Bringing human resources to forefront of bank mergers

The reform-driven measure of 10 public sector banks to be merged into four to build higher efficiency and improve governance in banking brings in its wake considerable challenges in the arena of HR, IT and rationalisation of ATMs and branches in terms of priority amongst others.

As per the scheme of amalgamation announced, Allahabad Bank will be merged with Indian Bank; OBC and United Bank will be merged with PNB; Andhra Bank and Corporation Bank will be merged with Union Bank of India; and Syndicate Bank will be merged with Canara Bank. While there are many aspects that need to be looked at, the cause of concern for employees and unions across these banks is job security despite the finance minister categorically stating that no retrenchments will take place on account of the merger.

The reports post-merger of Bank of Baroda, Dena Bank and Vijaya Bank also state that employees have been redeployed and best practices in each bank have been replicated in others. For instance, instead of giving VRS, Dena and Vijaya Bank employees were given the option to disassociate and the same was opted for only by a handful.

Despite assurances of job security, mergers give rise to other HR issues that need to be tackled including synchronisation of different working styles, levels of stress on account of different compliances and reporting, issues of favouritism and biasness, feeling of superiority/inferiority amongst employees depending on being employed with the anchor/merging entity, career related issues in terms of growth, internal transfers, adaptability to different organizational politics to name a few. In the current scenario too, the merger fears had led to various unions of banks calling for nationwide strike and the same was withdrawn on government’s assurance.

The issues that crop up during M&A include something miniscule like which workstation to work on to the cabin allotted and post/ designation assigned post-merger. The banks have different allowance and pay structures along with different categorisation for posts. The synchronisation of the compensation packages, hierarchies, promotions and transfers will open a Pandora’s box for the top management of the bank.

Employees of the banks become anxious and stressed as they realise that post-merger environment leads to situations which pressurise them to leave their secure jobs on account of closure of branches in same vicinity, administrative wings and zonal offices leading to placement/transfer of excess staff at locations not conducive for the staff as well as loss of promotion opportunities with large number of staff vying for the same post at junior and middle level.

Though bank merger announcements have been done keeping in mind the same technology platforms, there exists issues in integrating various versions of the platforms. For example, in the case of Bank of Baroda, IT integration is still in process despite the fact that Dena and Vijaya were on Infosys’ Finacle platform but on different versions that is the later two being on version 7 as against former being on version 10. UBI and OBC use Finance 7 while PNB uses Financle10. So, UBI and OBC would need to upgrade their software solutions to have a seamless integration.

Furthermore, each bank depending on the reporting and MIS requirement had got certain level of customisation done. To synchronise these systems will take an approximate time span of 12 to 18 months and an area of concern would be to train the staff to work on the higher versions as well as generate the MIS and reports as per the anchor bank’s requirement. As per current reports, Bank of Baroda has taken nearly seven months to integrate 30,000 employees of Dena and Vijaya Bank with itself, taking the total headcount to 85,000.

Bank of Baroda has created new levels of management and structures after various rounds and levels of discussions with managers and employees of the all the merged entities and the employee unions.

The bank in order to absorb the talent at various levels has brought the new setup under its existing four-tier structure, has created more zonal and regional bases and has put in place a plan for the leadership and resources in higher positions to be aligned to new structure and therefore created new job positions. The bank also employed a survey and feedback systems, wherein few thousand employees gave their opinion on the progress of integration, which formed the basis for corrective measures, if any.

Measures to focus

In light of the various human resource challenges mentioned herein, the top management of the banks would have to focus on various measures to reorganise and effectively manage the staff and union concerns on the following lines:

Hold staff meetings at various levels to make them realize the new organisation structures, building of new brand, the integrated business and financial plans so that they can understand the culture and needs of the combining bank

Create employee support desks and feedback systems, which can become tools for problem sharing and midcourse correction of actionables

Train employees to handle customers facing issues on account of IT integration, use of ATMs, cheque books

In the case of banks having different geographical presence such as one having spread in south and the other in east, cultural aspirations and transfers would have to be handled with care and consideration with focus on common objectives.

There is a requirement to carry out orientation programmes on staff policies, welfare schemes, compensations, perks and allowances.

The management may have to form team by combining staff from the various merging organisation to enhance staff productivity. The top management along with the HR team of the banks would have to lay down new policies and communicate the same to the employees so that they have clear comprehension of their duties and responsibilities.

It would be essential to identify the leaders in the merging entities, who have rapport with the large group of employees and can facilitate the transition.

The board and top management of these banks have realised the complex challenges in front of them to bring the human resource on the same page as the anchor bank’s vision and mission. It is interesting to note that banks have taken lessons from the issues faced and being faced by Bank of Baroda, Vijaya Bank and Dena Bank merger as well as merger of associates of SBI with SBI.

As per a recent report, the 10 banks - part of the merger plan - have recently interacted with Bank of Baroda to understand the challenges faced by them to plan for the same while carrying out their integration. The banks have also created functional committees to facilitate harmonization of the various processes and departments.

But each bank would face peculiar issues depending on their cultural diversity, geographical presence, effective use of infrastructure including ATMs and branches, information technology, compensation policies etc which would require different measures and steps and test strategies and policies implemented by the management of the bank.

(The writer Founder & Managing Partner of Ravi Rajan & Co and former chairman, Bombay Stock Exchange)