HRM IN INDIAN BANKING INDUSTRY: A COMPARATIVE STUDY OF SBI AND HDFC
HRM contributes to organizational performance in different ways: through sound functional basics; through effective realignment when the external environment changes; and by building an organizational context to that the organization can cope with the dualistic forces ( 2002).
Human Resource in Banking
The core function of HR in banking industry is to facilitate the performance improvement among its people. Factors such as skills, attitudes and knowledge of personnel, play a critical role in determining the competitiveness within the organization or the industry (2002). The quality of human resources indicates the ability of banks to deliver the value to clients or customers.
Indian banking industry has been an important driving force behind the nation’s economic development. The emerging environment poses both opportunities and threats, particularly to the public sector banks, as well as the human resource in changing economic and business environment. The primary emphasis needs to be on integrating human resource strategies with the business strategy. Above the aspects of recruitment, placement, performance management, rewards and employee relations - a radical transformation of the existing personnel structure in public sector banks like the seniority over performance is not the best environment for attracting the best talent from the young competitive environment. However, recruitment practices as well as on-the-job-training and redeployment are considered as one of those many improvements of HR in Indian Banks (2002).
HRM Background and Practices
To make the Indian Banking System stronger, efficient and low-cost, the creation of fundamentals must include in the bank’s operations, strategies and processes: strengthening the prudential norms and market discipline; adoption of international benchmarks; management of organizational change and consolidation within the financial system; upgrading the technological infrastructure of the financial system; and human resource development as the catalyst of the transformation (2002).
The Human Resource field in the Banking Industry is considered as one of the process of discovery and transformation. The field of Human Resource can be described as emergent and dynamic within the cultural business aspect in a Banking Industry. The success of today’s banking business will sparsely depends on the human resources of the organization, in which plays a crucial role in providing the services needed.
The evolution of banking system in India affected the human resource practices, recruitment and selection practices, and training system. It is very important that the details of human resource are discussed along with the employees, to build their own career planning, perceptions and development.
The primary strength of the industry is the human resource that is why the efforts to develop the skills and management are the main subject placed before the human resource. A major challenge for many banks will be to develop the special competencies and skills for credit appraisal and risk management. Putting the information technology is a key contributed in human resource development. Therefore, the HR model of the future will require professionals to be both driving and anticipating change, understanding the complexities of the new business environment and forces shaping it (2002).
HR Practices and Methods
A key focus of the human resource management is highlighted in the role of staffing, performance management, training and development, and compensation that plays indifferent types of business strategies. With the acquisition and preparation of human resources, including planning, recruitment, selection, and training can affect the whole organizational performance (2006).
ü The HR planning, the start of the strategy, illustrates the process of developing human resource plan. The strengths and weaknesses of staffing options such as outsourcing, use of contingent workers, and downsizing are involved in planning.
ü The recruitment process is done strategically to determine the talented employee fit for the position.
ü The selection process emphasizes the ways in minimizing errors in employee selection and placement to improve the company’s competitive position. The selection method standards such as validity and reliability are utilized.
ü An effective training systems of the manager’s role in determining employees’ readiness for training, creating a positive learning environment, and ensuring the training is used on the job.
Beyond the human resource strategies are the rewarding and compensating that can strengthen or weaken the employee effectiveness. In order to give recognition and increase motivational levels amongst the employees, some Banks linked the individual performance in an incentive scheme – or for some rewards that may come into any form ( 2006). In summary, all of the HRM strategies and function should be aligned to help the company meet its objectives – as well as focusing on their customers ( 2006).
The best practice approach assert that certain HR practices are found to consistently lead to higher organizational performance, independent of an organization’s stated strategy. The high performance HR practices foster innovation through the development of innovation values, encouraging of information sharing, goal setting and appropriate training and development. The major innovations in Hr practices occurred when senior line managers take the lead and their adoption depends on the attitude of top management and their relationship with the HR department ( 2007).
Comparative Study: SBI and HDFC
The State Bank of India, the largest public sector bank of India, offered voluntary scheme (VRS) to trim its workforce as recommended that the banking industry was overstaffed. SBI implemented a VRS or the “Golden Handshake” system. The vast workforce that was once regarded as one of SBI’s strongest assets became a liability following the computerization of the bank. The introduction of this scheme leads to strong protests and SBI faced with a prospect of losing its talented employees and be left with less efficient employees (2007).
The Housing Development Finance Corporation Limited (HDFC) staffing needs continued to increase particularly in the retail naming businesses in line with the business growth. HDFC aims to facilitate a combination of human resource and technology in disseminating their banking functions and practices ( 2002). The growth of the employee base was in line with the growth in the banks business and distribution both inorganically as well as organically.
The Bank continues to focus on training its employees on a continuing basis, both on the job and through training programs conducted by internal and external faculty. The Bank has consistently believed that broader employee ownership of its shares has a positive impact on its performance and employee motivation. HDFC Bank lists their people as one of its stated values. The Bank believes in empowering its employees and constantly takes various measures to achieve this (2009).
The universality of the HR model maintains the practices are universally associated with high performance. The high commitment of high performing practices, have better financial returns (2002).