AROHAN

A New Age Urban Focused MFI

Amit Kumar Dutta Roll No. U210002 Ex-PGP 201013

Overview of the Company In 2006 Arohan Financial Services Limited started microfinance operations and since then the Company is providing financial services to urban and rural population following Joint Liability Groups (JLGs) methodology. The Company provides small tickets loans for tenure of 45-57 weeks without any collateral security. At present Arohan is operating their business in West Bengal and Bihar with two products viz. Saral Product (for economically active women) & Bazar Product (for vendors in the authorized markets selling household commodities, generally perishables). By March 2014 Arohan aims to reach 2million customer with a portfolio of Rs. 15,000 million. 1.00 Background Microfinance is a manpower intensive industry and other than capital human resource is the most important factor for its growth. Therefore PEOPLE is the most important and valuable resource for Arohan as in the form of its employees. Employees are the pillar of Aroahn as dynamic people can make dynamic organizations. Effective employees can contribute to the effectiveness of the organization. Competent and motivated employees can take their company at the highest peak of success and enable an organization to achieve its goals. Therefore success of any micro-finance organization is greatly depends on its human resource management system. The systematic attention to human resources is the only way to increase organizational efficiency in terms of productivity, quality, profits and better customer orientation. HR can help in delivering of organizational excellence by focusing on learning, quality, teamwork, and through various employee friendly strategies. MFIs need strong human resource, not only recruit them but also retain them. One of the major challenges for a MFI is its high attrition rate. Many MFIs are also seriously considering the attrition problem. To achieve their goal a strong group of employees is essential. Another challenge for Arohan is to hire right people at right time in the middle level as well as senior level management. 2.00 Objectives The project aims at evaluating the overall Human Resource management System and to assess its contribution towards the accomplishment of the mission and objectives of Arohan. The study will also improve the work performance of field officers by helping them realize and use their full potential in carrying out organization's mission. In addition of that it also provides feedback to the management and identifies the areas where development efforts are needed to bridge the gap. 3.00 Research Methodology In line with the objective of evaluating HR system all the HR personnel were interviewed and policies were also reviewed. In addition of that both resigned as well as existing staffs are interviewed. Among all 100 employees (including 40 resigned employees) physical interview was conducted for 56 respondents across 10 districts in W.B and 6 districts in Bihar. Telephonic interview was conducted for rest of 14 employees. We

have visited 25 branches including 7 branches in Bihar while conducting interviews of active field officers. 4.00 Role of Human Resource Department Initially when Arohan started its microfinance business that time there was no separate HR department but with the continuous growth of the organisation the need of a separate work group was felt and in middle of 2008 HR department has been formed. At present HR department in Arohan is a well defined department handling near about 1,200 employees successfully. The department is headed by the General Manager, Mr. Ayan Chatterjee, who has a degree in management from IRMA and also has a post graduate degree in international human rights and refugee law. Prior to join Arohan Ayan has 10 years of experience in HRM. Beside Ayan total 12 people are also backing up HR department for accomplishment of HR functions. Out 12 employees in HR 2 are in the position of manager and handling 5 executives each. Both the managers are professionally qualified and have an experience in HR function in more than 3 years. All the executives have an prior exposure in working in HR department. In addition of that some of low level work of HR department has also been outsourced to the external agencies. In Arohan the activities of the HR department is being broadly classified into following categories: Human Resource Planning Framing Human Resource Policies Recruitment and Selection Processing Salary, Incentive & other benefits Performance Appraisal System Induction, Training & Development

The responsibility of establish HR related objectives and policies are primarily lying with the general manager of HR department. However before deciding any policy related to human resource they have also consult the issue with respective general manager of the operation. Further if there is any major issue then decisions are being taken after consulting the matter in the meeting of the SMG held on monthly basis. Two major resources for any microfinance organisation are capital & people and without timely supply of both these resources the growth of the organisation is badly affected. Beside operation the manpower requirement of other departments like accounts, IT etc. are very low. Out of total manpower 95% manpower of the Arohan is representing field staff who actually run the business and therefore requirement of field staff is crucial. Typically they are not very educated and low level staff. There pay packet is also not so attractive even though their jobs are very laborious. Organisation could not be opened branch office if HR not able to provide branch head as well as field officers on time and the growth of operation is totally depends on performance of HR department. In comparison to field staffs HO staffs are qualified and get an attractive pay packet. Therefore recruitment of field staff and to sustain them in Arohan is the main challenge for HR department.

5.00 Human Resource Planning For HR planning HR department seat with line managers on quarterly basis and they also take the help of operating people at the time of mass recruitment as well as at the time training and development of new as well as existing staff. They just facilitated the process of recruitment, selection and training & development functions with the help of operation people. The logic behind the strategy is that the line managers are in a better position to select their people and providing require training as they have better domain knowledge about their work. Arohan has a standard system of HR planning. The main focus of HR planning is to forecast the number of field staff as well as the people in the level of middle management. As the staff strength of each branch is standardised in Arohan (1 branch head and 6 field officers) HR planning is basically quantitative in nature and forecasting of the field staffs are corelated with the number of new branches that Arohan is going to open in next few years. Yearly plans are bifurcated into monthly plans and monthly requirement of field staff are decided after considering due promotion of the field staff. Estimation is being done with respect of other operational staffs on the basis of certain assumptions and thumb rules such as one Area Manger for 10 branches, 1 Monitoring Officers for 5 branches and 1 Executive for 5 Monitoring Officers. However other than field staff there is no systematic approach by which requirements of other departments are decided. Forecasting is being done on ad hoc basis as decided by the corresponding line manager. After job analysis each individual position the job description as well as job specification are being done with respect of field staff. However there is no readily available job description and job speciation for other staff. In Arohan there is an opportunity for a field staff to be promoted as a monitoring officer or as a branch head. Similarly a branch head gets an opportunity to be an area manager. However inconsistence in such promotions affects the HR planning adversely. Further high attrition rate of field staff is also a major problem for Arohan like other MFI. It also affects HR planning badly. In addition of that it has been observed that other functional department like accounts, IT etc. are not able to perform their duty efficiently as they are not able to recruit right person on right time. Further another challenge for Arohan is planning for the middle management and the senior management positions as it is very difficult to get right people for those positions. As microfinance sector has scaled up it would be very difficult to get experience people within the industry. Further the number of business institutes and management schools are very rare who can produce people with required skill and knowledge. The supply of graduates from IRMA, IIFM & XIMB is inadequate. In addition of the graduates within the organization prefer to join in a bank instead of in any MFI. Therefore the only alternative is to promote existing staff. However in that case because of lack of professional qualification it would be difficult for them to contribute effectively and efficiently. To address the issue Arohan has taken a decision to sponsor people over the level of

executive for some management MDP. During last six months they have send 2 Area Managers for MDP program organised by IIMC and XLRI. Considering the different type of challenges Arohan may look after the following alternatives for solution:

Prepare a calendar for promotions so that inconsistence related to promotions of field staff can be reduced. In addition of that carrier planning and career concealing of prospective employee may also be helpful for successful planning of promotions. In this case Markov Analysis could have been done for better planning. Flow model may also be used for account for the attrition of field staffs as it helps us to reduce the error margin while estimating the attrition. Job analysis requires to be done with respect of each and every position of staff working in different functional departments. Job description and job specification should be decided and documented for HO staff. As the size of support staff is not so big, work life study as well as Delphi technique can be used for effective HR planning.

6.00 Recruitment & Selection In case of field staff Arohan has a standard criteria and processes and recruitment is being done on mass scale as required for the huge expansion plan of the organisation. Sourcing of candidates are mainly done through advertises in the local newspapers. In addition of that candidates are sourced through employee referral scheme. Further leaflets for recruitment are also distributed among the customer for their reference. However in case of area manager Arohan does not have a policy to recruit area managers from outsider. All the area managers are being promoted within the organisation from the post of branch manager as the position requires at least one year experience in core microfinance operation. The selection process comprises written test, test of public speaking and group interview. Selection criteria is being standardised with respect of qualifications and experience. Most of the selected candidates are higher secondary pass and some of them are also checked through an external agency. In case of middle and senior management levels, generally sourcing of the candidate is being done through advertisement in different job portal like naukri.com, microfinancegateway.org and also through personal reference. Selection process comprises 1st round interview, one day branch exposure visit, psychometric tests and also a final round interview at least by two GMs (General Managers). However the selection criteria for middle level and for senior level staff is not standardised and the success of right selection is totally depends on the panel of interviewer. In absence of clear selection criteria as well as qualification for middle level and senior level position Arohan suffers a lot to recruit right people on right time. Further response from professionals is also very low as they prefer to join in banks instead of any middle level MFI. To overcome this issue job analysis of each position under middle and senior level management is require to be done and selection criteria need to be fixed on the basis of job description and job specification. Further graduates

from IRMA, XIMB can also be considered for middle level management and are recruited through campus interview.

7.00 Rewards & Compensation In Arohan all the field level jobs are standardised and well structured. Reward and compensations of filed level staffs provided according to their grade and 95% of the employees are field level staff. Quarterly incentives are decided on the basis of customer acquisition, portfolio size and rate of recovery. The objective behind such type of incentive structure is the strategies for rapid growth. Further subsidies are also provided for food and lodging by reimbursing salary of cook, cost of gas, room rent of field officers. Increments are made on yearly basis after considering the market rates. For that salary of other MFIs are compared. Other than field staffs salaries are not structured at all. Salary is being decided on case to case basis after considering academic qualification as well as experience and therefore it varies individual to individual. Yearly incentives as well as increments are decided after taking feedback from the immediate superior. Therefore chances of lobbing as well as politics are high. 8.00 Performance Appraisal System The overall performance appraisal system of Arohan with respect of field staff is moderate. Process of promotion comprises feedback from immediate superior, written test on policy and processes and an interview. However in case of other categories of staff promotions are being done on the basis of recommendation of departmental head which encourage lobbing as well as politics within the organisations. 9.00 Maintenance & Retention of Staff Because of the typical nature of work Arohan is facing a problem of high attrition rate. To overcome such problem management has taken a lot of preventive measures by which they can motivate their staff, maintain an employee morale and job satisfaction. As a part of such corrective measures different type of events are organised like inter office football tournament, cultural evening, area-wise get together, yearly picnic etc. In addition of that company is also providing support to their employees through personal loans and advance. Further several facilities like PF, Insurance (life & accident) and ESI etc. are also provided to bring security. 10.00 Training & Development The induction program of Arohan for its field staff is very well designed and structured system of induction for its field staff. Induction programs comprise class room session as well as branch exposure visit and all the candidates require attending 21 days induction program. At class room session the mission and vision, organizational structure, processes and procedures and basic concepts in MIS and accounting system are

discussed. During the training detailed operational policy as well as job responsibilities are provided. In between the class room session they are sent to the branches for on job training where are accompanied by one of the experienced field staff who assist the candidate to learn his/her duties and responsibilities. After completion of branch exposure another round of class room is being organized to evaluate their knowledge and skills as required for their job. However for other category of staff Arohan does not have structured training program. They are directly deployed in jobs after 5 days branch exposure visit. In case of internal promotion within the organizations a 7 days class room sessions are organized before put into them on charge. In addition of that short term training is also being organized frequently for developing soft skills as well as analytical skills of existing employees. In Arohan HR department is playing a role of a facilitator to organize and design induction program. The hired the operation people like area manager, manager and GM (General Manager) within the organization for training. However in some cases professionals are being hired for providing training on communication and attitude. Even though Arohan has a well designed and structured training program they are facing following problems which need to be addressed for fulfil the objective of training Less application of training skills in practical field Field staffs are not able suits their self for training because of their low academic qualifications. inappropriate selection of participants Training is not being conducted on time because of non-availability of trainer The middle and senior level manager does not have adequate time for participation Lack of skills in the middle level management To overcome the above mentioned issues following suggestion can be considered:

Before selection of any training program need assessment is

recommended and for that requirement of organisation as well as requirement of skills for a particular task is need to be analysed. After that training should be designed according to the requirement of a particular staff. This process will increase application of skills imparted through training program.

Initiative to offer part time courses to acquire formal academic

qualifications may be helpful to develop the overall knowledge base of the field staff. For that tie-up with different universities and institutions is recommended. A dedicated team of trainer needs to be developed so that schedule of training would not be affected.

 As it would be very difficult for middle level as well as senior level

staff to manage time after they get into their work an induction program should be designed so that training would be provided before they put into the jobs. Further they may be sent for a short term MDP organised by different management schools and in this case it may be used as a motivational tool. 11.00 Executive Summary The overall HR system in Arohan is moderate. In specifically all the HR processes related to field staff is well designed and structured. However for other categories of staff there is a huge opportunity of improvement. As the organisation is going for a major expansion they need a chunk of field staff and considering the present HR system it would not be difficult for Arohan. Further to cope up with the high attrition rate Arohan has already taken different corrective measures and at present they are able to control such attrition rate remarkably. However for handling a large scale of human resource Arohan also requires to hire professionals in middle level as well as senior level of management. For that Arohan need to structure their HR processes like HR planning, recruitment & selection, training & development, appraisal system etc. To decide the need of human resource in middle as well as senior level management job analysis requires to be done for each individual position. As the size of support staff is not so big, work life study as well as Delphi technique can be used for effective HR planning for middle level as well as senior level staff. Selection criteria should be determined on the basis of job description and job specification. A schedule for induction requires to be designed after need assessment of organisation, position and also the prospective candidate. Reward & compensation should be decided on the basis systematic job evaluation. Increment, promotions and also incentives should be decided after systematic performance appraisal of the candidate. For that different method of appraisal such as ranking method, 360 degree appraisal, critical incident method etc. can be used. In addition of re-structuring HR processes related to middle level as well as senior level staff following suggestions are being recommended for the overall improvement of HR functions: For better planning of human resource a calendar for promotions require to be prepared to reduce inconsistency in promotion. In addition of that carrier planning and career concealing of prospective employee may also be helpful for successful planning of promotions. Further Markov Analysis could have been done for better planning. Flow model may also be used for account for the attrition of field staffs as it helps us to reduce the error margin while forecasting manpower requirement. Before selection of any training program need assessment is recommended and for that requirement of organisation as well as requirement of skills for a particular task is need to be analysed. After that training should be designed according to the requirement

of a particular staff. This process will increase application of skills imparted through training program. Initiative to offer part time courses to acquire formal academic qualifications may be helpful to develop the overall knowledge base of the field staff. For that tie-up with different universities and institutions is recommended.

Introduce 360 degree feedback system as a tool of performance appraisal so that lobbing as well as politics within the organisation can be reduced. Create a specialist team of trainer to provide better quality of training.