Impact of Human Resource Management on the Performance of United Commercial Bank Limited: A Case Study

Abstract

Banking is considered as one of the most important economic inventions of the world. There is no denying the fact that overall socio-economic development of a country largely depends on the performance of banking sector. Private Commercial Banks (PCBs) play a crucial role in this regard. It is a large financial as well as business organization. But executing the functions of PCBs is not manager friendly. It is tough to handle. PCBs are highly competitive units of the banking industry. It competes not only with other banks but also with non-banks and other financial institutions. Success of the PCBs and UCBL depends on the amount of quality business brought by the bank executives operating in highly competitive environment. Commercial Banks are a flourishing sector of our economy. To maintain the present flourishing condition and expansion or growth in future, a good set of efficient and dedicated workforce is highly needed. This set of efficient and effective workforce can only be ensured through proper implementation of human resources policies and practices in the commercial banks of Bangladesh, like United Commercial Bank Limited (UCBL). Top level management of Commercial banks in Bangladesh particularly, UCBL should realize why an individual joins in a particular organization and what factors inspire or motivate him/her to remain in the organization. In motivating atmosphere, no symptom of frustration is observed and no difference between personal goals and organization goals exists. It is possible through maintaining the effective Human Resource (HR) in any organization. Thus, HRM can ensure the profitability and social responsibility as well as better performance. The study makes an attempt to evaluate the impact of HRM practices on the performance of the bank which may help to improve future performance of UCBL as well as the PCBs. The prime focal point of the study is to evaluate the impact of human resource management practices on the performance of UCBL in Bangladesh. In this respect various facets of human resource management practices like recruitment, selection, training and development, compensation, motivation, performance evaluation and employee relation have been focused and analyzed. Area wise distribution of bank branches, deposits, loans and advances, income and expenditure, import and export, urban-rural position, rural credit and other important facets of productivity and profitability of UCBL are also included in it. It is tried to identify the HR factors which are influencing upon the overall performance of the bank as well as it is also tried to identify the impact of HR pool of UCBL upon the perception of its customers. Human capital is considered as the crucial source for a bank to interface with its customers as well as to serve them. In this connection it is tried in the study to make out the core values that the customers expect from the workforce of UCBL. In addition to customers’ perception, it also included officers and executives, the inner performers of the bank who have also expressed and evaluated the significance of human resource management practices at UCBL. This study uses more than one method. It is an evaluative type of study. Mainly documentary method is applied in conducting this study. Justification of adopting documentary method is that it is appropriately applicable in finding out what has happened in course of time and correlating the events of HRM practices with the performance of UCBL. Both qualitative and quantitative methods are used to study the impact of HRM practices on the performance of UCBL. Both primary and secondary data are used in this study. To obtain primary data, different structured questionnaires with different question set-ups with the aim of generating responses from the target groups were executed. Total number of sample is 272 that include executives, officers and customers of UCBL. But the filled up returns were sent back by 250 respondents of whom 180 were bank executives and officers. Different statistical and mathematical tools have been used to find out the relationship among the concerned variables. The study includes the period from 1983 to 2010-2011 financial years. As UCBL is one of the pioneers in the private commercial banking sector, it provides a real picture of existing human resource management practices and financial condition of PCBs in relation to growth, profit, productivity, profitability, customer satisfaction and fulfilling the social compulsion. For this reason UCBL is selected as a case study with a view to discover the relationship between performances of private commercial banks and human resource management. Like other PCBs, UCBL was established on 26 of June 1983 with a view to make sure superior banking services to the clients and extending the umbrella of banking coverage as well as to increase competition in the banking sector of Bangladesh. From its inception in 1983 UCBL is trying to pursue the twin objectives of profit maximization and social obligation. To achieve the twin goals, the bank has reallocated resources towards competitive strategies such as innovation of new product and services, expansion of its efficient human resource as well as bank branches and recently the development and implementation of an effective human resource practice in the ongoing operation of UCBL. Nevertheless, the emphasis has been given upon the financial performance of the bank. It was found that the journey of private banking in Bangladesh started with the establishment of “Dacca Bank” in 1846, the first modern joint-stock bank in European style. A comparative scenario of four categories of banks (NCBs, PCBs, DFIs and FCBs) in terms of branches, assets and deposits are depicted in this study where it is seen that the performance of PCBs is much better than that of NCBs. An attempt was made to analyze the different growth activities of UCBL for the period of 1983 to 2011. It is found that UCBL attained a noteworthy growth and development in its branches, human resources, deposits, loans and advances, total income and expenditure, net profit, export, import and so on from its inception. Unfortunately, the growth rate in all the areas is not balanced and pleasing in some cases. This study also appraised the existing HRM policies and practices of UCBL with a view to realizing their impact over performance of UCBL. Different aspects of HRM such as recruitment, selection, training and development, compensation, motivation, performance appraisal and employee retention were analyzed with various indicators. A number of similarities and dissimilarities were found between the opinions of officers and executives in relation to HRM practices of UCBL. In some cases the dissimilarities are dominant ones which lead to make supposition that HRM of UCBL is lacking of better co-ordination and assimilation in its operations. Nevertheless in general consideration it may discern that HRM practices in UCBL is as good as other PCBs in the country. Still it requires some revision and adaptation of new ways to make the HR as a competitive human capital. The study also put emphasis on the operations of UCBL that is the core competence of PCBs and extensively depends upon the effectiveness of HRM. It is said that UCBL provides variety customer services with some limitations. But in some cases the quality of customer service was found below the standard level. This occurred mainly because of limitation of resources, fruitful training and together with inefficiency of HR. The biggest priority of the banks is considered to be maintaining the continuous social services, as well as achieving growth, productivity, profitability and customer services. From the study it is also observed that a strong positive correlation exists between working fund and total income with total expenses and HR expenses. It is worth mentioning that HR expenses have the strongest element that has a huge influence over generating total income and maintaining working fund. Therefore, it comes to the conclusion that an integrated HRM practices is indispensable for UCBL to attain desired productivity and profitability and satisfactory performance. In this study some recommendations are made for policy implications and preferred changes. This is not definite that the recommendations will dramatically improve the present HRM aspects of UCBL but it is hoped that it will improve HRM practices and the performance of UCBL as well as the PCBs in Bangladesh to some extent. The rural urban ratio of bank branches is very poor. So, UCBL as well as other PCBs should extend their services by the expansion of bank branches in rural areas of the country. As training strongly affects the performance and quality of customer services, UCBL as well as PCBs should arrange diversified training programs for their human capital so that they can enrich them. Besides, PCBs including UCBL should revise the compensation policy from time to time, increase motivational factors and should straight and justified performance appraisal system, maintain congenial working environment with good peer relation and attractive retention policy, an effective HRP and ratio between HR and branch should be well proportionate. It is true that the recommendations made in this study will not provide an instant remedy for the existing problems of UCBL. But, it is believed that they might be quite helpful for solving the existing problems of banking sector in Bangladesh. In addition to this, management of PCBs and government should also be involved in a joint effort in order to address the issues that have been found in this study. It is found in the study that HR expense is the strongest element which has vast influence over generating income and maintaining working fund which leads to conclude that a well maintained HR pool and integrated HRM is the key to productivity performance of any organization. It is also found in the study that due to age variation motivation also varies from person to person. So, HRM practices should consider the age of the employees while designing motivational factors. The twin objectives of PCBs and UCBL are profit maximizing and meeting social obligation. In case of profit maximization the performance of PCBs and UCBL are satisfactory. But in the case of carrying out social obligations PCBs are far behind. One of the crucial expectations of the emergence of PCBs in the 1980’s was to bring the rural people under the umbrella of coverage and hoped that they will play a strong role along with NCBs. Although even after the three decades of PCBs’ journey, it remains far behind the desired level. By extending their coverage in rural areas, PCBs can meet the obligation. It is also true for UCBL. However, performance of PCBs as well as of UCBL does not depend exclusively on their own endeavor rather it is also influenced by the national economic environment as well as business policy of the company. The authority of UCBL is informed about it and hope they will shape their future accordingly.