Effect of Human Resource Management on the Performance of Private Sector Commercial Banks in Bangladesh: A Study on National Bank Limited

Abstract

There is no denying of the fact that, Banks have become the most important intermediary organization in financial transaction. Being one of the most ancient financial institutions, it has evolved in different format from countries to countries and has served to the monetary need of the people. In present World, due to the expansion of multidimensional economic facets, banking sector is facing some challenges such as earning desired profit, survival through severe competition by competent workforce and providing quality services to the customers and so on. Being an important power in the development process of the economy, the banks require to remain in good health for better performance. Hence, it is necessary for Banks to concentrate both on its financial activities and development of HR to survive in the competing money market. The banking sector in Bangladesh has a rich and eventful history. The banking structure of Bangladesh switched from NCBs to simultaneously NCBs and PCBs in the early 1980s. The beginning of private sector commercial banking was subjected to increase the coverage of banking facilities throughout the country and create a competitive environment for the smooth development of the nation as a whole. As the inherent mission of allowing PCBs is to encourage competition between public and private sector, most of the PCBs have undertaken an integrated approach towards such HRM practices in order to create efficiency among its operational functions. The main focus of the present study has been to examine the effect of the HRM on the performance of NBL in Bangladesh. In this connection various aspects of human resource management like acquisition, training and development, motivation and maintenance have been covered. It also includes various aspects of growth trends of the banking facilities, area wise distribution of bank branches, deposits and advances, income and expenditure, urban-rural position, rural credit, and other important aspects of productivity and profitability performance of NBL. Different service related issues such as ancillary and general services, e-banking services have been covered for the analysis. Apart from those, service related various issues, transaction behaviour of the bankers and time study has also been included under the study. It also tries to identify the HR factors which are influencing the overall performance of the bank. Furthermore it also tries to identify the impact of PCB's HR workforce upon the perception of its customers which have been clustered into various fragments of corporate, business, investors, depositors and creditors. Since, the workforce is the basic mean for Banks to interface with its customers as well as serve them; we have also tried to identify the core values that the customers seek from the employees of the NBL. Apart from the view point of the customers, we have also included the internal players within the banks such as the employees, and executives who have also expressed and evaluated the significance of Human Resources Practices at banking sector. As a method of our research we have followed documentary analysis. Depending on the nature of the study, data were collected from the primary and secondary sources. To get Primary data, we framed different structured questionnaires with different question formats in order to generate responses from the targeted groups. Our total sample size was 250 representing the customers, executives and employees of NBL. Observation method was also used to find out the impact and beneficiaries of HRM in PCBs. Different statistical and mathematical tools have been used in the study for looking at the relationships between the concerned variables. For content analysis, we have taken the time frame of 1985-2005. Although time, manpower and money were the main constraints for the study, the level of errors has kept to the minimized point through discussion, constant revision and consultation. For the research purpose we have selected National Bank Limited (NBL) as our model in order to find out the correlation between the performance of the private commercial banking and the human resources management. Being one of the pioneers in the private commercial banking sector, NBL has provided us with a true picture of existing Human resources practice and the financial condition of the PCBs in terms of growth, profit, productivity, customer satisfaction and meeting the social obligations. Like most other PCBs, NBL was formed to ensure better banking services to the customers and provide banking coverage as well as to increase competitiveness in the banking sector of Bangladesh. The beginning of NBL was jeweled with its twin objective of profit maximization and social responsibility which the bank has been pursuing since 1983. To meet these twin targets, the bank has naturally shifted towards competitive strategies such as innovation of new products and services, expansion of its workforce and bank branches and recently the development and implementation of an effective Human Resources Practice in the on going operation of NBL. However, since we are considering a financial institution, we had to mostly concentrate upon the fiscal performance of the bank in order to evaluate the overall activities. The growth of N BL in regards to its bank branches, workforce, investment, income and expenditure, deposits, loans, advances, import and export have been analyzed in order to evaluate progress of the bank in completing its targets. With the analysis of NBL's growth in various sectors we found that NBL's performance is quite satisfactory. We have also reviewed the existing HRM policy and practice of NBL in order to find out its impact over the performance of NBL. Various aspects of HRM such as acquisition, training and development, motivation and maintenance were analyzed with various indicators such as HRP, recruitment, training, career development planning, performance appraisal, compensation, benefits and so on. The executives, employees and the customers were also interrogated about their perception of the HRM at NBL which has provided us with a holistic view of it. Later on, we have emphasized on the operations of NBL which is the core competence of the PCBs and significantly depended upon the efficiency of the HRM. We have reviewed various services of NBL such as collection of deposit, providing loan and advances, e-banking services and other miscellaneous services and tried to find out any correlation between service quality and effective HRM. Since the biggest priority of the banks is considered to be maintaining the continuous social service as well as achieving growth, profitability, customer service and productivity, we had to bring these topics under discussion also. We used various indicators to measure these areas which lead us to the finding that NBL's performance is quite satisfactory in regards to productivity, profitability and social responsibility. In the later part of the thesis, we have tried to identify the existing issues regarding the performance lapses of NBL. From the responses of the customers, employees and the data collected from secondary sources, we have identified a number of problems for NBL among which some noteworthy issues are due to improper planning of bank branch expansion and branch distribution disparity, negligence over the workforce, lack of modernization, lapses in performance appraisal, promotion policy, recruitment procedure and some motivational factors. Apart from finding these issues, we also tried to come up with a number of recommendations which we hope can assist the bank in addressing such issues and have a positive effect upon the performance of the bank. It is undeniable that HR can have a significant effect upon the performance of NBL as well as other PCBs. However, without a properly planned and perfectly executed HR strategy it is not possible for the banks to accomplish their short and long term goals. Hence, PCBs like NBL should switch towards a holistic approach regarding its HR policy, practice and planning as well as its other functional areas in order to achieve the maximum output through the integration of these complementary aspects. Their policy and planning needs to be modified which should prioritize proper expansion and equal distribution of their services through adequate number of bank branches proportionately distributed in the nation. They should also modify their HR acquisition policy in order to cope up with the understaffing as well as employee stress management. Apart from these recommendations, modernization of their service and improvisation of their training facility should also be given importance which would ultimately lead the bank towards better and efficient performance in all its functional levels. Ultimately, the government agencies of Bangladesh especially Bangladesh Bank, Ministry of Finance (MOF) should also come forward in the aid of the PCBs through ensuring a better economic stability, proper monitoring facilities as well as developing and implementing time be-fitting economic policies. Apart from these external factors, the PCBs should engage themselves in continuous pursuit of their twin objectives through establishing these external as well as their internal business policies into a reality up to the grass root level of banking hierarchy.