With the onset of financial sector reforms and the growing competition from private and foreign payers public sector banks (PSBs) have been on a transformation journey. Many such reforms came in the form of implementation of prudential norms, retail banking, IT implementation and Basel II recommendations on banking standards.
In spite of many positives, one most critical area where PSBs today are seriously handicapped vis-à-vis their competitors in the marketplace is human capital. They have made little effort in undertaking any major human resource (HR) reforms. The HR function in most PSBs is still concerned with mere admin work; with focus on compliance and maintenance. Except some ad hoc measures in training and performance appraisal, the core of HR has lacked any long-term orientation.
PROBLEMS (The Khandelwal Committee, 2010)
• HR does not find a place in the strategic management matrix of banks.
• HR is highly transactional, ad hoc and inadequately professionalized, with high degree of standardization and militant trade unionism.
• Outsourcing of non-core activities is limited.
• Employee engagement strategies are patchy.
• The performance management system and its administration are generally routine. In many banks, clerical staff is not covered by the appraisal system.
• Lack of any worthwhile manpower planning linked with strategic and business plans.
• Progress in business process reengineering and change management is tardy in most PSBs.
• Underutilized talent pools.
• Diversity management and associated issues are given inadequate attention.
FUTURE ACTION PLAN
Introduction of bank-level wage negotiation: In a bank level arrangement, banks should consider variable pay as a major component of wages. In such an arrangement, banks can also have the discretion to go in for Cost-to Company (CTC) concept which is a prevalent trend world over. It would also align employees to bank level problems and engage them in the bank level transformation programme. Linkage of wages with productivity in individual banks will greatly enhance their capacity for long term sustenance and create sensitivity towards customer satisfaction.
Professionalization of HR: Professionalization would involve installation of scientific systems in HR backed by professional expertise and long term policy formulation. HR specialization must drive the core element of developmental HR functions, including manpower resourcing and manpower planning, talent management, performance management and measurement, compensation management, leadership development, employee surveys, HR audit and employer branding.
Succession planning and Leadership Development: Although most PSBs identify succession as a major problem, few initiatives have been undertaken to tackle it. There needs to be a comprehensive strategy to develop people to take up strategic positions in senior and top positions. The quick promotion system adopted currently to tide over the problems of finding successors to retiring top management levels without rigorous leadership grooming is far from adequate in meeting the new challenges. The tendency to fill the positions will not serve the purpose. Selecting them through a brief process of interview is inadequate. The best way would be to create an industry pool of PSB general managers for identifying the potential candidates through the assessment centre methodology.
Employee engagement: The challenge before the banks is how to get the employees go an extra mile for achieving the organization objectives. Banks should set up efficient system for grievance readressal and motivate employees to increase job satisfaction. Banks will need to work out innovative methodologies for employee engagement
Enunciation of HR policy: Banks have a written policy document approved by the board for most functions. Such documents include loan policy document, risk management policy, etc. But when it comes to HR, most banks don’t have a policy document. In the absence of this, there is wide variation in managing this crucial function by different managements and there is no monitoring by the board or by the regulators to adhere to pronounced policies. The policy document should clearly lay down the direction of initiatives in the various subsystems of HR such as recruitment, talent management, career planning, employee engagement, and succession planning and leadership development. This would facilitate engagement of the top management in implementing HR reforms and professionalize the function.
Author: Rahul Sharma
Reference: Report of the AK Khandelwal committee on HR issues of public sector banks
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