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Govt banks stare at mid-level crisis

Last Updated: Thu, Jan 23, 2014 10:54 hrs
A labourer works on the sign of a bank building in the western Indian city of Ahmedabad

The recruitment freeze in the nineties in public sector banks is now haunting them. Termed 'retirement decade' by Reserve Bank of India Deputy Governor K C Chakravarty, the government-owned lenders are now staring at over a quarter of the 150,000 mid-level managers retiring in the next three years.

That essentially means a wafer-thin leadership pipeline, which is bad enough, but some say the crisis could worsen with new private banks expected to treat the PSU banks as a happy hunting ground. "Government banks will face a serious challenge 18-14 months from now when new banks begin operations," says Anil Khandelwal who headed a government-appointed committee to look into the human resource issues of such banks and a former chairman of Bank of Baroda.



The Khandelwal committee had talked about the projected awning gap in the mid-management level and had called for a consolidated plan on identifying and grooming potential successors for vacant positions.

One of the key challenges that government banks – which control 70% of the market -- face is that skilled manpower is in short supply. They went on branch-network and operation expansion spree in the last decade but did not give attention to the fact that manpower growth is equally important. A study by the Boston Consulting Group (BCG) says that while in private and foreign banks, the growth in employees has been in sync with their balance sheet, state-run banks have increased their manpower by a meagre growth rate of 0.5% to achieve a balance sheet growth rate of 22%.

All this is terrible news, as it has led to hollowing out of the middle management. Middle management is often termed as the backbone of banks as they provide continuity across businesses and are the key people for getting things done.

A mid-level executive at Bank of Baroda puts it succinctly. "We may not be decision makers, but for customers, we are the face of the bank. So it has huge implications for the bank's reputation."

To meet the shortage, many banks, however, have taken the shortcut by fast-tracking promotions, without the required training. Earlier, it took 23 years for officers to reach the position of deputy general managers. That has now come down to 17 years.

Sangeet Shukla, senior advisor with Indian Banks' Association (IBA), says many banks have people at the middle level with inadequate experience, which creates room for deficiencies in performance. "Banks have to worry about this since it hits customer service and harms the reputation of the bank," he adds.

Ashwin Parekh, senior advisor, Ernst & Young, says that there is a real crisis at the middle level and suggests a way out: outsource grooming and training activity for mid-level executives.

The Kolkata-based Allahabad bank has done exactly that. It has hired an external HR consultant to develop leadership among general managers.

Shubhalakshmi Panse, Chairman & Managing Director, Allahabad Bank says that when she joined the bank in October 2012, the bank was staring at huge number of retirements. Even if the bank was recruiting, training was inadequate as fresh recruits in the officer category were given just one week's training.

"We need to teach them basic banking functions properly before putting them in the branches. Hence, we decided that we will give them an initial on-board training. This time we hired around 1,500 officers. They joined the training institute directly for a three-month training programme. We gave them extensive training on banking as well as on technology," Panse says, adding fresh clerical staff are now given one month training.

Bank of Baroda also says it has been proactive on this front. It runs Project Sparsh, a leadership development programme for middle level managers and those heading branches.

Consulting firm KPMG has suggested a two-pronged approach to tackle the leadership vacuum. In the first level, banks have been suggested to hire talent laterally, including retired executives and freelancers to fill critical roles. "Banks also need to look at talent management holistically and define a long term Level 2 approach. They need to develop a talent strategy by taking a systems approach to recruitment and talent management and rethinking their employer value proposition ," KPMG says.

But, going by the track record, lateral recruitment of specialised jobs in treasury, risk management and information technology has had only a few takers. Such recruitments accounted for just 2% of all the employments in government banks in 2012-13. In comparison, close to 53% of the hiring in private sector banks came through lateral recruitments. The low pay-scales of government banks are no doubt a big factor in this. But there are other concerns as well. Mohan Tanksale, chief executive of IBA, says those coming in through lateral route face challenges of assimilation with the culture of the organisation.

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