HRM IN BANKING

PROJECT MADE BY RISHI BALCHANDANI ROLL NO 02

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 corporations continues 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. 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 profitmaking and service-rendering organizations.

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 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

UPGRADING MANPOWER 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. 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.

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. 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. 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.
5

 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. 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.

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. WIDE SCOPE The scope of HRM programmes is very vast. It is multidisciplinary in character. Training and guidance are given on different aspects of business management to enable managers to deal with complex managerial problems and challenges. NEED AND IMPORTANCE OF HUMAN RESOURCE MANAGEMENT

 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.

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 HRM programmes as they provide training and opportunities of self-development to employees working at lower levels.

TO DEVELOP STRENGTH FOR SURVIVAL

HRM programmes are necessary for survival in the present competitive marketing environment. An enterprise can face market competition only improvimg quality, reducing costs and avoiding wastages. All this is possible through HRM.

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.

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 guidance, etc. for their self-development. HRM programmes are needed to fulfill self-development and career development of employees. 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.

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.

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. 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 for self-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. (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.

(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:

10

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 and non-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 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 resource management and information technology. It merges HRM as a discipline and in particular its basic HR activities and processes with the information technology field, whereas the planning and programming of data processing systems evolved into standardised routines and packages of enterprise resource planning (ERP) software. On the whole, these ERP systems have their origin on software that integrates information from different applications into one universal database. The linkage of its financial and human resource modules through one

11

database is the most important distinction to the individually and proprietary developed predecessors, which makes this software application both rigid and flexible.

THE HR FUNCTION'S REALITY

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

12

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

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

The benefit administration model: permits HR professionals to easily administer and track employee participation in benefits programs ranging from healthcare provider, insurance policy, and pension plan to profit sharing or stock option plans.

The HR management module: 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
13

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. 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.

14

The essential function of a bank is to provide services related to the storing of deposits and the extending of credit. The evolution of banking dates back to the earliest writing, and continues in the present where a bank is a financial institution that provides banking and other financial services. Currently the term bank is generally understood as an institution that holds a banking license. Banking licenses are granted by financial supervision authorities and provide rights to conduct the most fundamental banking services such as accepting deposits and making loans. There are also financial institutions that provide certain banking services without meeting the legal definition of a bank, a so called non-bank. Banks are a subset of the financial services industry. Human resource management (HRM) has long been overlooked in the corporate sector in the country where a small section, comprising mostly the multi-national companies was 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. 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

15

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 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.

16

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. 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

17

(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 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. (

18

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. (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 Rs500-800 per 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
19

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: 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 gettogethers, conferences, sports events, dinners, company sponsored travel, reunions, etc. This is the way employees create a feeling of belongingness.

20

HRM and HRD

The Human Resources Management (HRM) function includes a variety of activities, and key among them is deciding what staffing needs you have and whether to use independent contractors or hire employees to fill these needs, recruiting and training the best employees, ensuring they are high performers, dealing with performance issues, and ensuring your personnel and management practices conform to various regulations. Activities also include managing your approach to employee benefits and compensation, employee records and personnel policies. Usually small businesses (forprofit or nonprofit) have to carry out these activities themselves because they can't yet afford part- or full-time help. However, they should always ensure that employees have -- and are aware of -- personnel policies which conform to current regulations. These policies are often in the form of employee manuals, which all employees have. Note that some people distinguish a difference between between HRM (a major management activity) and HRD (Human Resource Development, a profession). Those people might include HRM in HRD, explaining that HRD includes the broader range of activities to develop personnel inside of organizations, including, eg, career development, training, organization development, etc. There is a long-standing argument about where HR-related functions should be organized into large organizations, eg, "should HR be in the Organization Development department or the other way around?" The HRM function and HRD profession have undergone tremendous change over the past 20-30 years. Many years

21

ago, large organizations looked to the "Personnel Department," mostly to manage the paperwork around hiring and paying people. More recently, organizations consider the "HR Department" as playing a major role in staffing, training and helping to manage people so that people and the organization are performing at maximum capability in a highly fulfilling manner. HRM deals with the day to day operations of the human resources department. This curriculum would include bus. law, compensation, employee relations, benefits, and medical etc. HRD : Human Resource Development deals with the training and the developmental aspect of employees. Most HRD curriculum include classes like T & D, organizational dev., industrial psy.

DIFFERENCE OF HRM AND HRD

HRD focuses on training and optimizing work performance. HRM focuses on whom you hire, whom you fire and remediation to employees who need discipline and retooling to continue their employment. HRD is more proactive; it copes with the changing needs of the people as well as anticipate these needs and HRD is function more independent with separate roles to play. HRD is sub-system of a large system, more organizational oriented and HRD is function more independent with separate roles to play. HRD is developing the whole organization and HRM is concerned with people only. HRD is continuous process and HRM is a routine and administrative function.

22

 HRD is involvement of the entire work force from top to bottom is more and a must in most of the cases and HRM is basically the responsibilities of the HR department. HRM stands for human resources management, which refers to the art of managing all aspects of the human work force at a company or organization. HRM aims at providing an optimal working environment for employees to fully and freely utilize their skills to their best to achieve the companys intended output. As human resources management usually applies to big companies and organizations, it has sub categories, among which is HRD, which stands for human resources development. This is a component of HRM that focuses on nurturing employees skills. Because the process of hiring new employees can be long, expensive and cumbersome, most companies employ the strategy of HRD to promote longevity of employees within the company because through this an employee is likely to progressively scale up the managerial ladder. Human resources management of a company is often an independent department of its own composed of various sections including recruitment and retention, performance and appraisal management, HRD and compensation sections. But HRD does not only focus on development of skills but also focuses on the personal development of employees. Because peoples needs and expectations are ever growing and changing this section of HRM is specifically there to help employees cope with such and prepare them for future uncertainties. Generally speaking, professionals working within the HRM department must have excellent people skills although this is more so with those particularly working in the HRD section. The HRD section needs to have professionals with impeccable people management skills as they need to be able to realize talent within people from a cross section of backgrounds. The HRD section is concerned with identifying strengths and weaknesses among different employees and

23

devising training means that aim at making those skills complement the other.

HRM stands for human resources management, which refers to the art of managing all aspects of the human work force at a company or organization. HRM aims at providing an optimal working environment for employees to fully and freely utilize their skills to their best to achieve the companys intended output. As human resources management usually applies to big companies and organizations, it has sub categories, among which is HRD, which stands for human resources development. This is a component of HRM that focuses on nurturing employees skills. Because the process of hiring new employees can be long, expensive and cumbersome, most companies employ the strategy of HRD to promote longevity of employees within the company because through this an employee is likely to progressively scale up the managerial ladder. Human resources management of a company is often an independent department of its own composed of various sections including recruitment and retention, performance and appraisal management, HRD and compensation sections. But HRD does not only focus on development of skills but also focuses on the personal development of employees. Because peoples needs and expectations are ever growing and changing this section of HRM is specifically there to help employees cope with such and prepare them for future uncertainties. Generally speaking, professionals working within the HRM department must have excellent people skills although this is more so with those particularly working in the HRD section. The HRD section needs to have professionals with impeccable people management skills as they need to be able to realize talent within people from a cross section of backgrounds. The HRD section is concerned with identifying strengths and weaknesses among different employees and
24

devising training means that aim at making those skills complement the other.

25