Description
The documentation about economic slowdown implication on HR practices.
2009
Economic Slowdown: Implications on HR Practices
A peek into Indian Banking Sector
Table of Contents
Table of Contents...................................................................................................2
Introduction
Human Resources mean employees in organisation, who work to increase the productivity of the organisation. Development is necessary to ensure efficient delivery of present jobs and those expected in future. HRD helps employees in developing competencies for achieving this objective. How effective an employee is depends on the organizational context, but more or less the employee should be a combination of dynamic personality, natural capabilities, developed skills, experience and learning. Climate is an overall feeling that is conveyed by the physical layout, the way employees interact and the way members of the organisation conduct themselves with outsiders. “Organisational climate is a set of characteristics of an organisation which are referred in the descriptions employees make of the policies, practices and conditions which exist in the working environment.” - Abraham An organisation became dynamic and growth oriented if their people are dynamic and proactive, which is achieved through proper selection of employees and nurturing.. To survive it is very essential for an organisation to adopt the change in the environment and also continuously prepare their employees to meet the challenges.
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Recession, Salary cuts, layoffs, cost cutting, withdrawal of job offers etc. seem to be a common feature in organizations of various sizes and sectors in today’s volatile economic scenario. In times where recession and economic slowdown are burning topics, organizations are fire-fighting to control costs in a bid to survive this explosive economic situation. As the current recession seems to be one of the biggest recessions ever, it will definitely change the way the HRM function operates in the organization. The HRM function will have to be more efficient and focussed on the strict cost control. There will have to be transformation in the outlook and attitude of the HRM function in organizations. The current HRM function which was usually concerned on the overall employee satisfaction and protection of the key employees and top talents against the competitors will have to change. The changes in the area of Human Resources will most probably affect almost all the HR processes. A few examples of the changes expected in the function are: 1. The current recruitment and staffing was focussed on finding the potential on the job market. The future challenge will be about finding them cheaply, without incurring unnecessary costs. 2. Compensation and benefits will not be focussed on the overall satisfaction, but the normal distribution will be introduced and forced again. 3. Organizations which spent a lot of money for the employees with no special contribution will definitely not do so anymore. 4. Training and development expenditure in the organizations would be more prudent and may be investment only on a specific group of employees, the top talents of the organizations.
Literature Review
Human capital Theory Implications for Human Resource Development This paper talks about how capital has extended to hold multidimensional meanings in the economic world. It was difficult to explain the growth of a firm in terms of just physical capital, labour, land and management. The missing link was human capital. Like every other resource, human capital also seeks improvement in resources, here workers, and their utilisation, which here would mean the proper training of the employees. The definition for human resource development has been defined differently by different research authors. Two such instances are given below: 1. Swanson and Holton’s defined HRD as ‘a process for developing and unleashing human expertise through organization development and personnel training and development for the purpose of improving performance’. 2. McLean and McLean’s defined HRD as ‘any process or activity that, either initially or over the long term, has the potential to develop adult’s work-based knowledge,
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expertise, productivity and satisfaction, whether for personal or group, team gain, or for the benefit of an organization, community, nation, or ultimately, the whole of humanity’. Chronologically speaking, HRD has undergone a gradual change in how organisations perceive its usefulness and the variables that are dependent on HRD for performance enhancement. For instance, in the 60’s HRD was perceived as an investment in training and skills acquirement of the employees, which would enable them to perform better in the organisation. In the 70’s the focus shifted to a returns obtained from HRD. Employed gained education as they viewed that getting education will help them gain returns and help them to garner earnings in a lifetime more easily than any other source. In the 80’s HRD was expanded to include training and imparting oh formal and informal skill sets to the employees to increase their productivity of the workplace. It focussed on improving the attitude of employees and providing them an environment which hones their capabilities. From the 90’s to the present 21st century human capital was recognised as a great contributing factor in the growth of a firm or country with those having greater human capital experiencing faster growth. Human capital was identified as the traits one brings to the job: intelligence, fulfilling work energy, a generally positive attitude, reliability and commitment, one’s ability to learn: aptitude, imagination, creativity, and what is often called ‘street smarts’ savvy (how to get things done). Thus understanding HRD could help link human capital, HRD and organisational performance. Performance Appraisals any use for training Apart from training, performance appraisal is an important factor in enhancing employee productivity. Training alone cannot be beneficial unless it is followed by assessment of the modes of training. Performance appraisal is one of the most important aspects of HRM, yet it is woefully neglected in practice by managers. Very few mangers go for an enhancement in their appraising techniques, and in that to, they find themselves short of assistance. Performance appraisal researchers study how the people observe and process information which leads them to their judgements, how they are influenced by the “halo” effect and the “leniency bias”. Appraisal process is also affected by politics in the firm. A series of interviews with business executives revealed that politics becomes a contributing factor in the appraisal process, because the managers know that they have to preserve their relations with the people they apprise. Accuracy in appraisals also becomes a distant probability, as the appraisals are governed in preserving more of group harmony and avoiding conflict. This may result in artificially high ratings: either to make the problem employee someone else’s problem, or simply to avoid putting a blotch on someone else’s career.
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However, the appraisal process is an important factor for determining training needs. Hence, all the more reasons to avoid appraisal spiral into a formality or bureaucracy. Every organization should consider the following aspects thoroughly to understand its ability to deal with training and development needs through appraisals: • • • • • • • Decisions should not be ad hoc based. Importance of performance appraisal in organisation Managers should observe employees closely for every trait of performance Employees should be trained to utilise their own appraisals Allow employees to give meaningful input about appraisal system Avoid seeping in of political factors in appraisal Appraisal systems should give equal weight-age to measurable outcomes and other long term training needs.
Thus through proper employee training and appraisal systems in place, firms can maximize their employee potential and gain competitive advantage for themselves in the market place.
Increasing Performance Appraisal effectiveness: Matching task types, appraisal process and Rater training. The performance appraisal process has to be tailored to fit rate task characteristics and thus this paper proposes a cognitive processing approach that matches rater training and performance appraisal formats to characteristics of the task in order to aid the rater to form process and integrate behaviour relevant categories. The effectiveness of the system is dependent on accuracy of performance observations as well as the ability to improve the ratee’s future performance. Accuracy can be measured in two types 1. Actual comparison of the ratings 2. Differential accuracy. However they are rarely used because different contextual factor influence behaviour. Thus most of the organizations make use of the elevation method. Thompson suggested that organization evaluation should depend on two dimensions 1. Completeness of knowledge about means-ends relationship 2. Crystallization of goals.
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So taking this forward an evaluation system was developed based on monitoring and evaluation of behaviour or inputs. The task types were classified by constructing a matrix based on availability of reliable and valid performance measures vs. knowledge of transformation process. Availability of reliable and valid performance measures High Low Knowledge of transformation process High (Cell 1) High (Cell 3) Low (Cell 2) Low (Cell 4)
If a person knows how the work can be performed and can also monitor and observe the behaviour of the subordinates then it falls in the first category (i.e., Cell 1) On the other hand if the person can’t monitor the day to day activities but can measure the quantity and quality of output then it falls in the second category (i.e., Cell 2) If the performance of the individual can be evaluated only on the basis of behaviour and can’t be measured then it falls in the third category (i.e., Cell 3) Finally if the transformation process can’t be specified and performance goals is ambiguous then it falls in the fourth category (i.e., Cell 4) If the nature of the task is not taken into consideration it would ultimately lead to an inefficient and unsuccessful performance appraisal system. However if appraisal takes place according to nature of task and designing programs to increase observational accuracy then it would improve the overall system. The evaluation can be done by either past performance or through performance appraisal process. If reliable and valid performance measures are available and if there is a complete knowledge of the transformation process then either behaviour based or output based appraisal systems can be used. The checklists and rating scales such as behaviour anchored rating scales (BARS) or behaviour observation scales (BOS) can be used for describing acceptable behaviours rather than measuring or quantifying outputs. Taking this in account it is of the view that the congruence of task types and performance appraisal formats will lead to effective performance appraisal system. So for Cell 1: Behaviour based performance appraisal formats or output based performance appraisal formats is suitable. Cell 2: Behaviour based performance appraisal formats is suitable Cell 3: Behaviour based performance appraisal formats is suitable Cell 4: Use of consensus is a preferred method for effective performance appraisal system.
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Specification of performance criteria through MBO or output control and the specification of required role behaviours through BARS or behaviour control according to task types will increase the likelihood that the rater will use task relevant information for performance appraisal. The congruence of task types and performance appraisal formats will increase the likelihood that the rater and the ratee agree on performance appraisal criteria. The paper is also of the view that raters should be trained in order to increase observational accuracy. The salient features which need to be incorporated during the training of these raters are as follows 1. Raters themselves should be trained and it is necessary to observe and record certain behavioural aspects of the rate. 2. Also the rater needs to be trained to as per the demands of the task types so that the system can be more effective. 3. The rater should increase their self efficacy perception in order to determine the information to gather process and integrate. 4. If the rater has the knowledge of the process then the training should be designed to improve rater self efficacy to provide feedback which will help the appraisal process. 5. If the rater has no knowledge about the process then training should be designed to improve rater self efficacy to provide feedback which will facilitate performance appraisal effectiveness.
Human Resource Management and Organizational Performance Evidence from Retail Banking This paper explores the relation between the various HRM practices and their effect on performance of a firm. Here, the author conducts experiments in the service sector, as previous research papers have already catered to the manufacturing sector in detail. The author conducts her research in a Canadian bank. She proves that there is a marked relation between the performance level of employees, and their satisfaction with the quality of performance evaluation. HRM is an important determinant of productivity in services sector, as it has a higher percentage of employees as compared to the manufacturing sector. Also, it involves more interaction between employees and customers. Services end products are intangible, they tend to be produced and consumed simultaneously and they involve customers in production and delivery. Thus it becomes all the more important to study and improve the productivity of work force through HRM practices. A high performance system was implemented in the bank. It is one which involves managerial employees in decision making. The three elements of a high performance system are – opportunity to participate, skills and incentives.
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The author started out with questionnaires that he conducted not with the managers, but with the employees, as employees give a more realistic view of the situation. Managers tend to be a little short sighted and unaware of the actual activities. They may tend towards assuming that an ideal mode of working exists in their firm. Higher the level of the manager who does the survey/questionnaire, more limited is his/her knowledge of what is actually happening at the workplace. Getting questionnaires filled by employees also gives a more stable result, with hardly any fluctuations due to some differing opinions of any employee. The questionnaires conducted after the implementation measured the attitude and level of satisfaction of the employees. The main headings under which questions were framed were: Communication, Performance & reward, Climate, skill. These questions were used to measure the various perceptions of the employees working at that bank, rather than the incidence of specific HR practices. The responses to these questions were the same as that observed during branch visits made to the bank and observing employee behaviour. Using these factors, a pair-wise correlation table was prepared. Some results observed were: • • Incentive dimension of the work system had a positive and statistically significant relationship with branch performance. As a result of “opportunity to participate” element, there was noticed a positive flow of communication between manager and staff and among other staff members.
These results were mostly unaffected even when a dummy variable, like managers were included in the regression, or including a variable that measured the performance prior to any changes in HRM environment. The combination of the branch visits and the econometric results supports the notion that branch-level performance in the banking industry can be influenced by specific human resource management-related actions. How can HR Directors add value in a recession? “How Can HR Directors add value during a recession” is an article based on a survey carried out amongst a network of HR directors at an organization posing out a single question “How can they add value in a recession? “. This article summarizes the findings from the survey. The HR directors surveyed were responsible for coming up with various ideas and played a key role in the business. There was a consensus that although recession did give rise to devise short term strategy, it was equally important to focus on future performances and to keep an eye on the vision and values of the business. In spite of there being diverse opinions in the survey, there were six main themes that emerged as far as value addition was concerned, they being Communicate and Engage; Innovate: Performance Management; Recruit and Retain the Best, Support the CEO and the Power of Positivity. The paper explores deeper into the themes emerging out of the study.
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In these times, the HR directors feel the need to be visible where they can be seen and heard. It is felt that communication, morale and performance are all very closely connected. Hence effective communication through the correct channels especially when difficult messages have to be conveyed is an important task. Also engaging the employees and maintaining motivation in their careers is critical to business success. Given the unprecedented nature of the period, the directors believed it was time to probably challenge the traditional methods and thinking and explore new innovative ideas. Some of the suggestions that cropped up were flexible working and cutting hours rather than believing redundancy was the sole option. It was believed that it was vital to challenge managers to come up with new ideas to improve performance and deliver more for less. All in all it was believed that it was time for some radical thinking. Performance improvement and company performance are considered to being a key role of the HR. During recession, there should even a stronger focus on this aspect. There is a requirement to expect, encourage, nurture, recognise and reward high performance. The poor performers need to be subject to some tough decisions and moved out of business. In words of one of the directors “Get on a diet - lean and mean is the way to fight recession. “ Some see recession as an opportunity to instil a performance oriented culture. Strong leadership is critical as far as this aspect is concerned. Recession or No Recession, recruiting and retaining the best talent in place is vital and should be the top priority of the HR. It is essential to have the best people in the weakest areas of the business. Also, it was felt when money was tight and the organization was on a tight budget, alternatives non-monetary for rewarding high performers to retain them should be explored. However, there also a few who felt recession itself was a prime retention factor. The final anchor, maintaining a positive approach, having a “business as usual approach” was important to success , while not ignoring the difficult situation, the businesses found themselves in today. Negativity and too much focus on bad news is seen as being highly dangerous, and HRD felt that leaders should be seeking to exploit the opportunities that a downturn brings rather than dwelling on possible failure. HRD feel it important not to lose sight of the other side of the recession and to keep a strong and positive employer brand, even if making redundancies. To summarize, HR was perceived to play a very crucial role in this climate, given the fact that they were custodians of the companies’ highest costs that is their employees. HRD are seemingly adapting to the current harsh climate by taking a double-edged sword approach and balancing the short term imperatives with the longer term vision.
Sector Back Ground
Indian Banking Sector
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Indian banking system has evolved over the years and has gone through various phases. Since Independence the banking industry in India has witnessed 5 phases 1. Foundation Phase: The emphasis during this phase was about laying foundation for a sound banking system in the country. The phase lasted from independence till the nationalisation of banks. During this time the sector witnessed development of necessary framework for proper functioning of banking system in the country. 2. Expansion Phase: The emphasis during this phase was to make the banking facilities available to the masses. Credit was made available to rural and semi-urban population and also to some priority sectors. The phase lasted from the nationalisation of banks and continued till 1984. However due to weak supervision, the asset quality and profitability of banks were hit. 3. Consolidation Phase: This phase started in 1985 and a number of initiatives were taken by RBI and during this phase there was a marked slowdown in the branch expansion. Extra attention was paid to improving house-keeping, customer service, credit management, staff productivity and profitability. 4. Reforms Phase: This phase started in 1991 during the economic crisis faced by the country and paved way for extensive financial sector reforms. The reforms included deregulation of interest rates, more competition, technological changes, prudential guidelines on asset classification, capital adequacy etc. 5. Competition Phase: This phase can be considered to a part of the reforms phase but didn’t run in parallel to it. It started after the economic crisis faced by the country was overcome. During this phase saw the opening up of the banking sector in a major way to new private sector banks and foreign banks. This led to the improvement of the services offered to the customer. The banks offered the customers more services through a variety of channels. The customer no longer had to visit the branch for simple tasks which was now possible to be done via ATM and internet. So this phase actually coincided with the technology boom which the country was witnessing. HR Issues faced by Public Sector Banks 1. The average age of employees in public sector banks is 50 compared to 28 in ICICI. So majority of the people in these banks will retire over the next few years leading to the shortage of people in the organization. A study conducted reports that 63000 employees will retire in the next 2 years and the banks need to recruit 500000 new employees in the next 5 years to maintain its growth. 2. The banks during the consolidation phase were involved in a multi-year hiring freeze which led to an entire generation missing at these banks. So this is the reason why the banks have their employees in the higher age bracket. 3. However it is not easy to recruit new talent due to the cap on the salary which can be paid to the employees set by the government. Also government policy on reservation also is a hindrance in the recruitment process.
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4. Also due to major expansion of private sector and foreign banks in the country, the middle level management of the public sector banks are recruited at higher pay scales. This leads to the void in the middle management as well. 5. Lack of clarity in performance metrics and absence of rewards for performers are impediments to good performance.
Research Methodology
Objective The main purpose of the survey aims to measure the HRD climate and its systems in the organization, and to understand the impact of the current financial slowdown on the HRD climate of an organization with a focus on the Banking Sector in India. Methodology The questionnaire comprises of 27 questions which have been rated on a five point scale, these responses have been further categorized into ten dimensions. Responses of 15 employees from a private sector bank and two public sector banks have been obtained to understand the HRD climate and the impact of slowdown on the same. This data has been further analysed using quantitative analysis tools like mean, median, standard deviation etc. These tools have been used with a focus on the ten dimensions, attempting to identify the various dimensions of the HRD climate in the sector.
Process Flow 1. The mean value for each of the dimension for every response is calculated. 2. The mean value and standard deviation for each dimension has been calculated. 3. Since the responses received are from public and private sector banks, the top 5 dimensions of each sector are then selected. These dimensions are the most pertinent dimensions for each of sector ( i.e., public and private sector)
4. The dimensions are then represented using a Venn diagram and those which are
common to both the sectors are the ones which are dominant to the entire banking sector. Further those which are not common are the ones which characterize the individual sectors namely public and private sectors.
Quantitative Analysis
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For our analysis we have taken 17 responses of which 8 responses are from private sector bank and 9 from public sector bank. The table bellow gives the summery of the response collected.
Parameters Participation Succession Planning Human Resource Information Organization Development Training Appraisal Counseling Career Planning Reward and Welfare Job Enrichment Over All Mean SD* 3.20 0.77 3.41 0.66 3.03 0.89 3.63 0.81 3.35 0.68 3.15 1.18 2.94 0.93 2.76 0.97 3.04 1.11 3.59 0.87 Private Sector Bank Mean SD* 3.63 0.74 3.63 0.72 3.44 0.82 3.96 0.70 3.29 0.83 3.56 1.08 2.94 0.98 2.75 1.39 3.50 1.01 3.50 0.93 Public Sector Banks Mean SD* 2.81 0.60 3.22 0.58 2.67 0.83 3.33 0.82 3.41 0.56 2.78 1.20 2.94 0.95 2.78 0.44 2.63 1.09 3.67 0.87 * Standard Deviation
A comparative plot of various Parameters in public and private sector is given below
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Based on the above data, we have identified five top rated parameters which characterise the sector. Parameter common to both private and public sector bank can be identified as the parameter that characterise the entire Indian banking sector. The diagram below brings out analysis
Qualitative Analysis
Based on the quantitative data and the interaction with the bank employees, following inferences can be made with respect to the parameters under study: Participation: The “Participation” aspect refers to the employee involvement in the day to day operation of the organizations. In this economic slowdown where banks and financial institutions have been worst hit, participation of employees to avoid negative sentiments from spreading is of utmost importance which is reflected on the mean score of 3.20 obtained from the employees of various sectors. However the public sector due to the bureaucracy aspect seems to be slightly weaker on this aspect with a mean score of 2.81. Succession Planning: The efforts of the organization for planning and the preparedness of employees to fill in positions of a senior level is reflected through the “Succession Planning”. The banking sector on a whole is highly rated by its employees on this aspect with a mean score of 3.41. There is however a variation between public and private sector banks, that amounts to a 0.41 point difference between the means.
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Human resource Information: Human Resource information refers to the communication efforts taken by the organization to pass on information and details regarding human resource, potential etc to the employees. Information Communication is again a very important element in this slowdown climate. Public Sector banks because of the closed structure of the organization scores low on this aspect with a mean score of 2.67, which is the second lowest element score. The Private Sector Banks seem to be encouraging this pass on of information with a mean score of 3.44. Organization Development: It refers to the efforts or measurements undertaken to develop the organizations. The organization uses different type of interventions to solve problems which helps the organization to achieve growth and increase its efficiency. From the responses received it is evident that both the public and private sector organization employees are of the view that organizations have done enough in this regard. Also the private sector employees have rated this dimension more highly than the public sector employees. Training: It refers to the coaching given to the employees to improve employees potential and do away with the faults and short comings. From the responses received it is evident that both the public and private sector organization employees are of the view that organizations have done enough in this regard. Also looking at the mean we can infer that public sector employees feel that more emphasis is paid by their organizations than the private sector organization. Appraisal: It refers to the evaluation of each employee. The two types of appraisal are performance appraisal and potential appraisal. From the responses received we can infer that employees in public sector are not happy with the appraisal system in place in their organization compared to the private sector organization. So we conclude that private sector employees feel that there is a strong appraisal system in place. Counselling: It refers to help or guidance (mostly verbal) with respect to personal or professional problems. The data collected show a mean of 2.94 (i.e. almost neutral) response for both public and private sector bank. However, there exist high variability in the response collected (SD = .97). This shows that some employees have been receiving counselling while others are not. This kind of variability can lead discontentment. Career Planning: Refers to assistance provided to help employees attain greater heights in career. In public sector we see an almost neutral response (mean=2.78) with low variability (SD=.44) suggesting equal availability of opportunity. In private sector we again see a neutral response (mean=2.75) however the variability is High (SD=1.39) suggesting unequal availability of opportunity. Reward and Welfare: Observing the data for public and private bank employees for reward and welfare, we see that for public sector employees mean score for reward and welfare is 2.63 with a standard deviation of 1.09. The same for private sector employees is 3.5 with a standard deviation of 1.01. From this we deduce the following:
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• • •
•
On an average, employees of private sector banks have high satisfaction levels in reward & welfare For public sector bank employees, the satisfaction level with reward and welfare is just above average. Amongst the private banks, JP Morgan and HDFC figure as high in terms of above mentioned criteria, while ICICI and HSBC figure just about average. Amongst public sector banks employee motivation levels are at all time low especially in Dena Bank and Oriental Bank of Commerce. Indian Overseas Bank and Bank of Baroda hover just around average which reflects low satisfaction levels.
Job Enrichment: mean score for public sector employees is 3.67 with a standard deviation of 0.87. The same for private sector employees is 3.50 with a standard deviation of 0.93. Conclusions: • Public sector tends to offer more challenges in job, and hence greater job satisfaction. This is agreed upon by almost everyone, which is evident by the low standard deviation. Private sector offers lesser job satisfaction as compared to public sector. This may be taken from the fact that public sector is more relaxed in terms of flexible routines.
•
Conclusion
After analysing the responses received from the public and private sector, we are able to determine the most dominant dimensions in each of them. It helps us in finding out the dimensions which are relevant to the entire industry. The ones which are rated the least in both the sectors are the areas which are neglected so far in the Indian banking industry. These dimensions are neglected in the industry maybe due to the government regulations which are in place for the public sector banks. One major concern in Indian banking sector is lack of flow of human information. Banking being a service industry needs to have a an efficient human information flow so as to build efficient work stations else there will be variation in service quality experienced by customers, not only across branches but also within same branch.
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References
Human capital theory: implications for human resource development. ( Author(s): Nafukho, Fredrick Muyia; Hairston, Nancy; Brooks, Kit. Source: Human Resource Development International Dec2004, Vol. 7 Issue 4) Performance appraisals: Any use for training? (Authors: Thomas, Steven L. Source: Business Forum; Winter97, Vol. 22 Issue 1) Increasing Performance Appraisal Effectiveness: Matching Task Types, Appraisal Process, and Rater Training. (Authors: Lee, Cynthia1. Source: Academy of Management Review) Human Resource Management and Organizational Performance Evidence from Retail Banking. (Authors: Bartel, Ann P. Source: Industrial & Labor Relations Review, Jan2004, Vol. 57 Issue 2) How can HR Directors add value in a recession? (Authors: Martin Goodman. Source: HR magazine, 23 February 2009)
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doc_347992638.doc
The documentation about economic slowdown implication on HR practices.
2009
Economic Slowdown: Implications on HR Practices
A peek into Indian Banking Sector
Table of Contents
Table of Contents...................................................................................................2
Introduction
Human Resources mean employees in organisation, who work to increase the productivity of the organisation. Development is necessary to ensure efficient delivery of present jobs and those expected in future. HRD helps employees in developing competencies for achieving this objective. How effective an employee is depends on the organizational context, but more or less the employee should be a combination of dynamic personality, natural capabilities, developed skills, experience and learning. Climate is an overall feeling that is conveyed by the physical layout, the way employees interact and the way members of the organisation conduct themselves with outsiders. “Organisational climate is a set of characteristics of an organisation which are referred in the descriptions employees make of the policies, practices and conditions which exist in the working environment.” - Abraham An organisation became dynamic and growth oriented if their people are dynamic and proactive, which is achieved through proper selection of employees and nurturing.. To survive it is very essential for an organisation to adopt the change in the environment and also continuously prepare their employees to meet the challenges.
2|Page
Recession, Salary cuts, layoffs, cost cutting, withdrawal of job offers etc. seem to be a common feature in organizations of various sizes and sectors in today’s volatile economic scenario. In times where recession and economic slowdown are burning topics, organizations are fire-fighting to control costs in a bid to survive this explosive economic situation. As the current recession seems to be one of the biggest recessions ever, it will definitely change the way the HRM function operates in the organization. The HRM function will have to be more efficient and focussed on the strict cost control. There will have to be transformation in the outlook and attitude of the HRM function in organizations. The current HRM function which was usually concerned on the overall employee satisfaction and protection of the key employees and top talents against the competitors will have to change. The changes in the area of Human Resources will most probably affect almost all the HR processes. A few examples of the changes expected in the function are: 1. The current recruitment and staffing was focussed on finding the potential on the job market. The future challenge will be about finding them cheaply, without incurring unnecessary costs. 2. Compensation and benefits will not be focussed on the overall satisfaction, but the normal distribution will be introduced and forced again. 3. Organizations which spent a lot of money for the employees with no special contribution will definitely not do so anymore. 4. Training and development expenditure in the organizations would be more prudent and may be investment only on a specific group of employees, the top talents of the organizations.
Literature Review
Human capital Theory Implications for Human Resource Development This paper talks about how capital has extended to hold multidimensional meanings in the economic world. It was difficult to explain the growth of a firm in terms of just physical capital, labour, land and management. The missing link was human capital. Like every other resource, human capital also seeks improvement in resources, here workers, and their utilisation, which here would mean the proper training of the employees. The definition for human resource development has been defined differently by different research authors. Two such instances are given below: 1. Swanson and Holton’s defined HRD as ‘a process for developing and unleashing human expertise through organization development and personnel training and development for the purpose of improving performance’. 2. McLean and McLean’s defined HRD as ‘any process or activity that, either initially or over the long term, has the potential to develop adult’s work-based knowledge,
3|Page
expertise, productivity and satisfaction, whether for personal or group, team gain, or for the benefit of an organization, community, nation, or ultimately, the whole of humanity’. Chronologically speaking, HRD has undergone a gradual change in how organisations perceive its usefulness and the variables that are dependent on HRD for performance enhancement. For instance, in the 60’s HRD was perceived as an investment in training and skills acquirement of the employees, which would enable them to perform better in the organisation. In the 70’s the focus shifted to a returns obtained from HRD. Employed gained education as they viewed that getting education will help them gain returns and help them to garner earnings in a lifetime more easily than any other source. In the 80’s HRD was expanded to include training and imparting oh formal and informal skill sets to the employees to increase their productivity of the workplace. It focussed on improving the attitude of employees and providing them an environment which hones their capabilities. From the 90’s to the present 21st century human capital was recognised as a great contributing factor in the growth of a firm or country with those having greater human capital experiencing faster growth. Human capital was identified as the traits one brings to the job: intelligence, fulfilling work energy, a generally positive attitude, reliability and commitment, one’s ability to learn: aptitude, imagination, creativity, and what is often called ‘street smarts’ savvy (how to get things done). Thus understanding HRD could help link human capital, HRD and organisational performance. Performance Appraisals any use for training Apart from training, performance appraisal is an important factor in enhancing employee productivity. Training alone cannot be beneficial unless it is followed by assessment of the modes of training. Performance appraisal is one of the most important aspects of HRM, yet it is woefully neglected in practice by managers. Very few mangers go for an enhancement in their appraising techniques, and in that to, they find themselves short of assistance. Performance appraisal researchers study how the people observe and process information which leads them to their judgements, how they are influenced by the “halo” effect and the “leniency bias”. Appraisal process is also affected by politics in the firm. A series of interviews with business executives revealed that politics becomes a contributing factor in the appraisal process, because the managers know that they have to preserve their relations with the people they apprise. Accuracy in appraisals also becomes a distant probability, as the appraisals are governed in preserving more of group harmony and avoiding conflict. This may result in artificially high ratings: either to make the problem employee someone else’s problem, or simply to avoid putting a blotch on someone else’s career.
4|Page
However, the appraisal process is an important factor for determining training needs. Hence, all the more reasons to avoid appraisal spiral into a formality or bureaucracy. Every organization should consider the following aspects thoroughly to understand its ability to deal with training and development needs through appraisals: • • • • • • • Decisions should not be ad hoc based. Importance of performance appraisal in organisation Managers should observe employees closely for every trait of performance Employees should be trained to utilise their own appraisals Allow employees to give meaningful input about appraisal system Avoid seeping in of political factors in appraisal Appraisal systems should give equal weight-age to measurable outcomes and other long term training needs.
Thus through proper employee training and appraisal systems in place, firms can maximize their employee potential and gain competitive advantage for themselves in the market place.
Increasing Performance Appraisal effectiveness: Matching task types, appraisal process and Rater training. The performance appraisal process has to be tailored to fit rate task characteristics and thus this paper proposes a cognitive processing approach that matches rater training and performance appraisal formats to characteristics of the task in order to aid the rater to form process and integrate behaviour relevant categories. The effectiveness of the system is dependent on accuracy of performance observations as well as the ability to improve the ratee’s future performance. Accuracy can be measured in two types 1. Actual comparison of the ratings 2. Differential accuracy. However they are rarely used because different contextual factor influence behaviour. Thus most of the organizations make use of the elevation method. Thompson suggested that organization evaluation should depend on two dimensions 1. Completeness of knowledge about means-ends relationship 2. Crystallization of goals.
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So taking this forward an evaluation system was developed based on monitoring and evaluation of behaviour or inputs. The task types were classified by constructing a matrix based on availability of reliable and valid performance measures vs. knowledge of transformation process. Availability of reliable and valid performance measures High Low Knowledge of transformation process High (Cell 1) High (Cell 3) Low (Cell 2) Low (Cell 4)
If a person knows how the work can be performed and can also monitor and observe the behaviour of the subordinates then it falls in the first category (i.e., Cell 1) On the other hand if the person can’t monitor the day to day activities but can measure the quantity and quality of output then it falls in the second category (i.e., Cell 2) If the performance of the individual can be evaluated only on the basis of behaviour and can’t be measured then it falls in the third category (i.e., Cell 3) Finally if the transformation process can’t be specified and performance goals is ambiguous then it falls in the fourth category (i.e., Cell 4) If the nature of the task is not taken into consideration it would ultimately lead to an inefficient and unsuccessful performance appraisal system. However if appraisal takes place according to nature of task and designing programs to increase observational accuracy then it would improve the overall system. The evaluation can be done by either past performance or through performance appraisal process. If reliable and valid performance measures are available and if there is a complete knowledge of the transformation process then either behaviour based or output based appraisal systems can be used. The checklists and rating scales such as behaviour anchored rating scales (BARS) or behaviour observation scales (BOS) can be used for describing acceptable behaviours rather than measuring or quantifying outputs. Taking this in account it is of the view that the congruence of task types and performance appraisal formats will lead to effective performance appraisal system. So for Cell 1: Behaviour based performance appraisal formats or output based performance appraisal formats is suitable. Cell 2: Behaviour based performance appraisal formats is suitable Cell 3: Behaviour based performance appraisal formats is suitable Cell 4: Use of consensus is a preferred method for effective performance appraisal system.
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Specification of performance criteria through MBO or output control and the specification of required role behaviours through BARS or behaviour control according to task types will increase the likelihood that the rater will use task relevant information for performance appraisal. The congruence of task types and performance appraisal formats will increase the likelihood that the rater and the ratee agree on performance appraisal criteria. The paper is also of the view that raters should be trained in order to increase observational accuracy. The salient features which need to be incorporated during the training of these raters are as follows 1. Raters themselves should be trained and it is necessary to observe and record certain behavioural aspects of the rate. 2. Also the rater needs to be trained to as per the demands of the task types so that the system can be more effective. 3. The rater should increase their self efficacy perception in order to determine the information to gather process and integrate. 4. If the rater has the knowledge of the process then the training should be designed to improve rater self efficacy to provide feedback which will help the appraisal process. 5. If the rater has no knowledge about the process then training should be designed to improve rater self efficacy to provide feedback which will facilitate performance appraisal effectiveness.
Human Resource Management and Organizational Performance Evidence from Retail Banking This paper explores the relation between the various HRM practices and their effect on performance of a firm. Here, the author conducts experiments in the service sector, as previous research papers have already catered to the manufacturing sector in detail. The author conducts her research in a Canadian bank. She proves that there is a marked relation between the performance level of employees, and their satisfaction with the quality of performance evaluation. HRM is an important determinant of productivity in services sector, as it has a higher percentage of employees as compared to the manufacturing sector. Also, it involves more interaction between employees and customers. Services end products are intangible, they tend to be produced and consumed simultaneously and they involve customers in production and delivery. Thus it becomes all the more important to study and improve the productivity of work force through HRM practices. A high performance system was implemented in the bank. It is one which involves managerial employees in decision making. The three elements of a high performance system are – opportunity to participate, skills and incentives.
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The author started out with questionnaires that he conducted not with the managers, but with the employees, as employees give a more realistic view of the situation. Managers tend to be a little short sighted and unaware of the actual activities. They may tend towards assuming that an ideal mode of working exists in their firm. Higher the level of the manager who does the survey/questionnaire, more limited is his/her knowledge of what is actually happening at the workplace. Getting questionnaires filled by employees also gives a more stable result, with hardly any fluctuations due to some differing opinions of any employee. The questionnaires conducted after the implementation measured the attitude and level of satisfaction of the employees. The main headings under which questions were framed were: Communication, Performance & reward, Climate, skill. These questions were used to measure the various perceptions of the employees working at that bank, rather than the incidence of specific HR practices. The responses to these questions were the same as that observed during branch visits made to the bank and observing employee behaviour. Using these factors, a pair-wise correlation table was prepared. Some results observed were: • • Incentive dimension of the work system had a positive and statistically significant relationship with branch performance. As a result of “opportunity to participate” element, there was noticed a positive flow of communication between manager and staff and among other staff members.
These results were mostly unaffected even when a dummy variable, like managers were included in the regression, or including a variable that measured the performance prior to any changes in HRM environment. The combination of the branch visits and the econometric results supports the notion that branch-level performance in the banking industry can be influenced by specific human resource management-related actions. How can HR Directors add value in a recession? “How Can HR Directors add value during a recession” is an article based on a survey carried out amongst a network of HR directors at an organization posing out a single question “How can they add value in a recession? “. This article summarizes the findings from the survey. The HR directors surveyed were responsible for coming up with various ideas and played a key role in the business. There was a consensus that although recession did give rise to devise short term strategy, it was equally important to focus on future performances and to keep an eye on the vision and values of the business. In spite of there being diverse opinions in the survey, there were six main themes that emerged as far as value addition was concerned, they being Communicate and Engage; Innovate: Performance Management; Recruit and Retain the Best, Support the CEO and the Power of Positivity. The paper explores deeper into the themes emerging out of the study.
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In these times, the HR directors feel the need to be visible where they can be seen and heard. It is felt that communication, morale and performance are all very closely connected. Hence effective communication through the correct channels especially when difficult messages have to be conveyed is an important task. Also engaging the employees and maintaining motivation in their careers is critical to business success. Given the unprecedented nature of the period, the directors believed it was time to probably challenge the traditional methods and thinking and explore new innovative ideas. Some of the suggestions that cropped up were flexible working and cutting hours rather than believing redundancy was the sole option. It was believed that it was vital to challenge managers to come up with new ideas to improve performance and deliver more for less. All in all it was believed that it was time for some radical thinking. Performance improvement and company performance are considered to being a key role of the HR. During recession, there should even a stronger focus on this aspect. There is a requirement to expect, encourage, nurture, recognise and reward high performance. The poor performers need to be subject to some tough decisions and moved out of business. In words of one of the directors “Get on a diet - lean and mean is the way to fight recession. “ Some see recession as an opportunity to instil a performance oriented culture. Strong leadership is critical as far as this aspect is concerned. Recession or No Recession, recruiting and retaining the best talent in place is vital and should be the top priority of the HR. It is essential to have the best people in the weakest areas of the business. Also, it was felt when money was tight and the organization was on a tight budget, alternatives non-monetary for rewarding high performers to retain them should be explored. However, there also a few who felt recession itself was a prime retention factor. The final anchor, maintaining a positive approach, having a “business as usual approach” was important to success , while not ignoring the difficult situation, the businesses found themselves in today. Negativity and too much focus on bad news is seen as being highly dangerous, and HRD felt that leaders should be seeking to exploit the opportunities that a downturn brings rather than dwelling on possible failure. HRD feel it important not to lose sight of the other side of the recession and to keep a strong and positive employer brand, even if making redundancies. To summarize, HR was perceived to play a very crucial role in this climate, given the fact that they were custodians of the companies’ highest costs that is their employees. HRD are seemingly adapting to the current harsh climate by taking a double-edged sword approach and balancing the short term imperatives with the longer term vision.
Sector Back Ground
Indian Banking Sector
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Indian banking system has evolved over the years and has gone through various phases. Since Independence the banking industry in India has witnessed 5 phases 1. Foundation Phase: The emphasis during this phase was about laying foundation for a sound banking system in the country. The phase lasted from independence till the nationalisation of banks. During this time the sector witnessed development of necessary framework for proper functioning of banking system in the country. 2. Expansion Phase: The emphasis during this phase was to make the banking facilities available to the masses. Credit was made available to rural and semi-urban population and also to some priority sectors. The phase lasted from the nationalisation of banks and continued till 1984. However due to weak supervision, the asset quality and profitability of banks were hit. 3. Consolidation Phase: This phase started in 1985 and a number of initiatives were taken by RBI and during this phase there was a marked slowdown in the branch expansion. Extra attention was paid to improving house-keeping, customer service, credit management, staff productivity and profitability. 4. Reforms Phase: This phase started in 1991 during the economic crisis faced by the country and paved way for extensive financial sector reforms. The reforms included deregulation of interest rates, more competition, technological changes, prudential guidelines on asset classification, capital adequacy etc. 5. Competition Phase: This phase can be considered to a part of the reforms phase but didn’t run in parallel to it. It started after the economic crisis faced by the country was overcome. During this phase saw the opening up of the banking sector in a major way to new private sector banks and foreign banks. This led to the improvement of the services offered to the customer. The banks offered the customers more services through a variety of channels. The customer no longer had to visit the branch for simple tasks which was now possible to be done via ATM and internet. So this phase actually coincided with the technology boom which the country was witnessing. HR Issues faced by Public Sector Banks 1. The average age of employees in public sector banks is 50 compared to 28 in ICICI. So majority of the people in these banks will retire over the next few years leading to the shortage of people in the organization. A study conducted reports that 63000 employees will retire in the next 2 years and the banks need to recruit 500000 new employees in the next 5 years to maintain its growth. 2. The banks during the consolidation phase were involved in a multi-year hiring freeze which led to an entire generation missing at these banks. So this is the reason why the banks have their employees in the higher age bracket. 3. However it is not easy to recruit new talent due to the cap on the salary which can be paid to the employees set by the government. Also government policy on reservation also is a hindrance in the recruitment process.
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4. Also due to major expansion of private sector and foreign banks in the country, the middle level management of the public sector banks are recruited at higher pay scales. This leads to the void in the middle management as well. 5. Lack of clarity in performance metrics and absence of rewards for performers are impediments to good performance.
Research Methodology
Objective The main purpose of the survey aims to measure the HRD climate and its systems in the organization, and to understand the impact of the current financial slowdown on the HRD climate of an organization with a focus on the Banking Sector in India. Methodology The questionnaire comprises of 27 questions which have been rated on a five point scale, these responses have been further categorized into ten dimensions. Responses of 15 employees from a private sector bank and two public sector banks have been obtained to understand the HRD climate and the impact of slowdown on the same. This data has been further analysed using quantitative analysis tools like mean, median, standard deviation etc. These tools have been used with a focus on the ten dimensions, attempting to identify the various dimensions of the HRD climate in the sector.
Process Flow 1. The mean value for each of the dimension for every response is calculated. 2. The mean value and standard deviation for each dimension has been calculated. 3. Since the responses received are from public and private sector banks, the top 5 dimensions of each sector are then selected. These dimensions are the most pertinent dimensions for each of sector ( i.e., public and private sector)
4. The dimensions are then represented using a Venn diagram and those which are
common to both the sectors are the ones which are dominant to the entire banking sector. Further those which are not common are the ones which characterize the individual sectors namely public and private sectors.
Quantitative Analysis
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For our analysis we have taken 17 responses of which 8 responses are from private sector bank and 9 from public sector bank. The table bellow gives the summery of the response collected.
Parameters Participation Succession Planning Human Resource Information Organization Development Training Appraisal Counseling Career Planning Reward and Welfare Job Enrichment Over All Mean SD* 3.20 0.77 3.41 0.66 3.03 0.89 3.63 0.81 3.35 0.68 3.15 1.18 2.94 0.93 2.76 0.97 3.04 1.11 3.59 0.87 Private Sector Bank Mean SD* 3.63 0.74 3.63 0.72 3.44 0.82 3.96 0.70 3.29 0.83 3.56 1.08 2.94 0.98 2.75 1.39 3.50 1.01 3.50 0.93 Public Sector Banks Mean SD* 2.81 0.60 3.22 0.58 2.67 0.83 3.33 0.82 3.41 0.56 2.78 1.20 2.94 0.95 2.78 0.44 2.63 1.09 3.67 0.87 * Standard Deviation
A comparative plot of various Parameters in public and private sector is given below
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Based on the above data, we have identified five top rated parameters which characterise the sector. Parameter common to both private and public sector bank can be identified as the parameter that characterise the entire Indian banking sector. The diagram below brings out analysis
Qualitative Analysis
Based on the quantitative data and the interaction with the bank employees, following inferences can be made with respect to the parameters under study: Participation: The “Participation” aspect refers to the employee involvement in the day to day operation of the organizations. In this economic slowdown where banks and financial institutions have been worst hit, participation of employees to avoid negative sentiments from spreading is of utmost importance which is reflected on the mean score of 3.20 obtained from the employees of various sectors. However the public sector due to the bureaucracy aspect seems to be slightly weaker on this aspect with a mean score of 2.81. Succession Planning: The efforts of the organization for planning and the preparedness of employees to fill in positions of a senior level is reflected through the “Succession Planning”. The banking sector on a whole is highly rated by its employees on this aspect with a mean score of 3.41. There is however a variation between public and private sector banks, that amounts to a 0.41 point difference between the means.
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Human resource Information: Human Resource information refers to the communication efforts taken by the organization to pass on information and details regarding human resource, potential etc to the employees. Information Communication is again a very important element in this slowdown climate. Public Sector banks because of the closed structure of the organization scores low on this aspect with a mean score of 2.67, which is the second lowest element score. The Private Sector Banks seem to be encouraging this pass on of information with a mean score of 3.44. Organization Development: It refers to the efforts or measurements undertaken to develop the organizations. The organization uses different type of interventions to solve problems which helps the organization to achieve growth and increase its efficiency. From the responses received it is evident that both the public and private sector organization employees are of the view that organizations have done enough in this regard. Also the private sector employees have rated this dimension more highly than the public sector employees. Training: It refers to the coaching given to the employees to improve employees potential and do away with the faults and short comings. From the responses received it is evident that both the public and private sector organization employees are of the view that organizations have done enough in this regard. Also looking at the mean we can infer that public sector employees feel that more emphasis is paid by their organizations than the private sector organization. Appraisal: It refers to the evaluation of each employee. The two types of appraisal are performance appraisal and potential appraisal. From the responses received we can infer that employees in public sector are not happy with the appraisal system in place in their organization compared to the private sector organization. So we conclude that private sector employees feel that there is a strong appraisal system in place. Counselling: It refers to help or guidance (mostly verbal) with respect to personal or professional problems. The data collected show a mean of 2.94 (i.e. almost neutral) response for both public and private sector bank. However, there exist high variability in the response collected (SD = .97). This shows that some employees have been receiving counselling while others are not. This kind of variability can lead discontentment. Career Planning: Refers to assistance provided to help employees attain greater heights in career. In public sector we see an almost neutral response (mean=2.78) with low variability (SD=.44) suggesting equal availability of opportunity. In private sector we again see a neutral response (mean=2.75) however the variability is High (SD=1.39) suggesting unequal availability of opportunity. Reward and Welfare: Observing the data for public and private bank employees for reward and welfare, we see that for public sector employees mean score for reward and welfare is 2.63 with a standard deviation of 1.09. The same for private sector employees is 3.5 with a standard deviation of 1.01. From this we deduce the following:
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• • •
•
On an average, employees of private sector banks have high satisfaction levels in reward & welfare For public sector bank employees, the satisfaction level with reward and welfare is just above average. Amongst the private banks, JP Morgan and HDFC figure as high in terms of above mentioned criteria, while ICICI and HSBC figure just about average. Amongst public sector banks employee motivation levels are at all time low especially in Dena Bank and Oriental Bank of Commerce. Indian Overseas Bank and Bank of Baroda hover just around average which reflects low satisfaction levels.
Job Enrichment: mean score for public sector employees is 3.67 with a standard deviation of 0.87. The same for private sector employees is 3.50 with a standard deviation of 0.93. Conclusions: • Public sector tends to offer more challenges in job, and hence greater job satisfaction. This is agreed upon by almost everyone, which is evident by the low standard deviation. Private sector offers lesser job satisfaction as compared to public sector. This may be taken from the fact that public sector is more relaxed in terms of flexible routines.
•
Conclusion
After analysing the responses received from the public and private sector, we are able to determine the most dominant dimensions in each of them. It helps us in finding out the dimensions which are relevant to the entire industry. The ones which are rated the least in both the sectors are the areas which are neglected so far in the Indian banking industry. These dimensions are neglected in the industry maybe due to the government regulations which are in place for the public sector banks. One major concern in Indian banking sector is lack of flow of human information. Banking being a service industry needs to have a an efficient human information flow so as to build efficient work stations else there will be variation in service quality experienced by customers, not only across branches but also within same branch.
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References
Human capital theory: implications for human resource development. ( Author(s): Nafukho, Fredrick Muyia; Hairston, Nancy; Brooks, Kit. Source: Human Resource Development International Dec2004, Vol. 7 Issue 4) Performance appraisals: Any use for training? (Authors: Thomas, Steven L. Source: Business Forum; Winter97, Vol. 22 Issue 1) Increasing Performance Appraisal Effectiveness: Matching Task Types, Appraisal Process, and Rater Training. (Authors: Lee, Cynthia1. Source: Academy of Management Review) Human Resource Management and Organizational Performance Evidence from Retail Banking. (Authors: Bartel, Ann P. Source: Industrial & Labor Relations Review, Jan2004, Vol. 57 Issue 2) How can HR Directors add value in a recession? (Authors: Martin Goodman. Source: HR magazine, 23 February 2009)
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doc_347992638.doc