Human Resource Management: Leading Banks & Insurance

## Human Resource Management – An Introduction ### What Leading Banks & Insurance Companies Say About Their Human Resources | Company | Quote | |---|---| | Axis Bank | Employees remain the most critical driver in Bank's journey towards achieving its longterm objectives. The Bank values and unders...

## Human Resource Management – An Introduction ### What Leading Banks & Insurance Companies Say About Their Human Resources | Company | Quote | |---|---| | Axis Bank | Employees remain the most critical driver in Bank's journey towards achieving its longterm objectives. The Bank values and understands that it is the employees, those in the frontline and those supporting them that drive its promise of being 'Dil Se Open'. | | HDFC Bank | Our people and culture are fundamental to our success. Their collective knowledge, diverse skill sets and deep experience constitute our human capital. Our people enable us to stay agile, adapt to changing times, innovate and deliver competitive solutions. (HDFC Bank) | | State Bank of India | SBI believes in and acknowledges the critical role of its employees in achieving its present and future organisational goals. SBI recognises the employees' focussed efforts to steer the Bank's performance to greater heights. | | HDFC Life Insurance Company Limited | Employees are more than just staff for us, and we care for their overall happiness and wellbeing. Not only our employees, but we also hold a sense of responsibility towards their families, who play crucial roles in making an employee successful at work. | | ICICI Prudential Life Insurance Company Limited | The alignment of our people strategy with our business strategy, along with consistent investment in the growth & development of our employees helps create the edge which makes the Company's human resources a source of its strength and a key competitive advantage. | | ICICI Lombard General Insurance Company Limited | At ICICI Lombard, we believe that our employees are the driving force behind our success which they enable through their collective knowledge, skills, experience and abilities.| | | Source: All the above information has been extracted from the Annual Report 2021-22 of the respective companies. | ### Human Resource Management – Meaning, Nature, Scope, Objectives and Functions **Meaning and Nature of Human Resource Management** - Human resources are the most precious possessions of any organization. It is, therefore, necessary to take utmost care for their survival and growth. Human resource management is the management of this most important resource. Liberalization and globalization has increased the importance of human resource management by manifold. - The quality of human resource is a critical factor in the success of any organization, and more so in service organizations like banking and insurance. In a super-competitive world, the thing that is most unique to every financial institution is the capability of its people. It is the organization's employees - its human resources - that give a bank or an insurance firm its competitive edge. - Wendell French describes human resource management as "the philosophy, policies, procedures, and practices related to the management of people within the organization." - According to Michael Armstrong, human resource management can be 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." - Human resources management is about managing people. It is a process of binding people and organizations together so that the objectives of each are achieved. - From the smallest to the largest organization, it is vital that the human resources be managed effectively for the organization to prosper and survive. If these human resources are neglected or mismanaged, the organization is unlikely to do well and may even fail. ### Guru Mantra >Each industry has uniqueness and HR functions should be designed to address the uniqueness. Banks' uniqueness is the fact that they are human organizations and they deal with customers, which require high degree of sensitivity and interactional process. >Dr. Anil Khandelwal >Former Chairman and Managing Director >Bank of Baroda >Source: Banking Frontiers, September, 2014. ### Effective Utilization of Human Resources Effective utilization of human resources depends on sound management of human resources. Hence Human Resource Management (HRM) has gained increasing importance and is today viewed as a fundamental aspect of management. #### Significance of Human Resource Management - **Organizational significance:** Human resource management plays an important role in helping the organization attain its goals. It helps in this direction through effective human resource planning, recruitment and selection of talented employees, training and development of employees, developing sound performance appraisal and compensation systems, career planning and so on. - **Professional significance:** Effective management of human resources contributes towards the personal growth and development of every employee. It helps to improve the quality of work life by providing a healthy working environment. - **Social significance:** Human resource management is of great importance to the society. Sound management of human resources helps in satisfying the social and psychological needs of employees through suitable employment. It avoids wastage of human resources and helps in the conservation of physical and mental health. - **National significance:** The true wealth of a nation is not its natural resources but its people. Human resources and their management play a vital role in the development of a nation. ### The Development of A Country The development of a country depends on the skills, attitudes and values of its human resources. Effective management of human resources helps to speed up the process of economic growth which in turn leads to higher standards of living and fuller employment. ### The Role of Human Resource Management in Service Sectors Service sectors like banks and insurance are entirely dependent on the knowledge, expertise, skills, attitudes and quality of human resources for growth and success. Hence effective management of human resources is extremely critical in banks and insurance companies. ### The HDFC Bank Way - The HDFC Bank Way comprises of six defined Culture pillars - - Integrity - Execution - Collaboration - Inclusion - Innovation - Humility > Each pillar represents elements that the Bank stands for and believes in. Reinforcement of the HDFC Bank Way continues to be a key focus area of the Bank. > Source: HDFC Bank, Annual Report 2022-23. ### Objectives of Human Resource Management in Banking and Insurance Every organization has some objectives. In order to attain organizational objectives, it is necessary to integrate the interests of the employees with that of the employer. Hence the objectives of human resource management are derived from the basic objectives of the organization. - The overall purpose of human resource management is to ensure that the organization is able to achieve success through people. Specifically, the objectives of human resource management are: - **Integration of goals:** HRM seeks to integrate all the individuals and groups within the organization by reconciling individual/group goals with those of the organization. - **Cost containment:** In today's competitive business environment, keeping expenses down or cost containment, is a critical HRM goal. - **Goals through able employees:** HRM seeks to help the organization attain its goals by providing it with competent and dedicated employees. - **Harmonious relationships:** A top priority of HRM is to create a climate in which productive and harmonious relationships can be maintained through partnerships between management and employees. - **Optimization of human resources:** By employing the knowledge and skills of employees efficiently and effectively, HRM seeks to optimally utilize the human resources of the organization. - **Growth and development of employees:** HRM seeks to ensure the growth and development of the employees by providing opportunities for training and advancement. - **Self-actualization:** HRM aims to increase employees' job satisfaction and set them on the path of self-actualization by providing them with opportunities to utilize their potential to the fullest. - **Satisfy needs:** By providing adequate compensation, HRM seeks to ensure that the basic needs of the employees are satisfied and they are able to live a dignified life. - **Motivation:** An important goal of HRM is to motivate the human resources through adequate monetary and non-monetary incentives so as to stimulate better performance, which in turn will enable the organization to accomplish its objectives. It also helps to retain talented employees and reduce employee turnover. - **Legal requirements:** Violations of legal requirements can be costly to an organization. Virtually every human resource management decision, such as hiring, promoting, firing, pay raises etc., has legal ramifications. Hence meeting legal requirements is one of the important HRM goals. ### HR - The Greatest Challenge for Public Sector Banks >A report titled Indian Banking 2020: Making the Decade's Promise Come True'by The Boston Consulting Group (India) Private Limited, Federation of Indian Chambers of Commerce & Industry and Indian banks' Association states: >"There are two areas in which the Indian banking industry will be severely challenged to find a solution over the next decade. First pertains to the rising expectation from banks to find an economically viable solution for financial exclusion. The second pertains to human resources challenge in the public sector. the second threatens to cripple the ability of the largest segment of the banking industry from being able to innovate and stay competitive. >The public sector banks enter the next decade with the same expectations as their private sector peers but with a severe disadvantage in human resources. The HR challenge of public sector banks has reached a tipping point. Due to a legacy of several decades, the public sector banks will witness unprecedented loss of skills and competencies in the form of retiring senior and middle management executives over the next few years. That coupled with the need for large scale re-skilling, attracting and retaining fresh talent, controlling the growing employee costs, and introduction of performance discipline are significant challenges. >Unless the banks accord highest priorities to these challenges and work in concert, it is unclear that the solutions to these two challenges will be identified." >Source: Extracted and Edited from Indian Banking 2020: Making the Decade's Promise Come True published by The Boston Consulting Group, Inc. 2010. ### Scope of Human Resource Management The scope of human resource management is very vast. It is connected with all major activities in the working life of a worker. HRM is connected with every other department as human resources are the requirement of all departments in the organization. - HRM covers the following areas: - Human resource planning - Job analysis and design. - Recruitment and selection - Orientation and placement. - Training and development. - Performance appraisal. - Compensation management. - Career planning, promotions and transfers. - Motivation and communication. - Employee welfare. - Human resources Inventory. - HRIS – Human Resource Information System. - Employee safety and health. - Industrial relation. ### Guru Mantra >HR continues to remain a peripheral function in banks. HR should not be measured by more promotions across the cadres but by the process that entails development and engagement of employees. >Dr. Anil Khandelwal >Former Chairman and Managing Director >Bank of Baroda >Source: Banking Frontiers, September, 2014. ### Functions of Human Resource Management Human resource management involves a large number of functions or activities. This number varies according to the size and needs of the organization. The activities or functions of HRM affect the organization internally. However the external environment affects HRM functions. The major functions of human resource management are: 1. **Human resource planning:** Human resource planning is the process of assessing the organization's human resources needs in the light of organizational goals and changing conditions and making plans to ensure that a competent, motivated work force is employed. > Human resource planning is very important in these modern times where everything is fluid and changes are occurring at great speed. 2. **Organizational and job design:** A important activity of HRM is developing an organization which caters for all the activities required, groups them together in a way which encourages integration, cooperation, and provides for effective communication and decision making. > Job design is concerned with deciding on the content and accountabilities of jobs in order to motivate employees and maximize job satisfaction. 3. **Staffing:** Staffing or acquisition of human resources is another activity of human resource management. Staffing activities determine the composition of an organization's human resources. > Staffing activities include: attracting qualified people to the organization, selecting from among candidates, reassigning employees through transfer, promotion, or demotion and ultimately managing the employee separation through resignation, discharge or retirement. 4. **Training and development:** This activity of HRM focuses on improving the performance of individuals and groups within the organization. These activities aim to help employees learn new skills or refine existing skills. > Human resource managers must decide which skills or knowledge areas need development and which methods are most effective for helping employees acquire skills and knowledge. 5. **Performance appraisal and review:** Performance appraisal and review is an ongoing evaluation of individual and group contributions to the organization and the communication of those evaluations to the persons involved. > This HRM function is carried out for a number of purposes: to provide feedback about performance, to determine the need for training, to make decisions about promotions, pay increases and so on. ### Awards at Kotak Mahindra Bank | Award | Description | |---|---| | Customer Obsession Award | Awarded to the one who showcases a passion for customer-centric behaviour. | | Best in DigitALL transformation | Awarded to the team that has led digital transformation resulting in a positive impact. | | Best People Manager | Awarded to the one who leads the team effectively while also abiding by the Kotak DNA. | | Exclusive Annual Infinity Award for Best in Diversity Initiatives | Awarded to the team that contributes towards increasing the diversity ratio at the time of hiring and implementing diversity focused initiatives. | > Source: Kotak Mahindra Bank, Annual Report 2022-23. ### Functions of Human Resource Management in Organizations 1. **Compensation and reward:** Organizations compensate employees through wages and salaries, bonuses, and benefits, such as health insurance, vacation time, and pension programs. The presence or absence of rewards and recognition is important to employee morale and performance. > Compensation decisions include determining: ensuring fair and equitable pay differences among employees, designing a pay packages relative to that of its competitors, forms of compensation and so on. 2. **Maintaining effective employer-employee relationship:** An important function of HRM is to promote harmonious relationships between the management and employees. The aim of HRM is to increase cooperation, trust and to involve employees actively in the company's affairs. > This function of HRM includes addressing employee grievances and taking suitable steps towards solving them. 3. **Health and safety management:** This function of HRM includes activities and events that serve to protect organization members from illness and physical dangers in the workplace and to assist them with their physical and emotional health. > For many organizations, protecting the health and safety of human resources is a prime social responsibility. This HRM functions serves to preserve the human resources of the organization. 4. **Employee participation:** This is a relatively new function of HRM. Employee participation focus on giving employees a voice, sharing information with them and consulting them on matters of mutual interest. > Employee participation is an important step in establishing industrial democracy. 5. **Organization improvement:** Organizations must constantly improve themselves due to the emergence of new ideas regarding productivity, rapidly changing technology and competition from other organizations. > The function of human resources manager is to ensure the flow of events through which people in the organization improve the organization's effectiveness. He has to constantly lookout for ways to improve the organization through employee training, implementing work redesign programs and so on. ### Guru Mantra > "Just as the CFO is the trustee of the financial system, the chief human resources officer is the trustee of the people system." > Bill Conaty and Ram Charan > in their book > The Talent Masters > Why Smart Leaders Put People Before Numbers ### Organization of Human Resource Department A human resources department is becoming an integral part of every organization. Two important factors that strongly influence the establishment of the human resources department are: 1. **Size of the organization:** The larger the organization, the more is the need to set up a HR department. 2. **Management Philosophy:** The importance the management of the organization places on its human resources and sees it as a vital factor towards attainment of organizational objectives significantly influences their decision to set up a HR department. **Other factors that influence establishment and structure of human resources department are:** 1. The extent to which the organization's operations are decentralized. 2. The type of work carried out. 3. The kind of people employed. 4. The role assigned to the HR function 5. The type of services the HR department is expected to provide. #### Structure of Human Resources Department The human resources department is typically responsible for the effective management of the various personnel systems. However, the human resources managers usually share responsibility for personnel activities with other managers. These activities are usually performed in cooperation with other managers from other departments throughout the organization. > The following diagram illustrates the common structure of the human resources department: > PRESIDENT/DIRECTOR (HUMAN RESOURCES) > Manager > Manager > Manager > Manager > Manager > Recruitment > & Selection > Training & > Compensation > Employee > Employee > Development > & Benefits > Welfare > Relations > All managers have to perform the activities or functions assigned to them by the President/Director. > The most important principle about the organization of the HR department is that it should fit the needs of its business. There is no best structure to adopt but the choice of the structure should be made on the basis of an analysis of what the organization wants by way of HRM guidance and services. ### How HR Heads are Leading Change >Exhibit 1.1 >**How HR heads are leading change** >Namrata.Singh >@timesgroup.com >Mumbai: There's very little >that a chief human resources >officer (CHRO) today would >have in common with one who >had the same job a decade ago. >Back then, the head of the de- >partment needed to know the >nuances of labour law and be >anaceat managing ops. Today >it's more the ability to plan for >the future of work and align >employees to growth that's es- >sential. Today's CHRO is also >more likely to be younger and >a woman, though the scale >still tips in favour of men. >"The CHRO's job has beco- >me much more like that of a >chief transformation officer," >said Reena Tyagi, who has be- >en leading HR at Cigna TTK >Health Insurance for six years. >"To succeed, the CHRO must >master the attributes that were >barely on his or her radar five >years ago embracing disrup- >WHAT DOES A CHIEF HR OFFICER DO >Responsibility (in %) 2018 2008 >35 >30 >30 >25 >25 >20 >20 >20 20 >20 >15 >10 >0 >Source: BTI Executive Search >tion, practising agility, solving >for organisational structure, >employing data analytics, and >facilitating new work environ >ments. The companies that get >the right employees will great >ly improve their chances of be- >ing able to take advantage of >the big changes afoot in the >marketplace." >If a CHRO spent 20% time >30 >10 >10 >10 >5 >NA >on talent acquisition in 2008, >this now consumes 30% of >his/her time. On the other >hand. HR operations have re- >duced from 30% in 2008 to 10% >this year, according to a study >covering 100 companies by >BTI Executive Search. Today, >CHROs are more aligned to >the business compared to >2008. This means that they are >also judged on planning, en- >gagement and mapping the >skills capability for the cur- >rent and future needs. >James Agrawal, MD, BTI >Executive Search/PersolKelly >said, "The role of a CHRO is be- >coming more strategic in ma- >naging and developing talent. >It is a clear expectation from >CHROs that they must help the >business by building and as- >signing talent, especially key >people, and work towards un- >leashing the organisation's po- >tential." He said CHROs are >now expected to be both busi- >ness-savvy and data-savvy "In >recent years, we've witnessed >an increase in demand for ana- >lytical CHROs with good busi- >ness acumen and experience >in managing diverse talent >and work environments. Com- >panies are looking for CHROS >who are innovative and have >long-term vision," he said. >Continued on P 18 >Source: The Economic Times, Tuesday, March 13, 2018. ### Role and Functions of Human Resource Manager in Banking and Insurance Sector Service sectors like banks and insurance are entirely dependent on the knowledge, expertise, skills, attitudes and quality of human resources for growth and success. Hence effective management of human resources is extremely critical in banks and insurance companies. - Human resource management in banking and insurance concentrates on building employee capabilities. Employee capabilities serve as the trigger and create growth opportunities for the organization. - As employee capability is the key link to success in banks and insurance companies, the HR department becomes a 'strategic capabilities unit.' Some key functions of the HR department in banks and insurance are: - The use of the individual, team and organizational learning for serving the customer in a better way. - Ensuring that employee's knowledge and skills are kept up-to-date. - Aligning the HR development and learning strategies with the overall strategies of the bank. - Devising strategies to motivate the employees by means of a suitable compensation structure. ### The Decade of Retirement for State-Run Banks > Exhibit 1.2 >RBI calls it the decade of retirement for state-run banks. The reason being many CEOs, executive and managing directors areretiring next year. Thebigproblem, however, will be in the middle, where most executives are above 55 years. If the govt fails to wake up even now, the void could disrupt manybanks, writes Saloni Shukla >C >entral bankers rarely talk >straight, more so when it >comes to the state of the >banking industry. But the >Reserve Bank of India >deputy governor SS >Mundra came close to it when he >recently raised the red flag about the >state of human resources in the >banking industry. >When Mundra calls this a 'decade of >retirement', it should be the beginning >of sleepless nights to chiefs of banks >and the biggest stakeholder in the >system - the government, if it wants >to save whatever little value is left of >the sector after bad loans had eroded >1ts worth. >State-run banks, which used to be >the most sought after for job seekers >in the three decades since the 70s, not >only lost sheen to more lucrative >career options in technology and >other sectors, but the efforts to make >it more efficient by ending >indiscriminate hiring and not >replacing it with a suitable hiring >plan is beginning to bite. >"This is a decade of retirement for >PSBs and I am sure those working >there are already feeling the pinch of >the loss of experienced hands in their >day-to-day operations," Mundra told a >conference last month. >Many chief executives are retiring in >the next year and so are the executive >and managing directors. The big >problem is of the missing middle. Nearly >73% of the deputy general managers and >general managers put together at state- >run banks are above 55 years of age. And >another 23% are in the age group of 50-55, >which clearly suggests that their >retirement too isn't far away. >The very vocal former governor of >RBI, Raghuram Rajan, had also voiced >his strong opinion on the subject and >said the country could be staring at a >"national calamity" if the enormous >national assets with PSU banks start >to deteriorate due to loss of talent and >capabilities. >"Many private sector banks run on >people poached from public sector >banks. So, let us first acknowledge that >these are national assets and we need >to retain the value that they create," >he had said in an interview to a >television channel. "These banks are >sitting on enormous national assets >and for those assets to deteriorate >would be national calamity." >Source: The Economic Times, November 2, 2016. ### People, Culture, Integrity and Ethics at HDFC Bank At HDFC Bank, 'People' is one of the Bank's Core Values. It is extremely proud of them, the integrity and ethics that they demonstrate and, indeed, the culture that promotes these values. This culture ensures that the people with the right values are hired, groomed and encouraged. - HDFC Bank has an institutionalized, well-documented code of conduct, which every employee has to affirm annually. The five pillars of their People strategy are as follows: - **Recruitment:** Recruiting the right talent isn't enough anymore in an industry like banking. What is critical is recruiting and deploying them fast. HDFC Bank has an agile hiring mechanism that ensures this. This often entails leveraging online portals and new age channels like social media. Campus hiring and internship programs enable them to expand the hiring base further. - **Career Management:** Core to HDFC Bank's career philosophy is to create opportunities for employees to develop and grow. The systematic investment of time in career discussion with employees, competency assessment and intensive functional and behavioral training, through Gurukul their in-house programme, are also aimed at achieving that result. The Bank also facilitates inter-departmental job switches to employees to help them stay motivated, productive and happy. - **Employee Engagement:** Employee engagement has two planks, namely events and fun learning. The events are conducted at both local and national levels. While most of these events are open to employees, some are meant for families as well. - **Training and Development:** Training plans for businesses are developed based on needs identified in consultation with the business leaders. An extensive bouquet of training programs are delivered, covering on-boarding, product and process training, advanced programs and behavioral training. - **Rewards and Recognition:** Recognition programs of the Bank is based on a sound performance management system. HDFC Bank has a pay-for-performance culture based on meritocracy. There is equal emphasis on recognition as well. Extraordinary commitment towards work is rewarded. So is at times going beyond the call of duty. ICON Awards recognise employees for demonstrating individual, leadership and collaborative excellence in driving customer focus and operational excellence. > Source: HDFC Bank, Annual Report 2017-2018.