CM Report Final (1)

7/28/2019 CM Report Final (1)

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1Conflict Resolution at HBL Term Report

C O M P A R A T I V E

M A N A G E M E N T

B B A - 8

I B A , K A R A C H I

M A Y 0 6 2 0 1 3

Ghania Shaikh

Maria Abdul Razzaq

Syed Raza Hassan

Syed Salman Hassan

Syed Sameer Hasan

CONFLICTRESOLUTION ATHBL - TERM

REPORT


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TABLE OF CONTENTS

Page No.

Abstract ------------------------------------------------------------------------------------------ 03

Executive Summary --------------------------------------------------------------------------- 03

Introduction ------------------------------------------------------------------------------------ 04

Background ------------------------------------------------------------------------------------ 04

Introduction and History of the Organization ----------------------------------------- 06

Industry Analysis ---------------------------------------------------------------------------- 06

Methodology ---------------------------------------------------------------------------------- 07

Findings ---------------------------------------------------------------------------------------- 08

Dispute Resolution Process --------------------------------------------------------- 08

Arbitration ----------------------------------------------------------------------------- 09

Litigation ------------------------------------------------------------------------------- 09

Problems in Dispute Resolution Process at HBL --------------------------------- 10

Analysis ----------------------------------------------------------------------------------------- 13

Literature Review and Analysis of Findings -------------------------------------- 13

Recommendations -------------------------------------------------------------------- 16

Conclusion ------------------------------------------------------------------------------------- 18

Contributions Page

Bibliography

Appendix


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Abstract

Conflict resolution is an important subject area which has gained considerable importance asorganizations have looked to expand, incorporate the impacts that globalization has in store andthe need to depict greater acceptance towards diversity in its various forms. This report coversthe conflict management at HBL, primarily after the privatization in 2002. Several factors havecontributed towards conflict situations at HBL and the cases have had a considerable impact onthe organizational performance. The findings have been integrated with literature review andanalysis in the light of Pakistan s organizational culture. Lastly, various recommendations have

been made to address the flaws and potential issues that are embedded within the conflictresolution strategy at HBL.

Executive Summary

Changing management styles and structural changes which have been made to organizations maytake the form of several conflicts that emerge at a later stage. The intended purpose of this studyis to evaluate the conflict situations at HBL, the reasons behind them and the ways in which thetop management or the managers at HBL responded to the conflict situation.

In the beginning, we have provided the reader with the insights that we sought by interviewing people at HBL. The post privatization period, that is, after 2002, had posed considerablechallenges to the top management at HBL. While at one end of the spectrum they had to come toterms with excess staff, at the other end they looked to address the problem of decreasing

productivity. Layoff steps in the beginning backfired as employee morale worsened, a downfallin productivity was seen and job insecurity among the middle and lower level management rosesignificantly. All these combined, resulted in interpersonal and employee-management conflicts.

Moving, the report talks about the strategies that were implemented by HBL to address theseconflict situations. Mostly, managers used a dominating approach, whereby management sinterests were safeguarded and little attentio n was paid to the individuals interests. There waslack of communication and no clear policy guidelines which further created ambiguity within theorganization.

Furthermore, with the help of literature review, an analysis has been conducted into the findingsto assess where the management misread the problem. An intriguing feature of this analysis isthat cultural aspect of Pakistani organizations has been included which would give the reader aclear insight into how a typical Pakistani manager is, the organizational culture and workplaceenvironment and how the management addresses to a conflict situation in Pakistan. To further strengthen our analysis, detailed recommendations on how HBL must improve its conflictresolution approach have been outlined.


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Introduction

Conflict resolution is an area which has long remain unaddressed, atleast officially, in thePakistani context for being a typically collectivist society. It is assumed that individual interestsare secondary to the interests of the organization as a whole, rather than the need to understandthat the two work in parallel. After the steps of privatization which were taken in variousindustries in Pakistan, conflicts started emerging all the more, and perhaps a need to find aconcrete approach to resolve them further added to the challenges already faced byorganizations.

The intended purpose of this report is to dig down into the conflict situations that arose at HBL post privatization in 2002 and later years, conduct an analysis by incorporating the cultural

dimensions as laid down by Hofstede and Trompenaar, and finally to come up withrecommendations that must be introduced at all management levels to reduce the frequency of these conflicts and to extract positive learning out of them.

Background

Conflict situations have almost become an integral part of organizations all around the world.Management restructuring, the introduction of a technological change or tough economic times,all these have been the major driving force behind the conflicts that have emerged in Pakistani

organizations. Most disagreements and conflicts that occur at HBL are policy driven. HBLunderwent a major change in its structure and procedures and policies after its privatization in2002. The managerial change was a necessity since numerous problems stringed with listedcompanies required attention. Two major problems were;

Excess Staff o HBL, pre-privatization was over staffed with employees in excess of 31,000. An

organization which had long been impacted by close family ties meant that nepotismwas almost a certainty. This included both the management and non managementstaff. The new management wanted to reduce the number to 27,000 employees.

Excess staff was seen as a major contributing factor towards organizationalinefficiency and low productivity levels. The said period saw several new entrants inthe Banking Sector within Pakistan, therefore, it was important that HBL revisits itsworkforce size, hence lay off had become almost inevitable.


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Inefficiency and Under performance o Like all nationalized institutions, HBL too was heavily reliant and influenced on

government policies and procedures before 2002. The sheer size of HBL made it tooimportant an organization to be left independent hence the bank remained under strong government supervision. Owing to macroeconomic instability and inconsistentgovernment policies, it was imperative that HBL's performance and polices took a hit.The deteriorating performance was considered to be an impetus that led to the

privatization of the company in the prospect of improving efficiency and competingwell within the market.

Resistance that followed PrivatizationLike any other change, steps towards privatization were seen with great skepticism by theexisting employees at HBL. Transformation from a public company to a private company cameacross as a threat to them, for years they had been well settled in the bureaucratic structure and

polices that had held the organization for most of its period of nationalization. It was hard for employees to accept and adjust to the new policies and the new structure that would come in as aresult of privatization. They resisted, considering the new system unfriendly to existingemployees and it was only a matter of time before the clash of interests sprang across theorganization and led to significant detrimental impacts in the form of conflicts .

The intended purpose behind HBL s retrenchment program was to reduce the number of clericalstaff and instead employ more technology savvy employees, who were better trained to serve themodern day customer. With this, HBL looked to achieve higher levels of productivity; however,the change by far surpassed the negative consequences, which HBL had less perceived of. . It isimportant to note here that layoffs in Pakistani environment are not easy for factors such asAscription (seniority) as identified by Trompenaar and valuing relations above performancehave long been a part of the culture (Collectivism as suggested by Hofstede) . HBL however

provided them with compensation, packages and even provided them new jobs in other organizations but despite these efforts, HBL failed to gratify employees and secure their satisfaction, resulting in a few litigation cases still pending.

Moreover, prior to privatization, HBL employees had the privilege (in some conditions) of getting their children employed in the Bank after their retirement/death, depicting nepotismwhich is a routine aspect of organizations in this part of the world. However, with privatizationand the introduction of new reforms, human resource management and the hiring of skilledemployees was preferred. The idea behind this structural change was to ensure improvedcompany performance, which was greatly undermined due to the emergence of various conflictsthat followed privatization.

The problems that HBL experienced, post privatization shall be the central focus of our report.We intend to study these problems in light of the literature review and the company findings,


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followed by recommendations. Moreover, in our study we shall look to build a relationship between these problems and the culture of Pakistani workplaces.

Introduction and History of the Organization

HBL is the largest bank of Pakistan, headquartered in Karachi. It was the first commercial bank of Pakistan which now has more than 1500 branches and 830 ATM s across the country and acustomer base of over five million. HBL has a domestic share of more than 40% where itdominates the commercial sector with inward foreign remittances and loans to small industries,traders and farmers.Habib Bank was created in 1941 in Bombay as a commercial bank to serve the Indian Muslimthe community. After partition the bank s headquarter was moved to Karachi and the Habibfamily continued to own and manage the bank until the government nationalized it in 1974. In2004 Pakistan's Privatization Commission announced that the Government of Pakistan hadformally granted the Aga Khan Fund for Economic Development (AKFED) rights to 51% of theshareholding in HBL, against an investment of PKR 22.409 billion (USD 389 million). 42.5% of the shareholding is retained by the Government of Pakistan (GOP), whilst 7.5% is owned by thegeneral public i.e. over 170,000 shareholders following the public listing that took place in July2007.

With a presence in 25 countries, subsidiaries in Hong Kong and the UK, affiliates in Nepal, Nigeria, Kenya and Kyrgyzstan and rep offices in Iran and China, HBL is also the largestdomestic multinational. The Bank is expanding its presence in principal international marketsincluding the UK, UAE, South and Central Asia, Africa and the Far East.

Key areas of operations encompass product offerings and services in Retail and Consumer Banking. HBL has the largest Corporate Banking portfolio in the country with an activeInvestment Banking arm. SME and Agriculture lending programs and banking services areoffered in urban and rural centers.

Industry Analysis

Dr. Ishrat Hussain in his article on the banking sector in Pakistan quotes the IMF and the WorldBank s joint assessment of the Pakistani banking sector in 2004 giving the following conclusion:

for reaching reforms have resulted in a more efficient and competitive financial systemIn particular, the predominantly state-owned banking system has been transformed intoone that is predominantly under the control of the private sector. The legislative


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framework and the State Bank of Pakistan s supervisory capacity have been improvedsubstantially. As a result, the financial sector is sounder and exhibits an increasedresilience to shocks.

With 80% of the banking assets held by the private sector and privatization of the nationalized

commercial banks, the 1990s banking sector reforms initiated a culture of professionalism andfocus on service instead of bureaucracy and apathy. The increased profitability due to removal of inefficiencies and a wider product range is being used to increase the capital base of banks. The

borrower base of banks has expanded four folds in the last few years as the banks diversify intoagriculture, SMEs, consumer financing, corporate loans, mortgages, and etcetera. BankingTechnology that was almost non-existent in Pakistan until a few years ago has revolutionizedthe customer services and access on-line banking, Internet banking, ATMs, mobile phone

banking/branchless banking and other modes of delivery have made it possible to provideconvenience to the customers while reducing the transaction costs to the banks. The CreditCards, Debit Cards, Smart Cards etc. business has also expanded.

According to Dr. Ishrat Hussain the human resources of banks has also improved due to theadoption of the principles of merit and performance throughout the industry. Recruitment is donethrough a highly competitive process and promotions and compensation are linked to training,skills and high performance. The banks now routinely employ MBAs, M.Coms, CharteredAccountants, IT graduates, economists and other highly educated persons rather than Clericaland Non Clerical Workers. The banking industry has become the preferred choice of professionamong the young graduates.

According to an FBR study, as of June 2010, the banking sector comprised 36 commercial banks(including 25 local private banks, 4 public sector commercial banks and 7 foreign banks) and 4specialized banks with a total number of 9,087 branches throughout the country. Among the

banks, there are 6 fully fledged Islamic banks as at end of June 2010.

Methodology

Before conducting a primary research focused on HBL we first prepared a literature review. Thesecondary research was used to understand the implications of conflicts and disputes that may

arise in an organization. We used various journals and research papers to find out the differenttypes of conflicts that exist, different studies on conflicts in Pakistani organizations and their management.

To get a first hand insight on how HBL managed the conflicts that occurred after its privatizationwe conducted two interviews with Ms Hina Saqib and Mr Muhammad Arshad, HR executives atHBL. The transcript of the interview is attached in the appendix of this report. We used these to


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analyze the issues arising out the structural change and the procedures adopted by HBL tocounter them.

Findings

DISPUTE RESOLUTION PROCESS:The conflict resolution process, also known as the dispute resolution process at HBL iscomprises of four phases, where each phase plays an important role in ensuring that a positiveoutcome is reached, whereby the emergence of conflicts in some way proves to be source of value addition for the organization.

Negotiation:

The negotiation process is headed by the senior vice president of Human Resource and the headof the Disciplinary Committee. All parties to the conflict approach the HR department and inmost cases it is the employees who put forward their grievances against the management as wellas a possible solution which they think best addresses the issue at hand. The HR department andthe Disciplinary Committee aims to minimize concessions and tries to negotiate the conflict infavor of the management by making employees compromise on their demands. They makes surethat if negotiations is the only means of resolving the dispute, then the terms of the managementare upheld and compromised to the bare minimum. It is believed that resolving the dispute at the

negotiation phase is in the best interest of the organization, however in case the process of negotiation fails, the next phase is mediation.

Mediation :

Negotiations do tend to work in the Pakistani work environment especially in cases where thereis a powerful management against the less empowered workforce. However, when negotiationsfail, managers at HBL consider mediation. The mediator usually is a member of the HBLmanagement acceptable to both parties. The mediator acts as a communication route between thegrieving parties.

Stage 1: Winning trust of the concerned parties

During the first stage, the mediator plays a passive role. The main task is to gain the trust andacceptance of the conflicting parties, so that they begin to believe that he/she will be capableof assisting them fairly as a person on whom they can rely at all times. For this purpose HBLchooses a mediator with the mutual consent of employees and the management. Mediator in


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Even if disputes are not resolved and employees do end up in filing legal charges, managers arenot threatened; the employees do not have the will, or the financial resources to fight with themanagement on court. Employees do realize they could even lose their jobs over this.

PROBLEMS IN DISPUTE RESOLUTION PROCESS AT HABIB BANK LTDIn an organization of the size of HBL where there is diversity of thought, gender, race, andculture, conflict is inevitable. As long as these are functional conflicts which do not need formalresolution processes, they help an organization improve and work efficiently. Functionalconflicts need an environment where communication flourishes so that employees can resolvedisagreements, disputes and conflicts, in a manner that i s least detrimental to the organization scause.

There are a variety of problems that were explored while analyzing the dispute resolution processat HBL.

INSTANCES WHERE MANAGEMENT FAILS TO REDUCE THE OVERALL LEVEL OFCONFLICTThe dispute resolution process which aims to find solutions to conflicts was not successful andsome form of dissatisfaction and resentment persisted. When HBL downsized after privatization,the new management wanted to do away with the lower level staff which was overloaded and

paid way above the average market rates, for years of commitment and the increment policiesthat HBL followed. The management instead wanted to hire more skilled labor that would addvalue to the bank and improve its performance. This decision to downsize was conveyed in theworst of ways to the lower level staff by word of mouth and rumors through unofficial

communication channels, which ultimately led to an outcry from the employees. Although theywere being offered other incentives such as golden handshakes and alternate employmentopportunities, the management by and large failed to reduce the overall level of conflict.

ABSENCE OF PRE AND POST DISPUTE ANALYSISIn our interviews, we found out that HBL lacks a proper pre and post resolution analysis process.The resolution process was not followed by a concrete feedback on the resolution activity, thecosts associated with the conflict, how well the resolution was met and if the concerned partiesare satisfied with the eventual outcome. Also, little or no analysis is conducted from anorganizational standpoint.

For instance, when HBL decided to downsize after the initiation of privatization, themanagement was not sure if the desired outcome would be achieved, and in a way that theorganization intends to. Furthermore, when HBL went towards retrenchment, and successfully

but with great difficulty achieved it, managers did not do any proper formal analysis with the topexecutives of what were the difficulties they faced and how to make sure they do not reappear inthe future if a similar situation arises. Also, there was no evaluation of results that appeared from


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retrenchment, which showed the lack of a visionary approach that is necessary for anyorganization to be successful.

ADVERSE IMPACT ON EMPLOYEE-MANAGER RELATIONSHIPSAs the process did not manage to satisfy all or most of the parties and caused more conflicts in

return, it became a basis for more personal conflicts among individuals which adversely affectedthe work relationships and the organization s productivity as a result. Therefore, the conflictresolution approach that HBL had adopted did not promise to foster effective long termrelationships among colleagues giving rise to feelings of dissatisfaction and emotional disparityamong employees in the same department or between an employee and manager. In the case of HBL s formal dress code policy, a senior manager pointed out an individual in front of his junior colleagues making him feel insulted and hating the manager for doing so, causing him to feeldemoralized to perform any task given by the manager with eagerness. Such incidents startedhappening on a routine basis and the lower level management often felt disconnected or harddone by the top management s policy; results were low productivity levels.

LACK OF EMPLOYEE EMPOWERMENTEmployees at HBL lacked sufficient empowerment to effectively challenge the management.Managers were at such levels of job security where they could become complacent, while theemployees believed that they did not have enough power to challenge the system or raise their voice against it. This left any conflicts un-surfaced and un-resolved until the conflict maturedand had sowed seeds for even severe results in future.

Also, because of less employee empowerment, employees did not care to see the organization progress and worked on average motivational levels for the sake of securing their jobs. They did

not believe in their personal growth being closely tied to that of the organization, henceemployee turnover rates had also increased during the period.

HBL s management used a dominating style of resolving conflict rather than using collaborativestyle. Employee s interests were unheard and management did not collaborate to earn a win -winsituation. Employees were not involved in policy implementation which led to ambiguity amongworkers where they were not sure of the reasons behind the implementation of any changemeasures that were introduced and what are the goals of the organization. It was evident that the

post privatization stage lacked the top mana gement s vision that employees are the people whowork at the operational level; hence it is essential that they be involved in policy implementation

in order to secure the desired objectives.

All these issues culminated to point where conflicts had become inevitable, most of them of serious nature. While resolving conflicts the management did not encourage written inputs or even oral feedback from the employees. Discussions were not held with employees to uncover issues that they had. Thus, employee participation was little and even there were instances where


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the top management gave little heed to the importance of moving towards a participatorymanagement style.

ABSENCE OF EFFECTIVE COMMUNICATION NETWORK The dispute resolution process was unplanned because the managers were often unaware of the

conflicts due to lack of communication with the employees. Personal discussions were seldomheld. Moreover, the management used informal or rather inappropriate methods of communication to inform employees about their dismissal. The reasons were not explained for the downsizing which further strengthened the already existing ambiguous environment and gaverise to employee resentment. Furthermore, those who were retain had also become uncertain of their future with HBL, and their focus was drastically shifted from being work focused to merelysecure their jobs.

While downsizing, employees got multiple messages in the form of rumors and grapevine. Thismade all employees feel extremely insecure and stressed; and a feeling of mistrust between the

employees and the management. Such distorted communication channels led every employee tohave an understanding of his own, whereas the organization s intended message on severalinstances would take a different route altogether. Consequently, there was no integration betweenthe organization s intended message and that interpreted by the employees.

The management was not willing to share complete information with their employees which ledto employees having incomplete information about the organization. When this happenedemployees misunderstood what was happening and assumed it as something not in their favor.This misunderstanding further enhanced the conflict as the employees made their owndeductions.

UNSATISFACTOY APPLICATION OF RESOLUTION PROCEDURESThe employees of HBL were not allowed to participate or give feedback even though they werethe ones that directly contacted with the consumers. Resolution procedures were applied in areaswhere management thought it was important without employees consideration and suggestions.The employees were given tasks and forced to work without management delving into the rootcause of the problem. What appeared on the surface was what the management would take andmade their decisions upon.

This could be reasserted with the fact that when negotiating with labor unions, the management

appointed a mediator whom the employees preferred and would look upon to as their rolemodels. Hence the management would easily turn the table in their favor by forcing employeesto agree on what the mediator asked for.

POLICIES NOT UPDATED AND EMPLOYEES NOT AWARE OF NEW POLICIESEven though new policies were meant to increase the organizational effectiveness, the inabilityof the managers to communicate and ensure that employees all around the organizationunderstood new policies led to inefficiency. HBL is more organization centric meaning that


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interest of the organization takes priority over employees. Moreover, the workplace stylechanged dramatically in HBL, however the management did not incorporate the changing needsof their employees within new policies. Hence, employee needs were unmet which led tofrequent conflicts.

Another factor that was of concern was the ambiguity and less clarity of job descriptions. Themanagement was unable to communicate clearly what they expected of their employees and howtheir performance was tied to rewards. This affected the motivational levels of the employeeswho preferred to give an average performance and not get rewarded. The performancemeasurement criterion was not clear to the management itself, therefore inconsistent reward andmotivation policies were experienced.

IMBALANCE OF FORCES OF CHANGE AND STABILITY Change process must be a gradual one and management must not rush to achieve the desiredoutcomes. Contrary to this, the management at HBL did not give adequate time to employees to

adapt and become familiar with change and understand the management s vision behind the proposed change. Therefore, an imbalance of forces of change and stability were evident and hadits detrimental impact on the organizational performance on the whole.

LITTLE EFFORT TOWARDS HAVING A WELL DEVELOPED ADR POLICY HBL did not have any formal ADR policy for dispute resolution process to make sure thatdisputes are solved in an organized fashion. Rather the process was very informal and unclear toemployees. There were no guidelines regarding the investigation committee to investigate theconflicts and how an amicable situation may be reached.

In the next section of our report, we have outlined several recommendations for HBL in light of the literature review and after analyzing our findings thoughtfully.

Analysis

LITERATURE REVIEW and ANALYSIS OF FINDINGSWith differing cultures across boundaries, conflict resolution strategies are different in differentcountries. India, being the closest to us, we read up on the conflict resolution strategies prevalentin India. Kaur (2009) found out that almost 70% of the conflict cases in Indian banks are heard

and a solution is achieved which is significantly higher than in case of Pakistan. The conflictresolution strategy that Indian Banks employ is Dialogue Process by virtue of whichmanagements give due attention to the grievances of their workers, for they know that theorganizational growth is tied to employee productivity and the two cannot work in isolation. Assuggested by the Hofstede comparison, it is evident that Indian culture is more achievementoriented and Individualism is high in India, therefore it is important to account for individualneeds and opinions for the organization to flourish. This is extremely important while resolving


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conflicts and to ensure that such situations do not reoccur in future. Another differentiating factor is that India is considerably a LongTerm Oriented society, andorganizations are visionary in their approach.

In the preparation of our report,Mirchevski s (2012) literature onhow privatization impacts themanagement styles and the businessobjectives was what we firststudied. Since, the conflictsituations that arose at HBL werelargely as a result of privatization in2002, it was important to study how

privatization contributes toconflicts. Mirchevski (2012) hashighlighted that one of the mostimportant factors that lead to

conflicts in post privatization stages is lack of communication. As noted in our findings, therewas no proper communication channel adopted by HBL. Mostly, these channels were informal,and therefore every individual looked at things differently and interpreted the message on hisown. Another deduction that we made was that due to high power distance (PDI 55) ,managements in Pakistan adopt a more authoritative approach rather than fostering an open

communication environment.With changing management practices all around the world and the need to acknowledge theincreasing impacts of globalization together with appreciating diversity in the workplace,managements in Pakistani organizations have taken initiatives to adjust themselves according tothe need of time. Pakistan s organizational structure for the most part has been bureaucratic innature, whereby superior subordinate distance were always maintained, job insecurity among thelower workforce p revailed and boss is always right approach was something which drove thePakistani economy for long. However, in the last couple of decades, the trend has taken adifferent route whereby the organizational culture has moved towards one which is considerably

more open and looks to accommodate the individual needs as well. However, these changes have been subject to several conflict situations which arose, and in their study conducted on theconflict management situations at PTCL, Chaudry, Sajjad and Khan (2011) found out that sincePakistani culture is such where people avoid confronting directly (High Context Society) ,therefore most of the conflicts at PTCL remained largely unheard. Also, on occasions whereconflict situations were actually put forward before the management, the course of action wasmore of a coercive approach which the management adopted. Such a conflict resolution


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strategy adversely impacted the organizational performance for long and employee productivitywas compromised significantly.

Similarly in his study Mukhtar (2012) integrated the results of conflict management strategies inthe Academia, Banking and Industrial Sector of Pakistan. The research centered around the meta

model presented by Rahim in 2002, which said that there are five basic ways of approaching aconflict. These included I ntegrating, Obligin g, Dominating, Avoiding and Compromisin g .When surveyed, 75% of the respondents suggested that the conflict management strategies thatare used within their sector is Avoiding and compromising . When further read upon, it wasfound out that it is usually the lower management levels that compromise, however in most of the cases avoiding is what the organizations usually address a conflict with. This could be linkedto our findings of HBL where we found out that in most cases the management took the upper hand and due to the prevailing job insecurity, the lower management levels would compromise.However, as we shall recommend in the next section of our report, there is an inherent need tolook for a win-win situation when resolving conflicts, which shall require a different route toresolving conflicts altogether.

Ahmed, Shaukat and Usman (2010) talked about how personality impacts the conflict handlingstyle. Most of the managers at HBL have years of industry experience and perhaps are not wellaccustomed to the new work environment that businesses must move towards. Consequently,they tend to maintain a certain level of distance, avoid direct communication and also oninstances have been seen to have a blue eyed person within the department. This on instancehas further contributed to employee resentment. Therefore, the mind set which is required toaddressing a conflict situation lacks within the top management at HBL, mostly due to the factthat they are not accustomed to listening the other side of the story. This we believe, needs to beaddressed at the earliest, for which training and development, educating them of changing work environment and encouraging a stronger communication network is the need of time at HBL.

In another study by Rashid, Murtaza, Habib and Toheed (2012) we concluded that incontemporary times when a team culture is an absolute necessity, conflicts tend to havedevastating impacts. Within a team, every individual has a different approach therefore,managements must look to address each individual and then formulate a single strategy thatincorporates every individual s point of view. In this regard, the leadership plays a dominant roleand must realize the due role. Better team cohesiveness leads to increased productivity, and inPakistani culture it must be kept in mind that there is a high tendency of group formulationwithin a single team which could severely hamper organizational growth in the long run and giverise to further conflicts.

Conflicts have certain costs associated to them. Riaz and Junaid (2011) found out that mostly,the costs that an organization has to bear as a result of conflict are reduced employee

productivity and morale. This was evident in HBL s case where employees after the privatizationfelt disconnected with the organization and were uncertain of their future with the organization.


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Stress levels within workers increased and with stiff competition that surrounds the BankingSector in Pakistan, mergers and acquisitions had increased considerably after 2002. This further added to the job insecurity which was already quite high within the lower workforce and after years of service that they had provided to the organization, layoffs were seen as a price whichthey had to pay for their unconditional loyalty towards the organization. While this was what thelower management thought, the higher management was of the opinion that such steps are likelyto increase competition within the workforce which would bring the best out of the workers.

RECOMMENDATIONSIn contemporary workplace, conflicts have become almost inevitable. The growing impact thatglobalization has had together with advancements in the field of technology has to an extentmodified the way people approach a certain issue, an idea, or even a problem at hand. All thesewhen combined form the basis of conflict within an organization, however, more thaneliminating the conflicts altogether, constant efforts must be directed towards extracting a

positive value out of them. Therefore, it is critical for HBL to regularly visit the organizational policies in order to formulate a well developed conflict resolution procedure, by virtue of whichit shall help in fostering a positive work environment within the organization, build healthyrelationships and shall channelize a positive energy across the organization.

Considering, a collectivist society that Pakistan typically is, the employee productivity is closelylinked to the relationships that people maintain with one another, both within and outside theorganization. Conflict resolution is not only important from employee productivity standpoint,

but also is critical in terms of holding a good repute within the ever increasing competitiveBanking Sector in Pakistan. To best address and develop a conflict resolution approach, we haveoutlined the following recommendations;

Every Stakeholder must be taken aboard

To get a positive outcome from a potential conflict situation, it is vital to have every stakeholder within the organization on the same wavelength. This brings us to the importance of having astrong communication network within the company. As previously discussed, Pakistan s culturalsetting is such where there is high power distance (PDI 55) and is a collectivist society (IDV 14) .What this means is that managements on several instances tend to ignore the lower levels of management and their voice goes unheard. While this happens at one end of the spectrum, at theother end, due to a collectivist nature that is present within the workers, the lower levels of

management get together and practice informal communication channels, through which rumorsgain momentum and employee productivity is severely compromised. The combination of two,ultimately would lead the larger interest of HBL to suffer, hence, first and foremost, effortsshould be made to involve every member of the organization in the communication process.


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A broad system that can accommodate various conflicts

It is possible that the nature of the conflict may differ, including personal, workplace or any other major conflict that stems within the company. A proper conflict resolution procedure mustaccount for every type of conflict and a proper channel should be outlined that shall assist in the

conflict resolution process.

Work towards a win-win situation

Broadly speaking, every individual is success driven. There is a constant desire to achievesomething and even incase of Pakistan, there isconsiderable Masculinitythat prevails (MAS 50) .The situation is no

different in case of conflict resolution;therefore HBL smanagement should work the conflict in a win-winsituation for the actorsinvolved. Through this,

both the parties would feelmotivated and rejuvenated rather than resentment creeping within the workforce. For this, we

propose that every conflict should first be addressed by a pre-negotiation stage where the actual

root cause behind the conflict or the problem at hand be understood. Ideally speaking, if asolution could be found at this stage is best suited; otherwise the conflict should be taken into thenegotiation stage.

Line Managers should be trained along conflict resolution lines

Line managers would have a vital role to play in conflict resolution. Since, the level of interaction is most among the workers of the same department, the line mangers would be the

best judge and mediator in such a situation. However, it is equally important that the line manger himself possess adequate skills to resolve the conflict, amicably and to the best of the

organization s interest.Educating workforce and working towards conflict resolution should be continuous

As the organization grows bigger and with changing times, the onus lies on the management toensure that it follows the trend and updates itself along the way. The need to do this, suggeststhat both the workforce as well as the management at HBL must monitor the dispute resolutionstrategies carefully and incorporate any new policy measures that are necessary for the effective

ConflictSituation

Pre-NegotiationStage

Negotiation

Results


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functioning of the organization. Failure to do so could result in a gap between the approach thatis adopted by the employees and that of the organization, thus further worsening the conflictmatters.

Eliminating Bureaucracy

Gone are the days when an autocratic management style could work in the best interest of theorganization. The new recruits join the organization with a different mindset altogether andorganizations all around the world and even in the Pakistani context are moving towards a moreempowered workforce. Moreover, now that HBL is a private sector entity, the consumer expectations have changed for the better which shall require quick decision making, innovativeservice offerings and a more motivated workforce to ensure superior customer service. All thisseeks a more empowered organization. Although the Hofstede s score in case of uncertaintyavoidance for Pakistan is 70, it should be kept in mind that the Pakistani environment has

become a lot more acceptable towards risk which is evident from increasing participation in the

financial markets as well. Furthermore, this need is coupled with the stiff competition thatorganizations face; therefore the y need to innovate continuously to match consumersexpectations.

Account for other conflicts and learn from existing ones

Learning from conflicts, predominantly speaking is crucial. All the conflicts that occur should bedocumented and their results be shared with the employees. This would foster a learningenvironment within HBL which would help prevent conflicts in the future and at the same time

provide a guidance to mitigate the ones that occur. Similarly, while a conflict resolution is under

process, possibilities of other conflicts must not be rejected outright. A new conflict may emergefrom an existing one, hence openness to such scenarios should be shown by the HBLmanagement and efforts be made to resolve them effectively.

Conclusion

Little could be debated about the fact that conflicts are an inherent part of workplaceenvironment. The basic objective behind conflict resolution must be to extract a positive learningout of it, whereby employees actually feel motivated about the conflict resolution and apply thatlearning in times to come. Currently, HBL lacks a proper conflict resolution mechanism and thisneeds to be brought in line with the changing management dynamics. In contemporary,organizations workers are empowered and an open communication culture needs to be fosteredat all levels. In the light of recommendations that have been made, the communication culture atHBL needs to be revisited and there exists a need to share information with the lower levelmanagement as well. As of now, there is considerable ambiguity and lack of clarity of purposeand goals whereby the workers are only encouraged towards adopting a day to day approach


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rather than achieving a long term growth. Conclusively, the gap between the top and the lower level management has to be reduced to avoid conflict situations and employees must beencouraged towards building an environment which is motivated towards a single organizationalgoal.


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Contributions

Ghania ShaikhFor the literature review I researched on Intragroup conflict and its impact on employee

performance in the banking sector. Analyzed the information gathered through the interviews to prepare a report linking the outcome of the secondary research to the interview findings. Alsocovered the introduction, organizational research and banking sector research of the report. Iattended all the meetings pertinent to this report.

Maria Abdul Razzak For the annotated bibliography, read four research articles and adopted the model from theresearch papers to apply on HBL. After reading them, I was involved in the analysis andrecommendations process. Furthermore, attended all the meetings conducted for research

purpose.

Syed Raza HassanAs part of our term report I interviewed Ms. Hina Saqib and Mr. Muhammad Arshad, HR Executives at HBL. I made transcripts of the interview which then formed the basis of theresearch findings and analysis. Also, I contributed in putting together the literature review whichwas critical to the analysis of the report.

Syed Salman RizviApart from the interviewing process, my primary responsibility in the report was to put together the findings which we gathered during our interview process. The literature review that I did in

preparation of annotated bibliography came in handy as I was able to better understand theconflict problems that HBL came across in the post privatization stage. I also made validdeductions by integrating the findings (problems of conflict resolution at HBL) with differentcultural theories which we have studied in our course.

Syed Sameer HasanI was entrusted with the task of conducting a detailed analysis into the findings which wegathered through interviews. For this purpose, I read up on the literature reviews and developed alink between the class discussions that we have had over the Pakistani culture, Hofstede andTrompenaar cultural aspects followed by several recommendations, which if implemented would

help HBL adopt a better approach towards conflict resolution in general, thereby ensuringemployee productivity and organizational growth. Moreover, like my other group members I was

present in the interview meetings that we conducted.


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Mukhtar, U. (May 2012). Identification of frequent use of Conflict Management Styles in Pakistan

Academia, Banking & Industrial Sector. International Journal of Business and Behavioral Sciences. 2(5),

41-51.

Mirchevski, M. (December 2012). The Impact of Privatization on the Management Process . Business

Management and Strategy, 23-35.


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Appendix

Findings from the interview with Ms. Hina Saqib and Mr. MuhammadArshad:

1. What kinds of conflicts do you usually face in HBL?

Conflicts vary in nature from bank to bank and industry to industry.

Not all conflicts can be managed the same way; each situation is unique

Sources of conflict range from a difference of opinion, difficult working conditions, or

unrealistic work expectations through to discriminatory behavior such as racism or sexism, poor communication, or non-compliance with organizational norms or values.

What is important is to analyze the source of conflict and use it to avoid future conflicts.

Conflicts can occur between individuals owing to HBL's diverse workforce; culture,religion, political views etc.

Conflicts can occur between 2 or more groups of people; can occur in large and smallorganizations and be healthy or destructive.

Conflicts within groups occur due to individual differences mentioned earlier. It isimportant to be aware of such group dynamics that can lead to possible conflicts.

2. Which department handles conflicts at HBL? Do you have a Conflict and Dispute ResolutionsDepartment?

No specific Conflict Resolution Department.

HR Department and Disciplinary Department manages conflict resolution.

There is no need for a specialist department for this function.

3. What is the most important element you consider to mitigate or eliminate conflict?

Feedback is very important. If we can develop a good system where we get timelyfeedback from our employees, conflicts can be reduced.

Feedback is internal and external


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A Marketing Director eagerly recognizes that client feedback is a better indicator of her performance than close ratios and costs-per-lead

Internal feedback is just as important as external feedback, and sometimes harder to get. HBL is trying to implement a system to extract feedback and then develop programs for

professional development. HBL lacked such systems in the past and suffered as a result

4. What is the most critical issue and the resulting conflict HBL is facing?

Overstaffing was a huge concern for the new management.

Overstaffing leads to inefficiency; the work of one person is done by many; extraresources are spent.

Overstaffing can lead to de motivation

This lead to downsizing which led to a huge conflict in HBL.

Other organizations that suffer because of overstaffing include PIA etc.

5. Negotiation Process:

Official negotiations are done at HBL.

Depending upon the situation and time, the way the negotiations are to be conducteddiffers.

The skills of negotiations depend and differ widely from one situation to the other.

Negotiation process takes one month at HBL.

It is at times beneficial in the organizations in order to resolve conflicts.

6. Mediation Process:

Mediation after negotiation:

o Mediation takes place after negotiation, if employees resist accepting new terms

and sticking to two or three points.o This takes place when employees and groups are not at all ready to accept the

decisions of the management and they call for strikes, threats etc.

7. Do you have a formal arbitration procedure given the judicial situation of Pakistan?


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Arbitration did not exist with this particular name at HBL but do work with thisunorganized way.

The appointment of an independent person to act as an adjudicator (or judge) in a dispute,to decide on the terms of a settlement.

Both parties in a conflict have to agree about who the arbitrator should be, and that thedecision of the arbitrator will be binding on them all.

Arbitration differs from mediation and negotiation in that it does not promote thecontinuation of collective bargaining: the arbitrator listens to and investigates thedemands and counter-demands and takes over the role of decision-maker.

People or organizations can agree on having either a single arbitrator or a panel of arbitrators whom they respect and whose decision they will accept as final, in order toresolve the conflict.

Arbitrator is a legal person and his decision will be followed by both employees andmanagement.

8. What other conflicts do you face at HBL?

Pay raise issues mostly create conflicts

When bonuses, rewards are not given at proper time and in proper amount.

These kinds of problems also rise because of the inflation

Transactional activities cause day to day meager conflicts. They are policy driven

Transformational activities lead to major structural and cultural changes and larger conflicts.

Downsizing :

o In 1997, 29000 employees were working at HBL which were downsized to13000; the case is in litigation now.

o In organization they have complex and heterogeneous structure.o In these cases HBL has no issues or problems because a certain amount goes to

the company s lawyer every month, and he handles the case.

o But t he people involved or individuals seek difficulties because lawyer s fees areexpensive and they can t afford these fees for too long.


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Re-entrenchment:

o Employees were given special bonuses and other incentives to leave HBL andseek employment elsewhere.

o Re-entrenchment allowed for cost savings

o Lower level staff was grossly over paid

Employees expectations from management:

o HBL employees perceived that it is their right that their child / children (in somecases) get employed at HBL

o HBL after privatization, started hiring skilled employees to satisfy the company sas well as stake holders expectations.

o This angered some older employees.

o Increased credibility and overall performance recently.

Outsourcing of Employees:

o Employees such as peons, guards, and drivers were outsourced from another company.

o This is because in order to avoid conflicts in a way that nor there will be a similar staff nor there will be groups, and there will be least probability of conflictsarising.

Employees hired at temporary work basis:

o At HBL there are no permanent operational employees hired instead they all arehired on a temporary basis contracts.

Role of Work Councils:

o Personality conflict chewing pan, talking loud on cell phone, Negative attitude of employees are monitored by these councils.

o Most of the time employees did this on purpose to give an impression that theyare more powerful than the management.

o These conflicts at HBL have also rise, such as not following the dress coat,negative attitude or any practice against the terms mentioned in the code of conduct.


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o Accountability or check the dress code and other matters at regular intervals isnecessary in any organization.


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NEWS CLIPPINGS


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CM Report Final (1)

Documents

Transcript of CM Report Final (1)