Revamping Nepal Bank: Challenges and Management Solutions

School

Tribhuvan University**We aren't endorsed by this school

Course

MANAGEMENT HUMAN RESO

Subject

Management

Date

Dec 11, 2024

Pages

Uploaded by BarristerProton15503

CASE NO. 6 : NEPALBANK L.T.DPresenter : Karishma DhamiBipana BaskotaKrishna RokayaChattra RawalGyatri BhattaRoshni Sha

ANALYZING THE CASE:Analyzing the case with the help of Four steps as presented below:Step 1st: Concentration on Background of the caseStep 2nd: Identifying issuesStep 3rd: Management InterventionStep 4th: Result of the Intervention

BACKGROUND OF THE CASENepal Bank Ltd. (NBL) is Nepal's first government-owned bank. Initially, it performed both central and commercial banking functions. However, after the government liberalized the banking sector:Special protections for NBL were removed.Many private banks entered the market, creating competition.NBL faced problems like inefficiency, slow decision-making, nepotism, and financial losses.To address its declining performance, the government partnered with the World Bank for financial reform. Foreign management was brought in, which introduced computerization and improved processes, despite initial resistance from employees.

IDENTIFY ISSUESLengthy Hierarchical Structure: Delayed decision-making and increased operational costs.Nepotism in Recruitment: Staff hired based on favoritism rather than merit, leading to inefficiency.Resistance to Change: Employees opposed the adoption of computerized systems.Non-Performing Loans (NPL): A high percentage of bad loans (54% in 2003) caused financial strain.Negative Net Worth: Financial health was severely deteriorated, with Rs. 90 million negative net worth in 2003.Customer Dissatisfaction: Complaints due to delayed and inefficient services.Increased Competition: Deregulation allowed private banks to enter, pressuring NBL to modernize.

MANAGEMENT INTERVENTIONEngaging Foreign Management: The government contracted foreign experts to revamp NBL’s management and operations.Modernization of Systems: Introduced computerized systems to streamline operations and improve customer service.Golden Handshake Program: Encouraged inefficient and resistant employees to retire voluntarily with compensation, reducing staff-related inefficiencies.Recruitment of Competent Staff: Hired skilled employees based on meritocracy.Loan Recovery Mechanism: Focused on reducing bad loans, which dropped from 54% in 2003 to 9% in 2007.Service Improvements: Prompted service delivery enhancements through computerization, reducing customer complaints.

RESULT OF THE INTERVENTIONOperational Efficiency: Streamlined processes reduced delays, improving service delivery and customer satisfaction.Financial Health: Profitability returned after years of loss, with net worth improving from Rs. 90 million negative in 2003 to Rs. 60 million negative in 2007.Loan Recovery Success: Non-performing loans dropped significantly, stabilizing the bank’s financial position.Increased Customer Base: Deposits and customers grew annually, making NBL the second-ranked bank in Nepal.Enhanced Reputation: The bank’s improved performance and reduced complaints strengthened its market position.

ANSWERING THE QUESTIONoScan the environmental situation of Nepal Bank L.t.d.It is done through Environment analysis as we had categories into : ) Internal environment(SWOT): ) External environment(PESTEL)SWOT Analysis:Strengths:•Strong brand recognition and a wide network of branches •Government backing and support•Experienced workforce with a deep understanding of the local market

Weaknesses:•Inefficient bureaucratic processes•Outdated technology infrastructure •Poor risk management practices •Lack of innovation and agilityOpportunities:•Growing economy and increasing financial inclusion•Emerging digital technologies•Potential for new product and service offferingsThreat:•Increasing competition from private banks•Economics downturns and political instability •Regulatory changes and stricter compliance requirementsKey issues and challenges:Organizational culture Technological Backwardness Human resource management Financial Performance Risk Management

Recommendations:Organization Culture Transformation Technology AdoptionHuman Resource developmentFinancial Performance Improvement Risk Management Internal factors:•Organizational culture : NBL’s traditional bureaucratic culture and resistance to change have hindered its ability to adopt to the changing environment.•Human Resource Management : inefficient HR practices, including nepotism and favoritism, have affected employee morale and productivity.•Financial Performance : NBL has faced challenges in terms of profitability, asset quality, and capital adequacy.•Technological Infrastructure : The bank’s outdated technology systems have impacted its operational efficiency and customer service.

Conclusion:By addressing these key issues and implementing the recommended strategies, NBL can overcome its challenges and emerge as a strong and competitive player in the nepali banking sectors. A focus on innovation, customer-centricity, and operational excellent will be crucial for the bank’s future success.

Do You find any problem while changing the organization and how was the problem solved? Problems Faced by Nepal Bank Ltd. 1. Resistance to Change Employees resisted the computerized system due to fear of job insecurity. 2. Inefficient Decision-Making Lengthy hierarchical structure delayed decisions and increased costs. 3. Nepotism in Recruitment Favoritism led to unqualified staff, reducing organizational efficiency. 4. Non-Performing Loans (NPLs) High percentage of bad loans (54% in 2003) strained financial stability. 5. Workforce Downsizing Golden handshake program caused emotional distress and financial strain. 6. Poor Customer Service Outdated practices led to slow service and customer dissatisfaction

SOLUTIONS:Golden Handshake Program:Offered early retirement to inefficient employees, reducing resistance.New Recruitment:Hired skilled and competent employees to improve service quality.Training and Modernization:Introduced computerized systems and trained employees to adapt to new technologies.Professional Management:Handed over management to foreign experts who implemented structural reforms effectively.

Evaluate the management decision related to HR planning and performance improvement.The management decision related toHR planningProblem:Initially, the bank hired employees based on favoritism, not skills. This resulted in unqualified and inefficient staff, which increased costs and slowed down the bank’s operations. There was no proper workforce management or planning.Solution:They introduced the golden handshake program, offering early retirement to unproductive staff.After removing the unnecessary employees, they hired new, skilled workersbased on merit.This brought in talent that could handle modern banking systems and deliver better results.Impact:The bank now had a team of capable employees who could adapt to technological advancements and wor

Performance improvementoComputerization reduced inefficiencies and enhanced customer service.oThe golden handshake program removed unproductive employees, reducing operational costs.oNew hires brought fresh skills and ideas, contributing to improved financial performance.oFocus on loan recovery reduced bad loans significantly, boosting profitability.Final EvaluationThe management's decisions were very effective in turning the bank around. By removing inefficient staff, hiring skilled employees, and introducing modern systems, they transformed the bank's performance. These decisions not only improved the work culture but also increased profits, customer satisfaction, and the bank’s overall market position. It was a great example of how good HR planning and performance-focused strategies can fix even big problems.