The Financial Express

Corporate Culture: A barometer for selection of borrowers

| Updated: October 22, 2017 15:31:58

Corporate Culture: A barometer for selection of borrowers

It is the prime duty of a banker to select the right borrowers for proper utilisation of fund deposited by the depositors. The selection process of a borrower involves thorough assessment of three "Cs" of the party, i.e., his character, capital and capacity, or, in other words, his reliability,  responsibility and resourcefulness. But now-a-days, business has become very tactical and complex. Due to lack of corporate culture in the business arena, even a good entrepreneur may face business failure. So, it is the utmost duty of a banker to pay proper attention to the practice of corporate culture of business while selecting borrowers.  
The term Corporate Culture became widely known in the business world in the late 1980s and early 1990s. Corporate Culture was used at that time by managers, sociologists and other academics to describe the character of the company, not only through general perceptions, but also through company-wide value systems, management strategies, employee communication and relations, work environment, attitude and so on.
Corporate Culture is the sum total of values, customs and traditions that make a company unique. Corporate Culture is often called "the character of an organisation", since it embodies the vision of the company's founders. The values of a Corporate Culture influence the ethical standards within a corporation, as well as managerial behaviours.
Senior management may try to determine a corporate culture. They may wish to impose corporate values and standards of behaviour that specifically reflect the objectives of the organisation. In addition, there will also be internal culture within the workforce. Work-groups within the organisation have their own behavioural quirks and interactions which, to an extent, affect the whole system.
Vision: A great corporate culture starts with a vision or mission statement. From a simple mission statement to a corporate manifesto, a company's vision is a powerful tool.
Values: A company's values are the core of its culture. While a vision articulates a company's purpose, values offer a set of guidelines on the behaviours and mindsets needed to achieve that vision.
Practices: These are the tangible methods guided by ethics, through which a company implements its values.
People: No company can build a coherent culture without people who either share its core values or possess the willingness and ability to embrace those values. That's why, renowned firms also have some of the most stringent recruiting policies.
Narrative: Having a powerful narrative or origin story, such as that of Steve Jobs and Apple, is important for growth and public image.
Place: The place of business, such as the city of choice and also office design and architecture, is also one of the most cutting-edge advents in contemporary corporate culture.
n Corporate culture begins at the top:
Entrepreneurs need to explain and share their vision of the company's future with the employees. A company without a vision is reactive in nature, and its management is seldom confident addressing competitive threats and stepping into the future. Business owners should be aware that their own behaviour and attitudes set the standard for the entire workforce.
n Treat all employees equally:
Entrepreneurs should treat all employees equally. This does not mean that business owners can not bestow extra rewards on workers who excel. Many businesses are family-owned and operated. But bloodlines should be irrelevant in daily operations.
n Hiring decisions should reflect desired corporate culture:
The business owners will hire workers who will treat clients and fellow employees well and dedicate themselves to mastering the tasks for which they are responsible. After all, good attitude is an essential component of any healthy corporate culture. But entrepreneurs and their managers also need to make sure that hiring decisions are not based upon ethnic, racial, or gender issues. Besides, businesses typically benefit from having a diverse workforce rather one that is overly homogeneous.
n Two-way communication is essential:
Business owners who discuss problems realistically with their workforce and enlist employees' help in solving them will likely be rewarded with a healthy internal environment. This can be an important asset, for once a participatory and engaging culture has been established, it can help propel a small business ahead of its competition.
[A businessman starts his career with a small amount of capital, not more than Tk.100,000. He buys and sells edible oil. After five years, he rented a small office and employed an assistant. By this time his capital rose to Tk.5000,000. After 15 years, he became a manufacturer of edible oil by establishing an oil mill involving a capital of Tk.400 million. In addition to that, he borrowed Tk.500 million from bank as working capital. As many as 150 employees worked in his company. Then it became a private limited company, all directors from his, i.e. his immature sons, his wife and he himself. But nobody has physical involvement in his business except him. All kinds of purchases and sales take place through him. A good amount of receivables is lying outstanding which requires a regular and a strong follow-up for timely realisation. But as the business expanded, he could not manage his time to realise receivables in time. As he can not trust any employee of his office, he does not empower any body who may assist him in important deals. All the employees work simply as clerks and peons. Nobody knows what is the vision of the company and what is the target of the individual employees. As he is the only decision maker of all aspects of the business, some important decisions come  late and prompt decision in day to day activity can not be made. With the passage of time, the receivables reached an intolerable position and he became a defaulter with the bank. Bank withdrew all support from him. Finally, the factory got closed and the entire business collapsed. The main reason of business failure is lack of corporate culture.]
[A service holder started business by leaving his job. His initial capital was Tk.50,000 only. With his devotion and sincerity he earns trust from other businessmen. He can purchase commercial goods from other traders on credit for a considerable amount. He maintains an ethic that by any means he has to perform his commitment to the counter parties. He never fails to honour his cheques in due time. People consider his cheques as good as Payment Orders. This ethic facilitates him to boost up his business. Within ten years he becomes an industrialist of five basic industries of the country. Almost all banks became interested to finance him, even without collateral security. By this time, his six sons completed their graduation - some from abroad. He insisted that his sons engage themselves in his business. He distributed the responsibilities of the entire business to the sons according to their merit and eligibility. Moreover, he allocated the delegation of authority to all key employees to discharge their duties individually. He trusts every employee and believes that 'chair makes a man perfect'. He got tremendous results from his business. The size of the business increased manifold but his direct involvement in the business reduced day by day. Meantime, some employees were found involved in misappropriation of money or unethical practices. He sacked them, but did not lose his trust from the rest of the employees. By this time, all the bank loans have been repaid. The company does not suffer any inconvenience in receivables. As all the employees know their targets and visions, they try heart and soul for achieving their individual targets. The secret of success here is adherence to the norms of corporate culture.]
By frequent visit of the customers' business entities, bankers can realise the practice of corporate culture in the business. Before being satisfied about the fair practice of corporate culture in the business, bankers should not allow investment facilities to customers.
Dr. S.M. Abu Zaker is a banker


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