Human Resources Development And Its Impact Business Essay Example

"people are our greatest asset" has been consistently emphasized throughout history and holds particularly true in the banking sector, where individuals are considered banks' most valuable resource.

The expertise, experience, and sound judgment of the staff are crucial in ensuring the effectiveness and credibility of a banking concern. Effective management of human resources is essential for maintaining an effective and credible banking system. Human resources play a significant role as they encompass the total abilities, knowledge, skills, and aptitudes possessed by employees. In modern organizations, the importance of human resources is continually increasing.

In the organizational field, it is evident that human and societal factors are more important than physical, technical, and economic aspects in most jobs. Neglecting this reality results in significant losses for the country, businesses, and individuals. The workforce comprises people with diverse characteristics such as gender, age, education levels, and affiliations. These individuals not only display common behavior patterns and traits but also show various differences. Every employee has their own distinct set of needs, motivations, goals, and experiences.

Management must take into account both the organizational needs and the goals of employees. In today's era of liberalization, privatization, and globalization, the banking sector is experiencing fierce competition, making it more difficult to achieve objectives and meet performance standards. Thus, having skilled and motivated employees is vital.

They can increase productivity per person. The survey focuses on banking services. The growth of a country's economy is influenced by deposit mobilization and resource utilization. Banks have a significant role in a country's economic life.

While banks do not create new wealth themselves, their adoption, lending, and related activities contribute to the process of producing, distributing, exchanging, and

consuming wealth. Consequently, they become valuable partners in driving economic development. The mobilization of deposits and efficient resource allocation significantly impact a country's economic growth. Presently, modern banks play a crucial role in utilizing a nation's resources effectively.

The banks are using individuals' savings for investments, which promotes higher saving rates. Without banks, a large part of a country's capital would go unused.

Statement of Problem

After independence, the banking sector started growing quickly. Since 1991, both public and private sector banks have been operating together and offering banking services to customers.

Human resources management plays a crucial role in the overall economic development, particularly in sectors like banking services. Factors such as employees' attitude, interest, motivation, skills and knowledge, behavior, promptness, and response to calls significantly impact both individual and organizational performance. Therefore, human resources management holds immense importance in the banking sector at present.

In today's challenging business landscape, the task of attracting and retaining customers has grown more arduous. The performance of employees plays a vital role in enhancing the profitability of banking units, thereby making individual productivity indispensable. This underscores the significance of effective human resources management across various industries. The banking sector consistently achieves favorable outcomes annually, owing to its motivated and proficient workforce.

The significance of workforce cannot be overlooked in the current competitive circumstances. Additionally, the output provided by them significantly contributes to the progress of the banking sector. The requirement is that banks should continuously strive to reduce costs and enhance productivity. Nevertheless, banks are not making any serious, systematic, and conscious efforts to improve productivity and operational efficiency.

The main idea of the text is that Public Sector Banks (PSBs) have

faced challenges in maintaining their position due to a significant decrease in market share and deposits following liberalization. Therefore, it is crucial to prioritize productivity as it plays a vital role in the prosperity of PSBs and the economy.

Literature Review

Varde (1979) conducted a literature review exploring the effectiveness, efficiency, and productivity of banks. According to Varde's research, bank efficiency can be divided into four categories: workforce efficiency, operational efficiency, commercial efficiency, and accessory business efficiency. Each category can be independently evaluated and has a positive impact on its respective area's productivity.

In their study, Subramanyam (1985) conducted measurements of Total Factor Productivity (TFP) using an index figure strategy. They addressed conceptual issues and their impact on accounting deductions. The Divisia index was found to be preferable over the Laspayers index.
Hansda (1995) developed a composite index to assess the relative performance of 28 public sector banks during the post-liberalization period from 1991-92 to 1993-94. The index considered 25 indicators across five categories: labor productivity, branch productivity, financial management, profitability, and growth. Principal component analysis was used to analyze the data.
The findings showed that during the pre-liberalization stage, banks operated under a relatively uniform regulatory framework. However, significant variations were observed in their performance in the year 1991-92. This suggests that organizational culture and quality management have a significant influence on the comparative performance of banks.

In a study conducted by Ram Mohan and Ray (2005), the entire factor productivity growth, Malmquist efficiency, and gross maximization efficiency of public sector banks and private sector banks were compared from 1992-2000. The findings showed that efficiency and productivity were not lower in public sector banks compared to their counterparts in

the private sector. Sinha (2006) also analyzed the efficiency of Indian commercial banks using data enclosure analysis, considering loan as the output index.

Two inputs were taken: the number of bank subdivisions and borrowed capital. The consequences were observed for the years 1996-97, 1998-99, 2000-01, and 2002-03. These consequences indicate that the observed private sector commercial banks performed better than the observed public sector commercial banks.

Aims of the Study

These are the aims of this survey:

1. To comprehend the concept of human resource and analyze the contribution of employees (people) in the banking sector during the post-liberalisation period.
2. To analyze the reasons for lower productivity, strategies to improve it, and involvement of different parties in the concept of labor productivity and their efforts.

Based on these findings, this summary provides suggestions for further improvement of employee productivity in India's banking sector.

Research Methodology

This study examines the productivity of human resources in India's banking sector from 2007 to 2011, post-reform. The analysis utilizes various indicators:

Time period of Study

The chosen time frame for analysis is 2007 to 2011.

Collection of Data

Gathering relevant data is essential for research analysis. This study relies on secondary information as a valuable source of research data, enabling detailed findings and meaningful conclusions.

The text above discusses the research methodology used to examine the productivity of human resources in India's banking sector from 2007 to 2011, post-reform. The analysis uses various indicators and relies on secondary information as a source of research data, allowing for detailed findings and meaningful conclusions.The survey's database includes information collected from previous research work, sourced primarily from published secondary sources like the Indian Bankers Association (IBA) and the Reserve Bank

of India (RBI). Publications such as "Fiscal Analysis of Banks" by the IBA and reports by the RBI provided additional information on financial performance. Statistical tools like Ratio Analysis were used for data analysis, with relevant ratios measuring bank employee productivity and profitability ratios assessing public sector bank productivity.

The mean of a series of observations, represented as X, is determined by the formula: $frac{?X}{N}$. In this equation, $?X$ represents the sum of the observations and N represents the number of points.

The standard deviation, denoted as ?, is calculated using the formula: $frac{?(X - X)^2}{N}$, where ? indicates (X - X), with X being the mean of the series and (X - X) indicating the divergence from the mean.

The coefficient of variation (C.V.) can be computed as: $frac{?}{X} imes 100$, where ? signifies the standard deviation (S.D.).

According to the statistical data, the Business per Employees of 20 nationalized Banks increased from 490.01 lacs in 2007 to 1144.77 lacs in 2011. In comparison, eight SBI and its Associates saw a rise from 436.35 lacs in 2007 to 793.06 lacs in 2011. On the other hand, Private Sector Banks witnessed an increase from 695.23 lacs in 2007 to surpass Public Sector Banks at 823.26 lacs in 2011. Interestingly, Foreign Banks experienced a remarkable growth rate of 1270.82% in terms of Business per Employees, surpassing both Public and private Banks.

Business per Employee

Net Income per Employee

The net income of a bank, which is the remaining operating income after taking into account commissions and contingencies, depends on its productivity and growth in income per employee. Profitability indicates how effectively a bank maximizes

its earnings by measuring the ratio of profits to funds utilized.

The net income per employee for banks has been calculated by dividing the total net income by the number of employees in the bank. According to statistics, nationalized banks saw an increase in net income per employee from 2.87 lacs in 2007 to 6.95 lacs in 2011, while SBI and its associates experienced an increase from 2.57 lacs in 2007 to 4.2 lacs in 2011. Private sector banks, on the other hand, saw their profit per employee rise from 4.65 lacs in 2007 to 6.418 lacs in 2011, surpassing that of public sector banks. Foreign banks recorded a net income per employee of 27.59 lacs, which exceeds both public and private banks' figures.

Among all bank groups, foreign banks have the highest standard deviation at 5.05.

Business per Unit of Staff Cost

The measurement of Business per Unit of Staff Cost is based on the payment to and provision for employees. This measurement is included in the operating expenses of the bank's group. Banks consider this measurement as a critical factor in improving profitability and aim to minimize it in relation to operating costs. Statistics show that in 2011, the Employees cost to Business per unit for 20 nationalized Banks was 15206 lacs, which is the highest among all banking groups. The new private sector Banks followed closely behind with 15185 lacs in the same year. Foreign Banks recorded a Business per unit of staff cost of 8074 lacs in 2011, which is relatively lower compared to other banking groups.

Net income per Unit of Staff Cost

The measurement

of Employee cost to Profit per unit indicates the payment to and provision for employees as a percentage of the total net income.

The staff cost to gain ratio in Public Sector Banks (SBI & A; its Associates) and Nationalized Banks has shown a decreasing trend in 2011. However, New Private Sector Banks had the highest staff cost contribution to profits, amounting to 164.16 lacs in 2011. Foreign Banks had the second highest contribution at 142.82 lacs in the same year. This indicates that Public Sector Banks are no longer the leading employers in the financial market and their per employee expenses have surpassed those of Private Sector Banks. Furthermore, while the staff strength of Public Sector Banks has decreased between 1998-99 and 2010-11, Private Sector Banks have witnessed a significant increase.

The per employee disbursals of Public Sector Banks have surpassed those of Private Sector Banks and now exceed them by more than 150%. This is even though the pension disbursals of PSU Banks are not fully included in their staff disbursals. This clearly indicates that the presumed competitive advantage of Public Sector Banks in terms of staff costs is no longer present. The lack of this cost advantage, along with the problem of lower productivity, highlights the urgent need for HR transformation in Public Sector Banks. Therefore, it is now time for us to pay attention to this crucial aspect, which ultimately determines our ability to compete. We can no longer delay addressing this issue.

Factors Affecting Employee Productivity

Quality Training Programs

The bank needs to implement appropriate training programs to enhance productivity efficiency. It is crucial that all

staff members have the opportunity to participate in these programs. The training should focus on developing a sense of quality consciousness among employees, and the bank should consistently strive to improve the quality of its services. Training helps new employees improve their performance in specific roles, leading to an increase in both the quantity and quality of their output.

Technological Knowledge Improvement

Some traditional banking methods are unnecessary and time-consuming, resulting in operational delays. Therefore, it is necessary to study the organization and methods of office processes to streamline them. Additionally, the bank is lagging behind new entrants in terms of adopting new equipment such as computer fax machines and ATMs, which are crucial for global competition.

To enhance the speed and effectiveness of decision-making in a scientific manner, online connectivity is highly valuable. Many Indian banks have initiated the process of automating their branches. It is vital for the banks to reinvest in IT in order to keep up with the changing dynamics of the market. Technology also aids in lowering operational costs, providing personalized products, and managing risks more efficiently.

Economies of Scale

The attainment of economies of scale, which means reducing per unit cost as the scale of operation increases.

Economies of scale refer to the reduction in per unit cost that occurs when a company produces multiple products. For example, a bank can offer insurance units and mutual fund products through the same branch network. This diversification of products can establish a "one-stop shop" and attract new customers, leading to increased productivity efficiency. In order to expand its presence in North India, a bank based in South India may seek to collaborate

with a bank in that region.

Similarly, Banks in the North may seek out Banks in the South in order to expand their operations within the country.

Employee Morale

Productivity is directly affected by employee morale. When employees are satisfied with their work, they are more motivated and this leads to increased productivity. Conversely, low morale results in disengaged employees.According to a survey conducted by the Corporate Executive Board, there has been a 5% decrease in productivity due to decreased employee engagement. However, when employees are motivated and provide excellent service to customers, banks experience increased profitability, which in turn benefits deserving employees. In addition to Business Process Outsourcing (BPO), the success of outsourcing has also led to the outsourcing of high-end knowledge work, known as Knowledge Process Outsourcing (KPO). India has a large pool of knowledge workers in various sectors such as Pharmacy, Medicine, Law, Biotechnology, Education and Training, Engineering, Design and Animation, Research and Development, and more.

Knowledge Process Outsourcing (KPO) is a form of outsourcing that is gaining popularity worldwide. It involves off-shoring complex business processes that require specialized expertise in a particular field. In a KPO arrangement, a company transfers its knowledge or information to a third-party KPO operator in exchange for fees. This is similar to Business Process Outsourcing (BPO) but focuses more on knowledge-based tasks.

But KPO does high end occupations and BPO does low end occupations. KPO is mainly used by Pharmaceuticals, Biotechnology, Financial Services, Technology Research, and other companies who deal with knowledge and information. KPO saves cost. This type of outsourcing is adopted by companies to implement their strategies and to protect their intellectual property rights. According

to a study by Global Sourcing Now, the Global KPO industry is expected to reach US $17 billion by 2010.

Conclusion

HR policies and activities are also crucial for every organization.

The HR services provided by an organization have a wide-reaching impact on the operation and management of business organizations. These services include enlisting, human resources development, compensation management, and maintaining industrial relations. Employees are crucial resources for banks, and it is important to measure their performance and productivity in a timely manner. Their performance directly contributes to achieving higher profitability, business success, competitive advantage, and building goodwill for the banks.

Management should treat employees as valued partners. The outdated mindset of the past is not going to be effective in today's circumstances. Instead, employees should be included in discussions, consulted, motivated, and involved in order to achieve objectives and meet performance standards. Ultimately, it is the workforce that distinguishes performance. The influence of employees on performance, profitability, advancement, and reputation of banks is significant. And in the future, it can be further enhanced as there is room for additional improvement.

With increased productivity and performance of employees, the future of banks looks promising. The banking sector offers various types of services, with the owners of banks situated in one place while their branches are scattered across the country. The employees are responsible for providing these services, and their performance in their jobs is crucial.

Improving customer satisfaction, acquiring and retaining bing clients, managing complaints, achieving goals, increasing sales turnover, maximizing profits, gaining market share, and maintaining the company's good reputation are all affected by employee performance. This focus on employee performance applies not only to

banking but also to every service sector. Enhancing employee performance results in greater customer satisfaction. To meet these objectives, services should be provided efficiently and with minimal processing and waiting time, while also ensuring a proper response, promptness, and a willingness to handle an increasing number of clients. Employees are selected based on their merit to achieve these goals.