Organizational Structure Impact: CBA's Innovation and Performance

This report examines the organizational structure of the Commonwealth Bank of Australia (CBA), focusing on its vertically integrated structure and its impact on innovation and overall business performance. The report highlights how CBA's structure facilitates rapid communication and decision-making, contributing to its success in developing innovative solutions like its top-rated banking app. It also explores the bank's digital sustainable innovation model and its use of tools like "Unleashing Innovation" to encourage employee participation in idea generation. The analysis reveals that CBA's organizational structure supports agile practices and allows for efficient resource allocation and quicker problem-solving. The study concludes by discussing the positive impact of CBA's structure on its financial performance, including increased customer accounts and business lending, while also acknowledging the challenges of maintaining a competitive edge in the face of disruptive innovations from startups and global giants. The report suggests areas where CBA can improve further, particularly in the area of AI-driven predictive banking.

Running head: ORGANIZATIONAL STRUCTURE
The Impact of Organizational Structure on Management Innovation and Performance
[Commonwealth Bank of Australia]
Name of the student:
Name of the university:
Author note:

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Executive summary
Innovation practices have become an essential part of modern organizations. It provides
them opportunities to enhance their competency level and produce better performance
than the current. This study also serves a similar purpose as it describes the
effectiveness of the organizational structure of the Commonwealth Bank of Australia
(CBA) concerning its innovating capability and its overall performance. As identified in
the study, CBA practices a Vertically Integrated Structure. The structure helps CBA to
form a network of people who communicate faster and respond quickly to a situation
with appropriate decisions. The banking app offered by CBA tells the fact. It is being
recognized as the best banking app in Australia. CBA is also good at identifying where
they still need to work. As the study identifies, CBA needs to show an utmost
attachment with AI-Driven Predictive Banking. This can be helpful for CBA in its intent
to serve its customers with more relevant products and services.

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Table of Contents
Brief introduction and background information..................................................................3
Section 1: Overview of the structure and strategies, and possible reasons.....................3
Section 2: Impact on management innovation..................................................................5
Section 3: Impact on overall business performance.........................................................8
Recommendation on how to improve innovation and performance..................................9
Conclusion.......................................................................................................................10
References.......................................................................................................................11

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Brief introduction and background information
The Commonwealth Bank of Australia (CBA) is a multinational corporation
having its business presence across New Zealand, the United States, the United
Kingdom and Asia. It offers services in banking and financial areas. Founded by the
Australian government in 1911 it became fully privatized in 1996. It is one of the big four
banks in Australia. It first appeared in the Australian Stock Exchange in 1991
(Commbank.com.au 2019).
Studies suggest that a company’s capability to innovate and its overall
performance depend much on its organizational structure. The organizational structure
does influence a company in numerous ways; however, the most evident impact can be
observed along with its organizational communication practices and so, its decision-
making efficiency (Adner 2017). When decision-making is faster changes will take place
in a shorter time. Resource allocation will be quicker. Moreover, the problem-solving
strategy could be identified in a few time and implemented as well (Albers,
Wohlgezogen and Zajac 2016).
This study also serves a similar purpose. The study assesses the efficiency of
the organizational structure practiced at CBA. The findings of the assessment will be
used in recommending improvement solutions to CBA.
Section 1: Overview of the structure and strategies, and possible reasons
CBA offers banking and financial services in both B2B and B2C format of
business. it has subsidiaries located in various parts of the world such as in New

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Zealand, Asia, the United States and the United Kingdom. The organizational structure
is so designed that it helps to offer services in four distinct ways. These are retail
banking services, wealth management, premium business services and executive
leadership. On a broader aspect, CBA applies and practices a “Vertically Integrated
Structure”. The members in CBA from top to the bottom are situated on this structure in
the form of a network (Commbank.com.au 2019). Indeed, the structure is highly
productive if a few studies on the effectiveness of organizational structures are to be
considered. Studies suggest that there are four behaviors found in companies that
mostly influence innovation. These are Equity Fraction, Management Span, Fitness
Ratio and Salary Growth. Out of these factors ‘Fitness Ratio’ and ‘Management Span’
show the direct linkage with a company’s communication efficiency and its task
allocation capability. When there is frequent reporting from the executives of a company
the occurrence of possible communication gap will also drop. Moreover, effective
communication between the concerned departments is needed to allocate tasks to the
right person and at the most appropriate time (Commbank.com.au 2019).
The contents covered as in the above paragraph shows that flow of
communication should be at a faster rate, so that, decision-making is quicker. Indeed, a
“Vertically Integrated Structure”, the one which is practiced at CBA promotes effective
communication at a faster rate. It does so by eliminating the middleman, which in other
way helps to save on money. It also speeds up the communication process (Naranjo-
Valencia, Jiménez-Jiménez and Sanz-Valle 2016). The other good thing about CBA’s
structure is a fact that it strives to operate in a networked environment, which allows its
members to be in close communication together. In this way, it is also able to facilitate

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faster communication between the closely connected peers (Ralston et al. 2015). These
are a few essences of its organizational structure that work for them in numerous ways.
Hence;
 CBA due to its organizational structure and due to practicing it efficiently can
facilitate the appropriate matching of skills in projects handling;
 CBA’s executives can connect to their people more frequently;
 It makes the difference as their style of communication and the way of presenting
things are far much different from officers sitting at comparatively lower ranks;
 Decision-making is, therefore, quicker at CBA. It can adopt innovative strategies
and implement effectively by knowing the resource requirement and by allocating
it with fewer hurdles.
A detailed discussion on the impact of CBA’s organizational structure on its
innovation capability will be discussed in the later section of this task.
Section 2: Impact on management innovation
CBA has been exceedingly well in terms of innovation. One of the examples of its
innovation excellence is its banking app, which tops the list of Australia’s leading
banking apps. CBA could manage to be ahead of other Australian banks in terms of
providing the best experience on a banking app as it enjoys an agile organizational
culture. It is due to this CBA can operate at a rapid speed. Many of its employees have
been the parts of startups. They bring new ideas to CBA. Hence, CBA has easy access
to solutions to be used in solving problems and strategies to be used in introducing an

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innovation. Since CBA follows a vertically integrated structure it can utilize these ideas
to make prompt decisions. It is their ability to access and implement new ideas that
keep it ahead of other Australian banks in terms of innovation (Lomi, Tasselli and Zappa
2017).
CBA is one of the very few companies that practice a Digital Sustainable
Innovation Model. CBA ensures that its members from bottom to top are aligned to this
model. All of them gets sufficient room to experiment. Their initiatives are given
importance. It appears as if CBA manages to empower its people and encourage them
to participate in the idea generation process (Commbank.com.au 2019). CBA has
created a tool, “Unleashing Innovation” that invites people to share their ideas to
overcome the challenges faced by customers. The tool helps CBA to access a wide
variety of ideas and explore it as well. Employees working at CBA can see the
conversion rates for ideas they unleashed using the innovation tool. It makes them feel
good and being valued. According to Butler and Wilson (2015), when employees are
given values for their contribution their sense of belonging to work gets increased. Their
rate of interest in doing a task is benefitted. They start liking their job and learn new
skills to achieve more milestones. The appreciation that works wonder in favor of
employees is not productive in companies where effective communication is a
challenge. Instead, appreciation happens at a very faster rate at CBA. The reason CBA
can manage these things faster is its ability to facilitate frequent reports from its
executives. Also, CBA can foster faster communication between its employees due to
being structured in a vertically integrated network (Commbank.com.au 2019).

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CBA practices a lean methodology to promote innovation. However, it is more
difficult to implement a practice than to devise it. On the contrary, CBA effectively
manages these things. What it does it attracts its people to participate in the idea
generation process. CBA allows each one of them to bring new ideas. They are given
four long weeks to explore their ideas. Opportunity is also allowed on pitching on the
funding need of the idea (Commbank.com.au 2019). It is how CBA can encourage
significant participation from its employees in the idea generation process. It is also how
CBA can align its people to its lead startup methodology (Commbank.com.au 2019).
There are reasons, which help CBA to align its people successfully with its several
innovation tools, models and methodologies. From effective organizational leadership to
its organizational structure all contribute to this agile workplace culture. CBA does not
just ask people for new ideas but promotes them at a much bigger platform. It allows its
people to develop newly proposed ideas. During the development process, CBA
ensures effective monitoring of the process to avoid any setback happened to the idea
(Child 2015).
Every company has its reasons for success and CBA has its own. CBA
effectiveness in introducing innovation has been its efficiency to access a wider range of
new ideas. It facilitates these ideas using innovation tool, models and lean
methodology. However, apart from these strategies, CBA can accelerate processes that
hinder an implementation has worked for it. Things that delay an implementation are
many such as slow-decision-making, ineffective communication and others. CBA
effectively controls its activities concerning a decision and communicating important
things. The communication has to travel fewer levels due to a fact that CBA manages to

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cut on the levels by practicing a vertically networked structure (Luhmann 2018). Hence,
the decision-making is faster and so, the decision-making. The effectiveness of the
organizational structure in terms of innovation has sufficient evidence in CBA.
However, CBA still has to travel a distance in furthering its worth in doing
innovation. Currently, CBA just offers a banking app. Other than this CBA does not have
too much to offer. CBA will soon introduce CBAX app, which will further users’
experience of banking. With this users will also be able to share their views on services
offered by CBA. In case they have any query will be able to connect to the concerned
department faster using the app (Butler and Wilson 2015). Undeniably, CBA faces the
heat of corporate innovation from both new startups and global giants. The startup
companies make things difficult with a disruptive innovation they bring to the industry.
On the other hand, global giants use their wide stretched network to achieve
competency through better innovation (Albers, Wohlgezogen and Zajac 2016).
Section 3: Impact on overall business performance
As found in section 2, CBA is one of the very few banks of Australia to manage
innovation efficiently. It has tactics to remain innovative in the long-term. The use of a
digital business model, the innovation tool and deployment of lean methodology have
proved profitable to CBA. The profits can be measured in several perspectives. It enjoys
having the best banking app in the country. The impact of CBA’s organizational
structure is also observable in the form of values it delivered to its stakeholders. Hence,
the number of new personal account opened in FY19 is 1.2 million. New lending made

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for Australian businesses was $36bn (Commbank.com.au 2019). Opening personalized
banking accounts requires manpower and technological resources to monitor the
transactions and provide security to each transaction. CBA prides to manage all these
pieces of stuff with its vertically integrated structure of people. The communication is
faster that allows resolving customer query quickly and handling their complaints as
well. Decision-making due to such organizational structure is robust. CBA prides to
make right decisions at the appropriate time. Such robustness in decision-making helps
to implement new ideas with increased efficiency (Lomi, Tasselli and Zappa 2017).
CBA is one of the most trusted Australian banks for education loan. The service
has benefitted more than 427,500 students as they could avail “Start Smart”. Start smart
is financial support given to aspirants in the form of education loans. Reports suggest
that CBA has invested $5.1bn in low carbon financing in FY19 (Commbank.com.au
2019). Due to being able to make faster decisions CBA enjoys high diversity at the
leadership positions. Approximately 39.1% of women work in leadership roles. A close
to 73.9% of its people enjoy work flexibility (Commbank.com.au 2019). CBA is also
ensuring long-term sustainable returns to its shareholders (Commbank.com.au 2019).
CBA could ensure all these things because it enjoys an agile workforce. The workforce
has people both skilled as well as creative. The organizational structure of CBA has
allowed it making appropriate decisions, communicating the changes efficiently and
forming a network of people who finds enough opportunity to explore their creativity.

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Recommendation on how to improve innovation and performance
Based on the findings of the discussion, it can be said that CBA should enhance
its innovating capability by going for AI-Driven Predictive Banking. CBA already prides
to offer the best banking app in Australia. It is constantly looking to develop a more
interactive relationship with customers to know what best can be offered to them. AI-
driven banking will help in consolidating all data both internal and external and building
predictive profiles of customers in real-time. More relevant offers and other services can
be offered to them.
Conclusion
To conclude, it can be said that the organizational structure has proved
beneficial for CBA in terms of doing innovation and its overall business performance.
The vertically structured network of people has enabled CBA making quick decisions,
communicating effectively, resolving queries at a faster rate and others. CBA is one of
the very few Australian banks to have managed innovation effectively. However, it
needs to go a long distance. CBA should look to AI-Driven Predictive Banking to
improve its services.

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References
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Albers, S., Wohlgezogen, F. and Zajac, E.J., 2016. Strategic alliance structures: An
organization design perspective. Journal of Management, 42(3), pp.582-614.
Butler, R. and Wilson, D.C., 2015. Managing voluntary and non-profit organizations:
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Child, J., 2015. Organization: contemporary principles and practice. John Wiley & Sons.
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https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/
annual-reports/CBA-2019-Annual-Report.pdf [Accessed 23 Sep. 2019].
Commbank.com.au 2019. Personal banking including accounts, credit cards and home
loans - CommBank. [online] Commbank.com.au. Available at:
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Network Thinking (pp. 65-85). Emerald Publishing Limited.
Luhmann, N., 2018. Organization and decision. Cambridge University Press.
Naranjo-Valencia, J.C., Jiménez-Jiménez, D. and Sanz-Valle, R., 2016. Studying the
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