IMPACT OF HUMAN RESOURCE DEVELOPMENT ON ORGANIZATIONAL EFFECTIVENESS-WITH SPECIAL REFERENCE TO THE BANKING INDUSTRY

Synopsis of the thesis for award of Ph.D. Degree submitted to
Bharathiar University

Name of the Research supervisor : Dr.R.Venkatapathy
Name of the Researcher : R.Rani Geetha Priyadarshini

SCHOOL OF MANAGEMENT AND ENTREPRENEUR DEVELOPMENT
BHARATHIAR UNIVERSITY, COIMBATORE - 641 046

Introduction

Over the years, organizations the world over have increasingly become aware of the importance of human resources. The real life experiences substantiate the assumption that no matter how sophisticated and modern the business activities of the organization may become, it will find it extremely difficult to sustain its growth and effectiveness unless its human resources are complementary to its operations. It has been realized that dynamic people can build dynamic and growth oriented organizations and effective people contribute to the effectiveness of the organization.

Trends in the Indian Banking Industry

The banking system of India has been rapidly transformed in the post-nationalization era. During the last two decades, new dimensions have been added to the banking system to provide it an absolutely new face. Indian banking has not only witnessed a phenomenal expansion in scope and volume of business but also a profound qualitative change in its styles and systems of functioning. The geographical expansion has gone hand in hand with the functional specialization of banking business. The society has recorded fast, continuous and sweeping changes in banking practices. There have been unprecedented changes in the role of banks and community's expectations of bank men. (Mathur, Navin and Vadera M.L., 1993.)

The banking system has significantly assumed the character of need based and purpose oriented activity from that of profit oriented and security- based activity. This is due to the highly interdependent forces of competition, technology and changing expectations of the clients. The traditional banking of transforming liabilities or deposits to assets or loans has now expanded to include aspects like logistic support for their customers for collection of receivables, tie-ups with other service providers to
facilitate bill payments and providing customized solutions to customer segments
(Pradhan Atul ., 2001).

Though the banking industry is exposed to similar technology and information there has been a rapid difference in the performance of the banks. It would be interesting to understand the reasons for the differences in their performance. Research studies have classified banks based on their performance classifying them into top and low levels of performance using a few criteria. The classification is based on their financial performance criteria. It is worthwhile to understand what really attributes to the performance of the organizations. The banking industry too is exposed to similar attributes. The hidden factors that manipulate the performance of the various nationalized and private banks into top and low performing nature for which one of the facilitating factors is the Human resources. Human resource factor is the backbone of the organizational structure of the Indian banks - which undertakes the crucial responsibility of transforming its operational system into the modern one that suits to the present requirement. However the fact that there is direct relationship between the level of organizational structure and the level of commitment of its Human resources to the targets of achieving organizational objectives could not be ignored.

Impact of HRD on organizational excellence

In the management of organizational excellence, the HRD culture becomes one of the most important variables of human behaviour. Components of HRD culture in the form of attitudes like trust in human capabilities, belief in their potential, respect for their dignity etc., result in a set of behaviors, which act as pay offs for effective and efficient policies and programmes of management of development. HRD policies would help to integrate the needs and aspirations of individuals into the strategic objectives and the mission of the organization, while at the same time providing for individual needs, concerns and interests. HRD becomes indispensable if the growth and development of people working in the organization is related to the growth and development of the organization itself. ( Rao, 1990)

Impact of HRD on organizational effectiveness in the Banking Industry

In spite of the rapid technological reformations, human resource remains the
backbone of the organizational structure of Indian banks - who undertake the crucial responsibility of transforming its operational system into the modern one that suits to the present requirements. In a service-oriented industry like banking the manpower is the key input and serious focus has to be given on Human Resource Development so as to enable the existing banking system to successfully meet the emerging challenges in the coming years. (Sharma J.K and Rajpurohit R.C.S., 1993). It has to be recognized that 80% of what any bank does can be done equally well by any other bank because virtually all banks have access to the same information, the same resource and the same technology. The only basis left upon which the banks can compete is the other 20% and that 20% is the people factor - how well the bank utilizes its human resources compared to its competitors.

This makes employee the pivot of the banking services and neglect to develop his latent potential, failure to motivate him or failure to develop collaborative process amongst employees can severely jeopardize the process of banking itself. Thus HRD is not merely a moral compulsion for bank management but a business necessity.

Case for the study

The HRD approaches assume relatively greater importance in banking industry for several reasons:

• It is an industry in which considerations of personalized customer service are paramount; this is possible by the quality, work attitude and the performance of the employees.
• The recent growth and diversification of the banking industry has brought in adoption of appropriate changes in work technology, particularly by way of computers and mechanization of important banking practices which is only made possible by the human factor.
• Being an industry, which provides wide-ranging services, both financial and non-financial, it requires appropriate training programs to develop requisite type of professional skills amongst its employees.

Banking industry in India has to face many challenges, which can be adequately met only with the energetic assistance of professional bankers of high competence with high commitment. Such an emerging situation clearly demands creation of a climate of openness and trust for promoting a dynamic culture based on both human competence and high quality of life within each bank. Thus when excellence of work is the target, there will always be more to be done in HRD, particularly in the direction of orienting the bank's work ethos and culture to their goals and value system. (Shekewat G.S., 1993).

Objectives of the study:

Recognizing the impact of HRD on organizational effectiveness and the importance of HRD in the Banking industry, it has raised an impetus to study

• The extent of HRD practices in the Banking industry.
• The extent of organizational effectiveness in the Banking industry.
• The HRD practices and its impact on organizational effectiveness among the officials belonging to different categories of banks.

Research Questions:

Based on the above considerations, the following research questions were formulated:

• Would there be any difference between the respondent's scores on HRD with respect
  to High and Low performance and categories of ownership?
• Would there be any difference between respondent's scores on Organizational
  Effectiveness with respect to High and Low performance and categories of
  ownership?
• Would there be an impact of HRD on the organizational effectiveness belonging to
  High and Low performance and categories of ownership.

Hypotheses

Based on the research questions and the dearth of studies in this area, the following Null hypotheses were formulated:

1. The officials belonging to Top and Low performing banks would remain homogeneous on their scores on HRD.
In that,

The officials belonging to Top and Low performing banks would remain homogeneous on their scores on

(i) Role Analysis
(ii) Induction
(iii) Performance Appraisal
(iv) Potential Appraisal
(v) Counseling
(vi) Career planning
(vii) Training
(viii) Quality of work life
(ix) Organizational Development

2. The officials belonging to Nationalized and Private banks would remain homogeneous on their scores on HRD.

In that,
The officials belonging to Nationalized and Private banks would remain homogeneous on their scores on
(i) Role Analysis
(ii) Induction
(iii) Performance Appraisal
(iv) Potential Appraisal
(v) Counseling
(vi) Career Planning
(vii) Training
(viii) Quality of Work life
(ix) Organizational development

3. The officials belonging to Top and Low performing banks would remain homogeneous on their scores on organizational effectiveness.

In that,
The officials belonging to Top and Low performing banks would remain homogeneous on their scores on
(i) Immediate supervision
(ii) Management leadership
(iii) Compensation
(iv) Feed back and Growth
(v) Working conditions and Job demands
(vi) Perception of quality
(vii) Communication
(viii) Productivity and Decision making
(ix) Personal morale and motivation
(x) Organizational values.
4. The officials belonging to Nationalized and Private banks would remain homogeneous on their scores on organizational effectiveness.

In that,
The officials belonging to Nationalized and Private banks would remain homogeneous on their scores on
(i) Immediate supervision
(ii) Management leadership
(iii) Compensation
(iv) Feedback and growth
(v) Working conditions and job demands
(vi) Perception of quality
(vii) Communication
(viii) Productivity and decision making
(ix) Personal morale and motivation
(x) Organizational values.

5. The scores of the respondents on HRD would influence that on organizational effectiveness with regard to each of the private, nationalized, top and low performing categories of banks.

Methodology

Sampling

Indian banks rated as Top and Low performers for the year 2001 (as per Business Today's Best Banks 2001') is the population for the study. Out of the top 25 top performing and 25 low performing banks, 5 banks each belonging to nationalized and private ownership with at least 2 branches in the urban area were considered. The categorization resulted in
i) Top performing nationalized banks
ii) Top performing private banks
iii) Low performing nationalized banks
iv) Low performing private banks
From such banks, officer and manager cadre employees with at least 5 years of experience working in urban branches of the bank were constituted to be the sample. For the purpose of uniformity, responses were confined to 10 from 15 to 20 responses collected from each branch. Hence from a total of 324 responses, 200 complete responses were collected from 20 banks with equal number of 5 banks in each category.

Instrumentation

The instruments used in the study are:
a. Human Resource Development Questionnaire (HRDQ)
HRDQ (Venkatapathy.R & Rani Geetha Priyadarshini.R, 1995) was developed with an extensive research to elicit the extent to which the various HRD dimensions like Role Analysis, Induction, Performance Appraisal, Potential Appraisal, Performance Counseling, Career Planning etc are practiced in any organization. This instrument is made of statements representing each dimension reflecting the practice of each of them.

The HRDQ consists of 87 statements covering the following dimensions:
(i) Role analysis
(ii) Induction
(iii) Performance Appraisal
(iv) Potential Appraisal
(v) Counseling
(vi) Career Planning
(vii) Training
(viii) Quality of work life
(ix) Organizational Development

The reliability co-efficient of each of the nine dimensions is as below:

The HRDQ was also checked for its face validity. The respondents rated the statements on Likert's 4-point rating scale ranging from strongly agree to strongly disagree. The maximum possible score is 348 and the minimum score is 87.

b. Organizational Effectiveness Questionnaire (OEQ)

OEQ (Venkatapathy.R & Rani Geetha Priyadarshini.R, 2002) was developed to elicit the extent to which the various factors of Organizational Effectiveness (OE), namely work motivation, leadership, decision-making, employee satisfaction, cohesion and work environment influence the effectiveness of an organization. Further dimensions representing the above factors were framed namely, Immediate supervision, Management leadership, Compensation, Feedback and growth, Working conditions and job demands, Working conditions and job demands, Perception of quality, Communication, Productivity and decision making, Personal morale and motivation and Organizational values.

The OEQ consists of 99 statements measuring the ten dimensions of OE namely.

(i) Immediate supervision
(ii) Management leadership
(iii) Compensation
(iv) Feedback and growth
(v) Working conditions and job demands
(vi) Perception of quality
(vii) Communication
(viii) Productivity and decision making
(ix) Personal morale and motivation
(x) Organizational values

The reliability co-efficient of each the dimensions of OEQ are as follows:

The OEQ was checked for its face validity. The statements are to be responded on Likert's 4 point rating scale ranging from 1 to 4 depending on how strongly the respondents agree or disagree with the statements. The maximum possible score is 396 and the minimum score is 99.

Analysis

The scores of the respondents on HRDQ and OEQ were subjected to comparison using Analysis of Variance (ANOVA) with respect to the different categories of banks. The impact of HRD on organizational effectiveness with respect to different categories of banks was examined using the co-efficient of correlation.

Results

The analysis has resulted in the inferences:
1. Performances of banks differentiate the HRD scores of the respondents. The respondents belonging to the top performing banks have a higher score on HRDQ on the following dimensions namely:
(i) Role Analysis
(ii) Induction
(iii) Performance appraisal
(iv) Potential appraisal
(v) Counseling
(vi) Career planning
(vii) Training
(viii) Quality of work life
(ix) Organizational Development

2. Ownership of banks differentiates the HRD scores of the respondents. The respondents belonging to the nationalized banks have a higher score on HRDQ on the following dimensions namely:
(i) Role Analysis
(ii) Performance Appraisal
(iii) Potential Appraisal
(iv) Career Planning
(v) Counseling
(vi) Training
(vii) Quality of work life
3. Performances of banks differentiate the OE scores of the respondents. The respondents belonging to the top performing banks have a higher score on OEQ on the following dimensions namely:

(i) Immediate supervision
(ii) Management leadership
(iii) Compensation
(iv) Working conditions and job demands
(v) Productivity and decision making
(vi) Communication
(vii) Perception of quality
(viii) Personal moral and motivation
(ix) Feed back and growth
(x) Organizational values
4. Ownership of banks differentiates the OE scores of the respondents. The respondents belonging to the Nationalized banks have a higher score on OEQ on the following dimensions namely:
(i) Immediate supervision
(ii) Management leadership
(iii) Compensation
(iv) Feed back and Growth
(v) Working conditions and job demands
(vi) Productivity and decision making
(vii) Communication
(viii) Perception of quality
(ix) Organizational values
5. Each of the categories of banks shows a significantly high correlation between the respondent scores on HRD and organizational effectiveness. The highest correlation score being that of the Top performing banks followed by Nationalized, Private and finally the Low performing category of banks.
6. The Top performing banks show the highest mean score on both the HRDQ and OEQ.
7. The mean score of the Top performing Nationalized banks on HRD and organizational effectiveness is greater than all other categories of banks followed by Top performing Private, Low performing Nationalized and finally the Low performing Private banks.

Recommendations
1. The results show that respondents of the private banks have a low mean score on HRD practices and Organizational Effectiveness. Hence the private banks must place emphasis on HRD, which will essentially influence their organizational effectiveness.
2. The low performing private banks have the lowest score on HRD and Organizational effectiveness when compared to that of high performing private banks, high performing nationalized banks and low performing nationalized banks. Hence the Private banks may place greater importance on the HRD practices in the organization.
3. There is a pattern emerging that higher the correlation scores between HRD and organizational effectiveness, higher is the ranking of the banks. In specific, in the study, the scores of the top performing banks have the highest correlation score, followed by that of the Nationalized banks. Hence the low performing banks and private banks may strengthen their HRD practices so that it influences organizational effectiveness and hence their performance.
4. When the different categories of banks were considered, it is seen that the respondents of top performing nationalized banks show a higher mean score on HRDQ and OE than the other criterion group of banks. This calls for organizations to strengthen their HRD practices, which will result in a better performance.

Conclusion
The above considerations explicitly bring about a conclusion that HRD positively impacts organizational effectiveness and hence the performance of banks i.e., as the respondent scores on HRD increases, the scores on OE also increases which further influences the performance of banks.

In this connection it is proposed that firstly, the concept of HRD should be well defined and conceptualized before it is being introduced in any banking organization. Secondly, the executive cadre of the bank should be helped to develop people oriented perspective, re-orient their basic attitudes and behavior Their market oriented and service efficient skills should be honed through training and the top management must instill team spirit and collaborative working in their organizations. Thirdly, the government should shoulder the responsibility of ensuring excellence through he process of appropriate policy formulation, rendering timely guidance and developing accountability in the top management of the banks to initiate appropriate changes, to create a climate of performance in the banks.

References:

Mathur, Navin and Vadera M.L., "HRD in the Banking Sector of India: Some Problems" in " HRD in the Banking sector" ed. Hakku, V.N. and Lalwani J. Sushil., Radha Publications, New Delhi, 1993.

Pradhan Atul ., "Changing trends in Indian Banking", Business Today, May 21, 2001.

Rao T.V., "Excellence through Human Resource Development-Improving Productivity and competitiveness", Tata McGraw Hill, 1990.

Shekawat G.S., " The HRD system in Indian Banking Industry: Approaches, Trends and Perspectives" in " HRD in the Banking sector" ed. Hakku, V.N. and Lalwani J. Sushil., Radha Publications, New Delhi, 1993.

Sharma J.K and Rajpurohit R.C.S., " Role of Indian Institute of Banks in Human Resource Development" in " HRD in the Banking sector" ed. Hakku, V.N. and Lalwani J. Sushil., Radha Publications, New Delhi, 1993.

Venkatapathy R and Rani Geetha Priyadarshini R., "A Study on the extent of HRD practices in the Banking Industry": Research report submitted to National Institute of Bank Management for publication - in the next issue of "Prajnan", 2002.

Venkatapathy R and Rani Geetha Priyadarshini R., "A Study on the Organizational effectiveness practices in the Banking Industry": Unpublished research report, 2002.