You are on page 1of 16

CHANGING WORK CULTURE IN INDIAN BANKING SECTOR

ABSTRACT:
Due to Liberalization, Privatization and Globalization (LPG), every sector
(especially of developing countries like India) is facing drastic changes and banking
sector is not the exception here. All the changes like from manual to information age,
local markets to globalization, from production to customer orientation, from human
resources to business partners etc. have changed the work culture of the banks in the
changing scenario. To develop and maintain a positive work culture has become a key
success factor for the people-oriented organizations like banking. Some trends that
fundamentally altering the banking industry are: globalization of operators, economic
reforms, development of new technologies, universalization of banks and increasing
competition etc. these changes reflect the work culture is reflected in a paternalistic
management style which generates a tender mindedness that is associated with a
reluctance to take bold decisions and see them through to the end. To develop and
maintain a positive work culture within the banks, following strategies are being adopted
by various banks:
• New Philosophy of action
• Human Resource Development (HRD)
• Changing role of HRM
• Transfer of functions of HRM to all middle managers
• Role of Govt. as intermediary
• A close connection with company’s mission
• Changing role of managers
• Employees on a participative and democratic culture within the organization
• Strong concern for adding value within the banks
• Effective work force
• Morale Boosting
• Voluntary retirement scheme (VRS)
• Strategic Human Resource Management (SHRM)
Introduction

India is among the top most developing countries and our economy is growing at
fast pace and resultantly everything is now more dynamic. Every sector is facing the
dramatic changes due to various reasons and Banking is not the exception here. Indian
Banking Industry is facing all the changes mainly due to increased competition and
technology transformation in the light of LPG (Liberalization, Privatization,
Globalization).
There has been a paradigm shift in the Indian Banking Sector since early 1990’s
due to various reasons like increased foreign investments, higher volatilities in interest
rates, exchange rates and commodity prices and secondly due to challenges in terms of
new banking products and players and restructuring systems etc.. And all these changes
and challenges call for a new, more dynamic, aggressive, innovative and challenging
work culture to meet the demands of brand values, reputation building and maintenance,
customer relationships, corporate governance, product differentiation and regulatory
prescriptions etc.

Changing Scenario of Banking Industry

Banking is the backbone of every economy. It is not a new concept rather it is in


existence from the ancient times in one form or the other. Without efficient banking
system, no organization or business whether that is small or big, can survive and grow in
today’s world of change. But what, when the banking sector itself is facing a plethora of
changes with the changes in our economic, legal and political, cultural, demographic and
socio cultural environments. There are various factors which are transforming from one
state to another, which are described as below:
1. From Local Markets to Globalization. Our old local regional vision of
banking sector is now giving way to a new global economic and business
vision. The new demand is: think globally and act locally. Banks were used to
deal with restricted or concentrated markets, but now they are becoming
accustomed to deal with business from a new global perspective.
2. From the Manual to the Information Age. Work performed in every
organization by human beings is being replaced by work at computer
terminals. And instead of working with things, people increasingly work with
ideas and concepts. Information and knowledge have replaced outdated files
and papers as the source of most new jobs.
3. From Stability to Change. Static, permanent banks designed for a stable and
predictable world are now giving way to flexible, adaptive organizations more
suited for a new world of change and transformation. Emphasis on
permanence, tradition and the past is giving way to creativity and innovation
in the search for new solutions, new processes, and new products and services.
Maintaining the status quo is less important than a vision of the future and the
organization's destiny. Banks now use to deal with certainty and
predictability.
4. From Solitary to Synergy. Teamwork is supplanting individual activity. The
old emphasis on individual efficiency (on which the total efficiency of the
organization depended) is being replaced by group synergy. It's a matter of
multiplying efforts, rather than simply adding them. Banks are now
emphasizing more on collaborative and team work rather than individual
efforts.
5. From Production to Customer Orientation. In the past, the product or
service was the most important element. Now, the customer to whom this
product or service is targeted has become fundamental. Now, an externally
focused vision for the customer who is going to use that product or service
predominate the product and services. In the past, the product/service was the
goal. Banks were used to work with the products and services, but now they
are shifting towards looking after the customer's needs.
6. From Agents to Leaders. The old autocratic, authoritarian, people-
controlling bosses are becoming democratic leaders and people promoters.
Formal hierarchical authority is being replaced by such modern concepts as
motivation, leadership, communication, interpersonal relationships, and
development of high-performance cohesive work teams. Employees are
becoming accustomed to work with leaders who move, motivate and stimulate
workers.
7. From Bureaucracy to Participative style. The rigid organizational hierarchy
with its monolithic chain of command is giving way to integrated team
networks based on autonomy and flexibility. Rigid departmentalization is
being replaced by flexible organizational structure -- business units and profit
centers that change rapidly. Banks which used to work as mechanical,
bureaucratic, vertical and pyramidal organizations are now feel the need to
become accustomed to work as organizations that grow and change as if they
were alive. The bureaucratic style of management is now transformed into
democratic and participative style.
8. From Direction to Orientation. The traditional hierarchical notion of
authority based on vertical imposition of orders and instructions is giving
place to democratic leadership based on the organization's mission and vision.
Blind, reactive obedience is giving place to spontaneous, proactive
collaboration, and employee commitment.
9. From Full-Time to Part-Time Work. Work carried out with total and
exclusive dedication to a single organization or bank is coming to an end. It is
being replaced by work carried out at any time, and at any place, to the extent
that workers are becoming suppliers for various activities and various banks at
the same time. The old concept of a job with a single schedule and a formal
job description is being supplanted by a new concept of work that typifies the
digital age. Part-time work, remote work, and virtual work constitute these
new forms of human activity.
10. From Specialization to Multitasking. The traditional division of employees
with its consequent fragmentation of activity is evolving toward more varied
and integrated work. Compartmentalization is changing to a systematic
holistic vision, unified rather than separate. Employees who were used to deal
with division of labor and task specialization are now becoming accustomed
to work in teams and with holistic organizations.
11. From Human Resources to Business Partners. In the past, human resources
were considered passive agents of the company. Now, employees are
considered active and proactive agents of the business they manage together.
In the past, workers were considered an organizational resource. Now, they
manage the company's organizational resources. A resource is only a thing.
But people are human beings with minds, talent, motivation, and the proactive
capacity for decision-making. They can no longer be considered only as
objects.

Reasons Behind The Changes

A strong fact about change is - ‘No change occurs without any reason/ cause’.
And the same is true in the case of banking sector. Following are the major reasons that
cause these changes to occur:
1. Economic Reforms: Not only the banking sector, rather every sector of our
country is going through major changes as a consequence of economic reforms.
Indian economy is getting hammered, mainly due to inflation. Since January, the
rupee has weekend 9%, stock market capitalization has shrunk 32% and inflation,
at 13%, is at a 13 year high. Due to these reforms, changes occur in ownership
patterns, availability and utilization of funds, opportunities to earn profits, range
of service etc. and all these changes in banking industry directly affecting the
work culture.
2. Competition: The ongoing developments in Indian industry, integration of India
with global markets and entry of new competitors (especially foreigners) due to
economic reforms, all lead the competition at the deadly stage. Due to which new
customers are entering in the industry and expectations of new and existing
customers are constantly changing. So, there arises an urgent need to introduce
new products/services. And old products need to be delivered to the customers in
some new and creative way. As a consequence of competition, banks may have to
reorient their resources, as the managerial challenge includes reformulate market
segmentation, innovative ways of product positioning and innovative delivery
channels.
3. Demographic Changes: Expectations of Indian customers are continuously
changing due to demographic shift. Changes in the employment and income level,
lifestyle aspirations, education level etc. are changing the profile of Indian
customer. The Indian customer now seeks to fulfill his lifestyle aspiration at a
younger age with an optimal combination of equity and debt to finance his full
consumption and creation of assets. This all leads to the growing demand for
competitive and sophisticated retail banking services. And also the customers are
not just belonging to the union territories; rather they are also present across small
towns and rural areas. And this becomes major challenge in front of work force
to identify the needs of different customers, to retain and satisfy all the customers.
4. Industrials Relations in Bank: Industrial relations become a major issue in
banks these days. Some researches shows highly volatile and sensitive issues/
conflicts in the banks which require proper handling with utmost care, faith and
caution. The work culture in the banking industry is deteriorating at a fast speed
instead of improving. And in such an environment, especially in service oriented
industry like banking, it is totally impossible for one to gratify. There are also
some other factors which require proper care and attention under this section are.
• Trade union
• Union rivalries
• Overtime
• Frauds
• Collective Bargaining
• Managerial efficiency
• Changing role of HRM
• Knowledge workers
• Training & Development etc.
2. Developing Technology: As the consequences of LPG, new technologies are
continuously entering into our market. So, acquiring and developing the right
technology, deploying it optimally, and then leveraging it to the extent, is
essential to achieve and maintain the best efficiency standards, while remaining
cost effective and to deliver the sustainable return to the stake holders becomes a
key challenge for the Indian banking sector. Banks are developing alternative
channels of delivery like ATM’s, tele banking, remote access & Internet banking
and as this is the era of information technology, now every manual work is got
replaced by computers. Not only in private sector but also in public sector now.
And some employees are now don’t require to come into their offices daily, they
are doing/completing their tasks through internet in their homes as their duties
includes communication over all policies and procedures with the other
employees sitting across the boundary of our country . They are involved only in
maintaining linkages with other branches of the bank across all over the world.
See how the work culture paradigm is changing. And high-technology telecom
systems are also emerging now. As maximum number of users are now rely on e-
mail, fax, cellular phones and teleconferencing etc. to facilitate communication
across borders and to reduce the time to process information and to change the
documents form one language to another. This automation effects job design,
skill requirement and number of employees required etc.
3. Original Restructuring: Indian baking industry continues to face some structural
challenges due to the consequences of globalization. Indian banks are also getting
globalized now i.e. Head office in one country, policy formulation in some other
country and sales, distributions and services close to customers in some other
countries. Almost every bank has the branches all over the world or in some
different countries.

Instability of work environment is taking place due to mergers, acquisitions and


takeovers etc. These issues of emergence of cross-cultures are putting a tremendous
pressure on the minds of employees. In order to help their organizations service,
employees have to become more competitive. Very often they have to compete outside
their local environment/markets and against unfamiliar players according to unfamiliar
cultures and conditions. The level of ambiguity and risk is continuously increasing and
this creates the need to recognize the importance to understand the characteristics of
different cultures and markets and to learn about making adjustments to them.

Strategies for changing work culture:

As now we know that there are number of factors behind the changes in work
culture. So, it is totally impossible to restrict those changes. What is in the hands of
management is to adjust the work culture of their own organization according to the
demanding needs of the environment. And as it is understood that work culture is totally
formulated & reflected by the employees working in that organization (i.e. all from top
level to lower level) and to develop a positive work culture within the organization, it is
very necessary to attain & retain most innovative & outstanding employees as it gives
both effectiveness & efficiency to the working of the organization. With the changes in
the external environment of the banking sector, also the employees objectives, both at
societal & individual level, has undergone the drastic change with the passing of years.
So, it lies with the responsibility of HR department that how they can mould their present
policies and strategies as the changing strategies of the organization as a whole to
develop the best talent and knowledge of workers in their organization to maintain
positive work culture. Work culture in Indian Banking Industry dictates a distinctive
style of transformational leadership, which has been called the ‘Nuturant-Task
Leadership’ style. It presents a plausible picture of the average Indian’s resistance to
change, their willingness to accept the authority and accountability, but unwillingness to
delegate. Due to all these reasons, it becomes a key challenge for HR departments to
develop a positive work culture within their organizations even when there are already
lots of challenges present in front of them due to external changes. Entire bank culture is
now needed to be changed into a more performance oriented culture, a view which fitted
in with the popular trend mainly focusing on “soft” aspects of management. In light of
all the above mentioned factors, every bank is trying their best, and for this the key
human resources objectives are:
• A motivated and well trained staff geared to performance
• Control and authority of staff by line managers with personnel support
• Work culture where family concept is practiced among employees
• Receptivity to new ideas
• Opportunities for experimentation
• Facilities which support growth
• Record cordial industrial relations

And with a view to fulfill all these objectives following are the some strategies,
which most of the Indian banks are implementing:

1. New Philosophy of action: Most of the banks are now replacing the old
concept of HRM with new term that is gaining more acceptances, namely,
‘People Management’. According to this change, banks are now considering
their employees as more humane rather than as organizational resources. Their
activities, knowledge and individual differences are now respected because
they are endowed with unique personalities and intelligence. And this new
philosophy even goes beyond this, some more advanced organizations do not
even talk about managing people, because this concept could imply that
employees are nothing more than passive agents which are handled and totally
dependent upon the decisions of top level management. They profess the
philosophy not as ‘managing people’, rather as ’managing with people’, which
shows that their employees are their business partners, rather than as mere
foreign elements attached with their banks. And according to this concept,
people now at all levels are considered to be responsible for all of the business
activities. There is an increasing consensus that workers/employees of their
banks are their real partners. Moving jointly with employees is a way to move
towards a conceptualizing business.
2. Human Resource Development: Banks are now understanding that the
capital and technology considered to be the most important pillars of banking
are replicable, but not human beings, which need to be viewed as a distinctive
competency of every organization. The skill level, attitude and knowledge of
the personnel play an important role in determining the competitiveness of a
bank. So, the primary concern of every bank is now to bring a proper
integration of HRM strategies with business strategies. There is now a faster
move towards cohesive teamwork and environment of creating commitment
to improve the efficiency of human capital. More than operational skills
today, banking call for ‘soft skills’ to fulfill the needs and requirements of the
customers at the counter.

3. Changing role of HRM : The role of HRM in banks is changing at very fast
speed, i.e. from hiring and firing to relationship building, from dictating to
guiding and coaching from protector and screener to strategic partner and as a
change agent. This all is because they accepted the truth that until the
employees are emotionally inspired from job design and job satisfaction,
working relations cannot be improved further for effective job performance.
All the internal and external changes in the environment lead the HRM from
‘push oriented’ (creative) to ‘pull-oriented’ (proactive).
4. Transfer of functions of HRM to all middle managers: Functions like
selecting, braining, performance, evaluation, maintaining relations and pay
etc. were the primary activities of HR department. But now banks have
accepted the truth that managing people is a strategic activity. Now, managers
from various areas are becoming managers of people, and they are gaining full
autonomy to make decisions and take actions with respect to their
subordinates. Managers are gradually becoming empowered to act as
managers of their human resources also. Every manager is now considering
his own responsibility for managing his own subordinates.
5. Role of Govt. as intermediary: To accelerate the pace and extent of
economic reforms, the Central Government, despite its own political
constraints, is calculatedly marching ahead by bringing out suitable
amendments to the outdated labor legislations/statutes at the same time
protecting the interests of work force without giving blanket permission to
hire and fire to the industry. Important amendments include: Severance
package of one month, Role of industrial tribunals, Contract labor,
Introduction of strike ballot, Time limit of 3 years for initiating industrial
disputes, Minimum 10% or at least 100 employees to form and register a
union, Reduce number of outside office bearers in trade unions are some
major sectoral policy modifications. Employers hail these amendments as
opening up the Indian economy with tremendous opportunities for industrial
growth, whereas the unions oppose it as being anti-labor.

6. A close connection with company’s mission: Now a days, HR planning is


closely linked with strategic planning, so as to support the organization’s
mission. HRM is becoming involved strategic planning and development so
that people can work pro-actively towards the achievement of organization’s
mission and objective. This means a broader prospective than ever before
which required a personal commitment by every employee of the bank.
Personal commitment here means employee education, commission;
involvement and incentives now become fundamental. HRM objectives are
indicative of such original objectives as profit, growth, productivity, quality,
flexibility and especially innovation, change and competitiveness.
7. Employees on a participative and democratic culture within the
organization: Participative decision-making, continuous consultation,
opportunities for dialogue, direct and open communication, suggestion
programs, use of meetings and award ceremonies, more freedom in task
selection and the methods to carry them out, group work and teamwork, work
schedule options, availability of online information are the methods used by
all the leading banks to adopt a consultative and participative management
style. There is a deep concern with original climate and employee satisfaction
in such organizations. Quality of life became an obsession in successful
companies, because they perceived that the quality of their products and
services was a direct function of the quality of life of the people that made or
provided them. What does "quality of life" mean in this context? It means
good salaries and benefits, adequately defined tasks, a healthy organizational
environment, democratic and efficient leadership, high motivation and
continuous feedback. It means rewards for productive contributions such as
psychological effort, intense communication and interaction, continued
education, and all the rest. A worker cannot have a good quality of life within
an organization or bank, if he or she does not enjoy these conditions. Nor can
the worker enjoy this quality of life outside the company, if it does not exist
within. "Quality of life" creates the psychological state necessary for the
employee to produce quality work for the company in return. The change is
worth the investment. A happy worker works better and produces much more
than an unsatisfied, rebellious worker.
8. Changing role of managers: A role of manager in every bank is changing as
the changing demands of the work culture. Following table indicates the role
of a manager in past and present scenario:
Manager’s role in the past Manager’s role at present
Listening and suggesting Taking responsibility for employee’s
decisions
Dictating Guiding and coaching
Being critical Supplying resources
About giving guarantees Giving honest feedback on objectives and
performance
Being bureaucratic Being democratic and participative
Providing direction Providing orientation
Focusing on original objectives Holding with balancing employees and
original needs
Considering employees Just as Considering employees as business
human resources partners

9. Strong concern for adding value within the banks: In new world of change,
there is an effort towards creating value for the customers and more emphasis
is now on making profits that add wealth. This emergent process of adding
value can be called a synergic effect. According to this concept, the critical
element is that each director is interested in making the organization more
valuable; each manager is interested in training people better; and each person
is interested in increasing the value of products and services delivered to
customers. The goal is to increase stockholder’s assets, satisfy customers, and
increase the value of human capital. HRM is vitally involved with educating
people and increasing their awareness of what it means to generate value
within the company.
10. Effective work force: The most time-consuming and hectic job, not only in
banks but also in every organization is to hunt the right talent. It is the similar
process as to sit by the side of river and wait for the right fish to catch.
Because the professional education and value is increasing, search for the
right candidate is becoming difficult. Banks are keenly interested to fill up
two types of professionals. Ones who are outstanding professionals with high
job hopping attitude - these are those who come in - work for some time and
then leave for better prospects. Others are those who are keenly picked-up,
trained and are some how retained to be developed as future management
within the bank. This is the reason, that Management Trainees are a growing
popular phenomenon where freshly qualified business graduates are engaged
by banks and a certain percentage of these well equipped professionals stay
back within the organization to grow into the footsteps of senior managers.
The hiring process has been facilitated by specialized hiring agencies who
may take up the job of hiring in case of large number of vacancies
11. Morale Boosting: As described above that ‘attaining’ right person is the tuff
job, but side by side, we cannot ignore ‘retention’ of right candidates. Banks
are continuously implementing different strategies to boost the morale of
employees because creating a positive work culture, increasing efficiency and
productivity satisfying customers etc. will remain as a dream unless there is a
feeling of high morale among the employees. Human beings even if satisfied
of material well being need to be praised and encouraged constantly. Smart
banks are realizing this need and taking steps to keep their work force
motivated through proper encouragement like –
• Man of the month award
• Repeat get-together
• Conferences/Workshops/Trainings
• Cultural Events
• Dinners
• Company sponsored sight seeing tours
• Pensions etc.
12. Voluntary retirement scheme (VRS): The VRS is initially introduced in the
banks because it was felt that most of the banks are over-staffed and 65-70%
of the total operating costs account for establishment expenses and on
rationalization of manpower. This scheme was implemented by public sector
banks. It was observed that while there is a growing need for competitive and
innovative employees having the knowledge of modern technology, foreign
exchange, venture capital, e-commerce, money management and e-banking
etc., it is also essential to rationalize the existing manpower. So, keeping this
requirement in mind, banks have implemented VRS policy which allows
employees to go on voluntary retirement providing them with suitable
financial package as compensation or incentives. But as and when the staff
strength reaches at a level, known as threshold level, the VRS is withdrawn
because the staff strength reaches the required level. In case of non-
compliance of the conditions stated in the VRS policy, an employee can
approach the industrial and civil court against the management. But this
remedy is available only to the persons working in the public sector and not
for the private sector employees. The main objectives behind this scheme are:
• To achieve optimum human resource utilization
• To optimize return on investment
• In implementing the VRS scheme, management shall ensure that
it is extended primarily to such employees whose services can be
dispensed with without detriment to the organization. Care shall be
exercised to ensure that highly skilled and qualified workers and staff
are not given the option, because there will be no recruitment against
vacancies arising due to VRS.
13. Strategic Human Resource Management (SHRM): The term ‘HRM’ is
now transforming into ‘SHRM’. Being strategic, here, simply means obliging
the HR goods and initiatives to the organization’s objectives that HR be
proactive and focuses on the future by providing inputs towards formulation
of business strategy and creating workforce plans and programmes in
alignment with the strategy. SHRM is largely about integration and
adaptation. Its concern is to ensure that:
i) HRM is fully integrated with the strategy and the strategic needs of the
firm
ii) HR policies have full consistency over both policy areas and
iii) HR policies are adjusted, accepted and used by line managers and
employees as part of their everyday work.

SHRM practices are macro-oriented, proactive and long term focused in nature, views
human resources as assets or investments and not as expenses.
Benefits of a Strategic Approach to HR are:
• Development of high-quality workforce through focus on types of people and
skills needed.
• Cost-effective utilization of labor, particularly in service industries where labor is
generally of greatest cost.
• Facilitates planning and assessment of environmental uncertainty, which helps to
cope up with changes in external factors.
• Identification of strategic needs.
• Employee participation is critical to linking strategy and HR practices.
• Development of systematic and analytical mindset.
• Impact on organization's efforts to launch strategic initiatives

Conclusion:

The Indian banking sector is thus at an exciting point in its evolution. Due to the
changes that occur in the environment, Indian banks are facing lots of challenges but also
there are immense opportunities in front of the organizations. All these challenges and
opportunities are playing an important role in changing the work culture of the banks.
The core values, mission, vision and mode of conduct etc. that form the basis of work
culture also heavily reflected and influenced by the fast changing environment. Due to
the consequences of liberalization, privatization and globalization, the role of HRM has
been totally transformed. There is a growing need to change the workplace practices
within the banks to cope up with the changes. Development of human resources is worthy
of higher priority. Smart banks are now more pro-active in the area rather than merely
respond to problems. Technical and supervisory training, new communication strategies,
employee relation strategies, changing role of personnel and line managers etc. are all
efforts towards the development of positive work culture. To develop a positive work
culture is the challenge and opportunity in front of every bank to survive and grow in the
world of change. The only way to manage the survival and success of the organization is
to manage the workforce and work culture effectively and efficiently.

You might also like