MGT 211

Course Title: Principles of Management

Final Term Paper

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Final Term Paper

Topic:

Applications of Henri Fayol’s Fourteen Principles within

One Bank Limited

Submitted to: Afsana Akter

Prepared By:

Humayra Fakir, 10121039

Musharrat Hasan Promi, 11104134

Syeda Jannatus Salwa, 12104199

Afsary Adiba Priyanka, 12204079

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Topic of the Term Paper:

Application of Henri Fayol’s Fourteen Principles within

One Bank Limited

Submitted to:

Afsana Akter

Assistant Professor

BRAC Business School

BRAC University

Date of Submission: 15th August 2013

Submitted By:

Name ID DepartmentHumayra Fakir 10121039 EEE

Musharrat Hasan Promi 11104134 BBSSyeda Jannatus Salwa 12104199 BBSAfsary Adiba Priyanka 12204079 BBS

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ACKNOWLEDGEMENT

We would at first like to thank our course faculty, Afsana Akhtar for giving us the opportunity to

work on report that will increase our knowledge on the managerial activities of any organization

that we would select. We have selected One Bank Limited for preparing our final report. We got

all the information that we searched for from Mr. Shafiuzzaman, Executive vice President and

Manager of OBL. Without his co-operation may be it wouldn’t be possible for us to complete

this report.

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TABLE OF CONTENTS

DESCRIPTION NUMBER OF PAGES

Title fly 2

Title page 3

Acknowledgement 4

Table of contents 5-6

Abstract 7

Introduction

(origin of the report, objectives, methodology, scope,

limitation)

8-9

Description of Fayol’s principles relating OBL

Division of labor

Authority

6

Discipline

Unity of Command

Unity of Decision

Subordination of individual interests to the general

interest

Remuneration

Centralization

Hierarchy

Order

Equity

Stability

Initiative

Esprit de Corps

10-17

Conclusion 18

Recommendation 19

Bibliography 20

Signature by submitters 21

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ABSTRACT

Henri Fayol (Istanbul, 29 July 1841 – Paris, 19 November 1925) was a French mining engineer

and director of mines who developed a general theory of business administration. He and his

colleagues developed this theory independently of scientific management but roughly

contemporaneously. He was one of the most influential contributors to modern concepts of

management. Fayol's work was one of the first comprehensive statements of a general theory of

management. He proposed that there 14 principles of management. These 14 principles are

discussed below and their applications in a commercial bank named ONE Bank Limited.

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INTRODUCTION

One Bank Limited was incorporated in May, 1999 With the Registrar of Joint Stock Companies

under the Companies Act 1994, as a commercial bank in the private sector of Bangladesh.

The Bank is pledge-bound to serve the customers and the community with utmost dedication.

The prime focus is on efficiency, transparency, precision and motivation with the spirit and

conviction to excel as ONE Bank in both value and image.

The name 'ONE Bank' is derived from the insight and long nourished feelings of the promoters

to reach out to the people of all walks of life and progress together towards prosperity in a spirit

of oneness.

Origin of the report:

This report has been prepared to make a study on the “Application of Henri Fayol’s Fourteen

Principles in One Bank Limited”, as a part of the fulfillment of the course MGT211, Principles

of Management, required for the Department of Business Administration of BRAC University.

The report was prepared under the supervision of Ms. Afsana Akhtar, Assistant Professor of

BRAC University. We are thankful to her for assigning us in this project.

Objectives of the report:

Primary Objective:

The main aim preparing this report was to know the application of Henry Fayol’s fourteen

principles in the managerial structure of One Bank Limited. We also tried to prepare a written

statement of the managerial structure of OBL.

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Secondary Objectives:

While working for this report we came to know about many things that go for and against the

application of Fayol’s principle of management in One Bank Limited.

Methodology:

Primary Data Collection:

As we wanted to know about the managerial structure and function of One Bank so we

interviewed on their managers. We interviewed (plz write the name n his designation). We tried

to ask précised questions to our interviewed person so that he could answer them properly and so

that we could get what we were looking for.

Secondary Data Collection:

We even went for secondary sources where we could find some information about the

management system of One Bank Limited. We search for information online in the official

website of world and many others.

Scope:

This report has enormous scope and those are:

1. Clear picture of management structure of OBL.

2. Information about One Bank’s management.

3. Discussion on Henri Fayol’s fourteen principles.

4. Detail discussion on One Bank’s management in perspective of Fayol’s fourteen principles.

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Limitation:

As any study, this study has also some limitations:

1.Slight lack of interviewed persons.

2. Privacy of information.

3. Political issues such as hartal (strike).

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DESCRIPTION OF HENRI FAYOL’S PRINCIPLES RELATING OBL

1. DIVISION OF LABOR:

According to Henry Fayol under division of work, "The worker always on the same post, the

manager always concerned with the same matters, acquire an ability, sureness and accuracy

which increases their output. In other words, division of work means specialization. According to

this principle, a person is not capable of doing all types of work. Each job and work should be

assigned to the specialist of his job. Division of work promotes efficiency because it permits an

organizational member to work in a limited area reducing the scope of his responsibility. Fayol

wanted the division of work not only at factory but at management levels also. The Government

of Bangladesh and the country’s donor community have taken a step forward towards closer and

more aligned cooperation with the agreement to develop a Joint Cooperation Strategy (JSC) by

2010. This JCS, which will emphasize inter alia, a better division of labor among donors and a

move towards better alignment with country systems in accordance with the Paris and Accra

agendas, will have to be taken into account in future programming strategies. One Bank has been

trying to follow this system ever since.

2. AUTHORITY AND RESPONSIBILITY:

Authority and responsibility go together or co-existing. Both authority and responsibility are the

two sides of a coin. In this way, if anybody is made responsible for any job, he should also have

the concerned authority. Fayol's principle of management in this regard is that an efficient

manager makes best possible use of his authority and does not escape from the responsibility. In

other words when the authority is exercised the responsibility is automatically generated. One

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Bank cannot and will not turn a blind eye to evidence of corruption. They have both an ethical

obligation and a fiduciary responsibility to our shareholders and its customers. It is our

responsibility to make sure that resources are used for their intended purposes and that we only

finance a project when we have adequate assurances that we can do so in a clean and transparent

way.

3. DISCIPLINE:

According to Henri Fayol discipline means sincerity about the work and enterprise, carrying out

orders and instructions of superiors and to have faith in the policies and programs of the business

enterprise, in other sense, discipline in terms of obedience, application, energy and respect to

superior. In One Bank Limited, they observe referral based entry into low and unskilled jobs

with high costs to firms from worker shirking. For this they expect variation in the use of

workplace referral across sectors and job types. A higher prevalence of workplace referrals in

jobs where strong tie networks have the capacity to supply candidates. In contrast to Karlan

(2009), they expect more referral in low and unskilled jobs which are jobs ’everyone can do’.

There should be strong social ties between the worker and the referee when referee incentives are

aligned with the firm or when referee stakes are high. They observe referrals when the employer

has access to referees with high stakes (good positions, a lot to lose) in the firm. They observe a

negative relationship between referee stakes and the entrant’s wage and between the strength of

ties and the entrant’s wage. They observe a referral wage premium for jobs that have a high cost

of opportunism relative to jobs with low costs of opportunism. However, Fayol does not

advocate warming, fines, suspension and dismissals of worker for maintaining discipline. These

punishments are rarely awarded. A well-disciplined work force is essential for improving the

quality and quantity of the production.

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4. UNITY OF COMMAND:

According to Fayol there are supposed to be appropriate, methodical and logical array of

physical and shared factors, such as land, raw resources, apparatus and equipment and employees

respectively. As per view, there should be protected, suitable and précised place for every article

and every place to be used effectively for a particular activity and service. In other words,

principles are that every piece of land and every article should be used properly, economically

and in the best possible way and selection and appointment of the most suitable person to every

job. There should be specific place for everyone and everyone should have specific place. As

One Bank Limited is a large organization, every employee here is not accountable to only one

manager. There are multiple managers and many subordinates work under them. So every

employee is not accountable to only one boss and they have many employers to respond to.

5. UNITY OF DIRECTION:

Fayol advocates "One head and one plan" which means that group efforts on a particular plan is

lead and directed by a single person. This enables effective co-ordination of individual efforts

and energy. This fulfills the principles of unity of command and brings uniformity in the work of

same nature. In this way the principle of direction create dedication to purpose and loyalty. It

emphasizes the attainment of common goal under one head. In case of One Bank, even this

principle is completely comparable since the subordinates are not under one boss and get the

same direction every day. In such a large organization like OBL, it is quite hard to maintain such

kind of principle where all employees will follow the direction of the same manager and work in

a unified manner. The employees belong to multiple teams working on differing plans. In matrix

environment of OBL, the employees are reporting their work to more than one person.  This does

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not necessarily negate Fayol’s principle. In the bottom line workers are being lead by one team

leader and getting directed by that same person. If there is a separation of duties to other teams or

sets of workers, then the reporting would still go back to the Chairman, Mr. Sayeed Hossain

Chowdhury overseeing the plan. So, this principle of Henry Fayol is partially applicable in One

Bank’s managerial structure.

6. SUBORDINATION OF INDIVIDUAL INTEREST TO GENERAL INTEREST:

The interest of the organization should come before the interests of the individual workers. In

other words, principle of management states that employees should submit their personnel

interest before the general interest of the organization. Sometimes the employees due to this

ignorance, selfishness, laziness, carelessness and emotional pleasure overlook the interest of the

organization. This attitude proves to be very harmful to the enterprise. Every employee must be

dedicated and submissive to achieve the goal of the organization. It would not have been possible

for the organization to achieve its goals and work on different projects if the employees were not

cooperative enough and saw interest before the organizations. The employees are extremely

dedicated to the organization and work for the welfare and goal of the organization. Thus this

principle is evidently established in One Bank’s managerial pattern.

7. FAIR REMUNERATION TO EMPLOYEES:

According to Fayol wage-rates and method of their payment should be fair, proper and

satisfactory. Both employees and employers should agree to it. Logical and appropriate wage-

rate and methods of their payment reduces tension and differences between workers and

management, create harmonious relationship and a pleasing atmosphere of work. In One Bank

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Limited, they recruit and retain highly qualified staff and have developed a compensation and

benefits system designed to be globally competitive, to reward performance, and to take into

account the special needs of a multinational and largely expatriate staff (One Bank, 2007).

Every employee is paid a fair compensation so that they stay focus at their work. The Bank

Group’s staff salary structure is reviewed annually by the Executive Directors and is adjusted on

the basis of a comparison with salaries paid by private financial and industrial firms and by

representative public sector agencies (One Bank, 2010)

8. CENTRALIZATION:

Fayol defined centralization as lowering the importance of the subordinate’s role. The degree to

which centralization or decentralization should be adopted depends on the specific organization

in which the manager is working. There should be one central point in the organization which

exercises overall direction and control of all the parts. But the degree of centralization of

authority should vary according to the needs of situation. According to Fayol there should be

centralization in small units and proper decentralization in big organization. Further, Fayol does

not favor centralization or decentralization of authorities but suggests that these should be proper

and effective adjustment between centralization and decentralization in order to achieve

maximum objectives of the business. The choice between centralization and decentralization be

made after taking into consideration the nature of work and the efficiency, experience and

decision-making capacity of the executives.

9. HIERARCHY:

Managers in hierarchies are part of a chain like authority scale. Each manager, from the first line

supervisor to the president, possesses certain amounts of authority. The President possesses the

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most authority; the first line supervisor the least. Lower level managers should always keep

upper level managers informed of their work activities. The existence of a scalar chain and

adherence to it are necessary if the organization is to be successful.

10. ORDER:

For the sake of efficiency and coordination, all materials and people related to a specific kind of

work should be treated as equally as possible. According to Fayol there should be proper,

systematic and orderly arrangement of physical and social factors, such as land, raw materials,

tools and equipment and employees respectively. As per view, there should be safe, appropriate

and specific place for every article and every place to be used effectively for a particular activity

and commodity. In other words, principles are that every piece of land and every article should

be used properly, economically and in the best possible way and selection and appointment of

the most suitable person to every job. There should be specific place for everyone and everyone

should have specific place. This principle also stresses scientific selection and appointment of

employees on every job.

11. EQUITY:

All employees should be treated as equally as possible. Employees must be treated kindly and

justice must be enacted to ensure a just workplace the principle of equality should be followed

and applicable at every level of management. There should not be any discrimination as regards

caste, sex and religion. An effective management always accords sympathetic and human

treatment. The management should be kind, honest and impartial with the employees. In other

words, kindness and justice should be exercised by management in dealing with their

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subordinates. This will create loyalty and devotion among the employees. Thus, workers should

be treated at par at every level.

12. STABILITY OF TENURE OF PERSONNEL:

Retaining productive employees should always be a high priority of management. Recruitment

and Selection Costs, as well as increased product-reject rates are usually associated with hiring

new workers. One Bank Limited insists on not to hire out of desperation, not to hire an employee

because the company needed someone to fill the position yesterday. That is what temporary

employees are for. If OBL is looking for someone to fill the position long term, it is best to take

some time to do some research, gather as much information as one can about a job applicant.

Proper information is needed before hiring someone and those are: contact information for

personal and business references, a list of past and present employers, social security number,

birth date and more. These items will help the company complete reference checks and to

perform background checks to find out about any past criminal activity. Offering skill testing can

be helpful if a company wants to decrease employee turn-around. It can either be done directly

through human resource department or employers can contract this responsibility out to a job

placement agency. This is one of the tools that will help determine whether the employers have

found the best fit for each position your company has open. Not only that, but it also cuts down

on new applicant recruitment costs. One Bank Limited follows this form of testing or

verification.

Showing appreciation plays a major role here in OBL. Many employees almost always know

when they are doing a job wrong. However, these same employees very rarely ever hear from

their employers when they are doing their job right. Encouraging the employees by saying kind

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words to them, and telling how much of a good job they are doing makes them more likely to

accept any words of advice on how to improve their work later on.

13. INITIATIVE:

Management should take steps to encourage worker initiative, which is defined as new or

additional work activity undertaken through self-direction. Ways that manifests employee

initiative might occur on a small scale, such as an employee jumping in to assist a coworker if

there's a backlog of work. By taking the initiative, this employee doesn't wait for direction from

his boss. He observes a need and he makes himself available. In addition, employees might show

initiative on the job by simply speaking up and offering suggestions. The employee might detect

cracks in the system and then brainstorm ways to fix these issues and improve productivity. The

employee might also do his homework and consider the financial aspect of implementing a new

idea.

Sometimes fear or uncertainty of how they'll be received by management prevents some

employees from taking the initiative. Managers and employers are not always open to

suggestions from their employees. Even if an employee has an inventive and useful idea,

employers might dismiss his idea or accuse him of exceeding his authority. This negative attitude

causes many employees to keep quiet with regards to change. Although OBL is trying to remove

this fear from the minds of the employees, this problem is still visible.

Being open to suggestions is the key to improving employee initiative. If a company establishes

an open-door policy and solicits suggestions from the staff, employees will feel comfortable with

taking the initiative and presenting new ideas. During staff meetings OBL opens the floor and

allows employees to discuss their concerns or ask questions. This creates a platform for

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employees to express their thoughts on certain matters, and perhaps offer suggestions on ways to

improve production or the work environment. OBL also facilitates one-on-one discussions with

employees and invite them to express their opinions privately.

14. ESPIRIT DE CORPS:

Management should encourage harmony and general good feelings among employees. The big

question comes when as an individual member or a manager has a challenge to promote the team

spirit. This is one of the important aspect of OBL which not only drives the composition of any

team but also maintain the spirit it in future. There can be many ways to promote the “Team

Spirit” and there are different methods which suits different situations. Some of them are:

Giving Good Name to Teams- This is very important and the core tool. Teams need a

name; they need an identity to which they can relate to. Major brands have created an

image in minds of people and everyone relates to them very well. In same manner

employees need to give an image to the team to which they can relate to. Name like

Alpha, Romeo, Alligators, Roaring Tigers are just few names which we have used in

past. When used in a sporting spirit these names gives team members something to look

upon and feel proud of in tough situations.

Chartering out a Yearly Plan- When team members know what they have ahead in future

and how they would be evaluated it becomes easy for them to be prepared. OBL forms

the plan in form of breakup of events and associated points that make the evaluation

process extremely transparent. The activities can be in the form of the results related to

the work and other events which give them opportunity to score points.

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Treating employees as Profit Centers- Treating each team as independent profit center,

assigning them goal and challenge them to score points can play a vital role in promoting

team spirit. One Bank Limited has taken various initiatives quarterly where each team

was evaluated on specific number of projects and winner was decided based on their

performance or target conversion. It worked wonders because some members pitched in

to help other members so that team target exceeds the expectations. While doing this it is

important to come out with some accolades and make sure that everyone performs to

their best.

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CONCLUSION

Conclusion: to secure the maximum prosperity for the employer, coupled with the maximum

prosperity for each employee. Although they are now almost 100 years old , they continue to be

relevant today .

RECCOMENDATION

Fayol principles of management were written having industrial firms in mind. Obviously these

are for profit companies not applicable to non-profit organization. So some changes are needed

for applying them in non-profit organization .

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BIBLIOGRAPHY

Dhillon, A. and V. Iversen (2011): Referrals, social proximity and workforce discipline, mimeo,

Department of Economics, University of Warwick.

Kono, H. (2006): ‘Employment with connections: negative network effects,

Journal of Development Economics, 81: 244-258

http://www.onebank.com.bd/financial-statement.php

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SINGNATURE

Humayra Fakir, 10121039

Musharrat Hasan Promi, 11104134

Syeda Jannatus Salwa, 12104199

Afsary Adiba Priyanka, 12204079