Individual Assignment

EVALUATION OF THE ORGANIZING FUNCTION OF NDB BANK

MBA/21/6001 : L.C.G. Punchihewa

Sub Group No : A-4

Course : MBA 501 – Managing Organizations

Instructor : Professor Ajantha Dharmasiri

Term : January - March 2021

Postgraduate Institute of Management

University of Sri Jayewardenepura

 Declaration

I am aware of the content under plagiarism stated in the PIM Student Handbook, and I hereby
declare and affirm that I have strictly observed the law relating to intellectual property,
copyright and plagiarism in this exercise.

L.C.G. Punchihewa

MBA/21/6001

22nd Feb 2021

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1. Introduction to the Report
This report provides an overview of how NDB, as a bank, uses centralized banking operation
in an effective way to create a superior shareholder value. Furthermore, this report illustrates
the structure of the bank which fundamentally supports the delivery of organizational goals.
The accountabilities and responsibilities of NDB bank during the new normality caused by
COVID 19 pandemic has been critically evaluated within this report. This report further
evaluates identified issues providing recommendations to improve the performance of the bank
in relation to Organizing which would eventually affect the overall development of the Bank.

2. Overview of the NDB Bank

NDB bank has a proud history in banking and finance sector over 40 years, having a vision of
being the Driving force for a financially driven Sri Lanka. Since the inception as a
development bank, NDB fully focused on contributing to the economic development of the
country on noncommercial basis. As a part of the economic movement took place within the
country, NDB was later incorporated as a private bank and listed for the public with a broader
perspective of investor relationship.

NDB Bank currently operates 114 branches nationwide and provides a central service to
corporate customers in both lending and investing their excess liquidity. The Bank provides a
separate financial, technical and business support to the customers in the SME sector through
the Business Banking division (Locate NDB Bank Branches, 2021).

3. Centralization within the NDB Bank

Centralization means that the decision authority is located near the top of the organization. In
contrast Decentralization distributes the decision authority downward to lower levels (Daft,
2014). The organizational structure of NDB is headed by the Chief Executive Officer (CEO)
with the Board of Directors (BOD). CEO has assigned his authority to the next level (Vice
Presidents) who take charge of their respective functions and report relevant information to the
CEO. However, the authority of the decisions they make is limited to a pre-determined

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monetary value and when that value is exceeded, they must obtain the approval of the CEO
and the BOD. Based on these facts, NDB Bank can be described as a semi-centralized
organization.

4. Evaluation of the Organizational structure of NDB

A well-designed organizational structure is pivotal to the organizational strategy and culture.
Generally, whether the organization adopts a tall or a flat structure depends on the hierarchical
levels of the organization (Daft, 2014). NDB operates as a large-scale private organization with
over 2,500 employees and many branches, having a tall organizational structure for ease of
control. Accordingly, Vice Presidents have been appointed for specific functions and all 17 of
them, together with the CEO, are involved in important decision-making activities. They are
known as THE LEADERSHIP TEAM and are accountable to the Board. (see Figure 2)

Figure 1 shows the structure of NDB, flowing down from Vice Presidents (VP). Accordingly,
each VP is given the decision-making authority within their team, which then flows down to
functional level managers. However, that decision-making authority is often limited to a
specific monetary value. The more critical the decision, VP becomes more involved in making
decisions.

Figure 1 : Hierarchical Structure of Departments

Vice President

Assistant Vice Assistant Vice

Presidnet Presidnet

Senior
Chief Manger
Manager

Manager Manager

Deputity
Manager

Associate Associate
Manger Manger

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However, due to its tall organizing structure, the bank often encounters problems in decision
making. Notably, the delay of decision-making can sometimes cause customer-related issues.
In many cases, functional level managers are at a risk of failing the entire function by thinking
only about the benefit of their own sub functions instead of activating a common purpose.
Additionally, important decisions may not be communicated to the lower level, making it more
difficult to take informed decisions. Further, sometimes leaders may miss opportunities to
improve work processes and tasks as they do not spend enough time with employees who
commit to work regardless of the rank.

As a large and highly monitored organization, it is not easy for NDB to easily adopt a flat
structure and such a structure might not always be appropriate for all types of organizations.
Above problems can be minimized within this structure by allocating authority further and
building a common ground that builds trust between each other, directing towards the same
goal.

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Figure 2 :Higher Level Organizational Structure

Source: (National Development Bank PLC Annual Report 2019, 2020)

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5. Responsibility and Accountability over COVID 19 Challenges
COVID 19 pandemic had a negative impact on many industries in Sri Lanka, including the
banking sector. Despite being a stable bank, NDB could not evade from the effect of this
economic downturn. Key issues emerged during this stage were to determine how the bank
would continue its essential functions with COVID and how to minimize the negative
impact of the recession on Bank's financial position and financial performance.

The leadership team took many measures to mitigate this impact by initiating Organizational
Effectiveness and Efficiency Programme and Business Continuity Management
Programme. As a result, NDB was able to overcome the COVID challenge up to some extent
comparing to competitors. NDB was able to increase its net interest income by 9 percent year-
on-year (YoY) to Rs.4.9 billion while the net fee and commission income rose by 24% YoY
to Rs.1.54 billion (NDB Maintains Growth Momentum in 3Q, 2020).

5.1. Organizational effectiveness and efficiency programme (OEE).

Among the measures taken by the Bank to confront this pandemic, responsibility to maximize
controllable costs became a primary action because revenue generation in a downturned
economy is difficult. The Leadership Team commissioned a separate team including the COO,
to identify inimitable costs and different ways to minimize those costs. The team was solely
responsible to report findings to the management team in order to implement new decisions.
The OEE team taking this responsibility, appointed a responsible officer from each department
to oversee the cost control of each division through that person. (refer Figure 3)

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Figure 3 : Responsibility Structure of the OEE Programme

The specialty in this was that, at no point, bank decided to reduce wages or lay-off employees
to achieve the target. However, various departments raised some objections regarding some of
the decisions taken during the implementation of OEE. Underlying reason for that was the
communicational gap between the OEE team and the staff in relation to decisions taken, the
importance decisions and the reason for those decisions. This, sometimes, caused delays in
program execution and disagreements between individuals.

As a solution for this, it is pivotal (1) to make the system aware of critical decisions taken
during program (2) inform decisions to the parties affected by those decisions and (3) take their
views to the decision makers at the highest level. OEE programme ultimately led NDB to
improve the cost to income to an industry best ratio of 35.9% (Results for the nine months
ended 30 September 2020 [Q3 2020], 2020)

5.2. Business continuity management (BCM) programme

The main issue emerged with COVID was ‘how the bank would continue operations as an
essential service to its customers during an epidemic, without compromising the employee’s
safety?’. To this end, NDB focused on empowering and reactivating the Business Continuity
Division. Accordingly, the leadership team engaged with key department heads and made
decisions to continue the business processes.

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The management agreed to implement a business continuity plan, identified key processes and
decided to maintain only those functions as essential services. A 14 days’ roster mechanism
was initiated and duty leave was granted to all non-essential employees. With the introduction
of the ‘Work from Home’ facility, the safety of employees was further strengthened due to
reduced number of employees in the offices.

Figure 4 : Flow of Responsibility of BCM

The •Initial Decision making and take

Leadership inputs from MANCO and escalte to
Team BOD

Managemen •Take the ground leval inputs

t Commitee and escalate to the TLT .
with BCP •Escute the plans and
Team overseeing the activities

• Provide the safety measure and

Administraion immediately act accordig to the
Department situation. Snitising / Transport
arrangement
• Arrange PCR facilities
Human • Self quarntine
Resources
Department
arrangement
• Duty Leave

However, the bureaucratic nature of the structure delayed some relevant actions to be
immediately taken. This resulted in a risk of further infections. In some other instances, all
employees had reported to duty without complying to enforced regulations, considering this
program as another HR action, thus, neglecting their accountability for it. In my view, both
responsibility and accountability should always be highlighted in relation to each individual.
Also, a responsible officer (with authority) in each department should be trained to make
immediate decisions in such cases.

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6. Issues associated with “Organizing” in NDB Bank
Organizing, the subsequent function of planning, entails the achievement of organizational
plan through assigning tasks, developing departments, delegating authority and allocating
resources across the organization (Daft, 2014).As a well-organized bank, NDB currently
implements long-term and short-term strategies with a strong organizational structure.
However, there are several aspects where the bank’s organizing function can be strengthened
to become more effective and efficient.

6.1. Centralization of the Branch network into Regions – SME Facilities Handling

Currently NDB allocates 113 branches to eight regions based on geographical locations. Each
region has a separate regional office with the primary function of providing financial solutions
to the SME sector. Additionally, the regional manager and a separate team carry out the
operational function. Issue in this case is that some regional offices have to cover significantly
large areas and having a long distance between branches and regional offices could waste time
and money.

Uwa
Sabaragamuwa • Ampara District to Awissawella city in Colombo district.
Region

Colombo Region • Pettah Branch to Horana Branch

6.2. Unnecessary possession of technical-related authority by senior managers

In many instances, managers must use authority to run day-to-day operations where the
importance and risk involved in these activities are not so high. However, some strategic level
managers still maintain this authority solely to show their power. Therefore, they have little
time to spend for strategic level decisions to be made by them and are too busy to make
technical operational decisions.

Theoretically, top managers require more conceptual level skills, but these managers focus on
technical skills unnecessarily instead of developing their strategic level skills. Also, this

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unnecessary centralization of authority results in less training and decision making
opportunities for managers at the functional level (Daft, 2014).

Figure 5: Skill type needed by manger level

Top Mangers

Middle Mangers

Line Managers

Conceptual Human Technical

Source: Daft (2014).

6.3. Lack of ‘front office – back office’ collaboration

The bank's front facing department is the front line of bank. Back office operates centrally to
provide customers with the required services efficiently and effectively. Although both parties
can provide a more efficient customer service by working hand-in-hand, problems arise when
they provide services by pursuing only the objectives of their own function.

According to the customer relations approach, the front office and back office activities should
operate with the same objective to do justice to the different needs of the customers and
maximize the efficiency of the service system (Zomerdijk & Varies, 2007). (See appendices
1– example of a scenario).

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 7. IRTOO Analysis
Issue Recommendation Time Output Outcome

Line

1.Centralization of the  Allocating Short  Increase the  Increase in

Branch network into resources to Term and efficiency of market share due

regions –inefficiencies of selected branches Medium lending process. to increased

SME facilities handling. to provide a more Term  Cost savings and customer
convenient service effective utilization satisfaction.
to customers. of time.  Decreased
 Performing operational cost
possible branch has a positive
related works effect on the
through head bottom line.
office (instead of
regional office)
using the existing
work flow system.

2.Unnecessary  Revise the Short  Transferring top  Empowerment

possession of technical delegation of Term level managers, the and motivation

related authority by authority. operational level of employees and

senior managers  Empower authority, to their ensure the future

functional level lower level development of
managers along management can organization.
with their give them more  Organization
responsibilities. time in strategic strategies will
 Continue training decisions become more
and development  Development of competent and
on functional level functional level competitive.
managers’ managers.
 Implementing Job Medium  Increase the  Bank can
Rotational Term knowledge of both ultimately

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3.Lack of ‘front office – Programs Between parties and provide a smooth
back office’ Front of Office understand the and effective

collaboration and Back of Office importance of service to the

others job role customers and
buildup a loyal
long term
customer base.

 Organizing Short
temporary back Term
office training for
front office staff
 Introducing Short  Being standardize,
standard policies Term would mitigate the
and procedures operational
from back office deficiencies and
functions to misunderstanding in
business lines; processes.

 Conducting Short  Building up the

bonding programs Term relationships
to increase between both
collaboration by business lines and
bringing together support functions,
both parties . help to friendly
transmission of the
function.

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8. Conclusion
The purpose of this report was to evaluate the organizing function of the NDB Bank.
Accordingly, it was confirmed that the decision-making authority of the bank is semi-
centralized. In addition, the organizing structure was identified as a tall functional level
structure. The report emphasized some problems related to Organizing Function, provided
recommendations for those issues and discussed the impact on organization if such changes
are made.

A study was conducted on the actions taken by the organization in facing COVID challenge
and how the responsibilities and accountability of the organization were implemented in those
actions.

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 References

Daft, R. (2014). New Era of Management. New Delhi: Cenage Learning.

Locate NDB Bank Branches. (2021). Retrieved from www.ndbbank.com:

https://www.ndbbank.com/branch-locator

NDB Maintains Growth Momentum in 3Q. (2020, November 13). Retrieved from
www.dailymirror.lk: http://www.dailymirror.lk/business-news/NDB-maintains-
growth-momentum-in-3Q/273-199780

Results for the nine months ended 30 September 2020 [Q3 2020]. (2020, November ).
Retrieved from www.ndb.com: https://www.ndbbank.com/cms/media/3152/PDF-4-
Pages-497-KB-a8ae30f0e34b2bdafa5306d9296c865c6f9df953.pdf

Zomerdijk, L., & Varies, D. (2007). Structuring front office and back office work in service.
International Journal of Operations &, 27(1), 108-131.

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 Appendices
Appendices 1

Figure 6: Scenario - A customer came to a brand to obtain a personal loan

Branch as the front line

Branch staff usually collect required
documents and send their receipt with
the customer request to the central
retail credit department. They also
inform the customer about the day the
loan is disbursed.

Retail Credit Unit as the Back office

Central retail department processes
loans at existing branches all over the
country so it is always very busy.
Because of this, they are very
systematic and if there is a small
mistake in one of the documents it
will be returned for correction.
What would be the outcome?
This process usully continue more
than one time and takes a long time
for the loan to be granted. That delay
makes it very difficult for the branch
to handle the customer Maybe this
customer dissatisfaction is a big
damage to the bank's reputation.

What are the reasons for this ?

1.The branch performs a non-standard
documentation process to reach its
loan targets quickly.
2The Central Service department
returns the same document several
times without looking at it at once due
to the increase in the amount of loan it
has to approve.

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