latest trends in banking
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Organised banking
In India
General Bank of Indiain 1786
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Indian Banking-
Past,Present & Future
The Indian Banking system is
unique and has no parellels in the
Banking history of any country in the
world.
Various Phases of Indian Banking are:-
1. Phase I:: 1948 to 1968 Character
2. Phase II:: 1969 to 1991 Nationalised
3. Phase III:: 1992 to 2002 Prudential
4. Phase IV:: Beyond 2002 Universal
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Todays Banking
Banking
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3 T s Of Present DayBanking
Technology
Transparency
Transformation
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Where did we start?
3---6---3 Banking
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Accept Deposits @ 3%
Lend @ 6%
Go for Golf @ 3 pm
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The Bank ingBus iness has gone
through fundamentalChange.
There is so muchpressure on Cos t .
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Business of Banking
AcceptDeposits
at lowrates
Security
oriented
lending---Lend against
security likegold, land &
building
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4 or 5Indian banks could
potentially enter theglobal top 20 by
market capitalisationby 2020.
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FICCI-BCG Report (August 2011)
Indias Gross Domestic Product(GDP) growth will make the Indian
banking industry the third largest
in asset size in the world by 2025
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Bankingis now
365X24
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Plastic money hasreplaced paper money.
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Why technology? Diligence Accuracy Speed Storage Automation Versatility
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CBS is nolonger a choice,but a compulsiondriven by Marketreality.
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You cannot doTodays JobwithYesterdaysMethodsand want to bein BusinessTomorrow
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It is not technology itself
that supplies returns to aBusiness but how
technology is employed to
meet businessrequirements
Standing examples::
ICICI Bank, HDFC Bank, Axis Bank etc
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Competition Competition is fiercer than ever
There is increasing pressure to reduceprices
Blaming each other for non performance
There is an urgent need to launch newproducts at an unprecedented rate
Large %age of work force lack adequateskills to cope up with present day
requirements People are overloaded with routine work
People do not come out with creative
ideas for expanding business
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What we see today? Increased competition New IT avenues Erosion of Product boundaries Less Govt.restrictions Erosion of & Geographic boundaries Pressure on bottom line Increased use of HR practices Customer centric policies/action High expectations of Customers who arewell informed & Possess TechnicalKnowledge. BASEL Accord III
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Technology BenefitsLarge Scale Use of Computers in Banking
Operations implies improvement in
Efficiency,
Productivity,
Customer Satisfaction,
Profitability
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Are we seeing these benefits fully?
Only partially
Increasing NPAshave drained the
profits
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Interest rate deregulation
Only SB and NRI deposits within the
RBI regulations now.
In the advances front, ROI on Exports,
DRI, Small loans upto Rs.2 lakhs
regulated by RBI.
All other rates at the discretion of the
individual Banks
Lowering of reserve
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Lowering of reserve
requirements
The CRR 4%Introduced in 1935 :: 7%
Highest in 1989 to 1992 ::15%
The SLR 23%Introduced in 1949-20%
Highest in 1990 to 1992-38.50%
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Govt equity in Banks has
been reduced. Banks are allowed to access
the capital market foradditional capital
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F i
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Foreign
Banks
permitted to
expand their
operations,including thru
subsidiaries.
N i t
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New private
sector
banks will
be
licenced.
New norms
announced
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Insurance
Infrastructure financing Gold Banking
Investment banking
Asset management
Factoring
Forfaiting
Adoption of Global standards w.r.t Capital
adequacy, Asset classification, Incomerecognition.
Risk based supervision
Best international practices
BANKS
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Narasimhan Committee 1998 Capital Adequacy,
ASSET QUALITY, NPAs,
Directed credit,
Prudential norms, Disclosure requirements,
Asset liability Mgmt.,
Earnings and Profitability, Systems & Methods
Review of Banking sector
Laws
Restructuring
includingmergers &
amalgamation
Reduction in
Govt.& RBI
share holding
to 33% in PSBs.
DONE
ToBE
DO
NE
Challenges for
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Challenges for
Banks Internally
Strategic planning
Staffing
the regulatory environment
Marketing
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Let us hear
about a
fewbanking
experiences
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B ki t d i N ti li ti
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Banking trends since Nationalisation Social banking
Lead bank scheme
Priority sector lending
Service area approach
Micro credit
Self Help Groups
Banking sector reforms
Asset Liability Management
Risk Management
Asset Classification
Capital Adequacy norms
Anti Money Laundering
Out sourcing of Banking services
Core banking
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The implementation of the International
Financial Reporting Standards (IFRS) in
india:
Select Companies from 1.04.2011
Insurance Cos from 1.04 2012
Banks & NBFCs from 1.04.2013
Convergence effected for IND Ass for 35
sections
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BanksWoo Indians
LivingAbroad
N t d
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Newer trends
Upgraded technology
Governance & Policies
Rating methodologies
Innovative products Emerging services
Simplified procedures
HR policies
Outsourcing of services
G & li i
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Governance & policies
Mergers & Acquisitions
HR Challenges
Microfinance
Risk management
New Basle accord-Basle I to III E Banking
Merchant Banking
Retail banking
CRM in Banking
Financial Inclusion
Bancassurance
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Transferring
money
A decade ago, transferring money from
your account to a family member's would
have meant a visit to the nearest bank
branch, a long queue and a few days-longwait.
Today, you can use your mobile phone to
make the same transaction instantly.
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Pilgrimages to bank
branches
Innovations such as automatic bill
payment, cash transfers through mobile
phones and online banking have ensured
that customers no longer have to make
pilgrimages to bank branches.
Passbook entries have been replaced by
hassle-free e-statements;
ATMs facilitate easy withdrawals and
payments.
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Are these transactions safe and
secure?
YES
S C
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The HT-MaRS Bank and Credit
Card Satisfaction Survey 2012
ranked banks according to customers'satisfaction across various categories.
I HDFC Bank
II ICICI Bank IIIAxis Bank
PSBs were down in the list.
Can you highlight the reason for this?
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Technology and constant
upgradation helped thePrivate sector Banks.
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Customer satisfaction
Top 10 slots went toPSBs
Bank of Baroda --best
government-run bank.
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Changing global and localfinancial regulations, such
as Basel III, will further
exert pressure on Indian
banks.
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Core Banking solutions(CBS)
Banks have come a long way from
the old days of manually recording
transactions in registers andtallying them up at the end of the
day.
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--More and more people are
shifting to alternative deliverychannels, which account for
nearly 30-40% of customers atpresent.
--Over the next few years this islikely to go up to 70-80 %,
Ch d K hh MD d CEO
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Chanda Kochhar, MD and CEO
ICICI Bank Ltd says::
only 15% of transactions on an average
take place through the branches. The rest
are happening outside.
ATM ld t f th lt ti
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ATM --oldest of the alternative
banking channels
Enjoys the highest level of acceptanceamong customers .
The number of ATMs in India has doubled
in the past three years. Currently, thereare more than 100,000 ATMs.
Around 70% of the ATMs are in urbanlocations.
The number of ATMs is to double by 2016,with more than 50% being set up in smalltowns.
http://businesstoday.intoday.in/story/sbi-competing-hard-with-the-best-private-banks/1/190807.htmlhttp://businesstoday.intoday.in/story/sbi-competing-hard-with-the-best-private-banks/1/190807.htmlhttp://businesstoday.intoday.in/story/sbi-competing-hard-with-the-best-private-banks/1/190807.htmlhttp://businesstoday.intoday.in/story/sbi-competing-hard-with-the-best-private-banks/1/190807.html -
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RBI data 2011-12
---the volume of online fund transfers through
NEFT (National Electronic Funds Transfer,
used for low-value transactions) grew by71%
---RTGS (Real Time Gross Settlement, used
for high-value transaction) grew by 11.7 %,
Use of Cheques
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Use of Cheques
Charges for issue of
cheque books
RBI discouraging use of
cheques by advising banksto levy charges
Electronic cheque
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Electronic cheque
CTS 2010 Cheque
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Cheques
Physical cheques
Truncated cheques
Electronic cheques
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Technology & Cost
Technology is not only making bankingconvenient for customers, it has alsoallowed banks to expand their businesses
faster and bring down costs. The cost of servicing a customer :
-- at a branch Rs.200
--ATMs Rs.20--online and mobile phones, further less
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Moving to alternative channels
is a win-win for both sides,
viz; customers and Banks
Business correspondent
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Business correspondent
model
A third party serves as the
interface between a bank and its
customers.
To expand the Banks reach and
bring more people under formal
banking using technologies such ashandheld devices and micro-ATMs.
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Business
facilitatorModel
NGOs, Farmers clubs,
Cooperatives, Agri clinics,
Krishi vigyan kendras etc are
eligible. Services like identification of
borrowers, promotion of
SHGs, loan process, follow upetc are rendered.
Facilitates Financial inclusion
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The road
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The road
ahead We have come a long way since the 1991
reforms. We rejoice in our achievements and
success
We must have the humility toacknowledge that much more needs to
be achieved in our pursuit of excellence.
Challenges that lie
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Challenges that lie
ahead
A. Challenges in coping
up with the emerging regulatory
and supervisory framework B. Challenges in meeting the
specific needs of the economy
C. Challenges in fixing the fault
lines in the system.
I t
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Importance
oftechnology
for Bankoperations,andsurvival.
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Personnel
Departmentto
HRD
HRD in Banks
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HRD in Banks
Translates corporateobjectives into
achievements and
transforms the organisation.
The PSBs must hasten the
HR reengineering processand reposition their
resources
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HRD in thebanking industry
is to facilitateperformanceimprovement
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HR PoliciesEarlier
Appointmentthru referrals
Enquiry to
evaluatesuitability
Training afterrecruitment
Seniority basedpromotion
Present trend
Specialistqualifications
Campus recruitment
Online tests
Training beforerecruitment
Performance linkedpromotions
Innovativecompensationpackages
HR and Skill
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HR and Skill
Development
A sound and futuristic HR policy is
essential New technology is transforming the
skill structure in banking.
How should an HR Manager in abank respond to this fast-changing
scenario?
What exactly is the impact of technology on
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What exactly is the impact of technology on
the human resources employed in banking?
These new and enhanced skills would require new knowledge andbehavioral adjustments in respect of existing human resources.
In this context, the training system will emerge as an important toolof intervention. The training system in the banking industry has astrong structural base. However, in the past, the training activitieshave been more ritualistic due to absence of a strategic link between
training and human resources development. Today, it is importantthat the training function is made an effective organizationalintervention by establishing a clear policy of training anddevelopment within the framework of total human resourcedevelopment. The training establishments need to be activelyinvolved in the total training process starting from the identification oftraining needs, evaluation of training effectiveness, and the benefits
of training to the end-users, viz., the internal and externalcustomers.
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Emerging Models
Myopic (short term,involving
replacements for
retirement)
Telescopic (longterm, involving
development and
replacement)
Could be a Hybrid approach
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Emerging Hybrid approach
Impetus to recognize the talent within the
organization
Design bold initiatives for acquiring fresh
resources.
The attitude silos among the existing staff
about the understanding and conviction of
the new business models and theirpositioning, will be the drivers of success.
Junior management
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g
cadre
In the junior management cadre, quality isas important as quantity.
The attractive opportunities in Privatesector Banks leave PSB banks with onlymediocre talent.
But attrition is a game in any industry and
banks have to handle this in a pragmaticway.
In this context, myopic human resourceplanning will help.
PSB banks look at the following
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options: - Looking inward and recognizing the talent within the bank by
framing an HR policy to spot the staff from a specific age-group and promoting them, subject to suitability andeligibility and developing them for the future. This will resultin motivation and building commitment and loyalty.
Creating a new sub-junior management cadre for the frontoffice operations, and marketing and selecting newresources by loading performance-driven career pushes inthe cadre to make it attractive and, thus, reduce attrition.
The compensation should be innovatively structuredmatching the performance levels with clearly defined rolefunctions and responsibilities.
This model has been successfully implemented by somenew generation private sector banks.
The level of responsibility and accountability shouldinfluence the compensation to act as an exit-barrier.
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A special pool of people from the organisation can be identified and createdbased on their competencies for new and emerging business opportunities.A residual service of, say, eight to ten years, will be the enabler forstructuring a position-oriented career path and preparing them for theimmediate senior management positions which will open up in the very near
future. From the immediate next batch, with a residual service of, say, 10-15 years,
after a competency mapping, eligible human resources have to be identifiedand an action plan should be drawn to develop them for taking theorganisation forward in the next decade.
This segment is important for keeping the banks afloat in the HR front, andhas to be taken care of with regard to developing business initiatives skills.
This segment will be at the helm of affairs when banks will not only re-engineer the business models but also get engaged in a host of newbusiness initiatives. Retraining and re-skilling will be the top-most priority forthis segment.
S
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PSBs
Needs a HR Vision and
Mission Document in
tandem with the BusinessVision and Mission
Document.
R i i B k
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Recruitment process in Banks
Old procedure::
Thru referrals
Advt in papers
Now::
Camus visits
Selection process
Specialists recruited Online tests
IBPS mode
Changing
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g g
business lines
From plain vanilla banking solutions to
holistic financial and beyond financial
solutions provider This necessitates a clear understanding
of the changing business paradigm.
The middle-management resources withstrong banking background will be the
right fit for meeting these challenges.
Basel Committee Norms
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Basel III
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Basel III
According to Basel Committee onBanking Supervision "Basel III is a
comprehensive set of reform measures,
developed by the Basel Committee onBanking Supervision, to strengthen the
regulation, supervision and risk
management of the banking sector".
B l III
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Basel III
Basel III is only a continuation of effortinitiated by the Basel Committee on
Banking Supervision to enhance the
banking regulatory framework under
Basel I and Basel II.
Basel III seeks to improve the banking
sector's ability to deal with financial
and economic stress, improve riskmanagement and strengthen the banks'
transparency.
Basel 3 aims to:
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Improve the banking sector's
ability to absorb shocks arisingfrom financial and economic
stress, whatever the source
Improve risk management
and governance
Strengthen banks'transparency and disclosures.
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M bil b ki
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Mobile banking
has hit a tipping point.
New technologies, investment, and
infrastructure are enabling Banks to unlock
a new domain of financial services.
Wide range of services provided
bil b ki
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mobile banking
mobile banking is leapfrogging traditionalbanking to bring services to millions of
unbanked customers.
mobile banking is becoming a way of lifefor many consumers
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Banks have adopted several
innovative means to enhance
their base and make theirservice accessible .
ATM C d
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ATM Card ATMs are mini banks without employees.
Customers can withdraw cash from theaccount and get statements on their bankbalance using such machines .
This is a personlised plastic card bearing anumber for each customer .
The card is to be inserted into the machine
and enter the personal identificationnumber.
It gives accessibility for 24hrs a day and365 days in a year.
C dit d
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Credit card
This is a popular means for providing retailcredit.
A credit card is an instrument issued by a
bank in the name of the customerproviding for credit upto a specific amount.
Outstanding balances can be converted
into emis repayable in different months.
Financial
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Financial
Inclusion1. Delivery of banking services at an affordable
cost to vast sections of disadvantaged and low
income groups.
2. Some features:: Basic Savings account(No frill
a/c), Easier credit facility(General purpose credit
card Rs 25000), Simpler KYC norms, Use of IT(Smart cards with biometric identification, Mobile
held electronic devices for Bkg transactions , EFT)
Achievements
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The modern banking industry has
brought greater businessdiversification.
Some banks have entered into
investments, underwriting of securities,portfolio management and the
insurance businesses.
Taken together, these changes havemade banks an even more important
entity in the global business
community.
The unfortunate trends
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The unfortunate trends
Increasing Frauds
Increasing Cyber frauds Increasing NPAs
To reiterate
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The Critical areas of Change
1. Change in the concern & Approachtowards Business (From walk in
business to Go Out concept)
2. Change on account of financial
sector reforms
3. Technology Change4. Product change & Process change
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Tomorrow belongs topeople who prepare
for ittoday.
Lastly, The Winning Formula
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1. Improve bas ic eff ic iency-al l the t ime
2. Th ink as s imp ly & d i rec tly as poss ib leabou t what you are do ing & why
3. Behave to o thers as you wou ld w ish
them to behave towards you.
4. Evaluate each bus iness & bus iness
oppo rtun i ty with al l the object ive facts &
log ic you can muster
5. Concen trate on what you do well
6. Ask ques tions ceaseless ly about your
performance, your markets, your
object ives
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The Winning Formula ..contd 7.Make money-unless you do, you cant do
anything else8. Economize -doing most with the least.9. Flatten the company, so that authority isspread over---not a pyramid10. Admit to your failings & shortcomings,for improvement11. Share the benefits of success widely
among all those who helped to achieveit.12. Tighten the organisation whenevernecessary, because success tends to
breed slackness.
Time and Tide ait for none
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Time and Tide wait for none.
Let us keep moving.
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