CHAPTER I

INTRODUCTION

1.1 Introduction of Study

1.1.1 Background of study

The environment is dynamic and is changing day by day. Organization set up in such

dynamic environment needs to adapt and survive in such hostile conditions to achieve

the organizational goals and objective. Organizational structures developed from the

ancient times of hunters and collectors in tribal organizations through highly royal and

clerical power structures to industrial structures and today's post-industrial structures.

As pointed out by L. B. Mohr, the early theorists of organizational structure, Taylor,

Fayol, and Weber "saw the importance of structure for effectiveness and efficiency

and assumed without the slightest question that whatever structure was needed, people

could fashion accordingly”. Organizational structure was considered a matter of

choice. When in the 1930s, the rebellion began that came to be known as human

relations theory, there was still not a denial of the idea of structure as an artefact, but

rather an advocacy of the creation of a different sort of structure, one in which the

needs, knowledge, and opinions of employees might be given greater recognition."

However, a different view arose in the 1960s, suggesting that the organizational

structure is "an externally caused phenomenon, an outcome rather than an artefact." In

the 21st century, organizational theorists such as Lim, Griffiths, and Sambrook (2010)

are once again proposing that organizational structure development is very much

dependent on the expression of the strategies and behaviour of the management and

the workers as constrained by the power distribution between them, and influenced by

their outcome (http://en.wikipedia.org/wiki/Organizational_structure).

The set organizational structure may not coincide with facts, evolving in operational

action. Such divergence decreases performance, when growing.

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E.g., a wrong organizational structure may hamper cooperation and thus hinder the

completion of orders in due time and within limits of resources and budgets.

Organizational structures shall be adaptive to process requirements, aiming to

optimize the ratio of effort and input to output. Organizational structure is an

important aspect of modern day organizations. It helps in alignment of tasks,

structuring of jobs and maintaining a proper communication channel between the

employees. So , basically the whole idea of organizational structure came into

existence because the without proper framework the organizations failed to exist in

the competitive business environment and thus to prevent future failures the

organizations focussed on maintaining a framework of entire organizational activities

and a process to achieve the completion of those activities and so came organizational

structure into existence.

1.1.2 Historical Development of Organizational Structures

Definition of organizations has changed during history along with different

components involved an organization which has developed. When business leaders

and managers set the objectives and goals of the organization, the next step would be

to design an organizational structure to get the proper and suitable strategies together

and make use of them to achieve those objectives. Organizational structure is a formal

system of reporting relationships that controls and coordinates employees and keeps

them motivated to go for organization’s objectives (Andrjz A, Hucznski & David A,

Buchanan, 2007). It is also the factor which determines the allocation of both

resources and responsibilities in an organization within its different departments and

individuals. Organizational structure as a path to achieve the organization’s visions

can be used as a standard to measure the performance of the organization. There are

some theories about constructing and selecting a structure for different organizations

based on their specific strategy and visions. Structures of organizations have changed

and modified according to conditions and different factors dominating that era. . The

theories of organizational structure that we are going to cover in this include;

Taylorism, bureaucracy, and Fordism.

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Taylorism:

Taylorism is derived from the name of Fredrick Winslow Taylor (1856-1915) a

member of a wealthy family in America. He was a mechanical engineer who tried to

achieve the industrial efficiency. He is known as father of scientific management also

called Taylorism. Taylor in his theory dealt with management as a true science and

tried to apply this science to engineering processes (Daft, 2007). Scientific

management or Taylorism is a model of job design that emphasis on short repetitive

work cycles and detailed written work sequences in which motivation is based on

economic rewards. Key fundamentals of Taylorism are; mass production methods and

division of labor (Daft, 2007). . Taylor in his approach aimed to achieve economic

efficiency specifically labor productivity, predictability and control. Taylor tried to

achieve efficiency through increasing the output per worker (mass production) and

decreasing the amount of conscious extra unnecessary loaded works by employees.

He also aimed to get to the predictability of job performance through defining the job

in small, standardized tools and implements and precise subtasks (Andrjz , Hucznski

David & Buchanan, 2007). He believed that control could be achieved by disciplining

the hierarchical authority in an organization that can assure the implementation of

management decisions. As Barnevik, the former ABB CEO states “managers need

“well-defined sets of responsibilities, and clear accountability and maximum degree

of freedom to execute” (Taylor, 1991: 99, cited in Ruigrok et al., 2000b: 120).

However, there are some critics on Taylor’s theory like making assumption about

human motivation and morale, social elements of work, psychological needs of

workers, and taking too simple the relationship between production and morale.

Bureaucracy:

Bureaucracy word was created from French word of ‘bureau’ meaning office and

Greek word of ‘kratos’ meaning rule that together means rule by office or a political

power. Scientific management and administrative principles gave the organizations

essential innovative ideas to increase affluence and productivity. These principles

have contributed in developing bureaucratic organizations (Daft, 2007). Max Weber

contemporary with Fredrick Taylor and Henry Fayol, was a German political

economist, historian, and sociologist. As Scott states Weber believed in emergence of

bureaucracy from very traditional organizational form like feudalism, which is getting

to dominate the modernized societies (Scott p.41).Weber in his bureaucracy idea at

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the very first stage believes that for being the bureaucracy successful, commitments

should be to bureaucratic offices rather than individuals who hold those offices. In

this respect, the individuals lose their significance. For Weber this practice in political

realm results in this matter that bureaucracy is a governing structure (Jo, J & Jones,

A). However, Weber considered bureaucracy as a threat to individuals’ liberties; he

accepted it as a truth that, it is the most efficient possible system of organization

because it’s ensuring more efficiency in functioning of organizations in both business

and government sectors (Daft, 2007). Weber studied governmental organizations to

construct a framework to make large organizations rational and efficient.

Bureaucracy of Weber is based on impersonality, rational basis through specialization

of labour and duties, clearly defined hierarchy of authority and responsibility, formal

and uniform set of standard rules, and formal recordkeeping that employees are

promoted by their achievement (Daft, 2007).

Fordism:

Fordism is the process in which workers’ jobs is subject to application of scientific

management theory by using machines to do some standardized parts of the job and

also introducing assembly lines (Andrjz, Hucznski, David & Buchanan, 2007).

Fordism theory derived its name from Henry Ford the owner and founder of Ford Car

Company. Henry Ford is famous for his technique for mass production and increasing

productivity. He believed that in order to increase the level of production, skilled

craftsmen should be replaced by machines that could do some of their jobs. Ford

believed in ‘continuous improvement’ instead of ‘only one best way’. Ford aimed to

increase his control over the work by decreasing uncertainty (Ford and Crowther,

1924 cited by (Andrjz, Hucznski, David & Buchanan, 2007).

Based on David Houndshell, Ford ‘Taylorized’ his factory plant through applying a

broad range of scientific principles such as analysis of work, scientific selection,

establishment of work standard department. Ford moved application of mechanization

and rationalization of work on the individual task or object established by Taylor, to

mechanizing a series of objects between operatives There are also some critics on the

Fordism theory. Harry Braverman who was a craftsman coppersmith before becoming

a journalist and sociologist is one of those opponents of the Fordism and scientific

management idea. One of the main outcomes of Fordism was the ‘deskilling’ of

workers, especially by introducing his famous assembly line of production. From that

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time, there have been a lot of debates about the effect of deskilling on workers’

motivation and job satisfaction. Harry Braverman in his book Labour and Monopoly

Capital: The Degradation of Work in the Twentieth Century states that the process of

deskilling is growing through development of Fordism and Taylorism principles in

the modern organizations.

Braverman considered the scientific management as a tool for controlling the

employee directly. In the valorization process which he called, he stated that

managers deprived employees from surplus value of their labour. Through

Braverman’s ideas, Andrew S. Zimbalist in his case studies on the labour process said

that through processes of fragmentation, mechanization, and rationalization of

workers and the task, workers lose their skill in the long run and get deskilled. Even

if, a worker has a skill he or she is doing a degraded job that doesn’t require that skill.

Therefore, that worker regardless of his or her personal skills would be more easily

substituted in the labour market department (Andrjz , Hucznski, David & Buchanan,

2007). Briefly, Braverman believed that scientific management and Fordism ideas

increase the conflict between social classes (wood p 12).

Karilal KN in his article Deskilling and Wage Differentials in Construction Industries

states that wage differential between skilled and unskilled construction workers is

increasing and it is going to grow more and more in the modern societies. Actually the

process of deskilling can be related to some kinds of creating classes in the labor

society (wood p 12).

1.1.3 Meaning of organizational structure

Organizational structure is the outline of the hierarchical relationship between the

various positions in the organization that clearly defines the roles and responsibility of

the employees appointed in the organization. Organizational structure is concerned

with creating different departments and division of work. The development of

particular type of organizational structure defines the authority-responsibility

relationship.

It defines the formal relationship among executives and subordinates and also helps

maintaining functional network among them. It is a means of implementing strategies

and plans to achieve a desired result. For a proper implementation of strategy plan, it

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is essential to develop an organizational structure and design. It’s a network of

assigned tasks, defined roles and designed relationship among the organizational

members. In the organizational structural specified, it defines the pattern of formal

relationship of the supervisors and subordinates and also their authorities and

responsibilities. The forms of organizational structure depend upon the nature and size

of the enterprise or organization. It may vary from organization to organization.

1.1.4 Components of organizational structure

Organization structure compromises of 3 components that are: complexity,

formalization and centralization. The organization structure defines how task are to be

allocated, who reports whom and the formal mechanisms and interacting patterns:

complexity, formalization and centralization.

1.1.4.1 Complexity

Complexity considers the extent of differentiation within the organization. It includes

the degree of specialization or division of labour, the number of levels in the

organization’s hierarchy, and the extent to which the organization’s units are

dispersed geographically. Complexity of course, is a relative term. When an

organization is created, it is easy to coordinate the functions between few people but

whereas when an organization increases in size, the differentiation in task arises in

positive way but it is necessary to connect areas and integrate efforts coordinating

tasks that make new units necessary. This implies the coordinators making the

hierarchic differentiation because the organization becomes more complex.

We can identify three types of complexity within the organization: Horizontal,

Vertical and Spatial differentiation.

1.1.4.1.1 Horizontal differentiation

This refers to the departmentalization in which the division of activities is

represented, according to the grade of specialization of the people responsible for the

operation grouping that will exist, which needs a grade of coordination with other

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departments. The more positions and specialities exist in the organization the more

complex before the eyes of the observer. The organizations grow horizontally when

they grow in size and the doing of the task is subdivided.

1.1.4.1.1.1 Specialization

Organization needs several functional experts to run the functional department. As

they are the experts in their respective discipline according to their philosophy. When

the functional manager starts working according to their own view, it will create

conflict in the organization. When the organization is suffering from conflicting

situation it will be difficult for the management to coordinate their activities and even

they will not be cooperative with the organization as well as the other co-workers.

Hence, due to the horizontal differentiation, organization feels difficulty to run the

organization and the designer need to design the structure to solve the problem that

can be seen because of horizontal differentiation.

1.1.4.1.1.2 Departmentalization

Departmentalization on is another difficult job that has to be considered by the

designer. In organization, tasks are divided into groups as per the nature of the jobs.

The coordination, cooperation, transfer of information to the lower level and operative

level staff is found difficulty. The designer of the structure should design the structure

considering all of the above facts that might be difficult for the designer.

1.1.4.1.2 Vertical differentiation

Vertical differentiation establishes hierarchy in the organization. When we realize an

analysis of vertical differentiation we should remember that it is the consequence of

the horizontal differentiation. Differentiation increases along with complexity because

of the increase in hierarchical levels. The more levels between the top level

management and the operatives, there is greater possibility of the distortion of the

communication with difficulties in managerial decision and as a whole it is difficult

for the top level management to coordinate with the operatives. The increase in

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objectives and goals contributes to advancement of hierarchical levels and as a result

there exist vertical differentiation.

1.1.4.1.2.1 Span of control

The number of subordinates that a manager or supervisor can directly control varies

with the type of work: complex, variable work reduces it to six whereas routine, fixed

work increases it to twenty or more. Span of control is the term now use more

commonly in business management, particularly human resource management. Span

of control refers to the number of subordinates a supervisor has. In the hierarchical

business organization of sometime in the past it was not uncommon to see average

spans of 1 to 4 or even less. That is, one manager supervised four employees on

average. In the 1980s corporate leaders flattened many organizational structures

causing average spans to move closer to 1 to 10. That was made possible primarily by

the development of inexpensive information technology.

As information technology was developed capable of easing many middle manager

tasks like collecting, manipulating and presenting operational information – upper

managers found they could hire fewer middle managers to do more work managing

more subordinates for less money. The current shift to self-directed cross-functional

teams and other forms of non-hierarchical structures have made the concept of span of

control less salient. Theories about the optimum span of control go back to V. A.

Graicunas. In 1933 he used assumptions about mental capacity and attention span to

develop a set of practical heuristics. Lyndall Urwick (1956) developed a theory based

on geographical dispersion and the need for face to face meetings. In spite of

numerous attempts since then, no convincing theories have been presented. This is

because the optimum span of control depends on numerous variables including

organizational structure, available technology, the functions being performed, and the

competencies of the manager as well as staff. An alternative view is proposed by

Elliott Jaques (1988) that a manager may have up to as many immediate subordinates

that they can know personally in the sense that they can assess personal effectiveness.

The neoclassical theorists have developed a different solution. They assumed that a

considerable amount of decisions could be delegated to organizational members at

lower organizational levels. This solution would be equivalent to the application of

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Fayol's bridge combined with the principle of employee initiative that he proposed.

As a result, the need for supervision would be reduced from direct control to

exception handling. According to this assumption, they considered the opportunity of

having access to a supervising manager would be sufficient to satisfy the need for

control in standard situations. Peter Drucker (1954) refers to this principle as the span

of managerial responsibility

Figure 1.1 Span of control

Sources: http:// www.quizlet.com/span of control.html

1.1.4.2.2 Flat and tall organization structure

1.1.4.2.2.1 Tall organization structure

A tall organizational structure has multiple layers of management between the

executives and the front line employees. The long chain of command runs from the

top down. The larger the organization is, the taller the hierarchy grows and the more

complex the movement of information between the layers becomes. However, tall

structures rarely exceed 8 levels of management. This is firstly because the numbered

layers decrease the span of control. Secondly the disadvantages of the tall structure

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begin to outweigh the advantages of a tall structure. Tall organizational structure is

one which has many levels of hierarchy. In these organizations, there are usually

many managers, and each manager has a small span of control – they are in charge

only on a small group of people. Tall structures tend to be more complicated and

complex, and may be slower to respond to market changes than organizations where

managers have a larger span of control.

Figure1.2: Tall organizational structure

Sources: http://www.slideshare.net/organizational structure.html

1.1.4.2.2.2 Flat organizational structure

In contrast to a tall organisation, a flat organisation will have relatively few layers or

just one layer of management. This means that the chain of command from top to

bottom is short and the span of control is wide. Span of control refers to the number of

employees that each manager is responsible for. In this scenario, manager has lots of

employees reporting to them; span of control is said to be wide. Due to the small

number of management layers, flat organisations are often small organisations. A flat

organization is also known as organic structure. The flat pyramid is characteristic of

organizations with low hierarchy. Less hierarchy with a larger number of employees

per manager means that workers have more autonomy or freedom to perform their

tasks. Control is sacrificed for creativity. Flat structures work well for small

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businesses or those with a small number of job roles. However, a business with a flat

structure needs to ensure that each manager’s span of control does not become too

wide making it difficult to manage direct reports from numerous subordinates.

Figure 1.3: Flat organizational structure

Source: http://images.flatworldknowledge.com

1.1.4.1.3 Spatial differentiation

It is in relation with the specifications of the centre according to the departments,

units and environmental, physical sections and others. It is a continuous quantitative

variable that if not given the value according to its place, can cause problem such as a

break in the line of decision, difficulties in the centre services lack of group

interrelation, etc.

1.1.4.1.3.1 Location of office:

As we know that spatial differentiation is created by the distance. If the branches are

far from the head office, it is difficult for the managers to communicate the

information to the subordinates who are at distant branch offices. So the organization

structure should consider these sort of geographical influences for the communication

and coordination of the information and inclusion of management information system

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i.e. M.I.S should be done that clearly defines the responsible person to transfer the

information.

1.1.4.1.3.2 Plants and Personnel

Organization can feel difficulty in coordinating and getting cooperation’s from the

plants are not installed properly that facilities for the supervisors to supervise the job

of subordinates. The distribution of employee also create trouble to communicate and

coordinate the activities of all employees. There should be strong mechanism in the

structure that facilitates the communication in the organization. The distribution of the

employees creates trouble and to supervise the subordinate the authority should be

delegated.

1.1.4.2 Formalization

Formalization refers to the extent to which the activities, rules, procedures,

instructions, etc. are specified and written. This primarily means that the degree to

which the activities of the organization are standardized. High division of labor i.e.

specialization, high level of delegation of authority, high degree of

departmentalization and wide span of control lead to high degree of formalization.

The major benefits of formalization are as follow:

a) Standardized activities reduce the variability in the organization.

b) It promotes coordination. All activities are defined and specified which

facilitate the process of coordination.

c) There is least scope of discretion. The decision is taken on the basis of

standard rules and procedures hence the scope of personal discretion is

reduced.

d) Operating costs are reduced.

e) The standard activities reduce the conflict and ambiguity.

Formalization is criticized on the following ground:

a) It prevents creativity and flexibility in the organization.

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b) It may be difficult for the organization to change the rules.

c) The formulation and implementation of new rules may face great resistance

by the employees.

Despite these limitations formalization has been widely used in the organization. The

formalized structure helps in smooth functioning of the organization. Well defined

jobs and relationships enhance the efficiency of the organization.

1.1.4.3 Centralization

There are some organizations, where top management makes all the decisions and

middle and lower level managers merely implement the decisions taken by the top

management. At the other extreme, there are some organizations in which decisions

are made at all levels of management. The first case fits into the centralized structure

where as the second one is highly decentralized. One of the fourteen principles of

Henry Fayol happens to be centralization. According to him, decreasing the role of

subordinates in decision-making is centralization; increasing their role is

decentralization. Fayol believed that managers should retain final responsibility but at

the same time give their subordinates enough authority each case. Thus centralization

refers to the degree to which decision making is centralized in the organization. In

centralization little delegation of authority is the rule; power and discretion are

concentrated in a few executives. Control and decision-making reside at the top levels

of management. However, absolute centralization is untenable because it would mean

that subordinates have no duties, power or authority. Centralization may be essential

in small organization to survive in a highly competitive world. But as the organization

becomes more complex in terms of increasing size, interdependence of work-flow,

complexity of tasks and spatial physical barriers within and among groups, a function

requisite for efficiency is to move decision-making centers to the operating level.

Thus the larger the size of an organization the more urgent is the need for

decentralization. This does not mean that decentralization is good and centralization is

bad.

On the other hand, decentralization is the systematic effort to delegate to the lowest

levels all authority except that which can be exercised at central points. It is the

pushing down of authority and power of decision-making to the lower levels of

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organization. The centers of decision-making are dispersed throughout the

organization. The essence of decentralization is the transference of authority from a

higher level to a lower level. It is a fundamental principle of democratic management

where each individual is respected for his inherent worth and constitution. As we

know, decentralization is a correlate of delegation; to the extent that authority is not

delegated, it is centralized. Absolute centralization decreases the role of subordinate

managers which in turn encourages decentralization. Absolute decentralization is also

not possible because managers cannot delegate all their authority.

1.1.5 Types of Organizational structure

1.1.5.1 Functional structure

This kind of organisational structure classifies people according to the function they

perform in the organization. The organisation chart for a functional based organisation

consists of: Vice President, Sales department, Customer Service Department,

Engineering or production department, accounting department and Administrative

department. Product structure – a product structure is based on organizing employees

and work on the basis of the different types of products. If the company produces

three different types of products, they will have three different divisions for these

products.

Fig 1.4: functional organizational structure

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Sources: http:// www.slideshare.net/organziationl structure and theory.html

1.1.5.2 Line organization structure

This has a very specific line of command. The approvals and orders in this kind of

structure come from top to bottom in a line. Hence the name is line structure. This

kind of structure is suitable for smaller organizations. This is the sort of structure

allows for easy decision making, and is very informal in nature. They have fewer

departments, which makes the entire organization a much decentralized one. In

management, a line structure is a hierarchical system that denotes the rank of staff

from the top manager to the person at the bottom. In the hierarchy, each person at the

top has authority over his subordinates or the people below him or her.

Fig 1.5: line organization structure

Sources: www.slideshare.net/organziationl structure and theory.html

1.1.5.3 Line and staff organization structure

Line and structure combines the line structure where information and approvals come

from top to bottom, with staff departments for support and specialization. Line and

staff organizational structures are more centralized. Managers of line and staff have

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authority over their subordinates, but staff managers have no authority over line

managers and their subordinates. The decision making process becomes slower in this

type of organizational structure because of the layers and guidelines that are typical to

it, and the formality involved. This consists of a line, which is managers who make

business decisions for their respective departments, and a staff, whose members

perform tasks in support of the directives issued by the line. Though the duties of

these two components seem clear, there is often overlap in tasks that they perform.

Fig 1.6: line and staff organizational structure

Sources: www.slideshare.net/organziationl structure and theory.html

1.1.5.4 Market structure

Market structure is used to group employees on the basis of specific market the

company sells in a company could have three different markets they use and

according to this structure, each would be a separate division in structure. So the

market organizational structure works for corporate house with multiple product lines

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and various strategic business units like CG Corporation in Nepal which serves

electronic goods market, financial market as well as FMCG products.

It is quite useful structure for organizations which is large and produces multiple

products for various consumer markets.

Fig 1.7: Market structure

Sources: http:// www.slideshare.net/organziationl structure and theory.html

1.1.5.5 Geographic structure

Large organizations have offices at different place, for example there could be a north

zone, south zone, west and east zone. The organizational structure would then follow

a zonal region structure. This type of structure holds good for organizations with

many branches that are geographically dispersed in course of organizational

expansion and helps in better function of the diversified branches of the organization.

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Sources: http:// www.slideshare.net/organziationl structure and theory.html

1.1.5.6 Matrix Organizational structure

This is a structure, which has a combination of function and product structures. This

combines both the best of both worlds to make an efficient organizational structure.

This structure is the most complex organizational structure. Matrix organizational

structure is formed to complete various types of project of specific and unique nature.

This is also known as project management structure. It requires diverse technical and

administrative experts to adjust efficiently with the dynamic and rapidly changing

environment of the business. In matrix structure, a major project is assigned to the

project manager and he is given a team of specialists from different disciplines. The

team members may be from various functional areas such as research and

development, production, finance, marketing etc. This team provides support to the

general manager to complete the project in a given time frame. So matrix

organizational structure is a combination and interaction of functional and project

managers.

Fig 1.9: Matrix structure

Sources: www.slideshare.net/organziationl structure and theory.html

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1.1.6 Introduction of Nepal Bank limited

Nepal Bank is the first commercial bank of Nepal. It was established in 1937 which

marked the beginning of an era of formal banking in Nepal. It was formed under the

principle of Joint venture (Joint venture between govt. & general public). NBL's

authorized capital was Rs. 10 million & issued capital Rs. 2.5 million of which paid-

up capital was Rs. 842 thousand with 10 shareholders. The bank has been providing

banking through its branch offices in the different geographical locations of the

country.

Corporate vision

“Pioneer bank with complete banking solution”

Mission statement

Network for inclusion: Use bank's network to increase its reach all over the

country from urban areas to rural areas and help in improving the lifestyle of

rural population and in turn become the bank of choice of corporate, medium

businesses and rural market.

Enhancing the value: To employees, shareholders, government and customers

World class banking services: Provide world class banking services by

achieving excellence in customer service and adopting high level technology

standards

Objectives

Nepal Bank Limited has the following objectives:

Focus on building the positive net worth and meeting minimum capital

requirement over the coming five years.

Focus on increasing the customer base and market share.

Maximize the potential/efficiency of bank's staff.

Focus on minimizing the risk associated with the business.

Focus on providing the world class business solutions.

Focus on increasing the sustainable pro

Sources: http://www.nepalbank.com.np

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1.2 Area of the Study

Management is the major part of the organization, without proper management the

organization cannot achieve its goals and objectives. Nepal Bank has also focussed on

developing effective organizational structure. In today’s world organizational

structure plays an important role in achieving the goals and the objectives the

organization. The bank has been following functional structure with tall hierarchy

with delegation of authority which has helped in creating a framework of activities for

the pursuit of the goal set by it. So field report writing has been done on the

management part majorly focusing on the dimensions of the organizational structure

and thus has been taken for the study.

1.3 Issues to be addressed / Questions

Different issues were raised. The main issues related to my study are:

What type of organizational structure is followed in Nepal Bank ltd?

What is the pattern of hierarchical communication pattern in Nepal Bank ltd?

What are the functional departments of Nepal Bank ltd?

What are the dimensions of organizational structure in Nepal Bank ltd?

1.4 Objective of the Study

The major objectives of the study are to identify the organizational structure that

exists in NBL ltd. The other specific objectives are as follows:

To identify the organizational structure of Nepal Bank ltd.

To examine the dimensions of the organizational structure

To study about the hierarchical compositions of the structure

To study the functioning of a it department as a functional department

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1.5 Need of the Study

Report writing is the very significant to the students. It helps the student to enhance

their mind studying directly at an individual level and conducting analysis at his own.

The field report writing is related with the “Organizational structure of the Nepal

Bank ltd”. The overall framework of the Nepal Bank ltd along with dimensions as

well as the functional department and the communication pattern between various

hierarchical levels were studied during the period. The analysis of the presented data

will be helpful to know about the structure of Nepal Bank ltd. Nepal Bank ltd is a well

renowned financial institution that has been serving the customers with higher

facilities regarding financial services. Hope the presented study will help to improve

the performance of in Nepal Bank ltd n future & can be a suitable reference report

for future study.

1.6 Organization of the Study

1.6.1 Chapter plan

This study is divided into three chapters. They are given below:

Chapter-I Introduction

The first chapter basically is introductory in nature. It gives the background of the

study. It also gives information about the organization upon which the research was

conducted i.e. Nepal Bank ltd. It also contains issues to be addressed, objective of the

study, need of the study, organization of the study and limitations of the study.

Organization of the study includes chapter plan and research methodology. Research

methodology includes research design, sources of information, population and sample

as well as data analysis tools and techniques.

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Chapter II Presentation and Analysis of Data

The second chapter includes the data presentation, data analysis and major findings.

This chapter deals with data presentation in the form of tables and figures as well as to

analyze the data contained in the table. Here the tools discussed earlier are used to

analyze the data and draw the conclusion.

Chapter III Summary, Conclusion and Recommendation

This chapter consists of summary of the whole study. It provides the brief of finding

and recommendation. Besides these chapters bibliography, annex has also been

prepared at the end of the research work.

1.6.2 Research Methodology

Various methodologies were used during the process in this practical field study. Both

primary and secondary sources of data were used. On the site interview was also an

important tool during the meeting with people of the HR department during the

collection of information as well as the people of the IT department. Secondary

sources of data like textbooks and reference books as well the internet came in as an

effective way of searching about the information. The annual report also served up as

a source of information.

1.6.2.1 Research design

A research design is the specification of methods and procedures for acquiring the

information needed to structure or to solve a problem. It is the overall operation

pattern and framework of the project that stipulates what information is to be

collected from which source, and what procedures.This research study attempts to

analyze the structural framework of NBL. Being a field-based study, it examined the

structural dimension of the bank in natural setting and the activities within it. The

research design used for this report is pointed below:

Confrontations with the staff of the particular department

Interviews and interactions with the authorities

22

Suggestions and guidance provided as a guide by Mr. Dhan Raj Chalise

1.6.2.2 Sources of information

The basic design of a research study is necessary to collect an accurate data to achieve

useful result. For this reason, it is helpful to consider various sources of collecting

data and the quality of information they produce. The report is based on both primary

as well as secondary data. The primary of data has been collected through

observation, direct personal interview and on the job-training. Secondary data has

been collected from annual report of NIC Asia, websites and various other

publications and journals.

1.6.2.2.1 Primary Data

Primary data is original data gathered by the researcher for the research project at

hand. Thus, primary is collected for meeting the specific objectives of the study.

There are many different types of primary data sources and one must decide which

approach is the best and primary sources include interviews, questionnaire,

observations or experiments. The main advantage of primary data is that one can

control the data collection process. Basically, primary data sources can be either

qualitative or quantitative. The primary data sources used in the process are listed

below:

Observation

During the research period, the activities of the functional departments and the

variables within the structural framework were observed.

Interview

During the research period, direct personal interview with the members of the

hierarchy and various functional departments had been taken.

1.6.2.2.2 Secondary data

23

Secondary data is data collected by someone other than the user. Common sources of

secondary data for social science include censuses, organisational records and data

collected through qualitative methodologies or qualitative research. Primary data, by

contrast, are collected by the investigator conducting the research.

Secondary data analysis saves time that would otherwise be spent collecting data and,

particularly in the case of quantitative data, provides larger and higher-quality

databases that would be unfeasible for any individual researcher to collect on their

own. In addition, analysts of social and economic change consider secondary data

essential, since it is impossible to conduct a new survey that can adequately capture

past change and/or developments. The sources secondary data are divided into two

groups: internal and external. The internal secondary data is found within the

company or an organizational. Sources of such external data are collected from

company or an organization. Such sources may include books, periodicals, published,

reports, and data services and computer data banks. The secondary sources of data

used during the preparation of this report were:

Annual report of Nepal Bank ltd

Publication and journals

Information from websites

www. nepalbank .com .np

1.6.2.3 Population sample

The data were collected from various sources and approaches such as interviews,

informal survey and visiting websites. The bank’s main branch was taken as

population study. There are various functional departments and as well as branches of

the bank. The composition of those departments and the branches were taken as

sample for the study. Since the organizational structure is similar throughout the

organization so the data became representative for all the other branches.

1.7 Limitation of the study

24

The limitations of the study which the researcher has to witness during the study

period are as follows:

The time allotted for the study was limited to few weeks. This duration was

not enough to know the functioning of the structure of. Nepal Bank ltd

The study has been done only on a branch of. Nepal Bank ltd

This study has been conducted only for partial fulfilment of Bachelor of

Business Administration (BBA) for Purbanachal University.

This study has only focussed on the area of organizational structure.

CHAPTER II

PRESENTATION AND DATA ANALYSIS

25

2.1 Data presentation and analysis

2.1.1 Organizational structure of NBL

Nepal bank is the pioneer of banking system in Nepal. The bank has gone through

several changes for past decade in response to dynamism from the environment. The

bank has a complex functional structure leaded by the management committee,

followed up with the CEO of the bank, general managers, functional managers and

their subordinates. The bank also compromises of audit committee to verify the

financial results exhibited by the bank under which there are departments i.e. audit

and inspection unit and administration unit along with their subordinates. All together

the bank has 118 branches throughout the country. The bank is under the control of

Central Bank of Nepal, Nepal Rastra Bank (NRB). NRB has appointed a five

members management committee. This management committee performs as the board

of director of the bank. The bank is running under the leadership of Nepal Rastra

Bank (NRB) appointed as three management team of Mr. Maheshwor Lal Shrestha.

The bank has tall hierarchy and the functional authority has been divided into various

departments. The bank is operating as semi government bank and currently is running

without the CEO as per the decision of NRB.

2.1.2 Organizational hierarchy composition of NBL

There are altogether 118 branches of NBl. These branches are run by the both male

and female employees and they are equally competent but the females are relatively in

lesser in comparison to men in the bank. The bank has 2380 staffs and the new

services have helped to increase the banks performance. The employees have been

provided with training and development opportunity

Table 2.1: Organizational hierarchy of NBL

S.No. Level Post Male Female Total % of Femal

26

e

1   Chief Executive Officer     0  

2   General Manager 2 0 2  

3 11 Deputy General Manager 5 0 5  

4 10 Chief Manager 9 1 10 10

5 9 Senior Manager 17 0 10 0

6 8 Manager 51 6 57 11

7 7 Deputy Manager 127 13 140 9

8 6 Assistant Manager 308 79 387 20

9 5 Senior Assistant 851 326 1177 28

10 4 Assistant 190 65 255 25

11 3 Junior Assistant 6 0 6 0

12   Driver 10 0 10 0

13   Peon 181 30 211 14

14   Security Guard 37 0 37 0

15   Sweeper 38 26 64 41

    Total 1832 546 2378 23

From table 2.1, we can clearly understand the hierarchy of NBL. CEO and general

managers are the top level. The deputy general managers are ranked 11 which is

highest rank after the top levels and chief manager, senior manager, manager, deputy

manager, assistant manager, senior assistant, assistant , junior assistant , driver , peon ,

security guard and sweeper are at rank 10,8,7,6,5,4&3 respectively where sweeper is

the lowest rank in the hierarchy. The hierarchy shows that the composition of female

staffs in the hierarchy is relatively less in comparison to male who dominate by high

numbers i.e. 1286. There are altogether 2378 people in the organization who are

spread across the country in 118 branches.

(Refer to the Annex -1 for organization structure of NBL)

2.1.3 Dimensions of the organizational structure

27

Table 2.2: Complexity Table t

Region wise branches No of Branches

Kathmandu Region 28

Biratnagar Region 28

Birgunj Region 19

Pokhara Region 21

Nepalgunj Region 16

Total no of Branches* 118

Sources: http:/www.nbl.np/network overview

Complexity refers to the extent of differentiation within the structure. The bank has

over 118 branches with 2378 people spread out in various regions across the country.

Higher is the number of branches, higher the number of employees and results in

higher complexity. As a result, NBL has higher complexity because of the complex

hierarchy the bank is working with. From the above table we see that Kathmandu has

the highest number of branches along with Biratnagar followed up by Pokhara and

birgunj with 21 and 18 respectively whereas we can see Nepalgunj is with the least

with 16 branches. The spatial differentiation is high since the branches are

geographically dispersed across various regions in the country and so the complexity

has been induced as the bank is rapidly expanding its branches to accommodate best

banking facilities throughout the country.

Centralization:

Centralization refers to the reservation or delegation of power & authority. Nepal

bank works under the management committee held by NRB for top level decision

where as the functional managers have leverage to take decision within the limitation

and boundaries of their rank and jobs.

Table 2.3: Centralization in NBL

28

Name Status

Prof. Dr. Dev Raj Adhikari Coordinator

Mr. Ramesh Prasad Sharma Member

Mr. Pramod Raj Sharma Member

Mr. Janardan Acharya Member

Total no. 4

Sources: http// www.nbl.np/ management committee.html

The above members listed in the table lists team of board of directors led by

renowned management expert Prof. Dr. Dev Raj Adhikari and along with other three

member’s .They are the management committee that take final decisions for the bank

along with Maheswor lal shrestha the leader of the bank as appointed by the NRB. We

can see the top level management play key role in decision making process since the

bank’s underperformance few years back and to rectify the flaws NRB took over the

banks top level management and elected its own members who were veterans in the

field of management and banking.

Formalization:

Formalization has always been a disintegrating factor for governmental organizations.

But since NBL has been operating under joint venture policy so there is formal code

of conduct in NBL. The dress code is common like in all commercial banks except for

special purposes like the government functions or promotion ceremony i.e. the

national dress indicated by government should be worn. The employees have to report

within 9: 30 according to the new time allocated by the bank as per the pervasive time

schedule maintained by the GON. There are formal guidelines of the bank policies

and formal rules for the new recruits.

2.1.4 Functioning of the IT department

29

From the establishment, 2004 A.D, IT/MIS Department of NBL is responsible for

enabling bank to deliver services to its customers with the help of state of art ICT

technologies and helping employee to enhance their knowledge of using ICT to

deliver banking services effectively and efficiently. Thus the major responsibility of

the department is to provide in house operational trainings on it enabled banking

services and user assistance.The department works closely and continuously with

other business departments for identifying new business new business opportunity and

to launch value added services in the competitive market. The department is on the

phase of computerizing all its branches around the country in its core banking as well

as to develop, manage and implement the bank overall ICT infrastructure. The core

banking and connectivity service of the bank are outsourced to different vendors

inside and outside the country but the helpdesk and it support service are provided by

the it department itself. For the services that outsourced, IT department took

responsibility of their availability and integrity to enhance the service delivery

through IT helpdesk and IT support service units.

The IT helpdesk and IT support unit use telephone; email and intranet chat -

application for the communication and issue reporting purpose.

The helpdesk unit of the department is responsible for

Receiving IT related issue

Analyze the issue

Structure the message

Transfer the issue to system engineer , database administrator and IT support

technician

Report the progress back to the branch

Customers of the helpdesk units are:

Branches(during the operation hour)

Functional departments(FD) at corporate office

Bank costume

2.1.4.1 Structure of the IT Department

30

Fig 2.1: Structure of IT department

Sources: Compiled field study analysis (2014)

The above structure is the structure of IT/MIS department of NBl headed by

Mr. .Dipendra N Shrestha. He is the head and the leader of the IT/MIS department

and under him are deputy manager Vishanta Rayamajhi and functional and

administration manager Krishna Chandra Shrestha. The deputy manager heads two

other departments system and communication & development department with

assistant managers and assistants. On the other hand, functional and administration

manager leads 3 departments under him which are administration,

31

Chief IT/MIS

DP ManagerFunctional& Administration

System and communication Development

Administration & training

UAT/QA/Reconciliation

Helpdesk

Regional engineers

AM

AM

AM

AM

SA

SA

SA

A

A

AM

AM

AM

AM

AM

UAT/QA/reconciliation and helpdesk unit. The hierarchy of the department is tall in

nature and it reflects functional structure adaptation in the department. The span of

control is flexible with less than 8 members in the control and the department is

responsible with maintaining the banks performance at an elite level which will

ensure higher consumer satisfaction through the means of technology.

2.2 Major finding

NBl is the first bank established in Nepal with aim of promoting banking

system in Nepal. The bank has a complex functional structure led by the

management committee, followed up with the CEO of the bank, general

managers, functional managers and their subordinates. Rastra Bank (NRB)

has appointed three team of management under Mr. Maheshwor Lal

Shrestha’s leadership. The bank has tall hierarchy and the functional authority

has been divided into various departments. The bank is operating as semi

government bank and currently is running without the CEO as per the decision

of NRB.

There are altogether 2378 people in the organization who are spread across the

country in 118 branches. The composition of female staffs in the hierarchy is

relatively less in comparison to male who dominate by high numbers i.e. 1286

out of 2378 staffs. This proves that females aren’t making at the top level in

the hierarchy because they haven’t been able to meet the competency level

like that of males and may be the promotion of female employees isn’t at the

level of visibility.

The bank has all together 118 branches and Kathmandu & Biratnagar with 29

branches each followed up by Pokhara and Birgunj with Nepalgunj with leas

number and this the vulnerability of the bank to reach out more people in far

western development region because of the uneven geographical terrain. The

bank has higher complexity because of the spatial differentiation at inclining

level and as well the size of the employees at higher scale has resulted in

management problems.

32

Nepal bank works under the management committee held by NRB for top

level decision where as the functional managers have leverage to take decision

within the limitation and boundaries of their rank and jobs headed by

management guru Prof, Dev Raj Adhikari along with other three board

members and they are the board of directors appointed by the bank. The

bank’s management have always been with issue and because of the

vulnerability in management.NRB had to take such bold decisions regarding

bank’s top level management and currently the bank is without the CEO but

still runs under the leadership of Mr. Maheshwor Lal Shrestha. The decision

centralized at the top but the authority has been delegated to the respective

functional department heads and general managers under their rank restriction.

Since NBL has been operating under joint venture policy so there is formal

code of conduct in NBL. The dress code is common like in all commercial

banks except for special purposes like the government functions or promotion

ceremony i.e. the national dress indicated by government should be worn. The

employees have to be in office within 9:30 and should leave after the office

hour unless certain circumstances like urgent leave, sick leave. The holidays

are the bank holiday and festive holidays as per the scheduled holidays by

bank’s HR department.

IT/MIS department has been an integral part of NBl for the past decade. The

technological advancement in the bank system has definitely helped the bank a

lot. E-banking, Mobile banking and ATM services has been possible because

of the continuous effort of the department. The IT department is being led

under the leadership of Dependra N Shrestha and the department is operated

under functional structure with tall hierarchy .But the number of experience

and skilled HR can be observed with lesser female numbers in the department

and lack of proper job description as well as Adhoc computerization has been

observed and the raining has also been not at the optimum level.

CHAPTER –III

33

SUMMARY, CONCLUSION AND

RECOMMENDATIONS

3.1 Summary

Nepal bank had led the foundation for the banking sector in Nepal, being the first

bank of Nepal. The bank was established under government ownership but currently

the bank is operating under joint venture policy. The bank underwent a lot of changes

for the past decade and has made a remarkable comeback after lot problems in the

management area. Since the takeover by NRB for management, the bank has been is

being led under the 3 team leader Mr. Maheswor lal Shrestha. The top level

management is under the advisory team of Prof, Dr. Dev Raj Adhikari and he along

with other members are the board of directors.

The bank has been expanding its branches and currently there are 118 branches

operating throughout the country. The bank’s corporate vision "Pioneer Bank with

complete banking solution" has led the way for better banking solutions in Nepal. The

2378 people have contributed diligently to provide better facilities to customers and

increase bank’s reputation and standards. This report particularly focuses on the

organizational structure, its composition and the study of it department as a functional

department.

The bank has doing pretty particularly past five years. The bank is heading on right

path after the interference of NRB in the management and has been able to compete

with the contemporaries in the banking sector. The IT/MIS department has played an

important role in the recent success of the bank and the bank being under joint venture

policy has been able to maintain good reputation at stock market as well.

3.2 Conclusion

34

Nepal bank ltd has been able to compete with it’s modern contemporaries and work

upon its corporate vision to be a pioneer bank in Nepal. The improvement of the

management team has paved a new way for the bank in today’s cut throat

competition.

The study is basically on the organizational structure of NBl , its composition and the

dimensions along with the structure of functional department i.e. IT/MIS department .

The bank has functional structure with tall hierarchy with the board of directors

appointed by NRB and currently the three team leader Mr. Maheswor Lal Shrestha

and even though there is no CEO in the bank, the bank is running smoothly under his

leadership. The takeover by NRB was an important step from the bank’s perspective

and the bank’s sinking reputation was uplifted through the process. The bank has 118

branches throughout the country and is highly spatial but the technological

advancement has somehow helped in reduction of the spatial differentiation.

The bank has not higher number of female staffs in comparison to males and so

female recruits should be encouraged. Far western region has not been reached out to

greater extent and the formal policies have helped in maintaining discipline and

coordinating mechanism.

The study seeks to evaluate the organizational structure of the bank and the data

were collected from various sources like the annual report, official site. These data

were collected by personal visits, web searching as well interviews. The study can be

concluded as an active finding about the organizational structure its composition&

impact on the bank as well the functional study of the structure of IT department and

its challenges.

3.3 Recommendations

35

The recommendations are made as per the findings from the analysis of data and

information obtained from the different sources, which would be helpful for the banks

future planning and performance.

The bank has been relatively underperformer but has gradually maintained the

level. So it is recommended that the management of the bank should be

improved with the appointment of CEO for the bank.

The bank has not been able to maintain competent female staffs at greater

number and hence should focus on female empowerment and increase the

composition of females in the hierarchy and structure.

The bank has not been able to reach out more in far western region of the

country and should focus on increasing their reach out in the region as

compared to other region.

The management of the bank has always been a questionable factor , the

members and the experts should focus on synchronizing the activities of the

bank and should manage the staffs and the resources to provide consumer

satisfaction.

The organizational structure is functional but the complexity has contributed

in creating hurdles and the structure can be re-modified by introduction of

CEO with decentralization from the board of directors giving more flexibility

to the bank.

BIBLIOGRAPHY

36

Books

Pant, P.R. (2011), Social Science Research and Thesis writing, Buddha Academic

Publishers Pvt. Ltd. Kathmandu

Devkota, S.P. (2012), Organizational Structure and Process, Sunrise Publications Pvt.

Ltd. Kathmandu

S.P Robbins & Matthew (2009), Organization theory, structure design and

Applications, Dorling Kindersley Pvt. Ltd. India

Adhikari, D.R. (2012), principles of management, Sunrise Publications Pvt. Ltd.

Kathmandu

Sites:

www.nbl.com.np

www.slideshare.net/

en.wikipedia.org/wiki/Organizational structure

37

38

39