CHAPTER I INTRODUCTION

PART A- BANKING INDUSTRY

Indian Banking has come from a long way from being a sleepy business organization to a highly proactive and dynamic entity. This transformation has been brought by the liberalization and economic reforms that allowed Banks to explore new business opportunities.

Banking in India has evolved through five distinct phases. Each phase could be separated from the other by a landmark development in the sphere of Banking Sector.

Phase I Pre-independence Phase (up to 1947)

India had centuries old tradition of indigenous Banking. There existed many evidences showing that the concept of Banking was not new to India. As Chanakyas Arthashashtra about 3000 B.C. showed facts that Banking was already there in powerful existence in India. Banking began with the foundation of the Agency houses in Calcutta and Bombay in 18 century 1.

In early periods, the lending money was simple and easy as it was sahukar who financed clients whom he closely knows. Moneylenders used to be known as people who fulfilled urgent needs of people but later they were known for malpractices. As they charged extra rates of interests and made illiterate people fool. With the arrival of the British rule, indigenous Banking received a setback.

The Bank of Hindustan was established in 1770 and due to the financial crisis, it was closed in 1832. The most significant achievement of this period was emergence of three Presidency Banks: Bank of Bengal (1809), Bank of Bombay (1840) with a capital of Rs.52 lakhs, and Bank of Madras (1843) with a capital of Rs. 30 lakhs. These were Quasi Government Institutions under charter from Local Government, which contributed to the share capital 2. Establishment of Joint Stock Banks like, Allahabad Bank of India 1865, Alliance Bank of Simala 1894, and other Banks started gaining grounds by 1900. There were total 20 Banks, comprising of three Presidency Banks, nine Indian Banks, and eight Foreign Banks. Emergence of new Banks like, Bank of India 1906, Bank of Baroda 1909, Union Bank of India 1911 and Central Bank of India 1911 came into existence 3. Amalgamation of three Presidency Banks into Imperial Banks also known as State Bank of India was formed in 1921. In 1931, the Central Banking Committee made a detailed study of working and problems of Banking in India. Establishment of Reserve Bank of India took place in 1935 under the Reserve Bank of India Act, in 1934. The Reserve Bank of India (RBI) was established with a view to manage the currency and credit of the country by acting as a banker to Commercial Banks and Government. 4,5.

Failure of Banks was a regular feature during the pre-independence period and to a lesser extent during post-independence period. Serious shortcomings in the functioning was witnessed during the period of war 1935-45 , which lead to the realization that close inspection by the Central Banking Authority was necessary to ensure the soundness of the Banking Organizations. During this period from 1913 to 1918, at least 94 Banks in India failed
6,7

. Reserve Bank of India was constituted as an apex Bank without major

government ownership. This period saw turbulent time due the outbreak of the Second World War and later national freedom movement, which disrupted the economic development.

Phase II-Pre-nationalization Phase (1947-1969)

At the time of independence, there were 648 Banks in the Indian Union with a total of 4820 Branch Offices. In January 1949, the Reserve Bank of India was nationalized. Reserve Bank of India assumed extensive regulatory and supervisory powers under the Banking Companies Act 1949, later renamed as Banking Regulation Act. Thus, change in the outlook of Bank management started emerging, leading towards the end of traditional Banking. The Rural Banking Enquiry Committee in 1950 recommended in the larger context to meet rural credit requirements. This Committee recommended that the Imperial Bank should be persuaded to set up a network of branches in the rural areas as well.

The advent of newer services and mobilisation resulted into the formation of State Bank of India in 1955, which extended the Banking facilities on a large scale. With the purpose of diversification reorganization of seven Banks that became the Associate Banks belonged to the princely states (State Bank of India and its seven associate Banks called as the State Bank group), during 1956-59. The State Bank of India and its subsidiaries increased their rural base substantially during the decade 1960s but these were still unable to meet the requirement of the country. At the end of 1961, 2944 Banking Offices were located in 222 towns having a population of less than 50,000 and above, and 2,024 offices in 1,060 places having a population of less than 50,000. In 1962, the Reserve Bank of India issued a circular to all Scheduled Banks mentioning Banks to submit details about their expansion programmes for the next three years. Reserve Bank of India regulated branch licensing policy for new offices of Banks in a manner to assert the sound development of the Banking system and to cater the expanding requirements of India 8.

Nationalization of the Imperial Banks signified the entry of Public Sector Banks into Commercial Banking in India. It was made clear by Union Minister of Finance that nationalization of the Imperial Bank was not based on ideological grounds but it was intended to acquire control over a strategic section of Commercial Banking with a view to develop and serve. During this period, Banks went into compulsory or voluntary liquidation. This resulted into 204 weaker or non-viable Banking companies amalgamated and merged with other sound Banking Organizations. This brought down the number of functioning Banks to 93 by the end of 1967 9.

In July 1969, the Government of India Nationalized the 14 biggest Commercial Banks with deposit base of not less than Rs. 500 million
10

. The idea behind nationalization of the

Banks was to allow the Banking system reach out to rural and semi-urban areas. The Nationalization of Banks was also done to meet the needs of diverse kinds of borrowers, in particular farmers, small-scale industries, and self-employed professionals. In addition to serve to the need of these kinds of diverse borrowers, Banks changed their methods of operations. A special attention was paid towards the growth and development of the economy. Thus, to achieve these goals it was necessary to align Banks credit flow with the broader goals of planned economic development. With this view, the social control was introduced in 1968 with the main objective to achieve the wide spread of Bank credit, rectifying regional and sector imbalances and to direct credit flows to priority sectors. Social control ensured purposeful and even distribution of Bank credit and flow of credit to be attuned to serve the socio-economic objectives of development. Therefore, by the end of this phase the nationalization of Banks marked the beginning of the expansion phase of the Indian Banking Industry.

Phase III-Expansion Phase (1969-84)

Before 1969, Banking facilities were mostly operated in the urban and semi-urban areas. Particularly during this period, a strong-minded effort was made to take Banks to the interior of villages to rural people. The percentage of credit towards the socially desirable sectors of the economy was impressive and the targets of credit for the different sectors of the economy, which were in terrible need of the funds was implemented.
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During this period, Banks provided extensive publicity about various services provided by them especially to the customers in the rural areas. Banks made much more intensified efforts, through a coordinated branch expansion programme for mobilization of deposits from all sections of the society and lending to the weaker sectors of the society.

A new Banking policy with a view to geographical diversification of Banking facilities under the name of Lead Bank Scheme was announced in 1969. According to this scheme, entire country was divided into districts and each Nationalized Bank was allotted a district where it was supposed to play a leading role in extending branches. Banks were also required to conduct surveys of districts allotted to them to identify the unbanked areas for branch opening. Under Lead Bank Scheme, Banks were asked to recruit and train staff for offering advice to small borrowers and framers. The easy availability of credit spirited entrepreneurship among the masses leading towards the phenomenal growth of retail trade, small businesses, self employment, transport operators, and small scale industries throughout the country. This step taken by Banking Sector created huge employment opportunities for the unemployed people and increased the national Income of the country as well.

In the first decade after nationalization of the 14 Commercial Banks, 21,000 new Bank Offices were opened raising the total number of functioning offices from 8,262 in June 1969 to 30,202 by the end of June 1979. Out of these new offices nearly half number of offices were opened where there was no Commercial Bank previously. The average population per Bank Office declined from 65,000 in June 1969 to about 27,000 in 1975 and further to 18,000 in 197911. Among the Scheduled Commercial Banks, the Public Sector Banks opened the largest number of branches.
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Regional Rural Banks were set up in September 1975, as third component of the multi- agency credit system for agriculture and rural development. The establishment of new Regional Rural Banks and the expansion of the branches of existing Banks was encouraged. A district-wise study was conducted to identify areas where the Regional Rural Banks could be established and to encourage Regional Rural Banks they were also supported by apex Banks and Commercial Banks wherever possible. In relation to the operations of Regional Rural Banks, no rigid norms were adopted rather a flexible approach was adopted.

Another important development during the year 1978-79 was the formulation of a new branch licensing policy for the three year period (1979-81). The size and influence of Public Sector Banks in the economy continued to increase with unrestrained branch expansion along with nationalization of six more Private Banks in April 1980. Government controlled around 91 percent of Banking business of India. By the end of March 1984, the Public Sector Banks together with Regional Rural Banks accounted for 90 percent of the 44,520 Bank Offices functioning in the country of which nearly seven-tenths network was created during 1969-84 12.

The overall objective of the expansion phase was to expand the Banking facilities in deficit areas and to reduce the inter-state and inter-district disparities in order to support development activities. It was this phase in which Indian Banks worked in over protective environment with little competition among the Nationalized Banks themselves along with a few Private and Foreign Banks. During this period, Nationalized Banks worked more or less like the Government Departments having a bureaucratic attitude towards customers as customers had very few options available.
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The expansion phase was marked by geographical and numerical increase of Bank branches. This phase developed some weaknesses in the areas like poor customer services, low profitability, overstaffing and growing non-performing assets. During this period, viewing these shortfalls Reserve Bank of India took decisions to slow down the pace of expansion, to place emphasis on strengthening of the existing structure and consolidation.

Phase IV-Consolidation Phase (1985-91)

In 1985, a series of policy measures were introduced by Reserve Bank of India to strengthen Public Sectors Banks. Emphasis was made to pay special attention to internal control, customer services, credit management, staff productivity, and profitability of the Banks. Unfortunately, Banks were not prepared enough to implement the challenging changes, as suggested by Reserve Bank of India. To counter inefficiencies in 1985, there was a steady increase in the interest rates on Government bonds to better reflect supply and demand. From early 1990s Public Sector Banks stopped rural expansion and concentrated on urban and metropolitan Banking
13

. In 1990s structural problems created by Indias

economic policies in previous decades, such as its inward-looking nature and its distrust on foreign direct investment. This resulted into Indias inability to receive capital from the international market to cover its deficit accounts. The balance of payment crisis also showed that the economic policies were out of line with the changing environment. In fact, the crisis of 1990s facilitated major changes.

In 1990s, Narasimha Rao Government embarked on a policy of liberalization and licensing of a small number of Private Sector Banks. The Private Sector Banks were also known as New Generation Tech-savvy Banks. The new generation Banks included-

Global Trust Bank (the first of such new generation Bank that later amalgamated with Oriental Bank of Commerce), Axis Bank (earlier as Unit Trust of India), Industrial Credit and Investment Corporation of India Bank (commonly called as ICICI Bank) and Housing Development Finance Corporation Limited Bank (HDFC). The next stage for Indian Banking Sector proposed relaxation in the norms related to the Foreign Direct Investment, in which foreign investors in Banks were given voting rights with some restrictions 14 .

Particularly this phase witnessed the liberal entry of Private and Foreign Banks, operational freedom, deregulation of the interest rates, reduction in the statutory reserve requirements of Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR). These changes brought competitiveness in the Indian Banking Industry and even helped in improving the profitability. Apart from development of positive implications of liberalization, deregulation, and globalization increased risk also existed. Banks, being well aware of the risk factors for their business started proactively devising internal mechanisms for identification and management of the risks. Another significant instance of this phase was the entry of mass computerization to handle, the increased volumes of business effectively and to improve customer services. Computerisation in the Banks resulted into surplus manpower in the Banking Industry, which led to the introduction of voluntary retirement in the Nationalized Banks with a view to contemplating the manpower.

Thus, the rapid growth in the economy of India was revitalized with the help of Banking Sector, with strong contribution of three sectors of Banks, namely Government Banks, Private Banks, and Foreign Banks. A modern outlook emerged during this period along with the tech-savy methods of working. Customers demanded more from their Banks resulting into the requirements of restructuring of Indian Banking Industry.

Phase V-Restructuring Phase (1992 onwards)

Banks were recapitalised in 1992, but as the losses continued to scale up, restructuring was emphasized. The Banking Sector reforms were undertaken in India from 1992 onwards . These reforms primarily aimed at the safety and soundness of financial system and to make the Banking Industry strong, efficient, and competitive. Reforms made the Banking system workable, flexible from an international perspective. This called for improvement in allocation and operational efficiency of the Banks. Thus, Indian Banking Industry was categorized into Non-Scheduled Banks and Scheduled Banks. Scheduled Banks constituted of Commercial Banks and Co-operative Banks.

Year 1998, onwards Banks were free to offer differential rates of interest based on their size of deposits. The emphasis shifted from process based administration to risk-based management. During this period, Banks started developing new delivery channels likeautomated teller machine (ATM), phone banking, internet banking, any branch banking, and auto sweep products. Automated Teller Machines were established initially to offer cash withdrawal functions later also included offering facilities like account management
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and bill facilities. Banks used Automated Teller Machines for product promotions. Internet Banking became popular and Banks offered facilities like- account enquiry, money transfer, requests, mail alerts, railway ticketing and bill payment. Internet Banking made Banking anywhere anytime on 24* 365 basis.

With the progress of alternate delivery channels, the need for centralized database was felt. There arises a need to update the database instantly, irrespective of the branch or the alternate channel that the customer used. Apprehending the need for centralized data center architecture, Banks started consolidating their database into a single large database through networking. Core Banking Solutions (CBS) created an environment where the entire Banks operations could be controlled from a centralized hub. Core Banking Solutions created a centralized customer database that could be accessed from anywhere. Initially Private Sector Banks took a lead in Core Banking Solutions and viewing the success of Private Sector Banks even Public Sector Banks started switching to it. Core Banking Solutions helped Banks to provide faster and efficient customer services at reduced operational costs as it helped to save manpower costs. Apart from delivery channels development, during this phase emphasis was made to have international accounting standards. To be introduced in phased manner with a view to make the Indian Banks internationally competitive with sound capital base. Banks experienced the pressure of competition in the form of changing customer requirements and customer retention. To manage these pressures, Banks became more customer friendly.

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As a part of financial sector reforms State Banks were given operational flexibility and functional autonomy by diluting the stake of the Indian Government to 51 percent. Government further proposed, in 2000-01 in the Union Budget to reduce Government holding on Nationalized Banks to a minimum of 33 percent 15. Implementation of Banking Sector reforms helped Indian Banks net profit to grow by 52.3 percent in the year 20020316,17. The reforms in monetary and credit policy in 2004 were introduced in the view to increase the openness of the economy along with the integration of financial markets and rapid changes taking place in the global economic scenario.

During this period, Reserve Bank of India stressed on objectives like strengthening of prudential and supervisory norms for Banks, improving credit delivery system, developing technological and institutional infrastructure for efficient financial sector, ensuring stability, and modernising the payment system. Guidelines issued in February 2005, provided greater managerial autonomy and operational flexibility to support Public Sector Banks so that, they could respond to the new environmental changes and sustain competition with respect to the Private and Foreign Banks. Banks were permitted to invest a greater percentage of their assets and were given more freedom in their lending policies18. State Bank of India has already established 62 offices overseas, across 35 countries and has further planned to set new overseas offices in the coming years. In 2006 it was seen that Banks realized that better efficiency gains, stronger risk-based pricing and closer alignment with the international best practices need to be strengthen 19.

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Other aspects, which emerged due to the global economic downturn were- pressure to reduce cost to maintain global competition, adaption to the global culture, and potential of outsourcing was identified. Banks adopted outsourcing practices as it mainly helped to reduce cost, improvement in quality of services, higher efficiency, productivity, better utilization of Human Resource Management, and transfer of risk to the outsourcer. However, at same time there existed threat of transfer of vital information or loss of customer data. The payment system vision document 2008 adopted by the Reserve Bank of India to encourage a safe and secure payment system 20.

The progress of Commercial Banks was summarised in Table I. 1 to develop understanding with regard to the various remarkable developments that took place in Indian Banking Industry. In the last 39 years since 1969, it has been seen that, impressive changes had taken place in the Banking Industry. The number of Scheduled Commercial Banks almost doubled from 73 in 1969 to 170 in 2008 and the number of Branch Offices increased from 8262 in 1969 to 78666 in 2008. The expansion of the branch network helped to lower the population per office reduced from 64 in 1969 to 15 in 2008. Today, Public Sector Banks account for more than 78 percent of the total Banking Industry assets and the total assets of all Scheduled Commercial Banks has reached Rs. 40, 90,000 crores by end of March 201021. Thus, the profit pool of the Indian Banking Industry has increased at a fast pace.

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TABLE I. 1 PROGRESS OF COMMERCIAL BANKING (1969 2008)

Indicators Distribution of Employees of Scheduled Commercial Banks Category-wise Number of Scheduled Commercial Banks Number of Bank Offices in India Population per Office (in thousands) Officers Clerks Subordinates

Year

1969 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993

73 74 74 74 74 92 119 122 131 148 183 202 223 243 264 272 275 278 278 274 276 276 276

8262 13622 15362 16936 18730 21220 24802 28016 30202 32419 35707 39177 42079 45332 51385 53287 53859 55410 57699 59752 60220 60570 61169

64 41 37 35 32 29 25 23 22 21 19 18 17 16 15 14 15 14 14 14 14 14 14 55218 62597 71248 76243 85500 105515 125883 133475 149254 155549 167584 179029 198813 208881 222945 241214 253991 260127 265720 262169 262282 267077

166651 186651 209017 217414 233874 257121 292007 305440 336213 339278 352737 371621 405950 421847 444752 470252 484233 496628 505525 500943 499506 500296 75364 84869 93603 98318 103703 110748 120646 125273 135184 132856 138952 145659 157565 164560 173364 189006 198120 205140 209183 212585 215143 217840

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Year 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Number of Scheduled Commercial Banks

Number of Bank Offices in India

Population per Office (in thousands)

Officers

Clerks

SubOrdinates

276 284 293 299 300 303 297 301 297 298 286 284 218 179 170

61803 62367 63026 63550 64218 64939 65919 67937* 68195* 68500* 69170* 70373* 71685* 74346* 78666*

15 15 15 15 15 15 15 15 15 16 16 16 16 15 15

268905 270533 281326 283380 287701 290817 291389 268239 276368 286880 289356 313863 330093 347662 334884

502193 505728 509693 509971 507577 501474 494081 451062 425788 419675 401087 396812 384821 366700 333414

223361 221340 228006 227672 228693 225199 221161 207217 199132 194594 191279 189758 185210 185045 170471

*Number of Bank Offices includes Administrative Offices Source: Reserve Bank of India, Trend, and Progress of Banks in India (Various Issues from 1998 to 2008)22.

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Bank Mergers that has taken place since 1969 has been presented (Table I. 2). TABLE 1.2 LIST OF BANK MERGERS Year of Merger 1969 1970 1985 1985 1985 1986 1988 1989 1990 1990 1990 1990 1993 1993 1994 1996 1997 1999 1999 2000 2001 2002 2003 2003 2004 2004 2005 2005 2005 2006 2007 2008 2008 Name of Bank Merged With

Bank of Bihar Ltd. State Bank of India National Bank of Lahore Ltd. State Bank of India Miraj State Bank Ltd. Union Bank of India Lakshmi Commercial Bank Canara Bank Bank of Cochin State Bank of India Hindustan Commercial Punjab National Bank Trader Bank Bank of Baroda United Industrial Bank Allahabad Bank Bank of Tamilnadu Ltd. Indian Overseas Bank Bank of Thanjavur Ltd. Indian Bank Parur Central Bank Ltd. Bank of India Purbanchal Bank Ltd. Central Bank of India New Bank of India Punjab National Bank BCCI (Mumbai) State Bank of India Bank of Karad Ltd. Bank of India Kashi Nath Seth Bank Ltd. State Bank of India Bari Daob Bank Ltd. Oriental Bank of Commerce Bareilly Co op Bank Ltd. Bank of Baroda Sikkim Bank Ltd. Union Bank of India Times Bank Ltd. HDFC Bank Ltd. Bank of Madura ICICI Bank Ltd. Benares State Bank Ltd. Bank of Baroda Nedungadi Bank Ltd. Punjab National Bank Bank Muscat Centurion Bank of Punjab South Gujarat LAB Ltd. Bank of Baroda Global Trust Bank Ltd. Oriental Bank of Commerce IDBI Ltd. IDBI Bank Ltd. Bank of Punjab Ltd. Centurion Bank of Punjab. United Western Bank IDBI Bank Ltd. Lord Krishna Bank Centurion Bank of Punjab Sangli Bank ICICI Bank Ltd State Bank of Saurashtra State Bank of India Centurion Bank of Punjab HDFC Bank Ltd. Source: Various Banks websites 23

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The current scenario is of consolidation within Public Sector Banks, within Private Sector Banks and between Private Sector Banks and Public Sector Banks has emerged. Apart from this, Foreign Banks have become active in merger and acquisitions, buying out some old Private Banks and new Private Banks. The motive mentioned by experts for the major Indian Banks to adopt this was to gain advantages of economy in size and scope of operations, and the competence to operate in global market place. The merger and acquisition in the Banking Industry has brought a new life to the style of doing business in todays world. Strategic mergers, acquisitions, and shutting down has triggered the consolidation of Indian Banking Industry and helped Banks to survive.

It has been seen that Indian Banking Industry had played a tremendous role in reinforcing the economy of India, by servicing the needs of three sectors of the economy: agriculture, manufacture, and service. The Banking system of India was not hassle - free but was able to meet new challenges posed by the external and internal factors. Majorly the past three decades had a several outstanding achievements to its credit. The most striking was its extensive reach. Banking today is no longer confined to only metropolitan cities. In fact, it has reached to the remotest corner of the country. Presently, Banks in India are undertaking non-traditional areas of generating income through diversified activities other than the Core Banking activities. Today, Banking has become more or less paperless Banking. Banks has emphasized more on automation and outsourcing of different services so that they could handle the increased volumes of business efficiently and effectively. Banks are also providing tailor made products as suited to the requirements of the individual customers. Currently the Banking Sector is on the threshold of an exciting phase.

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PART B - LITERATURE OVERVIEW

Evolution and Models

The concept of Human Resource Management could be traced back to North American Management Literature. At the time when an idea of Scientific Management was on a height, Drucker
24

used the term Human Resources and clearly stated that Human

Resource unlike other resources cannot be controlled. During this period, Chandler25 emphasized that changes brought in the strategy of the business often results into change in organizations structure and determine how well a business performed. It was during this period the field of Human Resource Management moved from personnel perspective to Human Resource Management.

Miles26 Human Relation model was based on the assumption that all organizational members are reservoirs of untapped resources, and the prime task of a manager is to create an environment in which all the resources of his Department could be exploited to the maximum. The Human Relations Model rightfully argued for participative leadership and emphasized to make employees feel useful and important to get them involved in the decision-making processes.

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The logic behind bringing the employees into the decision -making process was to improve the decisions, which help organization to perform better. Thus, Human Relations Movement emphasized people, social needs, and productivity resulting directly through job satisfaction.

Ouchi

27

in his work suggested that the success of the Japanese Organizations in

comparison with the contemporary American Organizations was largely due to the adoption of Human Resource policies, which encouraged commitment and participation among employees and resulted towards innovative and flexible organizations, which finally led to the better performance.

Hence, the wastage of Human Resource means wastage of money, which becomes a burden on an organization. Thus, the role of Human Resource Management emerged as to maximize employee commitment, flexibility, organizational integration, and to improve quality of the work. To overcome various impediment Researchers of different countries derived different models and had given various theories in relation to Human Resource Management and Human Resource Strategy.

Dyer

28

stated that, the acid test is whether there are identifiable combinations of

environmental settings and particular types of Human Resource system, which consistently yield better results than their alternatives. Dyer gave a model (Figure I. 1) that concentrated on the outcomes of Human Resource Strategies and gave hypothetical linkages between the Human Resource business fit and various outcomes.

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FIGURE I. 1 HYPOTHESIZED LINKAGES BETWEEN THE HR-BUSINESS FIT AND VARIOUS OUTCOMES

MATCH

OUTCOMES PERSONNEL (absenteeism, labour turnover, morale, unit labour costs)

SITUATION Environment / Strategy/ Structure

HUMAN RESOURCE SYSTEM

ORGANIZATIONAL (productivity, new product development quality of service) FINANCIAL (measures of profitability e.g. return on investment)

Source: Dyer

Human Resource Functions like selection, appraisal, reward, and development could be integrated with Strategy and Structure to form a comprehensive strategic management policy, which would help to gear organizational performance. At the same time employees acted as a key in the implementation of the declared Organizational Strategy and Human Resource Strategy. Thus, declared Organizational Strategies and Human Resource Strategies should be designed to fit into each other.

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Some of the early formal models of Human Resource Strategy, particularly the one proposed by Fombrun et al., 29 (Figure I. 2) concentrated on Human Resource Strategy to be designed to ensure a close fit. The relationship in the fit model was represented by organizations, which follow their business objectives down from the senior management team through functions, through Departments, through teams and so on. Functions for example need to be proposed, which enable the organizational strategies to be achieved and Departments need to propose strategies that enable the functional strategies to be achieved, and so on. In this way, the Human Resource Functions respond to organizational strategies, which results to meet the organizational demands.

The Matching Model asserted that the Human Resource Management System and the organizational structure should be managed in such a way that they fit within the organizational strategy. Personnel practitioners were attracted to this aspect as more importance was given to the formulation of organizations policies and concepts like decentralization and development of responsibilities. The model also suggested that people should be managed like any other resource and must be used sparingly, developed and exploited fully. It also emphasized the interrelatedness of Human Resource Management activities and effectiveness of an organization that depends on the integration of strategy and structure of an organization.

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FIGURE I. 2 THE MATCHING MODEL OF HRM

Economic Factors

Political Factors

Cultural Factors

Mission and Strategy

Organizational Structure

Human Resource Management

Source: Fombrun et al.

Walton

30

tried to explain Human Resource Management as an approach in which people

are treated, jobs are designed, and organizations are managed. Human Resource Management Departments should achieve two main advantages, when attention was paid particularly to the managerial competencies. Firstly, it boosted the status of the Human Resource Departments and secondly, it acted as an important influence on the level of integration between Human Resource Management and organization strategy.

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Dowling and Deery

31

discussed that an increase in the strategic nature of Human

Resource Management activities categorically lead to the following improvements: Evidences of senior executives discussing Human Resource matters in committees; Involvement of line managers in Human Resource matters; and Human Resource Management functions received more recognition and prestige.

Golden and Ramanujam

32

proposed the evolution of linkages between strategic business

planning and Human Resource Management: Administrative Linkage - Human Resource units performed paperwork processing role; One-way Linkage- Human Resource Functions were only implemented; Two-way Linkage -involved reciprocal relationship in which the Human Resource functions helped in implementing strategic business plans and provided inputs for strategy formulation; and Integrative Linkage- this stage allowed involvement with other functional areas of business while developing strategic business plans that is the issues outside Human Resource area.

Industrial Relation specialists constructed a convincing alternative model. This model offered an implicit set of pointers towards strategic approach. These pointers are key elements, which are managed in a way that they remain congruent with the organizational style. Kochan et al., 33 pointed, the strongest factor that affected the choice of approach to employees voice was the attitude of management towards unions. They also suggested, that there existed a cycle in all organizations.

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The key Business Strategies like innovation, quality enhancement, and cost reduction required a specific set of role behaviour, which in turn suggest different Human Resource policies in relation to job design, employee appraisal, development, reward, and participation. Schuler and Jackson
34

highlighted that Human Resource Practices could

contribute to competitive advantage and results into lowering cost and enhancing product differentiation. In addition, to achieve competitive advantage, Human Resource Practices must be designed and implemented keeping a long-term focus and must ensure how an organization would utilize its human capital to attain organizational goals. Schuler and Jackson developed a model for each employee role behaviour and Human Resource policies required for them. The summary of the model framed is as: Innovation strategy required employees behaviour to be creative, long term focused, highly cooperative, concerned for quality, quantity, risk taking, high tolerance, and unpredictability. The Human Resource policies for this kind of employee behaviour would include jobs with close interaction, allowing employees to develop their skills and performance appraisal to reflect long-term and group based performances; Quality enhancement strategy required relatively repetitive and predictable behaviour with high level of commitment towards organizational goals. The Human Resource policies for this kind of employee behaviour would require relatively fixed and explicit job description and high level of employee participation; Cost reduction strategy required employee behaviour with moderated concern for quality and high concern for quantity. The Human Resource policies for this kind of employee behaviour required relatively fixed, narrowly designed job, and short-term results oriented performance appraisal.

24

Marginson et al.,

35

criticized Human Resource Management as a gatekeeper function,

which only acted as a separator of trade union from management. Human Resource Departments simply function in order to control employees operations .Whereas, instead of becoming a gatekeeper it must become gap filler between the two. The nature of Human Resource Management during this period was discussed as non-strategic, reactive, and as a short-term function.

Baird and Meshoulam

36

figured that the execution of effective Human Resource Practices

and the design of a Human Resource System must be compatible within the organizational strategy for the successful implementation. The interdependence of Business Strategy and Human Resources Strategy was highlighted as vertical integration (integration between the Business Strategy and Human Resource Strategy) and horizontal integration (integration within the various Human Resource Practices). In general vertical fit, viewed as a critical step towards attaining the organizational goals by initiating some Human Resource activities that needed to be aligned with organizations objectives. While horizontal fit was considered as an essential when making use of various resources.

The strategic approach on Business Strategy and its impact on the bottom-line performance in which people are managed (Figure I. 3) was discussed by Lengnick-Hall and LengnickHall
37

in their study. They highlighted various external factors required to be considered

while formulating competitive strategy and Human Resource Strategy.

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FIGURE I. 3 A PERSPECTIVE ON BUSINESS STRATEGY AND HR STRATEGY INTERDEPENDENCE

Industry Structure

Economic Conditions

Distinct Competence

Labour Market

Skills and Values

Competitive Strategy

Human Resource Strategy

Competitive Advantage

Product/ Market Scope

Economic Conditions

Culture

Demand for skills and employees

Organizational availability and readiness

Source: Lengnick-Hall and Lengnick-Hall

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Another important model discussed by Guest

38

indicated four main Human Resource

outcomes as components and discussed these outcomes below (Table I. 3). Strategic Integration confirmed that Human Resource Management gets fully integrated into strategic planning. Human Resource policies become coherent, and line managers use Human Resource Practices as a part of their everyday work; Commitment verified that employees feel bounded to an organization and are committed to high performance via their behaviour; Flexibility ensured adaptable organization structure, and functional flexibility based on multi-skilling; and Quality ensured good products and services. TABLE I. 3 A THEORY OF HUMAN RESOURCE MANAGEMENT

HRM Policies Organizational/ Job Design Management of Change Recruitment Selection Socialization Appraisal Training Reward Systems Communication

Human Resource Outcomes

Organizational Outcomes High Job Performance High Problem-solving Change High Innovation

Strategic Integration

Commitment

Flexibility Quality

High Cost effectiveness Low Turnover, Absence, Grievances

Source: Guest

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McCrae and Costa

39

gave an Italian Human Resource Management Model (Table I. 4),

which emphasized the push towards the adoption of new tools and more sophisticated management techniques to integrate Human Resource Department with the core business activities. A marked attention was paid towards the characteristics such as processes of internal communication, planning, decision-making, bargaining and the management of organizational power. TABLE I. 4 MODEL OF HUMAN RESOURCE MANAGEMENT Variables Human Resource Management and Development Define Human Resource Systematically look for Strategy and line managers compatibility and consistency support to operational between strategic choices and activities Human Resource Strategy On Management and On Strategic Management operation problems operations and development Attempts to involve the line Widespread function interacting during the stages of strategy with the line and the strategic planning and implementation level mainly during the planning stage, strong involvement of the line in Human Resource Management Either residual or adaptive Proactive anticipation removal of constraints and development opportunities for both the company and the workers Ability to provide standards Nourish competitive advantage for technical specialized through the development of performance; efficiency in the distinctive characteristics of use of Human Resource Human Resources. Source: McCrae and Costa Human Resource Management

Task

Focus Organizational position of the function

Relationship to corporate strategy

Dominating criterion for assessment of performance

28

Schuler and Jackson 40 (Table I. 5) discussed Human Resource philosophies and attempted to provide a Model for Human Resource Management rather than prescribing certain universal best practices. Schuler and Jackson presented in tabular form a package of Competitive Strategies and Human Resource Practices. TABLE I. 5 HRM PRACTICES AND COMPETITIVE STRATEGIES High participation Implicit job analysis External recruitment source Broad career path Process and results appraisal criteria Differentiation Strategy Long-term appraisal criteria Same group criteria Some employment security Many incentives Egalitarian pay Extensive training Cooperative labour-management relation High participation Explicit job analysis Some external recruitment sources Narrow career paths Mostly results appraisal criteria Mostly short-term appraisal criteria Focus Strategy Same group criteria Some employment security Some incentives Egalitarian pay Extensive training Cooperative labour-management relation Low participation Explicit job analysis Mostly internal recruitment sources Narrow career paths Results criteria Cost-reduction Strategy Short-term criteria Mostly individual criteria Little employment security Few incentives Hierarchical pay Little training Traditional labour-management relations Source: Schuler and Jackson

29

Poole 41 noted the potential of Harvard Model, which consisted of six basic components: situational factors; stakeholders interests; Human Resource policy choices; Human Resource outcomes; long-term consequences; and feedback loop. Harvard Model took into account different sets of philosophies and assumptions that may be operating. The industrialized nations of western world had developed trait approach to Human Resource Management, which often contradicted in many aspects. It seemed that in practice, a single universal concept does not exist.

Miller

42

highlighted aspects of Human Resource Management, which included: assessing

environmental threats and opportunities; deciding the scope of the organizations activities; creating and communicating a strategic vision; strategy as a senior management activity directed towards organizational objectives; and managing the process of change in an organization.

Snell and Dean

43

agreed that Human Resource Practices were the primary means by

which firms invested in their employees. Human Resource Management has moved its concern from domestic focus to multi-national focus, more escalating concern for issues like ecological, health care, and illiteracy. They also demonstrated that Human Resource Practices to be employee centric and need to be business centric as well.

Linkage between Human Resource Practices and Strategy was studied by Wright and McMahan
44

who stated that the main aim of strategic nature of Human Resource

Management was to link Human Resource Management with Strategic Management processes of an organization and to emphasize coordination among the various Human Resource Practices.
30

The study suggested that Human Resource Management as a combination of practices that would move towards improving organizational effectiveness and better performance outcomes.

There was no doubt, as to why Human Resource Practices should not be linked with Business Strategy. Storey
45

highlighted four main areas with respect to Human Resource

Management approach, which helped to achieve integration are: Beliefs and assumptions mean that Human Resource among all the factors of production make the real difference. Moreover, Human Resource must be cultivated as a valuable asset and not to be regarded as a secondary cost; Strategic Human Resource Management required the full attention of the chief executives and senior management teams. The decisions about Human Resource policies should not stem from a set of prior notions about good professional personnel practices, but should take cue from an explicit alignment of the Competitive Environment, Business Strategy and Human Resource Strategy; Role of Line managers must be seen as a crucial role for the effective delivery of Human Resource policies. Line managers are required to conduct team briefings, target setting , holding performance appraisal interviews, and encouraging quality circles ; and Issues and techniques like performance-related pay, harmonization of conditions and the learning environment of a company must be featured strongly in Human Resource Management.

31

Schuler

46

discussed the challenges for Human Resource Management practitioners in a

personnel management type of an organization to achieve programmes, which complement and support the Business Strategies. He also explained Strategic Human Resource Management as an essential planned programme that would address and solve fundamental strategic issues related to the management of Human Resource in an organization. Further, the successful adoption of Strategic Human Resource Management required support from the senior management and consistent coordination for setting standard policies.

Developing Human Resource Practices such as resourcing, employee development, reward system, and employee relationship so that they get complemented with one another. These practices were named as bundles of Human Resource Practices. Integration of Human Resource Practices with strategic business planning depended heavily on the value, strategy, and support of top executives along with active role of union representatives and line managers. These aspects were discussed by Researchers like Kochan and Dyer Walker 48; and Cusworth and Franks 49.
47

Ropo

50

in a research on Singaporean companies suggested two aspects. Firstly, Human

Resource professionals must learn to cope with the favorable or adverse circumstances existing in an organization that means, they must be able to manage stress and keep the integration process continuous after it has been started. Secondly, sometimes Human Resource managers lack the necessary skills to perform their duties for a particular function then competent line managers and executives must take over those functions from Human Resource professionals and need to pursue organizational goals along with the tuning of the enterprise culture and market economy.
32

Wright et al., 51 confirmed that organizations required different competencies and to meet this need they need, to match individuals competencies with the requirements of the job from the talent pool. Wright and his co-authors viewed human resource in an organization as the pool of capital. They concluded that linking Human Resource Strategies and policies with business objectives helped to achieve high level of organizational performance. They also suggested that human resource to be involved not just during implementation but also, at the time of formulation of strategies.

Hollinshead and Leat

52

suggested features of Japanese Human Resource System and they

distinguished Japanese Organizations from other nations. The elements were referred as pillars, as they strongly bonded culture within organization and increased individuals commitment to corporate values such as: Lifetime employment- employees in the core labour force were assumed to stay with the same company for their working lives and a strong emphasis was placed on internal labour markets; Seniority based wage system- incremental pay according to time served by employees in an organization; Consensus decision-making- decisions to be taken through participation instead of unilateral management decisions; and Enterprise unionism- management and union representatives need to have collaborative relationship.

33

Pickard

53

suggested ethical issues to be taken care by Human Resource practitioners.

Human Resource practitioners must communicate ethical policies by holding training sessions for their employees, to help employees to be aware about ethical issues. Human Resource practitioners needed to set example through professional conduct, fairness, equal treatment, and confidentiality. Pickard also suggested that Human Resource professionals must contribute in the formulation of company strategies, which further required to be integrated with mission and values of an organization.

Legge

54

argued with the help of studies made by him that there had been irregular

implementation of practices designed to achieve flexibility, quality, and commitment that was due to various challenges inherited by an organization like constraints of recession, enhanced competition and many other. He also noted that Human Resource policies were tailored to match the business values with the changing business environment.

Huselid

55

used the term High-Performance Work Practices and suggested that these

practices helped to increase motivation and enhanced retention of quality employees. In order to achieve high-performance work practices, emphasis was made to improve the knowledge, skills, and abilities of organizations current and potential employees. Huselid study also, suggested that these high-performance work practices at the same time encouraged non-performers to leave the organization.

34

Human Resource Management need to consider how it affects its suppliers, customers, and employees and to play this role Human Resource Management required support of top executives. A properly developed Human Resource system created value that enhanced the organizational capabilities and at the end directed towards the performance.

The basic Strategic Human Resource Management Model, which was widely accepted in the Human Resource Management literature was given by Kane and Palmer 56 (Figure I. 4). FIGURE I. 4 A BASIC MODEL OF STRATEGIC HUMAN RESOURCE MANAGEMENT

Organizational Mission, Purpose, Actions of Corporate Headquarters

Analysis of External Environment

Organizational Strategy and Objectives

Analysis of Internal Environment

Human Resource Management Strategy

Human Resource Management Policies and Practices

Source: Kane and Palmer

35

Kane and Palmer in their study discussed how to link Business Strategy with Human Resource Strategy and mentioned that both these strategies must move parallel with each other. The planned organizational strategies and objectives must be based on vision and mission of an organization, which are influenced by internal and external factors. Organizations also needed to develop strategies that help to achieve competitive advantage by identifying, developing, and applying distinctive capabilities to the relevant market present at that point of time.

Boxall

57

stated on the basis of judgement of commentators, from both academicians and

practitioners that Human Resource Managements position with respect to being strategic was considered to be lower in the viewpoint of senior management. Boxall also mentioned about the distinction between Business Strategy and Competitive Strategy, suggesting that Business Strategy means dealing with desired competitive position in a particular business and attaining goals existing external to the organization whereas, Competitive Strategy means dealing with critical internal resources such as organizational structure, human resource, technology and capital. Boxall mentioned that Business Strategy could be interpreted as broader than a Competitive Strategy. He further pointed out that there might be no consistent relationship between any particular Strategy and Human Resource Management. It does not matter how we conceptualized the strategies and potential of employees, these would undoubtedly affect the achievement of any planned strategy. Therefore, it would be sensible to take account of these in developing strategic direction.

36

Delery and Doty 58; and Frits and MacDuffie

59

research studies concluded that, a unique

fit between Human Resource Practices with other organizational characteristics like organizational structure and technical system need to be developed. Human Resource Strategies developed must support business initiatives in areas like total quality, customer care, organizational restructuring, process reengineering and product development. Towards this unique fit Marchington and Wilkinson
60

, study emphasized on creating and

shaping the culture of an organization to bring in integration between organizational goals and individual values; and beliefs and behaviour.

Benson

61

research study focused on the local issues of Human Resource Management.

He commented on the nature and type of Human Resource Practices in Japanese manufacturing organizations. Despite similar environmental causes existing in the country the Human Resource Managements frequent push for flexibility varied not only between organizations but also within national sectors. Another important aspect about local culture of Japan was noted that local employees were reluctant to accept western style of performance appraisals.

Delaney and Huselid

62

disclosed in their study that the progressive Human Resource

Strategies should include those practices, which influence employees skills, ability, motivation, and structure of work. Along with these, other environmental factors needed to be considered while formulating Human Resource Practices. The environmental forces that influenced Human Resource Management Model were technology, culture, labour, legislative, demography, and organization culture.

37

An integrated framework by Paauwe

63

(Figure I. 5) was developed: which linked Human

Resource Management activities, outcomes, and firm performance. The Model suggested that Human Resource Management activities give rise to Human Resource Management outcomes, which influenced the performance of the firm. However, some activities influenced the performance of the firm directly as indicated in the figure as upward arrows. Dotted lines indicated that the organizations performance itself give rise to change in Human Resource Management Practices. FIGURE I. 5 A SYNTHESIS OF EMPIRICAL BASED RESEARCH IN THE AREA OF HRM AND PERFORMANCE

HRM Activities Recruitment/selection HR Planning Rewards (motivation) Participation (commitment) Internally consistent HR bundles Decentralization Training/Employee development Organization Structures/internal labour market Formal procedures

HRM Outcomes Turnover Dismissal/layoffs Absenteeism Disciplinary actions and grievances Social climate between workers and management Employee involvement / trust loyalty

Firm Performance Profit Market value of the company Productivity Market share Product / service quality Customer satisfaction Development of products / services

Contingency and/or control variables like: age, size, technology, capital intensity, degree of unionization, industry/sector. Source: Paauwe
38

Ulrich

64

discussed the benefits of translating Business Strategies into Human Resource

Practices. It helped the business to adapt to changes, from the time of conception to execution of strategy and reduced the time for implementation. The business could better meet customer demands as customer service strategies were translated into specific policies and practices to achieve financial performance with the help of effective execution of strategies.

Dowling and Fisher

65

in their study in Southeast Asia proposed following findings:

17 percent of Human Resource represented at top level; 56 percent companies considered Human Resource matters regularly; 46 percent companies had Human Resource Managers, 53 percent were concerned with the broad range Human Resource issues; and 72 percent provided Human Resource training to the supervisors. These findings reflected the position of Human Resource Management in Southeast Asian countries.

Based on various dimensions Guest

66

highlighted on the Human Resource Management

aspects. He mentioned that the essence of Human Resource Management lies in the strategic contribution and alignment. Human Resource Management required involvement of line managers and need to focus upon Human Resource outcomes like commitment, flexibility, and quality. The achievement of Human Resource outcomes were in turn expected to contribute to a range of positive organizational outcomes which included high job performance, low turnover, low absence and high cost-effectiveness through the full utilization of employees.

39

Price 67 mentioned about the development of Human Resource Management as integration of many approaches (Figure I. 6). Various schools of thoughts on Human Resource Management were categorized under three main headings: Human Resource Management is the modernized form of personnel management based on integration of various practices like recruitment, training, assessment and development; Human Resource Management is a strategic model as it employed the techniques of strategic management for the utilization of human resource and its aim is to link business policy and employment cycle; and Human Resource Management is people management as it covers all aspects of managing people and concentrated on achieving organizational goals by wining employees commitment. FIGURE I. 6 INFLUENCE ON THE DEVELOPMENT OF HRM Scientific Management Selection of best people Time and motion Direction of effort Minimum staffing Performance Management Performance Related pay Anti-union climate Human Relation People matter Consultative Management Working Conditions Motivation other than pay Team-working Informal organization Peer pressure

Hard

HRM

Soft

Strategic Management Long-term thinking Missions and objectives Values Planned activities Resource Management Proactive focus direction

Japanese Management Commitment Devolvement Organizational culture Quality Just-in time resource Core/periphery (flexibility) Continuous Improvement

Source: Price
40

Baird and Meshoulam

68

suggested that Human Resource Management should serve the

business goals of an organization. The critical managerial task for managers is to align the formal structure and Human Resource system to drive the strategic objectives of an organization. Human Resource Strategy is not just the mean to accomplish Business Strategy but an end in itself. Therefore, there could be no strategy without Human Resource Strategy. Baird and Meshoulam pointed to Human Resource professionals to have following skills: Information Management Skills -like statistics, analysis and research; Planning Skills -the knowledge of planning and planning methodologies; Management Skills- skills on various business functions and environment analysis; Integration Skills- competency at managing organizational interface and skills to assess and match different settings; Change Management Skills- the skills about predicting the future, facilitating change, and developing organizational activities.

Wright and Snell

69

made an important observation that most of the Human Resource

Management Models consisted of fit components, which included Human Resource Management Practices, employees skills and behaviour and flexibility. The fit components focused towards responding to a variety of competitive needs required for strategic and non-strategic considerations. Most of the literature supported linking of Human Resource Practices to Business Strategies for organizations performance. Kay70 also supported this by adding that the Human Resource Strategy to be considered as an integral to organizations strategic processes contributing towards organizations overall performance. It was analyzed that the organizations relationship with environment could be handled with the help of suitable strategies.
41

Wood 71 distinguished four different fits in his study based on the review given by various authors particularly in the area of Human Resource Strategy: Fit between Human Resource Strategies and the business known, as strategic fit; Fit between a coherent set of Human Resource Practices and systems within the organization, known as organizational fit; Fit between Human Resource Strategies and the organizations environment , known as environmental fit; Fit between Human Resource Practices as coherent and consistent bundles, known as internal fit.

Brockbank

72

framed a competency framework for Human Resource professionals, which

included competency areas and their outcomes discussed as below: Personal credibility- maintaining relationship and following organizational values helped to build trust; Ability to manage change-need to diagnose problems in the environment and derive change with the help of leadership; Ability to manage culture-executives to behave consistently with the desired culture and regularly identify the culture required to meet the organizational strategic needs; Delivery of Human Resource Practices- expert in Human Resource Management with the ability to deliver innovative Human Resource Practices; and Understanding of the business - knowledge about technology, finance, marketing, sales, operations, competitors, and organization strategies in Human Resource professionals.

42

Guest

73

suggested best Human Resource Practices that included: job design in such a

manner that employees have the responsibility and autonomy to use their knowledge and skills; selection process framed to carefully identify best potential; training as an on-going activity; two-way communication process to keep everyone informed; and employee participation to increase employees awareness about the implications of their actions, for the financial performance of the firm. Guest proposed a simple model (Figure I. 7) of Human Resource Management and performance which suggested that Human Resource Practices influence directly to an employees level of commitment towards his performance, which in turn impact on the organizations financial performance as an outcome. FIGURE I. 7 A SIMPLE MODEL OF HRM AND PERFORMANCE Box 1 HR Practices Box 2 Employee Commitment Box 3 Productivity Quality Box 4 Sales, Financial performance

Source: Guest

Uhl-Bien et al.,

75

argued that Human Resource Management Models did not focused

enough on interpersonal relationships. It was always disputed that the way individuals interacted within organizations through interpersonal relationships depended on social relationship. Another theoretical view existed which was named as Behavioural view discussed by Appelbaum, et al.76 explained that the Human Resource Practices were designed to control and influence attitudes and behaviour of employees. According to these approaches Human Resource Practices directly influenced the behaviour of workers and improvement of organizational performance.
43

Armstrong

77

developed a systematic approach to formulate Human Resource Strategies

and emphasized on considering all relevant internal and external environmental issues (Figure I. 8). Armstrongs Model showed very strong linking between Business Strategy with Human Resource Strategy and finally with Human Resource programmes, plans, and policies along with stress on its sequential aspect. FIGURE I. 8 SEQUENTIAL STRATEGIC HUMAN RESOURCE MANAGEMENT MODEL

Mission

Business Strategy Internal Environment Scan External Environment Scan

HR Strategy

HR Programmes

Source: Armstrong

Siengthai and Bechter

78

found that Human Resource Policies and Practices were

significantly and positively related to organizations level of innovation. Top managements support, organizational structure, firms performance, and size of organization influenced the level of innovation in an organization. Whereas, organizational structure found to have an inverse relationship to organizations level of innovation that is, the more mechanistic an organization structure becomes less innovative.
44

Budhwar and Sparrow 79 proposed four different Human Resource strategies: Talent Acquisition Human Resource Strategy emphasized on attracting the best human talent ; Effective Resource Allocation Human Resource Strategy aimed at maximizing the utilization of Human Resource by having right person at the right place and at the right time; Talent Improvement Human Resource Strategy endeavoured to make best use of the talent by training and guiding them on the job; and Cost Reduction Human Resource Strategy designed to reduce the personnel costs to lowest possible level.

Paauwe and Boselie 80 presented Human Resource Model, which incorporated elements of the contingency and configurational mode. The two dimensions in the environment which played a dominate role in designing of Human Resources Strategies included: product market combinations and the appropriate technology dimensions, which were expressed in terms of criteria such as efficiency, effectiveness, flexibility, quality, innovativeness and speed. It also represented the tough economic consistency with respect to national and international competition; and socio-political, cultural, and legal context dimension expressed in terms of widely shared societal values such as fairness, legitimacy with regard to work, time, and money. Paauwe and Boselies model highlighted the intrinsic tension in shaping of Human Resource policies between economic rationality and relational rationality that included moral values and the outcomes because of the past choices of strategy in interaction with the way in which structuring issues were originally posed and the kind of organizational culture existed.

45

Mir et al.,

81

examined changing employee-organization relations. As the new age

employees have different expectations from organizations about their career needs. Such employees want to be responsible for their work and the results to be produced by them. They want tasks matched to their strengths. They expect equitable treatment at the workplace. They also demand and receive higher compensation for their work. Therefore, the changing needs of employees must be made part of Human Resource Strategy so as to develop right Human Resource Practices.

Purcell et al., 82 emphasized that it was not about having a range of well conceived Human Resource Policies and Practices but it was about how these policies and practices were implemented. More purposely, Human Resource Strategies were concerned with the development of continuous improvement and customer relation policies. The Study also, detailed about the contribution of front line managers in Human Resource policies and practices. The key areas in Human Resource like job and work design, flexible working, workforce resourcing, employee development, reward, and giving employees a voice need to be developed for the successful implementation of high performance work practices. Identifiable key factors affecting job satisfaction were career opportunities, teamwork, and good working conditions for employees. Finally, it could be concluded that Purcell and his co-authors considered policies and practices implementation as a vital component in linking people to business, for effective management of change, for creating workplace a good place to work and this been the prime task of line managers.

46

Palthe and Kossek 83 concluded that various organizational sub-groups played a significant role in ensuring that Human Resource Strategies must be effectively implemented. Their study attempted to illustrate linkage between the changing Human Resource Strategies and employment modes within an organization. Various Human Resource Strategies included in the study were creating human capital, buying human capital, contracting human capital and partnering and collaborating for human capital. These Human Resource Strategies were also influenced by different subcultures existing in an organization. It was suggested by Palthe and Kossek that organizations should recognize and accommodate multiple subcultures, to enable Human Resource Strategy implementation.

Bowen and Ostroff

84

suggested that in order to understand the Human Resource Practices

and performance link, more micro and macro level Researches were required. Values and culture of a firm also influenced upon Human Resource Practices. These influences were mainly reflected by how quickly the strategy merged or attuned with the Human Resource Practices. Therefore, development of a Strategy and Human Resource Practices required integration along with corporate values and culture.

Caldwell 85, survey findings suggested that Human Resource professionals need to identify the persistent gaps and judge them realistically .Caldwells study examined progress in the implementation of Human Resource Management in various organizations. He listed twelve key Human Resource policy goals. These policy goals were ranked according to their importance as: managing people as asset and fundamental to the competitive advantage of organizations ; developing a close fit of Human Resource policies, procedures and systems with one another ; creating a flatter and more flexible organization capable of responding more quickly to changes ; encouraging team-work and co-operation
47

across internal organizational boundaries ; creating a strong customer philosophy throughout the organization ; increasing line management responsibility for Human Resource policies ; improving employees involvement through better internal communication ; aligning Human Resource Management policies with business policies and corporate strategy ; empowering employees to manage their own self-development and learning; developing reward strategies designed to support a performance-driven culture ; developing the facilitator role of managers as enablers ; and building greater employee commitment for the organization.

Legge 86 discussed how to measure the outcomes of Human Resource Management: Financial outcomes measured as profits, sales and market share; Organizational outcomes measured such as productivity, quality and efficiency; and Human Resource related outcomes measured with the help of attitudinal and behavioural impacts on employees such as- satisfaction, commitment and job satisfaction.

Likierman 87 suggested measures to measure Human Resource Management by: Agreed objectives against budget assumptions would ensure Human Resource role with respect to changes in strategy implementation; Using more sophisticated measures for unearthing the data and looking not only at the figures but also at the reasons behind them; Using comparisons imaginatively, including internal and external benchmarking; and Improved feedback through face-to-face discussion rather than relying on questionnaires; Be realistic about what performance measures could be delivered.
48

Green et al.

88

mentioned that the organizations, which vertically aligned and horizontally

integrated with Human Resource functions and practices performed better and produced more committed and satisfied employees, who exhibited improved individual and organizational performance.

Wei

89

from his study concluded it was always challenging with respect to acquiring best

package for Human Resources Strategy implementation and to enhance overall performance (Figure I. 9). Weis study proposed that Human Resource function factors were specific factors that influenced the compatibility of a variety of Human Resource Practices. While firm level factors were analyzed as major determinants for matching Human Resource activities with organizational strategies. The Model helped to frame a conceptual framework to better understand and establish Human Resource Practices. FIGURE I. 9 DETERMINANTS OF BOTH TYPES OF FIT HR function factors -HR Policy -Option -Investment/ budget

Personnel factors - HR Managers capability -Top managers ability and support - Employees knowledge and skills Firm level factors -Nature of strategy -Values and culture

Overall fit

Horizontal fit Vertical fit

Firms Performance

Source: Wei
49

Research studies of Researchers like Grubb 90 and Gibson et al., 91 emphasized that Human Resource systems needs to be based on long-term plans with characteristics of internal consistency among various Human Resource Strategies. Stability in Human Resource Strategies will encourage high trust beliefs, seeding the supportive work place relationships with effective standards like how to hire, promote, evaluate, and equitably compensated employees. For example, an effective Human Resource Practice for setting salary and promotion decisions needs to be based on past performance as well. It will aid in the development of a performance improvement plan by utilizing coaching from the Departments supervisors or managers for skill development. Hence, in this way, Human Resource practitioners could measure and improve the practices offered by their organizations for employees. Such initiatives will also help to improve employees satisfaction and better service quality.

Compton

92

in his study mentioned that Human Resource Strategies must include

recruitment and selection, education and development, performance management, succession planning, remuneration and finally retention of key players. Compton pointed, that the previous approaches to Human Resource Management were largely incoherent with no real linking to strategic planning. Human Resource Management Models needs to have clear link with the external environment, external customers, and suppliers. The internal strategic planning processes required to be developed so that it adds value to the organizations. Comptons study suggested that Human Resource professionals might focus on a few strategies to develop best practices.

50

Human Resource Management in India

Human Resource Management in India dated back to 4th century B.C. to the period of Kautilya. According to Sharma
93

Arthasastra gave a detailed discussion on staffing and

Personnel Management embraced job description, qualification for jobs, selection procedures, executive development, incentive system, and performance evaluation.

Akhilesh and Nagaraj 94 mentioned in their study that prior to independence private owners dominated in Indian industrial scene, particularly characterized by an autocratic leadership style. The issues related to employee relation were, handled as a fire-fighting strategy by management. After this period, number of developments started taking place such as formal recognition to workers unions and appointment of labour officers that brought changes in the personnel functions in India. In 1960s, the personnel function raised concern about obtaining people, maintaining personnel records, administrative work, and enforcing discipline. Whereas in 1970s, the personnel functions shifted towards greater organizational efficiency and in 1980s, onwards the focus was on terms and issues such as Human Resource Management and Human Resource Development.

Reddy

95

suggested that Indian organizations should focus on organizational structure,

technology, and communication according to the emerging environment changes (Figure I. 10). Human Resource Strategies are to be supported by changes taking place in the economy, and accordingly these strategies are to be implemented by organizations. Reddys study indicated that the requirement of Human Resource Management as strategic partner and organizations to become extremely strategic and dynamic.
51

FIGURE I. 10 CORPORATE STRATEGY AND HUMAN RESOURCE STRATEGY Corporate Strategy HR Strategy

Formal Task/ Technology Organizational Task/ Technology

Outcome/Result s Source: Reddy

Rao

96

brought focus to the relationship between Human Resource Development

mechanism like performance appraisal, training, organization development interventions, counselling, and Human Resource Development outcome variable. Raos study emphasized on the influence of macro aspects like technology, competitors, resource availability along with emphasis on micro aspects like satisfaction and commitment among employees. Another set of relationship was mentioned between roles played by Human Resource chief executives to initiate various practices and review programmes implemented periodically by Human Resource Development Departments.

52

The liberalization policy has affected the competitiveness due to the global pressures resulting into combination of Human Resource Management with business policies. Intervening variables such as top managements commitment, line managers interest significantly influenced on the nature of Human Resource outcomes. Sandri and Roy
97

proposed (Figure I. 11) competitive Human Resource Management model in India during 90s . FIGURE I. 11 HUMAN RESOURCE MANAGEMENT MODEL FOR INDIA

Exogenous Influences The State The Market The MNC

Ideological Influence Corporate Ethics and Culture State Ideology

Corporate or Business Policy towards Labour and Capital

System Output Effectiveness Efficiency Competitive Edge

Endogenous Influences Employee collectively Corporate structure Company history

Source: Sandri and Roy

53

Kanungo and Mendonca98 in their study found that there has been always strong influence of social, cultural, economic, and political factors on Human Resource policies and practices in Indian organizations. At times selection, promotion, and transfer in Indian organizations are based on ascribed status in society and political connections. Singh and Singh
99

highlighted that top management of organizations must periodically review goals

and take corrective actions during implementation of strategies along with reassessing the environment and its influences on strategic goal setting (Figure I. 12). FIGURE I. 12 STRATEGIC HUMAN RESOURCE MANAGEMENT MODEL FOR INDIAN COMPANIES

Environment Analysis Production Finance

Strategic Implementation

R &D

Industry Analysis

Human Resource

HR Marketing

Organizational Analysis

Evaluations and Management Control

Source: Singh and Singh

54

Kazmi and Ahmed

100

studied Strategic Human Resource Management principles in four

Indian organizations and found that strategic Human Resource Management principles existed in all the organizations except in one organization. They found that the corporate and Human Resource Management Strategies must be developed simultaneously.

Amba-Rao et al., 101 in an empirical study compared performance appraisal practices and management values among foreign and domestic firms, which included three global Indian companies with 235 managers. Amba-Rao and co-authors suggested that managers of organization needed to adapt selectively depending on the basis of ownership structure of an organization. Their study also gave evidences of positive linking of Human Resource Management Practices with organizational performance.

The traditional Indian values like respect for seniority, status, and group affiliation were complemented by newer areas of attention such as- work quality, customer service, and innovation, which were usually linked to globalization. Now a days employees considered learning new things at work as an opportunities and an important factor for job satisfaction. Chatterjee and Pearson
102

listed these above mentioned qualities with the help of an

empirical study in which they collected evidences from 421 senior level Indian managers.

Paul and Anantharaman

103

in a study on 35 Indian software companies determined a

causal model linking Human Resource Management with organizational performance through an intervening process. It was observed that not even a single Human Resource Management Practice was directly connected with organizations financial performance, though Human Resource Management Practices influenced indirectly on the operational and financial performance of the organization.
55

Budhwar and Boyne 104 studied the gaps between Indian Private and Public Sector Human Resource Practices. They found that the gaps were not significant with respect to structure of Human Resource Departments. Both Public and Private Sector organizations had key Human Resource Strategies like- recruitment and selection, pay and benefits, training and development, and employee relations but on the other hand, both the sectors adopted different approaches with respect to few functional areas like compensation, training, and development. Researchers finally stated that Private Sector organizations had more rational approach than their Public Sector counterparts.

Chiamsiri et al.,

105

; and Prasad

106

suggested from their research studies that due to the

rapidly growing competition in the global market, talent pool has become a crucial factor for survival in the market. Another major challenge for the Human Resource managers of today is to recruit right person and retain them for longer time to survive and flourish in todays hyperactive competitive business. Thus, meeting the demand and supply requirements of manpower in the industry is the chief role played by Human Resource managers.

Radjamanogary

107

; and Das

108

highlighted with respect to globalisation that Human

Resource Practices such as -training and development, performance appraisal, communication, and participation were the key practices, which helped organizations to face challenges due to globalized environment. The changing environment calls for adequate orientation and to facilitate the transition with the necessary support to individuals for organizational excellence.

56

Chatterjee

109

mentioned that the understanding of the relativity of Human Resource

Management to strategically intended organization seems to be less well articulated in Indian organizations. Chatterjee highlighted key drivers for modern Indian market driven Human Resource Management (Figure I. 13). There existed four external spheres of interference for Human Resource professionals, which were integrated within organizational settings. FIGURE I. 13 DRIVERS OF CONTEMPORARY INDIAN HUMAN RESOURCE MANAGEMENT TRENDS

From Operational Focus to Brand India Focus Intellectual Sphere Sociocultural Sphere

From Local Mindset to Global Mindset

From Traditional Welfare HRM to Market Driven Strategic HRM

From Individual support to Professional Autonomy

Emotional Sphere

From System Maintenance to Collective Performance bonds

Managerial Sphere

Source: Chatterjee
57

Kunda et al.,

110

discussed the presence of effective Human Resource Practices in the

shipping companies. The practices, namely Training and Performance Appraisal and Hiring and Compensation System emerged as very strong practices followed by Career Development. Job Analysis and Human Resource Planning emerging as moderately practiced in these companies. Workforce Diversity and Flexi-work System also showed presence but did not emerge as strong practices.

Soms

111

research study on various Indian organizations revealed that the role of Human

Resource Department was to not only design and evaluate employees related management policies and practices, but to implement the changes along with supervisors and frontline managers in the changing business environment. The study demonstrated that Human Resource professionals required right competencies and understanding of various environmental forces impacting on implementation of Human Resource Policies and Practices.

Kumars

112

study revealed that Human Resource policies and practices were followed in

Indian Cement Industry. Kumar also confirmed that human input was the single largest input that goes in the cement industry. This Study proved the pertinent existence of Human Resource Practices in India. Kumar suggested that Human Resource professionals needed to focus on the individual needs and aspirations to the extent that they develop the ethos of organizational commitment. The Study also concluded that culture and leadership were the significant predictors of employee performance. Biswas
113

highlighted that Indian

organizations could design as well as sustain effective policies and practices and point out that Human Resource functions in Indian organizations are becoming business strategic partners.
58

Human Resource Management in Indian Banking Industry

Indian Banking Industry evolved from a stage of extreme exploitation of human resource before independence, as there was a fear of losing the job due to the scarcity of jobs. Around 1940s, managements major concern was how best they could extract work out of people to maximize profits. Employees were made to work on ad-hoc basis, for longer hours and at low remuneration and employees were discontent with the working conditions and facilities like leave, medical aid that were almost unknown
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. However, as the

number of employees grew along with the expansion, Banks started organising small Staff Departments to keep track of employees, disbursement of their payments and to discipline employees in case of misconduct. Gradually, these Staff Departments also became the legal wings of Banks in order to fight employees in a more legalistic manner 115.

Around 1946, the trade unions in various Banks were formed either Bank-wise or statewise as they understood the need to unify under one banner and started demanding for higher salaries, allowances, and better service conditions. The Bank of India employees under the name of the Bank of India Staff Union called the first strike in the industry on 26 June 1946 to 7 July 1946 and the major demands included improvement in service conditions, provision of annual leaves, sick leaves and casual leaves. Standardization in Human Resource Practices began after Banks were brought under the Central Government after passing of the Industrial Disputes Ordinance, 1949 (Banking and Insurance Companies) that allowed for settlements covering only for the clerical and subordinate staff 116.

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By the late 1960s, there were some improvements in the working and service conditions, but there were no matched improvements in personnel skills .Unions in Banks became stronger and responded toward the poor service conditions and low salaries. Unions fought over issues such as promotion, wage and salary, welfare measures such as medical facilities and different types of leaves. Reserve Bank of India instructed to set up the National Institute of Banking Management (NIPM) in 1969 as an apex institute for training and research and the Banking Service Recruitment Board (BSRB) for recruitment 117.

In 1970s, when Banks were focused on branch expansion programme, Human Resource Functions mainly geared itself to the needs of expansion through mass recruitment, mass promotion, and mass training. During this period, Banks started setting up Human Resource Departments to frame policies in order to have industry wise uniformity in service conditions and for the revision of salaries for officers in Nationalized Banks. To overcome the frustration among employees due to the prevalence of long time scales and the absence of accelerated promotions for the meritorious aspirants 118.

The Pillai Committee Report in 1978 suggested seven scales in four grades. Mankidy 119 in the study discussed about the intake of employees at the officer level with Public Sector Banks followed a closed system for promotion. There were mainly two ports of entry into the profession: at the clerical level, the Banking Service Recruitment Board filled 75-100 per cent of the vacancies via screening; and at the Junior Management level, 20-25 per cent of vacancies was filled via outside recruitment. 1980s witnessed a phase of consolidation, where Government initiated several measures to improve Human Resource Management in the Banking Industry.

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Some of the measures included: introduction of job rotation scheme for the Bank staff; stoppage of overtime; compulsory rural and semi-urban postings; and blockage on recruitment. Few areas in the field of Human Resource Management were also discussed by Narasimham committee in 1991, which included: over-staffing especially in metropolitan and urban areas because of trade unions pressure and managements weakness thus leading to increased staff cost; trade unions in Banks encouraged resistance to mechanization and computerization; and various obstacles to rational policies related to promotion, staff transfer; and poor quality of discipline 120.

Kaur 121 mentioned that the Voluntary Retirement Scheme (VRS) was visualized to assists Banks in their efforts to optimize the use of human resource and to achieve a balanced age and skill profile in tune with their Business Strategies. 18 Public Sector Banks offered voluntary retirement scheme employing 7,35,977 employees out of which around 14 percent opted for voluntary retirement scheme, although after severe opposition from employees . At the same time, Banks started recruiting specialists in various fields such as treasury management, credit, risk management, information technology, and Human Resource Management in order to meet the global standards. Banks also developed centralized personnel database containing skill profile, age profile, training profile, which were essential for effective and optimum Human Resource Management.

The Committee on Financial Sector Assessment highlighted major challenges in its report such as: seniority based promotion; limited performance incentives; inadequate compensation policies and; age and experience profile. Out of all challenges, the Committee mentioned that the most serious challenge faced was of age and experience profile with special concern to Public Sector Banks 122.
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Studies reflected that Human Resource Management has moved more closer to the centre stage and has evolved as an innovative approach towards managing the employment relationships. Authors stressed that the untapped contributions of the human resource in organizations could make the difference between efficiency and inefficiency, death and survival of the organization in the marketplace. The innovative Human Resource Practices are essential in order to build relationship between the organization and its employees to overcome competition.

Moreover, Researchers have broadly agreed on the key themes underlying Human Resource Management concept that: the Human Resource policies and practices to be based on circumstances rather than fit approach ; the achievement of appropriate and integrated Human Resource Strategies are critical to achieve organisations goals; the role of Human Resource professional has become strategic and they need to be involved in the process of planning, management, integration, and change management; the devolution of responsibility for Human Resource issues to line management is essential; and the development of a strong corporate culture in order to support employee commitment and to ensure that employees patterns of behaviour is consistent with the values and philosophies of the senior management in the organization.

Human Resource Management profession in India has rambled a long way from labour officer, welfare officer status , to industrial relations man, a fire fighter and that of a personnel manager as guard of industry. Human Resource professionals must understand the organisational environment and internal culture and they must develop and implement programs and policies that are employees centric.

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Many Researchers has found that the involvement of employees is essential. However, efforts of employees required to perform will come if employees believed that their individual interests are aligned with that of their organizations objectives need to be. This aspect discussed in detail. The review of various models of Human Resource Management indicated that the concept of effective Human Resource Management sometimes talked about in the context of measuring the contribution of Human Resource functions. At the same time, few studies focused to design the ways, to support the implementation of the Business Strategy or to deliver Human Resource basics such recruitment and selection, training and development, appraisal, and compensation and benefits.

Researchers clearly placed Human Resource Strategy at the centre of practices. There existed a broad consensus that Human Resource Strategy are translated into action through practices and Human Resource Strategies are formulated keeping in view the business objectives. However, their existed failure to recognize which Human Resource Strategy influenced the formulation and implementation of Human Resource Practices. At the same time, relationship between Human Resource Strategy and organizational change need to be highlighted with empirical grounds. Further, various studies more or less concentrated on the manufacturing industries regarding Human Resource related aspects rather than on service sector, particularly in Indian Banking Industry. The present Study endeavours to bridge such research gaps to some extent.

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PART C - RESEARCH DESIGN

Rationale of the Study

There have been significant developments in Banking Industry in India in terms of size, products, customers base along with visible changes hinting towards need and practice for strategic orientation in the industry. The subject of strategic management in general and strategy implementation in particular has undoubtedly attracted the Researchers to overview and undertake in-depth empirical investigations pertaining to the subject. However, industry specific research in the subject matter as well as research at the level of strategic process implementation have been quite scarce. It is against this backdrop that the present Study has been undertaken with the following objectives:

Objectives of the Study

To Review the strategic environment pertaining to the Banking Industry in India; To Examine the evolution of Human Resource Strategy in the Banking Organizations; To Study the parameters of effective implementation of the various Human Resource policies and procedures with strategic orientation in the selected Banking Organizations; and

To Suggest policy and operational measures for effective implementation of Human Resource Strategy/Practices in the above organizations.
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Hypothesis

The various research findings have advocated that it would be extremely advantageous for any organization to ensure effective Human Resource Management. It is, therefore, hypothesized that:

Hypothesis 1: Banking Organizations are responsive to change. Hypothesis 2: The nature of change in Banking Organization is strategic. Hypothesis 3: There is a correlation between strategic intent and performance. Hypothesis 4: Organization change and Human Resource Strategy are co-related. Hypothesis 5: Organizations having HR Strategy are people centric. Hypothesis 6: Effectiveness of Human Resource Practices is co-related with Human Resource Strategy. Hypothesis 7: Cross-cultural differences influence Human Resource Strategy formulation and implementation. Hypothesis 8: Organization culture and strategy implementation have a strong relationship. Hypothesis 9: HR Strategy and business ethics are related.

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Methodology

The Universe for the Study constituted of 88 Banks comprising of 27 Public Sector Banks, 30 Private Sector Banks and 31 Foreign Sector Banks 123. The population for the Research was the bank employees in Delhi along with those from Banks headquarters located in Mumbai. The Sample was determined on purposive basis. Due consideration was taken with respect to factors as- size, geographical differentiation, and nature of operations to make the Sample representative as far as possible.

Considering the non-homogeneity in the population as regard to types of Banks, Stratified Sampling Technique was applied in order to obtain representative Sample. The strata, thus, defined is as Public Sector Banks, Private Sector Banks, and Foreign Sector Banks. The Sample Size of 30 Banks comprised of 10 Banks each from the Public Sector Banks, Private Sector Banks, and Foreign Sector Banks (Appendix- I). Thus, keeping the derived Sample Size and other issues in mind, Sample Size 210 of Respondents emerged, comprising of Management Personnel-32 (15 percent), Human Resource Executives-81 (39 percent), and Staff at Branch Offices-97 (46 percent).

Before finalization of the Questionnaire, professionals comprising of both Banking practitioners and academics were consulted. The specific inputs from these experts groups were regarding the: number and type of items to be included; item sequence and their wording; and choice of rating scales etc. Drafted Questionnaire was first pretested by conducting a Pilot Study from four different Banking Organizations.

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Respondents were asked to indicate any ambiguity in the questions and some corrections were made subsequently in the Questionnaire. Respondents were approached in three ways: meeting directly or sometimes through phone calls to solicit their assistance in gathering responses; meeting on the recommendation or forwarding of the branch managers; and meeting on the advice or introduction of the colleagues.

Prior consent from the Management of the selected Banks branches office was taken and Primary Data was collected through a combination of a standard non-disguised questionnaire, and in some cases, unstructured interview technique was used. The Questionnaire was set in English language for both locations Delhi and Mumbai. Questionnaire incorporated a five-point scale that was used to measure responses to the various questions. However, the Structured Questionnaire was not administered strictly in the administered sense of the term, as Researcher had to resort to personal interviews of Respondents depending on the availability and cooperation of Respondents. The Survey Questionnaire (Appendix- II) was administered to 210 Respondents during July 2009 to December 2009.

Given the nature of the Data Collection procedure and unwillingness of few Banks Respondents to provide information, in total 190 employees agreed to respond to questionnaire (90.5 percent response rate). Amongst the Sample responses, four were incomplete, resulting into 186 total usable responses (88.6 percent usable response rate). Respondents were explained that the main purpose of the project was completion of academic research work.

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Data Analysis was undertaken with the help of (a) test of significance called Chi-square test was used to test if two variables were statistically associated with each other significantly; (b) correlation analysis to measure the degree of association between two sets of quantitative data; (c) and regression analysis chosen to explain the variation in one variable (dependent), based on the variation in one or more other variables (independent). To make the Data Analysis uncomplicated, Statistical Package for Social Sciences (SPSS) Software was used to simplify the Data Analysis.

Limitations of the Study

Banking is a vast industry spread throughout India and even having branches outside India. It consists of units of different sizes in diverse geographical areas. Any Sample, however rigorously arrived at, may not strictly meet the test of representativeness.

The Sample was limited as Respondents were drawn only from 30 Banks, obviously excluded many other Commercial Banks which could have also formed part of an enlarged Sample.

The Respondents responses were drawn from two broad segments geographically, Delhi and Mumbai, having different social backgrounds.

Work culture is not same in all types of Banks. Culture in a Public Sector Bank is vastly different from a Private or a Foreign Sector Bank; the Study could not consider it specifically.

The major part of the fieldwork was done in Delhi, and Mumbai, which are cosmopolitan cities of the country. Hardly, any rural branch formed part of the Sample.
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The Questionnaire was administered only to the Sample of Bank employees and not to other associated bodies working with Banks, which also play an important role.

The Study was based upon Respondents feelings, emotions, and attitudes at the time of the Survey, which may not be generalized over a period of time.

Keeping in due consideration the employees attitudes to talk relatively less on issues related to Human Resource, less emphasis was given on their detailed descriptive background.

Sample Size has to keep in mind practical constraints. Therefore, a large Sample could not be feasible due to time and budget constraints of an Individual Researcher.

However, Sample Respondents contacted for the Survey showed their keen cooperation in completing the research work because of the following reasons: complete confidentiality was assured to the Respondents; proper authorization was taken before conducting the research; research was conducted by obtaining prior willingness of the Respondents to participate and unbiased status of the Researcher was assured to the Respondents.

Thus, the inferences and conclusions are based upon the collective opinions of the Respondents in the backdrop of the historical events and contemporary developments taking place in the Banking Industry with respect to Human Resource Management.

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Significance of the Study

The Study may provide rich knowledge for academic purposes about Human Resource Management Practices in Banks in the Indian context.

The Study may advocate the need to adopt best Human Resource Practices and implementation of Human Resource Functions effectively.

The Study will be of immense use to the Banking Sector for undertaking effective implementation of Human Resource Policies and Practices and to develop a systematic design to implement Human Resource Practices with strategic focus.

The Study has future research scope in terms of attempting the same by enlarging the Sample base, organization-wide and across different organizations.

Chapter Outline

The whole Study has been presented in the form of Chapters as follows: Chapter I- Introduction Part A Banking Industry-dealt with background and phases of development of Indian Banking Industry. Part B Literature Overview- Provided viewpoints of various Researchers with respect to the field of Human Resource Management highlighting the evolution and developments in the area of Human Resource Management ; it also discussed Human Resource literature review in India and in Banking Industry.
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Part C Research Design-detailed about the objectives, research methodology, limitations, and significance of the Study.

Chapter II- Environment Analysis of Banking Industry Described the concept of environment scanning and detailing information about economic, technological, social, and political aspects pertaining to Indian Banking Industry.

Chapter III- Business Strategy and Human Resource Strategy- The Interaction Discussed some required perspectives for Business Strategy and Human Resource Strategy interaction.

Chapter IV- Implementation of Human Resource Strategy-Action Plans and Practices Presented the organized data along with an attempt to Study the prevailing Human Resource Practices in the Banking Industry.

Chapter V- Conclusions and Recommendations Provided Conclusions and Recommendations arising out of the above detailed Research Study. The, Study also incorporates: -Bibliography -Appendix I: List of Sample Banks -Appendix II: Questionnaire -Appendix III: List of RBI Committees from 1990-2008 -Glossary
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