Poor human resource management practices in Indian public sector could lead to a serious setback

 The absence of talent in the government and public sector is the product of a deliberate neglect of human resources issues. Dodging real issues could take us back to pre-reform days 

The Reserve Bank of India (RBI) plans to rope in outside consultants to overhaul its human resource (HR) practices, a move that would affect its nearly 18,000 employees. It is reported that the central bank will form a panel of up to six independent professional firms to help the RBI in framing, implementing and delivering integrated HR solutions in the areas of HR policies, processes and systems, among others.

The empanelled consultants would advise the central bank on matters like hiring, salaries, training, performance appraisal, retention and succession plans, the banking regulator said. The panel will help the RBI in areas like strategic HR planning and advisory services; evaluation and assessment system; HR and management practices audits; beside others.

This is a step in the right direction. Recent years saw several flaws in HR management in the central bank. Ad hoc recruitment of executive interns without planning their future deployment or absorption, succumbing to pressure on promotion policies, not being able to convince the Government of India (GOI) on the need to implement competitive remuneration packages for recruiting and retaining efficient officers, failure to decide on upgrading of retirement benefits at least on par with GOI are just some examples. When it comes to infusing professionalism in specialized areas like supervision, forex and debt management the RBI is facing several constraints, many of them emanating from its failure to argue with North Block as the finance ministry shows an attitude akin to master-servant relationship.

Now that RBI has woken up, we may expect other statutory bodies and public sector organisations followed by the GOI to follow suit and think of an overhaul in their Human Resources Management and Development (HRMD) practices.

In this context, a look at the relevance of the Indian public sector and the neglect the sector is subjected to especially since the LPG (Liberalisation-Privatisation-Globalisation ) days, circa 1991 may help us stop, look and proceed further to develop the India growth story further.

Our country, since independence—or more appropriately—right from the First Five Year Plan, has been giving due importance for a vibrant and growing public sector in the nation’s economic development. In fact, certain sectors like defence production, Railways, Post and Telegraph were almost monopolized by the public sector till a change in policy became necessary post-LPG. The policy shift has thrown up many challenges before the government and the organizations in the public sector.

Both Jawaharlal Nehru and Indira Gandhi clearly understood the role of public sector in the Indian scenario. Establishment of core industries in the public sector and other measures up to nationalization of major banks were well thought out steps, taking into account the needs of a nation with an abundance of resources waiting to be managed and the urgency in ensuring fast economic development, distributive justice, employment generation and outreach to the rural areas. The two leaders saw in public sector organizations the capability to function efficiently in a democratic dispensation, guided by government policy, especially in regard to social responsibility and reach out to areas, organizations guided only by profit motive would normally refuse to penetrate.

Actually, the private-public sector divide in regard to meeting social responsibility obligations/commitments and a discriminatory approach between the two sectors, when it comes to government policy support is a legacy of the British Raj. Once it is accepted that the resources of the country are the property of the people and irrespective of ownership (whether government or private individuals/groups/families/organisations), all are handling public funds/resources in a trusteeship sense, this divide can be bridged to a great extent.

Presently, in the above background, the Indian public sector is ailing from lack of autonomy, indecent competition arising from a wrong understanding of the unique position of our country and irrelevant comparisons. Unique position because, our per capita geographical area, availability of resources, literacy rate, development needs, system of governance  and so on are not amenable to comparison with most of the developed and developing countries of the world. Day in and day out India is given a rank or rating among the assortment of nations in the world, many of them together can be accommodated in one of the states of India.

We are persuaded to believe that corruption and inefficiency exist in government and public sector only. In fact there is nothing further than truth than this belief. The pre-IT success stories of the Indian Railways, Posts & Telegraph, oil sector, space research, defence production and several other sectors which functioned efficiently and where corrupt practices were brought to light quickly and remedial action initiated departmentally are easily and conveniently forgotten. Of course, now, one gets an impression that there is a vested interest working in the private sector to keep government corrupt and public sector inefficient. If human resources related issues in the government and public sector are given the attention they deserve, many of the present problems can be solved. A brief discussion of the HR-related problems in government and public sector follows.

The absence of talent in the government and public sector is the product of a deliberate neglect of HR-related issues by the government. The ageing top level in the government and public sector is a serious issue. In the present context when performance of the government and institutions in public and private sectors is being watched by the world and judged almost online, human resources development (HRD) at the top across sectors should become a national priority. As a fire-fighting measure, there is a need for a comprehensive look at manpower planning and deployment of available expertise among institutions across private and public sectors and related HRD issues which have to be handled without further loss of time.

More than a year back, the RBI governor made a plea for a level playing field for PSU banks with enough freedom to hire executives and employees on competitive terms. This should have been seen in a wider perspective. Recently, the RBI too opted for recruiting short-term (for three years) executive interns on contract basis. The RBI has tried out most of the options like accelerated promotion, foreign postings, deputation to subsidiaries, assignment to higher quality training programme and paid holiday with family for its employees. As large disparities between the pay and perks in institutions with similar responsibilities across public/private sectors had not been appropriately addressed, the RBI’s new hiring scheme also did not attract talent.

The government should not further delay a revamp of the policy relating to recruitment, training, placement and compensation strategies across government, public and private sectors. A long-term solution may  have to be found for HR-related problems, including inability to hire experts at market related compensation (this is applicable up to the position of secretary/CEO in government and public sector), skills becoming obsolete in short periods, employees’ reluctance to change and demands from trade unions emanating from job security concerns. There may not be a “fit-for-all” remedy, as the issues are diverse and sometimes sector/institution-specific.

The government and public sector organizations may have to consider how best the “Cost to Company” (C to C) principles can be integrated into their existing recruitment, training, placement and career progression policies. This may involve convincing the existing employees that the changes will only improve the working results of the government departments and organizations they belong to and they will get opportunity to share the benefits and new job opportunities and so long as they are prepared to learn new things/upgrade their skills the infusion of ‘experts’ will not eat into their career progression opportunities. Inter-mobility of executives at higher levels among comparable departments of government and public and private sector organizations should be possible, on transparent norms and strictly based on merits. Changes may have to come first in the recruitment and training procedures for IAS and relates services, management trainees in public/private sector undertakings including probationary officers in public sector banks (PSBs). Recent revamping of Tata Administrative Service gives enough food for thought for thinking on these lines. Specialized services like one for banking/financial sector could be evolved for institutions including those in the private sector and all regulatory bodies in the financial sector.

A transparent guidance for a remuneration package based on the paying capacity/need for skills for different sectors and ensuring social security should come from the government without always worrying about what will be the impact on cabinet secretary’s salary or trade union demands. If the government secretary deserves a higher salary, the government should not raise budgetary concerns for not paying it. Instead, merger of some departments and utilizing the surplus manpower for new job opportunities should be a wiser option.

Time is opportune for both private and public sector organizations to have some introspection on their HR practices right from recruitment at the lowest level to the selection of CEOs, remuneration packages, training facilities and social security measures for their employees. While organizations in the private sector may have to review the optimum pressure they can put on their executives and managers, government and public sector counterparts may dispassionately examine and modify their remuneration packages to ensure attracting and retaining competitive talent in the present market scenario. Let us not forget that the civil services, executives and staff of public/private sector undertakings have to supplement the skills of the increasing number of political masters who were not as fortunate to get trained or groomed. The nation is immensely dependent on them for carrying out the development agenda on hand.

Till, perhaps ten years back, employers could depend on a growing population of educated unemployed from which they could hire and fire candidates on their terms. The position has changed with the opening up of the economy and sooner we realize it and act, the better. Dodging real issues could take us back to pre-reform days.

(The writer is former general manager, Reserve bank of India. He can be contacted at [email protected].)

1 decade ago
I’m so glad you enjoyed the topic and the debates this week, and thank you again for the great discussion board topic. I’m really looking forward to the debate that sparks!
Chandra Bhan Gupta
1 decade ago
HR Policy in RBI is changing frequently and many talented officers got stuck in timely promotion to them. Many DR officers previously got promotion to gr. C on completion of 3 years service and now they get it after 7 years i.e. delayed future promotion due to bad HR Policy and due to their faults.

Recruitment at two levels Officer Gr. A and Gr. B in class I service with around two increments difference at start and maximum scale in the scale is it self is a joke. When many direct officer grade A officers took around 20 years for promotion to grade B officer post. Again total HRM failure.

My suggestion is that Officer Class I service recruitment should be only at one level as done in Group A services of the central government. Remaining grade promotions to be on seniority and merit basis on the line of UPSC formula.

My suggestion is that Officer Class I service to have only one running scale with grade pay separate for determining seniority as per 6 CPC.

Outside HR Expert may not be equipped with the HR Strategy concepts adopted by RBI Management and Think Tank which I gathered after personal working experience of 26 years officer service as ASO (DR) in 1980, Promotion to P &SO Gr B in 2000 and retired in 2007 as Gr C (PP).

All have forgotten Justice Nain Cadre Review Committee Recommendations and Formulae and various sequence of events in the area of promotions and Performance Appraisals.

1 decade ago
As an employee of a PSB, i really dont understand why there exists so many vacancies when the country is filled with talents. There are crores of young fresh blood looking for suitable jobs. We should start recruiting right candidate for the right post, say a clerk should have a minimum edu qualification like B.Com, BBM, BBA, BA(economics), etc who have enough english fluency and computer&accounting knowledge. This is how we can set good standard, not by recruiting BA(English) or BSc(Chemistry) which is irrelevant to the work.

Manojikumar.R B.com,MBA,CS(Professional), NCMP Level 1,
Asst. Mgr,
Vijaya Bank
1 decade ago
Neither lack of talent or HR resource is the real cause of public sector efficiency lagging, the real cause is a systematic politicization by over taking management from the public servants in the guise of obtaining majority in parliament assured at the cost of national interest.
Replied to KhandadhiBalakrishna comment 1 decade ago
Inefficiency is evenly distributed in private and public sector. The perceptible better front desk performance in private sector is only because that sector has an option to select areas of work. There are efficient organisations in public sector, which as you say are being destroyed, may be consciously, to help private sector. If you need one example in financial sector, UTI is there for all to see. First, its Unit 64 Scheme was destroyed. Now whatever is left of UTI is being weakened by keeping the top-most post vacant for about 18 months.M G Warrier
1 decade ago
This is truly a sorry state of affairs. This article brings out clearly that people management issues can no more be left to any deptt, by whatsoever name it exists but need attention at the very top. The temptation to remain comfortable with the legacy systems in HR needs to be got rid of and a very focussed, modern and professional approach to HR is the need of the hour. In fact, it should have happened yesterday.

With access to modern information technology, it should all the more be possible to transit smoothly from the present disappointing state of affairs to one where the best of the brains is hired, nurtured, rewarded and retained by the RBI and the PSBs.

Let this article be an eye opener for ACTION.

V G Subramanian, Former General Manager, Bank of Baroda, Mumbai
31st July, 2012
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