Thursday, September 30, 2010

Khandelwal report on HR in banks

The report on HR in banks, prepared by a committee headed by A K Khandelwal, former Chairman of Bank of Baroda, came out in June. It wasn't made public. I happened to get a copy of it last week. I am concerned about the focus on variable pay in the report. As I argue in my ET column, HRD in banks is more than just pay, I have serious concerns about whether such schemes can work in the public sector.

There is much talk about the public sector losing talent because of poor pay relative to the private sector. The IAS wanted a huge job in salary to make jobs comparable to the private sector. The army, as I recall, wanted the Chief of staff, to paid Rs 1 crore. IIT faculty agitated for pay superior to what the Pay Commission wanted. The IIMs grumble about pay. And, of course, all PSUs would like pay to be benchmarked to the private sector.

In many ways, pay in academics is a lot better than it has ever been before - and there is no indication that it is drawing in superior talent. Nor are there signs of the opposite kind, that the talent coming into IAS, for example, is poorer than in the past. Senior IAS officers have told me that the composition of probationary officers is changing- more come from lower middle class and rural families and they may lack polish but they are very bright and committted. Competition for the administrative services remains fierce- as fierce as that for IITs and IIMs.

So, we should not make the mistake of seeking parity in pay across the public and private sectors. The two offer different career choices and different lifestyles. This goes for public sector banks as well. They need to improve pay but not catch up with private sector either in what they pay or how they pay (fixed pay or variable pay).

10 comments:

tija said...

I agree. Public sector should not seek parity in pay with private sector. There are other aspects of job, like housing, flexible working hours, diversity of task etc which demands attention.

tija said...

I agree. Public sector should not seek parity in pay with private sector. There are other aspects of job, like housing, flexible working hours, diversity of task etc which demands attention.

Anonymous said...

Dear Professor Rammohan,

My random thoughts on your post:

1) I feel money is still important. If you look even at the permanent faculty (not visiting) of ISB, the quality difference versus even top IIMs is palpable, not to speak of the new IIMs or non-IIM b-schools. I guess the monetary reward is the main differentiator here. And I am in no way connected to ISB. Tell me, how many people of your background is there in all IIMs combined? You may find the Chiranjeeb Sens in IIMB, or some new faculty with US degrees. But most of them are not in functional areas like finance or strategy, but in areas like economics where getting a job in the US in much harder and the pay lower. I am not suggesting that an IIT-IIM degree or top US PhD is everything (particularly because I feel there is way too much 'science' put into selection at IIMs, and that way IIMs end up only with engineers and not necessarily good managers) - so even a non-US PhD or person with liberal arts background can be very brilliant (here I speak of faculty). But they do act as a signal (though may be imperfect) of quality.

2) True, after the recent HRD decision, the IIM director gets pay equal to secretary and the senior professor equal to additional secretary. But to make it 'fiercely' competitive as the IAS, you will need to provide the perks - more board seats for IIM profs on PSUs, more committee memberships, better 'quality' of housing (may be not on Prithviraj Road, but better than the faculty quarters), less IAS on governing boards, cars (even if not with red lights or chauffers), creation of position of professor of eminence with pay of secreatary, and so on. Till then, the very best will go either for money (private sector) or status (IAS) and not for teaching.

Anonymous said...

Let me add to my earlier comment.'Losing talent' is the truth. let me explain. Lets say a D-school econ MA topper. what options does he / she have?

1) get a PhD and join a top Delhi college or at best Delhi Univ or JNU, and lead a simple life (even after the changed pay)

2) Join IAS and sit on the board of DU or JNU and get pay more than JNU VC, and post-retirement positions (incl governor of states)

3) Join the private sector - make crores


4) go to US academia - join a top US university as faculty - rub shoulders with Nobel laureates, and also make a lot of money

In today's highly competitive India, tell me who will choose (1)? Because the person was so competitive he / she topped a place like IIT or D-school. and why will that person now choose a line which pays a lot less in every sense? do you have an answer Sir? or do the IAS folks you talk to have one? please ask them the question / scenario I just posed to you? would they advise their children anything else than what I just said?

T T Ram Mohan said...

Anonymous,

Thanks, first, for your kind sentiments.

You make many interesting points. Let me respond to a couple.

1. Public sector versus private sector: Almost anywhere in the world (except, perhaps, Singapore), private sector jobs would be more lucrative than academia. And yet we do have very good academics. The issue is not whether academic salaries can compare with those in the private sector. It is whether academics can permit a decent life. I submit that, after the Sixth Pay Commission, it does in India.

2. US academia versus Indian academia: Of course, Indian salaries will be way below those in the US. The answer is not to try to catch up with US salaries. Schools in Canada, Australia, Europe and Hong Kong have attempted that and yet failed.

Is it sensible for IIMs to match, say, ISB salaries? Well, I don't know that is desirable (even if feasible). You will still get people who, by and large, could not make it in the US market. So why overpay? Indian schools need only to target the small number of Indian academics abroad who wish to return to India for personal reasons. A leading IIM would need only three or four such persons to join every year. That is not difficult, provided you create an ambience where the returnees feel comfortable- facilities for research, freedom, recognition. That is where the IIMs have not succeeded in recent years. As for matching the perks of IAS officers, let me tell you that if you were to include consulting and board memberships, many IIM faculty do pretty well for themselves.

-TTR

Anonymous said...

Professor Rammohan,

Thank you for your reply. I appreciate and understand the points you make. Personally, I have a deep respect for your opinions which I invariably find very balanced. I look forward to reading more of your posts in future.

regards...

Anonymous said...

Respected Sir,

i agree whole heartedly with your opinion that what banks need is HRD and not necessarily parity with private sector salaries although raising salaries to atleast a decent level is necessary.
To give u an example about HRD in Govt Financial institution-
1) i work for LIC of india. The wage revision got due on 1.7.2007 a good 39 months ago till date no revision has taken place. Would you call it apathy or blantant disregard for the rightful aspirations of the employees.

2) There is no uniform transfer and promotion policy. Postings occur at the whim and fancy of management.
3) Today a Entry levelGroup A officer in LIC gets a princely sum of Rs 18,000 a month. Even after proposed wage hike he/she will pocket 22,000 a month far below Even Group C in GOI forget about matching private salary.
4) there is no concept of Value addition thru continous learning. There is no study leave at all. How do you expect future leaders to get properly groomed for higher positions when a plain graduate can become a chairman without any need or incentive to learn for future.

few(4) of my friends work in SBI and they work till 9pm each day. The govt threw a bread crumb of 17.5% hike on a small base. They rue the day on which they had joined a govt bank. They are ready to jump ship any day.

Therefore, monetary compensation is an important part of the story but not the entire story.

Your comments are awaited

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Anonymous said...

1. Profit making PSBs need to reward late sitting and job risk taking employees, demonstrating visible output with higher variable pay to stop them from leaving to a private sector job.
2. The question of board membership for professors has not been answered even in US and which led to many fund or brokerage houses being set up by ex-academicia.
3. I think so long as a person is able to move across a PSU to PSB to IITs and to MNCs or vice versa, in career, it is a healthy atmosphere for all, since perceptions and goasl change over time.

regards

dbag

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