HRD PRACTICES IN BANKING SECTOR-NEED FOR EFFECTIVE ADMINISTRATION

Posted: Oct 16, 2009 |Comments: 0 | Views: 3,481 | 8 Ads by Google

Talent Management SW Leading eRecruitment solution for medium and large companies www.hrmanager.net Sr Jobs in Top Companies High Quality, Hand Screened Jobs in Sales/Mktg/Finance/HR/Tech/Telecom www.headhonchos.com International BBA Course 3 Years International BBA Course in Mumbai. Apply Now ! iifmglobal.com/BBA-Course Looking For A Crown Cork With a Ring Pull For Easy Opening RingCrown Ring Pull Closures www.Finn-Korkki.com The primary apprehension of the bank should be to bring in proper integration of human resource management strategies with the business strategies. It should faster cohesive team work and create commitment to improve the efficiency of its human capital. More than operational skills today are banking call for these soft skills' to attend the needs and requirement of the customers at the counter. Banks have to understand that the capital and technology-considered to be the most important pillars of banking are replicable, but not human capital, which needs to be viewed as a valuable resource for the achievement of competitive advantage. The long-term vision for India's banking system is to transform itself from being a domestic one to the global level may sound far-fetched at present. To take up this industry to the heights of international excellence requires combination of new technologies, better processes of credit and risk appraisal, treasury management, product diversification, internal control, external regulations and human resources at the most. The main challenges faced by Banks in our country are the role played by financial instrumentation in different phases of business cycle, the emerging compulsions of the new prudential norms and bench marking the Indian financial system against international standards and best practices. There is a need for introduction of new technology, skill building and intellectual capital formation. The most important need in this service industry is naturally the HRD. During the early phase of banking development in India after independence, opportunities for employment of the educated manpower were relatively limited. This sector was the preferred employer for the educated persons in the country in addition to civil services. In recent years, this position has changed dramatically. Certain rigidities have also developed in HRD within the banking system as this system is public sector. Its hierarchical structure gives preference to seniority over performance, and it is not the best environment for attracting the best talent from among the young. How well Challenges are met will mainly depend on the extent to which the banks leverage their primary assets i.e., HR in the context of the changing economic & business environment.

Many literature surveys reveal that a paradigm shift is taking place in the role of the HR function in these organizations. There is a real danger of the function itself being outsourced in most organization. The danger comes through the following shifts:

The line manger has become increasingly competent even to handle the matters. The government is seriously thinking of privatization and this leads to a government-protected system, to an environment where it has to be contended with market forces and large corporations with significant brand equity and also follow vastly different HR strategies & practices. Technology is eliminating routine paper activities. Virtual organizations are coming up. HRD Practices in Bank:

Staff Meetings Staff Meeting aims at group synergy, team building, open culture, family feeling and talent recognition which individually and cumulatively benefit the organizations.

Goals/Targets set for the unit/Bank is discussed in the monthly Staff Meetings conducted at all branches/units and action plan is drawn in achieving them.

The forum is being effectively utilized for harmonious functioning of all the branches and administrative units through greater involvement and collective contribution of all staff members. Ads by Google

II Brain Storming Sessions

This is a technique for generating ideas and suggestions on topics of relevance and also to provide alternate solutions to problems by simulative thinking and imaginative power of cross section of employees.

Corporate Topics are selected for each quarter and BSS are conducted in administrative offices/ braches on the topic during every quarter.

Worthy implement able suggestions emanated are circulated for necessary action.

III Study Circle

Concept of Study Circle aims at self development of employees by kindling the desire to acquire/update knowledge, information and experience. Guest lectures/ Power Point Presentation / Group Discussions, etc are arranged on topics of general interest by inviting experts in the field.

Study Circle Meeting are conducted once in two months in administrative offices and once in a quarter in braches IV Quality Circles

It is a time tested tool of Total Quality Management (TQM) which promotes team spirit, cohesive quality work culture, commitment and involvement of employees. CHALLENGES FACED BY THE BANKS:

1. 2.

The real challenge of this sector is the "Indian companies", how to transform into global corporations without losing the positive values and culture that they have developed. As most part of the jobs in this industry is monotonous/repetitive and routine, the HRD Department has to empower, engage and energies employees to create effectiveness & efficiency through motivation organizational structures, systems & procedures are facilitators of these, and there is a need to focus greater attention on these aspects by the industry.

3.

However, the emergence of a core and peripheral workforce in many organization has presented new challenges for HR managers public & private sector organizations are fast becoming diverse communities for core workers, flexibly employed casual and part-time workers, consultants, contractors & business partners.

4.

Certain rigidities have also developed in HRD within this banking system itself because this industry is largely in the public sector. SUGGESTIONS: Following suggestions are very essential to adhere for effective Banking Administration:

1.

HR functions to be linked to corporate goals.

2. 3. 4. 5.

Shift from Industrial relations manager to Business manager or Commercial manager. Team work is another important and essential soft skill that is necessary in this industry. The HR Professionals have to introduce &improve the adaptability of their structure that will be able to absorb, draw and retain the best. As people are primary asset, it is essential not only to invest in them, but also to ensure that the supporting elements for this asset are such that it can provide the maximum value on a sustainable basis.

6. 7.

HRD is to be regularly reviewed against business outcomes as part of strategic and operational planning. To overcome the public sector's hierarchical structure, which gives preference to seniority over performance, is not the best environment to attract the best talent from among the young. RECOMMENDATIONS

1.

It is worthwhile to consider broad-basing the courses conducted in these institutions among other higher level educational institutions, so that specializations in the area of banking and financial services becomes an option in higher education curricular.

2.

There is a need to adopt global best practices in financial sector regulation and supervision and adapt them to the domestic environment. This largely depends on the functioning and policies of public institutions, such as the RBI as it is increasingly subject to public discussion and debate. This calls for greater transparency more effective communication, and a high degree of professionalism in the bank's staff, are the need of the hour. Continuous up gradations of human resources management strategies with a view to enhancing the level of knowledge, sharpening skills are and also to important the necessary and work culture must be installed.

3. 4.

5. 6.

There is a pressing need to develop work practices which encourage efficiency in this banking sector. Incentive structures need to be conceived, supported by appropriate training and motivations, which aligns the employee's goals and orientations with the core competencies and strategic advantages of the institution

7.

This service sector has to explore the feasibility of entering into collaborative arrangements with universities and other institutions in India and abroad to identify and provide specialized training in the financial services industry with an ongoing flow of emerging training packages. Information technology is an area where human resources development is critical fortunately, Indian professionals are world leaders in this area and spirit of co operation and partnership between them in banking industries will result in a strong and modern financial system comparable to the best in

8.

9.

the world. This committee recommended a system of recruitment from open market, including lateral induction of experts. Conclusion: In a nutshell, it is felt that, the changing environment, the forces of globalization and liberalization and the advances in information and communication technology have major HR implications for the RBI as well. Financial products are becoming increasingly complex and diverse, while the markets in which they trade get progressively deregulated. It also possesses both opportunities & threats particularly for this public sector banks.

A healthy HR function in an organization is as important as the physical and mental well being of a human body. Typically the basic reason why organizations prefer to conduct an HR audit is to get a clear judgment about the overall status of the organization and also to find out whether certain systems put in place are yielding any results. HR audit also helps companies to figure out any gaps or lapses and the reason for the same. Since every company plans certain systems and targets, an HR audit compares the plans to actual implementation. The concept of HR audit has emerged from the practice of yearly finance and accounting audit, which is mandatory for every company, to be done by external statutory auditors. This audit serves as an examination on a sample basis of practices and systems for identifying problems and ensuring that sound accounting principles are followed. Similarly, an HR audit serves as a means through which an organization can measure the health of its human resource function. Organizations undertake HR audits for many reasons: 1 To ensure effective utilization of human resources. 2 To review compliance with tons of laws and regulations. 3 To instill a sense of confidence in the human resource department that it is well-managed and prepared to meet potential challenges and opportunities. 4 To maintain or enhance the organization's reputation in a community. An audit is a systematic process, which examines the important aspects of the function and its management, and is a means to identify strengths, weaknesses and areas where rectification may be warranted. An audit is done on sampling basis. And in sampling, not every instance or situation can be examined. An HR audit can be used by an organization for multiple purposes. Some of the more common reasons are:

To identify and address HR-related problems. To seek out HR-related opportunities. To conduct due diligence for mergers and acquisitions.

To support initial public offerings.

How an audit is conducted is very often determined by its intended use. For instance, the type of audit used to ascertain HR practices may be significantly different from the type of audit used to support an initial public offering. Although the areas examined may be similar, the process used and the depth of inquiry will vary from the intended outcome. The audit process The HR audit process is conducted in different phases. Each phase is designed to build upon the preceding phase so that the organization will have a very strong overview of the health of the HR function, at the conclusion of the audit. These phases include: Pre-Audit Information: This phase involves the acquiring and review of relevant HR manuals, handbooks, forms, reports and other information. A pre-audit information request is forwarded to the client who compiles the necessary information for review by auditors. Pre-Audit Self-Assessment: In order to maximize the time spent during subsequent portions of the audit, a pre-audit self-assessment form, if sent to the client can be of use. The selfadministered yes/no questionnaire asks a number of questions about current HR policies and practices. The completion of this self-administered questionnaire allows auditors to identify key areas for focus during the HR audit. On-site Review: This phase involves an on-site visit at the client's facility interviewing staff regarding HR policies and practices. A very in-depth HR audit checklist is completed. Records Review: During the on-site visit, a separate review is conducted of HR records and postings. Employee personnel files are randomly examined as well as compensation, employee claims, disciplinary actions, grievances and other relevant HR related information are checked. Audit Report: The information gathered is used to develop an HR audit report. The audit report categorizes action needs into three separate areas. The areas that are urgent and important (UI), not urgent needs but important (NUI), not urgent but not important needs (NNI)), and important opportunities needs (IO). As a result of this scheme of classification, managements can prioritize their steps. The critical areas The comprehensive HR audit covers all areas of HR management like recruitment practices, training and development, compensation and benefits, employee and union relations, health, safety and security, miscellaneous HR policies and practices-welfare, strategic HR issues, manpower planning/budgeting.

Besides classifying needs in each of the above areas, the HR audit also cites relevant laws, cases and research to support the recommendations. Preparation for an audit Auditor engagement: If external firm carrying out the audit, it is preferable to set terms in writing defining and agreeing on scope .If using internal resource it is better to appoint them formally with clarity on scope and select persons who are non political or those who are not high on hierarchy. Also, if internal persons are auditing there must be training in auditing. Documents, manuals, handbooks, forms and reports auditor must have access to relevant information contained in employee files and other confidential documents of the organization. Auditors must be given unrestricted access to records, once they sign agreement for confidentiality. Data gathering: Completion of a self-assessment questionnaire significantly expedites the audit process and allows for better audit planning. On-site access: The on-site portion of the audit is the most critical. Using audit findings How does an organization use HR audit results? Since the HR audit results are classified, an important aspect is already taken care of. Critical needs should be the first ones to be addressed. Organizations generally have three options for dealing with audit results. * Use the HR audit as a blueprint or action plan for addressing HR needs. * Address as many needs as possible using the organization's internal expertise and resources. * Contract out those need areas where internal expertise and resources are not available or do not fit in the core competencies of the organization. An HR audit is much like an annual health check. It can perform the same function for the organization. An audit is a means by which an organization can measure where it currently stands and determine what it has to accomplish to improve its HR functions. It involves systematically reviewing all aspects of human resources, usually in a checklist fashion, ensuring that the government regulations and company policies are being adhered to. The key to an audit is to remember that it is a tool to discover and not to test. There will always be room for improvement in every organization.

Human resource audits involve a companys strategic actions to take an intensely objective look at its HR policies, procedures and practices. This type of comprehensive review of the companys current state can help to identify whether specific practice areas or processes are adequate, legal and/or effective. The results obtained from this review can help to identify gaps in HR practices, and these gaps can then be prioritized for attention in an effort to minimize lawsuits and/or regulatory violations, as well as to achieve and maintain world-class competitiveness in key HR practice areas.

Overview
Human resource audits are a vital means of avoiding legal and/or regulatory liability that may arise from a companys HR policies and practices. In addition to identifying areas of legal risk, audits often are designed to provide a company with information about the competitiveness of its HR strategies by looking at the best practices of other companies in its industry. In essence, an HR audit involves identifying issues and finding solutions to problems before they become unmanageable. It is an opportunity to assess what an organization is doing right, as well as how things might be done differently, more efficiently or at a reduced cost. In todays competitive climate, companies operate within the confines of a heavily-regulated employee environment. This includes dealing with myriad complex laws and regulations. The scope of the HR function includes establishing and administering a host of policies and practicesmany of which involve compliance implicationsthat significantly influence the productivity and profitability of the enterprise. Just a handful of these are: Benefit administration issues

Disciplinary matters Employee development Employees eligibility to work Interim/contingent staffing Interviewing and hiring Job descriptions Organizational development Payroll management

Performance management Problem or conflict resolution Stress management Substance abuse Team building Termination Workplace violence

Given that many HR departments are both understaffed and overworked, only in retrospect do many companies become aware of the monetary costs of ignoring HR-related legal hot buttons. Noncompliance with applicable laws and regulations involves significant financial risk. To minimize the risk, many organizations purchase employment practices liability insurance. While this is a sound strategy, companies can take other proactive measures. Chief among these is a voluntary HR compliance audit.

HR Audit Defined
An HR audit involves devoting time and resources to taking an intensely objective look at the companys HR policies, practices, procedures and strategies to protect the company, establish best practices and identify opportunities for improvement. An objective review of the companys current state can help you evaluate whether specific practice areas are adequate, legal and/or effective. The results can provide decision-makers with the information necessary to decide what areas need improvement. An HR compliance audit generally consists of two main parts: 1. An evaluation of the companys operational HR policies, practices and processes, with a focus on key HR department delivery areas (e.g., recruitingboth internal and externalemployee retention, compensation, employee benefits, performance management, employee relations, training and development, etc.). 2. A review of current HR indicators (e.g., number of unfilled positions, the time it takes to fill a new position, turnover, employee satisfaction, internal grievances filed, number of legal complaints, absenteeism rates, etc.). An audit usually is conducted by using a questionnaire that asks for the evaluation of specific practice areas. This document helps guide the audit team in scrutinizing all critical areas of a companys HR practices. The audit also may include interviewing selected HR employees and other department managers to learn whether certain policies and procedures are understood, practiced and accepted.

Rationale for Conducting an HR Audit

The changing nature of HR management demands that HR professionals participate and contribute fully to their companies as true strategic business partners. An audit will help a company understand whether its HR practices help, hinder or have little impact on the organizations business goals. The audit also helps quantify the results of the departments initiatives and provides a roadmap for necessary changes. Audits can also help the organization achieve and maintain world-class HR practices.

Types of Audits
An HR audit can be structured to be either comprehensive or specifically focused, within the constraints of time, budgets and staff. There are several types of audits, and each is designed to accomplish different objectives. Some of the more common types are:

Compliance: Focuses on how well the company is complying with current federal, state and local laws and regulations. Best Practices: Helps the organization maintain or improve a competitive advantage by comparing its practices with those of companies identified as having exceptional HR practices. Strategic: Focuses on strengths and weaknesses of systems and processes to determine whether they align with the HR departments and/or the companys strategic plan. Function-Specific: Focuses on a specific area in the HR function (e.g., payroll, performance management, records retention, etc.).

What to Audit
Deciding what to audit will depend largely on the perceived weaknesses in the companys HR environment, the type of audit decided on and the available resources. Keeping a log of issues that have arisen but are not covered in the companys procedures or policies will help identify areas of potential exposure that can be addressed during the annual review process (if they do not need to be addressed immediately.) There are, however, certain areas in which companies are particularly vulnerable. Most lawsuits can be traced to issues related to hiring, performance management, discipline or termination. Some additional risk areas that should be carefully reviewed include:

Misclassification of exempt and nonexempt jobs. Almost every company has job positions that have been misclassified as exempt from overtime eligibility. The complexity of wage and hour laws and regulations makes it easy to err in classifying a job as exempt, thereby exposing the company to liability for past overtime. Inadequate personnel files. A review of sample personnel files often reveals inadequate documentation of performancefor example, informal, vague and/or inconsistent disciplinary warnings. Performance evaluations may be ambiguous, inaccurate or outdated. Personal health

information is often found in personnel files, despite medical privacy laws requiring such data to be kept separate. Accurate and detailed records are essential for employers to defend any type of employee claim, particularly unemployment compensation or wrongful termination claims.

Prohibited attendance policies. Controlling excessive absenteeism is a big concern for most employers. However, the complexity of family and medical leave laws, with sometimes conflicting state and federal protections, has made many formerly acceptable absence control policies unacceptable. Absences affect workers compensation, family and medical leave, disability accommodations and pregnancy laws. Companies often have attendance policies that either do not comply with relevant laws and regulations or grant employees more protections than required. Inaccurate time records. Employers typically require nonexempt employees to punch a time clock or to fill out time sheets reflecting their time worked each week. The records generated by these systems typically are the employers primary means of defense against wage and hour claims, so it is essential that timekeeping policies and practices be clearly communicated and consistently administered. Insufficient documentation. Reviews of employer hiring practices often uncover inadequate documentation, such as missing or incomplete I-9 Forms. Employers can be fined between $100 and $1,000 for each failure to accurately complete an I-9 Form. Fines for these violations can easily add up, with reported cases of repayment totaling over $100,000.

When to Audit
Given the resources required for a full-scale audit, most companies will not want to go through this process more than once a year; however, mini-audits that allow for some course correction can be accomplished without too much departmental pain approximately every six months. Scheduling annual checkups to maintain the discipline of a regular review is preferable to only occasional or panic audits (e.g., those that take place only when a potential problem is brewing). Another strategy is to conduct an audit following any significant event (e.g. new plans, management changes, etc.).

What to Expect
A comprehensive audit is a time-consuming and intensely focused project that may require the review of numerous documents and policies, as well as interviewing HR staff, selected employees and managers from other departments. The amount of time involved and the effort required will depend on the size and type of company, the type of information the company hopes to glean, the scope of the audit and the number of people on the audit team. A full-scale legal compliance audit in particular will cover a great deal of territory and will take longer to complete as compared with a best practices audit in which one specific practice is being benchmarked against another companys approach, or a function-specific audit in which only one key area of the companys HR practices is reviewed.

Costs of an Audit

The actual cost of an HR audit depends on the scope of the review, the number of people interviewed and the size of the audit team. Consequently, the expense will vary greatly from one situation to another. Suffice it to say, though, that the cost of conducting any full-scale HR compliance audit will be far less than defending (let alone losing) even one lawsuit. Some insurance carriers even provide audits as a part of their compliance programs, so it could actually be free.

Who Should Conduct an Audit

The companys HR professionals can perform an audit in-house if they have the expertise, the time, a willingness to objectively acknowledge inadequacies in current procedures and, most importantly, the clout to make or influence the necessary organizational changes. However, if the audit is conducted with internal resources or even with an outside consultant who is a non-lawyer, everything connected with the audit is subject to discovery in litigation relating to employment practices. If a company has legitimate concerns about what its HR audit may reveal regarding the companys noncompliance with various employment laws and regulations, the company should follow fairly strict audit procedures and protocols and consider hiring outside legal counsel to conduct the audit. In doing so, the company may be able safeguard the audit results through the application of at least one of the three legal privileges against disclosure.

The HR Audit Process: A Model

The general process of conducting an audit includes seven key steps, each of which is discussed in greater detail below: 1. Determine the scope and type of audit. 2. Develop the audit questionnaire. 3. Collect the data. 4. Benchmark the findings. 5. Provide feedback about the results. 6. Create action plans. 7. Foster a climate of continuous improvement. Determine the scope and type of the audit

To uncover the needed information, it is important to determine exactly what areas should be targeted for review. If the organization has never audited its HR function, or if there have been recent significant organizational or legal changes, the audit team may want to conduct a comprehensive review of all HR practice areas. On the other hand, if concerns are limited to the adequacy of a specific process or policy, the audit focus should be limited to a review of that particular area. Develop the audit questionnaire Whether conducting a comprehensive audit or an audit of a specific practice, it is important to invest sufficient time in developing a comprehensive document that elicits information on all the subjects of the inquiry. A list of specific questions must be developed to ensure that the questionnaire is complete. Collect the data The next phase includes the actual process of reviewing specific areas to collect the data about the company and its HR practices. Audit team members will use the audit questionnaire as a roadmap to review the specific areas identified within the scope of the audit. Benchmark the findings To fully assess the audit findings, they must be compared with HR benchmarks. This comparison will offer insight into how the audit results compare against other similarly sized firms, national standards and/or internal company data. Typical information that might be internally benchmarked includes the companys ratio of total employees to HR professionals, ratio of dollars spent on HR function relative to total sales, general and administrative costs, cost per new employee hired, etc. National standard benchmarking might include the number of days to fill a position, average cost of annual employee benefits, absenteeism rates, etc. Provide feedback about the results At the conclusion of the audit process, the audit team must summarize the data and provide feedback to the companys HR professionals and senior management team in the form of findings and recommendations. Findings typically are reduced to a written report with recommendations prioritized based on the risk level assigned to each item (e.g., high, medium and low). From this final analysis, a roadmap for action can be developed that will help determine the order in which to address the issues raised. In addition to a formal report, it is critically important to discuss the results of the audit with employees in the HR department, as well as the senior management team, so everyone is aware of necessary changes and approvals can be obtained quickly. Create action plans

It is critical actually to do something with the information identified as a result of an audit. The company must create action plans for implementing the changes suggested by the audit, with the findings separated by order of importance: high, medium and low. It actually increases legal risk to conduct an audit and then fail to act on the results. Foster a climate of continuous improvement At the conclusion of the audit, it is important to engage in constant observation and continuous improvement of the companys policies, procedures and practices so that the organization never ceases to keep improving. This will ensure that the company achieves and retains its competitive advantage. On way to do this is to continuously monitor HR systems to ensure that they are up-todate and to have follow-up mechanisms built into every one of them. One approach is to designate someone on staff (or an outside consultant) to monitor legal developments to ensure that HR policies and practices are kept current. Likewise, it is important to keep track of the audit findings/changes made, turnover, complaints filed, hotline issues, employee survey results, etc. to identify trends in the companys employment-related issues. Identifying problematic issues, growth areas or declining problem spots can help in the decision of where to allocate time, money and preventive training resources in the future.

Books
Edwards, J., Scott, J.C. & Nambury, S.R. (2007). Evaluating human resource programs: A 6-phase approach for optimizing performance. Alexandria, VA: SHRM Foundation & Pfeiffer.

External Resources
Nonprofit/Research Organizations

Institute of Internal Auditors Contains information relevant to audit procedures.

Equal Employment Advisory Council Includes a comprehensive self-audit checklist (for a fee). AcknowledgementThis article was prepared for SHRM Online by Teresa A. Daniel, J.D., Ph.D., founder and principal of InsideOut HR Solutions PLLC, a human resource consulting practice based in Ashland, Ky. She is also the author of numerous articles and two books about HR and related legal issues. Her forthcoming SHRM book on the subject of workplace bullying is expected to be released in 2009. In addition to relying on her own professional expertise and research, the author has incorporated existing SHRM Online content in developing this analysis.

Publication NoteThis article was first published in December 2008. SHRM staff will update it periodically as developments in the Discipline of HR Audits warrant.