HR Practice in Cooprative Bank

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A

RESEARCH PROJECT REPORT

ON

H R P r a c t ic e in C o -o per at iv e B a nk

DISSERTATION REPORT SUBMITTED IN

PARTIAL FULFILLMENT FOR THE AWARD OF

MASTER OF BUSINESS ADMINISTRATION

(2012)

F a c u l t y S up er vi s o r : S u b m i tt e d

B y : MRS. RITU TIWARI KAVITA

NEGI (Assistant Professor) MBA IVSEMDEPARTMENT OF ROLL NO: 14

MANAGEMENT STUDIES

AMRAPALI INSTITUTE OF MANAGEMENT & COMPUTERAPPLICATION(AFFILIATED TO UTTARAKHAND TECHNICAL UNIVERSITY, DHERADUN)

SHIKSHA NAGAR, LAMACHAUR, HALDWANI


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Kavita Negi, MBA- AIMCA

ST UD E N T D E C L ARA TI ON

This is to declare that project titled HR Practice in Co-

operative Bank.

The project was executed during the winter after the fourth semester of

M.B.A. under the supervision ofMrs. Ritu Tiwari.

Further, I declared that this project is my original work and the analysis and

the findings are for academic purpose only. This project has not been

presented in any seminar or submitted elsewhere for the award of any

degree or diploma.

KAVITA NEGI

MBA V SEMROLL NO.:

(i

)


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AC KN OWLE D GE M E N T

Hard work and dedication is the key to any successful completion of any

job and this project is no different. Although strenuous, yet it is interesting.

However, our success to this project report cannot be accounted for by onlythese factors.

During the course of this study, many useful suggestions and constructive

criticism came across which really helped a lot in giving this project a

professional look. I extend my heartiest thanks to all those persons whose

willing cooperation led to the timely completion of the project.

In completing this study, I did my level best correcting my

shortcomings to possible extent and I sincerely hope that this report will

serve its purpose for the Life Insurance Corporation of India.

Although I am thankful to all those who have contributed towards the

completion of this report. I would be failing in my duty if I do not

mention the warm help extended to me by the Staff of Co-operative Bankfor providing me an opportunity to work in the esteem organization and

without whose willing cooperation and encouragement the accomplishment

of this project would have become impossible.

Also I would like to thank all those who have helped me directly or

indirectly in completing the present project.

(ii

)


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P R E F AC E

"Banking Sector and Human Resources-Changing Scenario' presents a host

of themes relevant for understanding the Indian experience in the period of

economic reforms, when the country is fast becoming an integral part of

globalization, and when international best practices and standard patterns

are being adopted in a phased manner. The influence of economic reforms,

and the phases in which specific measures have been adopted in a cautious

way, making sure that social objective of service to the vulnerable sections

and less developed regions is paid special attention, enable us to refer to this

as human face of economic and financial sector reforms. Under the broad

heads of banking and finance, and human resource management,

specialists examine a number of specific topics. The critical look at

progress in recent years, lessons learnt, and directions for the future are all

spelt out on each topic based on the research endeavors of contributors.

(iii

)


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CON TE N T S

Collage certificate

Student Declaration i

Acknowledgement iiPreface iii

C H A P TER 1

1 Introduction 1

1.1 Purpose Of Research Work 2

1.2 Chapter Arrangement 2-3

1.3 Objectives of Study 4

1.4 Period of Study 4

1.5 Research Methodology 5

1.6Scope of the Study 6

1.7 Limitations of Study 7

C H A P TER 2

2.1 Industry Profile

2.1.1 Banking Sector: 8-9

2.1.2 Economic functions 10-11

2.1.3 Origin of the word 11

2.1.4 Banking channels 11-

12

2.1.5 Indian Banking Industry 13-

14

2.2 Profile of the Company

2.2.1 The Co-operative Bank: Background 14-

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Kavita Negi, MBA- AIMCACCCCCCCCCCCCCCCCCC


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2

C H A P TER 3

This part of project report contains

summary of Findings.

C H A P TER 4

This part of the project report I finally concluded the project

with some recommondation.


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3

OB JE C TI V E OF ST UDY :

The objectives of my study are:

To get an idea about HR function in banking industry with special

reference to the cooperative sector

To study and get knowledge about the development of

Human Resource Management (HRM) in the Co-operative Bank

like management strategy and employee relations in banking

To get an idea about the possible relationship between uses of strategic

human resource practices of cooperative banking firms.

P E R I OD OF ST UD Y

The project was executed during the fourth semester.


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S C O P E OF S T UD Y :

The aim of the study is to explore the possible relationship between uses of

strategic human resource practices of banking firms. The study assumes

that there is a link between the business strategy pursued by the firm and

its human resource policies and practices. It is also assumed that there is a

'fit' aspect (external and internal) between the business strategy and the

human resources policies. The 'external fit', is the extent the human

resource planning and implementation process is part of the strategy

process in the bank organization. Data was collected using a structured

questionnaire from firms representing banking sectors.

The firms pursuing different business strategies have different degree of the

'external- internal fit' of human resources. Also, firms pursuing different

business strategies use different levels of strategic human resource

practices.


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6


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LIMIT A TI ON S OF ST UD Y

The researcher has to face certain difficulties while he carries out the

research work. He knows the limitations before hand. Some of them are

uncontrollable and some others are controllable. Some important

limitations, which were faced, are as follows:

1.Time was the major limiting factor during the research.it is quite

impossible to collect the sufficient data.

2. Limitation of funds: Availability of funds was another limitation

owning to shortage of money..

3.Limitation of human

behaviors:

4.Some of the respondent was not honest and genuine in their

approach. Some of the respondents could not understand

certain queries

7


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I nd us tr y P r of ile :

B a nki ng Sect or :

The definition of a bank varies from country to

country.

Under English law, a bank is defined as a person who carries on the

business of banking, which is specified as:

Conducting current accounts for his customers

Paying cheques drawn on a him, and

Collecting cheques for his customers.

In most English common law jurisdictions there is a Bills of Exchange Act

that codifies the law in relation to negotiable instruments, including

cheques, and this Act contains a statutory definition of the term banker:banker includes a body of persons, whether incorporated or not, who carry

on the business of banking' (Section 2, Interpretation). Although this

definition seems circular, it is actually functional, because it ensures that

the legal basis for bank transactions such as cheques do not depend on how

the bank is organised or regulated.

The business of banking is in many English common law countries not

defined by statute but by common law, the definition above. In other

English common law jurisdictions there are statutory definitions of the

business of bankingorbanking business

8


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In particular, most of the definitions are from legislation that has the

purposes of entry regulating and supervising banks rather than regulating

the actual

business of banking. However, in many cases the statutory definition

closely mirrors the common law one. Examples of statutory definitions:

"Banking business" means the business of receiving money on

current or deposit account, paying and collecting cheques drawn by

or paid in by customers, the making of advances to customers, and

includes such other business as the Authority may prescribe for thepurposes of this Act; (Banking Act (Singapore), Section 2,

Interpretation).

"Banking business" means the business of either or both of the

following:

1. Receiving from the general public money on current, deposit,

savings or other similar account repayable on demand or within less

than [3 months] ... or with a period of call or notice of less than that

period;

2. Paying or collecting cheques drawn by or paid in by customers.

Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale),

direct credit, direct debit and internet banking, the cheque has lost itsprimacy in most banking systems as a payment instrument. This has lead

legal theorists to suggest that the cheque based definition should be

broadened to include financial institutions that conduct current accounts

for customers and enable customers to pay and be paid by third parties,

even if they do not pay and collect cheques.


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9

Economic

functions

The economic functions of banks

include:

1. Issue of money, in the form of banknotes and current accounts

subject to cheque or payment at the customer's order. These claims

on banks can act as money because they are negotiable and/or

repayable on demand, and hence valued at par and effectively

transferable by mere delivery in the case of banknotes, or by drawing

a cheque, delivering it to the payee to bank or cash.

2. Netting and settlement of payments -- banks act both as

collection agent and paying agents for customers, and participate in

inter-bank clearing and settlement systems to collect, present, be

presented with, and pay payment instruments. This

enables banks to economise on reserves held for settlement of

payments, since inward and outward payments offset each other. It

also enables payment flows between geographical areas to offset,

reducing the cost of settling payments between geographical areas.

3. Credit intermediation -- banks borrow and lend back-to-back on

their own account as middle men

4. credit quality improvement -- banks lend money to ordinary

commercial and personal borrowers (ordinary credit quality), but are

high quality borrowers.


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5. Maturity transformation -- banks borrow more on demand debt

and short term debt, but provide more long term loans. Bank can

do this because they can aggregate issues (e.g. accepting deposits

and issuing banknotes) and redemptions (e.g. withdrawals and

redemptions of banknotes), maintain reserves of cash, invest in

marketable securities that can be readily converted to cash if needed,

and raise replacement funding as needed from various sources (e.g.

wholesale cash markets and securities markets) because they have a

high and more well known credit quality than most other borrowers.

Origin of the word

The name bank derives from the Italian word banco "desk/bench", used

during the Renaissance by Florentines bankers, who used to make their

transactions above a desk covered by a green tablecloth. However, there are

traces of banking activity even in ancient times.

In fact, the word traces its origins back to the Ancient Roman Empire,

where moneylenders would set up their stalls in the middle of

enclosed courtyards called macella on a long bench called a bancu, from

which the words banco and bank are derived. As a moneychanger, the

merchant at the bancu did not so much invest money as merely convert the

foreign currency into the only legal tender in Rome- that of the Imperial

Mint.

Banking


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channels

Banks offer many different channels to access their banking and

other services:

11

A branch, banking centre or financial centre is a retail location

where a bank or financial institution offers a wide array of face-to-

face service to its customers

ATM is a computerised telecommunications device that provides

a financial institution's customers a method of financial transactions

in a public space without the need for a human clerk or bank teller.

Most banks now have more ATMs than branches, and ATMs are

providing a wider range of services to a wider range of users. For

example in Hong Kong, most ATMs enable anyone to deposit cash

to any customer of the bank's account by feeding in the notes and

entering the account number to be credited. Also, most ATMs

enable card holders from other banks to get their account balance and

withdraw cash, even if the card is issued by a foreign bank.

Mail is part of the postal system which itself is a system

wherein written documents typically enclosed in envelopes, and also

small packages containing other matter, are delivered to destinations

around the world. This can be used to deposit cheques and to send

orders to the bank to pay money to third parties. Banks also

normally use mail to deliver periodic account statements to

customers.

Telephone banking is a service provided by a financial institution

which allows its customers to perform transactions over the

telephone. This normally includes bill payments for bills from major


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billers

Online banking is a term used for performing transactions, payments

etc. over the

Internet through a bank, credit union or building society's secure

website

12

Indian Banking Industry

The growth in the Indian Banking Industry has been more qualitative than

quantitative and it is expected to remain the same in the coming years.

Based on the projections made in the "India Vision 2020" prepared by the

Planning Commission and the Draft 10th Plan, the report forecasts that thepace of expansion in the balance-sheets of banks is likely to decelerate. The

total assets of all scheduled commercial banks by end-March 2010 is

estimated at Rs 40,90,000 crores. That will comprise about 65 per cent of

GDP at current market prices as compared to 67 per cent in 2002-03. Bank

assets are expected to grow at an annual composite rate of 13.4 per cent

during the rest of the decade as against the growth rate of 16.7 per cent that

existed between 1994-95 and 2002-03. It is expected that there will be large

additions to the capital base and reserves on the liability side.

The Indian Banking Industry can be categorized into non-scheduled banks

and scheduled banks. Scheduled banks constitute of commercial banks and

co-operative banks. There are about 67,000 branches of Scheduled banks

spread across India. As far as the present scenario is concerned the Banking

Industry in India is going through a transitional phase.

The Public Sector Banks (PSBs), which are the base of the Banking sector

in India account for more than 78 per cent of the total banking industry

assets. Unfortunately they are burdened with excessive Non Performing

assets (NPAs), massive manpower and lack of modern technology.


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On the other hand the Private Sector Banks are making tremendous

progress. They are leaders in Internet banking, mobile banking, phone

banking, ATMs. As far as foreign banks are concerned they are likely to

succeed in the Indian Banking Industry.

13

In the Indian Banking Industry some of the Private Sector Banks operating

are IDBI, ING Vyasa Bank, SBI Commercial and International Bank Ltd,

Bank of Rajasthan Ltd. and banks from the Public Sector include Punjab

National bank, Vijaya Bank, UCO Bank, Oriental Bank, Allahabad Bank

among others. ANZ Grindlays Bank, ABN-AMRO Bank,

American Express Bank Ltd, Citibank are some of the foreign banks

operating in the Indian banking Industry.

C o mp a ny

P r o f il e :

The Co-operative Bank:

Background

The Co-operative Bank is a wholly owned subsidiary of the Co-operative

Wholesale Society (CWS). The bank has a network of 90 branches and

some 4,000 in-store banking points in co-operative stores. It has seen itself

as an alternative force in UK banking and has a reputation for innovation,

in banking products. While the history of the bank shows development

away from the CWS (25 years ago 90% of deposits came from Movement

and 10% from other sources: the reverse is now the case) it remains the

banker to the Co- operative movement and as its Chief Executive stated in

the 1986 Annual Report, our co-operative philosophy dictates that we


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approach the bank market in a fundamentally different way.

The development of the banks policy on the management of people

illustrates the move from the narrower reactive function towards broader,

more proactive human resource management.

14

For instance, there was no formal succession planning process, and

training tended to be limited to providing technical skills for clerical

staff, much of which was on the job.

With its rapid expansion in the 1970s, a greater emphasis was placed on

recruiting staff from other banks.

Over the 1970s the Personnel Department was largely concerned with the

administration of salaries and negotiations over pay with a significant

input from the CWS. In the later

1970s, with the rapid expansion of staff in the bank and in the context of

changing legislation and incomes policies, there was a move to greater

specialization and professionalism. As in other banks, the personnel

department had been staffed by generalists, which tended to prevent the

development of a strong autonomous function; furthermore the highly

centralized nature of management, controlling both procedural

and substantive matters (to the extent that each clerical member of staff

appointed would be seen by Head Office) limited discretion at local level.

However, the Co-operative Bank differed from the major banks because

of its historical roots and the influence of the movement was reflected

in various agreements with the union, most notably the New

Technology Agreement,


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The Job Mobility and Job Security Agreement and the Union

Membership Agreement which exercised more of a constraint on the

management of labour than that faced by other banks "Banking

business" means the business of receiving money on current or deposit

account.

15

"Banking business" means the business of either or both of the

following:

1. Receiving from the general public money on current, deposit,

savings or other similar account repayable on demand or within less

than [3 months] ... or with a period of call or notice of less than that

period;

2. Paying or collecting cheques drawn by or paid in by customers.

Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale),

direct credit, direct debit and internet banking, the cheque has lost its

primacy in most banking systems as a payment instrument. This has lead

legal theorists to suggest that the cheque based definition should be

broadened to include financial institutions that conduct current accounts

for customers and enable customers to pay and be paid by third parties,

even if they do not pay and collect cheques

Economic

functions

The economic functions of banks

include:

1. Issue of money, in the form of banknotes and current accounts subject to


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cheque or payment at the customer's order. These claims on banks can act as

money because they are negotiable and/or repayable on demand, and hence

valued at par and effectively transferable by mere delivery in the case of

banknotes, or by drawing a cheque, delivering it to the payee to bank or cash.

16

2. Netting and settlement of payments -- banks act both as

collection agent and paying agents for customers

Banking

channels

Banks offer many different channels to access their banking and

other services:

A branch, banking centre or financial centre is a retail location

where a bank or financial institution offers a wide array of face-to-

face service to its customers

ATM is a computerised telecommunications device that provides

a financial institution's customers a method of financial transactions

in a public space without the need for a human clerk or bank teller.

Most banks now have more ATMs than branches, and ATMs are

providing a wider range of services to a wider range of users. For

example in Hong Kong, most ATMs enable anyone to deposit cash

to any customer of the bank's account by feeding in the notes and

entering the account number to be credited. Also, most ATMs

enable card holders from other banks to get their account balance and

withdraw cash, even if the card is issued by a foreign bank.


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Mail is part of the postal system which itself is a system

wherein written documents typically enclosed in envelopes, and also

small packages containing other matter, are delivered to destinations

around the world. This can be used to deposit cheques and to send

orders to the bank to pay money to third parties. Banks also

normally use mail to deliver periodic account statements to

customers.

17

Telephone banking is a service provided by a financial institution

which allows its customers to perform transactions over the telephone.This normally includes bill payments for bills from major billers .

Online banking is a term used for performing transactions, payments

etc.

Indian Banking Industry

The growth in the Indian Banking Industry has been more qualitative than

quantitative and it is expected to remain the same in the coming years.

Based on the projections made in the "India Vision 2020" prepared by the

Planning Commission and the Draft 10th Plan, the report forecasts that the

pace of expansion in the balance-sheets of banks is likely to decelerate. The

total assets of all scheduled commercial banks by end-March 2010 is

estimated at Rs 40,90,000 crores. That will comprise about 65 per cent of

GDP at current market prices as compared to 67 per cent in 2002-03. Bankassets are expected to grow at an annual composite rate of 13.4 per cent

during the rest of the decade as against the growth rate of 16.7 per cent that

existed between 1994-95 and 2002-03. It is expected that there will be large

additions to the capital base and reserves on the liability side.


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The Indian Banking Industry can be categorized into non-scheduled banks

and scheduled banks. Scheduled banks constitute of commercial banks and

co-operative banks. There are about 67,000 branches of Scheduled banks

spread across India. As far as the present scenario is concerned the Banking

Industry in India is going through a transitional phase.

18


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T h e o r e t ic al

B a c k g r o un d :

Management Strategy and Employee

Relations

The research is focused on the response of the Bank to changes in the

financial sector which has been experiencing deregulation, increasing

competition, technological innovation and an increasingly discriminating

public (Morris, 1986). It examines both changing business and employee

relations strategies and the links between the two. As greater diversity

begins to exist amongst the retail banks the study explores the Banks

attempt to find itself a niche or adopt a focus strategy (Porter, 1985). This

paper is primarily concerned with Human Resource issues. Changes in the

nature of banking clearly have a knock-on effect on employee relations

(defined broadly to include industrial relations, communications, training,

remuneration policy, etc.) as banks move towards being more market

driven organisations with a culture consistent with that, and with staff being

regarded more as a resource than a cost (Wilkinson, 1990).

Historically, it has been the case that employee relations have been

regarded as a second order strategy, purely facilitative and not fully

integrated into overall business strategy (e.g. Timperley, 1980; Purcell,

1983; Wilkinson, 1990). Hence, there was little consideration of employee

relations at the top corporate level implications unless the level of unrestwas such that labour was seen as a problem, as for instance in the car

industry (e.g. Willman and Winch, 1985). Although there has been a

gradual rise in the number of personnel professionals at Board level, these

are still a minority. Lack of serious consideration of employee relations

bargaining tended to focus on the plant.)


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19

1970s discovered an avoidance strategy whereby industrial relations were

regarded as somehow external to the enterprise (Winkler, 1974). Certainly

many would argue that while senior, management do think about human

resource issues, the degree of unpredictability in this area pushes it fairly

well downstream in corporate planning. However, there are dangers of

looking at HR issues in this way. The importance of ensuring the active

co-operation of employees in industry has been emphasised for

example by Walton (1985), who examined the shift away from

emphasising control to one of commitment, and this can be even more

significant for the service sector. Thus, in retail banking, the banks do notyet provide significantly different products and hence consumer choice is

heavily influenced by convenience and image, the latter partly created by

contact with staff, and there is thus a clear strategic link with quality of

service and staff quality. Yet, in banking traditionally staff have not been

recruited or developed for customer contact skills but for technical and

administrative ability. Mth banks wanting to move away from being

regarded merely as providers of a money transmission service to the selling

of a range of financial products and services with tellers becoming

sellers, the organisation will, need to become more organic and less

mechanistic, (Burns and Stalker, 1961) which will require far greater

commitment and co-operation rather than mere compliance from staff.

The recent emphasis on human resource management, e.g. Storey (1992),Torrington and Tan Chee Huat (1994), suggests that not only is the

management of labour being given more attention, but that the issues

discussed are broader and more strategic as well as tactical (see also

Wilkinson & Marchington, 1994). function of many personnel managers,

the newer style of human resource managers attempts to:


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20

Relate personnel practices to beliefs, to link each and every process of the

recruitment, induction, training, appraisal rewarding of individuals to an

overall set of articulated beliefs of organisation (Hunt, 1984, p.16)

Human resource management is seen as part of the movement away from

concentration on unions and collective bargaining, to an emphasis on staff

as individuals. Behind all this is a belief that it will release greater

commitment from employees although one has to be careful to examine the

extent to which human resource management is genuinely concerned with

creating a new equal partnership between employer and employed, or are

they really offering a convert form of employee manipulation dressed up

as mutuality (Fowler, 1987, p.3). Hence it is significant that human

resource management was, particularly in the USA, initially associated

with non-union companies.

Guest (1987) highlights the different between personnel management

and human resource management inherent in the literature so as to form

criteria for the measurement of change (see Table 1). However, one must

be wary of evaluating HRM simply by the range of activity being

undertaken. HRM is about both new processes new outcomes. The

existence of the former does not guarantee the latter. Many initiatives

may be no more than flavour of the month changes; others may be

opportunistic rather than strategic, taking advantage of slack labour

markets; in many uses the gap between the rhetoric and the reality may be

wide.


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21

Table

1

PERSONNEL

MANAGEMENT

HUMAN

RESOURCE

Time and Planning

PerspectiveShort-term reactive adhoc

marginal

Long-term

proactive

Psychological

Contract

Compliance Commitment

Control Systems External controls Self-control

Employee Relations

PerspectivePluralist collective low trust

Unitarist individual high

trust

Preferred Bureaucratic/mechanistic Organic devolvedflexible


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Table

1

PERSONNEL

MANAGEMENT

HUMAN

RESOURCEStructures/Systems centralized formal defined role

Roles Specialist/professionalLargely integrated into

line management

Evaluation Criteria Cost-minimizationMaximum utilization

(human asset

Source: Guest,

1987

Employee Relations in

Banking

The banking sector has been characterised by apparently harmonious

industrial relations and has not suffered from the British diseases of

industrial action and demarcation issues associated with parts of

manufacturing industry (e.g. Batstone, 1984). Banks have promoted

unitarism (Fox, 1966) encouraging an ethos of teamwork, shared interest

and loyalty, wanting commitment beyond the cash nexus.


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23Retail banking is a highly labour intensive industry with labour costs

forming 70% of total operating expenditure and involvement in funds

transmission meant that the

majority of clerical staff have not been used as a means of marketing the

banks products nor directly for increasing business but to process existing

accounts. They have accordingly been regarded as an overhead rather than a

resource (Morris, 1986, p.22). Until the 1980s competition between banks

has been limited, banks operating as an oligopoly and Governments

concern with maintaining economic stability with limits to lending, and

control over interest rates facilitated this. The oligopoly fed through to the

management of staff as national wage bargaining minimised competition

for labour. However, deregulation led to the collapse of the national system

and a questioning of old employment practices.

Changing Strategies

By the mid 1980s, it became increasingly clear to some senior managers in

the Bank that there was a need to re-examine its entire policy towards

managing staff. There was little point in producing corporate plans with

major strategic changes envisaged unless the staff were committed to

achieving these. As one senior manager put it:

It was beginning to register amongst management that unless the staff

were got up to scratch and on board with change, the bank was not going to

get there.


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24

It was felt that the entire bank culture needed to be changed to a more

performance orientated culture, a view which fitted in with the popular

trend towards emphasising the so-called soft aspects of management

exemplified by In Search of Excellence (Peters and Waterman, 1982).

With increasing competitive pressure in the sector, and with stagnant

profits and accounts and only a small percentage of the current account

market, there was a clear need to grow the customer account base by

adopting a new focus strategy (Porter, 1985). Furthermore, it was

recognised that any significant differentiation in products was short-

lived especially for small banks with limited resources and to create

sustained differentiation it was necessary to create a favourable perception

of the Bank by its customers. The Bank would emphasise a caring,

sharing image, and employee goodwill as well as technical competence

was required to project this.

There were several other reasons for the new approach to the

management of staff. Firstly, infrastructural problems - growth in the

Bank had taken place in the relatively soft markets of the 1970s and had

to some extent hidden rising costs associated with the clearing centre and

Head Office which were widely regarded as being overstaffed. Secondly,

the increasing competitive pressure in banking had led to greater attention

to controlling labour costs and increasing labour productivity. Thirdly, as

we have noted, the nature of change had moved the emphasis towards

being a market driven rather than an administratively driven organisation

and the importance of staff quality was being emphasized.


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25

Hence, the need to manage human resources more effectively was formally

recognised in the Corporate plan of 1986 and in particular it was seen

as necessary to change the attitude of staff towards customers a senior

manager put it:

The staff had to see that it was the customer not the pieces of paper which

the bank were concerned with.

However, the Corporate Plan, while recognising the need for changes in the

personnel area, did not explore in any detail what such changes would be,or how they were to be brought about. Thus references were made to

operating with maximum flexibility and maximum efficiency on

optimum numbers of staff but only broad indication as to how this was to

be achieved. Thus a sales culture was required, but what did this mean in

terms of personnel policies and practices?

Rothwell writes that: The starting point of a company employmentpolicy must be corporate policy: The employment policy must stem from

the business policy and be an integral part of its implementation. (1984,

p.31)

However, the links between business strategy and employment policy are

by no means clear cut: one is not simply able to read off from company

objectives a set of corporate employee relations policies.

Towards HRM: New

Policies

As a sign of the new emphasis on the human resource function, a human

resources manager was recruited from outside the Bank and appointed in


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however maintain strong links with the union which is a principle of the co-

operative movement.

28

In terms of the personnel function itself, the Bank aimed to give the

Head Office Personnel function the major strategic role, but to devolve

operational issues and responsibilities to line managers. The Bank

introduced team briefing and a new disciplinary code, both of which

were designed to increase the authority and accountability of line

management. This in line with developments in other industries and reflects

the view that many key issues, e.g. performance and productivity, are

best handle4at the operational level (Purcell, 1985) and that the old style

personnel specialists were too distant from line management. The personnel

department would have a strong role in developing and implementing new

structures and procedures, but would then become internal consultants,

having an advisory and supportive rather than fire- fighting role.

However, in banking, staff motivation and development have not generally

been regarded as important aspects of managers jobs and there was certainlysuspicion in the Bank that this was simply another personnel initiative

destined for a short life.

The need for cultural change was recognised in the Corporate Plan

which noted that:

In common with others in the industry, the Bank has traditionally

recruited and trained for a single career structure, with a strong technical (or

professional) bias.

However, it was rather ironic that, just when the Bank wished to erriphasise

the development of labour as a resource, the reduction of staff costs was

one of the major tasks in the late I 980s.


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29

which as far as possible would be achieved by natural wastage.

concentrating on Head Office and support functions (the so-called indirect

staff).

Towards HRM: new practices

a) Industrial Relations

A number of initiatives were introduced to re-shape the Union more in line

with the Banks view of its role. Firstly, the union role at Head Office

was diminished by reducing the number of Bank funded union

represenatatives. Secondly, the status of the Negotiating Committee was

amended so as to ensure it dealt only with major items such as pay

negotiations, while minor items were to be dealt with by the grievance

procedure, and it was agreed that much of the day to day recollapse of the

FLCBE which affected nearly a quarter of the Banks staff. The Bank

decided it required savings of some 4.5 million which walationship with the

union would be conducted by less senior personnel. Thirdly, and this also

reflected the new management style, responsibility for personnel issues was

devolved to line managers who would be encouraged to have regular local

discussions with union representatives as part of the consultative process

and this would also prevent them being by-passed with issues going directly

to Head Office

Nevertheless, while significant change could be achieved this is not to say

that the union could simply be steamrollered. Partly, this related to the

CWS who while not being involved in Bank personnel policy on day to day


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business, did exert pressure to ensure agreements which linked the Bank to

the rest of the movement were not broken.

30

However, the events described do show how the relationship was being

reshaped, albeit in an incremental fashion. Top managers no longer had

to belong to the union; other

b) Cost Control

Attention focused on the reduction of unit labour costs. Unit labour costs

can be reduced in two main ways: firstly, an increase in labour

productivity, secondly, a reduction in total labour costs. The first method

could be achieved by measures like better recruitment and training, a new

payment system, an improved organisational structure, a different

management style and culture. However, these are essentially long-term

measures and the more obvious and immediately effective method to

reduce unit costs is simply reducing the size of the workforce.

It was appreciated that the squeeze on labour costs would lead to problems

with the union and possible detrimental effects on staff morale, and

hence as far as possible the reduction in staff numbers would be achieved

in an unobtrusive manner. Natural wastage was one method, as the Bank

had a turnover of some 500 people per year. Early retirement was

another relatively non-contentious option..

would be an increasingly important function for the personnel function

(1984, pI7). The Bank was successful in reducing its numbers and hence

costs. This was to be the first step of a longer term examination of cost

structures with work continuing on removing duplication, moving staff


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industries. from the Union. argued that this related purely to redundancy

rather than merely reorganisation and redeployment, and it was not the

intention of the Bank to force people.

32

c) Remuneration - Relating Pay to

Performance

A comprehensive review of policy and practice was also being undertaken

in the remuneration area. There were a number of aims: firstly, to reflect

organisational change and remove outdated remuneration practices,

secondly, to safeguard the Bank from equal value claims and grading

issues; thirdly, to integrate the Banks salary structure into a single

continuous evaluated structure to ensure stability and cost control; and

finally to move away from automatic increases, award key objectives and

place a greater emphasis on line management contributions rather than the

central functions. Hence there were a number of processes that took place

in the Bank. There was the job evaluation exercise for managers and

appointed staff upon which trade unions were consulted, and the

clerical and technical scheme where the unions were involved in the

design of the scheme, up to the point where agreement was reached on the

format of the grading structure. With each job in every branch being highly

individual, the task was a long one.

The remuneration review took place separately from the pay round already

discussed; this enabled the Bank to set the scene for change and

maintain the initiative. The Bank insisted upon a separate bargaining unit

for managers and then extended this to the whole management group

including assistant managers and branch administrators in order to keep the


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whole management team together. By mid 1988 senior managers had been

removed altogether from the negotiating sphere. The Bank also insisted

on freezing salaries for staff whose jobs fell above the grade boundaries,

33

The third leg of the new remuneration policy was getting staff to accept a

pay what the Bank can afford principle in annual negotiations. The

Human Resources Committee agreed that it was necessary to show that the

Bank had to pay less than other clearing banks because of the difference in

its profitability along with the fact that possibly the skills in the fields in

which it operated were not required to be the same as the others.

Furthermore, the Bank stressed that if a reasonable settlement was not

reached, head count reduction might be necessary. The eventual settlement

of 6% in 1988 was seen as a clear sign of the success of its new HRM

policy. Firstly, the settlement was reached speedily. Secondly, the Banks

new open pro-active communications policy had been seen to deliver the

goods. The day after the settlement a terminal message was sent across the

network and faxed to London and Skelmersdale (the major employing

centres). The Personnel newsletter was hand delivered to managers in

Manchester and staff were consequently briefed within 24 hours, and

importantly, before the union had been able to give its message. Hence,

management had taken the initiative. Thirdly, there seemed to be evidence

that something of the argument that the Bank had been trying to put across

concerning profit/head and the dangers of being priced out of the market

had been taken and there was positive feedback from the staff, with

regard to the early receipt of information.

d) Changing Culture


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There was little detailed consideration in the HRM strategy papers of issues

like career patterns, recruitment, training etc. This was related partly to

little immediate attention being required, and secondly, to uncertainty as to

what was required.

34

Hence it was not until after the HRM strategy had been adopted and was

being implemented that attention was given to these issues.

In recent years, there had been an increasing belief that the

development of human resources is no longer a luxury to be achieved

when other objectives have been met, but

an essential part of the management of strategic change. Hence, the

development of human resources was worthy of a higher priority. This was

reflected in the development of manpower planning and a greater emphasis

on management development and training in a systematic and integrated

manner. The Bank looked to become more pro-active in this area rather

than merely respond to problems. However, much depended on a settled

business strategy for the Bank and each division, so as to identify staffing

requirements. Hence a manpower plan took time to develop given the

state of flux in the Bank. One area which needed examining was

recruitment where it was felt that there was a need to have a tiered policy.

In addition, the qualities and personalities of the staff recruited needed to b

examined. There was a move to look firstly to older, non mobile married

women as workhorses and secondly to look for more customer relations

skills and sales ability.

These changes were reflected in the training function and management

developnient programmes. There was a trend in the former towards

programmes stressing social skills and customer service training and sales


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and marketing training, all designed to educate staff in the new sales

culture. Previously, the training emphasis had been on technical training

and supervisory skills for clerical appointed and junior management staff;

the training also reflected a trend in banking to train for greater

productivity rather than preparation for future jobs (Mosson, 1986).35

A new communications strategy was also part of the attempt to change

culture. A paper by the Human Resources Manager emphasised that some

of the measures outlined may be unpalatable (particularly head-count

reduction and relocation) and hence there needed to be a much more pro-

active communications strategy. It was important that this was in place

before the 1988 pay round and before many new initiatives were

undertaken. The Human Resources Manager made this clear. If the Bank

was to achieve their Human Resource Strategy goals,

It is essential that we communicate directly with our staff to ensure they

are made aware by the Bank of our position and intentions, and not by any

other source. This is a major employee relations objective for

achievement by the Bank to enable management to

communicate directly the rationale for change, thus ensuring that it is

pro-active in managing the business.

We must develop mechanisms which ensure that communications are

simple, consistent and effective. The Bank must communicate to staff on a

regular basis, stating both good and bad news. Inconsistent or sporadic

communications are more harmful than no communications and must be

avoided at all costs. The Bank must not leave communications to BIFU.

The Unions role is to negotiate with the Bank on behalf of its members,

not to act as the channel for communication. (Employee Relations

Strategy,


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1987

).

The old system was largely based on a number of newsletters, and an

internal Bank magazine. It was largely left to the discretion of the

managers, some of whom explained the contents of the newsletters, others

merely leaving staff to read it on the noticeboard.

36The Bank introduced a system of team briefings into the existing structure

of employee involvement based on meetings, newspapers and

publications. Team briefings were designed to facilitate a consistent,

continuous flow of information (including feedback), so as to avoid the

union or even the grapevine being the main source of information. The

main aim of such involvement appeared to comprise of persuading staff to

accept the benefits of change expressed in terms of market logic. Hence it

was an endorsement of management policies which is sought, not some

form of co-determination. (Roberts and Wilkinson, 1991).

However, there were a number of problems with implementation.

Branch managers showed some cynicism as to the alleged benefits of team

briefing and many regarded it as yet another flavour of the month dreamed

up by Personnel. Some failed to see briefing in terms of ensuring that the

union would not be the main vehicle of communication, and that he who

communicates leads. Thus the Personnel Department felt it was important

that the benefits accruing to staff (including those negotiated with the

union) should be announced by managers. However, in a number of cases,

managers were content to let

However, there were a number of problems with implementation.

Branch managers showed some cynicism as to the alleged benefits of team

briefing and many regarded it as yet another flavour of the month dreamed

up by Personnel. Some failed to see briefing in terms of ensuring that the


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the training manager:

If they met financial targets, managers werent criticised even if the staff

were close to mutiny

A series of training courses on human resource management issues were

designed to reinforce this priority.

38However, many of the initiatives met with apathy, cynicism or

obstruction. Changes in the disciplinary code were regarded as cosmetic: as

one manager said, Personnel cant bring itself to let hold of the reins.

In so far as staff reflect the values of top management, this was a major

cause for concern

(Brewster et al , 1981) One of the key complaints to come out of the

courses being run

was the absence of top management. More direct difficulties also became

apparent. One of the themes in the human resource management courses

was reflective of the new management style. This was designed to

discuss the relationship of staff with their managers, and in particular the

need for staff to question their boss in an informal and constructive

manner. The course was aptly entitled How to Manage Your Boss.

However, it became apparent that it was unfortunate that managers had not

taken a course on how to accept constructive criticism.


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39


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S u m m a r y o f F ind i n g s :

1.The problem with communicating about pay is that employees are

often tired of the same boring manuals and written material.

2. When goals are met and employees help, Bank use to dosomethings acknowledge the success.

3. Culture changes were reflected in the training function andmanagement

developnient programmes.4.Pay systems are being re-designed to focus on issues of total rewards,

adding variable pay to the formula for large segments of

the workforce, and implementing performance-based pay solutions

that recognize the influence employees have on key measures of

organizational performance.

5. The remuneration review took place separately from the pay round

already discussed; this enabled the Bank to set the scene for

change and maintain the initiative.

6.Bank always use its all the communications tools which it have to

communicate .Bank Provide e-mail question and answers and also


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have a job hotline that gives employees access to understanding

about work. But the most important thing is to keep up the

communications for the long term. Everyone does a good job for a

few months, but the organizations with most success are in the

communication process for years.

7. Employees develop some of the very best recognition and celebration

Programs.

40


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Suggestions

Company should invite and implement the suggestion of the employees

because ignoring their suggestions is a slap in the face to employees. In

time, employees reciprocate by showing a lack of respect to management.

What management can do

1. G et Rid of t h e "Su ggest ion B ox"

There is no better way to alienate employees than to say, "If you

have any ideas, just stick 'em in the box." Employees should be

treated as adults and given the opportunity to communicate their

ideas in person.

2.. P rovid e Recognit ion

Public recognition or cash awards for good work can be very

motivating to employees. However, great care should be taken in

managing such a program. I have seen these types of programs lead to

resentment among employees


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3.S kip t h eM iddles

It is very easy for good work to get lost in the hierarchy. Employees

become frustrated when their supervisors do not pass along their

performance result to senior management. Senior management

should circumvent the bureaucracy by conducting face-to-face

meetings with employees. Meetings such as "bagels-with- the-

President"

41

and "brown-bag-lunches with the CEO" can offer richopportunities for ferreting out useful ideas.

4.. S et Realist ic Exp ect at ion s

Management needs to make it clear that not every suggestion can be

used, but that all suggestions are welcome.

5. P roact ive ly P romot e t h e P roli fe rat ion of Su gges t ions

Management should make it clear to employees that providing

new thingh or innovation is an expected part of everyone's job.

6. Clos e t h e Loop

Employees need to know that their suggestions are not being

ignored. It is important for management to communicate to

employees when their suggestions are being implemented. Doing so

will increase the probability that employees will continue to make

useful suggestions.


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42

C o n c l u s i o n

s

The case of the Co-operative Bank sheds light on the issues of human

resource management discussed in the management literature. It was

suggested that a shift from an administrative tO a market driven

organisation would lead to a greater priority for the management of human

resources. The Bank case provides examples of greater attention to this

subject at top level management, including the appointment of a specialist

human resources manager and shows a broader range of issues being

considered with an emphasis on management-employee relations rather

than management-trade unions relations and a more pro-active and

strategic role for the Personnel department with operational issues beingdevolved to line management. These are in line with the alleged change

from personnel management to human resource management.


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HR Practice in Cooprative Bank

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