UNIVERSITY OF MUMBAI

T.Y.B.B.I

( V SEMESTER )

A PROJECT ON

HR PRACTICE IN BANK

ACADEMIC YEAR

2016 2017

BY

HARDIK PAVAN GOYAL

ROLL NO : 122

PROJECT GUIDE

PROF. SHWETA PANDEY

MALINI KISHOR SANGHVI COLLEGE OF

COMMERCE & ECONOMICS

VILE PARLE ( W ). MUMBAI

1
 DECLARATION

I MR. Hardik Goyal, Student of Malini Kishor Sanghvi College of Commerce

& Economics Studing in T.Y.B.Com (Banking and Insurance) Semester V ,
hereby declare that I have completed the project on HR PRACTICE IN
BANK in the academic year 2016-2017. The information submitted
herein is true and original to the best of my knowledge.

Date of Submission Signature of Student

(Mr..Hardik Goyal)

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 CERTIFICATE

This is to certify that Mr. Hardik Goyal of T.Y.Com (BANKING &

INSURANCE SEMESTER V) of Malini Kishor Sanghvi College of
Commerce and Economics has successfully completed the project on HR
PRACTICE IN BANK for the academic year 2015-2016. The information
submitted is true and original to the best of my knowledge.

Signature of Principal Signature of Project Guide

(Dr. Krushna Gandhi) (Prof: Shweta Pandey)

Signature of Co-ordinator

(Prof: Shweta Pandey)

College seal Signature of External

Examiner

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 ACKNOWLEDGEMENT

I would like to thank Malini Kishor Sanghvi College of Commerce &

Economics & the faculty members of BBI for giving me an opportunity to

prepare a project on HR PRACTICE IN BANKS. It has truly been an

invaluable learning experience. Completing a task is never one mans efforts. It

is often the result of invaluable contribution of number of individuals in direct

or indirect way in shaping success and achieving it.

I would like to thank principal of the college Dr. (Mrs.) Krushna Gandhi and

Co-ordinator Prof .Shweta Pandey for granting permission for this project. I

would like to extend my sincere gratitude and appreciation to Prof: Shweta

Pandey who guided me in the study of this project . It has indeed been a great

learning, experiencing and working under him during the course of the project.

I would like to thank the librarian of the college for helping me in finding out

the relevant material for my project. I would like to appreciate all my colleagues

and family members who gave me support and backing and always came

forward whenever a helping hand was needed. I would like to express my

gratitude to all those who gave me the possibility to complete this thesis.

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 HR
PRACTICE
IN BANK

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 TABLE OF CONTENTS

EXECUTIVE SUMMARY...........................................................................7

INTRODUCTION.........................................................................................8

HUMAN RESOURCE MANAGEMENT.................................................15

HUMAN RESOURCE MANAGEMENT SYSTEM................................25

TWO THEORIES WHICH SUPPORT HR MANAGEMENT..................

HR MANAGEMENT IN BANKING........................................................36

CHALLENGES FACED BY BANKING INDUSTRY IN TERMS OF HR

MANAGEMENT.........................................................................................40

EXTRACT FROM A LECTURE ORGANISED BY ACAMEDY OF

BANKING & FINANCE............................................................................44

ARTICLE ON CASE STUDY- WESTPAC BANKING CORPORATION

.......................................................................................................................50

ROLE OF BANKS......................................................................................52

COMPARISON BETWEEN HIGH PERFORMING & AVERAGE

PERFORMING BANKS............................................................................62

BIBLIOGRAPHY.......................................................................................66

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 EXECUTIVE 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-performingbanks 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 Nolanstudy of the top-

performing banks year after year shows that improvements 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.

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 INTRODUCTION TO HUMAN RESOURCES:

Human Resource Management is essential in all sectors and this project deals with human

resources in general and in the banking sector. Before discussing Human Resources in the

banking sector it is essential to understand the basic concept of human resources as well as

that of management.

The term human resources is variously defined in political economy and economics, where it

was traditionally called labor, one of three factors of production. Its use

within corporationscontinues to define common conceptions of the term.

Modern analysis emphasizes that human beings are not predictable commodity "resources"

with definitions totally controlled by contract, but are creative and social beings that make

contributions beyond "labor" to a society and to civilization. The broad term human

capital has evolved to contain the complexity of this term, and in macro-economics the term

"firm- specific human capital" has evolved to represent the original meaning of term "human

resources".

What is Management?

Management is concerned with the human beings whose behaviour is highly unpredictable.

Ever since people began forming groups to achieve as individuals. Managing has been

essential to provide the coordination of individuals efforts.

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Management does not perform specific jobs. It motivates other people to perform specific

jobs. It indicates a total process of executive control in business. It implies undertaking of

responsibility for effective planning, policy making, fixation of targets and operative

functions of providing men, money and materials to run day-to-day administration.

Management is concerned with actually directing and guiding the operations to achieve

business objectives. It uses human efforts to reach the predetermined goals. Regulation.

Control and evaluation of human efforts in the direction of achieving the given objectives are

the primary functions of management. Also, management refers to bringing together of

physical and human resources to carry on planned activities and control performance in order

to ensure that what is done is what is expected. Management is applicable to both profit-

making and service-rendering organizations.

Nature of Management

(1). Management as an economic resource: Historically, land and capital were treated as

sources of production. Now along with land and capital, labour and management are given

the status of economic resource. Management coordinates as well as controls economic

resources. It facilitates effective use of other resources for achieving specific objectives.

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(2). Management as a system of authority: A manager is given specific duties and also the

authority. He has to achieve certain results with the participation of others. He has to get the

work done through the others. A manager can achieve results through delegated authority as

per the need of the situation.

(3). Management is a group activity: Management is not individualistic but a joint

activity. Managers have to guide and motivate their subordinates. Management is an activity

of a group. Results will not be achieved only by the managers but also bt the cooperation and

participation of subordinates.

Characteristic features of Management:

A few of the characteristic features of management are:

(1). Management is a process:

Management is a process and not merely a body of individuals. Those who perform this

process are called managers. The managers exercise leadership by assuming authority and

direct others to act within the organization.

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(2). Management is a social process:

Management takes place through people. A managers job is to get the things done with the

support and cooperation of subordinates. It is this human element which gives management

its special character.

(3). Management is a group activity:

Management is not an isolated activity but it is an activity of a group. It aims at using group

efforts for achieving objectives.

(4). Management is all persuasive:

Management is comprehensive and covers all departments, activities and employees.

Managers are working at different levels but their functions are identical. This indicates that

the management is a universal process.

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(5). Management is innovative:

Management techniques are dynamic and innovative. Such techniques are adjusted as per the

requirements of the situations. Another manager need not repeat the decisions of one

manager. Similarly, a manager has to change his decisions under different situations.

Need for Management

(1). Direction and control of group efforts: In business, many persons work together. They

need proper direction, guidance and even motivation for raising their efficiency. In the

absence of guidance, people will work as per their desire and the orderly working of

enterprise will not be possible. Management is needed for guiding employees in the right

direction and for coordinating their efforts.

(2). Orderly achievement of business objectives: Efficient management is needed in order

to achieve the objectives of business activity in an orderly and quick manner.

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(3). Performance of basic managerial functions: Planning, organizing, coordinating and

controlling are the basic functions of management. Management is needed as these functions

are performed through the management process.

(4). Effective communication at all levels: Management is needed for effective

communication within and outside the organization.

(5). Motivation of employees: Management is needed for motivating employees and also for

coordinating their efforts to achieve business objectives quickly.

(6). Success and stability of the business enterprise: Efficient management is needed for

success, progress and smooth functioning of a business enterprise

Importance of Management

The importance of management in business is universally accepted. Modern business is

highly competitive and needs efficient and capable management. It is through management

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that business activities are organized and conducted efficiently. Following are few of the

points that suggest the importance of management:

(1). Optimum use of resources: Management facilities optimum utilization of human and

physical resources, which leads to progress and prosperity of a business enterprise.

(2). Competitive strength: Management develops competitive strength in an enterprise. This

enables an enterprise to develop and expand its assets and profits.

(3). Motivates employees: It motivates employees to take more interest and initiative in the

work assigned and contribute for raising productivity and profitability of the enterprise.

4). Expansion of business: Expansion, growth and diversification of a business unit are

possible through efficient management. It creates good corporate image to a business

enterprise.

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(5). Reduces turnover and absenteeism: It reduces labour turnover and absenteeism and

ensures continuity in the business activities and operations.

HUMAN RESOURCE MANAGEMENT

Human Resource Management or Personnel management is the activity of managing

personnel, usually employees

In any organization, managing personnel is the process of making sure the employees (not the

customers) are as productive as they can be. This can include hiring, firing, or transferring

people to/from jobs they can do most productively.

This subject is a major at many universities, or a minor in the business school. It is also

known as personnel administration, which is functionally an equivalent term.

Meaning of Human Resource Management:

A business unit needs employees to look after different activities. This is called manpower or

human resource. Such human resource needs to be developed fully so that it will make

positive contribution for the progress and prosperity of a business unit. For this systematic

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development and management of human resources is necessary. Human Resource

Management (HRM) deals with:

(a)Training

(b)Self-development

(c)Promotions

(d)Performance appraisal of manpower recruited in an organization.

HRM is an organized learning experience aimed at matching the organizational need for

career growth and development. It is a process involving series of learning activities designed

to acquire desired level of competence among employees.

HRM is a continuous process and it needs money. Such investment creates a team of

efficient, skilled and trained manpower which brings success and stability to a business unit.

HRM programmes offer long term benefits to an organization.

Characteristics of Human Resource Management:

(1). Upgrading Manpower:

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 HRM is basically concerned with the upgrading of manpower working in an

organization. This leads to improvement in the individual performance of an employee and

also corresponding improvement in the organizational performance.

(2). Stress on Training: HRM includes various schemes arranged for providing education,

guidance, training and opportunities to learn and develop employees of all categories and

working in different departments. There is an integrated use of sub-systems (training, career

developments, organizational development) in the HRM programme.

(3). Attention to learning and career development: Learning, self-development, career

development and possible through HRM programmes. These are the core areas of HRM.

Career development is possible through joining training courses, reading books and

periodicals. Learning and career development raise the capacity of employees to work at

highest levels. They are given higher positions with monetary benefits.

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(4). Organizational Development: HRM includes organizational development, which

includes effective communication within the organization, coordination of different activities,

elimination of conflicts of different types and creation of orderly atmosphere in the whole

organization.

(5). Team Spirit: HRM is basically for developing team spirit in the whole organization. For

this, departments and levels of management are properly integrated. Team spirit facilitates

orderly growth of the organization in the right direction.

(6). Huge spending by Management: All companies invest huge money on HRM activities

but such expenditure is absolutely essential for survival in the present competitive business

world. HRM programmes create matured, skilled and efficient manpower, which is a valuable

asset of a business unit.

(7). Termination of Employment: Termination is an unpleasant part of any managers job.

Employees occasionally must be terminated for breaking rules of failing to perform

adequately.

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(8). Continuous Activity: HRM is rightly treated as a continuous activity due to new

developments taking place regularly in the business world. For this, on the job and off the job

training programmes are introduced from time-to-time.

(9). Wide Scope: The scope of HRM programmes is very vast. It ismulti-disciplinary in

character. Training and guidance are given on different aspects of business management to

enable managers to deal with complex managerial problems and challenges.

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NEED AND IMPORTANCE OF HUMAN RESOURCE MANAGEMENT:

(1). To create stable labour force: HRM programmes are needed in order to create stable,

efficient, skilled and matured manpower required by an enterprise for the present and future

period.

(2). To update the quality of manpower: HRM activities are needed for updating the

quality of manpower as per the growing and changing needs of an enterprise. This avoids

managerial obsolescence. Even the vacancies at higher levels can be filled in internally due to

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HRM programmes as they provide training and opportunities of self- development to

employees working at lower levels.

(3). To develop strength for survival: HRM programmes are necessary for survival in the

present competitive marketing environment. An enterprise can face market competition only

by improvimg quality, reducing costs and avoiding wastages. All this is possible through

HRM.

(4). To face challenges of technological changes: Technological changes are taking place

rapidly in every area of business. HRM programmes are needed in order to absorb

technological changes taking place with speed. In fact, introduction of new technology,

computers, automation, etc. will not be possible unless training is provided to the manpower.

(5). To satisfy the demand of self-development of employees: HRM is needed to meet the

needs of employees in regard to self- development and career development aspirations.

Employees demend, training facilities, refresher courses, promotions and transfers, career

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guidance, etc. for their self-development. HRM programmes are needed to fulfill self-

development and career development of employees.

(6). To meet future manpower needs: HRM is needed to meet the future manpower needs

of the organization. Executives, managers, supervisors leave the job or retire due to age

factor. Competent juniors must take their positions. HRM is needed in order to keep ready a

team of competent managers as a second line of defence.

(7). To facilitate expansion and diversification: HRM activities are needed to meet the

manpower requirements resulting from expansion and diversification programmes undertaken

at the enterprise level. Attention should be given to HRM much before the introduction of

expansion programme.

(8). To utilize production capacity fully: HRM is needed in order to use the available

production capacity to the optimum level. It provides skilled manpower for this purpose.

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 SCOPE OF HUMAN RESOURCE MANAGEMENT:

(1)Training: Training is an essential element of HRM. This develops skills and capacity to

work at higher levels and positions. Training is possible by different methods. It is useful

forself-development and career development.

(2). Performance Appraisal: Performance appraisal is an important area of HRM. The

purpose of performance appraisal is to study critically the performance of an

employee and to guide him to improve his performance. An employee is told about his

strengths and weaknesses and assistance is given to remove weaknesses and make the plus

points more strong. This technique is useful for building a team of capable employees and is

also used for their self- development.

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(3). Potential Appraisal: It relates to the study of capabilities of employees. It is useful for

proper placement and career development of employees. Potential appraisal of employees is

useful for developing their special qualities, which can be used fruitfully along with the

expansion and diversification of activities of the company. Potential appraisal is possible by

the superior with the help of different methods.

(4). Career planning and development: Under HRM employees should be given guidance

for their self- development and career development. The opportunities likely to develop in the

organization should be brought to their notice. They should be motivated for self-

development, which is useful to the organization in the long run. Superiors are supposed to

provide information and guidance to their juniors in this regard. Career development is an

integral part of HRM.

(5). Employees welfare: Employees welfare is within the scope of HRM. Welfare facilities

are useful for creating efficient and satisfied labour force. Such facilities raise the morale of

employees. Employees welfare include the provision of medical and recreation facilities,

subsidized canteen, free transport and medical insurance. Such facilities support training and

other measures introduced for HRM.

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(6). Rewards and incentives: HRM includes provision of rewards and incentives to

employees to encourage them to learn, to grow and to develop new qualities, skills and

experiences which will be useful in the near future. Reward is an appreciation of good work.

It may be in the form of promotion, higher salary or higher status. Rewards and incentives

motivate employees and raise their morale.

(7). Organizational development: HRM aims at providing conflict-free operations

throughout the organization. It also keeps plans ready to deal with problems like absenteeism,

turnover, low productivity or industrial disputes.

(8). Quality of work life: Quality of work life depends on sound relations between

employers and employees. A forward looking policy on employee benefits like job security,

attractive pay, participative management and monetary andnon-monetary rewards will go a

long way in improving the quality of work life helps employees to strike an identity with the

organization.

(9). Human resource information system: Such system acts as an information bank and

facilities human resource planning and development in a proper manner. It facilitates quick

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decision making in regard to HRM. Every organization has to introduce such system for

ready reference to HRM matters. Updating of such information is also essential.

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 resourcemanagement 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.

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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

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.

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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.

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The HR management module: 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.

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 THE TWO THEORIES WHICH SUPPORT HUMAN RESOURCE

MANAGEMENT.

THEORY X AND THEORY Y

Theory X and Theory Y are theories of human motivation developed by Douglas

McGregor at the MIT Sloan School of Management in the 1960s that have been used

in human resource management,organizational behavior, and organizational development.

They describe two very different attitudes toward workforce motivation. McGregor felt that

companies followed either one or the other approach.

Theory X

In this theory management assumes employees are inherently lazy and will avoid work if they

can. Because of this workers need to be closely supervised and comprehensive systems of

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controls developed. An hierarchical structure is needed with narrow span of control at each

level. According to this theory employees will show little ambition without an enticing

incentive program and will avoid responsibility whenever they can.

According to McGregor, most managers (in the 1960s) tend to subscribe to Theory X, in that

they take a rather pessimistic view of their employees. A Theory X manager believes that his

or her employees do not really want to work, that they would rather avoid responsibility and

that it is the manager's job to structure the work and energize the employee. The result of this

line of thought is that Theory X managers naturally adopt a more authoritarianstyle based on

the threat of punishment.

Theory Y

In this theory management assumes employees are ambitious, self- motivated, anxious to

accept greater responsibility, and exerciseself-control and self-direction. It is believed that

employees enjoy their mental and physical work activities. It is also believed that employees

have the desire to be imaginative and creative in their jobs if they are given a chance. There is

an opportunity for greater productivity by giving employees the freedom to be their best.

A Theory Y manager believes that, given the right conditions, most people will want to do

well at work and that there is a pool of unused creativity in the workforce. They believe that

the satisfaction of doing a good job is a strong motivation in and of itself. A Theory Y

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manager will try to remove the barriers that prevent workers from fully actualizing their

potential.

McGregor and Maslow's hierarchy

McGregor's work was based on Maslow's_hierarchy_of_needs. He grouped Maslow's

hierarchy into "lower order" (Theory X) needs and "higher order" (Theory Y) needs. He

suggested that management could use either set of needs to motivate employees but that

better results could be obtained by meeting the Theory Y needs.

Characteristics of the X Theory Manager

Results-driven and deadline-driven, to the exclusion of everything else

Intolerant

Issues deadlines and ultimatums

Distant and detached

Aloof and arrogant

Elitist

Short temper

Shouts

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Issues instructions, directions, edicts

Issues threats to make people follow instructions

Demands, never asks

Does not participate

Does not team-build

Unconcerned about staff welfare, or morale

Proud, sometimes to the point of self-destruction

One-way communicator

Poor listener

Fundamentally insecure and possibly neurotic

Anti-social

vengeful and recriminatory

Does not thank or praise

Withholds rewards, and suppresses pay and remunerations levels

Scrutinises expenditure to the point of false economy

Seeks culprits for failures or shortfalls

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 Seeks to apportion blame instead of focusing on learning from the experience and preventing

recurrence

Does not invite or welcome suggestions

Takes criticism badly and likely to retaliate if from below or peer group

Poor at proper delegating - but believes they delegate well

Thinks giving orders is delegating

Holds on to responsibility but shifts accountability to subordinates

Relatively unconcerned with investing in anything to gain future improvements

Unhappy

Managing an X Theory boss

Working for an X Theory boss isn't easy - some extreme X theory managers can be extremely

unpleasant - but there are ways of managing these people upwards. Avoiding confrontation

(unless you are genuinely being bullied) and delivering results are the key tactics.

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Theory X managers (or indeed theory Y managers displaying theory X behaviour) are

primarily results oriented - so orientate your own discussions and dealings with them around

results - ie what you can deliver and when.

Theory X managers are facts and figures oriented - so cut out the incidentals, be able to

measure and substantiate anything you say and do for them, especially reporting on results

and activities.

Theory X managers generally don't understand or have an interest in the human issues, so

don't try to appeal to their sense ofhumanity or morality. Set your own objectives to meet

their organisational aims and agree these with the managers; be seen to be self-starting, self-

motivating, self- disciplined and well-organised- the more the X theory manager sees you are

managing yourself and producing results, the less they'll feel the need to do it for you.

Always deliver your commitments and promises. If you are given an unrealistic task and/or

deadline, state the reasons why it's not realistic, but be very sure of your ground, don't be

negative; be constructive as to how the overall aim can be achieved in a way that you know

you can deliver. Stand up for yourself, but constructively - avoid confrontation. Never

threaten or go over their heads if you are dissatisfied or you'll be in big trouble afterwards and

life will be a lot more difficult.

If an X theory boss tells you how to do things in ways that are not comfortable or right for

you, then don't question the process, simply confirm the end-result that is required, and check

34
that it's okay to 'streamline the process' or 'get things done more efficiently' if the chance

arises - they'll normally agree to this, which effectively gives you control over the 'how',

provided you deliver the 'what' and 'when'. And this is really the essence of managing

upwards X theory managers - focus and get agreement on the results and deadlines - if you

consistently deliver, you'll increasingly be given more leeway on how you go about the tasks,

which amounts to more freedom. Be aware also that many X theory managers are forced to

be X theory by the short-term demands of the organisation and their own superiors - an X

theory manager is usually someone with their own problems, so try not to give them any

more.

Criticisms

Today the theories are seldom used. They are thought to express extreme positions that are

not realistic. Most employees fall somewhere in between these extremes and the theories are

of little help in everyday human resource management decisions. However Theory X and

Theory Y are still important terms in the field of management and motivation. Recent studies

have questioned the rigidity of the model, but McGregor's X-Y Theory remains a guiding

principle of positive approaches to management, to organizational development, and to

improving organizational culture.

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 HUMAN RESOURCE MANAGEMENT IN BANKING

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 financialservices. Currently the term bank is generally understood as an institution that

holds a banking license. Banking licenses are granted byfinancial supervision authorities and

provide rights to conduct the most fundamental banking services such as

accepting deposits and makingloans. There are also financial institutions that provide certain

36
banking services without meeting the legal definition of a bank, a so callednon-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

practising 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.

37
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 who 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 managements in progressive banks.

Like many other organized sectors, banking requires a 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

38
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 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 are constantly thinking in

many dimensions.

39
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:

CHALLENGES FACED BY THE BANKING INDUSTRY IN TERMS OF

HUMAN RESOURCE MANAGEMENT

(1). Effective work force:

A time-consuming and hectic job is to hunt the right talent. Its just sitting by the river and

waiting for the right fish to catch. 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 breads of

professionals. Ones who are outstanding professionals with high job hopping attitude - these

are those who come in - work for some time and then leave for better prospects. Others are

40
those who are keenly picked-up, trained and are some how 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 and 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 data base management problem. This

has been facilitated by specialised hiring agencies who may take up the job of hiring in case

of large number of vacancies.

(2). Right people:

The most difficult agenda of HRM across the banking sector is to retain the right people.

Sudden growth of retail banking and other services has put pressure on HR mangers in banks

to engage more professionals within shorter span of time thereby attracting manpower in

other banks on attractive packages has made the job market very competing. A bank in a

normal course invests time and money to hire and train the appropriate work force for its own

operations. This ready-made force is often identified and subsequently picked-up on better

terms by others.

41
(3). Compensation: How much to pay to the right employee and how much to the

outstanding performer. Banks have traditionally followed pay scales with predetermined

increments, salary slabs, bonuses and time-based fringe benefits like car and house advance,

gratuity, pension, etc.

The situation is not the same anymore. An increment of Rs500-800per annum is no more a

source of attraction for a professional anymore. A basic pay with traditional formulas of

linkage with medical and other facilities has no soothing effect today.

A promise of future growth, learning culture and corporate loyalty is out of dictionary and

does not mean anything to this energetic and competent performer today.

A waiting period of 3-4 years in each cadre haunts the incumbents who strongly believe in

immediate compensation. There are examples to this. Thanks to the car financing modalities

car is no more a fantasy item any more.

A freshly hired professional requires a brand new car or car loan on resuming office quite

contrary to his previous breed of bankers who would wait for the job seniority to qualify for a

car loan.

(4). Job satisfaction:

42
Everybody in the bank wants to work in the preferential department, preferential location,

city of his own choice and 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 employee's nativity yet other elements like appointment in the department of choice

and preference makes the job of HR manager quite challenging. What the HR manger cannot

afford is the dissatisfied employee who not only disrupts the smooth working himself but also

spreads the negativity to others by his de-motivated attitude.

(5). Morale boosting: What has long been overlooked is the morale boosting of the

employees by the organizations. Human beings even if satisfied of material well being need

to be appraised and encouraged constantly.

Smart banks have realized this need and have taken steps to keep their work force motivated

through proper encouragement like man of the month awards, repeat get-

togethers, conferences, sports events, dinners, company sponsored travel, reunions, etc. This

is the way employees create a feeling of belongingness.

43
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.

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

44
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-levelinternational 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.

45
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 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

46
direct contact with guests, and the other one including back-office personnel whose work is

also crucial for the proper functioning of the system.

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 be

devoted to retail, corporate and investment banking, as well as mortgages and insurance

business.

47
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.

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

48
Economics, gave a presentation on Contemporary Human Resources Management,

discussing the importance, organization, place and role of the human resources management

function within banks.

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.

49
 ARTICLE ON CASE STUDY- WESTPAC BANKING CORPORATION.

ARTICLE WRITTEN BY SANDRA ONEILL.

At the July meeting of the Making Mentoring Connections Network, a case study of the

pilot mentoring program in the Westpac Banking Corporation was presented by Niki

Kesoglou, Human Resource Manager of Westpac's Policy, Projects & Diversity Department.

Westpac's mentoring was born out of a need, expressed at focus groups of managers and

executive managers, to examine career progression and to retain high potential people

resources (particularly for female staff) within the company.

There was an overwhelming response to circulation of a mentoring booklet and invitation,

both from people wanting to be mentors and also from hopeful mentorees. The limited, trial

nature of the pilot meant that some people had to be turned away, but they were given

50
assurances they would be considered for involvement in such a program when it

goes company-wide. The pilot included 18 mentors (12 males, 6 females) and 14 mentorees

(6 males, 8 females).

Bio-data sheets were issued and participants took part in mentoring skills workshops. These

workshops were augmented, two weeks later, by a "get acquainted" breakfast.

Westpac's program was feedback-intensive. The breakfast, and also a mid- point follow-

up workshop with both mentors and mentorees, provided opportunities for checking reactions

and progress.

On-going verbal and written guidance was offered by the project manager and coordinator.

Every effort was made to stay in telephone contact with all participants, and their comments

and input acted upon. Three sets of evaluation questionnaires (at six weeks, mid-point and

project conclusion) were also used.

Westpac encountered some unwillingness on the part of some mentors to attend training.

Their attitude seemed to be, "I already have communication skills - that's why I'm a mentor."

Many satisfying outcomes of the pilot program have been observed. Although the Westpac

culture generally exhibits little gender bias, it was agreed that the program helped improve

the visibility of women in this particular workplace.

Initial career progression indications are positive with a rise noted in the number of internal

job applications by participants, and this will need to be tracked over time.

51
Mentoring relationships which cross functional areas have assisted in breaking down barriers.

ROLE OF BANKS

The key performance numbers that retail bank management rely on to run their franchise

effectively are shifting along with wholesale changes in technology, delivery channel choices,

sales strategy, segmentation, and management practices.

Managing branch effectiveness has been an elusive target for many banks due to changing

objectives, shifting resources, and varying tools that individual bank managers use to react to

the marketplace. The traditional measures of performance that branch management has relied

upon in the past are becoming invalid since they are indicators of an obsolete environment. In

cases where solid management information is not available, banks manage primarily by

experience, based on previous practices and existing rules.

The important issues taken from this discussion are that retail management is searching for

some solid ground in making management decisions, and that they do not necessarily trust

their own numbers.

52
In recent years, shifts such as the development of alternative delivery channels, customer

segmentation and the resulting targeted marketing campaigns, a younger more electronic-

minded customer base, and the adoption of end-to-end processing in new business to simplify

sales transactions have influenced retail management. Projections showed that these factors

would lessen the reliance on the traditional branch system to support and deliver retail

performance. The thought was that by deflectinghigh-value customers to private bankers

and low-value service customers to contact centers, banks would gain control of the most

profitable customers. Interestingly enough, a recent Gallup Poll (April 14 to 16, 2003) finds

that 83 percent of Americans still visited their branch bank atleast once a month on average

over the past year. Bank changes to products, service offerings, and their approach to

customer segments in general, have yet to significantly impact (deflect) customer behaviors.

The primary responsibility of retail bank managers is to meet the service expectations of

customers.

While each bank's key management numbers are unique to its conditions, an examination of

what is changing in the industry to gain competitive perspective is valuable. The Robert E.

Nolan Company conducts an annual Efficiency Ratio Benchmarking Study. The results

provide an excellent starting point in establishing directional shifts. The study examines

differences between high-performing banks and average banks by each line of business. The

2003 study includes data from 36 banks, thrifts and credit unions with assets between $ 1 and

$5 billion.

The retail branch Efficiency Ratio is currently 27.1 percent for the top-tierperformers and

47.5 percent for the average of all 36 participants. The efficiency ratio is a common banking

ratio which measures the cost to generate a dollar of revenue. It is important to understand the

53
essential factors that make a difference and try to put them into perspective. The differential

is significant between the top performers and the average banks, but we must comment that a

high efficiency ratio by itself for any given bank should not be viewed as an indictment of the

retail management of that bank. It is often, simply, a function of the work processes, systems,

policies, incentives, and marketing programs that the bank has chosen to employ. We will

examine the drivers beneath the key numbers to shed some light on what the new numbers

mean.

TECHNOLOGY

Banks are taking a variety of approaches in implementing technology to make improvements

in retail delivery. The methods differ, depending on the bank management's mindset toward

the purpose of the software and its valued place in the new business or service delivery

processes.

Some banks are convinced that the software developers have had to consider the effectiveness

issues in their design, and see little value in starting with process redesign. In those cases, the

technology decision starts with a traditional approach to define business requirements leading

to software selection and then implementation. Technology vendors prefer to install their

software in the easiest and most operationally effective way possible. Vendors have become

very effective in making this case. Banks have opted to design the technology

implementation process around meeting the customers' needs and limiting the work effort

required. The challenge has been to accomplish straight-through processing in order to

eliminate potential errors and work duplication.

54
Most banks do not have an integrated technology solution. Often in isolation, the "owners" of

an element of the process make the system choices for the pieces of technology they require.

For example, the loan accounting system is often in the hands of loan operations and the

credit division usually makes the credit system decisions. Branch administration may decide

on the document preparation system. Human Resources will drive the incentive system, but

sales and marketing management develop it. The contact management system and the CRM

are often the purview of marketing. Individual system owners most often do not want to

complicate the decision to acquire and install "their system" by including total integration of

all data requirements in the process resulting in largely disconnected technological

environments.

Further, technology is not often applied to simple processes that could reduce errors, cost and

time. Retail banks sell 65 to 80 percent of their new products to existing customers. Keeping

this in full view, the new business process should allow the existing core systems to populate

the appropriate customer data whenever a customer opens a new product or service.

The trend in technology is straight-through processing or electronic integration of all the

required data elements and support systems. Independent surveys conducted by the Robert E.

Nolan Company reveal that many banks have this objective; but, to date, very few have

accomplished the connectivity in an efficient or effective manner. The few banks that are

integrated have lower time to close, lower cost, and better quality of data elements. This

advantage will certainly impact the amount of work that a CSR (Customer Service

Representative) is able to complete on a comparative basis. An interesting discovery from the

most recent Nolan Efficiency Ratio Benchmarking Study (analysis completed july 2003)

reveals that there is no correlation between a particular software system and higher retail

performance. The study examined top-tier performers by line of business, asset size, and type

55
of organization, without noting any significance related to performance and system use. The

conclusion is that performance is more highly correlated to the process design and integration

of data systems.

TELLER EFFECTIVENESS

Industry data is best used as directional information, not as a true measure of what individual

banks need to achieve to realize high performance. Teller effectiveness is an area where

banks have gone through cycles over the past 20 years. In the 1980s, the operational focus

was on security factors, including balancing. Many banks fired tellers for being out of

balance. Those banks designed their transactions to include redundant steps to help measure

and track the balancing process, including triple counting the cash back to customers, and a

practice called "backing" deposit slips and/or withdrawal slips. Backing referred to writing

the exact currencies transferred on the back of the slip to potentially simplify the balancing

process later in the day (for example, ten 20s, five 10s, two 5s and five Is = $265. 00). In

these banks, the importance was on transaction accuracy. The audit department often imposed

security into the processing steps without regard to timeliness and the service impact on

customers.

Top-tier performing banks examined the value of each element of transaction processing and

found that the work expended in triple counting and backing added 20 percent or more to the

transaction time. They conclude that this work is not cost beneficial. The following statistics

from the 2003 Nolan Efficiency Ratio Benchmarking Study show the range of teller

performance from high-performing banks to average performers.

56
The data demonstrates that high-performing banks handle 13 percent more transactions per

month than average banks. The relative cost per transaction is 35 percent higher in the

average banks than the high- performing banks. Although banks need these statistics to look

at teller performance, a directional view is required. Each bank places differing process and

security time burdens on the teller position. Transaction effectiveness is a significant factor,

but other conditions can directly influence transaction performance.

Teller performance variables can include: the impact on training; the teller turnover rate; the

actual teller performance; the opportunity to perform at a high rate related to staffing and

scheduling; the use of part-time tellers and teller pools that can support multiple branches due

to illnesses and vacations; the customer base being serviced; communications; and, the sales

referral policies and requirements.

Wide variances exist in the time and effort banks put into teller training. Some banks provide

no formal training but have tellers work with a "teller trainer" in the branch to learn the

policies, procedures and systems. In these cases, the trainer will influence the procedure with

their individual biases and not necessarily the bank's standard practices. Some banks institute

a three-week formal training process where tellers learn about the bank's commitment to

customers and how it supports the bank's strategy. They train individual transactions in a

uniform and controlled way and then, in week four, assign them a branch teller monitor to

assist in getting started. The cost of effective training appears high on the surface; but, when

management considers that more tellers interact with customers daily than any other position

in the bank, it follows that service and transaction training is essential to high performance.

Effective training can cut errors and help to ensure that the speed of processing is elevated

through a confident and competent staff.

57
The annualized teller turnover rate is typically one of the highest areas in a bank, ranging

from the mid teens in some banks to over 100 percent in others. The national average is 33 to

35 percent. The teller turnover rate is generally lower in a down economy. Banks that seem to

have lower rates of turnover often have practices in place to reward high performance.

Recruiting appropriate personnel from the branch location often helps in keeping tellers with

the bank longer.

Not many banks are equipped to measure the actual teller performance or even relative

performance within a branch or from branch to branch. One of the reasons is that teller

opportunities to perform are not equal. A drive- up teller will usually handle more

transactions per hour due to handling two customers at a time and a limit on transaction

types. Within the branch, the teller at the head of the queue will service every customer in

slow periods, where a teller at either end of the teller line will not have as many

opportunities. To analyze real teller performance, the bank would need sophisticated

modeling to calculate customer arrivals during the tellers' working hours along with

customers in line to determine teller opportunity. The teller position is a "customer demand"

work environment and while management sometimes uses fill-in work to help the utilization,

it typically comes down to effective staffing and scheduling.

Hundreds of teller staffing and scheduling models are available in the marketplace, but

currently there are three that have the features necessary to model both teller and CSR

positions effectively. all three have the modeling capabilities and report generation necessary

to be effective with a diverse set of branch locations. GMT, Demos, and Exometrics all have

the required queuing models and the flexibility to place staffing and scheduling in the hands

of retail management.

58
Banks must factor in tailored work standards and develop scenarios that reflect the conditions

of each branch location as close as possible to reality. The flexibility of the model used is

only one element in staffing and scheduling success. The standards and the work measured

must accurately reflect the branch conditions as believed by branch management and then

used to develop schedules. Some banks tailor standards tolocation-type such as urban, rural,

shopping mall, university, etc. Differences in work are attributable to a varying mix of

transaction types due to customer base, possibly differing cashing limits for tellers due to

experience or branch characteristics, physical location of bank checks and encoding

equipment, and potential use of cash dispensers in some locations. Banks must account for all

of these differences, as well as differences due to the actual performance of standard work.

High turnover branches will have lower real performance due to more tellers who are in a

learning curve. The learning curve for tellers is typically three months; and with a bank

turnover rate of 35 percent, that can lead to lower performance in selected branches. Banks

can adjust the staffing model for effective service in locations with high turnover until the

time that problem is resolved. Staff modeling is a dynamic process and the tools used should

be dynamic as well.

True performance is difficult to measure without a tool to properly balance the customer

demand to the service staff hours. In low-volumelocations, it is very difficult to evaluate the

performance of tellers since management must staff to volume and allow for breaks and

coverage. Often a branch requires the equivalent of between 1.5 and 2.5 tellers per hour in

remote locations. Management may decide to utilize threefull-time tellers to allow for

coverage during peaks and deliver service properly. This decision places the teller in a

position where they cannot perform on the same level as a teller in a branch where customer

59
demand is high and relatively constant. The incentive system should not penalize them or it

will force even higher turnover.

In the past six years, retail banking has experienced a significant shift to transform practices

to primarily a sales orientation. Teller incentives are largely weighted on paying for closed

referrals over and above any measure for service and productivity. This shift in many

institutions has contributed to difficulty in making any comparisons. Many banks have

trained their teller staff in how and what to refer with an expected volume of two closed

referrals per day. Incentive systems can direct tellers to concentrate on referrals, which may

also slow down the transaction processing and resultant service levels.

The reported results from the recent Nolan Efficiency Ratio Benchmarking Study show

that top-performing banks' branch personnel are processing 13 percent more transactions per

month than the average banks and are supporting 39 percent more deposit accounts. The

factors that prevent banks from performing at the higher level relate to process efficiency,

policy, deployment of staff through scheduling and staffing, and the connectivity of software.

Line of business performance is determined by how people, process and technology are

deployed, not the software.

CSR EFFECTIVENESS

There are a variety of issues that impact the performance of Customer Service

Representatives (CSRs) in the current environment. Banks have wide differences in

deployment. Some will limit the activities of the "platform staff" to strictly new business and

support service. Other banks will view the CSRs as part of the retail branch sales and service

60
team, and will deploy their time to sales and service first with a component of teller support

in their mix of responsibilities. Some banks will establish an objective for outside sales

asking CSRs to have involvement in community functions in the sales effort, while other

banks see marketing as having a primary role in driving potential customers into the branch.

In any event, the key is to establish the branch objectives in line with the bank's strategic

direction. The primary activities we see CSRs handling are sales/new business, service,

branch support, and administration.

Performance is a function of how banks manage and structure time. This is where the

significance of work process has the greatest impact. Independent studies conducted by the

Robert E. Nolan Company show that high-performing banks have a work distribution of 55

percent on sales and account opening, 18 percent on fee and non-fee services, 8 percent on

customer problem resolution, and 19 percent on administration and other. Average

performing banks, on the other hand, see their CSRs spending more time in problem

resolution (25 percent) and less time (30 percent) in actual sales and account opening. A

factor influencing this difference in performance is that average performing bank CSRs spend

more time opening individual accounts and therefore open fewer accounts per month than the

time allows.

61
 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-tierbanks 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

62
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 establish both branch and

individual sales thresholds before incentives are earned.

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

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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

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not 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.

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 BIBILOGRAPHY

www.wikipedia.com

www.theinternatiuonaljournal.org

http://www.citehr.com/359710-hr-practices-indian-banking-sector.html

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