3. The change appears to be risky. RNB has built a successful business on the basis of local bank autonomy, allowing the local bank executives to develop products and services that fit the needs of their local customers. Local managers should be in the best position to determine how to improve customer satisfaction. The reduction of local autonomy will also likely have a negative impact on the motivation of the local managers and on the effectiveness of RNB’s management incentive plans.
The concerns about duplication of effort and loss of control are valid concerns, and it may be that for the bank to successfully implement new strategic initiatives, more top level control will be necessary. For example, if the firm wants to appeal to the type of customer that needs higher-level services of the type that would require coordination from a centralized office, or if the customers are large business which will need to deal with many of RNB’s local banks in a coordinated manner, then a greater emphasis on centralization would be advisable.