HRM and High Performance in Banking

This essay explores the role of Human Resource Management (HRM) in achieving high performance within the commercial/retail banking industry. It examines various HRM theories, such as neo-classical theory and the AMO model, and their application in structuring organizations. The essay also contrasts the rhetoric of soft HRM with the reality of hard HRM practices in banks, highlighting the gap between stated policies and actual implementation. It further discusses the importance of psychological underpinnings, recruitment, rewards, employee voice, and performance management in achieving organizational goals. The essay concludes that while HRM has the potential to enhance performance and commitment, the banking sector often falls short in fully implementing these practices, leading to a gap between theory and practice.

Essay
HRM works at achieving high performance by increasing employee commitment and
eliciting positive attitudinal response towards the organization and its objectives
The human resource management practices, models, theories are the organizational activities that
help in managing the pool of human resources, and they ensure that the resources of the
company are employed towards the fulfillment of the goals of the company (Mathis, 2016).
HRM is implemented in the form of a set of policies and practices that are designed and
implemented for ensuring that the human capital of the company is contributing to its maximum
for achieving the objectives of the business. In terms of its strategies, policies, and processes, the
human resource management is universal. It has replaced the traditional personnel management.
But, the management and development of the human resources are considered as a central
challenge. The organizations today are going global, and it is very difficult to manage the
workforce in the multi-national enterprises. The concept of human resource management is
theoretical as well as practical. The theoretical part can be considered as universal, but the
practical part is not universal. The theoretical part of human resource management has described
the way in which the organizations must be structured, but the way they are actually structured is
very different. In the banking sector, the role of HRM is very crucial because most of the
business of banks is target based and they have to change things as per the changes in the
environment. So, HRM helps the banks in ensuring that the employees maintain their
performance and dedication during these times and their level of commitment does not fall.
The purpose of this essay is to determine that to what extent the HRM works at achieving high
performance by increasing employee commitment and eliciting the positive attitudinal response
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in the commercial/retail banking industry. This examination will be made using the theories of
HRM that suggest how an organization should be structured. The rhetoric and the reality in
consideration of the traditional banking setup will be discussed, and then the comparisons will be
made using the models of HRM in relation to the psychological underpinnings of HRM,
recruitment and selection, reward, employee voice, managing the performance, etc.
Firstly, the theories of HRM will be discussed that suggests how an organization should be
structured. Several theories have been developed in the past that explain the rationale behind the
formation of the structure of the organizations. Some of them are classical theories like the
scientific management approach, the Bureaucratic approach by Max Weber, and the
administrative theory (Troitzsch, 2013). Then, there are neo-classical theories and the modern
organization theory. Some of these theories form a base for HRM and for the structures of the
organizations.
One of the theories that relate to HRM is the neo-classical theory that recognized the importance
of the individual and the group behavior and emphasized on the human relations (Shafritz, 2015).
These theories were developed from the Hawthorne experiments, and they place emphasis on the
human and social relations among people. It is argued by this theory that if the relationships are
considered, then the productivity can be determined and by making some changes in the working
conditions of the people, the productivity can be enhanced further. The theory believes that when
the people have the high level of motivation, they become more productive (Child, 2014). Their
motivation level is affected by the amount of individual, personal and the intimate attention that
these workers receive. So, as per this theory, the structure of the organization should be such that
the individuals are not treated as mechanical tools, but they are treated as distinct social beings.
The organization where I used to work earlier, used to follow this theory as the individual
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differences of the employees were respected in there, and were made to interact with the social
and economic factors affecting the company. Also, this theory suggested that the informal
structure should coincide with the formal structure. It emphasized on the concept of ‘groups’ in
the organizations and the synergistic benefits (Millar, 2016). This theory of HRM is relevant and
should be applied in the present organizations because it has the ability to encourage the concept
of participative management in the structures of the organizations in which the workers are
permitted to take part in the decision-making process. By this form of management, the increase
in the productivity is ensured. This neo-classical theory is very much implementable in the
banking sector because here the employees are a main part of the organization. They take care of
the cash, deal with the public, grant loans, handle the clients, maintain the reserve, take care of
the mortgages, etc. So, here the concept of HRM plays a very important role. Therefore, the
structure of these organizations must incorporate the HRM theories.
The theories and models of HRM are particularly important in increasing the performance of the
employees by ensuring they are highly committed to the organization in which they work. One
of them is the AMO theory which suggests that the independent work system consists of three
components that shape the characteristics of the employees; they perform better and hence
contribute to the success of the company. The interests of the organizations are best served by
the HRM system when it attends to the ability of employees, their motivation and provides them
the opportunity for contributing towards the company. This view applies to the
commercial/retail banking industry as the employees of the banks are compulsorily trained for a
particular period of time so that they build up and improve their knowledge and skills for doing
the tasks, most of the employees are given incentive based pay for the number of sales they make
for the bank and for the business that they bring to the bank which motivates them and they are
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also given opportunities in the form of off-site meetings, transfers, etc. so that they are able to
take decisions for the banks, meet new people; propagate their abilities in front of clients, etc.
When the AMO theory is practiced in banks, they not only improve their performance, but they
get the motivation to work, they become committed to the banks. This also helps in reduction of
the rate of attrition; the company saves costs of new recruitment and positivity in the banks helps
in to meet its objectives on time (Zaman, 2016).
Then, another important model of HRM is the soft HRM model which in my opinion helps the
banks in achieving high performance by increasing employee commitment and eliciting positive
attitudinal response towards the bank and its objectives. The model of soft HRM treats the
employees of the company as their most important and valuable resource, and in this, the people
are viewed as the source of competitive advantage. In the banks, the long term goals and
planning play a very important role because they have to plan as per the forecasted changes in
the external environment as the rate of inflation, change in government policies, etc. (Farouk,
2016). So, accordingly, they focus on the long-term workforce planning strategically, they
maintain strong and regular two-way communication; they design their pay structure
competitively, and they add the suitable performance related rewards in it. This ensures that
people perform as per the plans, remained motivated and committed to their work.
Bath gave a model of people and performance which suggests that when the managers of the
company and the organization itself invest in the people of the company, they listen to the
concerns that people face and make efforts to address those concerns in a timely manner, then
the possibility that the employees care about and focus on the organization and its goals
increases (Bratton, 2012). I think that the managers should continuously take care of the
employees by focusing on the things that lead to the increase of the performance of employees,
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their level of motivation, etc. The success of the managers of the company should be linked to
the success of the people of the company and vice-versa. This helps in creating a positive
difference to an individual, and the people get rewarded along with the manager. In the banking
industry, this model is applicable because, in every branch, there is a branch manager who is the
head of the branch and if he takes care of his employees, then only he can run the operations of
that branch successfully, otherwise he may have to face problems in meeting the targets at the
end of the month. So, the performance of the entire branch is based on the linkage between the
manager and its employees and when the performance is good, both are appreciated.
The rhetoric and the reality in consideration of the traditional banking setup will now be
discussed in this section. The strategy of human resource management is an integrative approach
that helps in managing the people so that the goals of the organization are achieved on time and
in an efficient manner (Nankervis, 2012). For this, it is important that the employees are
understanding, accepting and implementing the strategy of human resource management at the
tactic level as well as the explicit level. Only this can make it effective otherwise, it may fail.
When the strategy is not appreciated at both these levels, the gap comes between the strategy that
is proposed and the strategy that is actually put into practice. This is the gap between rhetoric and
the reality (Talukder, 2014).
In the banking set up, the adoption of soft HRM is an organizational rhetoric. The mission
statements that the banks have to relate to and suggest that the bank will stay committed to the
direct communication with the customers, with its employees who are often described as the
‘most valuable assets' in their mission statement. Also, the banks commit to experimenting with
their quality circles, and they focus on performance related pay. They reconsider and revise their
procedures of selection and declare their commitment to training. But, these ideas of the HRM in
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the banks fall short of reality. The surveys of practice along with the organizational behavior do
not match the rhetoric of the human resource management (Mathivanan, 2013). The findings of
these gaps as well as the observations in this industry have found that there is no dominance of
the participative management styles in the banks which are important theories that shape the
structure of banks. Also, the sophisticated policies related to human resource management were
also not found. Instead of this, the aggressive resistance to the unions and the harsh policies
related to personnel were found to prevail (Masum, 2015). This puts a convincing argument that
the progressive policies of personnel have not been able to get diffused broadly across the
employment settings.
In the rhetoric of human resource management, there is an attractive image in which the people
are found to trust each other, sharing risks and rewards and they are also found to be united by a
strong feeling of identity. But, this does not give the sense of impersonal economic rationalism
that characterizes the management thinking in the real world (Armstrong, 2014). The
empowerment of people is unseen. The power of human resource management cannot be felt in
the banks. Instead, it is considered as a manipulative thing. The vocabulary of human resource
management has led to surpassing of the conceptual and the empirical foundations, and its
rhetoric has outstripped the reality. Thus, a gap has occurred, and the reality of banking sector is
away from the rhetoric.
So now I can say that in the banking sector, the rhetoric is soft and the reality is hard. The banks
that have adopted some of the variables of soft HRM are found to be within the limits of the hard
framework of HRM. Despite the rhetoric empowerment, the style adopted by banks for the
human resource management appears to be aligned with the hard HRM practices and it involves
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the intensification of the processes of work and reduction in the autonomy of the workers using
the close surveillance.
These comparisons can be made using the models in relation to the psychological underpinnings
of HRM, recruitment, and selection, reward, employee voice, managing the performance, etc.
The different people in the company have different views related to the HRM practices in the
company. In the banking industry, the executives and the senior managers along with the HR
professionals feels that the performance management systems that they have installed help in
enshrining their vision and the cardinal values. But, the line managers did not support this belief.
They feel that the alignment between the performance management system and the vision and
mission statements of their organization is weak. The rhetoric of this alignment is not
operationalized in a proper way in reality. Also, there is the difference in opinion between the
line managers and the HR professional related to the linkage between the high-performance
cultures, performance management systems and the desired outcomes of the organization.
Though the rhetoric is different from the reality but it is true that HRM works at achieving high
performance by increasing employee commitment and eliciting positive attitudinal response
towards the organization and its objectives. The human resources of a company have the ability
to improve the total ability of an organization, the society, country and the nation. There are
rapid changes that hit the banking industry because the influence of the external environment on
the operations of the bank is too much. Also, the pace of technological development is very fast
in the economy which affects the activities and the processes at the banks. The technology has
transformed the way in which the traditional banking activities were performed. With the
introduction of the ATMs, ALPMs, the way of doing the banking business has changed. Even the
way in which people were recruited in the banks has changed. Earlier the people whcho had
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knowledge of the economy and the external environment entered this sector. But now, the people
with high level of computer literacy and skills are in demand. They are also offered higher pay as
compared to the other people. The banking industry is based on knowledge. To operate this
industry, the people who are knowledgeable and well-equipped are required so that they can
operate the business. To implement the human resource practices in these banks, it is required by
the HR practitioners and professionals that they take part in the various organizational activities.
the practices and policies of HRM require that the individuals should be managed and developed
using the specific HR initiatives. There is an important aspect of HRM which is the HR planning
and it confirms that the organization has right people in the right number for the correct position
and at the correct time. when the people are placed in right positions, they are able to do their
job in a better way, they fit the job profile, they do not take longer to adapt to the work that they
have been given, they are comfortable in the work they do and the work is as per their skills and
specialization. This automatically leads to higher performance because they do the job better
than any other person and when they are happy to do it, their level of commitment rises as they
see the work in a positive way.
Then, the HRM practices involve the aspect of compensation which is one of the major concern
and priority of the people. The HRM practices aim to design their compensation structure in a
fair manner, based on the market trends and specifications. The system aims to provide equal
and fair pay to all as per the work that they do. Also, the career prospects of a person, his well-
being, and standard of living depend on the compensation structure of an organization. Thus,
when this structure is apt, people get motivated to work, and they develop positivity towards
their work. In the similar fashion, their level of commitment increases and they feel good in the
company.
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Training and development are the systematic processes of the human resource practices that
relate to facilitation and acquisition of the skills, attitudes, and knowledge of the people that
leads to improvement in the performance of the organization. This also helps in fulfilling the
personal goals of the people. When they feel that they are being developed, they feel motivated,
commitment rises and performance improves.
From the above discussion, I can conclude that the HRM works at achieving high performance
by increasing employee commitment and eliciting positive attitudinal response towards the
organization and its objectives. There are various theories of HRM that have helped in the
development of the structures of the organizations. Also, there are gaps in the rhetoric and the
reality of the practices of human resource management in the organizations especially the
banking sector that leads to the devaluation of the importance of human resource management in
companies. Therefore, these gaps must be filled so that people do not face issues, work in a
collaborative environment and they remain happy in their workplace.
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