CONTENTS

CHAPTE PARTICULARS PAGE

R NO NO.
1 1.0 INTRODUCTION 8
1.1 HRM AND BACKGROUND AND PRACTICES 9
1.2 HRM SYSTEMS 11
1.3 JOB ANALYSIS 14
1.4 HRM PLANNING 15
2 2.0 HRM IN DIFFERENT TYPES OF BANKS 18
2.1 HRM DEVELOPMENT 19
2.2 CAREER PLANING AND DEVELOPMENT 21
2.3 RESPONSIBILITIES OF HRM DEPARTMENT 22
IN BANK
2.4 EMPLOYEE RELATIONS IN BANKS 23
2.5 CURRENT CHALLENGES FACED BY BANK 24
3 3.0 DEVELOPMENT IN BANKS 26
3.1 TRAINING AND DEVELOPMENT 26
3.2 RECRUITMENT 28
3.3 SELECTION 30
4 4.0 HRM ISSUES IN PUBLIC SECTOR BANK 34
4.1 TOWARDS HRM? NEW PRACTICES 34
5 5.0 INNAUGRAL ADDRESS BY DR.KC.CHAKRABARTY, 41
(Rbi deputy governor)
5.1 AN EXTRACT FROM A LECTURE, 49
ORGANIZED BY THE ACADEMY OF BANKING
AND FINANCE.
5.2 FIRST ROUNDTABLE CONFERENCE 51
5.3 SECOND ROUNDTABLE CONFERENCE 53
5.4 FORBES REPORT 53
6 6.0 COMPARISON BETWEEN HIGH PERFORMERS AND 56
AVERAGE PERFORMERS
7 7.0 SUMMARY 58
7.1 CONCLUSION 59
7.2 BIBLIOGRAPHY 61
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1.0 INTRODUCTION

What is a Bank?

The word bank is derived from the Italian banca, which is derived from
German language and means bench. The terms bankrupt and "broke" are
similarly derived from banca rotta, which refers to an out of business bank,
having its bench physically broken. Money lenders in Northern Italy originally
did business in open areas, or big open rooms, with each lender working
from his own bench or table. The essential function of a bank is to provide
services related to the storing of deposits and the extending of credit. The
evolution of banking dates back to the earliest writing, and continues in the
present where a bank is a financial institution that provides banking and
other financial services. Currently the term bank is generally understood as
an institution that holds a banking license. Banking licenses are granted by
financial supervision authorities and provide rights to conduct the most
fundamental banking services such as accepting deposits and making loans.
There are also financial institutions that provide certain banking services
without meeting the legal definition of a bank, a so called non-bank. Banks
are a subset of the financial services industry. Human resource management
(HRM) has long been overlooked in the corporate sector in the country where
a small section, comprising mostly the multi-national companies was

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practicing the same. With the growing realization of proper HRM in the
corporate sector, it has grown into an important activity. Now the head of
HRM is an important member of the senior teams of any thriving business.
Although the idea is new for many local businesses where entrepreneurs are
at the beginning of the learning curve yet in reality the theme is getting
support from the organized entrepreneurs. The banking sector has grown
from a few institutions primarily involved in deposit acceptance and trade
finance into a complex multi-player markets where large number of
commercial banks, financial institutions and specialized banks are operating
with various products and activities.

1.1 Human Resource Management Background

and Practices

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The banking has become a complex activity within the financial market
linked directly and indirectly with an over-all national growth and its impact
as an integral part of regional segment of a global banking environment.
Almost every bank and financial institution is involved in various functions in
a day's job and thus requires a highly effective team and appropriate
manpower to run the show. Corporate goals are translated into viable
realities and profits only with human element that play their due role in
achieving the desired results. Thus even the high automation would require
proper man behind the machine to make things happen. This idea has been
realized by top management in progressive banks. Like many other
organized sectors, banking requires multi-layer manpower for its various
requirements of professionals and support staff. The range may require
reasonably educated security guards on the one end and a highly educated
and trained professional as head of corporate finance at the other. With
liberalization of activities within the banking sector, for example, more
emphasis on consumer and house finance and personal loans, etc. banking
has turned itself into a more market-based business where banks have
expanded their reach more to customers' door steps in a big way making
banking more practical. This has further highlighted the need for proper
deployment of man-power to run banks efficiently. For many years, HRM
banks like other institutions have been handling this sensitive activity
through respective personnel departments. This means human resources
were managed like other physical assets e.g. pieces of furniture, calculators,
equipment and appliances. Personnel departments were primarily engaged
in approval of leaves, handling of staff loans, issuance of show cause,
conducting disciplinary enquiries and termination from service. Recruitment
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was a routine function and was done in a mechanical way to hire people with
specific educational background irrespective of their real value to the
institution. Success stories of large banking companies have been evident of
the fact that HRM is quite different from management of physical assets.
Human brain has its own peculiar chemistry. Its strong sensory and decision-
making capacity has to be greatly emphasized by the employers. The work
force constituting all levels of employees is constantly thinking in many
dimensions. On the one hand it is the assigned duty and task they are to
perform and for which they are paid by their employer, on the other they
think of their long run goals and objectives. By no means, their brains can be
controlled to think beyond the current situation of employment. Managing
this educated, skillful and trustworthy work force is not an easy job. A few of
the current challenges faced by the banking industry in terms of human
resource management may be the following: To make the Indian Banking
System stronger, efficient and low-cost, the creation of fundamentals must
include in the banks operations, strategies and processes: strengthening the
prudential norms and market discipline; adoption of international
benchmarks; management of organizational change and consolidation within
the financial system; upgrading the technological infrastructure of the
financial system; and human resource development as the catalyst of the
transformation (2002). The Human Resource field in the Banking Industry is
considered as one of the process of discovery and transformation. The field
of Human Resource can be described as emergent and dynamic within the
cultural business aspect in a Banking Industry. The success of todays
banking business will sparsely depends on the human resources of the
organization, in which plays a crucial role in providing the services needed.
The evolution of banking system in India affected the human resource
practices, recruitment and selection practices, and training system. It is very
important that the details of human resource are discussed along with the
employees, to build their own career planning, perceptions and
development. The primary strength of the industry is the human resource
that is why the efforts to develop the skills and management are the main
subject placed before the human resource. A major challenge for many
banks will be to develop the special competencies and skills for credit
appraisal and risk management. Putting the information technology is a key
contributed in human resource development. Therefore, the HR model of the
future will require professionals to be both driving and anticipating change,
understanding the complexities of the new business environment and forces
shaping it.

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1.2 HUMAN RESOURCE MANAGEMENT SYSTEMS:

Human Resource Management Systems (HRMS, EHRMS), Human Resource

Information Systems (HRIS), HR Technology or also called HR modules, shape
an intersection in between human resource management and information
technology. It merges HRM as a discipline and in particular its basic HR
activities and processes with the information technology field, whereas the
planning and programming of data processing systems evolved into
standardised routines and packages of enterprise resource planning (ERP)
software. On the whole, these ERP systems have their origin on software that
integrates information from different applications into one universal
database. The linkage of its financial and human resource modules through
one database is the most important distinction to the individually and
proprietary developed predecessors, which makes this software application
both rigid and flexible.

The HR function's reality

All in all, the HR function is still to a large degree administrative and common
to all organisations. To varying degrees, most organisations have formalised
selection, evaluation, and payroll processes. Efficient and effective
management of the "Human Capital" Pool (HCP) has become an increasingly
imperative and complex activity to all HR professionals. The HR function
consists of tracking innumerable data points on each employee, from
personal histories, data, skills, capabilities, experiences to payroll records. To
reduce the manual workload of these administrative activities, organisations
began to electronically automate many of these processes by introducing
innovative HRMS/HCM technology. Due to complexity in programming,
capabilities and limited technical resources, HR executives rely on internal or
external IT professionals to develop and maintain their Human Resource

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Management Systems (HRMS). Before the "client-server" architecture
evolved in the late 1980s, every single HR automation process came largely
in form of mainframe computers that could handle large amounts of data
transactions. In consequence of the high capital investment necessary to
purchase or program proprietary software, these internally developed HRMS
were limited to medium to large organisations being able to afford internal IT
capabilities. The advent of client-server HRMS authorised HR executives for
the first time to take responsibility and ownership of their systems. These
client-server HRMS are characteristically developed around four principal
areas of HR functionalities: 1) "payroll", 2) time and labour management 3)
benefits administration and 4) HR management.

The payroll model: automates the pay process by gathering data on

employee time and attendance, calculating various deductions and taxes,
and generating periodic paycheques and employee tax reports. Data is
generally fed from the human resources and time keeping modules to
calculate automatic deposit and manual cheque writing capabilities.
Sophisticated HCM systems can set up accounts payable transactions from
employee deduction or produce garnishment cheques. The payroll module
sends accounting information to the general ledger for posting subsequent to
a pay cycle.

The time and labour management module: applies new technology and
methods (time collection devices) to cost effectively gather and evaluate
employee time/work information. The most advanced modules provide broad
flexibility in data collection methods, as well as labour distribution
capabilities and data analysis features. This module is a key ingredient to
establish organisational cost accounting capabilities.

The benefit administration model: permits HR professionals to easily

administer and track employee participation in benefits programs ranging
from healthcare provider, insurance policy, and pension plan to profit sharing
or stock option plans.

The HR management module:

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is a component covering all other HR aspects from application to retirement.
The system records basic demographic and address data, selection, training
and development, capabilities and skills management, compensation
planning records and other related activities. Leading edge systems provide
the ability to "read" applications and enter relevant data to applicable
database fields, notify employers and provide position management and
position control.

Typically, HRMS/HCM technology replaces the four core HR activities by

streamlining them electronically;

1) payroll,

2) time and labour management,

3) benefit administration and

4) HR management.

While using the internet or corporate intranet as a communication and

workflow vehicle, the HRMS/HCM technology can convert these into web-
based HRMS components of the ERP system and permit to reduce
transaction costs, leading to greater HR and organisational efficiency.
Through employee or manager self-service (ESS or MSS), HR activities shift
away from paper based processes to using self-service functionalities that
benefit employees, managers and HR professionals alike. Costly and time
consuming HR administrative tasks, such as travel reimbursement, personnel
data change, benefits enrolment, enrolment in training classes (employee
side) and to instruct a personnel action, authorise access to information for
employees (manager's side) are being individually handled and permit to
reduce HR transaction time, leading to HR and organisational effectiveness.
Consequently, HR professionals can spend fewer resources in managing
administrative HR activities and can apply freed time and resources to
concentrate on strategic HR issues, which lead to business innovation.

HR Practices and Methods A key focus of the human resource management is

highlighted in the role of staffing, performance management, training and
development, and compensation that plays indifferent types of business
strategies. With the acquisition and preparation of human resources,
including planning, recruitment, selection, and training can affect the whole
organizational performance. The HR planning, the start of the strategy,
illustrates the process of developing human resource plan. The strengths and
weaknesses of staffing options such as outsourcing, use of contingent
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workers, and downsizing are involved in planning. The recruitment process is
done strategically to determine the talented employee fit for the position.
The selection process emphasizes the ways in minimizing errors in employee
selection and placement to improve the companys competitive position. The
selection method standards such as validity and reliability are utilized. An
effective training systems of the managers role in determining employees
readiness for training, creating a positive learning environment, and ensuring
the training is used on the job. Beyond the human resource strategies are
the rewarding and compensating that can strengthen or weaken the
employee effectiveness. In order to give recognition and increase
motivational levels amongst the employees, some Banks linked the
individual performance in an incentive scheme or for some rewards that
may come into any form .In summary, all of the HRM strategies and function
should be aligned to help the company meet its objectives as well as
focusing on their customers . The best practice approach assert that certain
HR practices are found to consistently lead to higher organizational
performance, independent of an organizations stated strategy. The high
performance HR practices foster innovation through the development of
innovation values, encouraging of information sharing, goal setting and
appropriate training and development.

1.3 Job analysis.

A job is defined as a collection of duties and responsibilities which are given
together to an individual employee. Job analysis is the process of studying
and collecting information relating to operations and responsibilities of a
specific job. It can be explained with the help of the following diagram.

Job analysis Job description Job specification Job title/ name of the job
Qualification Working hours Qualities Duties and responsibilities Experience
Working conditions Family background Salary and incentives Training
Machines to be handled on the job Interpersonal skills As mentioned in the
above table job analysis is divided into 2 parts a) Job description Where the
details regarding the job are given. b) Job specification Where we explain the
qualities required by people applying for the job.
Need/importance/purpose/benefits of job analysis Def.: - A job is defined as a
collection of duties and responsibilities which are given together to an
individual employee. Job analysis is the process of studying and collecting
information relating to operations and responsibilities of a specific job. The
following are the benefits of job analysis.

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 1. Organizational structure and design:- Job analysis helps the organization
to make suitable changes in the organizational structure, so that it matches
the needs and requirements of the organization. Duties are either added or
deleted from the job.

2. Recruitment and selection:- Job analysis helps to plan for the future
human resource. It helps to recruit and select the right kind of people. It
provides information necessary to select the right person.

3. Performance appraisal and training/development:- Based on the job

requirements identified in the job analysis, the company decides a training
program. Training is given in those areas which will help to improve the
performance on the job. Similarly when appraisal is conducted we check
whether the employee is able to work in a manner in which we require him to
do the job.

4. Job evaluation:- Job evaluation refers to studying in detail the job

performance by all individual. The difficulty levels, skills required and on that
basis the salary is fixed. Information regarding qualities required, skilled
levels, difficulty levels is obtained from job analysis.

5. Promotions and transfer:- When we give a promotion to an employee we

need to promote him on the basis of the skill and talent required for the
future job. Similarly when we transfer an employee to another branch the job
must be very similar to what he has done before. To take these decisions we
collect information from job analysis.

6. Career path planning:- Many companies have not taken up career planning
for their employees. This is done to prevent the employee from leaving the
company. When we plan the future career of the employee, information will
be collected from job analysis. Hence job analysis becomes important or
advantageous.

7. Labour relations:- When companies plan to add extra duties or delete

certain duties from a job, they require the help of job analysis, when this
activity is systematically done using job analysis the number of problems
with union members reduce and labour relations improve.

8. Health and safety:- Most companies prepare their own health and safety,
plans and programs based on job analysis. From the job Analysis Company
identifies the risk factor on the job and based on the risk factor safety
equipments are provided.

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 9. Acceptance of job offer:- When a person is given an offer/appointment
letter the duties to be performed by him are clearly mentioned in it, this
information is collected from job analysis, which is why job analysis becomes
important.

Job design
.Job design Definitions: - Job design is the process of a) Deciding the contents
of the job. b) Deciding methods to carry out the job. c) Deciding the
relationship which exists in the organization. Job analysis helps to develop
job design and job design matches the requirements of the job with the
human qualities required to do the job. Factors affecting job design: - There
are various factors which affect job design in the company. Factors affecting
job design

1. Organizational factors

2. Environmental factors

3. Behavioural factors.

1.4 Human Resource Planning

This is the process which assures the organization that it will have adequate
number of qualified persons, at requisite times, performing in a way to
satisfy the needs of the organization & also provide satisfaction to the
individual employee, so employed.

The process involves:

a) Estimating the present & future requirements of human resources based

on objectives & long range plans of the organization.

b) Calculation of net human resource requirements based on the present

availability of human resources.

c) Taking suitable steps to identify, mould, change & develop the strength of
existing employees so as to meet the future requirements.

d) Preparation of action plans to acquire the balance human resources from

outside the organization & to develop the existing employees.

1. Recruitment:

It is the process of searching for future employees (requirement) & ensuring

they apply for jobs in the organization. It involves:

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a) Identification of existing sources of candidates & developing them.

b) Seeking out & identifying new sources of applicants.

c) Motivating the right type of candidates to apply for jobs in the

organization.

d) Ensuring a healthy balance between internal & external sources.

2. Selection:

It is the process of ascertaining the qualifications, experience, skill,

Knowledge, etc. of an applicant to ascertain his/her suitability for the job
applied. This includes:

a) Developing application blanks.

b) Creating & developing valid & reliable testing techniques.

c) Formulating interviewing techniques.

d) Checking of references.

e) Setting up for medical examination policy & procedure.

f) Line Managers to be involved in the decision making.

g) Sending letters of appointment.

h) Employing the selected candidates, when he reports for duty.

3. Placement:

It is a process of allotting to the selected candidate the most suitable job, as

per the job requirements & employee specifications. This function includes:

a) Counseling the concerned managers regarding the placements.

b) Overseeing the follow-up studies, employee performance appraisal to

monitor employee adjustment to the job, in the coming days.

c) Correcting wrong/misjudged placements, if any.

4. Induction & Orientation:

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 These are procedures by which a new employee is rehabilitated in the new
surroundings & introduced to the practices, procedures, policies, people, etc.
of the organization. It includes:

a) Familiarizing the employee with company philosophy, objectives, policies,

career planning & development, company product, market share, history,
culture, etc.

b) Introduce new employee to the peoplehis colleagues, supervisors &

subordinates.

c) Mould the employees by orientation methods to the new working

conditions.

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 2.0 HUMAN RESOURCE MANAGEMENT IN
DIFFERENT TYPES OF BANKS.
The classification of the Indian banks into broad groups such as public sector,
old private sector, new private sector, foreign, regional rural banks &
cooperatives are largely on the basis of ownership pattern. It is also well
known that the business mix, delivery channels & IT strategies of these
organizations vary substantially. What is little known but of greater
importance is that each of these banks follows very distinct HR practices
which have contributed, substantially, to the business processes.

1. HRM in Cooperative Banks

It is sad that the HR policies of cooperative banks are totally dominated by

the Registrar of Cooperatives. This is, perhaps, one reason why the
cooperatives are unable to improve themselves.

2. HRM in Regional Rural Banks (RRBs)

As regards RRBs, most of them adopt the HR policies of sponsor banks, which
are not appropriate for their special nature.

3. HRM in Public Sector Banks

In the recent times, the contours of HR function in public sector banks are
slowly but definitely changing. One could say that these banks are
discovering the HR function & it is hoped that these banks will fast catch up
with others. It may be recalled that, in a controlled environment & to meet
with the rapid branch expansion- since 70s- Public Sector Banks (PSBs) have
adopted - 34 - HRM practices similar to that of Government departments.
Herein HRM did not have a direct role in business development but was more
concerned with centralized recruitment to staff & providing them across the
country.

4. HRM in Private Banks & Foreign Banks

The HR function as practiced by private & foreign banks is effectively

involved in the identification of specific skills that each job warrants &
recruiting suitable staff by every way possible. In these banks, recruitment is
a continuous process with a strong focus on getting the right person for the
right job by offering appropriate compensation, incentives & designations.
There is a great energy spent in keeping the turnover low & offering
appropriate training inputs. Possibly there are as many pay structures as

14
there are employees. More importantly, HRM has a role in monitoring &
mentoring the employee. There are no routine transfers. Rather people are
recruited in different geographical locations & different levels. Technology
has helped in centralizing the back office & other functions such that service
can be provided from a distance. These institutions adopt a proactive
performance appraisal system but still short of 360 Degree appraisals. Their
training process is concerned with both skill building & motivating. It should,
however be said that the demand for professionals on account of growth of
Indian Business is such that the efforts of HRM have not helped it from
completely staving off staff turnover in the ranks.

5. HRM in Public Sector Unit Banks (PSU Banks)

In the case4 of PSU Banks the recruitment process is annual & large scale.
People are recruited at the lowest grade & promoted I due course. This
makes the career path of each employee the responsibility of the
organization. This also underlies a belief that anyone can occupy any desk. In
such a system specialization is the loser. Recruitment at higher levels is a
recent phenomenon & more an exception than rule. Pay packets are uniform
for a grade/level with annual increments & uniform perquisites. Increments
are earned automatically. Transfers are not driven by business requirements
but a matter of routine. Vacancies get created as & when people move up. It
is not uncommon to see new departments spring up just to allow
promotions. In a way such a move is justified as salary is linked to grades &
not performance. The concept of job rotation is practiced with great
conviction. As regard leave it is seen that modern business organizations,
driven by work life balance issues & operational risk ensure that certain
annual leave is mandatory. In the case of PSU Banks, the compulsory leave
system has not yet taken root. In the circumstances an important task at
hand is training the staff member, who, on account of age profile is not
comfortable working in an IT environment. HRM should also take immediate
steps to improve productivity. There is a simultaneous need to balance the
demand of IT savvy youngsters joining the organization who ask for high
salaries. PSU Banks are not able to offer market driven salary. Given that
banking business & the business of Government are distinct, there is, in the
case of PSU Banks, an urgent need that salaries are not limited by what is
paid in the ministry but unshackled. Till that happens, HRM should,
innovatively tackle the issue.

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 2.1Human Resource Development.
This process involves improving, moulding, & developing the skills,
knowledge, creativity,attitude, aptitude, values, commitment, etc. based on
the present & future job & company requirements.

1. Performance Appraisal:

It is the continuous & systematic evaluation of individual employees with

respect to their performance & their potential for future development.

It includes:

a) Enunciating policies, procedures & techniques.

b) Assisting functional managers.

c) Reviewing & summarizing reports.

d) Evaluating the effectiveness of various programmes.

2. Training:

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It is the process of transmitting the employees the technical & operating
skills and knowledge.It includes:-

a) Identification of training needs of the individuals & for the organization.

b) Developing appropriate training programmers.

c) Assisting & advising the management in the conduct of training

programmes.

d) Transmitting requisite job skills & job knowledge to the employees.

e) Asses the effectiveness of the training programmes.

Management Development:
It is the process of designing & conducting appropriate executive
development programmes so as to develop the managerial & human
relations skills of the employees. It includes:

a) Identification of the areas in which management development is needed.

b) Conducting development programmers.

c) Motivating executives/managers.

d)Designing special development programmers/assessment procedures for

promotions.

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e) Utilizing the services of specialists-both internal & external for
development &/or Institutional (external) development programmes.

f) Evaluating the effectiveness of executive development programmes.

2.2 Career Planning & Development:

It is the planning of ones career & implementation of career plans by means

of education, training, job search & acquiring of work experience. It includes:

A.Internal mobility

Vertical, horizontal transfers,promotions and demotion.

B. Transfer

Process of placing employees in the same level jobs where they can be
utilized more effectively as per the needs of the organization. This also
means developing transfer policies, offering assistance & guidance to
employees under transfer orders & evaluating transfer policy periodically.

C. Promotion

It deals with the upward assignment of employees to occupy higher positions

(with better status & pay) in consonance with resources of employees & job
requirement. The department must ensure that:

Equitable, fair & consistent promotions are formulated & administered.

Managers & employees are given assistance & guidance on the subject of
promotion.

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 Executions of promotional policies are as per policies & procedures.

D. Demotion

It is the downward assignment of an employee in an organization. The

department must ensure that:

Equitable, fair & consistent demotion policies are drawn up.

Assisting & advising employees regarding demotions. Ensure fair

implementation of demotion Policies & Procedures.

2.3 Responsibilities of the Human Resource

Management Department in Banks.
1. Role:

The role of the Human Resource Department is to create the climate &
conditions in which management throughout the Bank will be enabled to
optimise the individual & collective contribution of all employees to the short
& long-term success of the Bank.

2. Responsibilities:

To be the principal sponsor & guardian of HR policies in the Bank. To

propose & obtain agreement on changes to these policies from time to time
& to ensure that policies which have been agreed are being implemented
throughout the Bank. To contribute fully to the task of meeting the business
challenges which the bank has to face by supporting Branch/Unit Managers
in continuously developing the potential of employees & in creating
conditions in which all the employees are motivated to meet the objectives
of the Bank. To continuously monitor the Banks strategies to ensure that
HR policies are appropriate & that employee numbers & skills are fully
supportive of such strategies. To deliver a full range of personnel services in
support of line management. These services include manpower planning,
recruitment/transfer, remuneration, and training & employee welfare. To
support line management in their day-to-day management of the workforce
by providing advice & consultancy on personnel & performance management
issues.

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 2.4 EMPLOYEE RELATIONS IN BANKS
The banking sector has been characterized by apparently harmonious
industrial relations & has not suffered from the British Diseases of
industrial action & demarcation issues associated with parts of
manufacturing industry (e.g. Batstone, 1984). Banks have promoted
unitarism (Fox, 1966) encouraging an ethos of teamwork, shared interest &
loyalty, wanting commitment beyond the cash nexus. While banks are
generally seen as having a passive approach to employee relations,
paternalism did underpin the system & particularly important was the
system of internal promotion supported by an unwritten agreement between
the major UK Banks on no poaching. The internal labour market created two
categories of employees: career & non-career which equated to a
male/female divide. Retail banking is a highly labour intensive industry with
labour costs forming 70% of total operating expenditure & involvement in
fund transmissions meant that a majority of clerical staff have not been used
as a means of marketing the banks products nor directly for increasing
business but to process existing accounts. They have been regarded as an
overhead rather than a resource. Until the 1980s, competition between the
Banks has been limited, banks operating as an oligopoly & Governments
concern with maintaining economic stability with limits to lending, & control
over interest rates facilitated this. The oligopoly fed through to the
management of staff as national wage bargaining minimized competition for
labour. However deregulation led to the collapse of the national system & a
questioning of the old employment practices.

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2.5 CURRENT CHALLENGES FACED BY BANKS
IN HRM.

Effective work force:

A time-consuming & hectic job is to hunt the right talent. Higher the
professional value of the vacancy, tougher is the search. Identifying the right
stuff followed by negotiation is the element which makes the job tough for
the employer. Banks are keenly interested to fill up two types of breeds of
professionals. Ones who are outstanding professionals with high job hopping
attitudethese are those who come in-work for some tome & then leave for
better prospects. Others are those who are keenly picked-up, trained & are
somehow retained to be developed as future management within the bank.
Management trainees are a growing popular phenomenon where freshly
qualified business graduates are engaged by banks & a certain percentage of
these well-equipped professionals stay back within the organization to grow
into the footsteps of senior managers. Banking jobs being apparently
lucrative for many attract a large number of candidates against advertised
vacancies in media creating a large database management problem. This

21
has been facilitated by specialized hiring agencies who may take up the job
of hiring in case of large number of vacancies.

Right People:

The most difficult agenda of HRM across the banking sector is to retain the
right people. Sudden growth of retail banking & other services has put
pressure on HR Managers in banks to engage more professionals within
shorter span of time thereby attracting manpower in other banks on - 39 -
attractive packages has made the job market very competing. A bank in a
normal course invests time & money to hire & train the appropriate
workforce for its own operations. This readymade force is often identified &
subsequently picked-up on better terms by others.

Compensation:

How much to pay the right employee & how much to the outstanding
performer. Banks have traditionally followed pay scales with predetermined
increments, salary slabs, bonuses & time based fringe benefits like car &
house advance, gratuity, pensions, etc. The situation is not the same
anymore. An increment of Rs.500-800 per annum is no more a source of
attraction for a professional anymore. A basic pay with traditional formulas of
linkage with medical & other facilities has no soothing today. A promise of
future growth, learning culture & corporate loyalty is out of dictionary & does
not mean anything to this energetic & competent performer today. A waiting
period of 3-4 years in each cadre haunts the incumbents who strongly
believe in immediate compensation. A freshly hired professional requires a
brand new car or car loan n resuming office quite contrary to his previous
breed of bankers who would wait for the job seniority to qualify for a car loan.

Job Satisfaction:

Everybody in the bank wants to work in the preferential department,

preferential location, city of his own choice & boss of his liking. An
administrative deviation from any of these results in lowered job satisfaction.
Although hiring is normally based on regional requirement matching the area
of activity with that of employees nativity yet other elements like
appointment in the department of choice & preference makes the job of HR
manager quite challenging. What the HR manager cannot afford is the
dissatisfied employee who not only disrupts the smooth working him, but
also spreads the negativity to others by his de-motivated attitude.

Morale Boosting:
22
What has long been overlooked is the morale boosting of the employees by
the organizations. Human beings even if satisfied of material wellbeing need
to be appraised & encouraged constantly. Smart banks have realized this
need & have taken steps to keep their work force motivated through proper
encouragement like man of the mouth awards, repeat get-togethers,
conferences, sports events, dinners, company sponsored travel, reunions,
etc. This is the way employees create a feeling of belongingness.

3.0 DEVELOPMENT IN BANKS

The banks must emphasis on human resource development as one of the
critical areas of its operations. It should redraw its training & development
schedules to suit the requirements of the current emerging scenario.
Requisite training should be imparted to various branch level functionaries as
also administrative staff. Besides in-house training the reputed external
agencies should be utilized for human resource development with a view to
updating their knowledge & to keep them abreast of the current banking
scenario for meeting the challenges ahead. The concept of segment
specialization may be resorted to in respect of the personnel selected
therefore. It is now thought expedient to plan & strengthen the squad of
skilled officers in various segments as IT, marketing management, risk
management, risk based supervisors, law, security, etc.The lead bank must
play an effective role in improving the work environment & pursuing staff
welfare measures in the form of whole range of financial assistance with
reference to various loans of sorts.

Human resource skills are other areas of challenge. Because of

modernization & technological advancement rigorous training & man power
planning are required.

In the market scenario characterized by heightened competition, growing

customer needs & technological up gradation, the bank fine tunes its HT
policy to meet its corporate objectives.

New training systems have been developed to impart competencies & a

broad range of skills among the employees to deliver faster & superior
service that can delight the customers. The Industrial Relations in the banks
have been harmonious & cordial.

23
 3.1 TRAINING & DEVELOPMENT
Meaning & Definition:

Training: Organization & individual should develop & progress simultaneously

for their survival & attainment of mutual goals. So every modern
management has to develop the organization through human resource
development. Employee training is the important sub system of human
resource management. Employee training is a specialized function & is one
of the fundamental operative functions for human resources management.

After an employee is selected, placed & introduced he or she must be

provided with training facilities. Training is the act of increasing the
knowledge & skill of an employee for ding a particular job. Dale S. Beach
defines the training as the organized procedure by which people learn
knowledge & skill for a definite purpose. The training system in the banking
industry has a strong structural base.

However, in the past the training activities have been more ritualistic due to
absence of a strategic link between training & human resources
development. Today, it is important that the training function is made an
effective organizational intervention by establishing a clear policy of training
& development within the framework of total human resource development.
The training establishments need to be actively involved in the total training
process starting from the identification of the training needs, evaluation of
training effectiveness & the benefits of training to the end users viz. the
internal & external customers. The need for training & development is
determined by the employees performance deficiency, computed as follows:

Training & Development Need = Standard Performance Actual

Performance.

We can make a distinction among training, education & development.

Training, as was started earlier, refers to the process of imparting specific
skills. Education, on the other hand, is confined to theoretical learning in the
classrooms. Training & Education Differentiated:

TRAINING EDUCATION

APPLICATION ORIENTED THEORITICAL ORIENTED

24
SPECIFIC TASKS CLASSROOM LEARNING

NARROW PERSPECTIVE GENERAL CONCEPTS

JOB EXPERIENCE BROAD PERSPECTIVE

Development:

Give a man a fish, & you give him meal. Teach man to fish, & you give him a
livelihood.

This ancient Chinese proverb seems to describe the underlying rational of all
raining & development programs. No banking organization can long ignore
the training & development needs of its employees without seriously
inhabiting the performance. Even the most careful selection does not
eliminate the needs for training, since people are not molded to
specifications & rarely meet the demands of their jobs adequately.

This HRM function deals with the overall development of the employees.
This includes their professional & well as their personal development. It is a
part of HRM function to identify opportunities for enhancing the skills of the
resources. Promotion is regarded as one of the ways of recognizing
development undertaken by an employee. Development is also largely
dependent on training. Generally people think that training & development
are one & the same, but there are many differences between them.

THE TRAINING PROCESS

Organizational Objectives & Strategies

Assessment of training needs

Establishment of training goals

25
Devising Training Programme

Implementation of Training Programme

Evaluation of Results

3.2 RECRUITMENTs
Meaning and definition:

The human resources are the most important assets of an organization. The
success or failure of an organization is largely dependent on the caliber of
the people working therein. Without positive and creative contributions from
people, organizations cannot progress and prosper. In order to achieve the
goals or the activities of an organization, therefore, they need to recruit
people with requisite skills, qualifications and experience. While doing so,
they have to keep the present as well as future requirements of the
organization in mind. Once the required number and kind of human
resources are determined, the management has to find places where the
required human resources are/will be available and also find means of
attracting them towards the organization before selecting suitable
candidates for jobs.

Recruitment is defined as, A process to discover the sources of man power

to meet the requirements of the staffing schedule and to employ effective
measures for attracting that man power in adequate numbers to facilitate
effective selection of an efficient work force.

Objectives of recruitment

Some of the objectives of recruitment are:

26
1. To attract people with multi-dimensional skills and experiences that suits
the present and future organizational strategies.

2. To induct outsiders with a new perspective to lead the company.

3. To infuse fresh blood at all levels of the organization.

4. To devise methodologies for assessing psychological traits.

Process of Recruitment:

Recruitment refers the process of identifying and attracting job seekers so as

to build a pool of qualifies applicants. This process comprises of five
interrelated stages, viz,

1. Planning

2. Strategy development

3. Searching

4. Evaluation and control

The ideal recruitment process is the one which attracts relatively larger
number of qualified applicants who will survive the screening process and
accept positions with the organization, when offered to approach the ideal
people, individuals responsible for recruitment process must know how many
types of employees are needed, where and how to look for individuals with
appropriate qualifications and interests, what inducements to use for various
types of applicants group, how to distinguish applicants who are unqualified
from those who have a reasonable chance of success, and how to evaluate
their work.

3.3 SELECTION

Definition

Selection is defined as the process of differentiating applicants in order to

identify and hire those with a greater likelihood of success in a job. The
objective of selection decision is basically picking an applicant from a pool of

27
applicants who has the appropriate qualifications and competency to do the
job. The selection procedure cannot be effective until and unless-

1. Requirements of the job to be filled have been clearly specified.

2. Employee specifications (physical, mental, social, behavioral etc) have

been clearly specified.

3. Candidates for screening have been attracted.

Selection process is preferable because:

1. It is easier for applicant as they can send their applications to a single

centralized department/agency.

2. It facilitates contacts with applicants because issues pertaining to

employment can be cleared through one central location.

3. It helps operating managers to concentrate on their operating

responsibilities. This is helpful during peak operating period.

4. It can provide for better selection because hiring is done by specialist

trained in staffing techniques.

5. The applicant is better assured of consideration for a greater variety of

jobs.

6. Hiring cost may be cut because duplication of efforts is minimized.

Selection Process:

The selection process consists of the following steps:

1. Application form: Many companies formulate their own style of

application form depending upon the size and nature of business carried on,
type and level of the job etc. Information is generally required on the
following items in the form: personal background, educational attainments,
work experience references etc.

28
2. Written test : Written test is conducted for the qualified candidates after
they are screened on the basis of application form to measure the candidates
ability towards the job, his aptitude reasoning, knowledge in various
disciplines, English language etc.

3. Preliminary Interview: The next step that tag along the selection
procedure is a preliminary interview wherein the applications are scrutinized
so as to eliminate unqualified applications. Preliminary Interviews are short.
This interview thus provides information about the candidate related to the
job or personal specifications.

4. Selection Test: After passing through the interview the next stage that
applicant has to prove himself on are the selection tests. There are different
types of selection tests for different levels of the organization and that too is
further differentiated within different types of organizations. Some of the
most common and well-known tests that an applicant has to go through are;

a) Aptitude test

b) Personality tests: This is common mostly for the higher levels of

management are given to measure a prospective employees motivation to
function in a particular working environment.

c) Internal test: To measure an individuals activity preferences.

d) Graphology Test: is an art wherein the individuals handwriting is seen

and accordingly his personality traits are derived by the way he writes.

e) Polygraph Test: Are designed to ensure accuracy of the information

given in the applications.

f) Medical Tests: Reveal physical fitness of the candidate.

g) Drug test: Help to ensure the presence of illegal or Performance-

affecting drugs.

1. References and background checks: Many employer request names,

address, and telephone numbers or references for the purpose of verifying
information and, perhaps, gaining additional background information on an
applicant.

29
2. Selection Decision: After collecting data from all the preceding steps,
this is the most crucial step in the entire selection process. The main
difference between the preceding stages and this is that former is used to
short list the number of candidates and later one is to make a final decision
from the pool of individuals who pass the tests, interviews and reference
checks. The view of line manager will be generally considered in the final
selection because it is he/she who is responsible for the performance of the
new employee. The HR manager plays a crucial role in the final decision.

3. Physical Examination: After the selection decision and before the job
offer is made, the candidate is required to undergo a physical fitness test.
The result of the medical fitness test is recorded in a statement and is
preserved in the personal records. The main objectives of this test are as
follows:

1. To detect if the individual carries any infectious diseases.

2. To determine whether an applicant is physically fit to perform the work.

3. It helps to determine if there are any physical capabilities which

differentiate successful and less successful employees.

4. Medical checkup protects applicants with health defects from undertaking

work that could be detrimental to them or might otherwise endanger the
employers property.

5. Last, but not the least such examination will protect the employer from
workers compensation claims that are not valid because the injuries or
illness was present when the employee was hired.

1. Job offer: The next step is selection process is Job offer for those
applicants who had passed the previous stage. Job offer is made through a
letter of appointment. Such a letter usually contains the date by which the
appointee must report on duty.

Appointee must be given a reasonable time for reporting because it may be

quite possible that the appointee is employed in some other company or
must be residing in some other city and for such other reasons. Company
may also want the appointee to delay in joining the job because the job may
require undergoing some training program. Decency demands that rejected
applicants must be informed about their non-selection. These applicants
data must be used for future references.

30
2. Contract of employment: After the job offer is made and the candidates
accept the offer, certain documents need to be executed by the employer
and the candidate. One such document is Attestation form. This form
contains vital details about the candidate, which are authenticated and
attested by him/her, which could be used for future reference. Another
document is contract of employment. This document contains the terms and
conditions of employment like designation, perks, term of job and so on. The
information written in the contract may vary according to the level of the job.
The main drawback of the contract is that it is difficult to enforce them.

3. Concluding the selection process: The selection process will not end
with executing the employment contract. The step is reassuring the
candidates who have not been selected. Such candidates must be told that
they were not selected, not because of any serious deficiencies in their
personalities, but because their profiles did not match the requirements of
the organization.

4. Evaluation of selection process: The broad test if the effectiveness of

the selection process is the quality of the personnel is hired. An organization
must have competent and committed - 49 -

personnel. The selection process, if properly done, will ensure availability of

such employees. Audit must be conducted by the people who work
independent of the HR department.

New methods of selection:

1.360 degree selection or participative selection:

Normally supervisors administer the selection test and interview. They judge
the fit between the job and the candidate. But the employee skills,
knowledge and performance affect not only superiors but also subordinates
and the employees of the same level. Hence the organization started
involving the subordinates and the employees of the same level in
administrating the employment tests and interviews. This type of selection
program is called 360 degree program.

2. Employee leasing:

The client company leases employees from a third party, not on temporary
basis but on a full time basis and for long help. An interesting feature is that
the client company need not perform personnel activities such as hiring
compensation or record keeping. Employees working elsewhere are leased.

31
They are not directly employed by the company where they are working.
Employees not recruited by one client are sent to another.

3. Selection by invitation:

Management observes the performance of the key executives of

competitors. If the performance of the key executives is excellent or the key
executives are the change agents, the management invites them to join the
organization by offering attractive salary and benefits. Thus, the significant
performance of the executives forms basis for selecting them by invitation.

4.0 HRM ISSUES IN PUBLIC SECTOR BANKS

Background:

Among the 12 services classified under the services definition of GATS,

banking is one of the prominent one. Banking industry in India is one of the
most diversified and heterogeneous in terms of ownership; co-existence of
private and public sector is one of the best examples of peaceful co-
existence of two entirely different cultural systems in the services sector.
Coupled with that, the country has a large number of foreign banks with
altogether a different work culture and climate. The simultaneous existence
of so many types of work ethos, systems and processes are truly symbolic of
the great Indian unity amongst diversity. Notwithstanding the fact that lots of
efforts have gone into bringing technological & process congruence, it is
really unfortunate that very little has been done on the human resource front
in this regard.

Unfortunately, public sector banking has been the biggest victim, being
governed by outdated & prohibitive sets of government guidelines. The
Management often complains lack of adequate power and flexibility; the
Trade Unions often look at any directional change with a sense of suspicion;
majority of the workforce remains in dream-world of the pre-liberalized
scenario of work security. The result is that public sector banks are least
concerned about human resource management and reforms thereto and
consequently remain under-productive.

Though renaming of Personnel departments to HR departments took place

quite few years ago in some of the public sector banks, the work processes &
culture in many of them till today remain outdated and are not in a position
to meet changing expectations of the human talent within.

32
The scope of this is limited to address some of the fundamental issues in
areas of human resource management front in the public sector banking in
India.

4.1 Towards HRM?: new practices

a) Industrial Relations

A number of initiatives were introduced to re-shape the Union more in line

with the Banks view of its role. Firstly, the union role at Head Office was
diminished by reducing the number of Bank funded union represenatatives.
Secondly, the status of the Negotiating Committee was amended so as to
ensure it dealt only with major items such as pay negotiations, while minor
items were to be dealt with by the grievance procedure, and it was agreed
that much of the day to day relationship with the union would be conducted
by less senior personnel. Thirdly, and this also reflected the new
management style, responsibility for personnel issues was devolved to line
managers who would be encouraged to have regular local discussions with
union representatives as part of the consultative process and this would also
prevent them being by-passed with issues going directly to Head Office. A
reduced union role was also apparent in the new remuneration policy, (see
below).

Nevertheless, while significant change could be achieved this is not to say

that the union could simply be steamrollered. Partly, this related to the CWS
who while not being involved in Bank personnel policy on day to day
business, did exert pressure to ensure agreements which linked the Bank to
the rest of the movement were not broken. Perhaps even more importantly,
the scope and degree of change which the Bank was attempting to achieve
was deemed to require union co-operation rather than sullen acquiescence
or confrontation.

However, the events described do show how the relationship was being
reshaped, albeit in an incremental fashion. Top managers no longer had to
belong to the union; other managers had a separate bargaining unit; the
process of job evaluation confined the union largely to discussing issues
relating to clerical workers. By devolving responsibility to the line, issues
were removed from the union head office function to the shopfloor where the
unions were very weak. Team briefings (see below) were partially designed to
cut out the union monopoly on information. Furthermore, management
prerogative was being re-asserted and on issues like job security the union
interpretation over agreements was challenged.

33
One Personnel Manager admitted that three quarters of the communication
was concerned with passing information, rather than consultation, but
maintained [paradoxically] that there was the full involvement of the union.
Of course the paradox could be explained by the Banks perception of the
legitimate role of the union. The same Personnel Manager admitted that by-
passing took place on a daily basis. It is of course not a new discovery that
unions have little detailed information as to long term strategy, and a limited
influence in strategic decision making. The re-shaping of the union was also
facilitated by the collapse of national bargaining which removed a barrier to
enterprise unionism, to which the banks are by nature of their closed culture,
quite susceptible.

However, the union did not turn out to be a major obstacle to change. On
some issues it proved difficult to persuade representatives, as for instance
over the closed shop and job security agreements, but neither of these were
major obstacles to the new Human Resource policies. We saw in the previous
section, concern regarding the cost-resource dichotomy, the attempt to
achieve major change on both sides of the equation. In practice these
difficulties did not prove insurmountable. The communications strategy
seemed to do the trick of persuading staff of the logic and inevitability of
management action. Furthermore, at the time of the research there was little
evidence of the fear factor which characterises declining industries. The
Bank was in an industry which had high profits, growth and relatively good
pay. Only on an issue such as job security as arose occasionally, was there
strong enough feeling for the union to bring to bear on management.
Undoubtedly also there was a degree of attitudinal structuring (Walton and
McKersie 1965) with regard to the union.

b) Cost Control

Attention focused on the reduction of unit labour costs. Unit labour costs can
be reduced in two main ways: firstly, an increase in labour productivity,
secondly, a reduction in total labour costs. The first method could be
achieved by measures like better recruitment and training, a new payment
system, an improved organisational structure, a different management style
and culture. However, these are essentially long-term measures and the
more obvious and immediately effective method to reduce unit costs is
simply reducing the size of the workforce.

It was appreciated that the squeeze on labour costs would lead to problems
with the union and possible detrimental effects on staff morale, and hence as

34
far as possible the reduction in staff numbers would be achieved in an
unobtrusive manner. Natural wastage was one method, as the Bank had a
turnover of some 500 people per year. Early retirement was another
relatively non-contentious option. However, if the targets could not be
achieved by these measures, the introduction of a new disciplinary code
would provide the Bank with another means to reduce staff numbers by
targeting ineffective performers. The fact that this was being considered was
itself indicative of a new more performance-orientated management style.
The case of the Bank bears out the prediction of Hunt that the management
of exit would be an increasingly important function for the personnel
function (1984, pI7). The Bank was successful in reducing its numbers and
hence costs. This was to be the first step of a longer term examination of
cost structures with work continuing on removing duplication, moving staff
out of the branches into the new administration centres and introducing a
model branch exercise to ensure full efficiency.

However, some of the manoeuverings of the Bank came under fire from the
Union. The major source of contention was the status and interpretation of
the 1983 Job Security Agreement. The Union regarded the issues as under
the control of the Staffing Review Committee, which had been established
under the Job Security Agreement. However, management argued that this
related purely to redundancy rather than merely reorganisation and
redeployment, and it was not the intention of the Bank to force people into
redundancy. It became apparent that the managers concerned, because they
were not party to the original agreement did not feel themselves bound by it;
indeed one manager threatened to give notice to cancel the agreement.

c) Remuneration - Relating Pay to Performance?

A comprehensive review of policy and practice was also being undertaken in

the remuneration area. There were a number of aims: firstly, to reflect
organisational change and remove outdated remuneration practices,
secondly, to safeguard the Bank from equal value claims and grading issues;
thirdly, to integrate the Banks salary structure into a single continuous
evaluated structure to ensure stability and cost control; and finally to move
away from automatic increases, award key objectives and place a greater
emphasis on line management contributions rather than the central
functions.

Hence there were a number of processes that took place in the Bank. There
was the job evaluation exercise for managers and appointed staff upon which

35
trade unions were consulted, and the clerical and technical scheme where
the unions were involved in the design of the scheme, up to the point where
agreement was reached on the format of the grading structure. With each
job in every branch being highly individual, the task was a long one.

The remuneration review took place separately from the pay round already
discussed; this enabled the Bank to set the scene for change and maintain
the initiative. The Bank insisted upon a separate bargaining unit for
managers and then extended this to the whole management group including
assistant managers and branch administrators in order to keep the whole
management team together. By mid 1988 senior managers had been
removed altogether from the negotiating sphere. The Bank also insisted on
freezing salaries for staff whose jobs fell above the grade boundaries, and no
increases of salary for those operating below an acceptable performance
level. It was only then that the Bank would enter into negotiation on the
composition of the scheme including salary ranges to apply to each grade.
The new structures were introduced in 1989.

Profit sharing was also introduced in this period. As one senior manager said
about staff:

if that doesnt crystallise their minds and make things easier for them to see
how to help customers, I dont know what will!

The third leg of the new remuneration policy was getting staff to accept a
pay what the Bank can afford principle in annual negotiations. The Human
Resources Committee agreed that it was necessary to show that the Bank
had to pay less than other clearing banks because of the difference in its
profitability along with the fact that possibly the skills in the fields in which it
operated were not required to be the same as the others.

Furthermore, the Bank stressed that if a reasonable settlement was not

reached, head count reduction might be necessary. The eventual settlement
of 6% in 1988 was seen as a clear sign of the success of its new HRM policy.
Firstly, the settlement was reached speedily. Secondly, the Banks new open
pro-active communications policy had been seen to deliver the goods. The
day after the settlement a terminal message was sent across the network
and faxed to London and Skelmersdale (the major employing centres). The
Personnel newsletter was hand delivered to managers in Manchester and
staff were consequently briefed within 24 hours, and importantly, before the
union had been able to give its message. Hence, management had taken the
initiative. Thirdly, there seemed to be evidence that something of the

36
argument that the Bank had been trying to put across concerning profit/head
and the dangers of being priced out of the market had been taken and there
was positive feedback from the staff, with regard to the early receipt of
information.

d) Changing Culture

There was little detailed consideration in the HRM strategy papers of issues
like career patterns, recruitment, training etc. This was related partly to little
immediate attention being required, and secondly, to uncertainty as to what
was required. Hence it was not until after the HRM strategy had been
adopted and was being implemented that attention was given to these
issues.

In recent years, there had been an increasing belief that the development of
human resources is no longer a luxury to be achieved when other objectives
have been met, but an essential part of the management of strategic
change. Hence, the development of human resources was worthy of a higher
priority. This was reflected in the development of manpower planning and a
greater emphasis on management development and training in a systematic
and integrated manner. The Bank looked to become more pro-active in this
area rather than merely respond to problems. However, much depended on a
settled business strategy for the Bank and each division, so as to identify
staffing requirements. Hence a manpower plan took time to develop given
the state of flux in the Bank. One area which needed examining was
recruitment where it was felt that there was a need to have a tiered policy. In
addition, the qualities and personalities of the staff recruited needed to be
examined. There was a move to look firstly to older, non mobile married
women as workhorses and secondly to look for more customer relations
skills and sales ability.

These changes were reflected in the training function and management

developnient programmes. There was a trend in the former towards
programmes stressing social skills and customer service training and sales
and marketing training, all designed to educate staff in the new sales culture.
Previously, the training emphasis had been on technical training and
supervisory skills for clerical appointed and junior management staff; the
training also reflected a trend in banking to train for greater productivity
rather than preparation for future jobs (Mosson, 1986).

A new communications strategy was also part of the attempt to change

culture. A paper by the Human Resources Manager emphasised that some of

37
the measures outlined may be unpalatable (particularly head-count
reduction and relocation) and hence there needed to be a much more pro-
active communications strategy. It was important that this was in place
before the 1988 pay round and before many new initiatives were undertaken.
The Human Resources Manager made this clear. If the Bank was to achieve
their Human Resource Strategy goals,

It is essential that we communicate directly with our staff to ensure they are
made aware by the Bank of our position and intentions, and not by any other
source. This is a major employee relations objective for achievement by the
Bank to enable management to communicate directly the rationale for
change, thus ensuring that it is pro-active in managing the business.

We must develop mechanisms which ensure that communications are

simple, consistent and effective. The Bank must communicate to staff on a
regular basis, stating both good and bad news. Inconsistent or sporadic
communications are more harmful than no communications and must be
avoided at all costs. The Bank must not leave communications to BIFU. The
Unions role is to negotiate with the Bank on behalf of its members, not to
act as the channel for communication. (Employee Relations Strategy, 1987).

The old system was largely based on a number of newsletters, and an

internal Bank magazine. It was largely left to the discretion of the managers,
some of whom explained the contents of the newsletters, others merely
leaving staff to read it on the noticeboard. There were also managers
meetings but information disseminated here was not necessarily trickled
down.

The Bank introduced a system of team briefings into the existing structure of
employee involvement based on meetings, newspapers and publications.
Team briefings were designed to facilitate a consistent, continuous flow of
information (including feedback), so as to avoid the union or even the
grapevine being the main source of information. The main aim of such
involvement appeared to comprise of persuading staff to accept the benefits
of change expressed in terms of market logic. Hence it was an endorsement
of management policies which is sought, not some form of co-determination.
(Roberts and Wilkinson, 1991).

However, there were a number of problems with implementation. Branch

managers showed some cynicism as to the alleged benefits of team briefing
and many regarded it as yet another flavour of the month dreamed up by
Personnel. Some failed to see briefing in terms of ensuring that the union

38
would not be the main vehicle of communication, and that he who
communicates leads. Thus the Personnel Department felt it was important
that the benefits accruing to staff (including those negotiated with the union)
should be announced by managers. However, in a number of cases,
managers were content to let the office (union) representative handle it,
perhaps in itself a reflection of branch managers unitary perception of
employment and/or lack of awareness of personnel considerations. Secondly,
there were practical problems relating to how briefings were to be
transmitted from head office to branches; thirdly, the mechanism for
feedback was regarded as being inadequate and hence team briefings were
seen as merely representing the party line.

e) Changing Role of Personnel and Line Managers

There were a number of methods by which the Personnel Department

attempted to devolve responsibility. We have already noted that team
briefings were thought to reinforce the line role as the chief disseminator of
information. Secondly, the new disciplinary code put authority and
accountability in the hands of the line (although initially Personnel would
take a slightly more active advisory role until the system was bedded in).
Thirdly, managers were given accountability within their budget to replace
staff who left rather than leaving it to the Personnel Department to provide
the skilled replacements. As evidence of a more integrated human resource
approach such policies were reinforced by a new performance appraisal
system which took greater account of human resources. Previously, financial
targets were paramount and in the words of the training manager:

If they met financial targets, managers werent criticised even if the staff
were close to mutiny

A series of training courses on human resource management issues were

designed to reinforce this priority.

However, many of the initiatives met with apathy, cynicism or obstruction.

Changes in the disciplinary code were regarded as cosmetic: as one manager
said, Personnel cant bring itself to let hold of the reins.

In so far as staff reflect the values of top management, this was a major
cause for concern (Brewster et al , 1981) One of the key complaints to come
out of the courses being run was the absence of top management. More
direct difficulties also became apparent. One of the themes in the human
resource management courses was reflective of the new management style.

39
This was designed to discuss the relationship of staff with their managers,
and in particular the need for staff to question their boss in an informal and
constructive manner. The course was aptly entitled How to Manage Your
Boss. However, it became apparent that it was unfortunate that managers
had not taken a course on how to accept constructive criticism!

5.0 Inaugural address by Dr.K.C.Chakrabarty,

Deputy Governor of the Reserve Bank of India, at
the HR Conference of Public Sector Banks, Mumbai,
1 June 2012.

Shri Alok Misra, CMD, Bank of India, Dr. K. Ramakrishnan, Chief Executive,
Indian Banks Association, CMDs and EDs of Public Sector Banks, fellow
bankers, external consultants, members of the press and distinguished
guests. I thank you for inviting me to this conference.

I am happy to note that a conference focusing exclusively on HR issues is

being organized by Public Sector Banks. I understand that the conference is
being organized at the instance of the Government of India, who are the
promoters/ owners of the Public Sector Banks. It is good to see the
promoters/ owners taking a keen interest in the human resource issues of the
promoted companies. Of late, a general trend of promoters/ owners taking
keen interest in normal routine operations of banks is being observed, which
needs careful analysis.

Let us have a look. Why are the promoters/owners being made to take a
keen interest in your routine affairs? Efficient and effective HR systems are
the key here. In my opinion, this may be due to something lacking in the
management capacity of the banks. Hence, we need to upgrade our HR
capacity development process to enhance management capacity of banks,
to avoid such needs on a recurring basis. If the banks HR practices are
augmented and optimized, may be through such conferences, there will be
an overall improvement in efficient management of banks, which would
preempt the need for the promoter/ owner getting involved in normal issues.
I would, therefore, like to congratulate the Department of Financial Services,
Government of India for prompting banks to take this long pending initiative.

40
I would structure my talk today into three broad segments where I would be
discussing the importance of human resource management for banks, some
of the key challenges facing HR managers in Public Sector Banks, including
probable solutions, and why now is the right time to focus on HR issues.

Why human resource management is important for Banks

Human Resource Management is important for banks because banking is a

service industry. Management of people and management of risk are two key
challenges facing banks. How you manage the people and how you manage
the risks determines your success in the banking business. Efficient risk
management may not be possible without efficient and skilled manpower.
Banking has been and will always be a "People Business". Though pricing is
important, there may be other valid reasons why people select and stay with
a particular bank. Banks must try to distinguish themselves by creating their
own niches or images, especially in transparent situations with a high level of
competitiveness. In coming times, the very survival of the banks would
depend on customer satisfaction. Those who do not meet the customer
expectations will find survival difficult. Banks must articulate and emphasize
the core values to attract and retain certain customer segments. Values such
as "sound", "reliable", "innovative", "international", "close", "socially
responsible", "Indian", etc. need to be emphasized through concrete actions
on the ground and it would be the banks human resource that would deliver
this.

It is a common complaint among bank executives that skilled manpower is

in short supply. No two arguments on this, HR resources are becoming scarce
both in quality and quantity. And, it is quite elementary that any resource
that is in short supply needs to be properly managed for the benefit of
society and, therefore, you need to pay attention to the entire Human
Resource Management process. What do I mean when I say this? You need to

41
manage the people and for this you need to discriminate between the
people, I mean positive discrimination. The entire spectrum of HR practice
requires revolutionary changes if the banks have to survive. Managing the
people is the key challenge. And, in my opinion, discrimination is the key
word when dealing with people. You will notice that I will use this word very
frequently during my discussion.

How to Manage Human Resources

I would like to highlight the following key challenges faced in HR

management in any organization and which is all the more relevant for public
sector banks today:

(a) Planning

(b) Acquiring the right people

(c) Retaining/ Developing the people

(d) Managing people separation / exit

(e) I would attempt at sharing my thoughts on each of the above areas:

(a) Planning

As the economy grows at a steady rate of around 78%, incomes rise and
demographic dividends start accruing, the Banking industry is expected to
take a quantum leap forward. But this growth will need a large number of
people and considering that there are retirements in lakhs, a defining
moment is being presented before the Nationalized Banks to transform. Are
the banks ready to handle the new bunch of employees who will be culturally
so different from their predecessors of the post nationalization era? It all
begins with having a manpower plan. How many banks can claim to have a
proper manpower plan that captures the type of people it requires, the level
at which they are required, clearly defined roles for everyone, etc. Manpower
plans should follow a lifecycle approach, that is, from the time of recruitment
of an employee to his retirement. Further, this needs to be integrated with
the Business Plan and strategy of the bank. Are we having a Business
Strategy or Business Plan needs to be addressed first. While planning your
people requirement it is very important for you to develop your employer
brand, that is, your reputation as an employer to attract, engage and retain
talented candidates and employees. Banks will have to plan for the following:

A steady, carefully calibrated recruitment programme,

42
 As rapid technological changes transform business continuous skill up-
gradation.

A new generation of the workforce will be working alongside an older

generation as a team. Banking, in my opinion is a team work and this new
situation will require cultural adjustments and therefore, change
management.

(b) Acquiring the right people:

What kind of talent is required by the banks? Discrimination is the key. Do

we need good people? Or do we need suitable people? I think we require
good but suitable people. Is the mad rush to top campuses justified? Will the
people recruited from top management institutes understand the Financial
Inclusion drive? Will these people have empathy towards poorest of the
poor? I have often heard bank heads talking about the challenge of finding
people keen to work in rural areas. Does it not indicate that there is
something amiss in the way we recruit people? Is it not better to recruit
people from smaller cities?

How do we get to acquiring people with the right kind of talent?

Unfortunately, it is the same limited talent pool that will be targeted by
Banks, Financial Institutions, Insurance, Telecom and other industries which
are on fast growth track and in need of talented manpower. While my friends
in the Banking Industry are busy developing on-line application forms and
online tests, we need to probably question if we are even targeting the
right kind of talent pool. I would like to have a study on how many people in
remote villages, at the taluka / tehsil level, appear for the recruitment tests
that are conducted. Because, these might be the people who could be best
suited to drive our financial inclusion agenda. While we are busy testing the
people for problem solving skills on paper, Professor Debashis Chatterjee,
Director of IIM Kozhikode says that these do not necessarily mean problem
solving skills on the ground. Our recruitment tests do not focus on testing the
psychological abilities of candidates to ensure that only the ones with right
attitude towards the job are selected. This is why we often end up with
people having brilliant minds but incapable of actually delivering on the
tasks assigned.

Banks need to seriously look at lateral recruitment as an option to induct

specialists at various levels with specific skill sets and experience pool. While
we have often heard of people leaving banks to join finance, legal,

43
accounting firms, etc. seldom have we heard of people leaving these
professions to join banks. This, I think, needs to change.

The right people will come only if they are paid competitive salaries.
However, too much pay also involves moral hazard issues and invites
adverse attention of external stakeholders. As we will see later, the salary
structure in the PSBs appears to be distorted. There has to be discrimination
of salaries of people.

(c) Retaining/ Developing the People:

We may be able to get the most suited people for our work but then the
challenge is to retain these people and to develop them. There are several
dimensions to this issue such as training/ re-skilling of employees,
performance measurement, promotion policy, transfer policy, talent
management, communication, etc. I would like to briefly dwell on some of
these issues:

Training / Re-skilling:

The nature of business requires massive re-skilling of the existing workforce

and continuous skill up-gradation. Khandelwal Committee has recommended
major up-gradation of in-house training facilities of banks. I tend to have a
different view. With a lot of service providers in the market, should we not
majorly utilize their services? Inhouse training facilities should be used for
courseware development on IT / electronic platforms. The courseware should
facilitate skill development. Again, there will have to be discrimination in the
training that each employee has to be provided based on his /her
requirements and the need of the institution, not as a routine, not as a
measure of reward alone.

It is also important here to understand why people work? In the olden times,
in agrarian societies, people worked for livelihood. Times changed and came
the industrial age. Livelihood was not the only reason of working. As Henry
Ford famously said Why is it every time I ask for a pair of hands, they come
with a brain attached? The people then understood that apart from
livelihood, there is something else required. This something else was termed
Job Satisfaction. We have moved on further and are now in the Knowledge
Age and in this age, in my opinion, people work for Empowerment more
than anything else. I will touch upon other requirements of managing in
Knowledge Age a bit later.

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 The best development of people is through empowerment. People at all
levels in the organization must feel empowered. For this, we need to cut
layers of bureaucracy that we have created over the years and adopt an
effective way to delegate. We have made some beginning in this direction in
the RBI.

Performance Management:

This is the most important area of Human Resource Management, the

foundation of which is discrimination. Unfortunately, current systems are
unable to discriminate and differentiate between performers and non-
performers. In fact, it is impossible to identify who are the performers and
who are the non-performers. I dont know if any one of you has even
attempted to identify who are, say, the bottom 25% people in your
organization. In any organization typically there would be some 1015% of
people who would be the high performers. HR managers often focus on this
segment and try to cater to their needs first. Instead, I feel that focus should
be on the remaining 85% as any improvement in their performance would
have a significant impact on the organizations performance. With all the
efforts a student who always scores above 90% marks in his class, will
benefit by only a few percentage. The one who scores only 45%, however,
has the potential of doubling his marks.

The result of not having a proper performance management system are

disastrous. We are all having to deal with the problem of people who are
promotable but not postable and people who are postable but not
getting promoted. This is because we have failed to discriminate between
performers and non-performers. HR systems may have failed to appreciate
performers. In fact, we have not even tried to define what performance is in
a given job. Despite this, what is the kind of time we are spending on
Performance Management? What is the kind of attention that the Boards,
CMDs and EDs give to this? To begin with, job roles and job descriptions need
to undergo a major overhaul. In fact, even at the level of CMDs/ EDs there is
a need for complete job description and clear delineation of job roles of
CMDs and EDs. We need to define performance appropriately in the
context of banking services today for all levels of functionaries.

A fair, transparent and objective mechanism for performance management is

a must for all banks because an effective Performance Management System
is the key to talent management and succession planning. In RBI we are
shortly going to introduce a new Performance Management System that will

45
work on goal setting, potential appraisal of performers and developing a
talent pipeline.

We are also going to face major challenges on the Talent Management front.
In coming times, the work force will get complex and there will be a need to
juggle a wide variety of people with varied needs and preferences, resulting
in an array of relationships between the organization and those who work for
it. Peter Drucker had, more than a decade ago, expressed the need for what
he called non-traditional work relations: flexible schedules, contract
arrangements, virtual teams, etc.

Managing in the knowledge era:

We are living in the knowledge age where our existing management theories,
which are oriented towards being more productive in the industrial society
and the ethics around it, will need to undergo a 360 degree change. As I
mentioned earlier, the key driver that motivates people in the knowledge era
is not livelihood or job satisfaction but is the feeling of empowerment. When
we talk of talent management today, it is about managing knowledge
workers and there are some prerequisites for it:

They cannot be treated as subordinates, but as associates

They cannot be managed, but led

They will work flexi-time and flexi-place but would need a home base

Above all, they cannot be purchased or bribed, they have to be

empowered. The new generation, in the age of knowledge workers, is going
to be different. We need to rewrite our employment contracts. There should
be a variety of people working with us on variety of options part time /
contractual / regular regular in regular job / regular on flexihours, etc.

A Performance Management System should throw up future leaders. This

sounds very simple but we must know what we expect from these leaders.
What is expected of a leader?

A leader is expected to do three things: (i) Plan (the tasks)

(ii) Inspire (people) Inspire for aspiring Inspire for perspiring

And;

(iii) Deliver (on results). A leader is no leader if he / she cannot deliver.

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Systems/ Processes:

The hallmark of any effective HR system/ process is that it should be

objective and transparent. These traits are essential for the manpower to
repose trust in the organizations systems/ processes. No HR function can be
effective if it does not enjoy the trust and confidence of its constituents.

Two key stakeholders in the HR management process are Board/ Senior

Management and Unions. How much time do Board members spend on HR
related issues? Perhaps,not enough. Structurally, it is important that Board/
senior management is actively involved in HR matters involving all its
manifestations. Organized employee unions are an important part of the
democratic process and form an effective channel for communicating with
employees down the line. It is important to involve them in the HR process
without allowing them to have an overbearing influence.

Communication:

Communication with employees is a vital part of the HR process as it helps

enhance transparency in HR practices, thereby imparting credibility to them.
When dealing with human beings, it is important to be objective, transparent
and non-discriminatory and this must be effectively communicated. The
employee must say that the management has all the above qualities. The
Board must spend time on devising ways and means for this communication
lay down appropriate structures for the purpose. All forms of modern
communication channels including intranet, corporate e mails, etc. can be
adopted to reach out to employees. However, despite these developments,
the traditional channel of communicating through unions continues to be
relevant as employees attribute greater credibility and reliability to
messages received through their unions. The Banks have a clear cut
advantage in this respect they already have a participative process.
Representatives of the employees sit on the Board itself and hence, it
requires better practice of participative management in the real sense of the
term.

(d) Managing people separation / exit:

Except maybe a last few years, so far most of the people leaving us were
due to retirements. Things will change, unless we are doing all the other
things that I spoke out earlier, properly, people will also leave us for other
opportunities and believe me, there are going to be plenty of them not
only from competitor banks and financial sector but also from outside the

47
financial sector. We need to introduce a system of exit interviews to
determine why people are leaving our organization whether there are any
inherent system/ structure failures? Have we not been able to empower the
people enough? We should not try to block their exit but, as a part of the
manpower planning process, should be able to identify substitutes who can
step in and ensure non-disruption of important functions, in the event of the
exit of a key person. The place of an experienced person could always be
filled in through lateral recruitment of a person with matching skills/
experience.

Is it the right time?

Definitely yes. Believe me, the time is now! In fact, we are already behind
the clock. During the 2010 to 2020 decade, Nationalized Banks are at the
cusp of a unique opportunity with people retiring in lakhs making it a
retirement decade, it is the best time to transform the HR processes and
implement some new age concepts. This kind of opportunity to transform HR
processes is once-in-a-lifetime window which, if properly utilized, could help
our banks take giant strides. On the other hand, those who miss the bus
would lag behind. The kind of HR changes required are a tremendous
challenge and opportunity at the same time. We need some fresh ideas to
make the banks future ready. This Conference would, I believe, throw up
many such ideas.

In the beginning, I alluded to the promoters Government taking a keen

interest in the Banks. Why has this situation arisen? Let me present some
data on staff expenses of various bank groups:

Table: Staff expenses (Payments to and Provisions for employees) of

Public Sector Banks versus Private Sector Banks

Year Public Sector Banks Private Sector Banks

Staff Cost per Staff Cost per

employee employee

1998-99 8,83,648 1,67,940 60,777 1,69,307

2002-03 7,57,251 2,70,426 59,374 3,54,532

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2003-04 7,52,627 2,97,903 81,120 3,17,308

2006-07 7,28,878 3,81,449 1,37,284 3,83,439

2007-08 7,15,408 4,00,611 1,58,823 4,47,920

2008-09 7,31,524 4,72,493 1,76,339 4,83,501

2009-10 7,39,646 5,55,874 1,82,520 5,16,491

2010-11 7,57,535 7,15,914 2,18,679 5,63,154

The above table suggests that Public Sector Banks are no longer the major
employment provider in the financial market and also that their per
employee expenses have gone above that of Private Sector Banks. The staff
strength of Public Sector Banks have gone down between 199899 and
201011 but that of Private Sector Banks have gone up significantly. The per
employee expenses of Public Sector Banks have gone above that of Private
Sector Banks and today, is more than 150% higher than that of Private
Sector Banks. This is despite the fact that pension expenses of PSU Banks
are not fully reflected in their staff expenses. One thing is, thus, loud and
clear the competitive advantage in terms of staff costs that we always
thought the Public Sector Banks had is no longer there. The absence of the
cost advantage coupled with the problem of lower productivity underscore
the critical need for urgent HR transformation in Public Sector Banks. Hence,
time has come for us to pay attention to this critical aspect on which our
ability to compete finally hinges on. We can no longer postpone this issue

5.1 AN EXTRACT FROM A LECTURE

ORGANIZED BY THE ACADEMY OF BANKING
AND FINANCE
Following is an extract from a lecture given by Milos Tucakovic who
is the Head of the Personnel and Training Division at the Hyatt
Regency Hotel in Belgrade. This lecture was held in NBS and it was
organized by the Academy of Banking and Finance.

49
Milos Tucakovic, the Head of the Personnel and Training Division at the Hyatt
Regency Hotel in Belgrade, was the guest lecturer at the round table of HR
managers in the banking sector, held in NBS and organized by Academy of
Banking and Finance. Mr. Tucakovic presented his experience in managing
human resources in the 5-star hotel, 51 percent owned by the famous
Pritzker family and 49 percent owned by domestic shareholders, to HR
division managers from Serbias commercial banks and the central bank.
Adaptation of world standards to domestic conditions and local culture, main
corporate culture values and personnel quality standards required in this
prestigious hotel were only some of the issues addressed by Milos Tucakovic
in his lecture.

Human resources management, presented from the viewpoint of top-level

international hotel industry, raised some new questions for banking sectors
HR division managers who displayed interest in evaluating other managers
experiences and possibly applying them in their future work. HR Manager,
Milos Tucakovic, pointed out that the specific advantage of his hotels
forming part of a world chain of luxury hotels provides an opportunity for
exchanging first-rate trainers and the simple option of professional training
abroad. The management of the Hyatt Regency Belgrade Hotel tends to
recruit its management personnel from the ranks of its own employees
whose characteristics, work, performance and professional training
demonstrate that they are ready to accept new challenges. Aside from
divisional training, intended for facilitating the performance of specific tasks,
all employees attend a compulsory training programme in the course of
which they become acquainted with the company and the hotel, hygiene and
general work safety standards, telephone communication skills, provision of
first-rate services, complaint resolution, selling skills.

Since the Hyatt Regency Belgrade was one of the first companies in this
region to invest in personnel selection and training in the modern sense, it
was interesting to learn about the characteristics required and developed in
its personnel.

Main characteristics required in all employees are energy, adaptability,

communicativeness, commitment to clients/accuracy in work, honesty, team
spirit, collegiality and punctuality. In addition to the foregoing, managers are
required to have the following skills: ability to implement changes, to make
decisions, to plan and view things in the long-term, to motivate others,
develop their staff, organize work, be acquainted with the market and the

50
business environment, have the ability to solve problems and be acquainted
with the company procedures, Milos Tucakovic pointed out.

The management and the owners of the Hyatt Regency Belgrade Hotel
believe that training is a type of employee benefit; hence, in addition to
various forms of training, the hotel also offers Hyattrack, the program of
independent development of managers requiring the candidate to exercise
self-initiative.

The high level of services and business practice for which the Hyatt chain of
hotels is recognizable worldwide is also maintained by means of the
Mystery Guest Audit institution, which practically means the unannounced
visit by a phantom guest, as this visitor is called in the Hyatt. This guest,
whose identity and time of coming is not known, is a person from the
company who conducts an unannounced check of compliance with
standards.

It should also be noted that commendations by guests are taken into account
when evaluating employees, but with a view to providing an equal
opportunity for all employees, there are always two employee recognition
lists: one encompassing front-office personnel, who are in direct contact with
guests, and the other one including back-office personnel whose work is also
crucial for the proper functioning of the system.

51
5.2 The First Roundtable of Commercial
Banks HR Managers

The newly founded Academy of Banking and Finance has organized the first
in the series of planned round tables for HR managers working in the banking
industry. The meeting took place in the NBS Villa in Topcider on 16
September with representatives of 28 commercial banks. The HR Managers
were welcomed by Mr. Wolfgang Rautenberg, Senior Adviser in the NBS, and
Aleksandara Lujic and Jasmina Milosevic from the NBS. Mr. Rautenberg said
that the Academy, as a joint venture of the National Bank, commercial banks
and the Association of Serbian Banks, would particularly assist in creating a
joint strategy for the development of human resources in this field, and
would also facilitate daily work for the managers taking care of the
employees in the banking and finance industry.

Mr. Rautenberg explained that the training to be offered to commercial banks

would primarily insist on the English language as the language of banking,
on adequate computer literacy, communication skills and specific banking
knowledge. The topics to be focused on within banking education would
comprise basics of international banking and finance, interdependencies
between the central bank and commercial banks, relations with international
institutions and modern banking systems. In addition, special attention would

52
be devoted to retail, corporate and investment banking, as well as
mortgages and insurance business.

Besides satisfaction of eventually meeting their colleagues from other banks,

HR managers also expressed interest in exchange of experience, in the
manner of organizing human resources and in education of employees in the
banking industry. They also stressed the need to find out more about
evaluating staff performance, efforts and availabilities and about motivation
and stimulation systems in business environment. The other topics of their
concern included the most reliable headhunting criteria, i.e. choice of new
professionals for the bank, but also the most desirable ways of parting with
employees who failed to meet the expectations or had to be made
redundant. The need for general managers to increase their awareness of
the significance of HR operations and investments in human capital was
singled out as a vital aspect of the education.

Mr. Rautenberg also emphasized the importance of training for managers,

especially with respect to managing people and organizations, together with
acquiring international presentation skills. It is up to you to change the
image of the HR sector into what it really is and that is much more than just
administration, as it is often mistakenly thought Mr. Wolfgang Rautenberg
underlined in his address to the commercial banks HR managers.

5.3 The Second Roundtable of Commercial

Banks HR Managers
The second roundtable of banking sector human resources managers,
attended by representatives of commercial banks, was held today by the
Academy of Banking and Finance in the NBS Villa in Topcider. Nebojsa
Janicijevic, Professor at the Faculty of Economics, gave a presentation on
Contemporary Human Resources Management, discussing the importance,
organization, place and role of the human resources management function
within banks.

53
In the course of the discussion, the participants in the roundtable
emphasized that the fundamental problem they face in their organizations on
a daily basis is how to retain young qualified personnel.

In this sense, stressing the importance of training managers in contemporary

management in this field, Professor Janicijevic pointed out that a basic
precondition for an efficient human resources management in banks is to
correct the misconceptions of banks management, underestimating the
significance of human resources, as well as to prevent the reduction of work
to a mere administering of working relations and transferring responsibility to
the organizational unit.

To manage human resources means to systematically attract, use and

develop personnel with a view to realizing the objectives of the
organization, Professor Janicijevic pointed out in the course of the
roundtable discussion.

5.4 Forbes report on Facing the banking

sector challenge in 2015

Its been a tumultuous year for the banking sector which has been beset with
corporate scandals, the latest one being the recent Forex-rigging debacle. On
top of this, many banks which are headquartered in the City of London are
grabbling with a raft of regulations such as Capital Requirements Directive IV
and the forthcoming Senior Managers Regime. What are the major
challenges facing HR directors of global banks in 2015? I asked the experts
to look into their crystal balls and offer their thoughts.

54
There are a number of challenges facing HR directors in the banking sector in
2015, according to Andrea Eccles, chief executive of City HR Association. She
believes that these challenges come under the categories of regulation,
remuneration and restoration. With regards to regulation, Eccles argued that
both EU directives and Prudential Regulation Authority (PRA) and Financial
Council Authority (FCA) consultation papers have had a major impact on
people management activities within banks. These include the reward
elements arising from the Capital Requirements Directive (CRD) IV and the
introduction of bonus caps of 100% of base pay or 200% with shareholder
approval. Furthermore, the PRA/FCA are also proposing new conduct rules
with the introduction of the Senior Managers Regime (SPR) which will hold
employees particularly those at the top end-more accountable for their
actions. This will result in seismic changes in HR strategy given that the SPR
is likely to impact the full employee lifecycle from recruitment and on-
boarding to performance management and exit.

The banking sector faces a constant challenge of new regulations, comments

Mark Quinn, UK and Ireland market business leader, Talent Mercer. The HR
function is facing constant application of regulatory rules. There has never
been so much external intervention in banking. There is a lot of stuff to do
for HR directors because regulatory change is driven heavily by political
change and subject to constant change. That constant change feeds into the
organization and they have to deal with it all the time. HR directors will
spend far more time dealing with implications of regulatory issues in 2015
than they would like.

There is a fear among banks that regulatory restrictions on bonus payments

will mean that talent will move outside the EU, commented Mark Thompson,
associate director for the Hay Group. The challenge is therefore to compete
with international markets within the new restrictions. The banking industry
is responding by introducing new reward elements that are not fixed or
guaranteed like base salary but paid as an allowance which can be adjusted
depending on the performance of the business and the contribution of the
individual. They have also responded by increasing base pay to make up for
the lower bonuses. The challenge that reward managers have is to leverage
these new approaches and the new terms around claw-back of bonuses to
incentivize some intangible elements of the scorecard such as customer
satisfaction as well as the hard cash measures of success.

55
The second major challenge facing HR directors in banking are the proposed
changes to the Remuneration Code as put out to consultation by the PRA and
FCA between July and October 2014, commented Eccles. Among many
proposals, this is likely to see changes to bonus deferrals, clawback, malus
and potentially bonus buy-outs, with tougher financial sanctions aimed at the
top management of any future bailed-out banks. Another remuneration
challenge facing HR directors in the global banks is the reform to pensions as
announced in the Spring 2014 budget, remarked Eccles. The introduction of
flexible access on the drawdown of funds within defined contribution
schemes will see the need for workplace pre-retirement education of
employees up to five years before their actual retirement date.

The third HR challenge facing HR directors in global banks is the restoration

of the industrys reputation, argued Eccles. Many financial institutions,
including those of other financial disciplines other than banking, have worked
hard to identify or re-emphasis their corporate values and to re-state the
behaviors required of their employees. As the custodians of most aspects of
culture, HR will have its work cut out for it in terms of looking to align
performance management schemes to the corporate values and to ensure
that reward is allocated accordingly.

The requirements from society to banks are substantially different coming

into 2015, remarks Quinn. If you think back to 2005, societal requirements
from banks was about driving economic wealth and about shareholder
return. If you reflect to now, the contrast could not been starker. In 2015,
there are questions of protection for customers and risk with tier 1 capital
requirements imposed onto banks in a different way. A completely different
regulatory framework drives banks to be thoughtful about risk appetite.

That means the business strategy of a bank has had to undergo major
change, added Quinn. Its not about being an engine for growth but its
about being a steady custodian. What does that mean for the talent
strategy? Banks are there to make money but not in a risky way and they
require a different profile for success. The template model for the senior
leadership in banks has changed radically. Increasingly, there are
requirements for people who rise in organizations to have the ability to lead
on a generalist basis. Banks are looking for different leadership qualities. Its
about how the business interacts with customers rather than innovation with
products.

56
One of the areas for consideration for HR directors in global banks next year
will be the impact of shared parental leave in UK, argues Charlotte Sweeney,
founder of Charlotte Sweeney Associates, diversity, inclusion and wellbeing
experts. This allows eligible women to curtail their right to maternity leave
to enable their partners to take shared parental leave. Although this is UK
law, there are a number of potential ramifications across global
organizations, which include creating the right cultural shift which means
that effective shared parental leave is important. For HR directors that are
serious about creating inclusive cultures, this is a key area of focus.

Sweeney argues that although there has been a huge focus on the Women
on the Board agenda by banks, attention was now moving to cultural
diversity on the boards. Cultural diversity is the quality of diverse or
different cultures as opposed to monoculture. For global companies where
there cannot be a single definition of who is or isnt an ethnic minority
because of the countries it operates, cultural diversity gives a sense of
wanting to bring people in who have different cultural backgrounds and
experiences. Regardless of the focus at the board level, the key has to be
focusing on the talent pipeline and ensuring talented people, regardless of
background, are filling the spaces ready to progress to the senior roles.

Another key diversity challenge facing global banks in 2015 is that there are
now multiple generations working together following the eradication of the
default retirement age in the UK, remarks Sweeney. In the coming years, we
will experience for the first time, five generations in the workplace together,
she said. Whats important for the HR director is reflecting on the culture of
the company and identifying what is important for all. Given the multiple
generations in the workplace and the increased ageing demographics in
many countries, this will have a knock-on effect for employers to ensure they
are really thinking of how they support their employees who have caring
responsibilities and those who have some form of disability.

Professor Andre Spicer, professor of organizational behaviour at Cass

Business School believes that many of the issues troubling the boards of
major banks are HR issues. This is an opportunity for HR. How does HR work
with other functions, systems, risk and compliance? HR needs to work
alongside risk and compliance to make sure that HR issues dont get
patronized.

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6.0 COMPARISON BETWEEN HIGH-PERFORMING
BANKS AND AVERAGE PERFORMERS.

When we examine the details of high-performing banks versus

average performers, we discover additional detail on what drives
branch performance. The following is from the 2003 Nolan Efficiency
Ratio Benchmarking Study retail branch data.

High performing banks put on 152 new accounts per employee versus the
average bank's 139 new accounts, an increase of 9.35 percent. Looking
deeper into the data, high-performing banks open only 25 percent of new
deposits to the total deposit account balances with their efforts as opposed
to 32 percent for the average bank. When we further dissect the information,
we see the new non-time deposit account balances as a percentage of total
non-time deposit balances was 14 percent in top-tier banks versus 20
percent on average. These measures support the conclusion that the high
performing banks do not need to open as much in new deposit balances
since they retain their existing deposits better than the average banks. What
are the underlying factors that might support this outcome? They are likely
the focus on new business in average performing banks versus the focus on
net new business in high-performing banks.

The emphasis on developing a sales culture has made a dramatic impact on

many banks. In some cases, it has literally transformed the retail banks from
"order takers" to "business development" engines. CSRs have had their
offerings expand to include insurance, investment and select deposit
products. It can be difficult to train CSRs in the relative benefits of each
vehicle and often the weight of the incentive to the product drives them, not
the need.

Not every bank has experienced the same success in terms of this change
translating directly to the bottom line. When banks examine the incentives
that are paid to CSRs there are a couple of telling characteristics to look for.
Many banks base incentives on the first sale, meaning banks are paying for
every new account regardless of how it was sold. The customer could have
been inclined to set up the account prior to walking into the branch, or the
CSR could have sold the account based on its features. Successful banks

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establish both branch and individual sales thresholds before incentives are
earned.

A second element to consider is what the bank is strategically trying to

achieve-net new business. In many of the campaigns and programs, booked
new business is the only criteria, not what it has achieved in terms of net
bottom line. The subliminal message is that servicing existing customers is
not as important to achieving individual or bank goals leading to service time
spent on difficulties booking new business correctly and not primarily
servicing existing customers. Not every bank or branch location has the
same potential for growth in their marketplace, so they should model each
location on its individual characteristics and opportunity for growth. The
development of excellent market data has greatly assisted the banks who
understand where to place their sales and service emphasis.

Segmentation of the market is significant since it is not so much a measure

of the actual effort as where the effort is extended. Today over 400 CRM
models are on the market, and the tools are more affordable with greater
applications. Deployment is as much a part of the success of the tools as it is
with any technology. Often the marketing teams concentrate on a specific
use and not on developing market intelligence. For example, the data may
help banks to determine which customers have a product, but unless they
understand why the customer has that product, they may miss a targeted
marketing opportunity. The reason may be due to the specific product
offering which may not convert to an interest in other product offerings.
Applying science and analytics to the data suggests that the most pertinent
information will lead to selling new products to existing customers.

This analysis also applies to the possible loss of customers. In this way,
banks may prevent the attrition of their customer base. Banks that see a gap
in their product offering often rush to put together a campaign before
understanding the potential customer acceptance and impact on existing
work processes. Often this happens with HELOC campaigns and the CSRs
cannot meet customer service expectations. This is an example of short-term
application with a potentially long-term strategic tool.

The work processes are as significant to the overall time success as any
factor in the performance equation. Many new business processes are
burdened at the point of the CSR, with too many unconnected information
inputs. As mentioned earlier, it is common that 65 percent to 80 percent of
new sales are due to existing customers, but ironically, processes are not

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structured to take advantage ofthat information in an automated way. Often
banks profess to have their process integrated, but rather have a series of
largely manual steps.

For instance, they take an application for a retail loan and submit it for credit
approval. It is common to find that the input form or screen for credit differs
from the loan application, thus requiring a separate input. When the loan is
approved, there is a separate input form or screen for document preparation.
In many cases, the CSR needs to prepare a separate document to show that
they have properly completed an assessment of the customer's full
investment, loan and deposit account needs with an entirely separate input
form and screen. After the loan is approved, a separate incentive form or
screen may need to be completed. Lastly, separate boarding documents get
the loan booked on the accounting system. Every step in the process may be
thought of as employing technology, but without integration, it requires
multiple inputs of the same information. A significant portion of CSR
effectiveness is in the details of the process.

The staffing and scheduling element has as much to do with success in CSR
effectiveness as with teller effectiveness. Banks should utilize the proper
information to determine how many CSRs are deployed, and see that they
have the right tools and products to be successful. Unfortunately, very little
science has been applied to the CSR position in banks, and this is where the
sales service face is presented to the customer and potential customer base.

7.0 SUMMARY
The findings noted here from the 2003 Nolan Efficiency Ratio Benchmarking
Study should not be surprising to most bankers since the behavioral basis
today is basically the same in the top-performing banks as it has been for
decades. What makes the difference between the top-performing retail banks
and the average performers is the way they design and deploy their
resources to achieve sales and service goals for their customers. The
numbers tell a story over time. The comparative gap in efficiency ratio
between the top performers, 27.1 percent, and the average bank, 47.5
percent, is significant at 20.4 percent. Interestingly, of the 20.4 percent gap,
the personnel cost gap is 10 percent and the other operating expenses is
10.4 percent.

The ways people, processes and technology are designed, integrated and
deployed make the difference. The analysis conducted in the annual Nolan
study of the top-performing banks year after year shows that improvements

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are ongoing-thai is what makes a single target elusive. The key to success is
to understand that policy, process, technology and deployment should be the
source of your measures and the basis for your improvement opportunities.

7.1 CONCLUSION

Today, banks focus on designing programs and process and services to

attract, develop and retain top talent. Utilizing the latest technologies HR
team has launched sophisticated online systems that provide the employees
with details on benefits, compensation, special programs and internal job
opportunities. As a global employee population continues to grow, these
cutting edge activities are increasingly important to the deliver world-class
HR solution.

The core function of HRD in the banking industry is to facilitate performance

improvement, measured not only in terms of financial indicators of
operational efficiency, but also in terms of the quality of financial services
provided. Factors like skills, attitudes and knowledge of the human capital
play a crucial role in determining the competitiveness of the financial sector.
The quality of human resources indicates the ability of banks to deliver value
to customers. Capital and technology are replicable but not the human
capital which needs to be valued as a highly valuable resource for achieving
that competitive edge. The primary emphasis needs to be on integrating
human resource management strategies with the business strategy. HRM
strategies include managing change, creating commitment, achieving
flexibility and improving teamwork. The other processes representing the
overt aspects of HRM are recruitment, placement and performance
management.

The public sector banking system in India is standing at an important cross

road. There are critical choices to be made and initiatives to be taken. The
time is ripe for leaving the old baggage and taking bold measures. These
measures would determine the future path of public sector banks and
whether they would continue to retain their position of preeminence in the
banking space or would they yield to the pressure from their peers in the
private sector. Considering the importance that banks have in the nation
building process, the choices made now could have a bearing on the
economic future of the country and on the lives of crores of our fellow

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countrymen, many of whom are yet to be touched by the formal financial
system. We must succeed. Not only for ourselves but also for the society and
for the nation. I hope that some of the issues raised by me here today are
dwelled upon during the course of this Conference and concrete action plans
emerge to tackle the HR challenges facing our banks. I wish the Conference
all success. Thank you.

BIBLIOGRAPHY
1. www.wikipedia.com
2. www.businessweak.com
3. www.articlebase.com
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4. Forbes magazine.
5. The Economic times.

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