Principles Of Management

FYBBA- A
Group 11
Study of the State Bank of India in respect to Organizational Structure,
Departmentation & Span of Control

Group Members,

Tushar Agarwal – A052

Vaibhav Bhatnagar – A053
Vaibhav Gupta – A054
Varun Gupta – A055
Vedant Agarwal – A056
 Acknowledgement

We take this opportunity to express our gratitude and deep regards to our professor Ms.
Pallavi Rallan for her exemplary guidance, monitoring and constant encouragement
throughout the course of this assignment.

We also take this opportunity to thank Mr. Anil Jain, the Deputy General Manager of
stressed assets management group, SBI, for his cordial support, valuable information and
guidance, which helped us in completing the assignment through various stages.

Lastly, we thank almighty, our parents, brothers, sisters and friends for their constant
encouragement without which this assignment would not be possible.

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 State Bank of India
State Bank of India (SBI) is a multinational banking and financial services company
based in India. It is a government-owned corporation with its headquarters in Mumbai,
Maharashtra. As of December 2013, it had assets of US$388 billion and 17,000 branches,
including 190 foreign offices, making it the largest banking and financial services
company in India by assets. State Bank of India is a regional banking behemoth and has
20% market share in deposits and loans among Indian commercial banks.

Operations
SBI provides a range of banking products through its network of branches in India and
overseas, including products aimed at non-resident Indians (NRIs). SBI has 14 regional
hubs and 57 Zonal Offices that are located at important cities throughout India.

Domestic presence
SBI has 14,816 branches in India, as on 31 March 2013, of which 9,851 (66%) were in
Rural and Semi-urban areas. In the financial year 2012-13, its revenue was INR 200,560
Crores (US$ 36.9 billion), out of which domestic operations contributed to 95.35% of
revenue. Similarly, domestic operations contributed to 88.37% of total profits for the
same financial year.

Subsidiaries of SBI
State Bank of – Indore/ Bikaner and Jaipur/ Hyderabad/ Mysore/ Patiala/ Travancore

Non-Banking Subsidiaries of SBI

SBI Capital Markets Ltd., SBI Funds Management Pvt. Ltd., SBI Factors and
Commercial Services Pvt. Ltd., SBI Commercial and International Bank Ltd., SBI
Discount and Finance House of India Ltd., SBI GILTS Ltd and SBI Mutual Fund.

Joint Venture of SBI

SBI Card and Payment Services Pvt. Ltd., Gt. Capital Business Process Management
Services Pvt. Ltd., SBI Life Insurance Co. Ltd. and Credit Information Bureau (India)
Ltd.

International presence
The Israeli branch of the State Bank of India located in Ramat Gan.
As of 28 June 2013, the bank had 180 overseas offices spread over 34 countries.

Foreign Subsidiaries of SBI

SBI International Mauritius Ltd., SBI Canada, SBI Logos and SBI California

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Organizational Structure and Management of SBI

The management of the State Bank of India vests in a Central Board of Directors which
consists of:
 A Chairman and a Vice-Chairman appointed by the Central Government
in consultation with the Reserve Bank of India.
 Two Managing Directors appointed by the Central Board of Directors
with the approval of the Central Government.
 Six directors to be elected in the prescribed manner by the shareholders
other than the Reserve Bank.
 Eight directors to be nominated by the Central Government in
consultation with the Reserve Bank of India to represent territorial and
economic interests in such a manner that not less than two of them have
special knowledge of the working of the cooperative institutions and of
rural economy and the others have experience in commerce, industry,
banking and finance.
 One director to be nominated by the Central Government.
 One director to be nominated by the Reserve Bank.
 Two directors to be appointed to represent the officers and the staff of the bank.

State Bank of India’s Organizational Structure

Explicit and implicit institutional rules and policies designed to provide a structure where
various work roles and responsibilities are delegated, controlled and coordinated.
Organizational structure also determines how information flows from level to level within
the company. State Bank of India’s organizational structure is of two types:
 Functional Structure: A functional organizational structure is a structure that
consists of activities such as coordination, supervision and task allocation. The
organizational structure determines how the organization performs or operates.
 Divisional Structure: The Divisional structure or product structure is a
configuration of an organization, which breaks down the company into divisions that are
self-contained. A division is self-contained and consists of a collection of functions that
work to produce a product.

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State Bank of India’s organizational structure is mainly divisional at Apex Level,
although as we percolate downwards, it becomes largely functional.

Fig 1: Organizational Structure of SBI as of March 2014

State Bank of India’s organizational structure can be segregated into four main
departments based on business groups as seen in the figure 1, that fall directly under the
chairman of Sate Bank of India. A separate Managing Director (MD), directly reporting
to the Chairman, heads each department:
 International Banking (IB)-The Treasury Segment includes entire investment
portfolio and trading in foreign exchange contracts and derivative contracts.
 Central Banking Group (CBG)-The Corporate / Wholesale Banking segment
comprises the lending activities of Corporate Accounts Group, Mid Corporate Accounts
Group and Stressed Assets Management Group. These include providing loans and
transaction services to big size corporate and institutional clients and further includes
non-treasury operations of foreign offices. The credit sanction of Rs. 100 crore per
company will fall under the jurisdiction of the Managing Director
 National Banking (NB)-The Retail Banking Segment consists of branches in
National Banking Group, which primarily includes Personal Banking activities, including
lending activities to corporate customers having banking relations with branches in the
National Banking Group. This segment also includes agency business and automated
teller machines (ATMs).
 Associates and Subsidiaries (A&S)-Other business units involve associate and
subsidiary banks and non-banking subsidiaries.
There are two more departments on the same level that are under the chairman as seen in
figure 1, namely:
 Chief Vigilance Officer (CVO) - The Chief Vigilance Officer is appointed to
assist the Head of the Department/Organization in all vigilance matters. He will look after
activities including fraud detection and prevention of frauds.
 Central Board Secretariat (CBS) – He revises the budget and delegates authority.

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Again, referring to figure 1, apart from these, there are several parallel business verticals
to help the main departments that are also controlled by the chairman:
 Deputy Managing Director Mid-Corporate Group (DMD MC) - Provide loans to
Mid-corporate Group, pertaining to International banking.
 Deputy Managing Director Stressed Assets Management (DMD SAM) - Handles
Recovery of bad loans/the accounts of large defaulters.
 Deputy Managing Director Global Markets (DMD GM) – He is responsible for
handling foreign office and overseas branches.
 Deputy Managing Director Chief Financial Officer (DMD CFO) - Handles the
balance sheet and is the head of accounting unit as well.
 Deputy Managing Director Cross Selling and New business (DMD CS&NB)
-Responsible for selling other financial products, and providing corporate loans to new
ventures and businesses as well.
 Deputy Managing Director Corporate Development Officer (DMD CDO) - He
handles the recruitment/training/accountability/transfers/postings/promotions.
 Deputy Managing Director Chief Info Officer (DMD CIO) - He is responsible for
handling and providing all matters pertaining to the Right to Information Act.
 Deputy Managing Director Chief Credit & Risk Officer (DMD CC&RO) - To
ensure that loan portfolio of bank is not subject to risk, he lays out plans and policies to
maximize recoveries and minimize risk.
 Deputy Managing Director Information & Management Audit (DMD I&MA) -
Information & Management Audit Department supervises internal audit of all foreign
offices of the Bank, namely:
a. Home Office Audit carried out by officials identified by Information &
Management Audit Department.
b. Internal Audit conducted either by an official of the Bank or by an outsourced
firm of that country, where foreign office is located.
c. Management Audit of Representative Offices, Joint Ventures and Subsidiaries.

Advantages of Divisional Structure for State Bank of India:

 Divisions work well because they allow a team to focus upon a single product or
service, with a leadership structure that supports its major strategic objectives.
 Having its own president or vice president makes it more likely the division will
receive the resources it needs from the company.
 Also, a division's focus allows it to build a common culture and esprit de corps
that contributes both to higher morale and a better knowledge of the division's portfolio.
This is far preferable to having its product or service dispersed among multiple
departments through the organization.

Disadvantages of Divisional Structure for State Bank of India:

 A company comprised of competing divisions may allow office politics instead of
sound strategic thinking to affect its view on such matters as allocation of company
resources. Thus, one division will sometimes act to undermine another.
 Also, divisions can bring compartmentalization that can lead to incompatibilities.

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Advantages of Functional Structure for State Bank of India:
 Specialization—It ensures a greater division of labor and enables the concern to
take advantage of specialization of functions.
 More efficiency—Efficiency of workers is increased as the workers and other
have to perform a limited number of operations and they get suggestions and instructions
from specialists.
 Economy—Standardization and specialization in various fields facilitates
production on a large-scale resulting in economy in production.
 Expansion—It offers a greater scope for expansion as compared to line
organization. It does not face the problem of limited capabilities of a few line managers.

Disadvantages of Functional Structure for State Bank of India:

 Confusion—The operation of functional organization is too complicated. Workers
are supervised by a number of bosses. This results overlapping of authority and thus
creates confusion in the organization.
 Lack of coordination—Under this, the work is divided into parts and sub-parts. It
poses difficulties in coordinating the functioning of different parts. Thus it is difficult to
take quick decisions.
 Conflict-Supervisory staff of equal rank may not always agree on certain issues.
Therefore, there may be frequent conflicts, which may lead to non-performance.

Methods Adopted by State Bank of India to Overcome the Disadvantages of

Functional and Divisional Structure
 State Bank of India considers that executive leadership is the single most
important determinant of success for a company using divisional structure.
 The top leaders of State Bank of India understand what each division is doing and
they provide leadership to the division chiefs on how to accommodate new strategic
directions or more effectively partner across divisions.
 In addition, the executives of State Bank of India have a solid grasp of resource
use. Having a shared pool of centrally managed resources like administrative support or
office equipment can reduce costs and organizational complexity.
 State Bank of India have well defined the roles and functions of each department.
 State Bank of India adapts to changes quickly and there is quick percolation of
information.
 There are training institutes present at various levels to train the employees and
manager about their roles and about the organizational structure of the company. The
levels are:
a. Apex Level – Centers are present at Gurgaon and Hyderabad. Chief General
Manager overlooks them.
b. Corporate Center – Training center is located at Nariman Point, Mumbai and is
overlooked by a Deputy General Manager.
c. Circle Level – There are various circle-training centers across the country
overlooked by an Assistant General Manager.

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Span of Control
Span of Control is a term originating in military organization theory, but now used more
commonly in business management, particularly in human resource management. Span of
control simply refers to number of subordinates a supervisor has.

Implications of Span of Control

Span of control of the average manager in an organization determines the width of the
organization, as seen when viewing the organizational chart. Fewer reports to the average
manager will result in a taller or leaner organizational chart, with more management
positions relative to the number of individual contributors. A higher number of reports to
the average manager will result in a flatter or wider chart, with fewer management
positions relative to the number of individual contributors.
The average span of control will also impact the company's time to make decisions
and cost structure.

Wider Span of Control

Higher average span of control means fewer layers of management within the
organization, and a relatively flatter organizational structure. This can lead to:
 Faster decision-making due to fewer levels of approvals required for a specific
decision, which allows the company to respond more quickly to business issues.
 Better and more frequent communication between higher-level managers and
staffers, so the staff is more knowledgeable about company goals and the higher-level
managers are more knowledgeable about daily operational issues faced by staff.
 Reduced costs relative to taller organization, since there are fewer management
layers needing compensation.

Leaner Span of Control

Leaner average span of control means relatively more layers of management within the
organization, and a relatively taller organizational structure. This can lead to:
 Fewer opportunities for promotions, since there are fewer management positions
in the company.
 The concern that manager input will be relatively harder for staffers to obtain, and
managers will have less time to focus on specific decisions. Employees will need to be
relatively more self-motivated and independent in their work style due to having less
manager input.
 Important strategic decisions by the company will have relatively less time spent
on them, due to the reduced time available to focus on individual decisions. This can lead
to less-than-optimal responses to business opportunities and threats.

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SBI’s Span of Control
State Bank of India adopts the wider span of control. A very basic way to show this is
take the MD(National Banking’s Entire span of control throughout the country.
Expanding further, here are a few charts which will help make simple the Organizational
Structure, as well as the span of Control of the Company, ranging from the Chairman,
right to the branch manager of the Bank.

Fig 2: SBI’s Organizational Chart at National Level

The Chairman is the Head of the Central Management. Committee who is appointed by
the Government of India in consultation with RBI.

Fig 3: Organizational Chart at State Level

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The Chief General Manager will be assisted by four Circle Officers at the DGM cadre
in the areas of bank development, credit, finance and vigilance.
The State Bank of India has 14 Local Head Offices, which are also called
‘Offices at the Circles’ located at state head quarters. The heads of all LHOs are
directly responsible to the Chairman of the ban. The Circle Office has the jurisdiction of
all Modules of the bank attached to it.
The General Manager Personal and Development Banking is assisted by four Assistant
General Managers (AGMs) in the areas of administration, personal, development and
expansion. The General Manager Commercial and International Banking is assisted by
four AGMs in the areas of premises, computers, accounts and policy and decision
making.

Fig 4: SBI’s Organizational Chart of Module

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There are 58 modules headed by a Deputy General Manager. The modules cordinate the
activities of the bank through regional offices. The heads of the regional offices and the
branches headed by Assistant General Managers will directly report to the Deputy
General Manager of a module.

Fig 5: Organizartional Chart of a Regional Office

The regional office will be headed by an Assistant General Manager and

takes the responsibility of co-ordination, developing and promoting the bank
operations in a region. All Branch Managers in a region will report directly to the
AGM. The functions such as credit support, sales planning, performance
monitoring, general banking, personnel and HRD and NPA management and
recovery are managed at this office.

Fig 6: SBI’s Organizational Chart of a Branch

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The organization chart of a branch is shown in Exhibit No.3.5. A branch is
the first level office having direct interaction with large number of customers.
The branch manager is the functional head of a branch. He is assisted by
managers, officers and clerks and the size of the staff is based upon the volume of
business.

How it is beneficial to SBI

A wide span of control is less expensive because the business employs fewer managers.
With only one manager, or a manager with a supervisor or team leader in the hierarchy
below, most employees are all on the same level and can work with each other with clear
delegation of duties. Less supervision and control can create a more positive attitude
among employees, who appreciate the extra trust and freedom.

Considerations
Although a wide span of control can save money, budget developers must be careful
about cutting costs when it comes to management.
 Budget consultants tend to cut employees in middle management, but widening
the span of control can create more problems than the cost savings is worth.
 Managers may begin to fall behind on deadlines or become unable to properly
manage their employees because there is not enough time for each task.
 Also, Mangers have less control over their subordinates, leading to slackness.
 Lethargy tends to creep in.

Strategies adopted by the bank to help establish control-

 The bank prides itself on its constant learning ability and being proactive.

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  There are policies in place for Business process reengineering, to improve control,
processes, etc.
 At every level, management is aided by Secretariats to help establish control. The
Secretariat at every level has a administrative reporting and control function.
 Apart from this, the bank provides Co-ordination platforms for brainstorming and
to maximize sales.

Centralization And Decentralization

Centralization is said to be a process where the concentration of decision making is in a

few hands. All the important decision and actions at the lower level, all subjects and
actions at the lower level are subject to the approval of top management.

Decentralization is a systematic delegation of authority at all levels of management and

in all of the organization. In a decentralization concern, authority in retained by the top
management for taking major decisions and framing policies concerning the whole
concern. Rest of the authority may be delegated to the middle level and lower level of
management.

The degree of centralization and decentralization will depend upon the amount of

authority delegated to the lowest level.

In term of decision making in SBI centralization is high and low decentralization,

managers have some power to take decision but it is very limited.

This sort of structure is in place because in a company like SBI, a large-scale

decentralization in decision-making can lead to confusion and mishandling of powers.

 There is a well-defined system in the SBI regarding the decision making process.
 Different officials depending upon their positions and also through committee
approach take financial decisions at various levels.
 Centralized credit processing cells are being formed at certain center for sanction
of personal segment loans and loans under SIB segment.
 Branches source the applications and forward them to the respective credit
processing cells, for their consideration
 Centralization and decentralization in state bank of India regarding sanction of
loans, each officer of the Bank will consider loan proposals and take a decision in
terms of the scheme of delegation of powers, on the merits of the proposals.
 If bank need to purchase any kind of equipment like computers or software branch
managers are required to take permission from the high authority.

Departmentalization

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Departmentalization involves the dividing of an organization into different departments,
which perform tasks according to the departments' specializations in the organization.
Departmentalization as a means of structuring an organization can be found in both
public and private organizations. There are three types of departmentalization in State
Bank of India:
 Functional Departmentalization: An organization can be organized into
departments based upon the respective functions each performs for the organization.
 Territorial Departmentalization: Organizing departments along geographic lines is
often a good idea for large multinational firms with offices around the world. All
activities related to the organization's activities in each region are handled by a
department in that region.
 Product Departmentalization: An organization can also divide itself by its product
lines. It creates a department for each product and that department controls all activities
related to the product including development, production, marketing, sales, and
distribution.

The complex Departmentalization of SBI varies at multiple levels.

At the Apex level:

Here, we refer to Figure 2. Here departmentalization is by product and territorial both
with functions of the corporate center (Under DMDs), running parallel as business
verticals. The Associates and Subsidiaries and Central Banking Group fall under
product departmentalization and International Banking and National Banking fall
under territorial departmentalization.

At Managing Director & Deputy Managing Director level:

Here departmentalization depends on the post of the manager. The Managing Director
National Banking has a largely territorial departmental structure under him, comprising
of Chief General Managers of circles (LHOs), and so on, as described in Figure 2, 3, 4
and 5.
The Managing Director International Business, Associates & Subsidiaries and Central
Banking Group have administrative/secretarial staff under them, containing Chief
General Managers, Deputy General Managers, Assistant General Managers, Chief
Mangers & Managers plus Clerical Staff. These are all divided functionally, and have
working levels all over India and globally as well.
The Deputy Managing Directors reporting directly to the chairman are divided based on
their functions. They have their own Chief General Managers, General Managers with an
administrative office to carry out their roles.
The Deputy Managing Directors reporting to the Managing Director National Banking
are divided according to functions (Namely Retail Strategy and Operations)

At Chief General Manager & Assistant General Manager Level

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Referring to Figure 3, the Chief General Manager will have General Managers and
Assistant General Managers directly under them, according to functions and product.
Apart from this there are 58 modules controlled by Deputy General Managers
Refer to figure 4. The Deputy General Managers are also territorially controlling
modules. The heads of the regional offices and the branches
headed by Assistant General Managers will directly report to the Deputy General
Manager of a Module. Apart from this, departmentation is product and functional as well.

Refer to figure 5. The Assistant General Managers and Regional Managers are spread
across different regions. The Assistant General Manager again has branch managers
reporting to him, which are territorially spread and has other Chief/Deputy managers and
work staff, which are divided functionally. The Branch Managers have a mix of Product
and Territorial Departmentalization as well, with managers, and staff working under
them.

Advantages of Functional Departmentalization:

a. There is maximum utilization of personnel efficiency of workers.

b. This helps in gaining economy in marketing of service provided by the bank.
c. The bank is able to provide better services to customers as proper attention is
given to each service provided by the bank.
d. The bank is able to know the profitability of each service.
e. If the bank wants to introduce new line of product, it can be done without any
disturbance in the bank’s organizational structure.

Disadvantages of Functional Departmentalization:

a. Duplication of work occurs while adopting funcational departmentalziation.

b. Heavy costs are incurred by the bank due to uncrease in number of personnel.
c. Control over each department becomes difficult.
d. Additional costs are incurred for maintaing a sales force for each service.

Advantages of Territorial Departmentalization:

a. In territorial departmentalization SBI enjoys effective span of control.

b. This reduces cost of opertaion and this also gains savings in time.
c. SBI can know the profitability of bank in each region.
d. Intimate knowledge about the taste and preference of customers of each region
can be known easily.

Disadvantages of Territorial Departmentalization:

a. This also increase number of personnel which leads to heavy costs.

b. Control of head office is ineffective and thus management becomes difficult.
c. Duplication of work can also occur in territorial departmentalization.

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Advanatges of Product Departmentalization:

It is a scientific and time tested method.

In SBI, it leads to principles of specialization and division of labour being followed.
It preserves the importance of each activity that the bank performs or undertakes.
It helps in effective utilization of manpower and resources of SBI.
It faciliates coordination activity between all the departments sorted functionally.

Disadvanatages of Product Departmentalization:

It increases work load and responsibility of managers of SBI’s managers.

This type of departmentalization does not offer scope for overall development of
managers.
Managers may become experts of their departments but they won’t be able to understand
the problems and working of other departments.

Methods Adopted by SBI to Improve Their Departmentalization Process:

The bank has various Branch units and admin offices containing
Compliance unit(Inspection and management audit dept), this comes under the control of
a Deputy Managing Director.
Every branch has an inspection audit, which are responsible for checking loan Portfolios,
individual accounts, etc.
One copy of the report is sent to the branch, one to regional office and one to corporate
center, this helps in rectification of mistakes done by each departments, this ensures
efficient work.

Deputy Managing Director International & Management Audit Department supervises

internal audit of all foreign offices of the Bank, namely:
a. Home Office Audit carried out by officials Identified by International &
Management Audit Department.
b. Internal Audit conducted either by an official of the Bank or by an outsourced
firm of that country, where foreign office is located.
c. Management Audit of Representative Offices, Joint Ventures and Subsidiaries.

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Questionnaire

To collect information about the organizational structure, span of control and

departmentalization of State Bank of India we took an interview of Mr. Anil Jain, the
Deputy General Manager of stressed assets management group at the corporate office of
SBI located at Nariman Point, Mumbai. Also to collect additional information we did
thorough research on Internet about the same.

The following questions were asked to the sir to acquire information about the Bank:

1. Can you give me an idea about the span of control of SBI at various levels, and in
various regions? What are the factors that affect its Span of Control?
2. Does SBI face any grievances due to this system? How does the bank address
them? Any changes you plan on making?
3. A wide span of control leads to loss of control/overburdened superiors, how do
you address those issues?
4. Can you tell me about SBI’s Organizational Structure at various levels/ regions?
5. Also, can you tell me what the reasons are leading to this sort of Organizational
Structure?
6. Please give me an idea of the troubles faced due to this type of organizational
structure in SBI.
7. What are the methods adopted by the bank to overcome them?
8. Is SBI centralized or decentralized? Why?
9. Can you provide details of the type of departmentalization followed at various
levels/regions?
10. What are the advantages/disadvantages of the type of departmentalization SBI
follows?

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Verificaton Letter

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