HR Practice in Cooprative Bank
Transcript of HR Practice in Cooprative Bank
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A
RESEARCH PROJECT REPORT
ON
H R P r a c t ic e in C o -o per at iv e B a nk
DISSERTATION REPORT SUBMITTED IN
PARTIAL FULFILLMENT FOR THE AWARD OF
MASTER OF BUSINESS ADMINISTRATION
(2012)
F a c u l t y S up er vi s o r : S u b m i tt e d
B y : MRS. RITU TIWARI KAVITA
NEGI (Assistant Professor) MBA IVSEMDEPARTMENT OF ROLL NO: 14
MANAGEMENT STUDIES
AMRAPALI INSTITUTE OF MANAGEMENT & COMPUTERAPPLICATION(AFFILIATED TO UTTARAKHAND TECHNICAL UNIVERSITY, DHERADUN)
SHIKSHA NAGAR, LAMACHAUR, HALDWANI
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ST UD E N T D E C L ARA TI ON
This is to declare that project titled HR Practice in Co-
operative Bank.
The project was executed during the winter after the fourth semester of
M.B.A. under the supervision ofMrs. Ritu Tiwari.
Further, I declared that this project is my original work and the analysis and
the findings are for academic purpose only. This project has not been
presented in any seminar or submitted elsewhere for the award of any
degree or diploma.
KAVITA NEGI
MBA V SEMROLL NO.:
(i
)
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AC KN OWLE D GE M E N T
Hard work and dedication is the key to any successful completion of any
job and this project is no different. Although strenuous, yet it is interesting.
However, our success to this project report cannot be accounted for by onlythese factors.
During the course of this study, many useful suggestions and constructive
criticism came across which really helped a lot in giving this project a
professional look. I extend my heartiest thanks to all those persons whose
willing cooperation led to the timely completion of the project.
In completing this study, I did my level best correcting my
shortcomings to possible extent and I sincerely hope that this report will
serve its purpose for the Life Insurance Corporation of India.
Although I am thankful to all those who have contributed towards the
completion of this report. I would be failing in my duty if I do not
mention the warm help extended to me by the Staff of Co-operative Bankfor providing me an opportunity to work in the esteem organization and
without whose willing cooperation and encouragement the accomplishment
of this project would have become impossible.
Also I would like to thank all those who have helped me directly or
indirectly in completing the present project.
(ii
)
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P R E F AC E
"Banking Sector and Human Resources-Changing Scenario' presents a host
of themes relevant for understanding the Indian experience in the period of
economic reforms, when the country is fast becoming an integral part of
globalization, and when international best practices and standard patterns
are being adopted in a phased manner. The influence of economic reforms,
and the phases in which specific measures have been adopted in a cautious
way, making sure that social objective of service to the vulnerable sections
and less developed regions is paid special attention, enable us to refer to this
as human face of economic and financial sector reforms. Under the broad
heads of banking and finance, and human resource management,
specialists examine a number of specific topics. The critical look at
progress in recent years, lessons learnt, and directions for the future are all
spelt out on each topic based on the research endeavors of contributors.
(iii
)
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CON TE N T S
Collage certificate
Student Declaration i
Acknowledgement iiPreface iii
C H A P TER 1
1 Introduction 1
1.1 Purpose Of Research Work 2
1.2 Chapter Arrangement 2-3
1.3 Objectives of Study 4
1.4 Period of Study 4
1.5 Research Methodology 5
1.6Scope of the Study 6
1.7 Limitations of Study 7
C H A P TER 2
2.1 Industry Profile
2.1.1 Banking Sector: 8-9
2.1.2 Economic functions 10-11
2.1.3 Origin of the word 11
2.1.4 Banking channels 11-
12
2.1.5 Indian Banking Industry 13-
14
2.2 Profile of the Company
2.2.1 The Co-operative Bank: Background 14-
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C H A P TER 3
This part of project report contains
summary of Findings.
C H A P TER 4
This part of the project report I finally concluded the project
with some recommondation.
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OB JE C TI V E OF ST UDY :
The objectives of my study are:
To get an idea about HR function in banking industry with special
reference to the cooperative sector
To study and get knowledge about the development of
Human Resource Management (HRM) in the Co-operative Bank
like management strategy and employee relations in banking
To get an idea about the possible relationship between uses of strategic
human resource practices of cooperative banking firms.
P E R I OD OF ST UD Y
The project was executed during the fourth semester.
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S C O P E OF S T UD Y :
The aim of the study is to explore the possible relationship between uses of
strategic human resource practices of banking firms. The study assumes
that there is a link between the business strategy pursued by the firm and
its human resource policies and practices. It is also assumed that there is a
'fit' aspect (external and internal) between the business strategy and the
human resources policies. The 'external fit', is the extent the human
resource planning and implementation process is part of the strategy
process in the bank organization. Data was collected using a structured
questionnaire from firms representing banking sectors.
The firms pursuing different business strategies have different degree of the
'external- internal fit' of human resources. Also, firms pursuing different
business strategies use different levels of strategic human resource
practices.
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LIMIT A TI ON S OF ST UD Y
The researcher has to face certain difficulties while he carries out the
research work. He knows the limitations before hand. Some of them are
uncontrollable and some others are controllable. Some important
limitations, which were faced, are as follows:
1.Time was the major limiting factor during the research.it is quite
impossible to collect the sufficient data.
2. Limitation of funds: Availability of funds was another limitation
owning to shortage of money..
3.Limitation of human
behaviors:
4.Some of the respondent was not honest and genuine in their
approach. Some of the respondents could not understand
certain queries
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I nd us tr y P r of ile :
B a nki ng Sect or :
The definition of a bank varies from country to
country.
Under English law, a bank is defined as a person who carries on the
business of banking, which is specified as:
Conducting current accounts for his customers
Paying cheques drawn on a him, and
Collecting cheques for his customers.
In most English common law jurisdictions there is a Bills of Exchange Act
that codifies the law in relation to negotiable instruments, including
cheques, and this Act contains a statutory definition of the term banker:banker includes a body of persons, whether incorporated or not, who carry
on the business of banking' (Section 2, Interpretation). Although this
definition seems circular, it is actually functional, because it ensures that
the legal basis for bank transactions such as cheques do not depend on how
the bank is organised or regulated.
The business of banking is in many English common law countries not
defined by statute but by common law, the definition above. In other
English common law jurisdictions there are statutory definitions of the
business of bankingorbanking business
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In particular, most of the definitions are from legislation that has the
purposes of entry regulating and supervising banks rather than regulating
the actual
business of banking. However, in many cases the statutory definition
closely mirrors the common law one. Examples of statutory definitions:
"Banking business" means the business of receiving money on
current or deposit account, paying and collecting cheques drawn by
or paid in by customers, the making of advances to customers, and
includes such other business as the Authority may prescribe for thepurposes of this Act; (Banking Act (Singapore), Section 2,
Interpretation).
"Banking business" means the business of either or both of the
following:
1. Receiving from the general public money on current, deposit,
savings or other similar account repayable on demand or within less
than [3 months] ... or with a period of call or notice of less than that
period;
2. Paying or collecting cheques drawn by or paid in by customers.
Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale),
direct credit, direct debit and internet banking, the cheque has lost itsprimacy in most banking systems as a payment instrument. This has lead
legal theorists to suggest that the cheque based definition should be
broadened to include financial institutions that conduct current accounts
for customers and enable customers to pay and be paid by third parties,
even if they do not pay and collect cheques.
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Economic
functions
The economic functions of banks
include:
1. Issue of money, in the form of banknotes and current accounts
subject to cheque or payment at the customer's order. These claims
on banks can act as money because they are negotiable and/or
repayable on demand, and hence valued at par and effectively
transferable by mere delivery in the case of banknotes, or by drawing
a cheque, delivering it to the payee to bank or cash.
2. Netting and settlement of payments -- banks act both as
collection agent and paying agents for customers, and participate in
inter-bank clearing and settlement systems to collect, present, be
presented with, and pay payment instruments. This
enables banks to economise on reserves held for settlement of
payments, since inward and outward payments offset each other. It
also enables payment flows between geographical areas to offset,
reducing the cost of settling payments between geographical areas.
3. Credit intermediation -- banks borrow and lend back-to-back on
their own account as middle men
4. credit quality improvement -- banks lend money to ordinary
commercial and personal borrowers (ordinary credit quality), but are
high quality borrowers.
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5. Maturity transformation -- banks borrow more on demand debt
and short term debt, but provide more long term loans. Bank can
do this because they can aggregate issues (e.g. accepting deposits
and issuing banknotes) and redemptions (e.g. withdrawals and
redemptions of banknotes), maintain reserves of cash, invest in
marketable securities that can be readily converted to cash if needed,
and raise replacement funding as needed from various sources (e.g.
wholesale cash markets and securities markets) because they have a
high and more well known credit quality than most other borrowers.
Origin of the word
The name bank derives from the Italian word banco "desk/bench", used
during the Renaissance by Florentines bankers, who used to make their
transactions above a desk covered by a green tablecloth. However, there are
traces of banking activity even in ancient times.
In fact, the word traces its origins back to the Ancient Roman Empire,
where moneylenders would set up their stalls in the middle of
enclosed courtyards called macella on a long bench called a bancu, from
which the words banco and bank are derived. As a moneychanger, the
merchant at the bancu did not so much invest money as merely convert the
foreign currency into the only legal tender in Rome- that of the Imperial
Mint.
Banking
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channels
Banks offer many different channels to access their banking and
other services:
11
A branch, banking centre or financial centre is a retail location
where a bank or financial institution offers a wide array of face-to-
face service to its customers
ATM is a computerised telecommunications device that provides
a financial institution's customers a method of financial transactions
in a public space without the need for a human clerk or bank teller.
Most banks now have more ATMs than branches, and ATMs are
providing a wider range of services to a wider range of users. For
example in Hong Kong, most ATMs enable anyone to deposit cash
to any customer of the bank's account by feeding in the notes and
entering the account number to be credited. Also, most ATMs
enable card holders from other banks to get their account balance and
withdraw cash, even if the card is issued by a foreign bank.
Mail is part of the postal system which itself is a system
wherein written documents typically enclosed in envelopes, and also
small packages containing other matter, are delivered to destinations
around the world. This can be used to deposit cheques and to send
orders to the bank to pay money to third parties. Banks also
normally use mail to deliver periodic account statements to
customers.
Telephone banking is a service provided by a financial institution
which allows its customers to perform transactions over the
telephone. This normally includes bill payments for bills from major
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billers
Online banking is a term used for performing transactions, payments
etc. over the
Internet through a bank, credit union or building society's secure
website
12
Indian Banking Industry
The growth in the Indian Banking Industry has been more qualitative than
quantitative and it is expected to remain the same in the coming years.
Based on the projections made in the "India Vision 2020" prepared by the
Planning Commission and the Draft 10th Plan, the report forecasts that thepace of expansion in the balance-sheets of banks is likely to decelerate. The
total assets of all scheduled commercial banks by end-March 2010 is
estimated at Rs 40,90,000 crores. That will comprise about 65 per cent of
GDP at current market prices as compared to 67 per cent in 2002-03. Bank
assets are expected to grow at an annual composite rate of 13.4 per cent
during the rest of the decade as against the growth rate of 16.7 per cent that
existed between 1994-95 and 2002-03. It is expected that there will be large
additions to the capital base and reserves on the liability side.
The Indian Banking Industry can be categorized into non-scheduled banks
and scheduled banks. Scheduled banks constitute of commercial banks and
co-operative banks. There are about 67,000 branches of Scheduled banks
spread across India. As far as the present scenario is concerned the Banking
Industry in India is going through a transitional phase.
The Public Sector Banks (PSBs), which are the base of the Banking sector
in India account for more than 78 per cent of the total banking industry
assets. Unfortunately they are burdened with excessive Non Performing
assets (NPAs), massive manpower and lack of modern technology.
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On the other hand the Private Sector Banks are making tremendous
progress. They are leaders in Internet banking, mobile banking, phone
banking, ATMs. As far as foreign banks are concerned they are likely to
succeed in the Indian Banking Industry.
13
In the Indian Banking Industry some of the Private Sector Banks operating
are IDBI, ING Vyasa Bank, SBI Commercial and International Bank Ltd,
Bank of Rajasthan Ltd. and banks from the Public Sector include Punjab
National bank, Vijaya Bank, UCO Bank, Oriental Bank, Allahabad Bank
among others. ANZ Grindlays Bank, ABN-AMRO Bank,
American Express Bank Ltd, Citibank are some of the foreign banks
operating in the Indian banking Industry.
C o mp a ny
P r o f il e :
The Co-operative Bank:
Background
The Co-operative Bank is a wholly owned subsidiary of the Co-operative
Wholesale Society (CWS). The bank has a network of 90 branches and
some 4,000 in-store banking points in co-operative stores. It has seen itself
as an alternative force in UK banking and has a reputation for innovation,
in banking products. While the history of the bank shows development
away from the CWS (25 years ago 90% of deposits came from Movement
and 10% from other sources: the reverse is now the case) it remains the
banker to the Co- operative movement and as its Chief Executive stated in
the 1986 Annual Report, our co-operative philosophy dictates that we
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approach the bank market in a fundamentally different way.
The development of the banks policy on the management of people
illustrates the move from the narrower reactive function towards broader,
more proactive human resource management.
14
For instance, there was no formal succession planning process, and
training tended to be limited to providing technical skills for clerical
staff, much of which was on the job.
With its rapid expansion in the 1970s, a greater emphasis was placed on
recruiting staff from other banks.
Over the 1970s the Personnel Department was largely concerned with the
administration of salaries and negotiations over pay with a significant
input from the CWS. In the later
1970s, with the rapid expansion of staff in the bank and in the context of
changing legislation and incomes policies, there was a move to greater
specialization and professionalism. As in other banks, the personnel
department had been staffed by generalists, which tended to prevent the
development of a strong autonomous function; furthermore the highly
centralized nature of management, controlling both procedural
and substantive matters (to the extent that each clerical member of staff
appointed would be seen by Head Office) limited discretion at local level.
However, the Co-operative Bank differed from the major banks because
of its historical roots and the influence of the movement was reflected
in various agreements with the union, most notably the New
Technology Agreement,
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The Job Mobility and Job Security Agreement and the Union
Membership Agreement which exercised more of a constraint on the
management of labour than that faced by other banks "Banking
business" means the business of receiving money on current or deposit
account.
15
"Banking business" means the business of either or both of the
following:
1. Receiving from the general public money on current, deposit,
savings or other similar account repayable on demand or within less
than [3 months] ... or with a period of call or notice of less than that
period;
2. Paying or collecting cheques drawn by or paid in by customers.
Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale),
direct credit, direct debit and internet banking, the cheque has lost its
primacy in most banking systems as a payment instrument. This has lead
legal theorists to suggest that the cheque based definition should be
broadened to include financial institutions that conduct current accounts
for customers and enable customers to pay and be paid by third parties,
even if they do not pay and collect cheques
Economic
functions
The economic functions of banks
include:
1. Issue of money, in the form of banknotes and current accounts subject to
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cheque or payment at the customer's order. These claims on banks can act as
money because they are negotiable and/or repayable on demand, and hence
valued at par and effectively transferable by mere delivery in the case of
banknotes, or by drawing a cheque, delivering it to the payee to bank or cash.
16
2. Netting and settlement of payments -- banks act both as
collection agent and paying agents for customers
Banking
channels
Banks offer many different channels to access their banking and
other services:
A branch, banking centre or financial centre is a retail location
where a bank or financial institution offers a wide array of face-to-
face service to its customers
ATM is a computerised telecommunications device that provides
a financial institution's customers a method of financial transactions
in a public space without the need for a human clerk or bank teller.
Most banks now have more ATMs than branches, and ATMs are
providing a wider range of services to a wider range of users. For
example in Hong Kong, most ATMs enable anyone to deposit cash
to any customer of the bank's account by feeding in the notes and
entering the account number to be credited. Also, most ATMs
enable card holders from other banks to get their account balance and
withdraw cash, even if the card is issued by a foreign bank.
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Mail is part of the postal system which itself is a system
wherein written documents typically enclosed in envelopes, and also
small packages containing other matter, are delivered to destinations
around the world. This can be used to deposit cheques and to send
orders to the bank to pay money to third parties. Banks also
normally use mail to deliver periodic account statements to
customers.
17
Telephone banking is a service provided by a financial institution
which allows its customers to perform transactions over the telephone.This normally includes bill payments for bills from major billers .
Online banking is a term used for performing transactions, payments
etc.
Indian Banking Industry
The growth in the Indian Banking Industry has been more qualitative than
quantitative and it is expected to remain the same in the coming years.
Based on the projections made in the "India Vision 2020" prepared by the
Planning Commission and the Draft 10th Plan, the report forecasts that the
pace of expansion in the balance-sheets of banks is likely to decelerate. The
total assets of all scheduled commercial banks by end-March 2010 is
estimated at Rs 40,90,000 crores. That will comprise about 65 per cent of
GDP at current market prices as compared to 67 per cent in 2002-03. Bankassets are expected to grow at an annual composite rate of 13.4 per cent
during the rest of the decade as against the growth rate of 16.7 per cent that
existed between 1994-95 and 2002-03. It is expected that there will be large
additions to the capital base and reserves on the liability side.
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The Indian Banking Industry can be categorized into non-scheduled banks
and scheduled banks. Scheduled banks constitute of commercial banks and
co-operative banks. There are about 67,000 branches of Scheduled banks
spread across India. As far as the present scenario is concerned the Banking
Industry in India is going through a transitional phase.
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T h e o r e t ic al
B a c k g r o un d :
Management Strategy and Employee
Relations
The research is focused on the response of the Bank to changes in the
financial sector which has been experiencing deregulation, increasing
competition, technological innovation and an increasingly discriminating
public (Morris, 1986). It examines both changing business and employee
relations strategies and the links between the two. As greater diversity
begins to exist amongst the retail banks the study explores the Banks
attempt to find itself a niche or adopt a focus strategy (Porter, 1985). This
paper is primarily concerned with Human Resource issues. Changes in the
nature of banking clearly have a knock-on effect on employee relations
(defined broadly to include industrial relations, communications, training,
remuneration policy, etc.) as banks move towards being more market
driven organisations with a culture consistent with that, and with staff being
regarded more as a resource than a cost (Wilkinson, 1990).
Historically, it has been the case that employee relations have been
regarded as a second order strategy, purely facilitative and not fully
integrated into overall business strategy (e.g. Timperley, 1980; Purcell,
1983; Wilkinson, 1990). Hence, there was little consideration of employee
relations at the top corporate level implications unless the level of unrestwas such that labour was seen as a problem, as for instance in the car
industry (e.g. Willman and Winch, 1985). Although there has been a
gradual rise in the number of personnel professionals at Board level, these
are still a minority. Lack of serious consideration of employee relations
bargaining tended to focus on the plant.)
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19
1970s discovered an avoidance strategy whereby industrial relations were
regarded as somehow external to the enterprise (Winkler, 1974). Certainly
many would argue that while senior, management do think about human
resource issues, the degree of unpredictability in this area pushes it fairly
well downstream in corporate planning. However, there are dangers of
looking at HR issues in this way. The importance of ensuring the active
co-operation of employees in industry has been emphasised for
example by Walton (1985), who examined the shift away from
emphasising control to one of commitment, and this can be even more
significant for the service sector. Thus, in retail banking, the banks do notyet provide significantly different products and hence consumer choice is
heavily influenced by convenience and image, the latter partly created by
contact with staff, and there is thus a clear strategic link with quality of
service and staff quality. Yet, in banking traditionally staff have not been
recruited or developed for customer contact skills but for technical and
administrative ability. Mth banks wanting to move away from being
regarded merely as providers of a money transmission service to the selling
of a range of financial products and services with tellers becoming
sellers, the organisation will, need to become more organic and less
mechanistic, (Burns and Stalker, 1961) which will require far greater
commitment and co-operation rather than mere compliance from staff.
The recent emphasis on human resource management, e.g. Storey (1992),Torrington and Tan Chee Huat (1994), suggests that not only is the
management of labour being given more attention, but that the issues
discussed are broader and more strategic as well as tactical (see also
Wilkinson & Marchington, 1994). function of many personnel managers,
the newer style of human resource managers attempts to:
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Relate personnel practices to beliefs, to link each and every process of the
recruitment, induction, training, appraisal rewarding of individuals to an
overall set of articulated beliefs of organisation (Hunt, 1984, p.16)
Human resource management is seen as part of the movement away from
concentration on unions and collective bargaining, to an emphasis on staff
as individuals. Behind all this is a belief that it will release greater
commitment from employees although one has to be careful to examine the
extent to which human resource management is genuinely concerned with
creating a new equal partnership between employer and employed, or are
they really offering a convert form of employee manipulation dressed up
as mutuality (Fowler, 1987, p.3). Hence it is significant that human
resource management was, particularly in the USA, initially associated
with non-union companies.
Guest (1987) highlights the different between personnel management
and human resource management inherent in the literature so as to form
criteria for the measurement of change (see Table 1). However, one must
be wary of evaluating HRM simply by the range of activity being
undertaken. HRM is about both new processes new outcomes. The
existence of the former does not guarantee the latter. Many initiatives
may be no more than flavour of the month changes; others may be
opportunistic rather than strategic, taking advantage of slack labour
markets; in many uses the gap between the rhetoric and the reality may be
wide.
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Table
1
PERSONNEL
MANAGEMENT
HUMAN
RESOURCE
Time and Planning
PerspectiveShort-term reactive adhoc
marginal
Long-term
proactive
Psychological
Contract
Compliance Commitment
Control Systems External controls Self-control
Employee Relations
PerspectivePluralist collective low trust
Unitarist individual high
trust
Preferred Bureaucratic/mechanistic Organic devolvedflexible
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Table
1
PERSONNEL
MANAGEMENT
HUMAN
RESOURCEStructures/Systems centralized formal defined role
Roles Specialist/professionalLargely integrated into
line management
Evaluation Criteria Cost-minimizationMaximum utilization
(human asset
Source: Guest,
1987
Employee Relations in
Banking
The banking sector has been characterised by apparently harmonious
industrial relations and has not suffered from the British diseases of
industrial action and demarcation issues associated with parts of
manufacturing industry (e.g. Batstone, 1984). Banks have promoted
unitarism (Fox, 1966) encouraging an ethos of teamwork, shared interest
and loyalty, wanting commitment beyond the cash nexus.
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23Retail banking is a highly labour intensive industry with labour costs
forming 70% of total operating expenditure and involvement in funds
transmission meant that the
majority of clerical staff have not been used as a means of marketing the
banks products nor directly for increasing business but to process existing
accounts. They have accordingly been regarded as an overhead rather than a
resource (Morris, 1986, p.22). Until the 1980s competition between banks
has been limited, banks operating as an oligopoly and Governments
concern with maintaining economic stability with limits to lending, and
control over interest rates facilitated this. The oligopoly fed through to the
management of staff as national wage bargaining minimised competition
for labour. However, deregulation led to the collapse of the national system
and a questioning of old employment practices.
Changing Strategies
By the mid 1980s, it became increasingly clear to some senior managers in
the Bank that there was a need to re-examine its entire policy towards
managing staff. There was little point in producing corporate plans with
major strategic changes envisaged unless the staff were committed to
achieving these. As one senior manager put it:
It was beginning to register amongst management that unless the staff
were got up to scratch and on board with change, the bank was not going to
get there.
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24
It was felt that the entire bank culture needed to be changed to a more
performance orientated culture, a view which fitted in with the popular
trend towards emphasising the so-called soft aspects of management
exemplified by In Search of Excellence (Peters and Waterman, 1982).
With increasing competitive pressure in the sector, and with stagnant
profits and accounts and only a small percentage of the current account
market, there was a clear need to grow the customer account base by
adopting a new focus strategy (Porter, 1985). Furthermore, it was
recognised that any significant differentiation in products was short-
lived especially for small banks with limited resources and to create
sustained differentiation it was necessary to create a favourable perception
of the Bank by its customers. The Bank would emphasise a caring,
sharing image, and employee goodwill as well as technical competence
was required to project this.
There were several other reasons for the new approach to the
management of staff. Firstly, infrastructural problems - growth in the
Bank had taken place in the relatively soft markets of the 1970s and had
to some extent hidden rising costs associated with the clearing centre and
Head Office which were widely regarded as being overstaffed. Secondly,
the increasing competitive pressure in banking had led to greater attention
to controlling labour costs and increasing labour productivity. Thirdly, as
we have noted, the nature of change had moved the emphasis towards
being a market driven rather than an administratively driven organisation
and the importance of staff quality was being emphasized.
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25
Hence, the need to manage human resources more effectively was formally
recognised in the Corporate plan of 1986 and in particular it was seen
as necessary to change the attitude of staff towards customers a senior
manager put it:
The staff had to see that it was the customer not the pieces of paper which
the bank were concerned with.
However, the Corporate Plan, while recognising the need for changes in the
personnel area, did not explore in any detail what such changes would be,or how they were to be brought about. Thus references were made to
operating with maximum flexibility and maximum efficiency on
optimum numbers of staff but only broad indication as to how this was to
be achieved. Thus a sales culture was required, but what did this mean in
terms of personnel policies and practices?
Rothwell writes that: The starting point of a company employmentpolicy must be corporate policy: The employment policy must stem from
the business policy and be an integral part of its implementation. (1984,
p.31)
However, the links between business strategy and employment policy are
by no means clear cut: one is not simply able to read off from company
objectives a set of corporate employee relations policies.
Towards HRM: New
Policies
As a sign of the new emphasis on the human resource function, a human
resources manager was recruited from outside the Bank and appointed in
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however maintain strong links with the union which is a principle of the co-
operative movement.
28
In terms of the personnel function itself, the Bank aimed to give the
Head Office Personnel function the major strategic role, but to devolve
operational issues and responsibilities to line managers. The Bank
introduced team briefing and a new disciplinary code, both of which
were designed to increase the authority and accountability of line
management. This in line with developments in other industries and reflects
the view that many key issues, e.g. performance and productivity, are
best handle4at the operational level (Purcell, 1985) and that the old style
personnel specialists were too distant from line management. The personnel
department would have a strong role in developing and implementing new
structures and procedures, but would then become internal consultants,
having an advisory and supportive rather than fire- fighting role.
However, in banking, staff motivation and development have not generally
been regarded as important aspects of managers jobs and there was certainlysuspicion in the Bank that this was simply another personnel initiative
destined for a short life.
The need for cultural change was recognised in the Corporate Plan
which noted that:
In common with others in the industry, the Bank has traditionally
recruited and trained for a single career structure, with a strong technical (or
professional) bias.
However, it was rather ironic that, just when the Bank wished to erriphasise
the development of labour as a resource, the reduction of staff costs was
one of the major tasks in the late I 980s.
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29
which as far as possible would be achieved by natural wastage.
concentrating on Head Office and support functions (the so-called indirect
staff).
Towards HRM: new practices
a) Industrial Relations
A number of initiatives were introduced to re-shape the Union more in line
with the Banks view of its role. Firstly, the union role at Head Office
was diminished by reducing the number of Bank funded union
represenatatives. Secondly, the status of the Negotiating Committee was
amended so as to ensure it dealt only with major items such as pay
negotiations, while minor items were to be dealt with by the grievance
procedure, and it was agreed that much of the day to day recollapse of the
FLCBE which affected nearly a quarter of the Banks staff. The Bank
decided it required savings of some 4.5 million which walationship with the
union would be conducted by less senior personnel. Thirdly, and this also
reflected the new management style, responsibility for personnel issues was
devolved to line managers who would be encouraged to have regular local
discussions with union representatives as part of the consultative process
and this would also prevent them being by-passed with issues going directly
to Head Office
Nevertheless, while significant change could be achieved this is not to say
that the union could simply be steamrollered. Partly, this related to the
CWS who while not being involved in Bank personnel policy on day to day
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business, did exert pressure to ensure agreements which linked the Bank to
the rest of the movement were not broken.
30
However, the events described do show how the relationship was being
reshaped, albeit in an incremental fashion. Top managers no longer had
to belong to the union; other
b) Cost Control
Attention focused on the reduction of unit labour costs. Unit labour costs
can be reduced in two main ways: firstly, an increase in labour
productivity, secondly, a reduction in total labour costs. The first method
could be achieved by measures like better recruitment and training, a new
payment system, an improved organisational structure, a different
management style and culture. However, these are essentially long-term
measures and the more obvious and immediately effective method to
reduce unit costs is simply reducing the size of the workforce.
It was appreciated that the squeeze on labour costs would lead to problems
with the union and possible detrimental effects on staff morale, and
hence as far as possible the reduction in staff numbers would be achieved
in an unobtrusive manner. Natural wastage was one method, as the Bank
had a turnover of some 500 people per year. Early retirement was
another relatively non-contentious option..
would be an increasingly important function for the personnel function
(1984, pI7). The Bank was successful in reducing its numbers and hence
costs. This was to be the first step of a longer term examination of cost
structures with work continuing on removing duplication, moving staff
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industries. from the Union. argued that this related purely to redundancy
rather than merely reorganisation and redeployment, and it was not the
intention of the Bank to force people.
32
c) Remuneration - Relating Pay to
Performance
A comprehensive review of policy and practice was also being undertaken
in the remuneration area. There were a number of aims: firstly, to reflect
organisational change and remove outdated remuneration practices,
secondly, to safeguard the Bank from equal value claims and grading
issues; thirdly, to integrate the Banks salary structure into a single
continuous evaluated structure to ensure stability and cost control; and
finally to move away from automatic increases, award key objectives and
place a greater emphasis on line management contributions rather than the
central functions. Hence there were a number of processes that took place
in the Bank. There was the job evaluation exercise for managers and
appointed staff upon which trade unions were consulted, and the
clerical and technical scheme where the unions were involved in the
design of the scheme, up to the point where agreement was reached on the
format of the grading structure. With each job in every branch being highly
individual, the task was a long one.
The remuneration review took place separately from the pay round already
discussed; this enabled the Bank to set the scene for change and
maintain the initiative. The Bank insisted upon a separate bargaining unit
for managers and then extended this to the whole management group
including assistant managers and branch administrators in order to keep the
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whole management team together. By mid 1988 senior managers had been
removed altogether from the negotiating sphere. The Bank also insisted
on freezing salaries for staff whose jobs fell above the grade boundaries,
33
The third leg of the new remuneration policy was getting staff to accept a
pay what the Bank can afford principle in annual negotiations. The
Human Resources Committee agreed that it was necessary to show that the
Bank had to pay less than other clearing banks because of the difference in
its profitability along with the fact that possibly the skills in the fields in
which it operated were not required to be the same as the others.
Furthermore, the Bank stressed that if a reasonable settlement was not
reached, head count reduction might be necessary. The eventual settlement
of 6% in 1988 was seen as a clear sign of the success of its new HRM
policy. Firstly, the settlement was reached speedily. Secondly, the Banks
new open pro-active communications policy had been seen to deliver the
goods. The day after the settlement a terminal message was sent across the
network and faxed to London and Skelmersdale (the major employing
centres). The Personnel newsletter was hand delivered to managers in
Manchester and staff were consequently briefed within 24 hours, and
importantly, before the union had been able to give its message. Hence,
management had taken the initiative. Thirdly, there seemed to be evidence
that something of the argument that the Bank had been trying to put across
concerning profit/head and the dangers of being priced out of the market
had been taken and there was positive feedback from the staff, with
regard to the early receipt of information.
d) Changing Culture
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There was little detailed consideration in the HRM strategy papers of issues
like career patterns, recruitment, training etc. This was related partly to
little immediate attention being required, and secondly, to uncertainty as to
what was required.
34
Hence it was not until after the HRM strategy had been adopted and was
being implemented that attention was given to these issues.
In recent years, there had been an increasing belief that the
development of human resources is no longer a luxury to be achieved
when other objectives have been met, but
an essential part of the management of strategic change. Hence, the
development of human resources was worthy of a higher priority. This was
reflected in the development of manpower planning and a greater emphasis
on management development and training in a systematic and integrated
manner. The Bank looked to become more pro-active in this area rather
than merely respond to problems. However, much depended on a settled
business strategy for the Bank and each division, so as to identify staffing
requirements. Hence a manpower plan took time to develop given the
state of flux in the Bank. One area which needed examining was
recruitment where it was felt that there was a need to have a tiered policy.
In addition, the qualities and personalities of the staff recruited needed to b
examined. There was a move to look firstly to older, non mobile married
women as workhorses and secondly to look for more customer relations
skills and sales ability.
These changes were reflected in the training function and management
developnient programmes. There was a trend in the former towards
programmes stressing social skills and customer service training and sales
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and marketing training, all designed to educate staff in the new sales
culture. Previously, the training emphasis had been on technical training
and supervisory skills for clerical appointed and junior management staff;
the training also reflected a trend in banking to train for greater
productivity rather than preparation for future jobs (Mosson, 1986).35
A new communications strategy was also part of the attempt to change
culture. A paper by the Human Resources Manager emphasised that some
of the measures outlined may be unpalatable (particularly head-count
reduction and relocation) and hence there needed to be a much more pro-
active communications strategy. It was important that this was in place
before the 1988 pay round and before many new initiatives were
undertaken. The Human Resources Manager made this clear. If the Bank
was to achieve their Human Resource Strategy goals,
It is essential that we communicate directly with our staff to ensure they
are made aware by the Bank of our position and intentions, and not by any
other source. This is a major employee relations objective for
achievement by the Bank to enable management to
communicate directly the rationale for change, thus ensuring that it is
pro-active in managing the business.
We must develop mechanisms which ensure that communications are
simple, consistent and effective. The Bank must communicate to staff on a
regular basis, stating both good and bad news. Inconsistent or sporadic
communications are more harmful than no communications and must be
avoided at all costs. The Bank must not leave communications to BIFU.
The Unions role is to negotiate with the Bank on behalf of its members,
not to act as the channel for communication. (Employee Relations
Strategy,
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1987
).
The old system was largely based on a number of newsletters, and an
internal Bank magazine. It was largely left to the discretion of the
managers, some of whom explained the contents of the newsletters, others
merely leaving staff to read it on the noticeboard.
36The Bank introduced a system of team briefings into the existing structure
of employee involvement based on meetings, newspapers and
publications. Team briefings were designed to facilitate a consistent,
continuous flow of information (including feedback), so as to avoid the
union or even the grapevine being the main source of information. The
main aim of such involvement appeared to comprise of persuading staff to
accept the benefits of change expressed in terms of market logic. Hence it
was an endorsement of management policies which is sought, not some
form of co-determination. (Roberts and Wilkinson, 1991).
However, there were a number of problems with implementation.
Branch managers showed some cynicism as to the alleged benefits of team
briefing and many regarded it as yet another flavour of the month dreamed
up by Personnel. Some failed to see briefing in terms of ensuring that the
union would not be the main vehicle of communication, and that he who
communicates leads. Thus the Personnel Department felt it was important
that the benefits accruing to staff (including those negotiated with the
union) should be announced by managers. However, in a number of cases,
managers were content to let
However, there were a number of problems with implementation.
Branch managers showed some cynicism as to the alleged benefits of team
briefing and many regarded it as yet another flavour of the month dreamed
up by Personnel. Some failed to see briefing in terms of ensuring that the
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the training manager:
If they met financial targets, managers werent criticised even if the staff
were close to mutiny
A series of training courses on human resource management issues were
designed to reinforce this priority.
38However, many of the initiatives met with apathy, cynicism or
obstruction. Changes in the disciplinary code were regarded as cosmetic: as
one manager said, Personnel cant bring itself to let hold of the reins.
In so far as staff reflect the values of top management, this was a major
cause for concern
(Brewster et al , 1981) One of the key complaints to come out of the
courses being run
was the absence of top management. More direct difficulties also became
apparent. One of the themes in the human resource management courses
was reflective of the new management style. This was designed to
discuss the relationship of staff with their managers, and in particular the
need for staff to question their boss in an informal and constructive
manner. The course was aptly entitled How to Manage Your Boss.
However, it became apparent that it was unfortunate that managers had not
taken a course on how to accept constructive criticism.
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S u m m a r y o f F ind i n g s :
1.The problem with communicating about pay is that employees are
often tired of the same boring manuals and written material.
2. When goals are met and employees help, Bank use to dosomethings acknowledge the success.
3. Culture changes were reflected in the training function andmanagement
developnient programmes.4.Pay systems are being re-designed to focus on issues of total rewards,
adding variable pay to the formula for large segments of
the workforce, and implementing performance-based pay solutions
that recognize the influence employees have on key measures of
organizational performance.
5. The remuneration review took place separately from the pay round
already discussed; this enabled the Bank to set the scene for
change and maintain the initiative.
6.Bank always use its all the communications tools which it have to
communicate .Bank Provide e-mail question and answers and also
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have a job hotline that gives employees access to understanding
about work. But the most important thing is to keep up the
communications for the long term. Everyone does a good job for a
few months, but the organizations with most success are in the
communication process for years.
7. Employees develop some of the very best recognition and celebration
Programs.
40
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Suggestions
Company should invite and implement the suggestion of the employees
because ignoring their suggestions is a slap in the face to employees. In
time, employees reciprocate by showing a lack of respect to management.
What management can do
1. G et Rid of t h e "Su ggest ion B ox"
There is no better way to alienate employees than to say, "If you
have any ideas, just stick 'em in the box." Employees should be
treated as adults and given the opportunity to communicate their
ideas in person.
2.. P rovid e Recognit ion
Public recognition or cash awards for good work can be very
motivating to employees. However, great care should be taken in
managing such a program. I have seen these types of programs lead to
resentment among employees
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3.S kip t h eM iddles
It is very easy for good work to get lost in the hierarchy. Employees
become frustrated when their supervisors do not pass along their
performance result to senior management. Senior management
should circumvent the bureaucracy by conducting face-to-face
meetings with employees. Meetings such as "bagels-with- the-
President"
41
and "brown-bag-lunches with the CEO" can offer richopportunities for ferreting out useful ideas.
4.. S et Realist ic Exp ect at ion s
Management needs to make it clear that not every suggestion can be
used, but that all suggestions are welcome.
5. P roact ive ly P romot e t h e P roli fe rat ion of Su gges t ions
Management should make it clear to employees that providing
new thingh or innovation is an expected part of everyone's job.
6. Clos e t h e Loop
Employees need to know that their suggestions are not being
ignored. It is important for management to communicate to
employees when their suggestions are being implemented. Doing so
will increase the probability that employees will continue to make
useful suggestions.
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42
C o n c l u s i o n
s
The case of the Co-operative Bank sheds light on the issues of human
resource management discussed in the management literature. It was
suggested that a shift from an administrative tO a market driven
organisation would lead to a greater priority for the management of human
resources. The Bank case provides examples of greater attention to this
subject at top level management, including the appointment of a specialist
human resources manager and shows a broader range of issues being
considered with an emphasis on management-employee relations rather
than management-trade unions relations and a more pro-active and
strategic role for the Personnel department with operational issues beingdevolved to line management. These are in line with the alleged change
from personnel management to human resource management.
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