CHANGING WORK CULTURE IN INDIAN BANKING SECTOR

ABSTRACT:

Due to Liberalization, Privatization and Globalization (LPG), every sector

(especially of developing countries like India) is facing drastic changes and banking

sector is not the exception here. All the changes like from manual to information age,

local markets to globalization, from production to customer orientation, from human

resources to business partners etc. have changed the work culture of the banks in the

changing scenario. To develop and maintain a positive work culture has become a key

success factor for the people-oriented organizations like banking. Some trends that

fundamentally altering the banking industry are: globalization of operators, economic

reforms, development of new technologies, universalization of banks and increasing

competition etc. these changes reflect the work culture is reflected in a paternalistic

management style which generates a tender mindedness that is associated with a

reluctance to take bold decisions and see them through to the end. To develop and

maintain a positive work culture within the banks, following strategies are being adopted

by various banks:

New Philosophy of action

Human Resource Development (HRD)

Changing role of HRM

Transfer of functions of HRM to all middle managers

Role of Govt. as intermediary

A close connection with company’s mission

Changing role of managers

Employees on a participative and democratic culture within the organization

Strong concern for adding value within the banks

Effective work force

Morale Boosting

Voluntary retirement scheme (VRS)

Strategic Human Resource Management (SHRM)

Introduction

India is among the top most developing countries and our economy is growing at

fast pace and resultantly everything is now more dynamic. Every sector is facing the

dramatic changes due to various reasons and Banking is not the exception here. Indian

Banking Industry is facing all the changes mainly due to increased competition and

technology transformation in the light of LPG (Liberalization, Privatization,

Globalization).

There has been a paradigm shift in the Indian Banking Sector since early 1990’s

due to various reasons like increased foreign investments, higher volatilities in interest

rates, exchange rates and commodity prices and secondly due to challenges in terms of

new banking products and players and restructuring systems etc.. And all these changes

and challenges call for a new, more dynamic, aggressive, innovative and challenging

work culture to meet the demands of brand values, reputation building and maintenance,

customer relationships, corporate governance, product differentiation and regulatory

prescriptions etc.

Changing Scenario of Banking Industry

Banking is the backbone of every economy. It is not a new concept rather it is in

existence from the ancient times in one form or the other. Without efficient banking

system, no organization or business whether that is small or big, can survive and grow in

today’s world of change. But what, when the banking sector itself is facing a plethora of

changes with the changes in our economic, legal and political, cultural, demographic and

socio cultural environments. There are various factors which are transforming from one

state to another, which are described as below:

1. From Local Markets to Globalization. Our old local regional vision of

banking sector is now giving way to a new global economic and business

vision. The new demand is: think globally and act locally. Banks were used to

deal with restricted or concentrated markets, but now they are becoming

accustomed to deal with business from a new global perspective.

2. From the Manual to the Information Age. Work performed in every

organization by human beings is being replaced by work at computer

terminals. And instead of working with things, people increasingly work with

ideas and concepts. Information and knowledge have replaced outdated files

and papers as the source of most new jobs.

3. From Stability to Change. Static, permanent banks designed for a stable and

predictable world are now giving way to flexible, adaptive organizations more

suited for a new world of change and transformation. Emphasis on

permanence, tradition and the past is giving way to creativity and innovation

in the search for new solutions, new processes, and new products and services.

Maintaining the status quo is less important than a vision of the future and the

organization's destiny. Banks now use to deal with certainty and

predictability.

4. From Solitary to Synergy. Teamwork is supplanting individual activity. The

old emphasis on individual efficiency (on which the total efficiency of the

organization depended) is being replaced by group synergy. It's a matter of

multiplying efforts, rather than simply adding them. Banks are now

emphasizing more on collaborative and team work rather than individual

efforts.

5. From Production to Customer Orientation. In the past, the product or

service was the most important element. Now, the customer to whom this

product or service is targeted has become fundamental. Now, an externally

focused vision for the customer who is going to use that product or service

predominate the product and services. In the past, the product/service was the

goal. Banks were used to work with the products and services, but now they

are shifting towards looking after the customer's needs.

6. From Agents to Leaders. The old autocratic, authoritarian, people-

controlling bosses are becoming democratic leaders and people promoters.

Formal hierarchical authority is being replaced by such modern concepts as

motivation, leadership, communication, interpersonal relationships, and

development of high-performance cohesive work teams. Employees are

becoming accustomed to work with leaders who move, motivate and stimulate

workers.

7. From Bureaucracy to Participative style. The rigid organizational hierarchy

with its monolithic chain of command is giving way to integrated team

networks based on autonomy and flexibility. Rigid departmentalization is

being replaced by flexible organizational structure -- business units and profit

centers that change rapidly. Banks which used to work as mechanical,

bureaucratic, vertical and pyramidal organizations are now feel the need to

become accustomed to work as organizations that grow and change as if they

were alive. The bureaucratic style of management is now transformed into

democratic and participative style.

8. From Direction to Orientation. The traditional hierarchical notion of

authority based on vertical imposition of orders and instructions is giving

place to democratic leadership based on the organization's mission and vision.

Blind, reactive obedience is giving place to spontaneous, proactive

collaboration, and employee commitment.

9. From Full-Time to Part-Time Work. Work carried out with total and

exclusive dedication to a single organization or bank is coming to an end. It is

being replaced by work carried out at any time, and at any place, to the extent

that workers are becoming suppliers for various activities and various banks at

the same time. The old concept of a job with a single schedule and a formal

job description is being supplanted by a new concept of work that typifies the

digital age. Part-time work, remote work, and virtual work constitute these

new forms of human activity.

10. From Specialization to Multitasking. The traditional division of employees

with its consequent fragmentation of activity is evolving toward more varied

and integrated work. Compartmentalization is changing to a systematic

holistic vision, unified rather than separate. Employees who were used to deal

with division of labor and task specialization are now becoming accustomed

to work in teams and with holistic organizations.

11. From Human Resources to Business Partners. In the past, human resources

were considered passive agents of the company. Now, employees are

considered active and proactive agents of the business they manage together.

In the past, workers were considered an organizational resource. Now, they

manage the company's organizational resources. A resource is only a thing.

But people are human beings with minds, talent, motivation, and the proactive

capacity for decision-making. They can no longer be considered only as

objects.

Reasons Behind The Changes

A strong fact about change is - ‘No change occurs without any reason/ cause’.

And the same is true in the case of banking sector. Following are the major reasons that

cause these changes to occur:

1. Economic Reforms: Not only the banking sector, rather every sector of our

country is going through major changes as a consequence of economic reforms.

Indian economy is getting hammered, mainly due to inflation. Since January, the

rupee has weekend 9%, stock market capitalization has shrunk 32% and inflation,

at 13%, is at a 13 year high. Due to these reforms, changes occur in ownership

patterns, availability and utilization of funds, opportunities to earn profits, range

of service etc. and all these changes in banking industry directly affecting the

work culture.

2. Competition: The ongoing developments in Indian industry, integration of India

with global markets and entry of new competitors (especially foreigners) due to

economic reforms, all lead the competition at the deadly stage. Due to which new

customers are entering in the industry and expectations of new and existing

customers are constantly changing. So, there arises an urgent need to introduce

new products/services. And old products need to be delivered to the customers in

some new and creative way. As a consequence of competition, banks may have to

reorient their resources, as the managerial challenge includes reformulate market

segmentation, innovative ways of product positioning and innovative delivery

channels.

3. Demographic Changes: Expectations of Indian customers are continuously

changing due to demographic shift. Changes in the employment and income level,

lifestyle aspirations, education level etc. are changing the profile of Indian

customer. The Indian customer now seeks to fulfill his lifestyle aspiration at a

younger age with an optimal combination of equity and debt to finance his full

consumption and creation of assets. This all leads to the growing demand for

competitive and sophisticated retail banking services. And also the customers are

not just belonging to the union territories; rather they are also present across small

towns and rural areas. And this becomes major challenge in front of work force

to identify the needs of different customers, to retain and satisfy all the customers.

4. Industrials Relations in Bank: Industrial relations become a major issue in

banks these days. Some researches shows highly volatile and sensitive issues/

conflicts in the banks which require proper handling with utmost care, faith and

caution. The work culture in the banking industry is deteriorating at a fast speed

instead of improving. And in such an environment, especially in service oriented

industry like banking, it is totally impossible for one to gratify. There are also

some other factors which require proper care and attention under this section are.

Trade union

Union rivalries

Overtime

Frauds

Collective Bargaining

Managerial efficiency

Changing role of HRM

Knowledge workers

Training & Development etc.

2. Developing Technology: As the consequences of LPG, new technologies are

continuously entering into our market. So, acquiring and developing the right

technology, deploying it optimally, and then leveraging it to the extent, is

essential to achieve and maintain the best efficiency standards, while remaining

cost effective and to deliver the sustainable return to the stake holders becomes a

key challenge for the Indian banking sector. Banks are developing alternative

channels of delivery like ATM’s, tele banking, remote access & Internet banking

and as this is the era of information technology, now every manual work is got

replaced by computers. Not only in private sector but also in public sector now.

And some employees are now don’t require to come into their offices daily, they

are doing/completing their tasks through internet in their homes as their duties

includes communication over all policies and procedures with the other

employees sitting across the boundary of our country . They are involved only in

maintaining linkages with other branches of the bank across all over the world.

See how the work culture paradigm is changing. And high-technology telecom

systems are also emerging now. As maximum number of users are now rely on e-

mail, fax, cellular phones and teleconferencing etc. to facilitate communication

across borders and to reduce the time to process information and to change the

documents form one language to another. This automation effects job design,

skill requirement and number of employees required etc.

3. Original Restructuring: Indian baking industry continues to face some structural

challenges due to the consequences of globalization. Indian banks are also getting

globalized now i.e. Head office in one country, policy formulation in some other

country and sales, distributions and services close to customers in some other

countries. Almost every bank has the branches all over the world or in some

different countries.

Instability of work environment is taking place due to mergers, acquisitions and

takeovers etc. These issues of emergence of cross-cultures are putting a tremendous

pressure on the minds of employees. In order to help their organizations service,

employees have to become more competitive. Very often they have to compete outside

their local environment/markets and against unfamiliar players according to unfamiliar

cultures and conditions. The level of ambiguity and risk is continuously increasing and

this creates the need to recognize the importance to understand the characteristics of

different cultures and markets and to learn about making adjustments to them.

Strategies for changing work culture:

As now we know that there are number of factors behind the changes in work

culture. So, it is totally impossible to restrict those changes. What is in the hands of

management is to adjust the work culture of their own organization according to the

demanding needs of the environment. And as it is understood that work culture is totally

formulated & reflected by the employees working in that organization (i.e. all from top

level to lower level) and to develop a positive work culture within the organization, it is

very necessary to attain & retain most innovative & outstanding employees as it gives

both effectiveness & efficiency to the working of the organization. With the changes in

the external environment of the banking sector, also the employees objectives, both at

societal & individual level, has undergone the drastic change with the passing of years.

So, it lies with the responsibility of HR department that how they can mould their present

policies and strategies as the changing strategies of the organization as a whole to

develop the best talent and knowledge of workers in their organization to maintain

positive work culture. Work culture in Indian Banking Industry dictates a distinctive

style of transformational leadership, which has been called the ‘Nuturant-Task

Leadership’ style. It presents a plausible picture of the average Indian’s resistance to

change, their willingness to accept the authority and accountability, but unwillingness to

delegate. Due to all these reasons, it becomes a key challenge for HR departments to

develop a positive work culture within their organizations even when there are already

lots of challenges present in front of them due to external changes. Entire bank culture is

now needed to be changed into a more performance oriented culture, a view which fitted

in with the popular trend mainly focusing on “soft” aspects of management. In light of

all the above mentioned factors, every bank is trying their best, and for this the key

human resources objectives are:

A motivated and well trained staff geared to performance

Control and authority of staff by line managers with personnel support

Work culture where family concept is practiced among employees

Receptivity to new ideas

Opportunities for experimentation

Facilities which support growth

Record cordial industrial relations

And with a view to fulfill all these objectives following are the some strategies,

which most of the Indian banks are implementing:

1. New Philosophy of action: Most of the banks are now replacing the old

concept of HRM with new term that is gaining more acceptances, namely,

‘People Management’. According to this change, banks are now considering

their employees as more humane rather than as organizational resources. Their

activities, knowledge and individual differences are now respected because

they are endowed with unique personalities and intelligence. And this new

philosophy even goes beyond this, some more advanced organizations do not

even talk about managing people, because this concept could imply that

employees are nothing more than passive agents which are handled and totally

dependent upon the decisions of top level management. They profess the

philosophy not as ‘managing people’, rather as ’managing with people’, which

shows that their employees are their business partners, rather than as mere

foreign elements attached with their banks. And according to this concept,

people now at all levels are considered to be responsible for all of the business

activities. There is an increasing consensus that workers/employees of their

banks are their real partners. Moving jointly with employees is a way to move

towards a conceptualizing business.

2. Human Resource Development: Banks are now understanding that the

capital and technology considered to be the most important pillars of banking

are replicable, but not human beings, which need to be viewed as a distinctive

competency of every organization. The skill level, attitude and knowledge of

the personnel play an important role in determining the competitiveness of a

bank. So, the primary concern of every bank is now to bring a proper

integration of HRM strategies with business strategies. There is now a faster

move towards cohesive teamwork and environment of creating commitment

to improve the efficiency of human capital. More than operational skills

today, banking call for ‘soft skills’ to fulfill the needs and requirements of the

customers at the counter.

3. Changing role of HRM : The role of HRM in banks is changing at very fast

speed, i.e. from hiring and firing to relationship building, from dictating to

guiding and coaching from protector and screener to strategic partner and as a

change agent. This all is because they accepted the truth that until the

employees are emotionally inspired from job design and job satisfaction,

working relations cannot be improved further for effective job performance.

All the internal and external changes in the environment lead the HRM from

‘push oriented’ (creative) to ‘pull-oriented’ (proactive).

4. Transfer of functions of HRM to all middle managers: Functions like

selecting, braining, performance, evaluation, maintaining relations and pay

etc. were the primary activities of HR department. But now banks have

accepted the truth that managing people is a strategic activity. Now, managers

from various areas are becoming managers of people, and they are gaining full

autonomy to make decisions and take actions with respect to their

subordinates. Managers are gradually becoming empowered to act as

managers of their human resources also. Every manager is now considering

his own responsibility for managing his own subordinates.

5. Role of Govt. as intermediary: To accelerate the pace and extent of

economic reforms, the Central Government, despite its own political

constraints, is calculatedly marching ahead by bringing out suitable

amendments to the outdated labor legislations/statutes at the same time

protecting the interests of work force without giving blanket permission to

hire and fire to the industry. Important amendments include: Severance

package of one month, Role of industrial tribunals, Contract labor,

Introduction of strike ballot, Time limit of 3 years for initiating industrial

disputes, Minimum 10% or at least 100 employees to form and register a

union, Reduce number of outside office bearers in trade unions are some

major sectoral policy modifications. Employers hail these amendments as

opening up the Indian economy with tremendous opportunities for industrial

growth, whereas the unions oppose it as being anti-labor.

6. A close connection with company’s mission: Now a days, HR planning is

closely linked with strategic planning, so as to support the organization’s

mission. HRM is becoming involved strategic planning and development so

that people can work pro-actively towards the achievement of organization’s

mission and objective. This means a broader prospective than ever before

which required a personal commitment by every employee of the bank.

Personal commitment here means employee education, commission;

involvement and incentives now become fundamental. HRM objectives are

indicative of such original objectives as profit, growth, productivity, quality,

flexibility and especially innovation, change and competitiveness.

7. Employees on a participative and democratic culture within the

organization: Participative decision-making, continuous consultation,

opportunities for dialogue, direct and open communication, suggestion

programs, use of meetings and award ceremonies, more freedom in task

selection and the methods to carry them out, group work and teamwork, work

schedule options, availability of online information are the methods used by

all the leading banks to adopt a consultative and participative management

style. There is a deep concern with original climate and employee satisfaction

in such organizations. Quality of life became an obsession in successful

companies, because they perceived that the quality of their products and

services was a direct function of the quality of life of the people that made or

provided them. What does "quality of life" mean in this context? It means

good salaries and benefits, adequately defined tasks, a healthy organizational

environment, democratic and efficient leadership, high motivation and

continuous feedback. It means rewards for productive contributions such as

psychological effort, intense communication and interaction, continued

education, and all the rest. A worker cannot have a good quality of life within

an organization or bank, if he or she does not enjoy these conditions. Nor can

the worker enjoy this quality of life outside the company, if it does not exist

within. "Quality of life" creates the psychological state necessary for the

employee to produce quality work for the company in return. The change is

worth the investment. A happy worker works better and produces much more

than an unsatisfied, rebellious worker.

8. Changing role of managers: A role of manager in every bank is changing as

the changing demands of the work culture. Following table indicates the role

of a manager in past and present scenario:

Manager’s role in the past Manager’s role at present

Listening and suggesting Taking responsibility for employee’s

decisions

Dictating Guiding and coaching

Being critical Supplying resources

About giving guarantees Giving honest feedback on objectives

and performance

Being bureaucratic Being democratic and participative

Providing direction Providing orientation

Focusing on original objectives Holding with balancing employees and

original needs

Considering employees Just as

human resources

Considering employees as business

partners

9. Strong concern for adding value within the banks: In new world of change,

there is an effort towards creating value for the customers and more emphasis

is now on making profits that add wealth. This emergent process of adding

value can be called a synergic effect. According to this concept, the critical

element is that each director is interested in making the organization more

valuable; each manager is interested in training people better; and each person

is interested in increasing the value of products and services delivered to

customers. The goal is to increase stockholder’s assets, satisfy customers, and

increase the value of human capital. HRM is vitally involved with educating

people and increasing their awareness of what it means to generate value

within the company.

10. Effective work force: The most time-consuming and hectic job, not only in

banks but also in every organization is to hunt the right talent. It is the similar

process as to sit by the side of river and wait for the right fish to catch.

Because the professional education and value is increasing, search for the

right candidate is becoming difficult. Banks are keenly interested to fill up

two types of professionals. Ones who are outstanding professionals with high

job hopping attitude - these are those who come in - work for some time and

then leave for better prospects. Others are those who are keenly picked-up,

trained and are some how retained to be developed as future management

within the bank. This is the reason, that Management Trainees are a growing

popular phenomenon where freshly qualified business graduates are engaged

by banks and a certain percentage of these well equipped professionals stay

back within the organization to grow into the footsteps of senior managers.

The hiring process has been facilitated by specialized hiring agencies who

may take up the job of hiring in case of large number of vacancies

11. Morale Boosting: As described above that ‘attaining’ right person is the tuff

job, but side by side, we cannot ignore ‘retention’ of right candidates. Banks

are continuously implementing different strategies to boost the morale of

employees because creating a positive work culture, increasing efficiency and

productivity satisfying customers etc. will remain as a dream unless there is a

feeling of high morale among the employees. Human beings even if satisfied

of material well being need to be praised and encouraged constantly. Smart

banks are realizing this need and taking steps to keep their work force

motivated through proper encouragement like –

Man of the month award

Repeat get-together

Conferences/Workshops/Trainings

Cultural Events

Dinners

Company sponsored sight seeing tours

Pensions etc.

12. Voluntary retirement scheme (VRS): The VRS is initially introduced in the

banks because it was felt that most of the banks are over-staffed and 65-70%

of the total operating costs account for establishment expenses and on

rationalization of manpower. This scheme was implemented by public sector

banks. It was observed that while there is a growing need for competitive and

innovative employees having the knowledge of modern technology, foreign

exchange, venture capital, e-commerce, money management and e-banking

etc., it is also essential to rationalize the existing manpower. So, keeping this

requirement in mind, banks have implemented VRS policy which allows

employees to go on voluntary retirement providing them with suitable

financial package as compensation or incentives. But as and when the staff

strength reaches at a level, known as threshold level, the VRS is withdrawn

because the staff strength reaches the required level. In case of non-

compliance of the conditions stated in the VRS policy, an employee can

approach the industrial and civil court against the management. But this

remedy is available only to the persons working in the public sector and not

for the private sector employees. The main objectives behind this scheme are:

To achieve optimum human resource utilization

To optimize return on investment

In implementing the VRS scheme, management shall ensure that

it is extended primarily to such employees whose services can be

dispensed with without detriment to the organization. Care shall be

exercised to ensure that highly skilled and qualified workers and staff

are not given the option, because there will be no recruitment against

vacancies arising due to VRS.

13. Strategic Human Resource Management (SHRM): The term ‘HRM’ is

now transforming into ‘SHRM’. Being strategic, here, simply means obliging

the HR goods and initiatives to the organization’s objectives that HR be

proactive and focuses on the future by providing inputs towards formulation

of business strategy and creating workforce plans and programmes in

alignment with the strategy. SHRM is largely about integration and

adaptation. Its concern is to ensure that:

i) HRM is fully integrated with the strategy and the strategic needs of the

firm

ii) HR policies have full consistency over both policy areas and

iii) HR policies are adjusted, accepted and used by line managers and

employees as part of their everyday work.

SHRM practices are macro-oriented, proactive and long term focused in nature, views

human resources as assets or investments and not as expenses.

Benefits of a Strategic Approach to HR are:

Development of high-quality workforce through focus on types of people and

skills needed.

Cost-effective utilization of labor, particularly in service industries where labor is

generally of greatest cost.

Facilitates planning and assessment of environmental uncertainty, which helps to

cope up with changes in external factors.

Identification of strategic needs.

Employee participation is critical to linking strategy and HR practices.

Development of systematic and analytical mindset.

Impact on organization's efforts to launch strategic initiatives

Conclusion:

The Indian banking sector is thus at an exciting point in its evolution. Due to the

changes that occur in the environment, Indian banks are facing lots of challenges but also

there are immense opportunities in front of the organizations. All these challenges and

opportunities are playing an important role in changing the work culture of the banks.

The core values, mission, vision and mode of conduct etc. that form the basis of work

culture also heavily reflected and influenced by the fast changing environment. Due to

the consequences of liberalization, privatization and globalization, the role of HRM has

been totally transformed. There is a growing need to change the workplace practices

within the banks to cope up with the changes. Development of human resources is worthy

of higher priority. Smart banks are now more pro-active in the area rather than merely

respond to problems. Technical and supervisory training, new communication strategies,

employee relation strategies, changing role of personnel and line managers etc. are all

efforts towards the development of positive work culture. To develop a positive work

culture is the challenge and opportunity in front of every bank to survive and grow in the

world of change. The only way to manage the survival and success of the organization is

to manage the workforce and work culture effectively and efficiently.