A SYNOPSIS ON

COMPARATIVE ANALYSIS OF HR PRACTICES IN PUBLIC AND PRIVATE SECTOR BANKS IN INDIA

In partial fulfillment for the award of the degree Of

MASTER IN BUSINESS ADMINISTRATION

In Human resource management

MANGALAYATAN UNIVERSITY, ALIGARH

MAY 2011

INTERNAL SUERVISOR Mr. Ankur Aggarwal

SUBMITTED BY

Priyanka Jain
Enrollment no. 2007EIT043

CONTENTS
1. Introduction...3 2. Problem identification.....6 3.Significance of the work...7 4. Review of Literature...9 5. Objectives of Study...10 6. Hypothesis...11 7. Research Methodology...12 Research design

Sampling technique

Sample size

Data collection

Steps / Statistical technique for data analysis 8.Organization of the study...14 Bibliography

INTRODUCTION

Even though Human Resources is a relatively modern management term coined in the 1960s, the importance of Human Resource Management can be traced back to Vedic ages! Yes, in The Bhagavad Gita, Lord Krishna not only makes Arjuna spiritually enlightened, but also teaches him the art of self management, anger management, stress management, conflict management, transformational leadership, motivation, goal setting and many other aspects which are now essential parts of any HRM curriculum. Over recent years there has been an increasing interest in the field of human resource management. Currently, the literature encourages the consideration of human resources as strategic factors, not only because they play important role in strategy implementation, also because they are beginning to be reckoned as sources of sustainable competitive advantage. Relationships between human resource

management and productivity have been studied from different perspectives. Without doubt, Human Resource Management (HRM) is one of the company functions that has experienced significant changes over the last few decades. To understand the differences in the practices regarding human resource management it is necessary to examine the historical development of the institution of these practices. The main HR practices that will be covered in the study are Recruitment, training and placement, Employee Retention, Performance Management. As Mankidy (2000) observes, in Indian banking, from a stage of extreme exploitation of employees prior to the 1940s, the industrial relations process unfolded itself into labour militancy and crises in the 60s and 70s. Most of the human resource management practices in the industry, such as salary structure, promotion, transfer, placement, etc are the by-products of this reactive process. In the 1940s the

management could extract work out of employees as there was a fear of losing the job due to the scarcity of jobs elsewhere. The employees had stretched working hours and low remuneration and there was much discontent with salary and working conditions. A landmark in this period was when the Bank of India Staff Union called

the first ever strike which lasted 17 days. This led to the Divatia Award that provided employees with a number of facilities such as a pay scale, annual leave, gratuity etc that were hitherto absent. This led to many awards covering bank employees in different states as banks were under state regulation. The passing of the Industrial Disputes (Banking and Insurance Companies) Act in 1949 brought banks under the central government and uniformity in human resource practices began from then onwards. The subsequent disputes between bank

employees under the umbrella of the All India Bank Employees Association (AIBEA) and bank managements led to a series of prominent awards such as the Sen Award of 1950, Sastry Award of 1953, and Desai Award of 1962. The Industrial Disputes Act allowed for settlements covering only the clerical and subordinate staff and the collective bargaining which started in the early 1960s led to the evolution of a bipartite relationship in the industry. The industry wise uniformity in service

conditions and salary for officers in nationalized banks began with the Pillai Committee Report in 1979. The All India Bank Employees Association that had always fought against computerization in October1993 for instance agreed to signing a Memorandum of Settlement with the Indian Banks' Association that allowed banks to introduce information technology. There are many differences in public and private sector banks in India. First, the growing asset base of the private and foreign banks means that they are increasingly able to attract deposits away from the public sector banks despite the large number of bank branches that public sector banks have. private and foreign banks were increasingly able to raise these deposits at more favourable net interest rates their share of net interest income which was 16.99% in 1995-96 improved to 20.23% by 1999-00. Second, the private and foreign banks have been aggressive in making expenditures that are provisioning and contingency related. This reflects possibly more sound risk-management practices and given that their capital adequacy ratios have been much higher it has contributed to making them safer financial intermediaries, thereby enabling their borrowing at lower interest rates, which contains their interest expenses. The trend growth of turnover per employee is 12.5%

for the SBI group, 12.8% for the nationalized banks, 25.2% for the private banks, and 15.1% for the foreign banks for the decade.

PROBLEM IDENTIFICATION
Public and private workforces differ in important ways. Over the last 20 years, the earnings for state and local employees have generally declined relative to comparable private sector employees. The pattern of declining relative compensation remains true in most of the large states we examined, although some state-level variation exists. Wages and salaries of public sector employees are lower than those for private sector workers with comparable earnings determinants (e.g., education). Public sector employees typically earn 11 percent less than private sector workers The practices of managing human resources at the officers' level are different in the public sector banks and the other banks. The practices regarding compensation, i.e. rules governing pay and pay raises, benefit structures and the practices that centre around training, staffing, hiring and selection, and job design differ substantially. To mention a few differences, public sector banks, structure compensation in such a way that there are lower differentials between employees, long-term tenure is rewarded, and there is a high base pay. In the private and foreign banks there are larger pay differentials, fewer rewards for tenure, and individual incentives are high. Finally, in terms of the practice of work organization public sector banks have relatively narrow jobs with a steep hierarchy whereas the other banks have broader jobs and a relatively flat hierarchy. Also due to these HRM differences the customer service is poor in case of public sector banks as compare to private sector. Hence I choose this topic to identify the factors which leads to such differences and thereby providing optimal solution for it. Therefore this study aimed to identify such differences in public and private sector banks. It will also reveal difference in HR practices in both the sector and their good and bad consequences on both the sectors.

LITERETURE REVIEW

The literature has emphasized the important role played by the human component in the competitiveness and response capacity of organizations, and this is reflected in numerous publications and research studies that have appeared in recent years (Barney 1991; Barney and Wright, 1998; Wright et al., 1994). According to this view, human capital is proposed as one of the key resources on which companies build their competitive advantage (Becker and Gerhart, 1996; Boxall, 1996; Tyson, 1995). As firms are entering into a more dynamic world of international business and as the globalization of world markets continue apace, comparative HRM issues appear to be gaining momentum. Both practitioners and academics in the field of HRM are increasingly aware of the need to examine and understand the HRM system suitable to different parts of the world. They are also interested in finding relevant HRM policies and practices for different types of organizations (for example, public/private sector, manufacturing/service sector) around the globe. HRM practices are central to improving the quality of services offered by the government .In the words of Pfeffer (1994), .having good HRM is likely to generate much loyalty, commitment or willingness to expend extra effort for the organizations objectives. Moreover, Stone (1998) remarks that. HRM is either part of the problem or part of the solution in gaining the productive contribution of people. The current study aims to test empirically the impact of eight HR practices on employee performance in a developing country Indian commercial banks. This is crucial for developing appropriate management practices. It can also become an important training tool for expatriate managers. The increased probability of having to manage in an international situation demands the conduct of more comparative HRM research (Boxall, 1995; Brewster et al., 1996; Budhwar and Debrah, 2001; Budhwar and Sparrow, 2002).Barney (1991) felt that firms could develop strategic

capability and for attaining this, the strategic goal will be to create firms, which are more intelligent and flexible than their competitors. The human resource management function has emerged as one of the most important areas of organizational practice. It has not been developed in isolation but rather in the context of industrial change and economic development. The uniqueness of HR requires a totally different type of attention from management. The HR function has the characteristics that provide the greatest challenges as well as opportunities. Shikha N Khera in her research paper concluded that if the public sector banks in developing countries like India are able to successfully implement HR practices, they could achieve the maximum contribution of their employees like private sector , although, at present, the economic and political environment within which HR practices in pubic sector operate is not that conducive. The significant relationships shown by her study between HR practices and firm performance (employee productivity) are consistent with institutional theory and the resource-based view of the firm (Tolbert and Zucker, 1983; Baron et al., 1988; Barney, 1991; Wright, McMahan and McWilliams, 1994).HRM practices are found to show a considerable positive impact in affecting performance. Clearly, the HRM performance link that has been demonstrated in the Western hemisphere also exists in the Indian context. She give five critical motivational issues in banking today : (1) performance management, (2) equal pay demands for comparable worth,(3) training and development, (4) how to best motivate individuals, and (5) providing competitive compensation beyond Similarly Errol D'Souza, Professor , Indian Institute of Management, Ahmedabad concluded in his study that The challenge for public sector banks accordingly is to upgrade technology, downsize, shift the composition of the employees towards officers, introduce multitasking, and a stronger link between pay and performance. Private and foreign banks have been investing heavily in technological upgradation so as to provide better customer support and manage assets better. The turnover per employee in the private and foreign banks also improved over the decade and relative to the turnover per employee of public sector banks by the end of the decade it was twice the figure for the beginning of the decade private and foreign banks improved their efficiency relatively faster during the course of the decade.

SIGNIFICANCE OF THE STUDY

The results of the study conducted by Shikha N. Khera strongly support the research question as there is significant relation of employee productivity with human resource practices including selection, employee benefits, compensation, training and staffing practices. Thus, through the use of strategy-based HR policies and practices, banks create a more competent and committed workforce, which in turn provides a source of sustainable competitive advantage. HR policies and practices help to sustain the level of competence that is created by banks. HR practices. This implies that bank cannot simply improve the quality of its human resource by pumping in more training dollars or recruiting employees at the eleventh hour when industry conditions shift or market demand changes. The managerial implication is that building a firms Human resources is a long-term commitment. Banks that resist trimming employee training or recruitment budgets during economic hardships are more likely to recover faster and build a more sustainable competitive advantage when market demand improves. The study also found that the banks with high disciplinary action were not able to reap a sustained performance advantage, as indicated by the significantly negative association with employee productivity. Overall, the results suggest that HR configurations that are more difficult for competitors to imitate generally had positive relationships with bank performance.

OBJECTIVES
The study aims to determine the following facts and the reason behind each of these:1.) Differences in HR practices in both sectors. 2.) Degree of Job satisfaction and job switching in both the sectors banks and the reason behind it. 3.) Effect of above differences on the growth rate of both the sector banks.

HYPOTHESIS
The study will be based on the following assumptions: There will be remarkable differences in the working environment and HR practices of both public and private sector banks. There will be considerable differences in the degree of job satisfaction and job switching in both the sectors. .

RESEARCH METHODOLOGY
To achieve the objectives of the study I have decided to use following elements of the research:-

RESEARCH DESIGN
I have decided to use analytical design to carry out my research including surveys and facts-findings. It will also include study of past literature of different organizations. The main purpose of descriptive research is to describe the state affairs, as it exists at present. In business research we quite often use the term. Ex-post facto research for descriptive studies. The main characteristics of this method is that the research has no control over variables, it can only report what happened.

SAMPLING TECHNIQUE
Judgmental sampling technique is used in which both public and private sector bank are included in equal proportion.

SAMPLING SIZE
Sample size is estimated to be 100 people from both public and private sector banks.50 people from 5 private sector banks and 50 people from 5 public sector banks.

DATA COLLECTION
PRIMARY DATA :Primary data can be collected by Questionnaire and pre-designed Personal interviews with the HR people of different organization. SECONDARY DATA:-

Internet and existing literature of different organization can be a source of secondary data. The surveys previously carried out in this respect can also be a source of secondary data.

STEPS TO ANALYSIS DATA

Appropriate tools and procedures will be used to analyze the data collected.

ORGANISATION OF STUDY
CHAPTER 1. Introduction and problem identification 1. Need and significance of the work along with managerial understanding and applicability.- The scope of the study will be discussed in this section. 2. Review of Literature - The study already conducted in this respect is mentioned in this section.
3. Objectives of Study The aim of the study is discussed in this section. 4. Hypothesis The assumption of which study is based is discussed. 5. Research methodology

Chapter. 2. Conceptual framework of the study

Detailed explanation (theory) about the theme / subject area of the study will be given.

Chapter .3. Data analysis and interpretation

This will include data analysis and interpretation after making thorough use and application of appropriate statistical techniques as mentioned in chapter one.

Chapter. 4. Finding and conclusion

The results of the surveys and the research conducted is mentioned in this section.

Chapter .5. Suggestion and recommendation along with future implication of work
On the basis of findings suggestions are given in this chapter.

Appendices

Bibliography/list of references

BIBIOGRAPHY
Shikha N. Khera (DSM Business review Vol 2, 2010 ) Human Resource Practices and their Impact on Employee Productivity: A Perceptual Analysis of Private, Public and Foreign Bank Employees in India. Pfeffer, J.( Boston, MA: Harvard Business School Press.1994), Competitive Advantage through People:Unleashing the Power of the Work Force, L Sparrow, P.R. and Budhwar, P. (1997), .Competition and Change: Mapping the Indian HRM Recipe against World Wide Patterns., Journal of World Business, Vol.32, No.3, pp.224-42..