Muslim Commercial Bank (Projec t)

Chapter - 7

                       

OPERATIONAL ANALYSIS

Operational analysis refers to the analysis of rules and regulations and procedures related to the operations of an organization. Rules and regulations are devices for the smooth operations of the organization. They are created to reduce to the cost of transactions. But rules and regulations created at' one point in time can become obsolete, outdated or just inefficient. The external circumstances can change which can demand a change in the " rules of the game" as well.

Operational Analysis section includes my own observations, analysis and interpretation of the managerial practices in Muslim Commercial Bank Ltd. Analysis shows how one uses his professional knowledge in analyzing managerial practices.

7.1 Analysis of Planning in MCB:

Planning is the first and the most essential element of management. Planning involve how to accomplish goals effectively and efficiently. Planning is done at every level in any organization.

One of the famous experts in management, Harold Koontz is of the view that three are seven types of plan:

I.	Purpose or Mission,
II.	Objectives.
III.	Strategies.
IV.	Policies.
V.	Procedure and Rules.
VI.	Programmes.
VII.	Budgets.

7.1.1 Purpose of MCB:

The purpose of MCB is to provide financial service to the society in such a way that both the bank and customers are benefited from it.

7.1.2 Objective of MCB:

The objective of MCB include improve customer service and other as mentioned earlier but these objective are not accomplished in true spirit in MCB. Branches usually deviate from the objective of MCB in different way such as, customer service, quick disposal of credit proposal. Usually customers are not satisfied with it.

7.1.3 Strategies of MCB:

Strategies denote a general programme of action and an implied deployment of emphasis and resources to attain comprehensive objective. After privatization banks overall strategy was aggressive, but now after attaining goals, their strategy is defensive to maintain their position in market. Defensive strategy is more risky and dangerous for a bank in present time while market is full with new competitor banks, which are adopting aggressive strategy with limited resources, so why not MCB continue its aggressive strategy, because in business world there is no limit of success.

7.1.4 Policies of MCB:

Policies are the 4th type of plan. Policies are general statement or understanding, which guide or channelize thinking and action in decision making. MCB has formulated policies for every department etc. it, has loan policy, customer service, personnel policy.

But the thing is that revision of policies is done very slowly in MCR In modern business environment, policies should be revised, amended, and changed on regular basis and very quick and calculated steps should be taken in this regard.

In MCB policies are very slowly made and revised. For example their recruitment policy is outdated. Psychological test, medical examination, current affairs, etc. are not included in their selection policy. Unwritten policies are also followed in MCB, which are not in favor of MCB in the long run for example Quota system in employment.

7.1.5 Procedure in MCB:

Procedure in MCB (advances. procedure, deposit procedure) is lengthy and outdated. They are following years old procedure, which discourages customers, and naturally they go to newly established bank whose procedures are modern and easy to follow.

7.1.6 Budget in MCB:

A budget is a statement of numberised programe. It is statement of expected results expressed in numerical terms. In MCB budget is prepared on basis of forecast done by different department of the bank, and title attention is paid to recommendation of branches, which are the real source of income for bank.

In MCB Board of Directors, President and top management do planning for entire bank. They adopt top down approach. Although this approach is best from control and direction point of view of the organization, but it is just like dictatorship; management at middle and low level has no say in it. Top management does not properly know about the practical know and about the practical situation and the lower management has to face tremendous problems in following such plans.

7.1.6.1 Problems in this approach:

a)      Management is unable to get valuable suggestion & information from field staff.

b)      Employee follow plans half-heartedly, they do not commit themselves to attain goals, just like dictatorship, same is the case here.

c)      Objectives set in this approach are seldom achieved in true-sense, because such objectives are usually above the achievement standard of subordinates.

7.2 Analysis of Organization Structure of MCB:

To design and maintain system of roles is basically the managerial function of organizing. I have analyzed the branch in which I worked as internee. The MCB, Melody branch is an organization with wide span.

MCB will be analyzed in following areas:

1. Management Span:

It refers to number of people that can be managed properly by a manager in a given situation, at a, tiri1e. Different experts on management have different views about the span of management. Some say 3 to 7 people can be controlled. Some give these number 7 to 10 persons.

Harold Koontz 28 is the opinion that managers can manger eight to fifteen at the lower levels and four to eight at lower levels. In MCB the branch manager is supervising 37 persons, in which one (1) is executive, 23 officers and 13 are clerical and non-clerical staff. It is a picture of MCB branches on average basis. This flat structure leads to delegation of authority, clear-cut policies and efficient subordinates. But the disadvantages or problems in this structure are the following:

I.                   Group Cohesiveness and Group Dynamics:

Group dynamics are concerned with the interaction and forces among group members in a social situation. In such a large organization problems of groups are created and sub groups emerge. The whole organization atmosphere is disturbed, and it creates problems in the smooth functioning of organization.

II.                Status and Authority Problems:

In flat structure the problem of status and authority is created especially the authority relationship among officer and clerical and non-clerical staff. Non-clerical staff does not work properly even sometimes officers go by their selves for photo state.

III.             Decision Making:

In this structure decision-making is very difficult. It opens result in conflicts and opposition.

IV.              Control:

In wide span, control is not effective, it is very difficult to control so may people at a time by one person. For example; when the Chief Manager is not present in the bank, the employee usually does not work properly. They leave their seats and start chatting, they even go for their private work during office timings, without permission.

         V.       Work Load on Chief Manager:

It is difficult for Chief Manager to run the routine work and also supervise and control each and every subordinate. He has to handle very minor issues' and problems, which can be solved at lower level.

2.  Departmentation in MCB:

MCB uses different basis of departmentation at different level. At Head Office level they have adopted Functional Departmentation. There are 20 divisions in HO. In MCB, departmentation on Territory basis is also adopted (circles). In functional department 29 there are following drawbacks in MCB.

I.                   Overlapping:

In MCB there is over lapping of function. Complete separation is not achieved. Overlapping is not favorable to bank from both functional and cast point of view. For example: in MCB Human Resource Development Division and Training Division are overlapping each other functions.

II.                Over Specialization:

Functional department lead to over specialization and narrow, viewpoint of staff. Problem solving and decision making is very difficult and time-consuming process in this system. Each division views a problem from his own specialized view. Foreign Exchange Division has own view about MCB Master Card and Business Development Division has own view.

III.             Sole Responsibility of Chief Executive:

Sole responsibility of the success or failure of bank lies with president. While the divisions are responsible for their own filed. This creates problem. This leads to individualism, which is not in favor of bank.

IV.              Co-Ordination:

Co-ordination among different divisions become very difficult. It results in deadlocks and delays.

V.                 Slow Response:

It results in slow response to customers. Application for loan is processed in credit Management Division, Corporate Affair Division, and Industrial Credit Division. Departmentation by territory basis is at the lowest level. For this purpose, MCB has established General Manager offices, Regional Manager offices. But the expenditure on these offices is extra burden on the revenue of MCB. A huge amount is annually spent on the maintenance of these offices (Expenses on staff, furniture and equipment etc). Although  these offices have some good points for MCB but usually these are overlapping each other’s function.

3.: Communication

communication problem in flat structure is very complicated and result in serious problems. In MCB (the Melody branch) communication and information flow is not according to standard. Usually vouchers are not communicated properly. TT and DD to account holder accounts are not recorded at proper time due to which customer is affected.

The outward communication with head office and branch is also not satisfactory. "Cash advices" are usually sent late. There is only two telephones in. the branch. The officers have to wait for long to make contact on telephone for office use. Phone is usually engaged. There is no telephone operator. The officers have to attend the phone, which disturb them in doing their important office work.

4. Delegation of Authority:

In MCB delegation of authority is very limited. Delegation means transfer of authority from superior to subordinate. MCB to a greater extent is a centralized bank Manager has very limited authority especially in cases of advances. He has to take the approval of General Manager and Regional Manager. In branch the officers have very limited authority. They have to take approval of Chief Manager even in case of minor issues. This create problem when the manager is not present in his office, the customer has to wait for hours. This discourages both customers and officers because they have to suffer a Jot. In newly established Banks there is comparatively more delegation of authorities as compared to MCB that is why other bank's deposits and business is improving day by day.

5. Authority and Responsibility Relationship:

One of the purposes of organizing is to show the hierarchy of position for this authority and responsibility must be structured in a systematic manner. In MCB authority ,and responsibility is set on scalar principle. In other words there is top down flow of authority.

In functional dep31imentation or -organization, head of the department makes all decision; and is responsible for its success or failure. He is not responsible for 'the success or failure of entire organization. Only the Chief Executive of the organization is responsible for the success or failure of organization. There is no balance between his authority and responsibilities. Before making a decision he has to take approval from many superiors, but when a problem is created in the said matter, he is solely held responsible for it. He even cannot suspend an employee who does not work properly.

7.3 Analysis of Financial Operations and Procedures:

1. Lengthy Procedure:

The procedure for advances is very lengthy and time consuming. The processing is done in various departments, which create problems for customer. They usually adopt delaying tactics with customers. This is not in the interest of bank, because advances are a great source of income for bank.

2. External Interference During Loan Processing:

The employees of MCB have to face a lot of pressure and interference during the processing of a loan, from political and other influential circles They pressurize them to sanction loan in favor of their relatives and favorites. This affect bank in two ways: Firstly their real customer is deprived of loan and secondly it is very difficult to recover such loan from these influential sources.

3. Delays in Disbursement:

The sanctioned loans are disbursed very slowly, this discourage customers.

4. Wrong Introducer:

"In account opening the introducer is usually a wrong person. Customer usually makes fake sign of introducer. This practice is against bank procedures.

5. Authority in Foreign Exchange Department:­

In foreign exchange department only one person handles the receipts and payment process. This is a very risky practice both for the bank and the person on this post. The policy of joint signature is also not followed properly.

6. Old Rates of Foreign Exchange:

In foreign exchange, rate list is usually received very late through fax, from Head Office. This disturbs the smooth functioning of the department. Some times the officers follow the old rates list, which is a great risk for bank.

7. No Checking of Clearing Department:

The bank manager does not usually check the working of clearing department. It is just like a separate autonomous body within the bank. Clearing is a very important function, any kind of irregularity will lead to serious problem both for the Mall Branch and other corresponding branches.

8. Problems in Remittance Department:

In remittances department Telegraphic Transfer (TT) ale received on telephones and they transfer the amount to the concerned person. This is very risky practice because in such case test key cannot be used.

9. Loose Control of Reconciliation:

The branch manager does not check the reconciliation process on regular basis. This is very sensitive function and any negligence can lead to the case of fraud. There is also no separate computer for reconciliation department; they have to do this important work in computers of other department. Where some one else can add or delete the secrete data.

10. Signature Verification:

Signatures of account holder are usually not checked with signature card. This is a very risky practice and may lead to frauds; which will affect the image of bank.

11. Master Card Issuing Procedure:

MCB Master Card issuing procedure is very lengthy and complicated as compared to the bank's, card that is why the sale is very low.

12. Burden on Cash Counter:

MCB Mall Branch is the feeding branch. There is only receipt counter and one payment counter for customers, which cannot handle the people properly. One has to wait for long time while making payments or receiving payments. Usually due to burden of work, unauthorized person sit on counter for the issuance of token which may create complications.

7.4 Analysis of Personnel Management:

1. Recruitment Policy:

In MCB recruitment is done in two ways. One is indirect and the other is direct. The source of recruitment may be internal. Internal recruitment policy creates competitive environment in the organization. But the existing recruitment policy is not accordance with modem competitive environment. Some important drawbacks are following:

I.                   Favoritism And Nepotism:

Favoritism and nepotism during recruitment is not hidden from any one. Unsuitable candidate are selected, who prove a great source of problem for MCB in 'future. They cost negative affect on the good will of MCB.

II.                Pressure From Staff Union:

 In MCB staff union has an upper hand in recruitment. They recruit, their  favorites and professional labor leader, who create problem in the smooth functioning of bank.

III.             Less Power With Human Resource Division:

Although recruitment is the function of HRD, but in practice this function is not performed by it in true sense. Under interference is made from different divisions. Even test paper and made and checked by Training Division of MCB. It has no power to confirm or approve employees of officer level. It is just like puppet department.

IV.              Old Pattern of Test:

In MCB written test is taken in traditional 4 subjects, elementary Economics, Mathematics, General Knowledge and English. This pattern of test in not suitable for employees of high qualification and specialized field. It is very difficult for specialized candidates such like computer programmers etc to express their knowledge.

V.                 Medical Examination:

In MCB, there is no medical board of the bank. The candidate brings medical certificate from any doctor, which may be fake. Due to this drawback, medically unfit person may be recruited.

VI.              Psychological Test:

In MCB there are no psychological test for candidates, to determine their IQ, mental level, alertness and aptitude toward banking. Only a physiatrist observes and gives his views about the candidate after the interview.

VII.           Recruitment Without Forecasting:

In MCB recruitment is done-without forecasting. This leads to shortage of suitable employees in future. Recruitment is done on traditional lines, without considering changing external environment.

2. Retirement Policy is Not Satisfactory:

In MCB, an employee get retire either at the completion of 30 years of service or at the age of 58 years. Fixed retirement policy is not adequate in the opinion of many experts including Edwin.

This policy reduces the morale of employee and his interest in work. He thinks that if I work good or bad, in both cases if will have to retire at a fixed time, so they do not take interest in their work, at the time when they are fully experienced and talented and can do some thing very important on the basis of their years long experience. Fixed retirement age kills the spirit of work in employees.

3. Unsatisfactory Training:

In MCB training programme both in service and pre-service is inadequate and unsatisfactory. Their training policy is only to improve the job knowledge of its employee. They pay little attention to improve their managerial skills such like interpersonal skill, leadership skill, problem solving and decision making skills. They usually sent irrelevant person for training. Course is offered on foreign exchange and the branch manager sends the officers of remittances department to it. No test is taken at the end of course, to get the feedback. Employees usually go to attend courses, only for getting T A, DA and misusing other facilities given by bank. Training courses, lectures have become recreational trips for employees.

4. Unfair Promotion Policy: ­

Promotion in MCB is based on seniority and efficiency. But in practice these things are not counted. In promotion, nepotism and favoritism play very important role. Even the staff union exercises its influence in the promotion process and is usually very successful in attaining its goal.

Due to this problem talented and deserving officers and other staff are deprived of their rights. This discourages them a lot and they lose interest in work. Even some employee, leave the job and join other private bank. Talented and hard working employees are the assets of an organization. But unfortunately this asset of MCB is decreasing at alarming rate, due to its unfair promotion policy.

5. Transfers:

In MCB transfers are not made properly. Nepotism and favoritism play 

Important role in its besides pressure from staff union side. Talented and

qualified personnel are transferred to such places where they are misfit and unqualified personnel are transferred to important position, where they cannot work accordingly to the required standard. This results in loss for bank.

6. Salary Administration:

In MCB salaries were earlier in accordance with government pay scale but after privatization these have increased about 45% to 50%. Salary is increased on basis of merit and seniority. Employees are given increment either by showing better performance or improving their qualification. For example for IBP part 1, 2 & 3 increments are given to the employee. But there are some drawbacks in the salary administration of MCB.

I.                   Job Evaluation:

In MCB salaries is not based on job evaluation. This result in extra financial burden on MCR Employees of low categories are getting very high salary as compared with other organizations employees of same category.

II.                Un-Systematic Performance Appraisal:

Employees are given increment on the basis of performance appraisal, which is unscientific in MCB. This does not show the performance of an employee in a true sense and in quantitative terms, because of it, the differentiation among the performance of employees is very difficult. Extraordinary and average employees are given equal increment, which lessen the spirit of hard work in extraordinary employees.

7. Performance Appraisal:

In MCB performance appraisal for officers is done according to grading method. While for clerical and non-clerical staff there is descriptive method of performance appraisal. There are following drawbacks in the performance appraisal process.

I.                   Forced Distribution:

In officer performance appraisal, grading method is adopted, in which usually forced distribution is followed.

II.                Sequence and Irrelevancy:

The sequence of performance appraisal is not proper, unimportant questions are written in beginni~1g for example, languages, basic pay etc. while the important questions are written in the last. Some' irrelevant questions are also included in performance appraisal.

III.             Free Hand of Officers:

In the case of performance appraisal of clerical and non-clerical staff officers have given complete freedom to write down their observations. There are no criteria mentioned in it for evaluating, the performance of employees. It gives complete freedom to officers to show favoritism and nepotism.

IV.              Untrained Raters:

Performance appraisal is filled by officers who themselves are not trained or the said function. They do not know how to analyze and evaluate the performance and capabilities of an employee. So this technical job is performed unsystematically and the purpose of performance appraisal is skilled.

V.                 Performance Appraisal not Discussed with Employee:

It is essential to discuss the performance appraisal of an employee with him in order to give him a change to improve his performance in weak areas for future. But this is not done in MCB. Many talented employees suffer due to this reason.

VI.              Counter Sign Policy:

Performance appraisal is counter signed by officers in MCB only to fulfill the requirement; they usually do not bother to check the validity of it personally. They just stamp the comments of reporting officers.

8. Discipline Policy:

In MCB disciplinary action is not taken against employees according to the standard given in discipline policy. Inquiry process is very lengthy. Staff union is the main hurdle in following the disciplinary rules and regulation. Due to this reason discipline is badly affected in MCB. No one cares about rules and regulations. This indiscipline is a bad sign for the bank. The environment of bank is disturbed due to it. Employees do not listen to directions of manager because they know he cannot take disciplinary action against them.