HR Remains On The Periphery For Banks: Anil Khandelwal, Former Chairman, Bank of Baroda
Author and former chairman of Bank of Baroda Anil Khandelwal says that a full-blown HR crisis could erupt in state-owned banks. In an interview with Mahua Venkatesh, Khandelwal, who has also served as member of the first Banks Board Bureau, points out how HR, as a discipline, has been completely neglected by state-owned banks.
Edited excerpts:
The Indian banking industry, which stood unchallenged even during the 2008-09 crisis, is now under pressure for rising non-performing assets (NPA) and frauds. What has gone wrong?
There is never a single cause for a crisis. Multiple problems including some undiagnosed ones during good times, contribute to such outcomes.
The quest to expand balance sheet in a high-growth period, dilution in risk management standards, lack of prudent judgement and lack of focus, specialised skills and a culture of exuberance have contributed to the present outcomes. Finally, it’s a leadership game, which means building a culture for taking informed judgement calls when everything seems to be going right. It’s never enough to be smart, (it’s important to be) wise as well.
What is your reading of the human resource (HR) issues in banks?
I am not quite comfortable with the state of HR in PSBs (public sector banks). Everyone acknowledges it as the number one problem and yet, it gets the least attention at the top level. For decades, we have complained about militancy of trade unions and their obstructive ways, but now when the environment is completely changed, the initiatives in building a culture of HR are still few and far between. There is now a tendency to increasingly engage consultants, but consultants can only contribute when within the organisation, there is a strong bandwidth to support HR transformation.
There is a huge scope for building a new ecosystem of HR, and consultants can be an aid and not a solution.
What are the obstacles? Is the government responsible?
It will be unfair to always blame the government. Building an HR culture is essentially a CEO and top-management function. We need to understand that it’s not about sermons and rhetorics, but real solid commitments — both time and resources and well-articulated philosophy about people issues. I think the real problem is excessive obsession with numbers and operational orientation at the cost of building intangibles such as HR, leadership, governance and integrity. This is serious work that requires huge time allocation by the top (management). Boards too hardly engage with such issues.
With some exceptions, in most banks, HR remains on the periphery of the organisation. There is no professionalisation of the HR function, unlike most industries where HR is driven by qualified HR professionals, who, based on their training, can substantially improve the performance and impact of HR contributions.
Today, most PSBs have succession problems at critical positions. Every year, in most banks, one-third of the top management retires leaving behind critical competency gaps. There is a huge scope for improving responsiveness to customers as well as productivity. In the next three years, about 90 per cent of GMs (general managers and 70 per cent of DGMs (deputy general managers) would retire. Rapid promotions in senior management cadres only through a short interview process is far too inadequate to measure the potential for top jobs. Managing a large-size organisation is different from being a credit expert!
You chaired a government-appointed committee on HR — the Khandelwal Committee. What were its key recommendations and what difference did it make?
Yes, in 2009, I chaired this committee and submitted a report. We made many important recommendations. We cautioned that HR is a new risk factor in the context of massive retirements in senior and top management, and mentioned that if banks aspired to become world-class in their technology and quality of products and range of services, PSBs will have to innovate their people processes and build a dynamic ecosystem for talent management.
We made recommendations in the entire spectrum of HR work: manpower and recruitment, training and skill development, career planning, performance management, reward management, succession planning and leadership development, employee engagement and motivation, the professionalisation of HR function, wage, service conditions and welfare, industrial relations, etc.
What about its implementation?
To be fair to the government, it acted quite fast and accepted 95 recommendations out of about 110. It advised banks to implement them. Some important recommendations such as the creation of the third post of executive director for HR was implemented by the government, but eventually the post was sucked in for operational work, and HR remained a small appendage.
Another important recommendation was to create a board committee on HR, which too was accepted and created. But in most banks, it has remained on paper with infrequent meetings, routine agendas and failure to develop any long-term game-changing strategy in HR. There is need for bold and innovative measures to engage employees and improve HR systems. Critical attention of the top is required to build a culture of service in the front-line and design policies that continuously build talent at all levels.
Are you saying that initiatives at banks’ level are inadequate?
Precisely. From my experience, I can tell you that basically, the HR function is to be owned as a principal role by the top management and the board. There are hardly any discussions at the board-level on key HR policies or to set a road-map for people development and professionalisation of this critical function. In meetings and conferences of bankers, there is hardly any discussions on HR. Due to the mobility of bankers in various jobs, we need a strong policy framework, and a sound and well-knit policy to build talent and leadership for the future. This is where the role of boards and CEOs is very critical.
How will this acute talent crunch hit the Indian banking system?
Talent crunch is a real problem. There are three dimensions of this problem: building potential leaders for the top, grooming them with rigour (not merely through vanilla training programmes on leadership) by putting them through crucible experience, and finally a reasonable tenure of three to five years and a reward and incentive system.
I believe leadership deficit in PSBs will be the next bomb waiting to explode. This should be an unpostponable priority for reforms.
