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CHAPTER-1
INTRODUCTION
Today, the forces of competition, consolidation and convergence are exerting
continual pressure, on organizations and individuals alikge, to deliver the best value under the
fast changing complex economic, political and social environment all over the world. The
emerging complex confluences of market forces and technology have made business highly
competitive. Integration of global markets, reducing profit margins and fast changing
consumer preferences are forcing organizations to redefine and reengineer their businesses
and adopt different strategies. These trends have a more dominant impact on service industry
like banking where money market dynamics further compound the nature of competition.
Many progressive business institutions around the world have begun to internalize this new
reality and are redesigning the role of their human resources, in order to get the best value
out of their intellectual capital and India is not an exception to all this.
Human resources as the only active resource in organizations are very important
because effective and efficient utilization of other resources like money, materials, machines
and technology depend upon them. In a rapidly changing scenario when all the developing
nations are facing fierce competition in the wake of globalization, deregulated markets, the
application of e-technology to all aspects of a complex organization, continuous updating of
the staff skills is becoming more critical. There is pressure on Indian industry to produce
quality products and provide quality services in the fast changing competitive environment.
With day-to-day increasing pressures of competitive market forces, there is an urge to
become cost effective and cost efficient banking sector.
A well-designed Human Resource Management (HRM) mechanism focuses on
acquisition of efficient and cost effective human resources, their training and development,
compensations, their welfare and other benefits, health, safety, job analysis, job descriptions,
job specification, performance evaluation, and industrial relations. It has become extremely
essential to carry out a complete work on science of Human Resource Management. Today,
organisations are downsizing, merging with others, acquiring each other and becoming
increasingly affected by changes throughout the world. So, managers increasingly recognise
the value of human resources and strive to better understand people and their roles in
complex organisations and competitive business environment. By following the newer human
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resource management practices (HRMP), the enterprise itself shapes the behaviours and
actions of each individual who becomes a part of it.
Human resource management practices are gaining importance in the present fast
changing socio-economic scenario. Everyone must realise now the role of human resources in
all round development and growth of organisation and above all the country as a whole. The
recent scenario of economic liberalisation and process of globalisation have increased the
importance of Human Resource Management by manifold. Human beings are no longer
considered now simply wage earning labour but as assets and a purposeful resource of the
organisation. For effective human resource utilization, HRM has become very essential. All
the organisations whether they are government or non-government, industrial, business or
service, depend on people, i.e., human resource for their operations vis-a-vis their survival
and growth. Still in many organisations human resources are not treated as assets or resources
that can be drawn upon.
With the emergence of improved technologies and global competitive environment,
upgrading the work methods, work norms, improving technical and managerial skills and
employees‟ satisfaction, have become the need of the hour, both in manufacturing and
services sectors. There is a mounting pressure on Indian commercial banks to provide cost
effective and cost efficient quality services in the fast changing competitive environment.
After the economic liberalisation process began, a vibrant banking sector powered by both
improved-efficiency public sector banks and growth-hungry private ones emerged on the
economic scene. Indian banks making available the number of instruments and services to
both the retail and corporate clients globally and the levels of technology involved in
managing these products have become pure science-oriented over the last 23 years.
Every organization is set for the attainment of certain predetermined objectives and
which can be achieved only when various resources are brought together and managed in
such a way that they contribute their best. These resources are, human and non-human. Of all
the resources, human resource is the most significant and the only active factor of production.
The utilization of all other resources depends on efficient utilization of human resources. It is
a widely acknowledged fact that in the emerging highly competitive global market
conditions, only excellent performers would survive. Today‟s organizations are confronted
with challenges in improving productivity and successful meeting the intense level of global
competition. How successfully an organization responds to these challenges largely depends
on how well it utilizes its available human resources to the highest level of performance. As
such, the concept of HRM is rapidly gaining ground as a popular method of ensuring higher
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productivity and faster growth which is now widely regarded as the hallmark of corporate
excellence.
1.1 STRUCTURE OF BANKING INDUSTRY IN INDIA
The Indian commercial banks can be classified into unorganized sector banks and
organized sector banks. The unorganized sector consists of indigenous bankers including
non-banking financial companies. In the Indian money market system, the Reserve Bank of
India occupies the central position because it regulates and controls the credit supply of the
country. The commercial banks can be divided into two groups:
(A) The scheduled banks are those which have been included in the schedule
(second) of Reserve Bank Act, 1934.
(B) Non-scheduled banks are those banks which are not included in the list of
scheduled banks. The number of non-scheduled banks is continuously
declining.
Over the last six and a half eventful decades, banks have played a commendable role
in promoting savings and investments, helping the nation in its march towards economic
independence.
As on 31st March 2012, 26 commercial banks in public sector are working in the
country. Out of these, 19 banks are nationalized banks (earlier this number was 20 but New
Bank of India was merged with Punjab National Bank leaving this number to 19), SBI and 05
Associates and one other commercial IDBI Bank. Out of the 21 private sector commercial
banks, 14 are old and only 7 are new.
1.2 DESCRIPTION OF CONCEPTS
Human resources, being the principal source of the service industry, constitute the
total knowledge, skills, creative abilities, and aptitudes of workforce as well as the value,
attitude and beliefs of the individuals involved in them. One of the important and dynamic
activities is the management of the human resources. It is a challenging task because of the
dynamic and unpredictable nature of the people. Human resource management is actively
involved in recruiting and selecting human resources, fashioning their career paths,
improving their skill sets and rewarding them accordingly. The operative functional areas of
human resource management are related to procuring, developing, compensating and
integrating them and maintaining a workforce for attaining organisational goals. HRM policy
is a total commitment of the organisation to act in a specified way while dealing with its
manpower, and generally deals with personnel selection, promotion, compensation and
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training and development of its employees, their performance evaluation, personnel relations
and public relations. Here, a brief description of the conceptual areas of HRM practices
relating to employees‟ recruitment and selection, promotion, compensation packages, training
and development practices as covered under the study has been undertaken.
Human resources are the most important and vital of all the resources and play a
crucial role in management process. Human resources equipped with knowledge and skills
are considered meaningful resources today. All the other resources are freely moving but the
people with knowledge are to be grabbed for, as they are invaluable assets to the
organisation. They are in greater demand, good performance, better competence, desirable
quality are the by-products of knowledge. It is the people (human resources) who work
behind machines, manage organization; they plan, organise, direct, control and communicate
to fulfil the common objectives and meet the targets. Human Resource Management
envisages the human approach towards the people at work; and ignorance of Human
Resources can prove to be a curse for the enterprise. Human beings design or order the
equipment; they decide where and how to use computers; they modernize the technology
employed; they secure the capital needed and decide on the accounting and physical
procedures to be used. Every aspect of organisations activities is determined by the
competence, motivation and general effectiveness of its human resources.
1.2.1 Human Resource Management
Human Resource Management includes planning, job analysis, job design,
acquisition, training and development, compensation, appraisal, benefits, rewards, safety,
health, motivation, job evaluation, human relations, employee counselling and personnel
research of human resources. A HRM system is a set of procedures framed to control, e.g.,
the system of employment in HRM through selection involving a set of procedures of inviting
applications, conducting tests, interviews, physical examination, checking references, issuing
appointment letters, their compensations; and beyond that training and other processes to be
followed for effective management. And total efficiency of all the systems should be
effectively planned, developed and executed collectively by human resource manager in
consultation with other managers.
Human resources encompass knowledge, skills, creative abilities, talents, and the
aptitude obtained in the population; whereas from the point of individual enterprise, they
represent the total of the inherent abilities, acquired knowledge and skills as exemplified in
the talents and aptitudes of its employees (Megginson, 2003). Whereas Michael (1973) calls
these resources, human factors which refer to “as a whole consisting of inter-related, inter-
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dependent and interacting physiological, sociological and ethical components. As such,
human resources by nature are multi-dimensional factors in an organizational set-up which
strive for the accomplishment of business objectives. The terms human resources or human
assets or human capital or personnel are used inter-changeably and are in intangible form.
Human resources represent a source of strength, ability, skill, competence,
knowledge, attitude, enthusiasm, decision-making powers to be used for accomplishment of
organisational, individual, societal and national objectives in the sense they are the most
essential. Nothing can be achieved without their co-operation. HRM in coming years will not
be contended with mere personnel management or industrial relations, but be more involved
and concerned with developing, educating, team building, counselling, motivating, caring and
above all, organisational development. Moreover, presently the top managements of
commercial banks in India are paying increased attention to HRM because they have realised
that human resources need to be closely integrated with planning & decision-making. Now
for them the Human Resource Management means viewing people as vital social capital; and
an effective Human Resource Management has become a must to face challenges on
knowledge, skill and technology fronts occurring in global economy. And as such, the
effective Human Resource Management has become mandatory for all the industrial and
service organisations.
Human Resource Management is meant “to integrate all personal activities with each
other and strategically with organizational objectives”. Essentially, it first serves the
organizational interest and in that context, “It is an investment rather than a cost to the
organization”. The utilization of all other resources directly depends on efficient utilization of
human resources. Every organization needs to have well-trained and experienced people to
perform the activities that have to be done. As jobs have become more complex in the
banking sector, the importance of employee training has increased. In a rapidly changing
society, employee training is not only an activity that is desirable but also an activity that an
organization must commit resources to, if it is to maintain a viable and knowledgeable
workforce. Owing to the changing banking environment, HR department has to care for
appropriate response in equipping people who have to perform in the new environment.
Human Resources Management (HRM) is defined as the policies and practices
needed to carry out the “people” or human resource aspect of a management position,
including selection, job definition, training, performance appraisal, compensation, career
planning and encouraging employee participation in decision-making. From another point of
view, HRM is defined as a process for the development of abilities and the attitude of the
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individuals, leading to personal growth and self-actualization which enables the individual to
contribute towards organizational objectives. Much of the debate has been around the
meaning of HRM, yet there is no universally accepted definition of HRM. Some definitions
interchange HRM with personnel management.
Human Resource Management is also defined as a strategic and coherent approach to
the management of an organization‟s most valued assets-the people working there who
individually and collectively contribute to the achievement of its objectives. Storey (1989)
believes that HRM can be regarded as a „set of interrelated policies with an ideological and
philosophical underpinning‟. Becker and Gerhart (1996) have classified these components
into three levels: the system architecture (guiding principles), policy alternatives, and
processes and practices. Human resource management operates through human resource
systems that bring together in a coherent way:
HR philosophies describing the over arching values and guiding principles adopted in
managing people.
HR strategies defining the direction in which HRM intends to go.
HR policies, which are the guidelines defining how these values, principles and the
strategies should be applied and implemented in specific areas of HRM.
HR processes consisting of the formal procedures and methods used to put HR
strategic plans and policies into effect.
HR practices, comprising the informal approaches used in managing people.
HR programmes, which enable HR strategies, policies and practices to be
implemented according to plan.
The overall purpose of human resource management is to ensure that the organization
is able to achieve success through people. As Ulrich and Lake (1990) remark: “HRM systems
can be the source of organizational capabilities that allow firms to learn and capitalize on new
opportunities.”
Human capital can be regarded as the prime asset of an organization, and businesses
need to invest in that asset to ensure their survival and growth. HRM aims to ensure that the
organization obtains and retains the skilled, committed and well-motivated workforce it
needs. This means taking steps to assess and satisfy future people needs and to enhance and
develop the inherent capacities of people and their contributions, potentials and employability
by providing them learning and continuous development opportunities. It involves the
operation of rigorous recruitment and selection procedures, performance-contingent incentive
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compensation systems, and management development and training activities linked to the
needs of the business (Becker et al., 1997). It also means engaging in talent management and
the process of acquiring and nurturing talent, wherever it is and wherever it is needed, by
using a number of interdependent HRM policies and practices in the fields of resourcing,
learning and development, performance management and succession planning.
Recruitment and Selection
The success of any organisation depends ultimately on the calibre and the
effectiveness of its recruitment and selection procedure. Both recruitment and selection are
two phases of employment process. Recruitment being the first phase, which envisages taking
decisions regarding the choice of typing the source of human resource supply. While
selection is the second phase which involves exercising various types of tests and interview
on the candidates in order to select the right person for the right job.
Recruitment
The term „recruitment‟ applies to the process of attracting potential employees to the
organization or company. It is a systematic means of finding and inducting available
manpower to apply to the company or enterprise for employment. Since it involves the
process of searching for prospective employees, it is concerned with the range of sources of
supply of labour or personnel, and of recruitment practice and techniques. The recruiting
activity in itself is selective or pre-selective, through choosing among the various sources of
labour supply and by the decision as to which candidates applying for employment should be
permitted to go through subsequent selection or screening procedures.
The process of identification of different sources of human resources is known as
recruitment. It is a linking activity that brings together those offering job and the job seekers.
Recruitment refers to the attempt of getting interested applicants and creating a pool of the
prospective employees so that the management can select the right persons for the right job
out of this pool. Recruitment precedes the selection process, i.e., selecting the right person for
various positions in the organisation. It is a positive process as it attracts suitable applicants to
apply for the available jobs. Thus, the process of recruitment involves:
1. Identification of different sources of labour, which may be grouped as:
i) Internal sources (recruitment from within the organisation), and
ii) External sources (recruitment from outside sources).
2. Assessing their validity
3. Selecting the most suitable source or pool of sources.
4. Inviting applications from prospective candidates for the vacant jobs.
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Methods of Recruitment
There are two main sources of recruitment:
1. The Internal Labour Market, and
2. The External Labour Market.
Poaching and Raiding
Another trend in recruitment process is poaching which means employing a
competent and experienced person already working with another reputed company, which
may be a rival in the industry. A company can attract talent from another company by
offering attractive pay packages, and terms and conditions. In fact, it is raiding the rival firms
for potentially better candidates. It is also considered as a challenge for human resource
managers because poaching of a key bank officer by a rival company certainly weakens the
competitive strength.
E-recruitment
These days, majority of the organisations use internet as a source of recruitment.
The companies advertise the job vacancies from bottom to the key positions through the
worldwide web. The job seekers send their applications or curriculum vitae through e-mail or
by filling the online forms using the internet. Alternatively, job seekers display their
curriculum vitae through the worldwide web or internet which may be drawn by prospective
employers to meet their requirements.
Selection
After determining the number and kind of personnel required by the organisation the
Human Resource Management department proceeds with identification of sources of
recruitment and begins with the search of suitable candidates for employment. Normally,
various types of screenings and tests are administered to shortlist the most suitable
candidates. Shortlisted candidates are then called for interview. After their selection, medical
tests are conducted and finally, reference check is carried out. And the process ends with
issuance of selection letters to the selected candidates.
Promotion
Although the organization‟s very existence in the socio-economic environment and its
reputation may be sufficient to attract people to it and its reputation in the local labour market
may influence its recruitment activities, reliance on informal and casual method of attracting
potential employees or candidates is a narrow basis of selection and may lead to the risk of
deterioration in available employee skills. Therefore, modern business and other
organizations use highly sophisticated methods of recruitment to protect themselves against
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gaps and shortage of rank and file labour supplies and managerial or officer personnel in
banking sector. Evidences show that it is difficult to find competent managerial and officer
personnel at the right time and at the right place from the external sources. In such
circumstances, internal human resources prove to be the only solution.
Promotion as an internal source of recruitment of personnel refers to recruitment from
within the organization so as to conserve the existing manpower through implementation of
policies of promotions and transfers. The best employees may be often found from within the
organization. It is, therefore, desirable that, in times of need, first to search for suitable
manpower from within the organization. Vacancies filled through promotions and transfers
provide further entry positions for which recruitment from external sources may be done.
Several benefits are associated with recruitment from the internal labour market such as:
1. It cultivates and enhances the morale of the employees.
2. Stability from continuity of employment.
3. Better evaluation of the employees.
4. Loyalty by creating a sense of job security and personnel advancement making
them a contented employee.
However, certain drawbacks are also usually attributed to recruitment from the
internal sources. Prominent among them are the following:
1. Danger of “inbreeding”, i.e., new blood would be discouraged.
2. Inadequate and limited source of supply of manpower.
3. New ideas or innovations or suggestions are so important for development in a
competitive market which has been sidelined.
However, despite these shortcomings of recruiting the personnel from the internal
labour market, there is a general tendency among the employers in industrial, business and
service organization to rely on this source of recruitment.
Training and Development
Modern industrial organizations widely recognize the need for training of their
employees so as to acquaint them with the new technological developments. Every company
must have systematic training programme for the growth and developments of its employees.
Having the right person at the right place at the right time is the basic object of
successful human resource policy. It is the only people, who make the organisation
successful. An organization can grow if its people also grow and vice-versa. Human
Resource is the most and valuable asset of an organization which never depreciates.
Investment in Human Resource or employee leads to success of the organization. It is always
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essential for an organization to update the knowledge and skill of its employees as it results in
more productivity which ultimately provides an edge over its competitors. The need of today
is to place training and development at the heart of a business strategy so as to enable the
organization to build its competence as a domestic and international player.
Training enables the employees to get acquainted with jobs and also increase their
aptitude, and skill and knowledge. It makes newly recruited employees fully productive in the
minimum time. Even for the old workers, it is necessary to refresh them and to enable them
to keep up with new methods and techniques as well as new machines and equipments for
doing the work. Thus, training is not a „one-step process‟, but it is a continuous or never-
ending process because it increases the knowledge and skill of new employees in performing
their jobs and serves as a refresher course for the old employees. Training job will never be
finished as long as the organisation remains in operation. It also comprehends the ability to
think clearly about problems arising out of the job and its responsibilities and to exercise
sound judgment in making decisions affecting the work. The training of computerized
banking processes and procedures with proper guidance helps in turning the disguised talent
into a precious asset of the bank. The biggest achievement in the area of human resource
management has been the development of strong training system in banks.
Every organisation works for the development of its existing or potential bank
officers, in order to enable them to be more effective in performing the various functions of
management. In fact, the management of development focuses on developing in a systematic
manner, the knowledge base, attitudes, basic skills, interpersonal skills and technical skills of
the managerial cadre, (Mathis,1990).A bank officer‟s development programme aims at
increasing the capacities of the individual to achieve the desired objectives. Bank officers‟
capacities imply his personnel abilities and potentials. Desired objectives imply consideration
for the goal of the organisation and individuals. Increasing the capacities implies that change
must occur in the bank officer and through him in his subordinates. Thus, training is quite
beneficial for the employers as well as employees.
The Five-Step Training and Development Process
The processes of training and development are often confused. Training means
learning the basic skills and knowledge necessary for a particular job or a group of jobs. To
put it in other words, training is the act of increasing the knowledge for a particular job. But
development, on the other hand, means growth of the individual in all respects. According to
Dessler and Berkkey (2009), training programmes consist of five steps:
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1. The needs analysis includes the identification of the skills required for the specific job
performance, assessing the prospective trainees‟ skills and developing specific,
measurable knowledge and performance objectives based on deficiencies.
2. Instructional designs are decided, compiled, and training programme content are
produced, including workbooks, exercises and activities. By using the appropriate
techniques, such as on-the-job training and computer-assisted learning.
3. Validation, in which the bugs are worked out of the training programme by presenting
it to a small representative audience.
4. Implementing the programme, by actually training the targeted employees group.
5. Evaluation, in which management assesses the programme‟s successes or failures.
Employees‟ training is more easily identified and provided when mechanism of
competencies and acceptances are employed on them, thus, facilitating the
identifications of these core competencies that are to be developed in each case, and
thereafter training actions that are required.
Compensations Management
Compensation and benefits or rewards are concerned with paying workers and
administering their benefits package. Job salaries and benefits are not paid on a whim basis
rather than money value as assigned to positions is the outcome of elaborate investigation and
analysis which consists of logical job rankings to extensive analysis. Once these analyses are
over, job ratings are statistically compared to determine the relative worth of the job,
dimension of skills, job responsibility, efforts and accountability to the company. Other
factors, such as market conditions, position of labour supply in the market, global economic
environment, legal aspects, internal financial and liquidity position of the company, etc. are
also taken into consideration.
Pay practice is one of human resources management practice which normally refers to
pay, wage, salary and benefit, etc. The pay has an important role in implementation
strategies. First, a high level of pay and/or benefits relative to that of competitors can ensure
that the company attracts and retains high-quality employee, but this might have a negative
impact on the company‟s overall labour costs. Second, by tying pay to performance, the
company can elicit specific activities and level of performance from employee (Hollenbeck et
al., 2006). Generally, pay practice is very significant for the organizations and firms which
can attract employees to apply for the job as recruitment. On the other hand, the employees
have to retain the high performance of work in order to show their quality of work, otherwise,
will lose their work.
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As far as rewards management is concerned, many changes have occurred over the
past few decades and as such, these have become significantly most costly. The managements
are constantly looking for the low cost products for their employees such as health insurance,
while concurrently maintaining or improving quality outsourcing for other facilities, flexi
benefits programme and utilization review to help the organisations to cost cuts or cost
reductions. Inherently flawed incentive compensation practices in the financial sector were
one of the important factors contributing to the recent global financial crisis. High short-term
profits led to generous bonus payments to employees without adequate regard to the longer-
term risks they imposed on their firms. These perverse incentives amplified the excessive
risk-taking that severely threatened the global financial system and left firms with fewer
resources to absorb losses as risks materialized. The lack of attention to risk also contributed
to the large, in some cases extreme absolute level of compensation in the industry.
The rewards management set-ups also serve as facilitator for providing its employees
crucial information such as pay cuts options, recent tax law changes, details of perquisites
attached to various jobs at different levels. This provides the work force a great deal of
responsibility and sharing a long-term vision of the undertaking with its employees.
Employees are too often rewarded for increasing the short-term profit without employees‟
activities posed to the organizations. These perverse incentives amplified the excessive risk
taking that severely threatened the global financial system, resulting in the 109 banks failures
all over the world. The compensation issue has, therefore, been at the centre stage of the
regulatory reforms. To address the issues in a coordinated manner across jurisdictions, the
Financial Stability Board (FSB) has brought out a set of principles and implementation
standards on sound compensation practices in April and September 2009 respectively. The
principles intended to reduce incentives towards excessive risk taking that may arise from the
structure of compensation schemes. The principles call for effective governance of
compensation and its alignment with prudent risk taking and effective supervisory oversight
and stakeholder‟s engagements. The principles have been endorsed by the G-20 countries and
the Basel Committee on Banking Supervision (BCBS) and being implemented across
jurisdictions.
Pay practices have established correlation with job satisfaction and are also useful to
influence motivation of employees then achieved higher productivity. The efficiency wage
theories affirm that paying higher wage can sometimes increase workers‟ productivity. In
other words, the wage or pay practice has influenced employees‟ work and turnover as well.
Second, a higher wage increases effort by increasing workers' loyalty.
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1.2.2 Job Satisfaction
Job satisfaction is one of the most popular and widely researched topics in the fields
of organisational psychology and Business Management. Job satisfaction has been studied
both as a consequence of many individual and work environment characteristics and as an
antecedent to many outcomes. Employees who have higher job satisfaction are usually less
absent, less likely to leave, more productive, more likely to display organisational
commitment, and more likely to be satisfied with their lives.
Shrivastava and Purang (2009) describe that job satisfaction is in regard to one's
feelings or state-of-mind regarding the nature of one‟s work. Job satisfaction can be
influenced by a variety of factors, for example, pay practice, quality of one's relationship with
one‟s supervisor, quality of the physical environment in which one works whereby turnover
refers to the characteristic of a given company or industry, relative to rate at which an
employer gains and looses staff. For example, if an employer is said to have a high turnover,
it means that employees of that company have a shorter tenure than those of other companies
in that same industry. Job satisfaction and turnover are basically inter-related to each other
by which job satisfaction has a direct effect on the turnover.
Moreover, job satisfaction is, generally, believed as a higher job satisfaction which in
turn is associated with increased productivity, lower absenteeism, and lower employee
turnover. Amah (2009) stressed that job satisfaction was found to have a direct negative
relationship with turnover intention. These results indicate that the effect of job satisfaction
on turnover can be enhanced in two ways; namely, when employees find congruence between
their job and their self-identity, and when involvement in such jobs enhances their overall life
satisfaction. On the other hand, turnover can be considered as cost of running a business.
Khilji and Wang (2007) reported that the impacts of labour turnover on a hotel‟s bottom line
could be classified into direct costs and indirect costs. Direct costs are essentially financial
consequences that include administrative costs as a result of increased recruitment and
training expenditure of new employees. As such a satisfied workforce can increase
organizational productivity through less distraction caused by absenteeism or turnover, few
incidences of destructive behaviour, and low medical costs.
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1.3 BACKGROUND OF THE STUDY
With rapidly changing scenario when all the developing countries are facing fierce
competition in the wake of globalization, deregulated markets, the application of e-
technology to all aspects of a complex organization, people have become an important
resource because organizations are made of people and the way money, technology and
resources are used depends upon Human Resources. A well-designed human resource
management system includes; acquisition of human resources, their training and
development, compensations, other benefits, health, safety, job analysis, job descriptions, job
specification, performance evaluation and other information such as skill, competence,
experience, their increments, bonus, cost of acquiring HR and so on. Career planning requires
thorough check up one‟s own preferences, abilities, skills, competence and train them
accordingly before placing them at respective designations. Finally, popular management
laboratories have one thing in common; they each view all employees (Human Resources) as
critically valuable parts of organization set-up.
Human Resource management is gaining importance in today‟s fast changing global
socio-economic and political scenario. Everyone must realise now the role of human
resources in all round development and growth of organisation and above all the country as a
whole. Still in many organisations human resources are not treated as assets or resources that
can be drawn upon. Basically, human resources represent a source of strength, ability, skill,
competence, knowledge, attitude, enthusiasm, decision-making powers to be used for
accomplishment of organisational, individual, societal and national objectives in the sense
they are the most essential. Nothing can be achieved without their co-operation. Moreover,
nowadays, top managements of commercial banks in India are paying increased attention to
HRM because they have realised that human resources need to be closely integrated with
planning & decision-making.
Table 1.1, as given below, highlights the staff strength of public and private sector
commercial banks in India from 2002-03 to 2011-12, indicating the increasing importance of
human resources in the banking sector. For the purpose of getting the detail intersectoral
comparative analysis, public sector banks have been classified into two categories, viz.
nationalized banks, and SBI and its Associate banks (including IDBI), while private sector
banks have been classified into old private sector banks and new private banks.
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Table 1.1
The Staff Strength of Public and Private Sector Commercial Banks in India from
2002-03 to 2011-12
Years Public Sector Banks Private Sector Banks
Nationalised
Banks
SBI
Group
Combined Old New Combined
2002-03 474328 282923 757251 44048 21408 65456
2003-04 470951 280676 751627 43619 26976 70595
2004-05 467983 280668 748651 43558 37867 81425
2005-06 469177 274760 743937 43972 40675 84647
2006-07 466547 263181 729728 45061 76602 121663
2007-08 458147 257261 715408 48725 110573 159298
2008-09 455464 278799 734263 51412 124998 176410
2009-10 455049 279545 734594 55071 127596 182667
2010-11 458129 296973 755102 55432 132627 188059
2011-12 475697 295691 771388 62965 151339 214304
Average 465148 279048 744195 49387 85067 134453
SD 7814 12310 16100 6680 49895 56023
Variance 61056210 151524055 259205272 44615480 2489429630 3138517756
CAGR 0.03 0.40 0.17 3.30 19.46 11.39
Source: Data compiled from Annual Publications of IBA Bombay; Performance Highlights of Public Sector
Banks and Performance Highlights of Private Sector Banks 2002-03 to 2011-12.
Note: SBI Group includes State Bank of India and its Associates, and IDBI for the purpose of this study.
The average number of employees of the nationalized banks, SBI group and its
associates has been 4,65,148 and 2,79,048 respectively over the period under study. On the
other side, the average number of employees of the old and new private sector banks has been
49,387 and 85,067 respectively. This shows that nationalised banks have got the Ist rank,
while SBI group and its associates are at the second position; and old private sector banks
have the lowest rank so far as the average number of employees is concerned. During the
period of study both the classes of public sector banks and the old private sector banks have
shown fluctuating staff strengths over the period under study. However, there has been a
constant rise in the staff strength of new private sector banks. SBI and its associates have
shown the highest strength of 2,96, 973 employees in the year 2010-11. During the remaining years,
nationalised banks have got the lead as compared to other banks in the matter of staff strength.
The Compound Annual Growth Rate (CAGR) of the new private sector banks have
been recorded to be the highest over the period under study, i.e., 19.46 per cent followed by
relatively very less growth rates of 3.30 per cent, 0.40 per cent, and 0.03 per cent in the case
of old private banks, SBI and its associates and nationalised banks respectively. The data
provided in the above table indicates that although the SBI and its associates have the highest
16
number of employees during some years of study in comparison to other banks but still their
growth is very low. The new private sector banks are at their developing stage and have
shown a remarkable compound growth rate during the period under study.
For the purpose of making an in-depth intersectoral comparative study, public sector
banks have been classified into two categories, nationalized banks, and the SBI and its
Associates (including IDBI). Similarly, private sector banks have been classified into old
private sector banks and new private banks. Table 1.2 carries the data showing the growth of branch
network of public and private sector commercial banks in India from 2002-03 to 2011-12.
Table 1.2
Branches of Public and Private Sector Commercial Banks in India
from 2002-03 to 2011-12
Years Public Sector Banks Private Sector Banks
Nationalised
Banks
SBI
Group
Combined Old New Combined
2002-03 33123 13585 46708 3573 961 4534
2003-04 33416 13678 47094 3713 1075 4788
2004-05 33537 13857 47794 3818 1465 5283
2005-06 34461 14037 48498 4050 1717 5767
2006-07 35810 14481 50291 4248 2338 6586
2007-08 37438 15616 53054 4529 3194 7723
2008-09 39574 16655 56229 4746 4277 9023
2009-10 41836 18188 60024 5071 5171 10242
2010-11 43962 19237 63199 4884 6834 11718
2011-12 48563 20339 68902 5462 8119 13581
Average 38212 15968 54180 4410 3515 7925
SD 5194 2509 7688 632 2515 3123
Variance 26978663 6292813 59103431 398672 6326194 9751309
CAGR 3.54 3.74 3.60 3.93 21.41 10.49
Source: Data compiled from Annual Publications of IBA Bombay; Performance Highlights of Public Sector
Banks and Performance Highlights of Private Sector Banks 2002-03 to 2011-12.
Note: SBI Group includes State Bank of India and its Associates, and IDBI for the purpose of this study.
The table indicates that nationalized banks have 48,563 branches in the year 2011-12
which is the highest number in comparison to other banks. However, the old private sector
banks have the lowest number of branches, i.e., 5,462 in the year 2011-12 and 3573 in the
year 2002-03 . The number of branches of new private sector banks have increased constantly
and rapidly. It had only 961 branches in the year 2002-03 which rose to 8,119 branches in the
year 2011-12. These figures indicate that the nationalized banks have the highest number of
branches as compared to other banks followed by SBI group and its associates.
17
The new private sector banks have also enjoy a leading position in the case of
Compound Annual Growth Rate (CAGR) showing 21.41 per cent which is much higher than
the old private sector banks, SBI and its Associates, and the nationalized banks having the
growth rates of 3.93 per cent, 3.74 per cent and 3.54 per cent respectively.
Table 1.3 carries the data exhibiting deposits per employee of public and private
sector commercial banks in India from 2002-03 to 2011-12. For the purpose of making an in-
depth intersectoral comparative analysis, public sector banks have been classified into two
categories, namely, nationalized banks, the SBI and its Associates (including IDBI).
Similarly, private sector commercial banks have been classified into old private sector banks
and new private banks.
Table 1.3
Average Deposits per Employee of Public and Private Sector Commercial Banks in
India from 2002-03 to 2011-12
(Amount in Rs. Crore)
Years Public Sector Banks Private Sector Banks
Nationalised
Banks
SBI
Group
Combined Old New Combined
2002-03 1.49 1.29 1.43 1.78 4.18 2.54
2003-04 1.72 1.56 1.67 2.07 4.30 2.78
2004-05 2.01 2.35 2.12 2.25 4.32 2.91
2005-06 2.28 2.59 2.38 2.45 4.47 3.09
2006-07 2.87 2.69 2.81 2.87 4.39 3.35
2007-08 3.57 3.29 3.48 3.26 4.40 3.63
2008-09 4.45 4.97 4.78 3.82 4.32 4.17
2009-10 5.36 5.60 5.43 4.03 5.00 4.55
2010-11 6.44 6.10 6.35 4.63 5.90 5.05
2011-12 7.11 6.58 6.97 4.80 5.79 5.14
Average 3.73 3.70 3.74 3.20 4.71 3.72
SD 2.02 1.94 2.01 1.08 0.64 0.95
Variance 4.09 3.77 4.02 1.17 0.41 0.91
CAGR 15.27 15.95 15.48 9.44 3.00 6.61
Source: Data compiled from Annual Publications of IBA Bombay; Performance Highlights of Public Sector
Banks and Performance Highlights of Private Sector Banks 2002-03 to 2011-12.
Note: SBI Group includes State Bank of India and its Associates, and IDBI for the purpose of this study.
The average deposits per employee of the nationalized banks and the SBI group taken
together in the public sector have been recorded as Rs. 3.73 crore and Rs. 3.70 respectively;
and the figures for old and new banks in the private sector for the same period have been
recorded as Rs. 3.20 crore and Rs. 4.71 crore respectively. This indicates that the new private
sector banks have achieved the highest deposits per employee followed by nationalized banks Rs.
3.73 crore, SBI and its Associates Rs. 3.70 crore and old private sector banks Rs. 3.20 crore.
18
The deposits per employee under both the classes of public sector banks have
increased gradually over the period under study which speaks about their growing business.
The deposits per employee in the case of old private sector banks have increased over the
period except the year 2008-09 when they came down to Rs. 4.32 crore from Rs. 4.40 crore. There
has been a fluctuating trend in case of deposits per employee in case of new private sector banks.
The Compound Annual Growth Rate (CAGR) of public sector banks is, again,
comparatively high with a rate of 15.27 per cent and 15.95 per cent in case the of nationalized
banks and SBI group respectively followed by 9.44 per cent and 3.00 per cent of old and new
private sector banks respectively. The data provided in the above table reveals that the
performance of public sector banks is better in comparison to the private sector banks.
Table 1.4 exhibits the data regarding average advances per employee of the public and
private sector commercial banks from 2002-03 to 2011-12. For the purpose of making an in-
depth intersectoral comparative analysis, the public sector banks have been divided into two
categories, namely, nationalised banks, and SBI and its Associates (including IDBI).
Similarly, private sector banks have been classified into old and new private banks.
Table 1.4
Average Advances per Employee of Public and Private Sector Commercial Banks in
India from 2002-03 to 2011-12
(Amount in Rs. Crore)
Years Public Sector Banks Private Sector Banks
Nationalised
Banks
SBI
Group
Combined
Old New Combined
2002-03 0.76 0.69 0.74 0.89 2.92 1.54
2003-04 0.88 0.83 0.87 0.95 2.62 1.48
2004-05 1.13 3.04 1.74 1.30 3.19 1.90
2005-06 1.46 2.61 1.83 1.56 3.18 2.08
2006-07 1.94 2.70 2.18 2.85 3.03 2.91
2007-08 2.47 3.33 2.75 2.16 3.18 2.49
2008-09 3.11 3.95 3.36 2.19 3.45 2.59
2009-10 3.70 4.34 3.89 2.59 4.05 3.05
2010-11 4.66 4.91 4.73 3.15 4.79 3.70
2011-12 5.30 5.35 5.31 3.50 4.98 4.02
Average 2.54 3.17 2.74 2.11 3.54 2.58
SD 1.61 1.56 1.56 0.92 0.80 0.86
Variance 2.58 2.44 2.44 0.85 0.64 0.74
CAGR 1937 20.51 19.69 13.22 4.96 9.12
Source: Data compiled from Annual Publications of IBA Bombay; Performance Highlights of Public Sector
Banks and Performance Highlights of Private Sector Banks 2002-03 to 2011-12.
Note: SBI Group includes State Bank of India and its Associates, and IDBI for the purpose of this study.
19
The average amount of advances per employee of the nationalized banks and the SBI
group in the public sector has been Rs. 2.54 crore and Rs. 3.17 crore respectively and that of
the old and new private sector banks has been Rs. 2.11 crore and Rs. 3.54 crore respectively.
It is evident that the new private sector banks have the highest average amount advances per
employee. However, the combined average advances of both the public and private sector
banks are more or less at the same level, i.e., Rs. 2.74 crore and Rs. 2.58 crore respectively.
The advances per employee in the case of nationalized banks have shown an increase
during the whole period of study. In the case of SBI group and its Associates there is a
sudden rise in the advances from Rs. 3.04 crore in the year 2004-05 from Rs. 0.74 crore in
2003-04. However, the advances declined to Rs. 2.61 crore in 2005-06 and thereafter kept on
increasing again. In both old and new private sector banks, there is a gradual increase in the
advances. So far as the Compound Annual Growth Rate (CAGR) is concerned, SBI and its
Associates are ahead of all other banks, while it is the lowest in the case of new private sector banks.
Table 1.5 presents a comparative analysis of the average business per employee of
public and private sector commercial banks in India form the year 2002-03 to 2011-12. In
order to have an in-depth intersectoral comparative analysis, the public sector banks have
been classified into two categories, viz. nationalized banks, SBI and its associates (including
IDBI), while private sector commercial banks have been classified into old private sector
banks and new private sector banks.
TABLE 1.5
Average Business per Employee of Public and Private Sector Commercial Banks in India from
2002-03 to 2011-12
(Amount in Rs. crore)
Years Public Sector Banks Private Sector Banks
Nationalised
Banks
SBI
Group
Combined Old New Combined
2002-03 2.20 1.95 2.13 2.55 6.98 3.96
2003-04 2.56 2.18 2.45 2.82 6.57 4.02
2004-05 3.06 4.00 3.36 3.26 7.10 4.48
2005-06 3.70 5.05 4.14 3.82 7.36 4.95
2006-07 4.74 5.44 4.97 4.39 7.15 5.27
2007-08 6.01 6.80 6.27 5.11 7.45 5.86
2008-09 6.97 8.56 7.44 5.77 7.44 6.30
2009-10 8.90 9.32 9.02 6.57 8.33 7.13
2010-11 10.83 10.68 10.79 7.59 9.78 8.32
2011-12 12.16 11.69 12.03 7.62 9.00 8.49
Average 6.12 6.57 6.26 4.95 7.72 5.88
SD 3.53 3.42 3.48 1.89 1.01 1.66
Variance 12.47 11.71 12.12 3.58 1.01 2.76
CAGR 16.79 17.70 17.06 10.48 2.34 7.18
Source: Data compiled from Annual Publications of IBA Bombay; Performance Highlights of Public Sector
Banks and Performance Highlights of Private Sector Banks 2002-03 to 2011-12.
Note: SBI Group includes State Bank of India and its Associates, and IDBI for the purpose of this study.
20
The average business per employee of the nationalized banks and SBI and its
Associates taken together in the public sector has been recorded as Rs. 6.12 crore and Rs.
6.57 crore respectively, and that of old and new banks in private sector for the under study
period has been Rs. 4.95 crore and Rs. 7.72 crore respectively. This reflects that the SBI and
its Associates have achieved the highest average business per employee as against other
public sector banks during the period. However, the combined average business per employee
of the public and private sector banks has been observed at Rs. 6.26 crore and Rs.5.88 crore
respectively.
The business per employee under both the categories of public sector banks has
shown a gradual increase during most of the years under study. However, during the years
2003-04 to 2004-05, SBI and its Associates have shown a remarkable increase from Rs. 1.95
crore to Rs. 4.00 crore. The old banks under the private sector segment have also registered a
rising trend, while in the case of new private sector banks a fluctuating trend was observed
throughout the period under study.
The nationalised banks have recorded the highest business per employee, i.e., Rs.
12.16 crore, followed by SBI and its Associates with Rs. 9.09 crore and old private sector
banks with Rs. 7.12 crore during the year 2011-12. But the new private sector banks have
shown the highest business per employee of Rs. 9.78 crore during the year 2010-11.
The Compound Annual Growth Rate (CAGR) of SBI and its Associates has been
recorded the highest over the period under study, i.e., 17.70 per cent, 16.79 per cent for the
nationalized banks and 17.06 per cent public sector banks taken together respectively.
However, in the case of private sector banks it has been 7.18 per cent, while it is 10.48 per
cent for the old private sector banks. The new private sector banks recorded the lowest
CAGR of 2.34 per cent. The analysis made above indicates that the nationalized banks are
showing a better business per employee as compared to the private sector banks.
The analysis made above leads us to conclude that the study of human resource
management practices has become an important and critical area in management and
organizational performance over the last decade only. The employees‟ satisfaction and
retention have become critical to the conduct of business in the competitive marketplace and
business environment today, and the banks are no exception to it. The commercial banks
have, thus, embarked on different management strategies as to promote employees‟ job
satisfaction and their retention. Employees‟ retention is contestably the biggest upshot
encountering corporate administrators as a sequence of the fragmentation of agile employees,
economic development and employee turnover. Employee retention confounds netting
21
measures to drive them to continue in the organization for the maximum time period. The
essential to employee retention is to presume the employees‟ apprehensions and secure
proper alignment of their needs with those of the organization.
1.4. SIGNIFICANCE OF THE STUDY
It can be clearly visualised that Human Resources is the only resource, which can
provide and produce unlimited out put through better ideas. There is no apparent limit to it.
In other terms, HR can be defined as the total knowledge, skills, creative abilities, talents and
aptitude, approaches and beliefs of individuals involved in the affairs of enterprises. HRM in
the coming years will not be contended with mere personnel management or industrial
relations, but should be more involved and concerned with developing, educating, team
building, counselling, motivating, caring and above all organisational development.
The recent scenario of economic liberalisation and process of globalisation has
increased the importance of Human Resource Management manifold. Human beings are no
longer considered now simply wage earning labour but an asset and a purposeful resource of
the organisation. For effective human resource utilization, HRM has become very essential.
All the organisations whether they are governmental or non-governmental, industrial,
business or service organisations depend on people, i.e., human resource for their operations
vis-a-vis their survival.
In this competitive environment, there is enormous pressure on the banking
managements to bring down the costs and improve the quality of their services. A good
number of researchers have pointed out that organizational profitability is due to the potential
employees; and the management must put them in the centre of development of all processes
to enhance the sense of ownership and to retain the asset employees. Every researcher has
described internal service quality in his own way. Bridging retention and preserving the
turnover rate under objective and business moulds is one of the dominant encountering issues
braving enterprises nowadays. From all manifestations, the issue will blend in future
eventuality, even as economic caveat modulates in current scenario.
Moreover, the doctrine of gratified employees for the endowment of satisfied clients
is prevalent and conceived by both academicians and practitioners. In fact, the considerations
of service marketing, communications, and human resource management are interdependent.
Despite all the recent excitement about the quality services, however, one bit of old advice is
still new, the goal of quality system is to help improve quality. Simply measuring quality
costs would not ensure the job done. To get things improved, organization machinery needs
22
its reengineering which originally divides quality into the categories of prevention, appraisal,
and failure. Recent human resources professionals are formally engaged in finding
appropriate Human Resource Management Practices (HRMP) to get maximum outcome for
the employees by recognizing their potentials and efforts.
The need of the hour is to search and tap the incredible characters of human resources
and manage their skills as a continuous process. The expenses incurred in this regard are
investment, which yield income over longer period. The effective human resources
management and their development are very essential for growth and prosperity of the
respective organisations. Top managements of organisations are now paying increased
attention to HRM because they have realised that human resources need to be closely
integrated with planning & decision-making.
Why Human Resource Management is important for Banks
Human Resource Management is important for banks because banking is a service
industry. Management of people and management of risks are two key challenges faced by
the banks. How they manage the people and how they manage the risks determine their
success in the banking business. Efficient risk management may not be possible without
efficient and skilled manpower. Banking has been and will always be a "People Business".
Though pricing is important, there may be other valid reasons why people choose and stay
with a particular bank. Banks must try to distinguish themselves by creating their own niches
or images, especially in transparent situations with a high level of competitiveness.
The real problem of running a bank successfully and viably is that skilled manpower
is in short supply. No two arguments on this, HR resources are becoming scarce;both in
quality and quantity. And, it is a basic issue that any resource that is in short supply needs to
be properly managed for the benefit of society and, therefore, banks need to pay attention to
the entire Human Resource Management process. The entire spectrum of HRM practices
requires revolutionary changes if the banks have to survive. Managing the people is a key
challenge before the bank managements. Commercial banks in India are expected to take
necessary steps in such a way that their employees should feel that recruitment, selection,
training and development and compensation have become essential to enhance their
productivity and satisfaction.
1.5 PURPOSE OF THE STUDY
Human Resource Management is meant “to integrate all personnel related activities
with each other and strategically with organizational objectives” and “as an investment rather
23
than a cost to the organization”. The utilization of all other resources directly depends on
efficient utilization of human resources. Every organization needs to have well-trained and
experienced people to perform the activities that have to be done. As jobs have been
becoming more complex in the banking sector, the importance of employees‟ recruitment and
selections, promotion, compensation management, training and development and their job
satisfaction has increased.
In the banking industry, there is one common slogan that “all our stakeholders are
important” but clients are at the top. Clients can be satisfied when they receive desired
services at the lowest cost and increased efficiency with all protocols. This could be possible
only when all the human resources of the banks are fully committed, contended and involved
in their professional working. Moreover, in order to deliver excellent quality services to the
customers and strive for the business excellence, the employee satisfaction, productivity, and
maintenance and retention within the organization become of much importance. All these can
be achieved if the top level management takes extra care while developing excellent HRM
Practices starting from selection and recruitment process to recognizing employees with their
core expertise and setting up tremendous work design for the employees.
Owing to the changing banking environment, Human Resource Management should
care for appropriate re-designing their policies and practices in order to equip its human
resources with latest technology and professional skills, to perform in the new environment.
Many banks are now investing in human resource management but few banks still ignore this
area. But, unfortunately, in the Indian banking sector all these human resource practices are
becoming too complex due to which the employees are dissatisfied and they are unable to
deliver what is expected of them. These assumptions require to be tested carefully. The
purpose of this research study is to have a sector-wise comparison to establish a link between
existing and perceived human resources management practices in mediating environment of
employee‟s job satisfaction. This research is likely to signify a bottom line solution for Indian
commercial banking sector to recruit and retain skillful human resources.
SUMMARY
Every organization strives to accomplish its goal of higher productivity through its
committed and motivated workers. Therefore, job satisfaction of the employees is of utmost
importance. Some of the main variables of HRM practices, namely, recruitment and
selection, promotion, training and development, pay and compensation practices have been
playing a crucial role to enhance job satisfaction of organisation‟s human resources. A strong
positive relationship between these practices and job satisfaction helps an organisation to
24
motivate its employees to work efficiently and cost effectively. However, a negative
relationship adversely affects the turnover of employees, and it demands a good induction of
human resources, their proper training and development, better compensation, etc. Moreover,
through effective human resource management policies and practices, human resources in the
banking sector should be made to inculcate a sense in them that they are in bank not as its
employees only, on them rests to attain the zenith with best sustained and continuous efforts
and participate in it with pride and pleasure. They have to become the most significant and
effective part of Indian banking machinery. There is an urgent need to revamp the
recruitment system in Indian banks and linking rewards with performance and participation.
Thus, the success of any organization depends mainly upon the Human Resource
Management Practices.
*******