ARTICLE BY B C THIMMAIAH

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Research Article: Management
HR INITIATIVES IN BANKS: NEED FOR A PRAGMATIC APPROACH
Dr. Thimmaiah Bayavanda Chinnappa , Professor (Assistant) , DMS -Ivane Javakhishvili
Tbilisi State University ,Tbilisi ,Georgia , proftbc@gmail.com.
Dr. Sheela Srivastava Director, Nehru School of Management@NCERC, Pampady, Thrissur,
Kerala. diíectoímba@nceíc.ac.in ; Anithapíasanth83@gmail.com
Dr. Anitha N Academic Freelancer, Thiruvazhiyad, Nemmara, Palakkad, Kerala.
ABSTRACT
Globalization waves have created considerable ripples in the national economy. With the
enormous changes taking place and the powerful market forces driving organisations, productivity
improvement of all resources, have been the survival mantra of business entities. Driven by these
factors, organisations have to increasingly fall back on their Human Resources to get the
competitive edge in the market. Today, the need of the hour is to urgently link human resource
initiatives to the business of the bank at the strategic level to meet the challenges triggered by
Liberalisation and Globalisation. In view of the new challenges posed by the deregulation and
liberalisation, many of the old generation banks have already started taking measures of change.
New entrants are snaring new customers, competition is spreading and competitive pressures will
effectively lock the choice of most banks. If they choose poorly, banks could jeopardize their future
businesses viability. It is obvious that proper HR initiatives based on a pragmatic approach will be
necessary for the survival and success of any organisation. HR initiatives acquire special meaningin
banking industry due to a variety of factors. The quality of banking services and the goals of a bank
are highly dependent on the employees who deliver the services. Hence the task of HR will always
be central and neglect of HR function is likely to destroy the fabric of banking itself. Against this
backdrop, the paper reviews the present status of HRM and identifies deficiencies andargues for a
pragmatic approach needed to develop the full potential of the human resources.
Key words: Banking industry, Globalisation, Human Resources, Competitive edge, Deregulation
and liberalisation
INTRODUCTION:
The economic policies of any country ought to guide its basic social philosophy. It is the
declared policy of the Government of India that the basic criterion for determining the objective for
extending credit must not be to augment profit but to achieve social development. The economic
reforms unlashed by the Government of India, way back in 90s, had sub-served to a reasonable
extent, the purpose for which they were aimed. The Narasimhan Committee on Banking Reforms
gave its report during November 1991 providing operational flexibility and functional autonomy to
strengthen the financial system and also for increasing the productivity and profitability of banks.
The first generation reforms and the liberalization process as enshrined in the Narasimhan
Committee recommendations took recourse to financial options and to a large extent overlooked the
HR initiatives so vital for any organisation. With the enormous changes taking place and the
powerful market forces driving organisations, productivity improvement of all resources, have been
the survival mantra of business entities. Driven by these and other factors like explosion of
knowledge in information, communication, shift in customer loyalty, organisations have to
increasingly fall back on their Human Resources to get the competitive edge in the market. As
Stephen Covey said about ‘sharpening the saw’, there is continuing attention given to the HR edge.
Excellence ought to become a habit. Today, the need of the hour is to urgently link human resource
initiatives inextricably to the business of the bank at the strategic level to meet the challenges
triggered by Liberalisation and Globalisation. This can be achieved by HR initiatives, which creates
a framework for aligning HR practices with the various goals of the organisation. In the context of
post-liberalised India, HR initiatives have become all the morerelevant, where it can be used as an

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important tool to achieve ‘competitive advantage’
RATIONALE OF THE STUDY:
The importance of human element in enhancing productivity has been recognized since a
very long time. Physical and financial resources cannot improve the efficiency of a bank by
themselves. Innumerable attempts have been made to find out a satisfactory answer to the ‘people
question’. The quest for an answer has been increased manifold due to the liberalisation and
globalisation in India. With the onset of economic reforms, liberalisation and globalisation, the
Indian banking sector is witnessing the phenomena of the survival of the fittest where only those
banks that are able to understand and rapidly adapt to change can exist. This can be achieved
through constant innovation, growth and exploration of new frontiers (Monappa and Engineer,
1999). This scenario has made Indian banking industry conscious of competition, quality and a
need to acquire a global mind set. Inevitably the process of readjustment, calls for HR initiatives in
banks.
This paper deals with the unresolved and inadequately addressed issues in HRM that
emerged in the post liberalisation era. Against this backdrop, the paper reviews the present statusof
HRM and identifies deficiencies and argues for a pragmatic approach needed to develop the full
potential of the human resources.
HR ISSUES THAT EMERGED IN THE POST LIBERALISATION ERA:
 HR policies are prone to generalisation of skills and expertise in handling the bankingbusiness.
 Linkages of performance with rewards/punishments are not established scientifically.
 Lack of skill development and professionally qualified employees enabling efficient
transaction of business.
 Lack of expertise in identifying the core competencies of the staff.
 Productivity norms are not worked out on some rational and generally acceptable bases.
 Competition further intensified as a result of deregulation process.
 Need to harness Information Technology better in the light of growing competition.
 Entry of foreign banks with skilled and specialised employees.
ROLE OF HR INITIATIVES:
There is an ever-increasing demand to find out strategic responses to meet the contemporary
challenges posed by liberalisation, growing competition, diversification of activities and greater
complexities, managing both change and stability and reorganising the present organisational
structure to create a vibrant organisation. In view of this, mix of different desirable skills and
backgrounds of economics, costing, statistics, information technology, banking and marketing are
the most desirable, in the light of the challenges posed by the liberalisation and competition.
Even in the ever-changing environment, the human resource still assumes key importancein
banking industry due to its capability to deploy all other elements of organisation to attain the
desired operational results. In view of the new challenges posed by the deregulation and
liberalisation, many of the old generation banks have already started taking measures like,
increasing the capital base, adopting technology for banking operations, renovating branch
premises and changing the outlook but the transformation of human resources still takes lower
priority. It is obvious that HR initiatives based on a pragmatic approach will be necessary for the
survival and success of any organisation. The liberalisation of the Indian economy and the
competition from overseas firms has put pressure on the personnel function of Indian domestic
companies to prepare and develop their employees. The foreign operators in India are known to
have better skilled human resources, and are more efficient and effective (Budhwar and Khatri
2001, Sparrow and Budhwar, 1997). Some of the leading Indian organisations have also taken the
initiatives in this regard and have brought out newer issues in the strategic management of their

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human resources (Saini and Budhwar, 2004). Many experts (Ahluwalia, 1994, Das 1996, Krishna
and Monappa 1994) have discussed the implications of the new economic environment for
organisation and management structure, strategy and culture values.
HR INITIATIVES: A PRAGMATIC APPROACH:
New entrants are snaring new customers, competition is spreading and competitive
pressures will effectively lock the choice of most banks. If they choose poorly, banks could
jeopardize their future businesses viability. It is obvious that proper HR initiatives based on a
pragmatic approach will be necessary for the survival and success of any organisation.
The key HR initiatives in the post-liberalisation era must include amongst other traditional known
elements:
1. Alignment to the environmental factors.
2. Determining the different desirable skills needed by employees in light of the challengesposed
by liberalization and competition.
3. Resource marshalling, allocation and deployment
4. Cost cutting by outsourcing and downsizing
5. Developing marketing culture in the organisation.
These key HR initiatives would ensure that the bank would adequately stand a chance of
successin the new world order.
1. Alignment to the Environmental Factors: Economic, technical and social trends have created
acute problems and challenges for business and industry and consequently focusedon HR initiatives
as key element in coping with these problems. Globalization dominates the competitive horizon and
entails new markets, new products, new mindsets, new competencies and new ways of thinking
about business. The rapid movement of products,people, information and ideas around the world,
focus on local needs and management of the paradox of global economies of scale. The importance
of HRD as a catalytic agent of growth has been increasingly recognized which makes necessary
organisational effort to help the managers in adapting to the emerging changes of the environment
(Nadler, 1984).In recent years, increased attention comes from the realisation that an organisation’s
employees enable an organisation to achieve its goals and the management and development of
these resources is critical to an organisation’s success (Schuler, 1992) Banks, like any corporate
body, have to operate in the continuously changing environment. The changes in environmental
factors influence the functioning and business of banks and can pose serious threats unless the
management is well prepared to cope with them. Amis and Heide (1991) in a study on different
firms in US and Japan, suggested that firms will need to improve these internal organisations to
remain competitive. It is inevitable that thechange process will become more and more complex in
the years to come and the banks will need to demonstrate an increasing measure of adopting
themselves to the changing environment. The threats posed by environmental changes can be turned
into opportunities for the bank by competent planning. Hence, the clear perception of the
environmental changes is the prime necessity.
2. Determining Skill Needs of Employees: As traditional sources of competitive advantagesuch as
technology and economies of scale provide less competitive leverage now than in the past, core
capabilities and competence, derived from how people’s desirable skills aredetermined. A strategic
perspective of HR initiatives is critical for creating and sustaining human resource-based
competitive advantage. In view of this, mix of different desirable skills and backgrounds of the
employees have assumed significant importance, in the light of the challenges posed by
liberalization and competition.
3. Resource Marshalling Allocation and Deployment: Performance of any organisation can be
measured in terms of two criteria - effectiveness and efficiency. The resource allocation is first
required to be made aiming at prioritization of programmes for funds, onthe basis of criteria like
urgency of the activity/ project for smooth running of operation and rate of return. However, the

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resources should be allocated only to the activities and projects which fulfil the criteria of
“Economic Value Addition”. Then proper deployment of such allocated funds is to be ensured.
Vittal (1994) looks at the man-man interface of the service sector where service consists almost
exclusively of interaction between humanbeings, the role of HRD becomes virtually synonymous
with improvement in services. While another study by Schneider and Bownen (1985) reported in a
study of various banksthat when the banks had sufficient emphasis on the development of people
over performance of their tasks, customers reported receiving higher levels of service.
4. Cost Cutting by Outsourcing and Downsizing: Pfeffer (1998), after scanning a numberof studies
spanning different organisations operating in various service industries, provides evidence for a
positive relationship between employee attitudes, HR practices, customer service and satisfaction
and profits. Therefore in the issue of outsourcing banks should retain the processes where they have
high expertise and which are run from a low cost base,and outsource others in which they might have
lower relative expertise and high cost. One of HR’s most challenging jobs is reliance on
outsourcing, flatter organisations with fewergrowth options, a tighter job market and the decline of
clear career paths. In a decision onoutsourcing any of the process of the value chain, banks should
retain ownership or controlof those parts of the process that touch the customers – that is where
value is created and captured
5. Developing Market Culture in the organisation: Market deregulation, technological changes and
globalisation are leading to a greater commoditisation of banking services. There is a great scarcity
of talented human resources. Due to globalisation free flow of talented manpower is possible across
the world. In an environment of constant downsizing, restructuring and reengineering even
organisational structure changes are seen rapidly andnow organisations are having flatter structure
with minimum hierarchy level. In the presentenvironment, competition is highly stiff and survival or
organisation depends more on thehuman resources of the bank and how the bank handles them. In
order to build broader aswell as deeper relationship with the customers, bank’s frontline staffs have
to have high level of expertise and better understanding about the products offered by the bank and
an ability to translate the features of each product into customer benefit. Rajpal (1994), duringhis
experience at Hewlett Packard, found the shift from technology driven or product driven to being
market driven and the role of HRD in making tremendous gains in productivity and efficiency for
the organisation.
HR initiatives need to be there in organisations because of the challenges to human capital.
Fromacquiring people and maintaining them, the challenge is now to keep them going strong and to
motivate them continuously. The aging workforce, schemes like VRS in banks particularly, the
increasing work pressure and the levels of the external environment make the HR task a highly
competitive and challenging one. Professor Dr. C. K Prahlad has observed, “It is advisable to
follow not just best practices, but to develop next practices to blaze a trial and stay ahead of the
pack”.
CONCLUSION:
HR initiatives should be an integral part of successful management and the top management
should place its key emphasis on the HR initiatives for successful management of theorganisation by
way of integrating the HR function with the managements’ overall plans and objectives. HR
initiatives acquire special meaning in banking industry due to a variety of factors.The quality of
banking services and the goals of a bank are highly dependent on the employees who deliver the
services. Hence the task of HR will always be central and neglect of HR functionis likely to destroy
the fabric of banking itself.
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