Chapter 1: Introduction

1.1 Introduction: Meaning and definition

The position of companies and business activities is difficult in nowadays’

dynamic and variable world. Requirements of the market are top
efficiency, optimal adaptation In an perspective. The performance of a
company becomes currently a very topical theme. Its content includes all
corporate activities that need to be cohered to get a result with a functional
and prosperous company with a long term perspective.

(Pavelková, Knápková, 2005) According to Synek (2006), human resource

management is the one of the key company activities and its purpose is to
lead employees to high productiveness, affect their quality and structure of
their job corresponding to increasing demands of the market business
environment.

Veber (2011) represents leadership as community mobilization, initiation

and motivation of executives’ involvement and their development. In the
current period, banks are in the center of attention. According to the public
general, the most significant part of crisis origination is attributed to banks.
On European politicians discuss about need to regulate the bank managers’
income and additional taxation of banks.

At the same htime, conditions for the credit risk management of the
banking sector are getting worse because of the adverse economic
development.
These factors create an enormous pressure on the performance of the
banking sector and can cause a decline in firms and households financing,
which may have a negative effect on the economic growth (Bučková,
Reuse, 2011). Croxford (2005) emphasizes the important role of the bank’s
 employees in the process of selling bank products for the retail segment.
According to him, bank sales clerks are one of elements, which customers
see in the bank and can strongly influence their opinion. Bank employees
have the primary opportunity to increase the value of customer
relationships. Author emphasizes also that bank employees need quality
management.

In these continuities, it is necessary and appropriate to examine potential

opportunities to increase the efficiency and competitiveness of the banking
sector by increasing the

quality of human resource management. In this context, leadership style in

the company plays a decisive role. In the article, managerial priorities of
branch managers is examined, the prevailing leadership style in the
banking sector of Slovakia is defined and an impact of leadership style of
bank’s sales clerks on the possibility of improvement of their individual
productiveness.(Jaroslav)

 MEANING:

Leadership is unique. It occurs when an individual with the right motivations

meets the right opportunity. Some people maybe all, have the qualities of
leadership but never get the chance to demonstrate them. They wait their whole
life for that single situation that forces them to reach deep down and find the
courage to step outside what’s comfortable. But naturally, most people fear the
unknown. They fear the ridicule of taking a stance or an unpopular position.
So instead, they wait for someone else to step forward and take that chance.
Often times the person that steps forward is ostracized as a “non-team player”
because they don’t conform to popular wisdom. Just look at the way some
groups make decisions. In the long run their vision can direct the company to
new opportunities. Leadership involves: establishing a clear vision, sharing that
vision with others so that they will follow willingly ,providing the information,
knowledge and methods to realize that vision, and coordinating and balancing
the conflicting interests of all members and stakeholders. A leader steps up in
times of crisis, and is able to think and act creatively in difficult situations.
(meaning and importanceof leadership)

DEFINATIONS:

 “It is interpersonal influence exercised in a situation and directed through

the communication process towards the attainment of specialized goals.”
-Robert Tannenbaum

 Majtán (2005) defines the leadership as the ability of managers to persuade

others to enthusiastically pursue the objectives set. He defines three basic
leadership styles based on level of leadership skills: directive style, liberal
and participative style. The prescriptive style is characterized by the
application of the manager’s will regardless of the subordinates’ opinions.
The participative style is characterized by a bidirectional communication
between a leader and subordinates. The liberal leadership style lets a great
deal of freedom in the proceedings of employees, so they are very
independent. The applied leadership style significantly affects the
employees’ productiveness in their jobs. Individual employee motivation
 is largely dependent on the style of management and leadership, which is
applied in the job process.

 “Leadership is influencing people to follow in the achievement of a

common goal”Koontz O’Donnell.(A study on style of banking sector)

 According to Bass and Stogdill (1990), Leaders differ in their concern for the

groups' goals and the means to achieve the goals. Those with a strong concern

are considered to be task oriented

 Leaders also differ in the extent to which they pursue a human relations

approach and try to maintain friendly, supportive relations with their

followers. Those with a strong concern are identified as relations oriented

(Katz et al., 1950), concerned for people (Blake & Mouton, 1964), people

centered (Anderson, 1974; Bass & Stogdill, 1990, p. 472).

1.2 Features/Characteristics

 Leaders demonstrate genuine respect for others

This is perhaps the fundamental trait of an effective leader. If those around
you perceive a lack of respect for them – they’ll never respect you.

 Leaders demonstrate honesty and integrity

“Lying” may be too strong a term. Actually honesty – or the lack of it –
in organizational terms is more subtle. It’s how willing a person is to
 dabble in the grey area. Did you ever hear someone justify a situation by
saying – “I didn’t lie – you didn’t ask me.”

 Leaders are confident and courageous

Confidence is contagious. It’s also rare. Especially in large organizations
where things become paralyzed in decision making because there are so
many layers and levels of approval – it’s refreshing for someone to step
out of bounds once in awhile.

 Leaders are influential

Unless a person can influence others to follow their vision, they’re not a
leader. Leaders have that something extra that gets others to buy into their
ideas and jump aboard.

 Leaders are decisive

Employees will gravitate towards those who provide clarity and
direction. That requires someone to make a decision. Unless that’s
done the group stagnates – and looks for a leader.

 Leaders are effective communicators

Have you ever listened to someone present and idea when they’re loaded
with enthusiasm and passion – but you’re not exactly sure what they
said?! They know exactly what they mean but somehow it gets lost in the
presentation.

 Leaders establish and reinforce a set of core values

This is an aspect of leadership that few people ever take the time to
think about in business – yet it’s quite common outside work. Many
people have values that guide their life, their decisions – everything.
What’s important to you at work? The next section describes core
values in behavioral terms.
  Leaders are driven continuous improvement
A leader is never satisfied. Leaders are driven by an internal desire
to constantly improve the business, employees, relationships with
customers, etc. Without that desire a group stagnates. Work becomes
ho hum and “good enough” is standard practice.

 Leaders possess and encourage physical, mental and spiritual health

Without a balance in your life you can’t be an effective leader at work. The
two are inseparable. If you neglect your personal needs – family, physical
health, mental health, and spiritual – you’ll lose your edge as a
leader.(characteristic of leadership in banking sector)

1.3 Origin and growth

Emergence of Universal banking system: Services provided by banks have

expanded graphically in the last decade .In addition to the traditional “savings

and loans” .banks started providing a wide gamut of financial services like

insurance, investment ,asset management, etc. which increased their in the

economy.

Economic growth: Over 9 percent GDP growth in the pre global financial

crisis period(2009-10) and over 7 percent in the last two years largely facilitated

the growth of this sector.

Globalization : As India is moving towards closer integration with the world

economy,

India’s merchandise trade, service exports and remittances are growing at a faster

pace .in order to serve these ’new needs; banks have evolved and redeemed

themselves in India and abroad.

Policy initiatives: The Banking Laws (Amendment) Act, 2012 at the monetary

front, and large scale infusion of funds into the public sector banks by the

government in recent years fuelled the growth of this sector.

For the government, the banking sector is at the core of governance. Initiatives like

Jan Dhan Yojana and Direct Benefit Transfer are case in point.

Usage of technology: Information and communication technologies including the

mobile phones and internet connectivity are the prime reason for expanding the

reach of banking sector to the youth and rural habitations.

True leaders work hard to understand and evaluate themselves. They seek honest

feedback from their team and are mindful of their weaknesses. This fosters trust,

develops

relationships and drives results.

The banking industry is changing at an extremely fast pace. Having the strategic

flexibility to adapt and change mid-course is an extremely attractive trait today.

Leaders in the banking industry need to constantly be monitoring and reviewing

products and programs, new technologies, and their market positioning to make

sure their particular bank .

Effective use of informal networks to understand people’s true perceptions can

help leaders of tomorrow. A good understanding of how innovation occurs can

help boost performance and reduce inefficiencies. By developing informal social

circles, customer relationships and networking groups, a core understanding of the

industry will be developed.

All too often employees fail to communicate the potential of risk due to fear of

“rocking the boat”. It is imperative that risk management is implemented by the

leaders of tomorrow, so that everyone on the team is prepared for any unforeseen

crisis. An open and progressive culture and attitude towards any risk or potential

crisis will help prepare the organization for any change in the industry.

The famous fifty-century BC Chinese philosopher Lao-Tzu once wrote, “If you tell
me, I will listed. If show me, I will see. But if you let me experiences, I will learn”
(Chinese, 2010,1).The idea of training and development (T&D) is nothing new to the
twenty-first century, but has rather evolved since the earliest stages of human
civilization and has been gradually refined into the sophisticated process that it is
today. The following will present an overview of the different styles of T&D that have
been implemented throughout history
• Apprenticeships (400s-1400s)- With its origins rooted in the Code of Hammurabi,
the law that governed ancient Egypt (2000 B.C.), apprenticeships were one of the first
types of training practices that became widely used, especially during the Middle
Ages. As trades in the area of craftsmanship became more demanding, most children
of the time were sent as apprentices to live with masters of this form of art who would
share with them the knowledge and teach them the skills they needed to succeed in
this line of work.

• Vestibule Training (1800s)- During the Industrial Revolution, intensive training

became a necessity for all employees who were working in factories, but did not have
all the required knowledge and skills to be able to work with the machinery that
produced the goods and materials needed by the society. In this setting, vestibule
training, understood as "near-the-jobtraining," became an activity that was carried out
within the factory, but in a special separated room that was big enough to store
machines with up to ten workers and their trainer (Vestibule Training, 2010, 1).

• Role Playing (1930s)- First devised by psychiatrist Dr. Jacob Moreno in

the 1910s, role playing became a new method used for training employees
by placing them in the kind of situation they could encounter in the
workplace, but in a controlled environment that did not pose any risks to
their lives. Role playing gave the employee the opportunity to physically
 interact and correctly apply the needed skills to the particular situation
(Role Playing, 2010).
• Job-Instruction-Training (1940s)- Popularized during the years of World
War II, job-instruction-training was specifically designed for "supervisors
in defense plants" to obtain the necessary skills to then be able to train their
own workers in various areas (Job Instruction, 2010).
• Computer-Based Training (1980s)- Initially created in 1959 under a
system known as PLATO, computer-based training (CBT) began to receive
more attention during the late twentieth century. As technology quickly
advanced and modernized, CBT povided individuals with greater
flexibility and interaction as they acquired more knowledge and newer
skills through online channels.

1.3.1 Advantages/Disadvantages/Benefits/Limitations

ADVANTAGE/BENEFITS:

a) ‘Leader Effectiveness’ has a high and significant positive co-relation with

jobsatisfaction

b)‘Leader Effectiveness’ has a significant positive co-relation with ‘job

area’ segment of job satisfaction (overall but not separately in case of
public or private banks)

c) ‘Leader Effectiveness’ has a high and significant positive co-relation

with
‘branch performance’ in case of both public as well as private sector
banks;

d) Leader Effectiveness has a high and significant positive correlation

with ‘branch performance’ in case of both public as well as private
sector banks.
 e) ‘Branch Performance’ has a high and significant positive co-relation
with ‘ job area’ segment of job satisfaction in case of both public as
well as private sector banks

f) ‘Branch Performance has a significant positive co-relation with ‘job

area’ segment of job-satisfaction (overall but not separately in case
of public or private sector banks).

g) ‘Branch performance has a high and significant positive co-relation

with ‘management area’ segment of job satisfaction.

h) ‘Leader Effectiveness’ has a high significant negative co-relation

with ‘personal adjustment’ area segment of job satisfaction (overall
but not separately)
i) It will also help in economic development and eliminated the cost.
At the same time, continued client dissatisfaction is forcing bankers
to reconsider their approach to service levels.

j) It focus on bank safety and soundness become more clear banks will

likely look to move to compliance as a “business as usual” activity

rather thanas series of regulatory responses.

Assets are kept as security for protections.

DISADVANTAGE:

 Inadequate banking facilities: Even tough banks have spread across the

country; still many parts of the country are unbanked. Especially in the

backward states such as the Uttar Pradesh, Madhya Pradesh, Chhattisgarh and

north-eastern states of India.

 Limited resource mobilized and allocated: The resource mobilized after the

nationalized is not sufficient if we consider the needs of the Indian economy.

Some time the deposits mobilized are enough but the resource allocation is

not as per the expansions.

 Lowered efficiency and profits: After nationalization banks went in the

government sector. Many times political forces pressurized them. Banking

was not done on professional and ethical grounds. It resulted into lower

efficiency and poor profitability of banks.

 Increased expenditure: Due to huge expansion in a branch network, large staff

administrative

expenditure, trade union struggle, etc. banks expenditure increased to

dangerous levels.

 Political and administrative interference: Many public sector banks badly

suffered due to political interference .It was seen in arranging loans meals. It

ultimately resulted in huge nonperformance assets (NPA) of these banks and

inefficiency.

 Most companies, when sponsoring employee training, confine the topics to

those which serve the company’s short-term interest.

 Employee training provides the company with many benefits, but it can also
cause financial

strain for some companies.

 Unless the banking company offers the training to all employees, a selection

criterion that is not only objective but also seen as objective remains essential

to prevent loss of morale, discontent, and consequently low productivity and

high turnover from other employees.

 Finally, the assumption of employees remaining loyal and committed in return

for the company sponsoring the training need not always hold true.

1.4 Recent trends and growing importance

• Banks continue to focus on innovation investment to retain and enhance

competitive differentiation.
• As cyber threats increase,banks are investing in secure system
• Banks are increasingly in using cloud service for core business activities.
• Banks will continue to leverage digital technologies to enhance customer
experience.
• Banks are investing in modern core banking solutions to transform legacy
systems.
• Banks are working to full integrate risk management and compliance
practices.
• Banks are focusing on financial inclusion and awareness for business
growth and customer engangement.

• Considering the staggering changes in banking we’ve experienced over the

last decade, it’s safe to say predicting what will happen next is like trying
to guess who is going to win the World Series. We can make some
educated guesses, but — to really hammer the metaphor home — there’s
always a chance a curve ball is thrown our way.

• Customers will soon be gaining more mobile-banking payment and

account options.
“We’re going to see a lot more and different products, and a richer (banking)
experience.
• Banks already are rolling out banking software for iPads and tablets and
thinking of new ways to structure bank accounts
 • Over the past decade, retail financial services organizations have been
reliant on profits generated from increasing consumer lending, whether
through loans, mortgages, or card spending.
• While the credit crunch may have reduced the volume of high net worth
individuals, the growth of the affluent sector.
• While retail banking has seen an influx of new players and new channels,
commercial banks have faced significantly different pressures over the past
few years.

1.5 Key challenges

Not making enough money. Despite all of the headlines about banking

profitability, banks and financial institutions still are not making enough return on

investment, or the return on equity, that shareholders require.

Consumer expectations. These days it’s all about the customer experience, and

many banks are feeling pressure because they are not delivering the level of service

that consumers are demanding, especially in regards to technology.

Increasing competition from financial technology companies. Financial

technology (FinTech) companies are usually start-up companies based on using

software to provide financial services. The increasing popularity of FinTech

companies is disrupting the way traditional banking has been done. This creates a

big challenge for traditional banks because they are not able to adjust quickly to

the changes – not just in technology, but also in operations, culture, and other

facets of the industry.

Regulatory pressure. Regulatory requirements continue to increase, and banks

need to spend a large part of their discretionary budget on being compliant, and on

building systems and processes to keep up with the escalating requirements.These

challenges continue to escalate, so traditional banks need to constantly evaluate

and improve their operations in order to keep up with the fast pace of change in

the banking industry.

Operation and Execution: Internal banking processes must ensure the right debt

to credit ratio and maximize profitability. Cash and liquidity management, savings

and investment management, financing and treasury management are key back

office functions that, if well run, promote long-term stability. Ensuring

confidentiality as well as ineffective organization wide communications still pose

major challenges.

Performance Management: Performance monitoring across departments and

locations will take on greater importance. Financial and managerial accounting,
credit, operations, market risk and internal risk management and regulatory
reporting must all build in oversight.

Product Development: It is the stage where finance institutions analyze existing

product performance and continuously develop new products. To rapidly launch
new products, the entire organization including all branches and customer service
representatives must be fully knowledgeable about new product features.
However, it is challenging for headquarters to quickly distribute product
information due to inconsistent communications environments and geographic
distance. Sales and Service: Campaign execution, point-of-sales management and
postsales communication are key activities. In fiercely competitive environments,
the ability for an organization’s sales team to produce consistently accurate on-
Banking Industry the-fly offerings that look professional is a key to success. To
enhance post sale loyalty, Finance Institutions must present a single unified point
of contact for customers across all product lines.

1.6 Objective of the study

With the growth of technology, banking customers are living in a connected world
with their experience from other industries influencing their expectations from
their financial services provider. This has led to an evolving customer-bank
relationship necessitating banks to be more customer-centric by embedding
themselves in customers’ lives to meet rising customer experience expectations.

However, banks have been facing challenges in meeting customer expectations,

as they are troubled with legacy challenges both in terms of technology and
culture. This document aims to understand and analyze the trends in the banking
industry that are expected to drive the dynamics of the banking ecosystem in the
near future.

On the basis of a theoretical analysis and our own research, the main objective of
the article was to prove a relationship between applied leadership style of branch
managers and productiveness of sales clerks and room for their productiveness
improvement applicable in the banking sector in Slovakia and change these
attitudes during the crisis. One part of the objective was to examine the continuity
between applied leadership style of branch managers and their time in a control
functions held. Dependencies between individual productiveness of bank’s sales
clerks and the level of their loyalty and satisfaction have been investigated.

Our assumption that the applied leadership style depends on the time of working

in managerial functions has not been confirmed. Managers who operate relatively
shortly in managerial functions did not show any differences in their management

priorities and approaches in comparison with long-time managers.