Bank of America rose from the merge beginnings where it was once named the Bank of Italy. The bank, at one time, nearly collapsed but miraculously survived due to the tenacity of its proprietor, Giannini. The Bank slowly grew with time by lending out money to its clients. It also reinvested and built more branches in other cities. The bank also deemed it fit to rebrand and change its name to the Bank of America. In fact, the growth process was so drastic and fast that come October 1945 the bank was the largest commercial bank in the world, dethroning giants like Chase National Bank.
The bank was also renowned for its impeccable management strategies, which made it one of the best managed firms in America for the next thirty years. Come the 1980s, this bank was operational all over the world with approximately 1100 branches in over 100 countries. However, in a mere 8 years the performance of the bank dropped making it one of the greatest losers in the market. Its stock performance drastically reduced. The firm’s financial position was so bad that they had to sell off some assets, cut the dividends, and sell off the firm’s head office. It was at this time that the last Giannini board member resigned due to frustration (Collins, 2009).
The drop of this bank has been alluded to several factors. The bank’s management and other high profiling ranks were highly paid, higher the conventional banker. The bank encouraged lavish lavishing, posh cars, and an esteemed social status quo of these employees. The bank relied on family hierarchy as a determinant of the qualification for top management.
The Five Stages of Decline
The initial stage in the growth any successful company is the hubris of success. This is the period of accumulated and increasing momentum. During this period, there are usually few competitors in the market. Managers may get away with wrong decisions and poor management practices during this phase. It is a period of bloated confidence of individual firms as they bloom rapidly. The second phase is usually characterized by a hunger for more power, profits, and public recognition. It is a period of over-reaching with companies literally chewing more than they can swallow. This may involve hiring of incompetent stuff, over-investing or investing in uncalculated risks (Collins, 2009).
. Alternatively, top management may opt to ignore professional consultancy given in a bid to make more money. This is especially because they are the majority shareholders and they stand to benefit the most from the profits. This ultimately leads to a rapid decline in the firm’s performance. It is usually very evident, even to the common public. The firm may try to recuperate by reinstating its prior disciplinary measures. This may involve the hiring of charismatic leaders and expecting them to carry out some miracles to revive the firm. However, this never works since success is dynamic and hence changes with time.
During the final stages, the employee morale is extremely low. Furthermore, the management may give up on the company at this time. Most opt to look for fallback plans such as reinvesting through selling of their shares in the company. It is almost impossible for a company to recover from this stage of decline. It is a period of poor publicity and a slow death into insignificance and extinction.
There are several ways firms can avoid declines that will render them extinct. Hiring of qualified personnel and constant performance appraisals may help improve the performance of companies. Internal audits may also help mitigate the losses that may accrue from bad investments. Companies should also have a department to monitor specifically growth and act independently in the event that the top management tries to intervene. This would ensure that such companies should have well documented constitution to promote independence and control (Jacob and Bergland, 2010).
Cause and Effect Diagram
Collins, J., (2009). How The Mighty Fall And Why Some Companies Never Give In. (2011). S.l.:
Jacob, D., Bergland, S., & Cox, J. (2010). Velocity: Combining Lean, Six Sigma, and the Theory
of Constraints To Achieve Breakthrough Performance: a business novel. New York: FreePress.