Nepal Bank — Deputy Manager (Level 7)

Organization Development: OD Process, OD at Group & Inter-group Level, Changing Organizational Culture

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1. Organization Development (OD) — Concept

Organization Development (OD) is a planned, systematic, long-range effort to improve an organization's problem-solving and renewal processes through the application of behavioural science knowledge. It aims to increase organizational effectiveness and health by aligning strategy, structure, people, culture and processes.

Key features:

• Planned and systematic — not ad hoc or reactive.
• Behavioural science based — draws on psychology, sociology, anthropology.
• Organization-wide / systemic — targets the total system, not isolated units.
• Long-term — a continuous process, not a one-time fix.
• Change agent driven — uses internal or external consultants (change agents).
• Action-research based — diagnosis → action → evaluation cycles.
• Goal: improve both task effectiveness and human fulfilment (quality of work life).

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2. Organization Development Process

OD follows a cyclical, data-based action research model. The classic steps are:

Step 1: Problem Identification / Entry

• Recognize the need for change (e.g., low morale, high turnover, poor service quality, resistance to technology).
• The client (management) contacts the OD consultant/change agent.
• Clarify the presenting problem and the client's expectations.

Step 2: Contracting / Establishing Relationship

• Define roles, responsibilities, time frame, cost, confidentiality and expected outcomes.
• Build trust and mutual understanding between client and change agent.
• Agree on the scope of the OD intervention.

Step 3: Diagnosis (Data Collection & Analysis)

• Gather data using interviews, questionnaires, observation, surveys, records.
• Analyse at three levels:
  • Individual — skills, motivation, job fit.
  • Group/Team — norms, roles, communication, conflict.
  • Organization/Inter-group — structure, culture, coordination, inter-departmental relations.
• Identify gaps between actual and desired state.

Step 4: Feedback

• Present diagnostic findings back to the client group.
• Help members own the data and accept the need for change.
• Prioritize problems and set change targets.

Step 5: Intervention / Action Planning

• Select and apply appropriate OD techniques (see Section 2 below).
• Jointly plan specific actions, responsibilities and timelines.
• Interventions may target individual, group, inter-group or organizational levels.

Step 6: Implementation

• Execute the planned interventions.
• Monitor progress, provide support, and make mid-course corrections.
• Manage resistance to change.

Step 7: Evaluation & Follow-up

• Assess results against objectives (hard measures: productivity, cost, absenteeism; soft measures: satisfaction, climate).
• Institutionalize successful changes.
• Re-diagnose if new problems emerge — the cycle continues.

Summary flow:

Entry → Contracting → Diagnosis → Feedback → Intervention → Implementation → Evaluation → (Re-diagnosis)

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2. OD at Group and Inter-group Level

A. Group (Team) Level OD

Focus: improving team effectiveness, cohesion, communication and problem-solving.

Common interventions:

Benefits: better coordination, reduced conflict, higher morale, improved decision quality, greater commitment.

B. Inter-group Level OD

Focus: improve relations and coordination between different groups/departments (e.g., between branches and head office, or between credit and operations departments).

Common interventions:

Benefits: smoother workflow, reduced "silo" mentality, better resource sharing, improved customer service, faster decision-making.

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3. Changing Organizational Culture

Concept

Organizational culture is the shared pattern of values, beliefs, norms, assumptions and behaviours that guide how members act. It is often described as "the way we do things around here."

Why Culture Change is Needed

• Merger/acquisition, privatization, or restructuring.
• Shift from bureaucratic to customer-centric or digital culture.
• Need for innovation, accountability, teamwork, or ethical conduct.
• Poor service quality, corruption, or resistance to reform.

Levels of Culture (Schein)

1. Artifacts — visible symbols, dress, rituals, office layout.
2. Espoused Values — stated mission, vision, codes of conduct.
3. Basic Underlying Assumptions — unconscious, deeply held beliefs (hardest to change).

Approaches to Changing Culture

1. Top management commitment — leaders must model the desired culture.
2. Clear vision and values — articulate the new culture explicitly.
3. Communication and socialization — training, induction, internal campaigns.
4. Structural and system alignment — change reward systems, appraisal, promotion criteria to match new values.
5. Role modelling and leadership development — champions of change at all levels.
6. Symbolic actions — change rituals, slogans, logos, ceremonies.
7. Participation and involvement — engage employees to reduce resistance.
8. Reinforcement over time — culture change takes years, not months.

Kotter's 8-Step Model (useful for culture change)

1. Create urgency
2. Form a powerful coalition
3. Create a vision for change
4. Communicate the vision
5. Remove obstacles
6. Create short-term wins
7. Build on the change
8. Anchor the change in culture

Challenges

• Deeply embedded assumptions resist change.
• Subcultures may conflict with the desired culture.
• Leadership inconsistency undermines the message.
• Short-term performance pressure competes with long-term culture building.

Relevance to Nepal Bank (Level 7)

As a Deputy Manager, one may be required to:

• Lead team-building and inter-departmental coordination.
• Support digital banking transformation by shifting from traditional to tech-enabled culture.
• Promote customer-centric, ethical and performance-driven culture.
• Act as a change agent in branches and departments.

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Key Takeaways

1. OD is a planned, systemic, long-term behavioural science-based change effort.
2. The OD process follows the action research cycle: entry → contracting → diagnosis → feedback → intervention → implementation → evaluation.
3. Group-level OD (team building, role analysis, process consultation) improves team effectiveness.
4. Inter-group OD (inter-group team building, organizational mirror, conflict resolution) improves cross-departmental cooperation.
5. Culture change requires leadership commitment, communication, system alignment, participation and long-term reinforcement.

Strategic Planning: Concept, Environmental Scanning, SWOT Analysis, Strategy Formulation, Implementation, Evaluation and Control

(Nepal Bank — Deputy Manager, Level 7 — Descriptive Question)

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1. Concept of Strategic Planning

Strategic planning is the systematic process by which an organisation defines its long-term direction, sets objectives, and decides how to allocate resources to achieve those objectives in a changing environment. It bridges the gap between where the organisation is now and where it wants to be in the future.

For a bank like Nepal Bank Limited (NBL), strategic planning means deciding:

• Which customer segments and geographic markets to serve,
• What mix of products (deposits, loans, remittance, digital banking) to offer,
• How to compete with commercial banks, development banks and fintechs,
• How much capital, technology and human resource to invest, and
• How to remain profitable while meeting regulatory (NRB) requirements.

Key Features

Vision, Mission and Objectives

• Vision — the desired future state ("to be the leading bank in Nepal in customer trust and digital service").
• Mission — the organisation's purpose and scope of business.
• Objectives — measurable targets (e.g., increase deposit base by 15% annually, reduce NPL to below 2%, raise digital transaction share to 60%).

Levels of Strategy

1. Corporate-level strategy — overall scope of the bank (growth, stability, retrenchment; diversification into insurance or securities).
2. Business-level strategy — how each business (retail banking, SME banking, treasury) competes (cost leadership, differentiation, focus).
3. Functional-level strategy — marketing, finance, HR, operations, IT, risk management.

Importance for a Bank

• Provides direction and reduces uncertainty,
• Coordinates diverse departments toward common goals,
• Enables proactive rather than reactive response to NRB directives, interest-rate changes and competition,
• Improves resource utilisation and long-term profitability,
• Builds a basis for performance measurement and accountability.

Strategic Planning Process (Overview)

Vision & Mission → Environmental Scanning → SWOT Analysis →
Strategy Formulation → Implementation → Evaluation & Control → Feedback

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2. Environmental Scanning

Environmental scanning is the monitoring, collecting and analysing of information about the internal and external environment to identify opportunities and threats and to anticipate change.

A. External Environment

(i) Macro (general) environment — PESTEL / PESTLE analysis

(ii) Micro (task/industry) environment

• Customers — depositors, borrowers, remittance users
• Competitors — other commercial banks, development banks, finance companies, cooperatives
• Suppliers — technology vendors, card networks, ATM service providers
• Regulators — Nepal Rastra Bank, SEBON, Insurance Board
• Publics — media, shareholders, employees, community

B. Internal Environment

Resources, capabilities and competencies: capital adequacy, branch network, brand image, employee skill, IT infrastructure, organisational culture, past performance.

Techniques of Environmental Scanning

• SWOT analysis
• PESTEL analysis
• ETOP (Environmental Threat and Opportunity Profile)
• Porter's Five Forces (industry competition)
• Competitor intelligence / benchmarking
• Scenario planning
• Customer surveys and market research

Importance

• Identifies opportunities to exploit and threats to defend against,
• Provides input for realistic objective setting,
• Helps anticipate regulatory and market changes,
• Supports competitive positioning.

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3. SWOT Analysis

SWOT is a structured tool that matches an organisation's internal Strengths and Weaknesses with external Opportunities and Threats to develop feasible strategies.

Framework

Illustrative SWOT for Nepal Bank Limited

Strengths

• Oldest bank of Nepal; strong brand and public trust
• Large branch network across all provinces
• Government-backed ownership and capital support
• Experienced workforce and established customer base

Weaknesses

• High non-performing loans and legacy problem assets
• Slower digital transformation than private banks
• Bureaucratic decision-making and union influence
• Weak marketing and product innovation

Opportunities

• Rising remittance inflow and financial inclusion drive
• Growth of mobile/digital banking and fintech partnership
• Expansion in SME, agriculture and hydropower lending
• Government priority-sector and subsidised loan schemes

Threats

• Intense competition from private commercial banks
• Tightening NRB regulations and capital requirements
• Cybersecurity risks and digital fraud
• Political instability and economic slowdown

TOWS / Matching Matrix (Strategy Generation)

Merits and Limitations

Merits: simple, low-cost, integrates internal and external view, useful for strategy generation.

Limitations: static snapshot, subjective, does not prioritise factors, needs weighting to be truly useful.

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4. Strategy Formulation

Strategy formulation is the stage of choosing the mission, objectives and the specific strategies and action plans to achieve them. It answers: What business are we in? What do we want to achieve? How will we compete?

Steps in Strategy Formulation

1. Define/review vision and mission
2. Set strategic objectives — SMART (Specific, Measurable, Achievable, Relevant, Time-bound)
3. Identify strategic alternatives using SWOT/TOWS, Porter's generic strategies, Ansoff matrix
4. Evaluate alternatives against suitability, feasibility and acceptability
5. Select the best strategy
6. Prepare functional/action plans — marketing, credit, HR, IT, branch expansion
7. Allocate resources and budget

Tools Used

• Ansoff Matrix — market penetration, market development, product development, diversification
• Porter's Generic Strategies — cost leadership, differentiation, focus
• BCG Matrix — for product/branch portfolio decisions
• Grand Strategy Matrix — growth, stability, retrenchment, combination

Example for NBL

• Market penetration: cross-sell insurance and remittance to existing depositors.
• Product development: introduce digital wallet, BNPL (buy now pay later), agri-loan products.
• Market development: expand branches in rural municipalities and open remittance tie-ups abroad.
• Diversification: subsidiary for securities trading or microfinance.

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5. Strategy Implementation

Implementation converts the formulated strategy into action. It is often called the most difficult stage because it requires changes in structure, systems, people and culture.

Key Elements

Requirements for Successful Implementation

• Clear communication of strategy to all levels,
• Alignment of individual and departmental KPIs with strategy,
• Adequate financial and technological resources,
• Strong leadership and change management,
• Monitoring mechanisms built in from the start.

Common Barriers

• Resistance to change, union resistance,
• Weak middle management commitment,
• Inadequate resources or skills,
• Conflicting functional priorities.

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6. Strategy Evaluation and Control

Evaluation determines whether the strategy is achieving the intended results; control ensures corrective action is taken when performance deviates.

The Control Process

Set standards → Measure actual performance → Compare with standards →
Identify deviation → Take corrective action

Standards and Measures for a Bank

Techniques of Evaluation and Control

• Budgetary control and variance analysis,
• Ratio analysis and trend analysis,
• Balanced Scorecard — financial, customer, internal process, learning and growth,
• Management by Objectives (MBO),
• Internal audit, inspection and risk-based supervision,
• Benchmarking against peer banks,
• Key Risk Indicators (KRIs) and early-warning systems.

Corrective Actions

• Revise strategy or objectives if environment has changed,
• Reallocate resources, retrain staff, tighten credit appraisal,
• Strengthen recovery of NPLs, close unviable branches,
• Accelerate digital initiatives.

Importance

• Keeps strategy aligned with a dynamic environment,
• Provides early warning of failure,
• Ensures accountability and continuous improvement,
• Supplies feedback for the next planning cycle.

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Conclusion

Strategic planning is a continuous, cyclical process. For Nepal Bank Limited, it begins with a clear vision and mission, is informed by systematic environmental scanning, is sharpened by SWOT analysis, is decided in strategy formulation, is executed through implementation, and is kept on track by evaluation and control. A Deputy Manager must understand each stage and, more importantly, ensure that departmental action plans, KPIs and reporting systems are aligned with the bank's overall strategy so that the plan translates into measurable performance.

General Management — Model Answer (Nepal Bank, Deputy Manager, Level 7)

1. Meaning of Management

Management is the process of planning, organising, staffing, directing, coordinating and controlling the resources of an organisation (human, financial, physical and informational) so as to achieve stated objectives efficiently and effectively.

• Efficiency — doing things right (least cost, least waste of resources).
• Effectiveness — doing the right things (achieving the intended goals).

Management is both a science (systematic body of knowledge, principles, cause–effect relationships) and an art (skill, judgement, creativity in application). It is also a profession in the sense of specialised knowledge, code of conduct and service motive. Koontz and O'Donnell call it "the art of getting things done through and with people in formally organised groups."

Key features: goal-oriented; universal; continuous and dynamic; intangible; a group activity; a social process; both science and art; a distinct activity from ownership.

2. Theories of Management

(a) Classical School

1. Scientific Management (F.W. Taylor — "Father of Scientific Management")
   • Time study, motion study, standardisation of tools and methods, differential piece-rate wages, functional foremanship, separation of planning from doing.
   • Core idea: there is one best way of doing a job; replace rule-of-thumb with science.
2. Administrative Management (Henri Fayol)
   • Identified five elements of management (planning, organising, commanding, coordinating, controlling) and 14 principles (see §3).
3. Bureaucratic Management (Max Weber)
   • Division of labour, clear hierarchy, formal rules, impersonality, merit-based selection — the "ideal bureaucracy".

(b) Neo-Classical School (Human Relations / Behavioural)

4. Human Relations Approach (Elton Mayo — Hawthorne Experiments, 1927–32)
   • Productivity depends more on social factors, informal groups, supervision style and employee morale than on physical working conditions.
5. Behavioural Science Approach (Maslow, Herzberg, McGregor, Argyris, Likert)
   • Maslow's hierarchy of needs; Herzberg's two-factor theory; McGregor's Theory X and Theory Y; Argyris's maturity–immaturity theory.

(c) Modern School

6. Systems Approach (Chester Barnard, Ludwig von Bertalanffy)
   • Organisation as an open socio-technical system interacting with its environment; sub-systems must be integrated.
7. Contingency / Situational Approach (Fiedler, Woodward, Lawrence & Lorsch)
   • There is no one best way; the appropriate structure and style depend on the situation (technology, size, environment, people).
8. Quantitative / Management Science Approach
   • Use of OR techniques, linear programming, queuing, simulation, decision trees for rational decision-making.

3. Principles of Management (Fayol's 14 Principles)

1. Division of work — specialisation increases efficiency.
2. Authority and responsibility — authority must match responsibility.
3. Discipline — respect for rules and agreements.
4. Unity of command — one employee, one boss.
5. Unity of direction — one head, one plan for one objective.
6. Subordination of individual interest to general interest.
7. Remuneration — fair and satisfying pay.
8. Centralisation — optimum balance between centralisation and decentralisation.
9. Scalar chain — clear line of authority from top to bottom (with gang plank for emergencies).
10. Order — right person in the right place; right material in the right place.
11. Equity — kindness and justice to employees.
12. Stability of tenure of personnel — low turnover, job security.
13. Initiative — encourage employees to suggest and act.
14. Esprit de corps — team spirit, "union is strength".

4. Functions of Management

Coordination is often treated as the essence of management — it runs through all the above functions.

5. Emerging Concepts of Management

1. Total Quality Management (TQM) — customer focus, continuous improvement, employee involvement, process approach (Deming, Juran).
2. Business Process Reengineering (BPR) — radical redesign of processes for dramatic gains in cost, quality, speed (Hammer & Champy).
3. Learning Organisation — Peter Senge's five disciplines: personal mastery, mental models, shared vision, team learning, systems thinking.
4. Knowledge Management — capturing, sharing and applying organisational knowledge as a core asset.
5. Digital and Agile Management — flat structures, cross-functional teams, sprint-based delivery, digital transformation.
6. Outsourcing, Benchmarking and Six Sigma — cost and quality competitiveness.
7. Green Management / Sustainability — ESG, carbon neutrality, circular economy.
8. Diversity and Inclusion Management — gender, ethnicity and generational balance in the workforce.
9. Remote / Hybrid Work and Virtual Teams — enabled by ICT, with new challenges of trust and control.
10. Corporate Governance and Risk Management — board accountability, compliance, Basel norms for banks.

6. Role of Managers (Mintzberg's Ten Roles)

Interpersonal

1. Figurehead — symbolic head; legal and ceremonial duties.
2. Leader — motivating, staffing, guiding subordinates.
3. Liaison — linking with outside contacts and networks.

Informational 4. Monitor — scanning the environment for information. 5. Disseminator — passing information inside the organisation. 6. Spokesperson — representing the organisation to outsiders.

Decisional 7. Entrepreneur — initiating change and innovation. 8. Disturbance handler — resolving conflicts and crises. 9. Resource allocator — deciding who gets what. 10. Negotiator — bargaining on behalf of the organisation.

In the Nepali banking context, a Deputy Manager additionally acts as a branch/unit head, compliance and risk controller, customer relationship builder, deposit and credit mobiliser, and developer of junior staff.

7. Managerial Skills (Katz)

• Technical skill — knowledge of methods, processes, procedures (crucial at operational level).
• Human skill — ability to work with, understand and motivate people.
• Conceptual skill — ability to see the organisation as a whole and think strategically.

Additional skills for modern managers: diagnostic skill, decision-making skill, communication skill, digital/IT skill, time-management skill, and emotional intelligence.

8. Ethics and Social Responsibility

Business ethics is the application of moral principles and standards to business behaviour — honesty, fairness, transparency, integrity, respect for stakeholders, and compliance with law.

Common ethical issues in banking: insider lending, conflict of interest, mis-selling of products, breach of customer confidentiality, money laundering, window dressing of financial statements, and misuse of depositors' funds.

Ways to institutionalise ethics:

• Written code of conduct and code of ethics.
• Ethics committee and whistle-blower protection.
• Top-management example and ethical leadership.
• Training, ethics audits, and reward for ethical behaviour.
• Strict enforcement of NRB directives, AML/CFT rules and Basel III requirements.

Social Responsibility (CSR) — the obligation of business to act in ways that protect and improve society's welfare along with its own interest. Carroll's four-part model:

1. Economic — be profitable, provide goods/services.
2. Legal — obey laws and regulations.
3. Ethical — do what is right, just and fair beyond law.
4. Philanthropic / Discretionary — voluntary contribution to community.

CSR in Nepali banking: financial literacy campaigns, branch expansion in rural areas, support to education and health, disaster relief, environmental protection, and CSR spending as directed by NRB (minimum 1% of net profit).

Benefits of ethical and socially responsible behaviour: enhanced reputation and brand image, customer and depositor trust, employee loyalty and motivation, reduced legal and regulatory risk, long-term sustainability, and contribution to national development.

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Conclusion: Management is the integrating force that converts resources into results. A Deputy Manager in Nepal Bank must combine Fayol's principles with modern practices — TQM, digital transformation, risk governance — and must lead with ethics and social responsibility to build a trustworthy, sustainable banking institution.

Human Resource Management — Core Concepts

Nepal Bank Ltd. — Deputy Manager (Level 7)

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1. Meaning of HRM

Human Resource Management (HRM) is the process of acquiring, developing, motivating, maintaining and utilising an organisation's human resources so that both individual and organisational goals are achieved efficiently and effectively.

In simple terms, HRM is the management of people at work — it covers everything from manpower planning, recruitment, selection, placement, training, performance appraisal, compensation, and employee relations to separation.

Key features:

• Pervasive function — present in every department and at every level of management.
• People-centred — deals with human beings, not machines; hence it is dynamic and behavioural.
• Goal-oriented — directs human effort towards organisational objectives.
• Continuous process — from recruitment to retirement.
• Strategic in nature — aligns the workforce with the long-term strategy of the organisation.

Nature/scope of HRM (three dimensions):

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2. Approaches to HRM

The main approaches to HRM are:

(a) The Commodity Approach (Traditional/Manpower Approach) Labour is treated as a commodity to be bought and sold like any other input. The focus is on maximum production at minimum cost. Employees are seen as a cost, not a resource. This approach prevailed before the 20th century.

(b) The Paternalistic Approach (Human Relations Approach) Management treats employees as family members — providing welfare facilities, job security and care. The Hawthorne Studies (Elton Mayo) gave rise to this approach. It recognises the social and psychological needs of workers but still keeps management in a superior, protective role.

(c) The Human Resource Approach (Modern/Developmental Approach) Employees are treated as valuable assets and a source of competitive advantage. The focus is on developing potential, participation, empowerment and mutual goal achievement. This is the approach followed by modern organisations such as Nepal Bank Ltd.

(d) The Systems Approach HRM is viewed as a sub-system of the total organisational system, receiving inputs (people, skills) from the environment and transforming them into outputs (performance, satisfaction) with feedback.

(e) The Strategic HRM Approach Human resource policies are integrated with corporate strategy. People are managed as a means of achieving sustainable competitive advantage — e.g., linking recruitment and training plans to the bank's expansion into new districts or digital banking.

(f) The Contingency Approach There is no single best way to manage people; the appropriate HR practice depends on the situation — size of the bank, branch location, labour market, technology and legal environment.

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3. Human Resource Planning (HRP)

Meaning: HRP is the process of forecasting an organisation's future demand for and supply of human resources, and matching the two so that the right number and right type of people are available at the right time and place.

Objectives:

• Ensure adequate manpower for present and future needs.
• Avoid over-staffing (wasteful cost) and under-staffing (work overload).
• Identify skill gaps and plan training and career development.
• Support organisational strategy — branch expansion, new products, digital transformation.
• Control manpower cost and reduce dependence on external recruitment.

Process of HRP:

1. Environmental scanning — economic, technological, legal (Labour Act 2074), competitive and social factors.
2. Analysing organisational objectives and plans — expansion, restructuring, automation.
3. Demand forecasting — estimating future manpower needs.
4. Supply forecasting — internal supply (existing staff, promotions, retirements, turnover) and external supply (labour market).
5. Comparing demand and supply (gap analysis) — surplus or shortage.
6. Action planning — recruitment, training, redeployment, redundancy, succession planning.
7. Monitoring and control — review against actual manpower position.

Forecasting techniques:

Barriers to effective HRP: lack of top management support, uncertainty in the environment, poor information systems, resistance to change, and the long time-lag between planning and results.

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4. Job Analysis, Job Description and Job Specification

Job Analysis is the systematic process of collecting information about a job — its duties, responsibilities, working conditions, and the human qualities required to perform it. It produces two documents:

(a) Job Description (JD) — a written statement describing the job itself. Contents:

• Job title and identification (code, department, location)
• Job summary / purpose
• Duties and responsibilities
• Reporting relationships (supervisor, subordinates)
• Working conditions and hazards
• Machines, tools and equipment used
• Performance standards

(b) Job Specification (JS) — a written statement of the human requirements of the job. Contents:

• Education and qualifications
• Experience
• Skills, knowledge and abilities
• Physical and mental requirements
• Personality traits and interests

Uses of job analysis: recruitment and selection, training needs identification, job evaluation and compensation, performance appraisal, job design, and manpower planning.

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5. Recruitment and Selection

Recruitment

Meaning: Recruitment is the process of searching for and attracting prospective candidates to apply for jobs in the organisation. It is a positive process — it increases the pool of applicants.

Sources of recruitment:

Internal vs External — merits:

• Internal: low cost, quick, motivates staff, known candidates, no induction needed. Demerit: limited choice, no fresh ideas, internal politics.
• External: wide choice, fresh talent and ideas, competitive spirit. Demerit: costly, time-consuming, lengthy induction, demotivating to insiders.

Selection

Meaning: Selection is the process of choosing the most suitable candidate from among the applicants. It is a negative process — it rejects the unsuitable.

Selection process (steps):

1. Preliminary screening / reception
2. Application blank / CV screening
3. Selection test — aptitude, intelligence, personality, trade, interest
4. Selection interview — preliminary, core, panel, stress, group
5. Reference and background check
6. Medical examination
7. Final selection and job offer
8. Placement and induction

Difference between Recruitment and Selection:

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6. Training and Development

Meaning: Training is the process of imparting specific skills, knowledge and attitudes required for a particular job. Development is the broader, long-term process of developing the overall personality and capabilities of an employee for future responsibilities.

Difference:

Methods of training:

• On-the-job: job rotation, coaching, apprenticeship, internship, committee assignment, vestibule training.
• Off-the-job: lecture, conference/discussion, case study, role playing, simulation, programmed instruction, sensitivity training, e-learning.

Benefits: higher productivity, better quality, reduced supervision, lower accident rate, employee motivation and retention, and a ready internal supply of managers.

Training process: needs assessment → setting objectives → designing programme → conducting training → evaluation (reaction, learning, behaviour, results — Kirkpatrick model).

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7. Performance Management

Meaning: Performance management is a continuous, strategic process of setting goals, monitoring progress, appraising performance, giving feedback and developing employees so that organisational objectives are met. Performance appraisal is one component of it.

Process:

1. Defining and communicating performance standards / KPIs
2. Measuring actual performance
3. Comparing actual with standards
4. Discussing the appraisal with the employee (feedback)
5. Taking corrective or developmental action

Methods of performance appraisal:

• Traditional: ranking, paired comparison, grading, forced distribution, checklist, critical incident, confidential report, essay.
• Modern: Management by Objectives (MBO), 360-degree feedback, assessment centre, BARS (Behaviourally Anchored Rating Scales), HR accounting, balanced scorecard.

Uses: promotion, transfer, salary increment, training need identification, career planning, and employee counselling.

Essentials of a good appraisal system: clear standards, reliability and validity, freedom from bias (halo, leniency, central tendency, recency effects), feedback to the appraisee, and linkage with reward and development.

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8. Linkage (Summary)

HRM is the umbrella function. Within it, HR planning decides how many and what type of people are needed; job analysis produces the job description and job specification that guide recruitment (attracting applicants) and selection (choosing the best); training and development build the competence of those selected; and performance management evaluates and develops that competence, feeding results back into HR planning — completing the cycle.

Contemporary Challenges and Problems of Human Resource Management, Labour Relations and Negotiations

(Nepal Bank Deputy Manager, Level 7 — long-answer question)

1. Introduction

Human Resource Management (HRM) is the strategic management of people in an organisation so that individual and organisational goals are achieved together. In a commercial bank such as Nepal Bank Limited, HRM covers recruitment, placement, training, performance appraisal, compensation, promotion, transfer, discipline and welfare. Labour relations refer to the relationship between management and employees (and their trade unions) concerning terms and conditions of employment. Negotiation is the process of joint decision-making between management and union representatives to settle these terms — in banks, mainly through collective bargaining agreements (CBA), wage revision, and grievance handling.

In the contemporary Nepali context — a liberalised economy, WTO membership, digital banking, merger/acquisition of banks, shortage of skilled manpower abroad (brain drain), and assertive trade unions — HRM and labour relations face several new and difficult challenges. These are discussed below.

2. Contemporary Challenges and Problems of HRM

a) Talent acquisition and retention. Banking has become highly competitive. Skilled staff — especially IT, risk, credit and treasury professionals — are attracted by higher pay in development banks, microfinance, insurance and foreign employment. High turnover raises recruitment and training costs and breaks service continuity. Retention tools (career path, competitive pay, recognition) are not always adequate.

b) Skill obsolescence and digital transformation. Core banking, mobile banking, QR payments, digital lending and fintech partnerships demand new competencies. Existing staff trained in manual/legacy systems need reskilling. Training is often ad hoc, under-budgeted and not linked to a proper Training Needs Assessment (TNA).

c) Workforce diversity and generational mix. Banks now employ four generations together — veterans, Baby Boomers, Generation X and Millennials/Gen Z — with different values, expectations of work-life balance, and attitudes to authority. Managing this diversity, plus gender and ethnic inclusion, is a continuing problem.

d) Performance management and productivity. Traditional confidential reporting and seniority-based promotion do not reward performance. Absence of objective KPIs, weak feedback, and subjectivity in appraisal create demotivation and disputes. Linking pay to performance (performance-linked incentive) is resisted by unions.

e) Compensation and cost pressure. Declining interest spread, high operating cost, and competition force banks to control staff cost, while employees demand pay at par with the best-paying institutions. Balancing internal equity, external competitiveness and affordability is difficult.

f) Trade union multiplicity and politicisation. In Nepali banks, several unions affiliated to different political parties operate simultaneously. Rivalry among them, frequent strikes, sit-ins and pressure tactics disturb normal banking, weaken discipline, and make uniform HR decisions difficult.

g) Legal and regulatory compliance. Banks must comply with the Labour Act 2074, Labour Rules 2075, Bonus Act 2030, Contribution-Based Social Security Act 2074, Bank and Financial Institutions Act 2073, Nepal Rastra Bank directives, and the directives of the Department of Labour and Occupational Safety. Frequent changes and strict enforcement increase the compliance burden.

h) Workforce planning and ageing. Many experienced employees are retiring while recruitment is delayed by legal and procedural requirements. Succession planning and knowledge transfer are weak, creating a leadership gap.

i) Employee engagement, morale and mental health. Workload, target pressure, long hours at branch counters, and fear of transfer/punishment reduce engagement. Stress, absenteeism and presenteeism affect service quality.

j) Outsourcing and contract labour. Use of outsourced staff for support functions creates dual pay scales, weak loyalty, and legal risk regarding equal pay for equal work.

3. Contemporary Challenges of Labour Relations

a) Recognition and representation. Management must decide which union is the sole bargaining agent; rival claims delay recognition and bargaining.

b) Collective bargaining deadlocks. Differences over wage increase percentage, dearness allowance, bonus, promotion quota, transfer policy and contract appointment often lead to deadlock and third-party mediation or arbitration.

c) Industrial disputes and strikes. Strikes, pen-down, and work-to-rule in banks directly hit customer service, cheque clearing and remittance, damaging the bank's image and profitability.

d) Grievance and discipline. Delayed or unfair handling of grievances (transfer, promotion, punishment) is a major source of mistrust. Principles of natural justice and domestic inquiry are sometimes not followed properly.

e) Union–management power imbalance and political interference. Political backing of unions weakens management's authority; conversely, weak unions may fail to protect genuine employee interests.

f) Participation and communication. Absence of effective works council, joint consultative committee or information sharing reduces trust and increases conflict.

g) Impact of mergers and restructuring. After amalgamation, issues of surplus staff, adjustment, seniority, uniform pay and union recognition create serious labour problems.

4. Contemporary Challenges of Negotiation

a) Preparing for negotiation. Lack of reliable data on inflation, market pay, bank's capacity to pay, and productivity weakens the management's bargaining position.

b) Distributive vs integrative bargaining. Unions press for maximum wage increase (distributive); management must convert the agenda to integrative bargaining — productivity, training, service quality — for mutual gain.

c) BATNA and bargaining power. If either party has a weak Best Alternative to a Negotiated Agreement (BATNA), the settlement is one-sided. Management's BATNA is weakened by legal restrictions on lockout and by political pressure.

d) Negotiation style and culture. Nepali labour negotiation is often positional, emotional and influenced by political affiliation rather than interest-based (principled) bargaining.

e) Implementation and monitoring. Even a signed agreement may not be implemented in time (arrears, promotion, facilities), leading to fresh disputes.

5. Measures to Address These Challenges

1. Strategic HR planning linked to business strategy, with proper manpower planning, succession planning and career paths.
2. Competitive, performance-linked compensation within the bank's capacity to pay, with transparent pay structure.
3. Continuous training and development based on TNA; digital and behavioural skills; learning culture.
4. Scientific performance appraisal with KPIs, balanced scorecard, and 360-degree feedback; transparent promotion policy.
5. Effective grievance handling within fixed time limits, following natural justice and domestic inquiry.
6. Constructive union relations — recognition of the sole bargaining agent, regular joint meetings, works council, and information sharing.
7. Interest-based (principled) negotiation — separate people from the problem, focus on interests, generate options, use objective criteria; strengthen BATNA through data and preparation.
8. Compliance system — updated HR manual, legal audit, timely contribution to social security and provident fund.
9. Employee welfare and engagement — health, stress management, work-life balance, recognition, and equal treatment of contract staff.
10. Change management for digitalisation and merger — communication, counselling, reskilling and fair adjustment.

6. Conclusion

The contemporary challenges of HRM, labour relations and negotiations in Nepali commercial banks arise from competition for talent, rapid technological change, cost pressure, union multiplicity and politicisation, and a fast-changing legal environment. These cannot be solved by ad hoc decisions; they require strategic HRM, transparent and performance-based systems, constructive union–management partnership, and professional, interest-based negotiation. For Nepal Bank Limited, treating employees as partners rather than adversaries — through fair pay, skill development, timely grievance handling and honest bargaining — is the surest way to achieve industrial peace, high productivity and sustainable banking performance.

Nepal Bank — Deputy Manager (Level 7)

Fundamentals of Organizational Behavior

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1. Individual and Group Behavior

Individual behavior is the way a single person acts and reacts in an organizational setting. It is shaped by:

• Biographical characteristics — age, gender, education, tenure, marital status.
• Ability — intellectual ability (mental alertness, reasoning) and physical ability (strength, stamina, flexibility).
• Personality — the Big Five model: Openness, Conscientiousness, Extraversion, Agreeableness, Neuroticism (OCEAN). Conscientiousness is the strongest predictor of job performance.
• Perception — how a person interprets stimuli; influenced by attitudes, motives, interests, experience and expectations.
• Attitudes — job satisfaction, job involvement, organizational commitment.
• Learning — classical conditioning, operant conditioning, social learning.

Group behavior is the behavior of two or more interacting and interdependent individuals who come together to achieve particular objectives.

Stages of group development (Tuckman's model):

Types of groups: formal (command, task, cross-functional, self-managed) and informal (interest, friendship).

Key group properties: roles, norms, status, size, cohesiveness. A group of 5–7 members is generally most effective for decision making.

Group phenomena:

• Social loafing — the tendency of individuals to put in less effort when working collectively than when working individually. Remedy: make individual contributions identifiable.
• Groupthink — the tendency of a cohesive group to suppress dissent and reach premature consensus. Remedy: appoint a devil's advocate, invite outside experts.
• Group shift (risky shift) — group decisions may be more extreme than individual decisions.
• Synergy — the whole is greater than the sum of the parts; the basis of teamwork.

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2. Leadership Development

Leadership is the ability to influence a group towards the achievement of goals. A leader is one who can influence others and who possesses managerial authority.

Difference between leader and manager:

Theories of leadership:

1. Trait theories — leaders possess distinguishing traits: drive, desire to lead, honesty and integrity, self-confidence, intelligence, job-relevant knowledge, extraversion.
2. Behavioral theories — Ohio State studies (initiating structure and consideration); Michigan studies (production-oriented and employee-oriented); Blake and Mouton's Managerial Grid (impoverished, country club, task, middle-of-the-road, team management).
3. Contingency theories:
   • Fiedler's model — effectiveness depends on leader style (LPC score) and situational favourableness (leader–member relations, task structure, position power).
   • Hersey–Blanchard Situational Leadership — telling, selling, participating, delegating, chosen by follower readiness.
   • Path–Goal theory (House) — directive, supportive, participative, achievement-oriented styles.
   • Vroom–Yetton–Jago — decision-making styles from autocratic to group.
4. Contemporary theories:
   • Transactional leadership — exchange of rewards for performance.
   • Transformational leadership — idealized influence, inspirational motivation, intellectual stimulation, individualized consideration.
   • Charismatic, servant and authentic leadership.

Leadership development methods: formal training, mentoring and coaching, job rotation, stretch assignments, action learning, 360-degree feedback, leadership pipelines and succession planning. In a bank like Nepal Bank, branch managers are developed through credit and operations exposure, leadership training at the staff college, and rotation between rural and urban branches.

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3. Motivation

Motivation is the process by which a person's efforts are energized, directed and sustained towards attaining a goal. It has three elements: intensity, direction and persistence.

Theories of motivation:

A. Content (need) theories

• Maslow's Hierarchy of Needs — physiological, safety, social, esteem, self-actualization; lower needs must be reasonably satisfied before higher needs motivate.
• Herzberg's Two-Factor Theory — hygiene factors (pay, working conditions, policy) prevent dissatisfaction but do not motivate; motivators (achievement, recognition, responsibility, growth) create satisfaction.
• McClelland's Three Needs — need for achievement (nAch), power (nPow) and affiliation (nAff).
• Alderfer's ERG — existence, relatedness, growth.

B. Process theories

• Vroom's Expectancy Theory — $Motivation = Expectancy \times Instrumentality \times Valence$. Effort leads to performance, performance leads to reward, and the reward must be valued.
• Adams' Equity Theory — employees compare their input–outcome ratio with referents; perceived inequity creates tension.
• Goal-Setting Theory (Locke) — specific, difficult goals with feedback raise performance.
• Skinner's Reinforcement Theory — behavior is a function of its consequences (positive reinforcement, negative reinforcement, punishment, extinction).

Motivational tools in banking: performance-based bonus and cash incentives, promotion and career path, recognition schemes (Employee of the Month), training and development, participative decision making, job enrichment, and a supportive work environment.

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4. Communication

Communication is the transfer and understanding of meaning. It is complete only when the receiver understands the message as intended.

Process: Sender → Encoding → Message → Channel → Decoding → Receiver → Feedback, with noise at every stage.

Types:

• Formal: downward, upward, lateral and diagonal.
• Informal: grapevine (single-strand, gossip, probability, cluster chains).
• Non-verbal: body language, gestures, tone, facial expression, proxemics.

Barriers to effective communication:

1. Filtering — manipulation of information to make it appear favourable.
2. Selective perception — seeing what one wants to see.
3. Information overload.
4. Emotions — extreme moods distort interpretation.
5. Language — jargon, semantics, poor vocabulary.
6. Silence and communication apprehension.
7. Lying and distortion.

Overcoming barriers: use feedback, simplify language, active listening, empathy, constraining emotions, watching non-verbal cues, and using multiple channels.

In banking: circulars and directives from head office, branch-level daily briefings, e-mail and internal memos, customer communication through statements and notices, and grievance-handling channels. Poor communication causes wrong credit decisions, delayed service and customer dissatisfaction.

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5. Time Management

Time management is the process of planning and controlling how much time is spent on specific activities to increase efficiency and productivity.

Principles:

• Pareto Principle (80/20 rule) — 80% of results come from 20% of activities; focus on the vital few.
• Eisenhower Matrix — classify tasks as urgent/important:

• Parkinson's Law — work expands to fill the time available; set tight deadlines.
• ABC analysis — rank tasks A (high), B (medium), C (low) priority.

Techniques: daily "to-do" lists, prioritization, goal setting (SMART), time blocking, delegation, avoiding procrastination, saying "no", batching similar tasks, avoiding unnecessary meetings and interruptions, and using planners/digital calendars.

Benefits: higher productivity, reduced stress, better work–life balance, timely completion of tasks, improved decision quality, and greater career growth. For a Deputy Manager handling credit, operations and staff supervision, time management directly affects branch performance.

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6. Conflict Management

Conflict is a process that begins when one party perceives that another party has negatively affected, or is about to negatively affect, something the first party cares about.

Views of conflict:

• Traditional view — conflict is bad and must be avoided.
• Human relations view — conflict is natural and inevitable; accept it.
• Interactionist view — some conflict is necessary for a group to perform effectively; distinguishes functional (constructive) from dysfunctional (destructive) conflict.

Sources of conflict: goal incompatibility, structural factors (size, specialization, reward systems), scarce resources, task interdependence, communication breakdown, personality clashes, differing values and perceptions, ambiguity over responsibility.

Levels: intra-personal, inter-personal, intra-group, inter-group, inter-organizational.

Conflict resolution styles (Thomas–Kilmann):

Resolution techniques: problem solving, superordinate goals, expanding resources, avoidance, smoothing, compromise, authoritative command, altering structural variables, and interpersonal skills training. Stimulating techniques (when conflict is too low): communication, bringing in outsiders, restructuring, appointing a devil's advocate.

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7. Decision Making and Problem Solving

Decision making is the selection of a best alternative from among available options. Problem solving is the process of identifying a gap between the actual and desired state and closing it.

Rational decision-making model (steps):

1. Identify the problem.
2. Identify decision criteria.
3. Allocate weights to criteria.
4. Develop alternatives.
5. Analyse alternatives.
6. Select the best alternative.
7. Implement the alternative.
8. Evaluate decision effectiveness.

Bounded rationality (Simon): managers cannot process all information; they satisfice — accept a satisfactory rather than optimal solution.

Common decision-making biases: overconfidence, anchoring, confirmation, availability, escalation of commitment, hindsight, framing, and randomness error.

Group decision making:

Group techniques: brainstorming, nominal group technique, electronic meeting, Delphi technique.

Problem-solving tools: 5 Whys, fishbone (Ishikawa) diagram, Pareto analysis, SWOT analysis, decision trees, cost–benefit analysis, force-field analysis, PDCA (Plan–Do–Check–Act) cycle.

In banking: credit appraisal decisions, loan restructuring, branch expansion, product pricing, handling non-performing loans, and customer complaint resolution all require systematic decision making. A Deputy Manager must balance risk and return, use data and MIS reports, consult stakeholders, and remain accountable for outcomes.

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Key Takeaways for the Exam

• Know the definitions of each concept precisely.
• Remember the theories with their proponents (Maslow, Herzberg, Vroom, Adams, Locke, Tuckman, Blake & Mouton, Fiedler, House).
• Be able to apply each concept to a bank/branch setting.
• Use tables and diagrams (Managerial Grid, Eisenhower Matrix, Thomas–Kilmann) for full marks.

Quality Management — Nepal Bank Deputy Manager (Level 7)

1. TQM Techniques

Total Quality Management (TQM) is an organisation-wide, customer-focused management philosophy that seeks continuous improvement in the quality of products, services and processes by involving all employees at all levels. Its core principles are: top-management commitment, customer focus, employee involvement and empowerment, process-centred approach, continuous improvement (Kaizen), fact-based decision making, and mutually beneficial supplier relationships.

Major TQM techniques:

Application in a bank: reducing transaction error rates (Six Sigma), cutting customer waiting time at counters (PDCA, 5S), improving loan-processing turnaround (process mapping, benchmarking against peer banks), reducing ATM downtime (FMEA, SPC), and improving complaint handling (QFD, quality circles).

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2. Factors Affecting Quality

Quality is not determined by the inspection department alone; it is the outcome of a whole system. The factors may be grouped as follows.

(a) Organisational / Managerial Factors

1. Top management commitment and leadership — quality cannot be delegated downward; it must be led from the top.
2. Quality policy, objectives and strategy — clear, communicated, measurable.
3. Organisational structure and culture — whether quality responsibility is line-owned or staff-owned; whether the culture is blame-oriented or improvement-oriented.
4. Employee involvement, empowerment and motivation — quality circles, suggestion schemes, recognition.
5. Training and development — skill, awareness and attitude of employees.
6. Communication and coordination between departments (marketing, operations, credit, IT, audit).

(b) Technical / Process Factors 7. Technology, machinery and systems — age, capability, calibration, automation level (core banking system, ATM, mobile banking). 8. Process design and standardisation — documented procedures, work instructions, service blueprints. 9. Raw materials / inputs — for a bank: information quality, KYC data accuracy, credit information. 10. Measurement, inspection and testing — availability of statistical tools and MIS. 11. Maintenance and reliability of equipment and systems. 12. Supplier and vendor quality — outsourced services (security, IT vendors, card networks).

(c) Human / Behavioural Factors 13. Employee attitude, morale, motivation and turnover. 14. Competence and experience of staff. 15. Customer behaviour and expectations — perception of quality is customer-defined.

(d) External / Environmental Factors 16. Government policy, laws and regulations — NRB directives, Basel norms, AML/CFT rules. 17. Market competition — competitive pressure raises quality standards. 18. Economic conditions — inflation, interest-rate volatility, recession. 18. Social, cultural and demographic changes — changing customer needs, digital habits. 20. Technological change — fintech disruption, cybersecurity threats.

Key insight: Quality is affected by the whole system — leadership, people, process, technology and environment — and not by any single factor. Deming's estimate that about 85% of quality problems are system/management-caused and only 15% worker-caused is the classic reference here.

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3. Benchmarking and Quality Assurance Techniques

3.1 Benchmarking

Meaning: Benchmarking is the systematic process of measuring and comparing an organisation's products, services, processes and practices against those of recognised leaders (inside or outside the industry) to identify gaps and adopt/adapt best practices for superior performance. It is a continuous process, not a one-time exercise.

Types:

1. Internal benchmarking — comparing between branches/divisions of the same bank (e.g., best branch in deposit mobilisation).
2. Competitive benchmarking — comparing directly with competing banks (e.g., Nabil vs. NIC Asia on NPL ratio).
3. Functional / generic benchmarking — comparing a function with the best anywhere, even outside banking (e.g., loan processing vs. Amazon's order processing).
4. Strategic benchmarking — comparing long-term strategies and business models.

Process (Xerox 10-step model, simplified to 5):

1. Plan — identify what to benchmark, form the team, define the scope.
2. Analyse — collect internal data on current performance.
3. Collect — gather data on the benchmark partner (surveys, visits, published reports, NRB statistics).
4. Analyse the gap — determine the performance gap and its root causes.
5. Implement and review — adopt best practices, set targets, monitor and re-benchmark.

Benefits: identifies weaknesses, sets realistic stretch targets, promotes learning and innovation, improves customer satisfaction, enhances competitiveness. Limitations: cost and time, difficulty in obtaining competitor data, risk of copying practices unsuited to own context, complacency after achieving parity.

3.2 Quality Assurance (QA) Techniques

Quality Assurance is the planned and systematic set of activities implemented before and during production/service delivery to ensure that quality requirements will be fulfilled. It is process-oriented and preventive, as distinct from Quality Control (QC), which is product-oriented and detective (finding defects after they occur).

Major QA techniques:

1. Quality planning — defining quality standards, specifications and acceptance criteria at the design stage.
2. Documented quality management system — ISO 9001:2015, quality manual, procedures, work instructions, records.
3. Process control and SPC — control charts (X-bar, R, p, c), process capability studies (Cp, Cpk).
4. Standardisation and codification — uniform service standards across branches.
5. Quality audits — internal audit, external audit, NRB inspection, ISO surveillance audit.
6. Training and certification of staff.
7. Supplier quality assurance — vendor evaluation, incoming quality checks.
8. Design reviews and FMEA — eliminating failure modes at design stage.
9. Customer feedback systems — complaint registers, satisfaction surveys, mystery shopping.
10. Continuous improvement tools — PDCA, Kaizen, Six Sigma DMAIC.
11. Total Preventive Maintenance (TPM) — for ATMs, servers, network uptime.
12. Statistical sampling for transaction verification.

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4. Managing Change and Development in Organisation

4.1 Meaning and Nature of Change

Organisational change is any alteration in the structure, technology, processes, people or culture of an organisation. Change is inevitable because of external forces (globalisation, technology, competition, regulation, customer expectations) and internal forces (new leadership, restructuring, growth, employee demands, declining performance).

Types of change:

• Incremental (first-order) — small, continuous adjustments (Kaizen).
• Transformational (second-order) — radical, discontinuous shifts (digital banking transformation, merger/acquisition).
• Reactive — forced by external pressure.
• Proactive / planned — initiated in anticipation of future needs.

4.2 Forces of Change

• External: political-legal (NRB directives, Basel III), economic (interest rates, inflation), socio-cultural (customer habits), technological (fintech, AI, cybersecurity).
• Internal: change in strategy, workforce composition, new systems (CBS migration), poor performance (high NPL), organisational politics.

4.3 Resistance to Change

• Individual: habit, security, economic fear (job loss), fear of the unknown, selective perception, social displacement.
• Organisational: structural inertia, group norms, threats to existing power balance, resource constraints, sunk costs, contractual obligations.

4.4 Overcoming Resistance

1. Education and communication.
2. Participation and involvement of employees.
3. Facilitation and support (training, counselling, reskilling).
4. Negotiation and agreement.
5. Manipulation and co-optation (used sparingly).
6. Explicit and implicit coercion (last resort).
7. Building trust, timing the change, and using change agents/champions.

4.5 Models of Change Management

(a) Lewin's Three-Step Model

1. Unfreeze — create readiness by breaking existing habits and showing why change is needed.
2. Change (Move) — implement the new behaviour, structure or technology.
3. Refreeze — stabilise, institutionalise and reinforce the new state through policies, rewards and culture.

(b) Kotter's Eight-Step Model

1. Create urgency → 2. Form a powerful coalition → 3. Create a vision for change → 4. Communicate the vision → 5. Remove obstacles → 6. Create short-term wins → 7. Build on the change → 8. Anchor the change in corporate culture.

(c) ADKAR Model — Awareness, Desire, Knowledge, Ability, Reinforcement (individual-level change).

4.6 Organisational Development (OD)

OD is a planned, systematic, long-range effort to improve organisational effectiveness through planned interventions in processes, structures and people, using behavioural science knowledge. It is planned, organisation-wide, top-down supported, and aimed at both effectiveness and employee well-being.

Key OD interventions:

1. Human process interventions — team building, sensitivity training, conflict resolution, inter-group development, survey feedback.
2. Techno-structural interventions — restructuring, work design, quality circles, TQM, reengineering.
3. Human resource interventions — goal setting, performance appraisal, career planning, MBO.
4. Strategic interventions — culture change, merger integration, transformation management.

OD process: Diagnosis (problem identification, data collection) → Action planning → Intervention → Evaluation → Feedback and follow-up.

4.7 Managing Change in a Bank — Practical Approach

1. Diagnose the need (e.g., falling customer satisfaction, rising NPL, CBS obsolescence).
2. Build the case with data and create urgency.
3. Form a guiding coalition — CEO, department heads, branch managers, union representatives.
4. Develop and communicate a clear vision (e.g., "digital-first bank by 2027").
5. Empower employees — remove structural barriers, delegate authority, reskill staff.
6. Generate short-term wins — pilot in a few branches, publish results, reward teams.
7. Consolidate gains — roll out bank-wide, align HR policies (KPI, promotion, training).
8. Institutionalise — embed new practices in policy manuals, audit checklists and culture.
9. Monitor and review — periodic review against benchmarks; re-plan if needed.

4.8 Change vs. Development

Conclusion: In a competitive and regulated banking environment, TQM techniques, benchmarking and quality assurance provide the content of quality improvement, while effective change management and organisational development provide the process by which that content is successfully implemented. A Deputy Manager must therefore combine technical quality tools with strong leadership, communication and people-management skills to make quality and change sustainable.

Corporate Governance, Ethics, Morality, Integrity and Social Responsibility

1. Conceptual Foundation

These five concepts form the value framework within which a bank like Nepal Bank Limited (NBL) must operate. They are related but distinct:

Corporate Governance is the system of rules, practices and processes by which a company is directed and controlled. It defines the distribution of rights and responsibilities among the board, management, shareholders and other stakeholders. The OECD Principles (2015) identify six pillars: ensuring an effective governance framework, shareholder rights, equitable treatment of shareholders, role of stakeholders, disclosure and transparency, and board responsibilities.

Ethics is the set of moral principles that guide behaviour — what ought to be done. Business ethics applies these principles to commercial decisions (lending, pricing, hiring, disclosure).

Morality is the personal or societal standard of right conduct. Ethics is the codified, professional expression; morality is the internalised belief. A person may be moral but work in an unethical system, or vice versa.

Integrity is adherence to moral and ethical principles even when no one is watching — consistency between stated values and actual conduct. It is the bridge between ethics (principle) and behaviour (practice).

Social Responsibility (CSR) is the obligation of business to contribute to sustainable development by balancing economic, social and environmental interests of stakeholders. Carroll's pyramid places economic responsibility at the base, then legal, ethical and philanthropic responsibilities.

2. Why These Matter Specifically for a Bank

Banks are fiduciaries — they hold public deposits and allocate credit. Their failure has systemic consequences. Hence:

• Depositor protection: Governance failures (e.g., Nepal's cooperative crisis, 2023–24) destroyed public trust and savings.
• Credit discipline: Weak ethics in lending leads to evergreening, related-party lending and NPL build-up.
• Financial stability: Poor governance was a root cause of the 1991 BCCI collapse, the 2008 global financial crisis, and Nepal's own bank merger/consolidation drive after 2015.
• Regulatory compliance: NRB's Bank and Financial Institution Act (BAFIA) 2073, NRB Corporate Governance Guidelines (2072), and Unified Directives impose fit-and-proper criteria, board independence, and CSR spending requirements.

3. Corporate Governance Framework in Nepali Banks

Legal and regulatory basis:

• Companies Act 2063
• BAFIA 2073 (Sections 25–40 on board, audit committee, etc.)
• NRB Corporate Governance Guidelines 2072
• NRB Unified Directives (especially on credit, related-party transactions, and CSR)
• SEBON Corporate Governance Code (for listed banks)

Key governance organs:

1. General Assembly of Shareholders — elects directors, approves audit reports and dividends.
2. Board of Directors — 5 to 9 members; at least 25% independent directors; CEO appointed with NRB approval; fit-and-proper test.
3. Audit Committee — chaired by an independent director; oversees internal and external audit.
4. Risk Management Committee — credit, market, liquidity and operational risk.
5. Internal Audit and Compliance — independent reporting line to the board.
6. External Auditor — appointed by the general assembly with NRB consent; rotation required.

Governance principles in practice:

• Transparency: quarterly and annual disclosure of financials, NPLs, capital adequacy, related-party exposures.
• Accountability: board answerable to shareholders and regulator.
• Fairness: equal treatment of minority shareholders.
• Responsibility: ethical conduct toward all stakeholders.

4. Ethics and Morality in Banking

Common ethical dilemmas in a bank:

• Whether to lend to a politically connected but weak borrower.
• Whether to hide NPLs by restructuring loans (evergreening).
• Whether to mis-sell insurance or mutual funds to depositors.
• Whether to use insider information for personal gain.
• Whether to discriminate in service delivery.

Ethical decision-making frameworks:

• Utilitarian: greatest good for the greatest number.
• Deontological (Kantian): duty-based — act only on principles you would universalise.
• Virtue ethics: what would an honest, prudent banker do?
• Justice/fairness: equitable distribution of benefits and burdens.

Codes and mechanisms:

• NBL's own Code of Conduct and Employee Service Bylaws.
• NRB's directives on KYC, AML/CFT, whistle-blower protection.
• Professional bodies: ICAN, Nepal Bankers' Association codes.

5. Integrity in Practice

Integrity in a bank means:

• Refusing bribes or kickbacks in loan approval.
• Declaring conflicts of interest.
• Reporting wrongdoing through proper channels.
• Maintaining confidentiality of customer data.
• Admitting errors rather than concealing them.

Instruments that build integrity:

• Tone at the top set by the board and CEO.
• Whistle-blower policy with protection.
• Regular ethics training and attestation.
• Disciplinary action for violations, regardless of seniority.
• Performance appraisal that includes integrity metrics.

6. Social Responsibility of a Bank

Carroll's four levels applied to NBL:

1. Economic: earn profit, pay taxes, provide returns to shareholders.
2. Legal: comply with BAFIA, NRB directives, labour laws.
3. Ethical: fair lending, no predatory pricing, responsible marketing.
4. Philanthropic: community investment, financial literacy, disaster relief.

NRB's CSR requirement: Banks must spend at least 1% of net profit on CSR activities in priority sectors — education, health, environment, drinking water, sanitation, and rural infrastructure.

Typical CSR activities of Nepali banks:

• Financial literacy campaigns in rural schools.
• Scholarships for disadvantaged students.
• Support to earthquake/disaster victims (e.g., 2015 Gorkha earthquake).
• Tree plantation and clean-up drives.
• Free health camps and blood donation.
• Support to differently-abled persons and senior citizens.

Social responsibility also includes:

• Financial inclusion: branch expansion in remote districts, zero-balance accounts for the poor, priority-sector lending (agriculture, SMEs, energy).
• Environmental responsibility: green banking, paperless transactions, financing renewable energy.
• Responsible lending: avoiding over-indebtedness of borrowers, avoiding sectors harmful to society.

7. Interrelationship of the Five Concepts

Morality (personal belief)
        ↓
Ethics (codified principles)
        ↓
Integrity (consistent practice)
        ↓
Corporate Governance (institutional system)
        ↓
Social Responsibility (outward obligation)

• Morality supplies the raw values.
• Ethics converts them into professional standards.
• Integrity ensures they are actually followed.
• Governance institutionalises them into structures and processes.
• Social responsibility extends them beyond the institution to society.

Weakness in any one link weakens the whole chain. A bank with good governance structures but no personal integrity will still suffer fraud; a bank with ethical employees but no governance framework will lack accountability.

8. Challenges in the Nepali Context

• Political interference in board appointments and lending decisions.
• Weak enforcement of governance rules; delayed action on defaulters.
• Related-party lending and concentration of ownership.
• Financial literacy gaps among depositors and small borrowers.
• Cooperative-style governance failures spilling over into trust in banks.
• Pressure to meet profit targets at the cost of ethical lending.
• Limited CSR monitoring — spending sometimes becomes publicity rather than genuine impact.

9. Role of a Deputy Manager (Level 7)

As a middle-to-senior manager, the Deputy Manager is a custodian of these values at the operational level:

• Model integrity in daily decisions — loan recommendations, staff appraisal, customer dealings.
• Enforce compliance with NRB directives, internal codes and AML/KYC norms in the branch/department.
• Promote ethical culture through training, example and open communication.
• Ensure transparency in reporting — no concealment of NPLs or irregularities.
• Support CSR by identifying genuine local needs and executing approved programmes.
• Protect whistle-blowers and escalate genuine concerns to the Audit Committee.
• Balance commercial targets with social obligations — a core test of managerial maturity.

10. Conclusion

Corporate governance, ethics, morality, integrity and social responsibility are not decorative add-ons to banking — they are the foundation of depositor trust and systemic stability. For Nepal Bank Limited, as the oldest bank of the country, these values carry added historical and national significance. A Deputy Manager must internalise them personally (morality and integrity), apply them professionally (ethics), uphold them institutionally (governance), and extend them socially (CSR). Only then can the bank fulfil its dual mandate — profitability with public purpose.

Internal Control and Internal Audit

1. Internal Control

Definition: Internal control is the whole system of controls—financial and non-financial—established by the management of an organisation to ensure that its objectives are achieved efficiently and effectively. It is a process designed to provide reasonable assurance regarding the reliability of financial reporting, the effectiveness and efficiency of operations, and compliance with applicable laws and regulations.

Nature: Internal control is a means to an end, not an end in itself. It is the responsibility of the board of directors and management, and it provides only reasonable (not absolute) assurance, because of inherent limitations such as collusion, human error, and management override.

Objectives of Internal Control

1. Safeguarding assets against loss, waste, fraud and misappropriation.
2. Ensuring accuracy, completeness and reliability of accounting records and financial reports.
3. Promoting operational efficiency and adherence to management policies.
4. Ensuring compliance with applicable laws, regulations and internal rules.
5. Detecting and preventing errors and frauds at an early stage.
6. Facilitating independent audit and timely decision-making.

Components of Internal Control (COSO Framework)

1. Control Environment – the tone at the top: integrity, ethical values, organisational structure, and management philosophy.
2. Risk Assessment – identification and analysis of risks to the achievement of objectives.
3. Control Activities – policies and procedures that mitigate risk (authorisation, segregation of duties, reconciliation, physical controls, IT controls).
4. Information and Communication – timely flow of relevant information within and outside the organisation.
5. Monitoring – ongoing and separate evaluations of the effectiveness of controls.

Types of Internal Control

• Preventive controls – stop errors/frauds before they occur (authorisation, segregation of duties, physical safeguards).
• Detective controls – discover errors/frauds after occurrence (reconciliation, physical verification, internal audit).
• Corrective controls – correct detected problems (adjusting entries, disciplinary action, system fixes).

Principles / Essentials of a Sound Internal Control System

1. Segregation of duties – separation of custody of assets, recording, and authorisation.
2. Proper authorisation and approval – every transaction approved by a competent authority.
3. Adequate documentation – pre-numbered documents, vouchers, records.
4. Physical safeguards – custody, insurance, restricted access to cash, stock and securities.
5. Independent verification – periodic reconciliation and surprise checks.
6. Rotation of duties and compulsory leave – prevents concealment of fraud.
7. Competent and honest personnel – recruitment, training and supervision.
8. Budgetary control – comparison of actual with budgeted performance.
9. Internal check – automatic checking of one person's work by another.
10. Internal audit – independent appraisal of controls.

Limitations of Internal Control

1. Cost-benefit constraint – controls should not cost more than the risk they cover.
2. Collusion among employees.
3. Management override of controls.
4. Human error, fatigue and negligence.
5. Inadequate segregation in small organisations.
6. Changes in circumstances making controls obsolete.
7. Fraud committed by top management.

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2. Internal Audit

Definition: Internal audit is an independent, objective assurance and consulting activity designed to add value and improve an organisation's operations. It helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes. In banking, internal audit is a statutory requirement under the Bank and Financial Institution Act (BAFIA), 2073 and NRB directives.

Nature: Internal audit is continuous, conducted by employees of the organisation, and reports to the Board/Audit Committee. It is an appraisal activity—it reviews and evaluates the effectiveness of internal control rather than merely checking transactions.

Objectives of Internal Audit

1. To verify the accuracy and reliability of accounting and other records.
2. To evaluate the adequacy and effectiveness of internal control.
3. To ensure compliance with laws, NRB directives, and internal policies.
4. To safeguard assets and detect misappropriation and irregularities.
5. To assess the efficiency and effectiveness of operations.
6. To advise management on improvements in systems and procedures.
7. To assist the statutory (external) auditor.

Scope of Internal Audit in a Bank

• Cash, vault, ATM and remittance operations.
• Loans and advances: documentation, classification, provisioning, and recovery.
• Deposits, interest calculation and application.
• Treasury, investment and foreign exchange transactions.
• Reconciliation of inter-branch, nostro/vostro and suspense accounts.
• Compliance with NRB directives (CRR, SLR, capital adequacy, exposure limits).
• IT systems, cyber security and business continuity.
• Branch-level audit, risk-based audit and special investigation.

Functions / Duties of Internal Audit

1. Reviewing and evaluating internal control systems.
2. Examining accounting records, vouchers and financial statements.
3. Verifying assets physically and reconciling liabilities.
4. Checking compliance with statutory and regulatory requirements.
5. Reporting findings, irregularities and weaknesses to management and the Audit Committee.
6. Following up on rectification of audit observations.
7. Conducting special investigations on suspected fraud.
8. Recommending improvements in systems and controls.

Qualities of a Good Internal Auditor

1. Independence from the activities being audited.
2. Technical competence and knowledge of banking laws and NRB directives.
3. Objectivity, integrity and confidentiality.
4. Good communication and reporting skills.
5. Analytical and risk-based approach.
6. Professional scepticism.

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3. Distinction between Internal Control and Internal Audit

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4. Internal Control and Internal Audit in Nepalese Commercial Banks

• BAFIA, 2073 (Section 61) requires every bank to appoint an internal auditor and to constitute an Audit Committee of the Board.
• NRB Unified Directives require a separate internal audit department, an audit charter, risk-based audit plan, and reporting to the Audit Committee.
• The Internal Audit Charter defines authority, independence, scope and reporting lines.
• Banks follow a risk-based internal audit (RBIA) approach, prioritising high-risk areas such as credit, treasury and IT.
• The Audit Committee oversees internal audit, reviews reports, and monitors follow-up on rectification.
• The statutory auditor (external) may rely on the work of internal audit but cannot substitute it.

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4. Conclusion

Internal control and internal audit are complementary and mutually reinforcing. Internal control is the first line of defence that prevents and detects irregularities; internal audit is the independent third line that evaluates whether those controls actually work. In banking, where public money and depositors' funds are at stake, a strong internal control system supported by an effective, independent internal audit function is essential for regulatory compliance, asset safety, and sound corporate governance. Weakness in either weakens the entire risk management framework of the bank.