Principles of Management at KMBL ~ Vishal Agarwal
Introduction Kotak Mahindra Bank Ltd is one of the fastest growing bank and among the most admired financial institutions in India. The Bank offers transaction banking, operates lending verticals, manages IPOs and provides working capital loans. They have one of the largest and most respected Wealth Management teams in India, providing the widest range of solutions to high net worth individuals, entrepreneurs, business families and employed professionals. The Bank offers complete financial solutions for infinite needs of all individual & non-individual customers depending on the customer's need - delivered through a state of the art technology platform. They also offer investment products like Mutual Funds, Life Insurance, retailing of gold coins and bars etc. The Depository services offered by the Bank allows the customers to hold equity shares, government securities, bonds and other securities in electronic or Demat forms. The Bank offers comprehensive business solutions for the business community that includes the Current Account, Trade Services, Cash Management Service and Credit Facilities. The Bank addresses the entire spectrum of financial needs of Non-Resident Indians. Their tie-up with the Overseas Indian Facilitation Centre (OIFC) as a strategic partner gives them a platform to share their comprehensive range of banking & investment products and services for Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs). The bank has overseas subsidiaries with offices in Mauritius, London, Dubai, Singapore, New York & San Francisco. The overseas subsidiaries are mainly engaged in investment advisory and investment management of funds, Equity & Debt Trading, management of GDR/ FCCB issuances, broker & broker dealer activities and investments.
History Kotak Mahindra Bank Ltd was incorporated in the year 1985 with the name Kotak Capital Management Finance Ltd. In April 8, 1986, the company's name was changed Kotak Mahindra Finance Ltd. They started bill discounting activity. In the year 1987, they entered into lease and hire purchase market. In the year 1990, they started car finance division and during next year, they started investment banking division. Also they took over FICOM, one of India's largest financial retail marketing networks. In the year 1994, the company formed Kotak Mahindra International in Mauritius and opened an office in Dubai. They formed Kotak Mahindra (UK) formed with office in London. In the year 1996, the car finance business was hived off into a separate company, namely Kotak Mahindra Primus Ltd and Ford Credit took a 40% stake in Kotak Mahindra Primus. In the year1998, they formed Kotak Mahindra Inc with office in New York. In the year 2001, Kotak Securities Ltd became a subsidiary company. In February 2003, the company was given the license to carry on banking business by the Reserve Bank of India (RBI). This approval created banking history since Kotak Mahindra Finance Ltd is the first non-banking finance company in India to convert themselves into a bank as Kotak Mahindra Bank Ltd. In March 2003, they commenced banking operations. The Bank started their operations in New Delhi by inaugurating a branch. They entered into ATM sharing agreement with UTI Bank (now known as Axis Bank. In October
4, 2005, the Bank acquired 40% stake in Kotak Mahindra Primus Ltd (KMP) held by Ford Credit International (FCI) thereby giving the Bank and their subsidiary, complete ownership of KMP. Simultaneously, they also sold their stake in Ford Credit Kotak Mahindra Ltd (FCKM) to FCI. In September 2006, the Bank acquired 51% of the paid up Share capital of Kotak Mahindra Securities Ltd (KMSL) by way of preferential allotment of shares by KMSL to the Bank. In March 2007, the Bank entered into a subscription agreement with International Finance Corporation, whereby the Bank will issue Upper Tier II Subordinated Bonds by way of Debentures of the value of USD 45 million with the final maturity of over 15 years. In September 2007, Kotak Mahindra Inc set up a branch in San Francisco. During the year 2009-10, they entered Ahmedabad Commodity Exchange as anchor investor. In June 2010, the Bank entered into an agreement with Sumitomo Mitsui Banking Corporation, Japan for a preferential issue of 1.64 crore shares at Rs 833 per share which amounts to approximately 4.5% stake on a post-issue basis for Rs 1,366 crore. In August 2011, the Bank entered into business cooperation arrangement with CIMB Group Sdn Bhd, Malaysia (CIMB).
Sir Henry Fayol(1841-1925) Henry Fayol was born in France in 1841. He got a degree in Mining Engineering in 1860 at the age of 19 years and started working as an engineer in a Coal Mining Company. In 1888 he was promoted as the Managing Director of that company. At that time the company was in a situation of insolvency. He accepted the challenge and developed a general theory of business administration. He developed this theory independently of scientific management but roughly contemporaneously to bring the company out from this situation and he succeeded. When he retired after 30 years the company was a leading coal- steel company with a very strong financial background. He was one of the most influential contributors to modern concepts of management. Henry Fayol became famous as “Father of Management Studies and Thoughts” because of the following contributions: a) He made a clear distinction between technical and managerial skills. b) He developed 14 principles of management which acts as guidelines for modern managers to perform their managerial activities. c) He identified the main steps involved in the process of management which are now considered as the major functions of management- Planning, Organizing, Staffing, Directing, and Controlling.
Fayol’s Principles Of Management 1. Principle of Division of Work:
According to this principle the whole work must be divided into small tasks or units and instead of assigning the whole work to one person, one task or a unit of work should be assigned to one person according to the capability, qualification and experience of the person. When a person performs a part of job again and again he will become perfect and specialized in doing that and the efficiency level of the employee will improve. At Kotak Mahindra bank there are different people employed for this purpose. There are different employees for accepting cash deposits, clearing cheques, granting loan etc., each employee is guided by the branch operation manager, branch manager or by the next senior person to that employee.
2. Principle of Authority & Responsibility:
Authority means power to take decision. Responsibility means obligation to complete the job assigned on time. According to this principle there must be a balance between the authority and responsibility. As excess of authority without matching the responsibility may
bring negative results and excess of responsibility without matching the authority will not allow the worker to complete his job on time. There should be a balance between both for best results. At Kotak Mahindra Bank there are 2 verticals to follow this principle. The first one is the imputer and the second is the authorizer. The imputer enters the details of each and every transaction and the authorizer simultaneously checks and verifies the transaction. Both the imputer and the authorizer have been given the authority according to their work which leads to completion of work on time.
3. Principle of Discipline:
Discipline refers to the general rules and regulations for systematic working in an organization. Discipline does not only mean the rules and regulations but it also mean developing commitment in the employees towards the organization as well as towards each other. These rules should not be applicable to subordinates only but will also be applicable to the supervisory level. At Kotak Mahindra Bank there is a very strict discipline check. The Branch Operations Manager checks the disciplinary level of all the employees in the branch and also checks that the employees are working systematically. The BOM also motivates the employees.
4. Principle of Unity Of Command:
According to this principle an employee should receive orders from one boss only because if he is receiving orders from more than one boss then he will get confused and will not be able to understand that whose order must be executed first and on the other hand, if employee gets order from more than one boss than he gets a chance to give excuses by saying that he was busy in executing the order of the other boss. At Kotak Mahindra Bank on a macro and micro level again there are two departments. The first one is the sales department and the other is the operation department. Each of these departments has got 8-10 team members and a head to whom all the members will have to report about the activities carried by each of them. The Branch Sales Manager and The Branch Operations Manager both will report about the activities carried out by their departments to the Branch Manager. And the Branch Manager will report to the head of the zone. The orders to each of these heads are given by their seniors only.
5. Principle of Unity of Direction:
According to this principle “one unit means one plan”, that is the efforts of all the members and employees of organization must be directed towards one direction that is the achievement of common goal. If this principle is applied than it leads to coordination in the organization. At Kotak Mahindra Bank the main aim of the employees of the bank is to satisfy the needs of its customer’s .For this purpose the bank has prepared different types of policies, accounts and directs all the efforts of their employee towards the achievement of the organizational goal as well as towards the achievement of customer satisfaction.
6. Principle of Remuneration of Persons:
According to this principle employees in the organization must be paid fairly or adequately to give them maximum satisfaction. The remuneration should be just and fair because if employees are underpaid they will not be satisfied and an unsatisfied person can never contribute his maximum.
At Kotak Mahindra Bank the salary paid to the employees are paid according to the Minimum Wage Act of Government, by comparing the salary given to other employees working at same post. The bank also compares the performance of the employees to determine their salary.
7. Principle of Order:
In this principle order does not mean command but it means orderly arrangement of men and material that is a fixed place for everything and everyone in the organization. Fayol insisted that there must be a fixed place to keep every material and things used in the organization and fixed place or seat or cabin for every employee of the organization so that no time and energy is wasted in search of any material or any person. At Kotak Mahindra Bank the bank has developed a system known as ‘OUTLOOK.’ It helps the employees to know about the other employees of the organization. An employee will also know about the contact details of another employee, and can also know about the employees working under that employee. Every asset of the organization has got a proper place in the bank and every employee has fixed place in the bank.
8. Principle of Equity:
Equity refers to kind, fair and just treatment to the employees of the organization. Employees will put up their maximum efforts only when they are treated with kindness and justice. If a manager is biased in dealing with the employees then employees will get dissatisfied and will not contribute to their maximum capacity. If this principle is followed in an organization than the employees will get satisfied and will be motivated which will lead to boost up their performance. At Kotak Mahindra Bank every employee are equally treated. There is no gender bias between any employees. The rules that are applicable to a male employee are also applicable on female employees as well. The bank grants leaves to the employees without any gender bias, the bank have the same leave policy for both male and female workers.
9. Stability of Tenure of Personnel:
It refers to no frequent termination and transfer. According to this principle the management must provide the feeling of job security among the employees because with the feeling of insecurity for the job, the employees cannot contribute their maximum. If this principle is followed than the efficiency level of the employees improves. At Kotak Mahindra Bank the employees are assessed on a monthly basis. The manager after proper assessment warns the employees whose performance is low and gives them a chance to improve their performance. But if the performance is not improving than the employees are sent for training known as Performance Improvement Plan (PIP). In PIP the employees are given proper training about their respective job. There are certain levels fixed for termination of an employee by the manager as well as the Human Resource Department of the company. Performance of all employees is tracked regularly and both ‘stars’ and ‘stalwarts’ are
moved across businesses to encourage cross functional exposure and Talent Fungibility.
10. Principle of Initiative:
Initiative refers to chalking out the plan and implementing the same. Fayol suggested that employees of an organization must be given an opportunity to take some initiative in making and executing a plan. It gives immense satisfaction to the employees by doing so. By following this principle manager can develop a feeling of belongingness among the employee.
At Kotak Mahindra Bank in every quarter there is a meeting held by the state head and managers in which employees are invited to give their suggestions. In this meeting the management discusses about the goals of the bank to be achieved and new plans and rules that are to be implemented. At Gujarat level, the meeting is held in Ahmedabad in every quarter. The employees are invited to give their suggestions about the existing policies and the new policies that the company will be introducing.
In order to encourage and foster continuous and transparent communication channels across the length and breadth of the organization a structured "Communication Calendar" is followed. This includes various mechanisms like Branch Visits, Skip Level chats, Town Halls, Intranet, Internet, Mass Mailers, Web casts, Family Meet, Health and Wellness initiatives, and Sports, hobbies and fun activities. Through such communication platforms employees get opportunities for skip level, leadership level and cross functional interaction. These channels are also actively used for seeking feedback, knowledge sharing and engagement initiatives.
11. Principle of Espirit De Corps: Espirit De Corps means union is strength. Fayol emphasized on the team work. He suggested that every employee in the organization must consider himself as a part or member of a team and try to achieve the team goal because team contribution is always better and more than individual contribution. Kotak Mahindra Bank is working on this principle only. The employees of the bank work in a team and contribute all their efforts towards the achievement of organizational goal. An employee in the training process is given training to work as a team and develop a feeling of belongingness towards the organization.
MILESTONES OF KOTAK MAHINDRA BANK (1986-2010)
1986 1987 1990 1991
Kotak Mahindra Finance Ltd started the activity of Bill Discounting. Kotak Mahindra Finance Ltd entered the Lease and Hire Purchase market. The Auto Finance division was started
The Investment Banking Division was started. Took over FICOM, one of India's largest financial retail marketing networks
1992 1995
Entered the Funds Syndication sector
1996
The Auto Finance Business is hived off into a separate company - Kotak Mahindra Prime Limited (formerly known as Kotak Mahindra Primus Limited).
1998
Entered the mutual fund market with the launch of Kotak Mahindra Asset Management Company.
2000
Brokerage and Distribution businesses incorporated into a separate company - Securities. Investment banking division incorporated into a separate company - Kotak Mahindra Capital Company
Kotak Mahindra tied up with Old Mutual plc. for the Life Insurance business. Kotak Securities launched its on-line broking site.
2001
was incorporated
2003
Kotak Mahindra Finance Ltd. converted into a commercial bank - the first Indian company to do so.
2004 2006
Launched India Growth Fund, a private equity fund.
2008 2009 2010
Bought the 25% stake held by Goldman Sachs in Kotak Mahindra Capital Company and Kotak Securities. Launched a Pension Fund under the New Pension System.
Kotak Mahindra Bank Ltd. opened a representative office in Dubai Entered Ahmedabad Commodity Exchange as anchor investor.
Ahmedabad Derivatives and Commodities Exchange, a Kotak anchored enterprise, became operational as a national commodity exchange.
