Committee (icbc-ltd.com 2020).
3.2 Cultural Perspective
The corporate culture of ICBC consists of three main aspects; they are
Mission, Vision and Values. The company has developed the corporate culture of
providing excellence for its customers (icbc-ltd.com 2020). In the mission statement,
the four main aims of ICBC are to provide excellent services to the clients, to
maximise the shareholders’ returns, to ensure success for its organisational people
and to ensure largely contribute to the betterment of the society. The vision of ICBC
is a major part of its corporate culture (icbc-ltd.com 2020). The vision of the bank is
to develop modern and world-class financial institution in the presence of global
competitive through complying with the principles delivering excellent innovative
products and services. ICBC believes that integrity leads to prosperity. The five
major values on which the operation of ICBC is situated are Integrity, Humanity,
Prudence, Innovation and Excellence (icbc-ltd.com 2020).
4. Financial Performance
The financial year of 2018 has been a good year for ICBC since the banks
has registered good numbers in terms of overall financial performance. In this year,
ICBC continued to improve its service capabilities for the real economy while
consolidating the foundation of management and operations. The overall profitability
structure has been optimized while increasing its control activities and risk
precautions. ICBC has been able in achieving the desired sustainability in terms of
quality and benefits (icbc-ltd.com 2020).
In the year 2018, the reported amount of net profit by ICBC is RMB298,723
million which is 3.9% more than the previous year’s figure of RMB287,451. 1.11% is

8LEADING INNOVATION AND CULTURAL CHANGES
the return on total assets and 13.79% is the return on weighted average equity
(v.icbc.com.cn 2020). ICBC has also registered a 7.3% growth in operating income
that is from RMB675,654 million to RMB725,121 million; and the main reasons
contributing this increase are increase in interest-generating assets and net interest
margin (v.icbc.com.cn 2020). There has been a 9.7% increase in the net interest
income of ICBC in 2018; that is from RMB522,078 million in 2018 to RMB572,518
million in 2018 (v.icbc.com.cn 2020). However, a fall of 0.6% can be seen in the non-
interest income of the bank in 2018 that is from RMB153,576 million in 2017 to
RMB152,603 million in 2018.ICBC has registered an increase of 4.3% in the
operating expenses amount to RMB194,203 million in 2018 from RMB186,194
million in 2017. There is a 4.5% reduction in the income tax expenses of ICBC from
RMB77,190 million in 2017 to RMB73,690 million in 2018 (v.icbc.com.cn 2020).
ICBC has registered increase in the total assets in the year 2018 by 6.2%;
that is from RMB26,087,043 million in 2017 to RMB27,699,540 million in 2018
(v.icbc.com.cn 2020). Moreover, there is increase in total loans and advances to the
customers have increased by 8.3% in 2018 from RMB14,233,448 million in 2017 to
RMB15,419,905 million in 2018 (v.icbc.com.cn 2020). Investments have grown at a
rate of 17.3% from RMB5,756,704 million in 2017 to RMB6,754,692 million in 2018.
At the same time, there is a 5.9% growth in the total liabilities of ICBC in 2018 from
RMB23,945,987 million to RMB25,354,657 million in 2018; and the key reasons for
this are the 81.7% increase in due to customers, 7.1% increase in due to banks and
other financial institutions, 4.4% increase in repurchase agreements, 2.2% increase
in debt securities issued and 4.6% increase in other liabilities in 2017 as compared
to the previous year (v.icbc.com.cn 2020).
5. Leadership and Growth Strategy
5.1 Leadership
The leadership team of ICBC mainly consists of the Board of Directors and
Board of Supervisors of the bank. The leadership team of ICBC has ensured that the
bank strictly adhere to all the regulatory requirements in the areas of credit risk
management, diligent fulfilment of the established strategies and business
objectives. The leadership team of ICBC is responsible for the execution of
strategies and overall policies of the organization (v.icbc.com.cn 2020).

9LEADING INNOVATION AND CULTURAL CHANGES
5.2 Growth Strategy
ICBC has placed a high significance and value on the development and
implementation of growth strategies. Business transformation is the main growth
strategy adopted by ICBC. As a part of this strategy, ICBC has developed and
implemented a strategic framework of a 3-year plan. Under this strategy, ICBC relies
on the real economy by focusing on stable quality, structural adjustment, pursuit of
innovation and transformation promotion (icbc-ltd.com 2020). Three major parts of
this growth strategy of ICBC are shown below:
1st Stage –ICBC will involve in the implementation of three key projects and
undertake the initiatives to ensure improvements in the overall quality. The three key
projects are reconstruction of credit management foundation, comprehensive
disposition of non-performing loans and improvements of the risk management
process (icbc-ltd.com 2020).
2nd Stage –ICBC will undertake the implementation of four key structural
adjustments regarding its assets, liabilities, earnings and channels and will build a
corporate framework that matches the new market as well as new types of business
of the bank (icbc-ltd.com 2020).
3rd Stage –ICBC will implement innovative transformation in five different field; they
are retail banking, IT-based banking, corporate banking, mega asset management
and integration and internationalisation. This will develop the strategic foundation for
the banks for stable growth in profit along with advantage in core competition (icbc-
ltd.com 2020).
4th Stage –ICBC will extend the institutional mechanism reform with the intention to
lay a solid foundation for transformation, growth and development (icbc-ltd.com
2020).
6. Theoretical Framework and Its Application
Earlier part of the discussion shows that the Board of Directors and Board of
Supervisors reside at the top of the organizational structure of ICBC; and the other
departments are under this senior management team of the bank. This particular
management structure of ICBC can be explained in the lights of classical
organizational theory that is all about getting the best people and equipment for

10LEADING INNOVATION AND CULTURAL CHANGES
performing the tasks. As per this theory, the shareholders of ICBC have chosen the
best people in the teams of Board of Directors and the Board of Supervisors; and
these two boards have selected the best people for other departments of the bank.
This helps in creating an overall equilibrium in the management structure of the bank
(Nonaka and Toyama 2015).
The above discussion also shows that ICBC has developed such an
organizational culture where its mission is driven by providing excellence to its
customers through providing quality products and services. ICBC has corporate
values like integrity, humanity, prudence, innovation and excellence that help in
developing such an organizational environment where ethics and values are
provided with utmost priority. On the overall basis, ICBC has been able in
establishing an effective organizational culture within their business (Weare,
Lichterman and Esparza 2014).
The above discussion shows that ICBC has an effective leadership team in
the Board of Directors and Board of Supervisors. Both of these boards include
members having effective skills, knowledge and expertise on different aspects to
manage a business. They have been appointed by the shareholders from different
organizations. This can be explained in the light of behavioural theory of leadership
which states that effective leadership is the outcome of learned skills, knowledge and
expertise; and it forms the effective leaders all over the world. The same can be
seen in case of ICBC as the leaders of the banks are fully skilled that makes them
good leaders (Shanafelt et al. 2015).
Earlier discussion discusses about two types of growth strategies that are
managed-growth strategy and innovative-growth strategy. The management of ICBC
has undertaken a three-stage growth strategy of their business where their focus is
on employing effective management while ensuring the presence of innovation in the
business. This is a crucial aspect that indicates towards the employment of both
managed-growths as well as innovative-growth strategy by the bank. The main aim
of ICBC is to ensure the increase in business growth and profitability through the
inclusion of innovation in every necessary aspect of the business. This will help the
bank in gaining the required competitive advantage in the banking industry (Wright
and Stigliani 2013).

11LEADING INNOVATION AND CULTURAL CHANGES
The benchmarking procedures adopted by ICBC shows that the bank has
adopted the strategies of internal benchmarking and functional benchmarking in
different aspects of their business. Internal benchmarking strategy has been adopted
by the bank in the development of dividend policy as the bank benchmarks its own
dividend percentage to provide the next year’s dividend to the shareholders. In other
aspects such as interest rate, internal control, short-term employee benefits and
financial products as services, ICBC has followed the policies and procedures of
different government agencies and other non-competitor agencies (Tian and
Ketsaraporn 2013). This shows the adoption of generic benchmarking strategy by
the bank.
7. Benchmarking and Strategy
ICBC has the strategy of benchmarking in different aspects of their financial
and business operations. These are discussed below:
1. ICBC has upgraded its financial services for small and micro enterprises and
private enterprises through benchmarking to the requirements of high-quality
economic developments (v.icbc.com.cn 2020).
2. ICBC has the strategy of benchmarking in order to benchmark the interest
rate. Benchmark interest is the rate of interest of one-year time deposits
applied by the People’s Bank of China on each of the value date in each
interest-bearing period (v.icbc.com.cn 2020).
3. ICBC has maintained the efficiency as well as effectiveness of its internal
control by considering the benchmark data. More specifically, the Board of
Directors of ICBC has undertaken a self-assessment on the internal control
effectiveness as per the Basic Standard for Enterprise Internal Control along
with its supporting guidelines issued by five ministries and commission that
include MOF, the Guidelines for Internal Control of Listed Companies that
SSE issue and the relevant regulatory requirements of CBIRC (v.icbc.com.cn
2020).
4. The strategy of benchmarking is also used by ICBC for determining the short-
term employee benefits along with the post-employment benefits-defined
contribution plans. In case of the latter, government’s plans are used as
benchmark (v.icbc.com.cn 2020).