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  • Human Resource Management for MFIs Toolkit

    MicroSave Market-led solutions for financial services

    Website: www.MicroSave.net Website: www.meda.org

    Human Resource Management for MFIs Toolkit

    (Version 0711)

    Mennonite Economic Development Associates

    Kim Pityn and Jennifer Helmuth

    Adapted by Graham A.N. Wright and Madhurantika Moulick

    November 2007

  • Human Resource Management for MFIs Toolkit

    MicroSave Market-led solutions for financial services

    Table of Contents

    Introduction to Human Resource Management ................................................... 1

    Human Resource Policies ...................................................................................... 11

    Salary, Benefits and Incentives ............................................................................. 18

    Recruitment, Selection, and Orientation ............................................................. 30

    Staff Performance Management Development and Training ........................... 51

  • Human Resource Management for MFIs Toolkit

    MicroSave Market-led solutions for financial services

    1

    Introduction to Human Resource Management

    What is Human Resource Management? Simply put, Human Resource Management (HRM) provides an institution with an effective work force in order to meet its mission. Effective human resource management uses systems and tools to bring together:

    the right number of people,

    with the right attitude and skills,

    in the right place,

    at the right time.

    The goal of human resource systems, tools and activities is to help the individual employees who make up your MFI to be successful at their jobs and to work well together. In order to accomplish this goal, Human Resource Management (HRM) must be an integral part of the strategic plans of your MFI and have the full support of your senior management and board of directors.

    Based on years of work in Human Resource Management for the microfinance industry, MEDA has developed a Human Resource Management Model as shown in the first figure. This model divides the primary activities of HRM in the context of microfinance into six broad categories:

    1. Human Resource Planning

    2. Human Resource Policies

    3. Recruitment and Selection

    4. Salary, Benefits and Incentives

    5. Performance Management

    6. Training and Development

    These functional responsibilities are influenced by the external context in which your MFI operates and well as your MFIs internal strategies, goals, mission, and institutional culture. It is also important to include a process of review and evaluation to ensure that your systems and tools continue to be appropriate as your MFI evolves. Each of the six HR functions plays an important role in the effective operations of your MFI. Throughout this toolkit, you will learn about these functions and how, when applied appropriately, Human Resource Management can propel your institution toward success.

    MFIs leadership, including the board and senior management must fully endorse HRM functions. This includes not only verbally supporting HRM initiatives, but more importantly, actively modeling the systems and tools. It is with this support that HRM will have an opportunity to impact the success and growth of the MFI.

  • Human Resource Management for MFIs Toolkit

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    2

    Human Resource Management Model

    Why is Human Resource Management important? Your institution requires two major resources to operate: capital and people. The microfinance industry gives significant attention to the financial issues of operations. While finance is essential, it is only a tool in the hands of your people. Money does not manage itself; people manage it. Human Resource Management tools and systems are critical in finding, training, managing, motivating, and developing a team of staff who will effectively carry out your MFIs mission. By building strong, well functioning human resource systems and tools, your institution will be poised for growth, ready to manage the challenges of an evolving environment, and responsive to the needs of your clients.

    How can Human Resource Management contribute to an MFIs success? All institutions are comprised of an interdependent network of individuals. In order for your MFI to be successful, the individuals within it must be productive, efficient, and effective. Attention to the

    Society (government laws,

    economy, social issues, donors, etc.)

    The MFI (mission, strategies,

    culture, etc.)

    The Staff (skills, needs, attitudes, etc.)

    Review & Evaluation of Human Resource Activities

    Performance Management

    Human Resource Planning

    Recruitment and Selection

    Training and Development

    Salary, Benefits, Incentives

    Human Resource Functions

    Policies

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    3

    management of these individuals can not only enhance the success of the individuals, but can encourage a team effort capable of reaching goals beyond what one person can do alone. All employees, regardless of their position in your MFI, need the same things to be successful. Everyone needs to:

    1. Identify with your MFIs mission

    2. Understand their role, and how that contributes to the mission

    3. Know specifically what is expected of them

    4. Have the capacity, resources, and environment which makes success possible

    5. Receive encouragement, constructive feedback, and opportunities to develop and improve

    The work of Human Resource Management is to implement systems and tools that will provide these key elements to help the individuals within your MFI to be highly motivated and successful. When individuals are successful, your MFI will be successful.

    What factors affect Human Resource Management? Three main factors that affect the work and goals of Human Resource Management are noted in the top three boxes in the figure. These three main factors are society, the MFI, and the staff. In managing your MFIs human resources, it is important to consider each of these stakeholders.

    Society

    The external environment in which you operate can heavily influence HRM. By its very nature, part of your MFIs mandate is to respond to some of societys needs and challenges. In your region, these might include issues such as poverty, high rates of illiteracy, environmental concerns, and high crime rates. Other external factors that will affect HRM could include competition in the microfinance sector, and even your relationship with donors. In addition to dealing with these challenges, your MFI must also understand and comply with the legal requirements and labour laws in your region. This will impact your human resource management policies and procedures. Many informal rules or expectations within society may also have an influence on the issues your MFI must address in staff management. In Africa, one widespread societal issue that impacts microfinance is HIV/AIDS. Special attention is given to this issue in the figure and throughout other sections in the toolkit.

    The MFI

    The major aim of Human Resource Management is to contribute to the success of your MFI. Therefore, the mission, strategy and goals of your MFI will form the basis of how you approach human resource issues. The structure and functions of HRM should be at a level that is appropriate to the size and needs of your MFI. You could be wasting precious resources if HRM systems and tools are more or less sophisticated than what your institution needs or can afford.

    The Staff

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    Effective Human Resource Management will seek success for your MFI through supporting the contribution of each employee. As noted above, your institutions success is highly dependent on the success of each of your staff. Many Human Resource Management systems and tools are available to support each employee to be productive, thereby contributing to your MFIs success. These three stakeholders (society, the MFI and the staff) are beacons that will help to guide your human resource strategies and day-to-day activities. Not every HRM decision or activity will affect these stakeholders every time or to the same degree. HR Managers will often need to find an appropriate balance between the competing interests of these three stakeholders and will learn when and how to compromise appropriately.

    Who is responsible for HRM? Ultimately, the responsibility for Human Resource Management activities rests with each MANAGER. If a manager does not accept this responsibility, then HRM activities will only get partially done. Maximizing the potential of the human resources available within your MFI is directly de