Check out the HRM Challenges in Banking IN INDIA
The RBI has already prepared the road map for major banking reforms and it is only a matter of time before i1 is implemented. This road map has two distinct phases of change:
a. In the first phase, foreign banks will be allowed to establish a presence in India through the wholly owned subsidiary route. The markets will be opened up for the acquisitions of weak banks that RBI considers are appropriate for acquisitions.
b. The second and more encompassing phase that the RBI plans to begin from April 2009 is to allow foreign banks to acquire controlling stakes in privately owned. Indian banks. This phase will lay the foundation for open markets.
The success and survival of the banks will depends more and more on. 'People Management' and only those banks that "can manage their human resource effectively will survive in the long run.
If there is anyone singularly important lesson that has been learnt from the process of reforms the world over then that is ¬'people' are the real strength of the organization and it they who give an organization its competitive advantage.
The quality of human resource will be a critical factor in the success of Indian Banks especially the Public Sector Banks (PSBs). As a consequence there is .an urgent need for overhauling of the entire human resource in banks and hence effective human resource management has become vital. Banks will need to take a holistic view of HRM for providing qualitative services with minimum cost and time to the public.
The major HRM challenges that confront the Indian Banks and the measures that need to be taken are discussed here below.
PROBLEM OF REDUNDANCY
A major problem in many Public Sector Banks (PSBs) is that many posts in them have become redundant either due to changes in business procedures or due to the computerization of branches which started two decades back.
Thus a scientific job and role analysis needs to be done to redefine various positions in the bank. It is only then that banks will be able to achieve an improvement in 'their performance and utilization of manpower. A first step in this direction would be for banks to start negotiating immediately with their unions for effective redeployment of the employees.
SNAIL PACED PROMOTIONS
A recent study found that the present promotion cycle in PSBs for the serving employees was 11 years. The average age of an employee at different scales has revealed that promotion take place at a late stage in one's career. The study also found that the existing promotion policy is one of the major causes of high levels of dissatisfaction (62/'0) among the employees.
This mismatch between the aspirations of the employees and organizational needs requires immediate attention. There is an urgent need to revamp the current promotion policy and replace it with a much more dynamic one that allows for a fast track growth.
FREQUENT TRANSFERS
The frequent transfers are a major cause of discontentment, particularly among officers. This is a serious issue because discontent has a direct impact on employee performance and thus on the bank's productivity. The average transfer cycle is 2.5 years and 3.5 years in the case of directly recruited officers and promotes officers respectively.
Banks need to formulate proactive and transparent transfer and placement mobility of staff optimum utilization of human resources and achieve cost effectiveness. However, care should be taken to minimize hardship to employees.
TRAINING
The way in which a banker performed banking activities no longer exists. In many parts of the world. The world is witnessing the emergence of the 'Techno Banker'. This is keeping in tune with modern banking gadgets and• payment 'gateways that the 'Techno savvy Banks' currently offer, If PSB employees are to fall in line with peer practices of the industry, then there is an urgent need to fine tune their skills and assimilate in them the intricacies of the new functions that are performed.
The focus in banks had shifted towards market orientation, from systems and procedure orientation. Thanks to the cut-throat competition among banks, the present day customers of banks are always demanding for better products and better services. Their demands are continuously increasing and bankers are constantly on the lookout for products that maximize the service quality.
Training programs should aim at enhancing the value-addition factor to the customers in products dispensed and the services rendered. Relationship Management (the new mantra in customer services in banks) should be the focus of training programs. It should aim at improving customer services in banks. PSBs need to start imparting training to their staff in marketing concepts. Service marketing is the area PSBs need to concentrate in order to win over the customers.
OVERHAULING OF PERFORMANCE APPRAISAL & REWARD SYSTEMS
A recent study has found that three-fourths of the clerical staff and more than 90/0 of the officers felt that the present performance appraisal system should be changed. Further about 76/0 of the employees thought that there should be a penalty for non¬performance and reward for superior performance.
Rewards and punishments are the vital elements for improving the individual employee's performance in banks. An uniform pay structure does not distinguish between performers and non-performers. Hence banks need to introduce a well-defined and non-discriminatory reward system for rewarding performance.
The improvement in the performance appraisal system is a major challenge that PSBs face. Designing and implementing an appropriate reward system is an even greater challenge.
ATTRACTING AND RETAINING TALENTED EMPLOYEES
In the face of stiff competition from service industries, private sector and foreign banks (which offer attractive remuneration and better working conditions), the public sector banks have a formidable challenge of attracting and retaining young people with mufti-dimensional skills and experience. This is more so in the case of staff members with some IT background and related knowledge.
HR Departments of Banks need to proactively to look into this area and develop suitable ways for tackling this problem. Perhaps, the time is ripe now to introduce initiatives such as Employees Stock Options (ESO), Special, appreciation schemes, quick promotional initiatives, specialized HRD training programs, etc.
CULTURE CLASHES
If Indian bonks want to arrive on the global map and compete on a global level then they need to develop size. Rather than have a large number of small banks, we need to have a small number of large banks. Thus the need of the hour is consolidation of PSBs. This can be done through mergers of various PSBs.
A challenge that HR managers are very likely to encounter during the consolidation phase is culture clashes. Each PSB has its own, unique culture and ways of working and hence confidence building measures prior and after the merger will be critical to ensure that these new marriages survive and prosper.
Framing a sound HRM policy and ensuring that the policy is practiced consistently at all levels in their branches will be a major test for most banks.
The RBI has already prepared the road map for major banking reforms and it is only a matter of time before i1 is implemented. This road map has two distinct phases of change:
a. In the first phase, foreign banks will be allowed to establish a presence in India through the wholly owned subsidiary route. The markets will be opened up for the acquisitions of weak banks that RBI considers are appropriate for acquisitions.
b. The second and more encompassing phase that the RBI plans to begin from April 2009 is to allow foreign banks to acquire controlling stakes in privately owned. Indian banks. This phase will lay the foundation for open markets.
The success and survival of the banks will depends more and more on. 'People Management' and only those banks that "can manage their human resource effectively will survive in the long run.
If there is anyone singularly important lesson that has been learnt from the process of reforms the world over then that is ¬'people' are the real strength of the organization and it they who give an organization its competitive advantage.
The quality of human resource will be a critical factor in the success of Indian Banks especially the Public Sector Banks (PSBs). As a consequence there is .an urgent need for overhauling of the entire human resource in banks and hence effective human resource management has become vital. Banks will need to take a holistic view of HRM for providing qualitative services with minimum cost and time to the public.
The major HRM challenges that confront the Indian Banks and the measures that need to be taken are discussed here below.
PROBLEM OF REDUNDANCY
A major problem in many Public Sector Banks (PSBs) is that many posts in them have become redundant either due to changes in business procedures or due to the computerization of branches which started two decades back.
Thus a scientific job and role analysis needs to be done to redefine various positions in the bank. It is only then that banks will be able to achieve an improvement in 'their performance and utilization of manpower. A first step in this direction would be for banks to start negotiating immediately with their unions for effective redeployment of the employees.
SNAIL PACED PROMOTIONS
A recent study found that the present promotion cycle in PSBs for the serving employees was 11 years. The average age of an employee at different scales has revealed that promotion take place at a late stage in one's career. The study also found that the existing promotion policy is one of the major causes of high levels of dissatisfaction (62/'0) among the employees.
This mismatch between the aspirations of the employees and organizational needs requires immediate attention. There is an urgent need to revamp the current promotion policy and replace it with a much more dynamic one that allows for a fast track growth.
FREQUENT TRANSFERS
The frequent transfers are a major cause of discontentment, particularly among officers. This is a serious issue because discontent has a direct impact on employee performance and thus on the bank's productivity. The average transfer cycle is 2.5 years and 3.5 years in the case of directly recruited officers and promotes officers respectively.
Banks need to formulate proactive and transparent transfer and placement mobility of staff optimum utilization of human resources and achieve cost effectiveness. However, care should be taken to minimize hardship to employees.
TRAINING
The way in which a banker performed banking activities no longer exists. In many parts of the world. The world is witnessing the emergence of the 'Techno Banker'. This is keeping in tune with modern banking gadgets and• payment 'gateways that the 'Techno savvy Banks' currently offer, If PSB employees are to fall in line with peer practices of the industry, then there is an urgent need to fine tune their skills and assimilate in them the intricacies of the new functions that are performed.
The focus in banks had shifted towards market orientation, from systems and procedure orientation. Thanks to the cut-throat competition among banks, the present day customers of banks are always demanding for better products and better services. Their demands are continuously increasing and bankers are constantly on the lookout for products that maximize the service quality.
Training programs should aim at enhancing the value-addition factor to the customers in products dispensed and the services rendered. Relationship Management (the new mantra in customer services in banks) should be the focus of training programs. It should aim at improving customer services in banks. PSBs need to start imparting training to their staff in marketing concepts. Service marketing is the area PSBs need to concentrate in order to win over the customers.
OVERHAULING OF PERFORMANCE APPRAISAL & REWARD SYSTEMS
A recent study has found that three-fourths of the clerical staff and more than 90/0 of the officers felt that the present performance appraisal system should be changed. Further about 76/0 of the employees thought that there should be a penalty for non¬performance and reward for superior performance.
Rewards and punishments are the vital elements for improving the individual employee's performance in banks. An uniform pay structure does not distinguish between performers and non-performers. Hence banks need to introduce a well-defined and non-discriminatory reward system for rewarding performance.
The improvement in the performance appraisal system is a major challenge that PSBs face. Designing and implementing an appropriate reward system is an even greater challenge.
ATTRACTING AND RETAINING TALENTED EMPLOYEES
In the face of stiff competition from service industries, private sector and foreign banks (which offer attractive remuneration and better working conditions), the public sector banks have a formidable challenge of attracting and retaining young people with mufti-dimensional skills and experience. This is more so in the case of staff members with some IT background and related knowledge.
HR Departments of Banks need to proactively to look into this area and develop suitable ways for tackling this problem. Perhaps, the time is ripe now to introduce initiatives such as Employees Stock Options (ESO), Special, appreciation schemes, quick promotional initiatives, specialized HRD training programs, etc.
CULTURE CLASHES
If Indian bonks want to arrive on the global map and compete on a global level then they need to develop size. Rather than have a large number of small banks, we need to have a small number of large banks. Thus the need of the hour is consolidation of PSBs. This can be done through mergers of various PSBs.
A challenge that HR managers are very likely to encounter during the consolidation phase is culture clashes. Each PSB has its own, unique culture and ways of working and hence confidence building measures prior and after the merger will be critical to ensure that these new marriages survive and prosper.
Framing a sound HRM policy and ensuring that the policy is practiced consistently at all levels in their branches will be a major test for most banks.