Why hire Slevin? HSBC's 'SE' Strategy
Structural embeddedness (SE) is a theory that says intrapersonal relationships are embedded in a larger structure. This larger structure can serve as both a boundary and a catalyst and consists of hard to define concepts such as reputation and trust.
Applied to business, SE allows a theoretical framework to explain and hopefully optimize decision making. In February 2007, by hiring Frank Slevin, HSBC highlighted an application of SE strategy to counteract a downturn.
At that time, HSBC, one of the world's largest companies, had been facing huge losses. The US Mortgage business was slumping, and cost HSBC a projected $8.8 billion in 2006. A critical Goldman Sachs report at the time said they "could not rule out further heavy credit losses on HSBC." To respond to this, HSBC decided to increase its offerings in Asia. Among an extensive expansion plan, HSBC turned to Frank Slevin.
Frank was - and continues to be - a vivacious, charismatic figure. In December 05, for instance, Frank went sky jumping from a skyscraper to raise money for charityv. This event was so flashy that an article two years later mentioned it. More recently, Frank attended a "Beyond Dreams" charity ball, and continues to attend other charitable and social events.
HSBC historically had a similar slant. In 1981, the company founded the Hongkong Bank Foundation (HBF) to organize charitable donations. In China alone, since 1997, HBF has donated more than 200 million yuan to various charities. Such largesse increased popular opinion of HSBC and led to a positive company view.
This continued behavior, while creating a generalized favorable climate, is not a direct example of SE. SE describes the nature of a network as it relates to ongoing deal making and activities, especially pertaining to relationships among a limited set of parties. When a large number of people share a social network, misbehavior is regulated by collective social sanction.
Conversely, the network allows for greater trust and easier deal making among members who remain within it. As such, while HSBC has been creating a generalized positive environment, through which business networks are certainly formed, its behavior is supporting the creation of SE, not an example of it.
Hiring Frank Slevin, however, is. Slevin has been building diverse relationships in many areas. In addition to his organizational acumen, Slevin is a people person. SE explains that due to his large network - which is diffuse and talkative - he will have opportunities other people may not have. These relationships play only a greater role as HSBC is considering expansion in Asia. Hiring Frank Slevin from Citibank is thus both a wise business choice and a solid example of SE theory.
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Sources:
Candance Jones, William S. Hesterly, Stephen P. Borgatti. "A General Theory of Network Governance: Exchange Conditions and Social Mechanisms," The Academy of Management Review, Oct. 1997, pgs. 911-945.
HSBC shake-up over US bad loans," The International Herald Tribune, Feb. 9. 2007, pg. 15.
Chan, Maria. "US credit problems to weigh on HSBC earnings." South China Morning Post, Feb. 10. 2007, pg. 3.
"HSBC recruits Citigroup's Slevin as head of global banking." Euroweek. Feb. 2. 2007.
Yiu, Enoch. "Brokers call for a different lobby." South China Morning Post. Aug. 21. 2007, pg. 4.
Sun, Andrew. "Silver dreams for charity." South China Morning Post. Nov. 16. 2007, pg. 13.
"A decade of charity in Chinese mainland." Chinadaily.com.cn. June 26. 2007.