final thesis downsizing

IMPACT OF DOWNSIZING ON WORKFORCECase Study of Habib Bank Limited

CHAPTER 1: INTRODUCTION

1.1 Introduction

In any organization work force is considered the life blood. It down the road,

assumes various denominations, designations, attributes, powers, meanings, strengths,

weaknesses, psychological advantages against other such small groups and some times

produce animosity, cruelty, harshness, indifference for other recessives subgroups.

The oft quoted feature usually appears in a large groups, institutions and

organizations working for a collective goal and targets. It is widely observed that groups

running various businesses at a time lack such transformation and variety of organization

psychological attribute. This is because in each individual working wing of the group, a

team spirit and sense of belonging among those wing members appears. The two sister

wings of a group may or may not conceive each other as rival but they enjoy a sense of

belonging among co workers in the same wing.

For instance a large group (ATLUS GROUP) running insurance firm, bank, car

manufacturing plant, trades company with different names but under one flag seldom,

experience tension inside the workers of any single subgroup or wing. They might

develop a sense of advantage, depravity, professional rivalry against other subgroup of

the same entity.

For instance insurance sales executive team might feel inferior to car sales team

but among each individual team the strong sense of belonging binds each other closely.

As far as a large organization is concerned where whole work force fall under same

category with no water tight demarcation, a different environment appears. For instance a

very strong administrative control of few executives yields the power circle, Then come

© Adnan RasheedUniversity of the Punjab

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supervisors that report directly to administration, then comes the working group under

different designations and denominations.

In this case the think tank, planners and human resource staff work independently

keeping humane feelings for the junior cadre. In such an organization, for instance a

bank(HABIB BANK), sale force , marketing force, consumer support executives , non

clerical , clerical , officer cadre , and then executives members constitute a team , a

staff, a representative body and assume a physical shape of the respective organization .

At this point of time any or all member reflects the behavior, temperament and stature of

that organization.

The behavior of sales representative is enough to work out the complete

hierarchical framework of the bank and same goes for any other institution. Blue – collar

jobs are not the only jobs being lost. During the last few years, thousands of executives,

managers and professionals have been laid off from their jobs as companies streamlines,

restructured, and downsized. About 85% of fortune hundreds companies have downsized

their white-collar workforce in recent years.

The trend of downsizing, sometimes called rightsizing, reduction in force, and

restructuring will probably continue to impact managers and organizations for a period of

time.

1.2 Background of Information

Downsizing is taking place in the public sector, private sector, non-profit

businesses, health-care, education and government in the whole world. Business realities

are making themselves felt throughout the corporate world. Decreasing margins, global

competition and customer expectations are forcing the domestic banks and companies to

look for ways to increase productivity. Many think that downsizing in the domestic

banking industry is the panacea for all economic ills. Downsizing in the domestic

banking industry is a legitimate tool, but not necessarily the best choice for every


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circumstance and economic ill. Governments may mediate the conflicting forces that

prompt organizations to downsize, but they abort the fundamental dynamics at their peril.

The severe competition, economic dependency and scarcity of financial resources

force the domestic banking industries, companies and the governments to opt for the

policy of downsizing. Many famous and big multinationals like AT&T, The Bank of

America, Kimberly-Clark, RJR Nabisco, Xerox, IBM, US Air, Ford Motors, Procter &

Gamble, Colgate-Palmolive and PIA, WAPDA, Pakistan Railways, Banks and DFIs of

the country are ready to initiate a new round of downsizing.

The ultimate results of downsizing, rightsizing, restructuring or reengineering

differ from country to country and from organisation to organisation. Some developing

countries like Pakistan are adopting this policy of downsizing because of the pressure of

the international monetary agencies. According to some economists, downsizing is a

positive and purposive strategy. It is a set of organisational activities undertaken on the

part of the management of an organisation, and is designed to improve organisational

efficiency, productivity, and/or competitiveness.

It is evident that in Pakistan, downsizing is part of the overall economic

programme that embraces deregulation and liberalisation of the economy, with a view to

achieving higher growth rates through improved efficiency and better services. It is also

true that in Pakistan, downsizing is integrated to the overall policy of privatisation. The

banking system of Pakistan consists of a central bank, 4 nationalised banks, 2

denationalised banks and 15 newly established private banks. They have been playing an

important role in the economic growth of Pakistan.

The expected policy of downsizing will damage the high standards of efficacy,

professional expertise, and rapidity of execution and overall credibility of the

government. There has been a ban on jobs in the federal and provincial government

departments from the early 1990s. This irrational policy may spoil the social fabric,

economic prosperity and financial stability of the general intelligentsia and banks alike.


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In our country, the downsizing exercise was instigated in the public banks and

DFIs in 1997.The golden handshake scheme was offered to all the permanent employees'

at all hierarchical levels. The main philosophy behind downsizing was to save Rs20 to 30

million annually. The IMF, the World Bank and the State Bank offered to bear part of the

downsizing expenses. As of June 1998, a total of 22,642 banks/DFIs employees availed

of the golden handshake and the payment that was made to them was Rs29.1 billion.

Every country of the world is adopting policy of downsizing according to its

socio-economic needs and compulsions. Hasty and imported policy of downsizing

programmes can leave countries/companies with an atmosphere of mistrust and

insecurity. Downsizing is not the only solution for any radical change in the banking

sector of the country. In spite of downsizing of local banks and DFIs, the recovery of

stuck-up advances in full, strict enforcement of credit, financial and administrative

discipline, reduction of cost of financial intermediation, payment of positive average real

rates of returns to depositors, removal of corrupt bankers and computerization to be

taken. According to ILO (1998), nearly 68 per cent of all downsizing, restructuring, and

reengineering efforts are not very successful all over the world.

In many cases, companies that downsized and restructured to become more

profitable and efficient have not achieved either. Instead they have experienced

tremendous fallout, especially in the areas of decreasing employee productivity and

morale, and increasing levels of absenteeism, cynicism, and turnover.

The people of Pakistan are very emotional about their jobs and organisations.

They work hard for the betterment of their departments. Therefore, the sudden

downsizing would be a bolt for them. The major economic conditions of Pakistan are not

stable. There are huge internal and external debts, regional disparity, massive

unemployment, low mark-up structure, and deteriorating law and order situation, which is


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negating all the efforts of the government for the quick economic revival and poverty

alleviation.

Unemployment is increasing, price hiking is a bitter reality, inflation is on the

move and industrial productivity is decreasing day by day. In this bleak situation, the

policy of downsizing in the domestic banking industry may add fuel to the miseries of

general masses and employees.

1.3 Habib Bank Limited

1.3.1 History & Background

The Habib Bank Group is a leader in Pakistan's services industry. An extensive

network of 1450 domestic branches – the largest in Pakistan – and 25 international

branches has enabled HBL to provide comprehensive services that meet customer needs.

This has ensured thriving client relationships that form the backbone of the Bank's

operations.

Today, HBL plays a central role in Pakistan's financial and economic

development. It has come a long way from its modest beginnings in Bombay in 1941

when it commenced operations with a fixed capital of 25,000 rupees. On 25th of August

1941, Habib Bank inaugurated its operations with the bank’s first branch in Bombay.

Impressed by its initial performance, Quid-e-Azam Mohammed Ali Jinnah asked

the Bank to move its operations to Karachi after the creation of Pakistan. HBL

established itself in the Quid’s city in 1943 and became a symbol of pride and progress

for the people of Pakistan. Throughout the decades, HBL has held the mantle of a

dynamic leader, by adding value to the lives of its customers


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Habib Bank has been a pioneer in providing innovative banking services. These

have included the installation of the first mainframe computer in Pakistan followed by the

first ATM and more recently, internet banking facilities in all its 1424 domestic branches.

It was HBL that introduced products such as Credit Cards, ATMs, Travelers Cheque, etc.,

to the Pakistani market.

The Bank's towering presence in Pakistan's financial and commercial life has

remained unchanged over the decades. The strength of its brand and image is symbolized

by its prominent Head Office building that has dominated Karachi's skyline for 35 years.

Bank continues to build on its track record and in its quest for excellence it strives to

meet the needs of both its customers and its employees. Habib Bank aims to ensure

customer satisfaction by providing high quality banking services. This is made possible

by the professionalism of its employees all of whom are provided with the requisite

training and opportunities to enable them to realize their full potential.

The Government of Pakistan privatized HBL in 2004 through which AGHA

KHAN FUND FOR ECONOMIC DEVELOPMENT (AKFED) acquired 51% of the

Bank's shareholding and management control. With a presence in 25 countries,

subsidiaries in Hong Kong and the UK, affiliates in Nepal, Nigeria, Kenya and

Kyrgyzstan and rep offices in Iran and China, HBL is also the largest domestic

multinational. The Bank is expanding its presence in principal international markets

including the UK, UAE, South and Central Asia, Africa and the Far East.

Key areas of operations encompass product offerings and services in Retail

and Consumer Banking. HBL has the largest Corporate Banking portfolio in

the country with an active Investment Banking arm. SME and Agriculture lending

programs and banking services are offered in urban and rural centers.

Economic activities both for the Govt. & affectees. In less than three weeks that

fell between August 22 to September 13 a total of 6,495 executives and officers were

retired by the Habib Bank Limited and United Bank Limited. The downsizing exercise


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initiated by HBL on the 22nd of last month and followed the UBL on the 13th of the

current has now spread to National Bank of Pakistan which has offered voluntary

retirement scheme to all its workers.

1.3.2 Down-Sizing and HBL Limited

1.3.2.1 Golden Handshake Scheme

The scheme offers an unique opportunity to boost long term investment & A

similar scheme has also been offered by one of the Development Financial Institutions,

the Agriculture Development Bank of Pakistan (ADBP) and is expected to be followed

by other DFIs soon. Besides, HBL also offered all 30,000 of its workers and staff a

voluntary golden handshake scheme and though the HBL president, Shaukat Tareen

expected that 10,000 employees would avail the offer, PAGE has learnt that only 6,500

HBL employees have applied to take advantage of the offer. On the other hand, the

president of UBL Zubyr I. Soomro has said that the downsizing in UBL is completed

and there would be no more retrenchment, mandatory or voluntary, at UBL.

Among reported 11,000 employees of the Habib Bank facing the axe of

downsizing, as many as twenty-five sportsmen will lose their job, but the officials

insisted the mass-scale retrenchment would not affect their cricket, hockey and football

teams.


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1.4 Problem Statement

My thesis is emphasize on mainly problems concerning with most employee

concerns with downsizing in HBL because their services with certain expectations, and,

for any number of reasons, those expectations were not met. Higher management can

help in this scenario controlling misconceptions and troubles. so this is total concern of

my thesis that how and when downsizing and top management can impart their role in

HBL concerning the favor and fear of employees.

1. Relationship revenue and relationship cost;

2. Relationship volume;

3. Relationship profitability; or

4. Relationship volume and profitability.

Research studies indicate that the employees satisfaction and job security provides

from two to three times as much profit as the traditional banking environment where the

fear of downsizing is present. Employees satisfaction encourage to have higher deposits,

more banking products, lower attrition and a lower service cost than downsizing fear with

similar demographics.

Thus, the research problem for this thesis can be formulated as:

How does downsizing and employee loyalty impact on profitability in HBL Limited?


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1.5 Purpose And Research Questions

The Purpose of the present research is:

"To gain a better understanding of the role of employee loyalty & satisfaction in

maximizing profitability in HBL Limited ".

To reach this purpose the following research questions are stated:

RQ1: What are the major reasons and requirements for implementing downsizing?

RQ2: How can employee's role are applied on organization?

RQ3: How employee's efficiency can be affected by the downsizing?

1.6 Objective of the Study

1.6.1 Understanding The Organizational Down cycle

To counter-act the long term effects of downsizing, managers need to understand

how organizations slip into "down cycles". An organizational down cycle can be

characterized as a long-term process where the organization becomes progressively more

depressed, insular, protective and confused. The important thing to note is that this

process occurs slowly, sometimes imperceptibly, and that if the process is allowed to

continue unchecked, it gets worse.

The down cycling organization loses its positive momentum and enthusiasm. A

vicious circle is formed. It snowballs. Bad feelings and depression become the norm

rather than occasional, until, in extreme cases, the organization becomes unable to move

effectively, and the work climate can become intolerable for everyone.


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Because the process tends to be gradual, managers tend to assume that the

problems that occur early in the down cycling will solve themselves without attention. It

is easy to assume that staff will "get over" the effects of downsizing over time.

This may be the fatal mistake, because if the process is left unmanaged, there is a

good chance that staff will become more demoralized. One final point on the down cycle

is in order. When an organization is close to the bottom of a down cycle, it is extremely

difficult to turn the organization around. This is because levels of trust, hope and

enthusiasm are so low that staff will have little faith in the effectiveness of any approach

that promises to be helpful.

1.6.2 Some Prescriptions

1. Proactive management activities are always required when downsizing occurs.

Managers must realize that they "can pay now or pay later", and that delaying

actions designed to revitalize the organization will result in a huge cost down the

road.

2. Managers should consider that the period immediately after downsizing is

critical. Action or inaction during this period will determine whether the

organization moves into a depressed down cycle, or makes the commitment to

move forward. Downsizing time should also be a time when the organization's

mandate and vision are revisited.

3. It should be a time when the manager dedicates him/herself to the long-term

health of the organization by clarifying, supporting and building trust.Above all,

this is the time where the manager's prime responsibility is to communicate, both

with staff, and with executives. One focus of communication should be clarifying

mandate, vision, priorities and commitment levels.

4. Proactive long-term approaches should also be applied by any central agencies

charged with "helping" downsizing organizations. Support should be offered to


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those that are displaced, but, in the long term, help offered to "survivors" will be

much more important in determining organizational health. As a manager, ask, or

demand that these services be made available by central agencies, or procure them

from private vendors, if the central agency won't do the job.

5. If you are in the unfortunate position of managing an organization that is "down

cycling", you need to be aware of two things. First, it will get worse if

neglected. Second, interventions to turn the cycle around must be considered as

long-term projects. One shot consulting or training isn't going to do much, and it

may be damaging. Remember that your organization may have been moving

downward for a year or two, and that it is going to take a substantial period of

time to reverse the process. Positive change will require a consistent effort on

your part, and may require consulting help over a period as long as a year.

Hypothesis

H0 = Downsizing activities do not have any impact on organizational

effectiveness of HBL.

H1 = Downsizing activities activities have impact on organizational

effectiveness of HBL.

1.7 Significance of Study

The financial services sector is one of the more obvious, and for the moment

visible, sectors undergoing dramatic structural changes in the light of a further

internationalization of the economy. In view of this, it is probably a good business

decision to engage in strategic mergers and other forms of alliances. It seems to be the

case, however, that those who make these decisions behave primarily as investors of

large capital and not as employers.


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This has serious consequences for the impact on employment in a sector that has

already been placing increased emphasis on automatisation. Given the seemingly

irreversible characteristic of the current trend in the financial sector, unions are limited to

pleading for acceptable forms of "downsizing" and the introduction of flexibility.

It seems to be the case that while many analysts are focusing on the vast amounts

of capital being merged and the gigantic profits for investors, little attention is being paid

to the possible impact on those earning a modest living as employees in the financial

services sector.

The significance of study, I think with my thesis interpret in the followings ways

to whom it may concerns.

1. Mergers in banking cause serious concerns about employment

2. Social consequences and employment effects

3. Role of the unions

4. The euro and future employment in financial services

5. Human Resources & HBL Limited

6. The effect of downsizing on organization-employee relationship

I think, the significance of study may help in this regard would be in the

followings,

One of the most telling comments is often put forth by employees a year or two

after downsizing, and it goes like this: "Sometimes I think that the ones who were laid

off are the lucky ones". They usually go on to describe a workplace where employees

feel:

a lack of executive commitment to their functions.

confusion about the priorities of their organization.

increased workloads.


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confusion about their mandate.

a sense of being betrayed by executives and managers.

a profound sense of distrust.

a sense of futility with respect to long-term planning.

undervalued and unappreciated.

In operational terms, this translates into a number of problems.

the organization moves towards less risk-taking and innovation

destructive conflict tends to increase

internal competition for resources increases

individual staff members devote less effort to working together and more

attention to doing things that will protect themselves.

general listlessness and lethargy

decreases service levels and increased public hostility

It is easy to understand these effects when they occur close to the time when

down-sizing occurs, and remaining staff "grieve" the loss of friends and colleagues. But,

these effects are now being seen as long as one or two years AFTER the downsizing

period. There are indeed long term effects of downsizing that need to be addressed.

The study will be beneficial on the following groups.

This will be humble addition to the existing hoard of knowledge.

The findings of the study may be used the good training of the bank employees.


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Improved employee morale and retention

Increased employee engagement and productivity.

Strengthened governance and compliance with company and regulator issues.

Motivation is the set of reasons that determines one to engage in a particular

behavior.

1.8 Delimitations

As a background of my thesis topic “Downsizing and its impact on workforce of

employees of HBL ” generally represent all those issues which influence Downsizing

adoption in Pakistani banking sector, but according to limited time an attempt was made

to narrow down the research. The study would focus only on the “Employees Satisfaction

& Downsizing Environment”. I believe the result of this research can be generalized to

all other issues designed for corporate customer especially big Corporate Sector.

The impact of Downsizing of the bank on Employees satisfaction from the time of

privatization.

The Branches belongs to Punjab only.


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CHAPTER TWO: LITERATURE REVIEW

2 Literature Review

2.1 Downsizing in Abstract

Organizational downsizing, or simply ‘downsizing’, is a feature of many

organizations in the industrialized world. As a goal-oriented restructuring strategy,

downsizing endeavors to increase an organization’s overall performance. However, the

consequences of downsizing have proven to be persistently negative. Indeed,

organizations embarking upon downsizing have largely failed to accomplish their stated

and desired objectives. Moreover, the execution of downsizing is not confined to

economic and organizational consequences, but profoundly affects the entire workforce.

The first of two, aims to review the relevant body of literature and attempts to clarify

many of the mysteries and misconceptions associated with downsizing paying particular

attention to aspects concerned with definitions and meaning, scope and implementation

strategies.

2.2 Employee Downsizing


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Employee downsizing is a nightmare feared by most of the employees working in

the corporate world. A downsizing strategy reduces the scale (size) and scope of a

business to improve its financial performance.

In management parlance, the term downsizing refers to pruning (including layoffs

and retrenchments) of the size of workforce for a variety of reasons:

Obsolescence of skills consequent upon up gradation of technology,

Shift in the organizational requirements;

Outsourcing;

Modernizing,

Restructuring or even reducing the activities of industrial units; and

Employees, nowadays, will have to reconcile with the ugly realities of the

corporate world and they may have to be prepared for alternative employment as the axe

may fall on anyone at any time. Due to the globalization of business, organizations are

able to develop a number of approaches by which to employ human resources,

technology, and capital to implement innovative projects in different parts of the world.

They are able to derive maximum advantage due to these possibilities. While the larger

goals appear justifiable and in the interest of most stakeholders, they lead to frequent

changes at the organizational, functional, and individual levels.

At the organizational level, such changes can lead to closure of businesses, off-

shoring, merging with another organization, outsourcing, restructuring, etc. At the

functional level, it can imply changes in the availability of resources, changes in the

scope of activities, etc. As a sequel to these developments, employees can be redeployed,

transferred, rendered redundant, or let go within a very short span, without adequate

preparation for these changes. Such changes take their toll in terms of organizational

productivity, nature of employer-employee relationships and the associated social costs.

People who contribute to the organizational goals are the organization's assets.

These assets are turned into liabilities due to reasons mentioned earlier. The challenge is

to what is morale manage employee exit without disrupting the organization's


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functioning. Those individuals who lose jobs are the hardest hit. For the affected

employee, the emotional trauma of losing a job is very difficult to cope with. Aside from

the financial implications of a job loss, they have to reconcile with the loss of self-

esteem, self-confidence, and a breach of trust between the employer and the employee.

Along with the individual, his/her family also gets deeply affected with the involuntary

job loss of a family member. The pain is not limited to the individual alone but affects a

number of others. The effect is also felt by other employees who remain in the

organization as they suffer from the guilt and are also faced with the fear of job

insecurity.

The fundamental reason to resize the organization is to improve organizational

performance and to reduce costs of operation. While these changes are expected to fetch

significant gains for the companies in the long run, an analysis of corporate experiences

of downsizing shows that such measures are not always implemented with careful

consideration of all the implications. Downsizing also brings, in its wake, a number of

associated hidden costs, which companies tend to overlook in pursuit of short-term gains.

The flip side of downsizing is that the organizations lose expertise, skills, knowledge,

experience and valuable relationships, which walk out of the door every time somebody

leaves. A number of alternative approaches can be implemented to achieve the over-

riding goal of enhancing business performance. At the same time, it is true that

downsizing in many cases is an inevitable option. However, downsizing should be

considered not as the first but the last option. If the axe has to fall, it should be preceded

by a careful consideration of the consequences of such a drastic action.

2.3 Morale

Morale, also known as esprit de corps, is an intangible term used for the capacity

of people to maintain belief in an institution or a goal, or even in oneself and others.

According to Alexander H. Leighton, "morale is the capacity of a group of people to pull

together persistently and consistently in pursuit of a common purpose".


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2.3.1 Morale in the workplace

Workplace events play a large part in changing employee morale, such as heavy

layoffs, the cancellation of overtime, canceling benefits programs, and the lack of union

representation. Other events can also influence workplace morale, such as sick building

syndrome, low wages, and employees being mistreated.

Factors influencing morale within the workplace include:

Job security.

Management style.

Staff feeling that their contribution is valued by their employer.

Realistic opportunities for merit-based promotion.

The perceived social or economic value of the work being done by the

organization as a whole.

The perceived status of the work being done by the organization as a whole.

Team composition.

The work culture.

2.3.2 How Down-Sizing Affects Employees’ Morale

Every year companies spend millions in recruitment due to employee turnover.

Turnover and its associated costs are a burden that used to be just the cost of doing

business. But more and more companies are investing time and effort in making better

hiring decisions and doing more to keep the employees they do hire. Employee retention

is now a buzz word in today’s business world.

Over two-thirds (70%) of HR managers state that employee retention is a primary

business concern. HR managers currently find employee retention a business challenge,

long-term demographic changes, such as the retiring Baby Boomer population have the

potential to aggravate this issue. All companies, regardless of size, are struggling with

how to keep employees from leaving for more money or better opportunities. Studies

consistently show that even though employees may say they are leaving for more money,


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when those same employees are asked several months later why they really left, the

money factor is about 5th or 6th on the list.

The first few reasons include lack of recognition, disagreement with the culture or

direction of the company, poor treatment by their boss, lack of excitement about their

growth prospects, and poor relationships with co-workers. How much? When you add the

costs of finding an employee, training the new employee, lost productivity and filling in

for the employee who leaves, the cost can easily equal 150% of the base salary of the

person who left. So, if you are paying someone $50,000, the cost to replace that person

will be approximately $75,000. This money comes out of your hard-earned profits.

This is one of the key reasons that companies are focusing so much effort on

keeping their current employees. Some of the steps taken by companies to retain their

work force are:

Ensure you offer competitive compensation.

Ensure you offer basic health care benefits at reasonable rates. Consider

adding lifestyle benefits that are cost effective (read easy on the cash flow).

Find out what employees want from their career and do what you can to

provide for their needs.

Be as flexible as possible about how the work gets done.

Be as flexible as possible as to when and where the work gets done. Can it be

OK for an employee to take a few hours off to attend to a family or personal

matter if they can accomplish the job at their home in the evening?

Take a real and genuine interest in people’s career aspirations and personal

lives.

Recognize positive contributions to the company. Communicate company

progress, financial news, major customer or sales activities on a regular basis.

Follow up on your commitments to provide information or answers.

Have regular (bi-weekly or monthly) meetings with all employees where they

can ask you questions about your plans, company progress, new developments

to look for, etc. Be accessible to them so you can learn their needs. If you can


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respond to their needs before they become real issues, they won’t begin

looking for greener grass.

Ask former employees why they resigned. Even if they left six months ago,

they still have a valid perspective.

Routinely ask employees what you can do to make the company a better place

to work. Set boundaries if necessary as to what items are not negotiable; such

as ownership in the company or 50% per year salary increases.

2.4 Conceptual Approach To Employee Downsizing

2.4.1 “Reflective Restructuring”

According to Theo Blackwell of The Work Foundation, in 1980s and 1990s many

companies resorted to downsizing their human resources in order to cope with economic

pressures. But what most of these companies do not realize is that downsizing does not

always lead to savings in reality or increase in the market worth of the company. On the

contrary, the downsizing companies may be branded anti-people. It usually leads to

repetitive downsizing and results in the loss of employee morale and loyalty and thereby

affects overall productivity levels. However, they can adopt alternative approaches to

cope with economic uncertainties. Wayne Cascio had proposed a new strategy termed as

"reflective restructuring", which enables companies to offer a range of smarter options to

employees. The article explains the significance of this new concept and provides

examples of companies in the US and UK which have adopted the strategy. It also

explains that while companies in the US are at a greater liberty to downsize, the UK

business environment is not amenable to such measures.

He outlines the causes that resulted in surplus manpower among PSUs. However,

after India opened up its economy, most PSUs were compelled to streamline their

operations to increase their efficiency.One of the major steps taken to achieve this goal

was to shed the excess staff on their payrolls through the "golden handshake," by floating

Voluntary Retirement Schemes (VRS) and Compulsory Retirement Scheme (CRS). The

other major step was to outsource non-core activities and focus on their core


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competencies. The article provides a snapshot of the Indian experience of downsizing and

also discusses the social implications of these drastic measures.

Barbara L Davison explains, in "The Difference Between Rightsizing and

Wrongsizing", the differences among the terms used in conjunction with downsizing,

i.e., rightsizing, resizing, upsizing, sidesizing, and wrongsizing. The author clarifies that

rightsizing need not imply reduction of personnel. In certain cases, it can also mean

increase in the numbers. The article explains the need for tying rightsizing efforts with

the overall strategy, identifying critical growth areas as well as those needing

consolidation, analyzing the effects of rightsizing on all functional areas, evaluating the

financial implications, and ensuring that each department and employee adds measurable

value. The author illustrates how to carry out a rightsizing exercise with the help of a

process example, which describes the most important steps. In this connection, it cites the

examples of a few companies, such as Ernst & Young, Cisco, Agilent Technologies, and

Schwab, which have implemented rightsizing. The article also illustrates a few

alternatives to downsizing and highlights new workforce concepts, i.e., "Just-in-time"

workforce and the "Portfolio" workforce, to cope with fluctuations in business cycles.

Rick Maurer of Maurer & Associates emphasizes the need for organizations to act

swiftly to cope with changing business conditions and on their requirement of human

resources. Business leaders need to continuously assess the mix of skills required as well

as the number of employees required for the present and the future. In addition, they

should engage in a process of benchmarking with companies in the same industry.

The article explains that downsizing may prove to be a risky strategy that may not

always bring about much improvement in terms of the productivity or revenues to the

organizations. Hence, to cope with changing requirements of staff, companies should

consider a number of different alternatives to downsizing.

2.4.2 Implementation Of Employee Down Sizing


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Sumati Reddy of the ICFAI University, Hyderabad, India outlines ways in which

employers can implement a well-considered downsizing program. If downsizing is

inevitable, organizations must pay due attention to the rationale for downsizing,

involvement of employees in designing the program, formulation of a fair and equitable

policy, Equal Employment Opportunity (EEO) guidelines, legal counsel, etc. The article

also suggests the use of objective data to formulate the downsizing plan. In conclusion, it

points to a few indicators to assess the effectiveness of a downsizing program.

Carlton Becker of ORC enumerates a number of lessons from the collective

experience of layoffs by companies across the globe. These lessons largely pertain to the

need to remain lean and mean in a fast-changing global business environment, rightsizing

the right way, considering scientific alternatives to downsizing, paying attention to the

after-effects of downsizing, and being aware of the legal implications of downsizing. The

author points out those mass layoffs should be viewed as a change process to be

implemented by adopting a systems approach. It explains the strategic role of HR

executives during the whole process, especially during the initial stages of rightsizing. It

further explains the step-by-step guidelines that HR executives can adopt in the

downsizing process. The article shares the experiences of a few companies such as

MacMillan Bloedel, Canada, DaimlerChrysler AG's US unit Motorola, Hallmark Cards,

and Lucent Technologies.

2.4.3 Coping with Downsizing

Neela Radhika of the ICFAI University, Hyderabad, India, describes a new

phenomenon observed in the aftermath of downsizing - Pink Slip Parties. It describes

how Pink Slip Parties came into practice and the reason for using the term `Pink Slip'.

The article elucidates the special features of these parties with respect to attendees, the

kind of music played during these parties, the color of wristbands or badges, message

boards, and activities. Pink Slip Parties offer a number of benefits to both job seekers,

who had lost jobs on account of downsizing, as well as the recruiters. The effectiveness

of these parties are analyzed vis-à-vis the nature of support gained by laid-off workers in


22


restarting their careers. The article also points to new developments in this area, such as

Layoff Lounges.

Mika Kivimäki, Jussi Vahtera, Jaana Pentti, and Jane E Ferrie reports the results

of a study conducted to investigate the effect of the psychosocial work environment on

employee health. This study was conducted among 1,110 municipal staff in Raisio,

Finland, between 1990 and 1995. It encompasses the period prior to downsizing, during

downsizing, and when downsizing had slowed down. The downsizing exercise was a

reactive one, conducted through retirement and hiring freezes, and letting go the

temporary employees. Some of the significant findings of the study are: downsizing

results in changes in work, social relationships, and health-related behaviours that lead to

increase in certificated sickness due to increases in physical demands, job insecurity, and

reduction in job control; sickness absence increases twofold in a major downsizing as

compared with sickness absence during a minor downsizing; downsizing was associated

with negative changes in work, impaired support from spouse, increased prevalence of

smoking, and sickness absence. It has been found that this study was unique in the area of

employee downsizing and employee health as it studied a natural experiment, which is

rarely feasible.

Jonathan Kelley explains that the significance of downsizing depends on its long-

term impact on workers. It presents a model to study the probability of re-employment

among workers shed by downsizing firms as compared with those departing from stable

or growing firms. This model can also be used to examine the impact of downsizing on

the duration of jobless spells, continuity or change in occupation, on earnings, and on job

satisfaction among workers who obtain employment. The model combines three factors:

re-employment by age, gender, and education.

Some of the significant findings of the study are: downsizing is not a disaster for

most of the workers; 75% of the downsized employees find jobs, and most of them do so

quickly; workless spells between jobs are short or non-existent; and the most serious


23


grounds for concern relate to groups of vulnerable workers, such as older workers and

women.

Carl Van Horn, William M Rodgers III, Neil Ridley, and Laurie M Harrington of

Rutgers, offers glimpses of the consequences of involuntary job loss for workers and their

employers. It describes the evident patterns of worker dislocation: it affects both blue-

collar and white-collar employees, workers of all races, ages, education levels,

occupations and industries; and it happens at very short notice (usually one week or less,

and many do not receive any advance warning). The report describes the impact of job

loss on individuals and their families, the most significant being emotional distress and

financial hardship. It delineates the differences in approaches by small and large firms.

Large firms offer more assistance and better severance pay as compared with smaller

firms. It also provides guidelines for employers, employees and policymakers to deal

with the consequences of job dislocation. The experience of downsizing employees

during the last few years points to the need for employees to be prepared for a job loss at

any point of time in their career. This report also includes examples of effective practices

of a few companies to bring succour to the displaced workers.

2.5 Downsizing And Employee Attitude

In today's competitive market, many companies have found that staying in

business means downsizing. However, this everyday event in the business world is a

unique (hopefully) event for you and your employees. It is important to remember that

this event affects not only the "downsized," but also those who remain.

2.5.1 Importance & Necessity

Downsizing has become a common occurrence in today's business world. Because

of this, and many other factors, many employers and employees no longer believe in the

concept of lifetime employment. As a result, employers often underestimate the need to


24


provide support to employees, both those who are being released and the 'survivors.'

Many employers feel that the only support they can provide is expensive outplacement

services.

The decision to downsize is made for strategic and financial reasons. The

expectation is that the expense reduction will lead to a positive impact on the bottom line

and will ultimately be reflected in improved profitability and productivity. However,

many organizations neglect to factor in the psychological impact of downsizing on those

who remain. In fact, if downsizing is handled improperly, the problems it was designed to

correct may be intensified due to the impact on the loyalty and attitudes of the survivors.

2.5.2 Effects on Work Effort

In an attempt to determine the impact of downsizing, the effects of job insecurity

and economic need to work on employee attitudes was examined by Brockner and his

colleagues in 1992. In this study, Brockner decided to use work effort as a measure of job

attitudes. The study found that high job insecurity coupled with high need to work,

resulted in increased work effort following a layoff. High job insecurity, coupled with

low need to work resulted in no change in the level of work effort.

This seems to indicate that when there are high levels of job insecurity, as would

be expected during downsizing; employees with a high need to work will increase their

work effort, while those with a low need to work will have no change in work effort.

While this result is interesting, of more interest was the finding that variables moderated

this observed relationship. Specifically, Brockner found that the remaining employees'

perception of the fairness of the lay-off process and their attachment to the lay-off victims

colored their views. This issue of fairness has been found to be related to a number of

other work-related variables and has its roots in theories of organizational justice.


25


2.5.3 The Justice Theory

Theories of organizational justice propose that people attend to the processes used

to determine outcomes as well as to the end result in determining "fairness." For example,

as Brockner's study reported, the remaining employees considered the way in which their

co-workers were treated during the downsizing process as well as the outcome (i.e.,

losing their jobs). From this perspective, layoff survivors can be expected to exhibit the

most negative reactions when they identify with the layoff victims, and feel the victims

have not been well compensated.

"When survivors perceived that those laid off had been dismissed with little or no

compensation, they reacted more negatively (from an organizational perspective) to the

extent that they felt some prior sense of psychological kinship with the laid-off parties."

What Brockner's study would indicate is that employees are affected by more than

just the fact of layoffs. They are affected by how the layoffs are managed and by what is

done for the individuals in those positions. Brockner found that negative attitudinal

changes were reflected in survivors' reduced work performance and lowered commitment

to the organization. Conversely, the study showed that employee commitment can

actually increase during a layoff process when the company shows some commitment to

displaced workers.

The post-layoff setting provides organizations with a rather unique...situation in

which to express their commitment to employees; that is, if organizations show

commitment to their dismissed workers (through caretaking activities of providing

severance pay and outplacement counseling,)—even as they are in the process of

becoming uncommitted to them by laying them off--the more committed to the

organization are survivors apt to be" (Brockner et al., 1987). Brockner's study indicates

organizations can proactively affect surviving employees' attitudes during periods of


26


downsizing. The next section describes some steps that can be taken to minimize the

negative effects of downsizing.

2.5.4 Strategies for Maintaining Positive Employee Attitudes

According to survey results from a study on employee loyalty conducted by

Industry Week, there are eight factors affecting employee loyalty. They are, in

descending order: equity, security, good management, integrity, empowerment, good

communications, benefits and personal support (McKenna, 1991).

Downsizing is a stressful time for employees, and is a time in which they will

question each of the eight factors mentioned in the above quote by McKenna. By

communicating with employees, making them feel part of the organization, and working

to restore loyalty, it is possible to avoid some of the most dangerous pitfalls of

downsizing.

2.5.5 Communicate

During downsizing, the losses due to decreased employee loyalty, morale and lost

productivity are compounded by the complexity of the layoff process. For example, the

rumor mill that develops, or intensifies, during the preliminary planning stages results in

employees spending significant amounts of time gossiping and worrying about what may

happen. Unfortunately, many managers in the position of being "in the know" are guided

by a policy in which they are to avoid talking about rumors with employees.

While this policy may seem appropriate, the associated costs, in terms of lost

productivity and employee loyalty, may be significant. Communication will help to curb

the worry and re-direct employee energies to the job at hand (Fisher, 1988). "If you don't

know something, or you do know but SEC rules or other legal constraints have

momentarily sealed your lips, come out and say that. Silence is the worst policy" (Fisher,

1988). The most preferred method of communication is personal appearances from upper

management; however, any communication at all will be helpful.


27


Ensure that communications cover the following topics:

Talk about the fact that changes are coming; employees already know, but it will

increase their trust level if they hear it from you;

explain the purpose of the downsizing;

explain the need for growth and profitability (which can be perceived as

legitimate reasons when presented in an appropriate manner);

if possible, explain future plans including detailed plans for restructuring,

upgraded technology, or some processes to increase efficiency;

communicate, whenever possible, that though employee downsizing is

necessary, each employee who is let go will receive appropriate severance pay

and (if you intend to offer it) job placement assistance;

emphasize that laid-off employees will be treated with respect and dignity;

this is important for managing and maintaining remaining employees' moral

and company commitment.

Most importantly, listen carefully to employee concerns and adequately

address each concern to whatever degree possible. This must be done with

sincerity and no sense of condescension, such as "calming the mob."

In addition, justification for the layoffs is extremely important, especially if times are

good and the downsizing is a part of strategic growth and profitability. Employees need

to understand that you sincerely need to make these cuts and it is not a whim or a

mistake.

2.5.6 Make Valuable Employees Part of a Progressive Organization

To stay or not to stay? That is the question some remaining employees ask in the

aftermath of their company's downsizing process—particularly those who have other

employment opportunities outside the company. When these employees see some top


28


managers leave voluntarily, they may question the long-term prospects for the company

and consider an immediate job change. This is something to watch out for, as the people

who leave under these circumstances are generally those with valuable skills and training.

A former West Coast bank manager who left when he saw his manager leave

made this comment for an article in Fortune: "If you let people get the idea that the

company is not just cutting back but is sinking into mediocrity, morale really goes to

hell" (Fisher, 1988). This quotation highlights the importance of managing perceptions

with "positive press" and communication from upper management. Discuss the

downsizing as a step towards a more efficient and profitable business with an attractive

future.

2.5.7 Rebuild Loyalty

Long after downsizing is completed; continue communicating with employees to

re-build security and trust. Do not allow management to assume remaining employees are

merely grateful to still have jobs. Employees need to feel they are valued, that they have a

place in the company, and that management believes that they are an important part of the

success of the organization. To emphasize this point, talk about where the company is

headed, and describe any plans for growth and prosperity.

2.6 Organizational Climate Also Affects Employee Retention Rate And

Positively Affects Employee Downsizing Rate

2.6.1 Organizational Climate

Litwin and Stringer define organizational climate as 'a set of measurable

properties of the work environment, perceived directly or indirectly by people who live

and work in this environment and assumed to influence their motivation and behaviour'.

Traditionally, organizational climate alms to capture a snapshot of an organization at


29


one point in time. Organizational climate research has had a long and active history,

with much of its foundation drawn from psychology. Because of space constraints and

the availability of excellent articles which review the extensive history of the

organizational climate literature, we will only briefly review the organizational climate

literature here.

Organizational climate is largely based on Lewinian field theory, which is a

result of Lewin's work on experimentally-created social climates This work was

advanced by several early key studies including Litwin and Stringer and Tagiuri and

Litwin. Litwi n and Stringer investigated how organizational climate affects individual

motivation. They also suggested that organizational climate was comprised of nine

dimensions: structure, responsibility, reward, risk, warmth, support, standards, conflict,

and identity. Taguiri and Litwin's book was comprised of a series of essays that treated

climate in ways ranging from a subjective interpretation of organizational

characteristics to an objective set of organizational characteristics. Other early studies

were aimed at identifying the dimensions comprising organizational climate

After the 1960s and early 1970s, the focus of the organizational climate field

became more clearly defined. More recently, organizational climate researchers have

begun to consider how organizational climates develop. Three schools of thought have

developed: the subjectivist, objectivist, and interactionalist perspectives.

Probably the most troubling issue that the organizational climate literature

continues to face is defining the appropriate dimensions that comprise organizational

climate. Organizational climate is a fairly general term which refers to a class of

dimensions which can be critiqued for being too diverse . In addition, the

multidimensional nature of organizational climate makes it more difficult to define

sharp borders. Organizational climate scholars have responded by making empirical and

theoretical arguments to distinguish organizational climate from various other const

ructs, such as structure and individual satisfaction. While these and other efforts have

been helpful, some fuzziness around the borders and differentiation of the

organizational climate construct still remains.


30


Research on organizational climate has continued more recently, including

Joyce and Slocum's study of person and organizational fit, Joyce and Slocum's

investigation of the extent to which organization members agree about their

organizational climate, Glick's discussion of the difficulties of measuring organizational

climate, Denison's investigation of the relationship between organizational climate and

performance, and Koyes and DeCotis's work on measuring organizational climate. Even

more recently, Denison has investigated the difference between organizational culture

and organizational climate, and Griffin and Mathieu have looked at how perceptions of

organizational climate vary with the hierarchical level in an organization. Anderson and

West contributed to the literature by exploring the link between organizational climate

and innovation.

2.6.2 Measuring Organizational Climate

At its most basic level, organizational climate refers to employee perceptions of

their work environment. Generally, these perceptions are descriptively based rather than

value based. For example, the phrase, "I have more work to do than I can possibly finish"

is a description of a person’s workload, while the phrase "I like my job" is a positive

evaluation of one’s job. Thus, organizational climate is more than simply a summary of

employee likes and dislikes.

The assessment of organizational climate typically occurs via an off-the-shelf or

customized survey containing questions about he work environment. Although

administration procedures used when conducting a survey can vary, ideally employees

are asked to report to a designated work site at a scheduled time to complete the survey,

and employee participation is voluntary.

2.6.3 Selecting a Survey


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Once a decision is made to conduct an organizational survey, it can be difficult to

identify the "right" survey to use. Although not a comprehensive list, the following

factors may be helpful in reducing the number of survey choices:

Determine the scope of information included in the survey. As might be imagined,

there are a large number of organizational climate areas that exist. Recent research has

identified more than 460 different types of work environment characteristics that have

been measured. Many of these characteristics can be classified into the following major

areas: job, role, leader, organization and work group. In many companies there are

particular areas where employee feedback would be useful. For example, a company

concerned about the impact of recent managerial downsizing may want to ensure that

leadership/supervisory components are included in the survey.

Make sure the number of climate areas included is kept to a manageable level.

Not only will including too many areas on the survey increase the time and effort needed

to administer the survey, but it also can make the interpretation process more difficult. On

a related issue, many users of organizational surveys find it useful to add a few

customized items to the survey. Although adding items does not always add to the

scientific value of a survey, it can go a long way in generating support from the

company’s management team.

It can be extremely helpful to choose a survey that offers some flexibility in its

administration capabilities. For example, some companies may require the ability to

administer the assessment using a paper-and-pencil format, while others may prefer an

intranet format. Factors such as employee demographics can be important, also. Some

companies may require both an English and Spanish version of the survey to

accommodate all of their employees.

Finally, identify some general pieces of information you would like to see in a

report once the survey responses have been analyzed. For example, some companies may

have an interest in only reviewing the average levels of item responses within the


32


company, while others may want to see how the company scored compared to other

companies throughout the nation.

In addition, some companies may want to have results broken down department-

by-department or item-by-item while others may want one set of analyses based on the

entire set of employee responses. In any event, the publisher/director of an organizational

survey should assist a company in selecting an instrument that will meet their specific

reporting needs.

2.6.4 Benefits

Companies that conduct organizational climate surveys may experience one or

more of the following benefits:

Employee involvement- By administering an organizational survey, employees are

given an opportunity to be involved in the company at a different level than is

typically defined in their job descriptions. Research has shown that employees who

are more involved in the company also may be more satisfied with their job, miss

fewer days of work, stay with a company longer, and perform better on the job.

Positive work outcomes- In the last 30 years, a significant amount of evidence has

been accumulated documenting the importance of the work environment in relation to

organizational performance. In general, research has shown that factors in the work

environment are related to outcomes such as employee motivation, job satisfaction,

intentions to quit, job performance and even organizational productivity. In addition,

an emerging area of research has indicated that organizational climate can influence

customer perceptions of the quality of goods or services delivered by a company.

Communication forum- In many companies it can be very difficult to communicate

with the majority of employees. Recent trends such as organizational restructuring

and/or merging of companies has resulted in "flat" organizational responsibility

charts, which increases the number of employees for which each manager is


33


accountable. As a result, some managers only have limited amounts of time to talk to

employees about day-to-day activities. Conversations regarding an employee’s work

environment can fall to the wayside, and in some instances, never take place.

Organizational surveys that occur on a scheduled basis (e.g., annually, biannually,

etc.) can be a more efficient way for managers to gather important information.

Industry comparisons- Organizations often look to other companies when

determining organizational policies and procedures. It is quite common for companies

to "explore the market" or conduct benchmark studies when considering issues such

as new product development, salary or employee benefit policies, marketing

strategies, etc. A common question is "How do we compare to others?" One

advantage of conducting an organizational survey is that it can provide an opportunity

to compare the company’s work environment to that of other companies. Many

surveys offer a national normative database that can be used to facilitate comparisons

across a variety of conditions and industries.

Proactive management- Administering organizational climate surveys allows

managers to be much more proactive in managing their employees and work

environments. When used on a scheduled basis, organizational surveys can help

pinpoint problem areas within the work environment before they grow into a crisis

needing immediate attention. Problems that require a reactive posture interrupt the

normal workflow, and typically cause delays in providing products or services to

customers.

2.6.5 Tips For Creating An Effective Organizational Climate For Minimum Employee

Down Sizing

1. Listen to the entire organization with ease.

2. Collect perceptions in real-time.

3. Reduce organizational bias.

4. Validate the questions and thus improve the results.


34


5. Facilitate candid and open feedback from employees who respond anonymously.

6. Identifying areas of inefficiency or performance gaps.

7. Identify root causes for poor productivity (such as poor communication or poor

process efficiency).

8. Reduce transition time during changes in the organization (such as reorganization,

relocation, a change in ownership, new products/services, or rapid growth).

9. Inform leaders with the information needed to make the best decisions.

10. Give employees an organized voice to assist leaders in taking actions.

11. Gain a fresh perspective of the organization.

12. Facilitate, track and execute informed action steps in one system.

2.7 Downsizing -- The Long Term Effects

Originally written about downsizing within the public sector, the points in

this article are no less applicable to any organization that is forced to undergo

downsizing. Interestingly enough, almost all surveys and research examining

the long term effects of downsizing indicate that companies that downsized

ended up disappointed in the results. Layoffs may serve a short term need, but

create huge longer term issues. Few government departments or branches have

escaped the necessity of downsizing. The last three or four years have brought

almost constant cuts in staffing, and some departments have been "hit" several

times. For many downsizing has become an annual process. When managers are

faced with downsizing, they tend to focus on the immediate and practical needs

that emerge at the time when staff are being let go. After all, employees need to

be selected and notified, one of the most difficult tasks for any manager. Jobs

responsibilities need to be shuffled, and generally the period where downsizing

is occurring is very busy and emotionally taxing.


35


Unfortunately, there is a tendency for managers to focus on those that are

leaving rather than those that remain. This also holds true for central training

and consulting agencies who are asked to support the laid off employees with

career development help, counselling, and other supports. There is no question

that laid off employees deserve and need these kinds of supports and services.

Unfortunately, there is a tendency to forget that after the laid-off workers are

gone, the "survivors" must soldier on, and the manager must deal with the long-

term effects on the remaining organization. We are now seeing the effects of

downsizing on those that remain. One of the most telling comments is often put

forth by employees a year or two after downsizing, and it goes like this:

"Sometimes I think that the ones who were laid off are the lucky ones". They

usually go on to describe a workplace where employees feel:

It is easy to understand these effects when they occur close to the time

when down-sizing occurs, and remaining staff "grieve" the loss of friends and

colleagues. But, these effects are now being seen as long as one or two years

AFTER the downsizing period. There are indeed long term effects of

downsizing that need to be addressed. Understanding The Organizational Down

cycle. To counter-act the long term effects of downsizing, managers need to

understand how organizations slip into "down cycles".

An organizational downcycle can be characterized as a long-term process

where the organization becomes progressively more depressed, insular,

protective and confused. The important thing to note is that this process occurs

slowly, sometimes imperceptibly, and that if the process is allowed to continue

unchecked, it gets worse. The downcycling organization loses its positive

momentum and enthusiasm. A vicious circle is formed. It snowballs. Bad

feelings and depression become the norm rather than occasional, until, in


36


extreme cases, the organization becomes unable to move effectively, and the

work climate can become intolerable for everyone.

Because the process tends to be gradual, managers tend to assume that

the problems that occur early in the downcycling will solve themselves without

attention. It is easy to assume that staff will "get over" the effects of

downsizing over time. This may be the fatal mistake, because if the process is

left unmanaged, there is a good chance that staff will become more demoralized.

1. Proactive management activities are always required when downsizing occurs.

Managers must realize that they "can pay now or pay later", and that delaying actions

designed to revitalize the organization will result in a huge cost down the road. Managers

should consider that the period immediately after downsizing is critical. Action or

inaction during this period will determine whether the organization moves into a

depressed downcycle, or makes the commitment to move forward. Downsizing time

should also be a time when the organization's mandate and vision are revisited. It should

be a time when the manager dedicates him/herself to the long-term health of the

organization by clarifying, supporting and building trust. Above all, this is the time where

the manager's prime responsibility is to communicate, both with staff, and with

executives. One focus of communication should be clarifying mandate, vision, priorities

and commitment levels.

2. Proactive long-term approaches should also be applied by any central agencies

charged with "helping" downsizing organizations. Support should be offered to those that

are displaced, but, in the long term, help offered to "survivors" will be much more

important in determining organizational health. As a manager, ask, or demand that these

services be made available by central agencies, or procure them from private vendors, if

the central agency won't do the job.

3. If you are in the unfortunate position of managing an organization that is "down


37


cycling", you need to be aware of two things. First, it will get worse if neglected. Second,

interventions to turn the cycle around must be considered as long-term projects. One shot

consulting or training isn't going to do much, and it may be damaging. Remember that

your organization may have been moving downward for a year or two, and that it is going

to take a substantial period of time to reverse the process. Positive change will require a

consistent effort on your part, and may require consulting help over a period as long as a

year. Your work success hint! Did you know that a high percentage of conflict at work

and at home is a result of ineffective use of language? It's true. The best part is that you

can learn to alter your communication and language so that what you say is perceived as

more cooperative, and less confrontational. The result? Less conflict incidents, and less

severe conflicts.

2.7.1 Model of Planned Organizational Downsizing

Change can be managed. By observing external trends, patterns and needs,

managers use planned change to help the organization to adapt to external problems and

opportunities. When organizations are caught flat footed, failing to anticipate or respond

to new needs, management is at fault.

Four events make up the change sequence:

Internal and external forces for change exist

Organization managers monitor these forces and become aware of a need for

change; and

The perceived need triggers the initiation for change, which

Is then implemented.

How each of these activities is handled depends upon the organization and

managers’ styles.


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2.7.1.1Forces For Downsizing

Forces for organizational change exist both in the external environment and

within the organization.

2.7.1.2Environmental Forces

External forces originate in all environmental sectors, including customers,

competitors, technology, economic forces, and the international arena.

2.7.1.3Internal Forces

Internal forces for change arise from internal activities and decisions. If top

managers select a goal of rapid company growth, internal actions will have to be changed

to meet that growth.

2.7.2 Steps For Effective Organizational Change

The four steps for organizational change process are as follows:

Assess the need for Downsizing

Initiate Downsizing

Implement Downsizing

Evaluate the Downsizing


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2.7.2.1Assessing the need for the Downsizing

The external and internal forces translate into a perceived need for change within

the organization. Managers sense a need for change when there is a performance gap—a

disparity between existing and desired performance levels. The performance gap may

occur because current procedures are not up to standard or because a new idea or

technology could improve current performance.

Managers in every company must be alert to problems and opportunities, because

the perceived need for change is what sets the stage for subsequent action that creates a

new product or technology. Big problems are easy to spot. Sensitive monitoring systems

are needed to detect gradual changes that can fool managers into thinking their company

is doing changes slowly, because managers may fail to trigger an organizational response.


Assess the need

Recognize that there is a problem

Identify the source of the

problem

Initiate

DownsizingDecide what organizations ideal future

state would be

Implement

DownsizingIntroduce the

change

40

Evaluate the

Downsizing

Compare pre change

performance with post change

performance


2.7.2.2Initiating Downsizing

After the need for change is perceived, the next part of the change process is

initiating change, a truly critical aspect of change management. This is where the ideas

are developed.

Search

Search is the process of learning about current developments inside or outside the

organization that can be used to meet the perceived need for change. Search typically

uncovers existing knowledge that can be applied or adopted within the organization.

Managers talk to friends and colleagues, read professional reports, or hire consultants to

learn about ideas used elsewhere.

Creativity

Creativity is the development of novel solutions to the perceived problems.

Creative individuals develop idea that can be adopted by the organization.

Each of us has the capacity to be creative. Creative people are often known for

originality, open-mindedness, curiosity, a focused approach to problem solving,

persistence, a relaxed and playful attitude, and receptive to new ideas.

Creativity can be designed into organizations. Companies or departments within

companies can be organized to be creative and initiate changes.

Idea Champions And New-Venture Teams

If creative conditions are successful, new ideas will be generated that must be

carried forward for acceptance and implementation. This is where idea champions come

in. The formal definition of the idea champion is a person who sees the need for and


41


champions productive change within the organization.

Personal energy and effort are required to successfully promote a new idea. Often a new

idea is rejected by the management. Champions are passionately committed to a new

product or idea despite rejection by others.

2.7.2.3Implementing Downsizing

Creative culture, idea champions and new-venture teams are ways to facilitate the

initiation of new ideas. The other step to be managed in the change process is

implementation. A new, idea will not benefit the organization until it is in place and

being fully utilized. One frustration for managers is that employees often seem to resist

change for no apparent reason. To effectively manage the implementation process,

managers should be aware of the reason for employee resistance and be prepared to use.

Techniques for obtaining employee cooperation are:

Resistance To Downsizing

Idea champion often discover that other employees are unenthusiastic about their new

idea. Members of a new-venture group may be surprised when managers in the regular

organization do not support or approve their innovations. Several reasons for employee

resistance are:

Self-Interest

Employees typically resist a change they believe will take away something of

value. A proposed change in job design, structure, or technology may lead to a

perceived loss of power, prestige, pay, or many company benefits. The fear of

personal loss is perhaps the biggest obstacle to organizational change.

Lack Of Understanding And Trust

Employees often do not understand the intended purpose of a change or distrust


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the intentions behind it. If the previous working relationships with an idea

champion have been negative, resistance may occur.

Uncertainty

Uncertainty is the lack of information about future events. It represents a fear of

the unknown. Uncertainty is especially threatening for employees who have a low

tolerance for a change and fear the novel and unusual.

Different Assessment And Goals

Another reason for resistance to change is that people who will be affected by

innovation may asses the situation differently from an idea champion or new-

venture group. Managers in different departments pursue different goals and an

innovation may detract from performance and goal achievement for some

departments. The reasons for resistance are legitimate in the eyes of employees

affected by the changes. The best procedure for managers is not to ignore

resistance but to diagnose the reasons and design strategies to gain acceptance by

users. The strategies for overcoming resistance to change typically involve two

approaches: the analysis of resistance through the force field technique and the

use of selective implementation tactics to overcome resistance.

Force Field Analysis

It’s the process of determining which forces drive and which resist a proposed

change. To implement a change, management should analyze the change forces. By

selectively removing forces that restrain change, the driving forces will be strong enough

to enable implementation. As restraining forces are reduced or removed, behavior will

shift to incorporate the desired changes.


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Implementation Tactics

The other approach to managing implementation is to adopt specific tactics to

overcome employee resistance. The following five tactics have proven successful:

Communication and Education. Communication and education are used when

solid information about the change is needed by users and others who may resist

implementation. Education is especially important when the change involves new

technical knowledge or users are unfamiliar with the idea.

Participation. Participation involves users and potential resisters in designing the

change. This approach is time consuming, but it pays off because users

understand and become committed to the change.

Negotiation. Negotiation is more formal means of achieving cooperation.

Negotiation uses formal bargaining to win acceptance and approval of a desired

change.

Coercion. Coercion means that managers use formal power to force employees to

change. Resisters are told to accept the change or lose rewards or even their jobs.

Coercion is necessary in crisis situation when a rapid response is urgent.

Top Management Support. The visible support of top management also helps

overcome resistance to change. Top management support symbolizes to all

employees that the change is important for the organization.

2.7.2.4Evaluating the Downsizing

The last step in the change process is to evaluate how successful the change effort

has been in improving organizational performance. Using measures such as changes in


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market share, profits, or the ability of manages to meet their goals, managers compare

how well an organization is performing after the change with how well it was performing

before. Managers also can use benchmarking, comparing their performance on specific

dimensions with the performance of high-performing organizations to decide how

successful the change effort has been.

2.7.3 Types of Planned Downsizing

Now that we have explored how the initiation and implementation of change can

be carried out, let us look at the different types of change that take place in organizations.

The types of organization changes are strategy, technology, products, structure, and

culture/ people. Organizations may innovate in one or more areas, depending on internal

and external forces or change. In the rapidly changing toy industry, a manufacturer has to

introduce new products frequently. In a mature, competitive industry, production

technology changes are adopted to improve efficiency.

In the diagram, the arrows connecting the types of change show that a change in one part


Strategy

Structure

Culture/ People

Technology

Products

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may affect other parts of the organization: a new product may require changes in

technology, and a new technology may require new people skills or a new structure.

2.7.3.1 Technological Downsizing

A technology Downsizing is related to the organization’s production process—

how the organization does its work. Technology changes are designed to make the

production of a product or service more efficient.

How can managers encourage technology downsizing?

The general rule is that technology change is bottom up. The bottom-up approach

means that ideas initiated at lower organization levels and channeled upward for

approval. Lower level technical experts act as idea champions—they invent and

champion technological changes. Employees at lower levels understand the technology

and have the expertise needed to propose changes.

Managers can facilitate the bottom-up approach by designing creative

departments. A loose, flexible, decentralized structure provides employees with the

freedom and opportunity to initiate continuous improvements. A rigid, centralized,

standardized structure stifles technology innovation. Anything managers do to involve

the grass roots of the organization—the people who are experts in their parts of the

production process—will increase technology change.

2.7.3.2 New-Product Downsizing

A product downsizing is a change in the organization’s product or service output.

New-product innovations have major implications for an organization, because they often

are an outcome of a new strategy and may define a new market. The introduction of a

new product is difficult, because it not only involves a new technology but also must


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meet customers’ needs. Companies that develop new products usually have the following

characteristics:

People in marketing have a good understanding of customer needs

Technical specialists are aware of recent technological developments and make

effective use of new technology

Members from key departments—research, manufacturing, marketing—cooperate

in the development of new product.

These findings mean that the ideas for new products typically originate at the

lower levels of the organization just as they do for technology changes. One approach to

new product innovation is called the horizontal linkage model. In this model people from

research, manufacturing and marketing departments meet frequently in teams and task

forces to share ideas and solve problems. Research people inform marketing of new

technical developments to learn whether they will be good to customers. Marketing

people pass customer complaints to research to use in the design of new products.

Manufacturing informs other departments whether a product idea can be manufactured

within costs limits. This teamwork required for the horizontal linkage model is a major

component of using rapid innovation to beat the competition with speed.

2.7.3.3 Structural Downsizing

A structural downsizing is a change in the way in which the organization is

designed and managed. Structural changes involve the hierarchy of authority, goals,

structural characteristics, administrative procedures, and management systems. Almost

any change in how the organization is managed falls under the category of structural

change.

Successful structural change is accomplished through a top-down approach,

which is distinct from technology change (bottom up) and new products (horizontal).


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Structural change is top down because the expertise for administrative improvements

originates at the middle and upper levels of the organization. The champions for

structural change are middle and top managers. Lower-level technical specialists have

little interest or expertise in administrative procedures.

If organization structure causes negative consequences for lower-level employees,

complaints and dissatisfaction alert managers to a problem. Employee dissatisfaction is

an internal force for change. The need for change is perceived by higher managers, who

then take the initiative to propose and implement it.

The top-down process does not mean that coercion is the best implementation

tactic. Implementation tactics include education, participation, and negotiation with

employees. Top-down change means that initiation of the idea occurs at upper levels and

is implemented downward. It does not mean that lower-level employees are not educated

about the change or allowed to participate in it.

2.7.3.4 Culture/People Downsizing

A culture/people downsizing refers to a change in employees’ values, norms,

attitudes, beliefs, and behavior. Changes in culture and people pertain to how employees

think; these are changes are in mindset rather than technology, structure, or products.

People change pertains to just a few employees, such as when a handful of middle

managers is sent to a training course to improve their leadership skills. Training is the

most frequently used tool for changing the organization’s mindset. A company may offer

training programs to large blocks of employees on subjects such as teamwork, listening

skills, quality circles, and participative management.

“Top 10” list of guiding principles for downsizing management, some of steps that the

company can take:


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1. Address the “human side” systematically

2. Start at the top

3. Involve every layer

4. Make the formal case

5. Create ownership

6. Communicate the message

7. Assess the cultural landscape

8. Address culture explicitly

9. Prepare for the unexpected

10. Speak to the individual

1. Address the “human side” systematically. Any significant transformation creates

“people issues.” New leaders will be asked to step up, jobs will be changed, new skills

and capabilities must be developed, and employees will be uncertain and resistant.

Dealing with these issues on a reactive, case-by-case basis puts speed, morale, and results

at risk. A formal approach for managing change — beginning with the leadership team

and then engaging key stakeholders and leaders — should be developed early, and

adapted often as change moves through the organization. This demands as much data

collection and analysis, planning, and implementation discipline as does a redesign of

strategy, systems, or processes. The change-management approach should be fully

integrated into program design and decision making, both informing and enabling

strategic direction. It should be based on a realistic assessment of the organization’s

history, readiness, and capacity to change.

2. Start at the top. Because change is inherently unsettling for people at all levels of an

organization, when it is on the horizon, all eyes will turn to the CEO and the leadership

team for strength, support, and direction (govt. in case of PTCL). The leaders themselves

must embrace the new approaches first, both to challenge and to motivate the rest of the

institution. They must speak with one voice and model the desired behaviors. The

executive team also needs to understand that, although its public face may be one of

unity, it, too, is composed of individuals who are going through stressful times and need


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to be supported. Executive teams that work well together are best positioned for success.

They are aligned and committed to the direction of change, understand the culture and

behaviors the changes intend to introduce, and can model those changes themselves.

3. Involve every layer. As transformation programs progress from defining strategy and

setting targets to design and implementation, they affect different levels of the

organization. Change efforts must include plans for identifying leaders throughout the

company and pushing responsibility for design and implementation down, so that change

“cascades” through the organization. At each layer of the organization, the leaders who

are identified and trained must be aligned to the company’s vision, equipped to execute

their specific mission, and motivated to make change happen.

4. Make the formal case. Individuals are inherently rational and will question to what

extent change is needed, whether the company is headed in the right direction, and

whether they want to commit personally to making change happen. They will look to the

leadership for answers. The articulation of a formal case for change and the creation of a

written vision statement are invaluable opportunities to create or compel leadership-team

alignment. Three steps should be followed in developing the case: First, confront reality

and articulate a convincing need for change. Second, demonstrate faith that the company

has a viable future and the leadership to get there. Finally, provide a road map to guide

behavior and decision making. Leaders must then customize this message for various

internal audiences, describing the pending change in terms that matter to the individuals.

5. Create ownership. Leaders of large change programs must over perform during the

transformation and be the zealots who create a critical mass among the work force in

favor of change. This requires more than mere buy-in or passive agreement that the

direction of change is acceptable. It demands ownership by leaders willing to accept

responsibility for making change happen in all of the areas they influence or control.

Ownership is often best created by involving people in identifying problems and crafting

solutions. It is reinforced by incentives and rewards. These can be tangible (for example,


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financial compensation) or psychological (for example, camaraderie and a sense of

shared destiny).

6. Communicate the message. Too often, change leaders make the mistake of believing

that others understand the issues, feel the need to change, and see the new direction as

clearly as they do. The best change programs reinforce core messages through regular,

timely advice that is both inspirational and practicable. Communications flow in from the

bottom and out from the top, and are targeted to provide employees the right information

at the right time and to solicit their input and feedback. Often this will require over

communication through multiple, redundant channels.

7. Assess the cultural landscape. Successful change programs pick up speed and

intensity as they cascade down, making it critically important that leaders understand and

account for culture and behaviors at each level of the organization. Companies often

make the mistake of assessing culture either too late or not at all. Thorough cultural

diagnostics can assess organizational readiness to change, bring major problems to the

surface, identify conflicts, and define factors that can recognize and influence sources of

leadership and resistance. These diagnostics identify the core values, beliefs, behaviors,

and perceptions that must be taken into account for successful change to occur. They

serve as the common baseline for designing essential change elements, such as the new

corporate vision, and building the infrastructure and programs needed to drive change.

8. Address culture explicitly. Once the culture is understood, it should be addressed as

thoroughly as any other area in a change program. Leaders should be explicit about the

culture and underlying behaviors that will best support the new way of doing business,

and find opportunities to model and reward those behaviors. This requires developing a

baseline, defining an explicit end-state or desired culture, and devising detailed plans to

make the transition.

Company culture is an amalgam of shared history, explicit values and beliefs, and

common attitudes and behaviors. Change programs can involve creating a culture (in new

companies or those built through multiple acquisitions), combining cultures (in mergers


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or acquisitions of large companies), or reinforcing cultures (in, say, long-established

consumer goods or manufacturing companies).

9. Prepare for the unexpected. No change program goes completely according to plan.

People react in unexpected ways; areas of anticipated resistance fall away; and the

external environment shifts. Effectively managing change requires continual

reassessment of its impact and the organization’s willingness and ability to adopt the next

wave of transformation. Fed by real data from the field and supported by information and

solid decision-making processes, change leaders can then make the adjustments

necessary to maintain momentum and drive results.

10. Speak to the individual. Change is both an institutional journey and a very personal

one. People spend many hours each week at work; many think of their colleagues as a

second family. Individuals (or teams of individuals) need to know how their work will

change, what is expected of them during and after the change program, how they will be

measured, and what success or failure will mean for them and those around them. Team

leaders should be as honest and explicit as possible. People will react to what they see

and hear around them, and need to be involved in the change process. Highly visible

rewards, such as promotion, recognition, and bonuses, should be provided as dramatic

reinforcement for embracing change. Sanction or removal of people standing in the way

of change will reinforce the institution’s commitment.

Most leaders contemplating change know that people matter. It is all too tempting,

however, to dwell on the plans and processes, which don’t talk back and don’t respond

emotionally, rather than face up to the more difficult and more critical human issues. But

mastering the “soft” side of change management needn’t be a mystery

2.8 Downsizing in HBL & Conflict Management.

Major Type of Conflict In HBL


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Most of the major conflicts in HBL belong to the category of policy driven

conflicts. After privatization of HBL, it had a major change in its structure and policies.

This change was necessary to overcome key problems associated with the structure of the

public owed company such as:

Over Staffing

HBL before privatization had more than 31000 employees, management and non-

management, they aimed to reduce this number to 27000 employees with the help of its

new policies.

Political Pressure

Before privatization HBL was highly influenced by the governmental policies as it was

the largest financial institute under government control. The economic policies of the

country were also affecting the bank’s policies. The problem occurred mainly because of

the unstable political situation in Pakistan which was causing the huge fluctuations in

governmental policies resulting in the inconsistency of HBL’s policies which led to the

inefficient results. The motive of privatization was to make HBL as independent as

possible.

The Conflict

Drastic transformation from public owned to private company gave origin to resistance

from the employees as a sudden change in structure was unacceptable to them as they

were used to work with previously defined policies and system. It was hard for the

employees to accept the new policies and overall system, they resisted as they felt that

new policies were not employee friendly and this clash of interest ultimately resulted in

conflicts.

Example: HBL’s re-entrenchment program was one of the bones of contention between

the employees and the management. HBL’s aim was to create space for more non

operational non clerical, technology savvy staff to generate more effectiveness they

aimed to remove the permanent clerical staff and get them on contractual basis. This

sudden change generated the feeling of uncertainty and disrespect among the employees


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and resulted in a huge retaliation. HBL however provided them with compensation,

packages and even provided them new jobs in other organizations but despite these

efforts to gain the satisfaction of employees failed to gratify employees and there are still

few cases in litigation.

Other issue

In 2002: HBL employees perceived that it is their right that their child / children get

employed at HBL but HBL followed merit based system and they were interested in

hiring skilled employees to satisfy the company’s as well as stake holders’ expectations.

2.8.1 DISPUTE RESOLUTION PROCESS

2.8.1.1Negotiation:

The Senior Vice President of Human Resource Management and Head of

disciplinary department, Mr. Amin-ul-Huda Khan undertake the negotiation process. The

representatives of the affected department approach Mr. Amin- ul – Huda and put

forward their point of view that usually is against the management. Mr. Amin uses his

experience and expertise to minimize the conflict and to achieve the BATNA (Best

Alternative To a Negotiated Agreement). He makes the employees agree to most of his

demands if not all he drags the employee to agree on two or three points at least by

making employees compromise on most of the issues. His preference remains that

management by any means should not compromise and if incase he fails to do this he

moves to the next phase that is of mediation.

2.8.1.2Mediation:

Despite trying hard, when the negotiation process fails HBL goes for the

mediation process, where the role of an effective, neutral mediator comes in who acts as a

communication bridge between the management and the employees. Usually the

mediator is in HBL is a trusted manager popular amongst both employees and managers

HBL’s mediation process can be broadly divided into the following three stages:


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Stage 1: Introduction and establishment of credibility:

During the first stage, the mediator plays a passive role. The main task is to gain the trust

and acceptance of the conflicting parties, so that they begin to believe that he/she will be

capable of assisting them fairly as a person on whom they can rely at all times for this

purpose HBL chooses a mediator with the mutual consent of employees and the

management. Mediator in HBL is usually an internal, neutral person trusted by both

management and employee. He leaves most of the talking to the disputing parties, but

listens attentively and asks probing questions to pinpoint the causes of the dispute,

obstacles to a possible settlement and to identify the issues in order of priority. Once

credibility is achieved and sufficient background knowledge gained, the mediator may

begin to persuade the parties to resume negotiations, possibly with a fresh perspective.

Stage 2: Steering the negotiation process:

In the second stage, the mediator intervenes more actively in steering the negotiations.

He/she may offer advice to the parties, attempt to establish the actual resistance point of

each party and to discover areas in which compromises could be reached. The mediator

encourages parties to put forward proposals and counter-proposals and (when a solution

appears feasible) will begin to urge or even pressurize the participants towards

acceptance of a settlement.

Stage 3: Movement towards a final settlement:

In the final settlement the mediator decides to finish the matter quickly, he/she uses bi-

lateral discussions with individuals or groups and during the final stages may actually

suggest or draft proposals for consideration. In the event of a final settlement being

reached, the mediator assists the parties in the drafting of their agreement, ensuring that

both sides are satisfied with the wording, terms and conditions of the agreement.

2.8.1.3Arbitration:


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When even mediation fails to work for HBL it goes for arbitration. The delay in

court cases has always been a source of concern to HBL as this impacts the enforceability

of contracts. As most of the conflicts are policy driven HBL’s utmost priority is to

enforce those policies on employees at any cost and without compromising when all the

methods fail to achieve this purpose, HBL goes for arbitration with the consent of

employees and make them realize that it was important for the benefit of organization.

Arbitration is used in HBL because arbitration awards are generally easier to enforce than

court judgments.

2.8.1.4Litigation:

HBL has lawyers who take care of its legal formalities. HBL believes that even if

the conflict gets failed to resolve and the employees file a lawsuit against them the

management is least bothered about it because it believes that employees don not have

enough resources to fight in the court where as HBL pays a fee of about 400000 Rs to

their designated lawyers who are expert in dragging the time of the hearing and making

employees willingly take the case back. According to Mr. Amin ul Huda they still have

cases in litigation and none of them yet got resolved or turned out in the favor of

employees.

2.8.2 Problems In Dispute Resolution Process At Habib Bank Ltd

Having a conflict is not anything uncommon in an organization being a system

comprising of many parts and subsystems that are all interlinked and interconnected. In a

multinational like Habib Bank ltd, the enormous level of activity giving rise to one or the

other major or minor conflicts in forms of either functional or counterproductive cannot

be ignored. However, since functional conflicts do not need any treatment with a

resolution process they are the destructive ones that actually demand such a process and

above all effective management of that very process too.


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Habib bank is an organization comprising of various branches and networks thus

conflict at each level is unpredictable and hard to surface without proper management

intervention. But while analyzing their dispute resolution system, various bottlenecks and

hindrances were found that actually make initially the application of such a process and

then the effective result of it to spread and bring benefit for the organization in the future.

There are a variety of problems that were explored while analyzing the dispute resolution

process at HBL.

2.8.2.1Failing To Minimize The Overall Level Of Conflict

Firstly, the resolution process although aimed at minimizing the overall level of

conflict but it was not fulfilling its purpose and was not able to minimize the overall level

of conflict giving rise to other more severe conflicts. Therefore, it can be said that the

resolution process did not completely satisfy the interests of all the parties and when at

one hand it managed to satisfy one stakeholder, left dissatisfactory results for others or

the organization itself. Example at the time when organization made a decision to go for

downsizing, their major concern was to make redundant lower level staff i.e. drivers,

peons etc to hire a better, more skilled personnel at the same rate so that they can offer

more to the organization since the lower level staff was being hired at a rate far above the

market rate increasing costs for the organization.

2.8.2.2Lack Of Pre And Post Dispute Analysis:

HBL lacks a pre and post dispute resolution analysis this means that there is no

analysis or interpretation of where the organization wanted to be and where it actually is

after implementation of the process of resolution and there were no proper guidelines

giving directions to take about the conflict resolution process. Hence, this resulted in

failure in having effective resolution process and there was no proper comparison or

evaluation of whether the organization has achieved its desired state can be done giving a

rather blur picture to both employees and management and leaving them confused about


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whether implementing such a process is cost and time worthy in the future since they do

not know the pros and cons of this system.

For example, when HBL decided to downsize and make certain employees quit,

they were not completely sure of whether doing so is likely to give them the desired

outcomes rather they were just hitting the ball blindfolded and simply hoped to achieve

what they want .furthermore, when HBL went towards retrenchment, and successfully

but with great difficulty achieved it, managers did not do any proper formal analysis with

the top executives of what were the difficulties they faced and how to make sure they do

not reappear in the future when they take such a crucial action. Also, there was no

evaluation of results the conflict appearing from retrenchment brought to them.

Moreover, no analysis of how to implement safety measures to avoid facing the same

conflict again was done.

2.8.2.3Resolution Process Caused Even More Conflicts

Apart from this, the resolution process instead of satisfying all the affected parties

at the end brought more dissatisfaction and complaints at its end making managers feel

the loss of time HBL have invested while engaging in resolving conflicts when at the end

it brought no fruitful results for either the employees or HBL.

2.8.2.4Failed To Foster Long Term Relationship

As the process did not manage to satisfy all or most of the parties and caused

more conflicts in return, it became a basis for more personal conflicts among individuals

which adversely affected the work relationships and the organization’s productivity as a

result. Therefore, the process did not promise to foster effective long term relationships

among colleagues giving rise to feelings of hatred and emotional disparity among

employees in the same department or between an employee and manager.


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Example, in the case of HBL’s formal dress code policy, the manager pointed out

an individual in front of his junior colleagues making him feel insulted and hating the

manager for doing so, causing him to feel demoralized to perform any task given by the

manager with eagerness and finding ways to back bite and bad mouth the manager with

other employees.

2.8.2.5Difficulty In Challenging Management

The dispute resolution at HBL does not assure management that employees can

safely and effectively challenge management. This is because such an act is not possible

with employees who do not have enough resources or power to raise a voice making

them insecure of their own jobs. moreover employees have a great degree of fear in their

minds of authoritative management situation which does not aim at collaboratively

discussing issues and then implementing an offer or demand rather just order employees

in shape of surprises or written messages .Therefore, employees do not have a say in their

own organization and this fear and lack of understanding with HBL’s management leave

most of the conflicts un surfaced and unresolved portraying a fake picture of happy and

content employees towards management.

2.8.2.6LAck Of Employee Empowerment

Because employee empowerment was lacking, the employees do not feel the need

to contribute towards the organization benefit and just work for the sake of securing their

jobs, positions and dignity among others since raising a voice means openly exposing

themselves to chances of being dismissed or transferred.

2.8.2.7Lack Of Effective Communication

Lack of Effective communication is another problem that makes dispute

resolution at HBL inappropriate and unsatisfactory. A classic example was seen at two

events.


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Firstly, due to lack of communication in HBL among departments regarding the

code of ethics and specifically organizational culture, most managers of HBL Sukkur

branch, were being seen to wear shalwar kurta and having tea while sitting on the floor

giving rise to an immediate clash of opinion between the directors and those managers.

Therefore, no or miscommunication left un-uniformity among the different branches of

the same bank.

Secondly, on the occasion of employee redundancy due to downsizing, employees

got mixed messages of them being departed from their organization in the form of rumors

and ‘grapevine’. Hence, this resulted in lack of trust in management for the employees

who were being affected and also for those who were not making them feel the next to

become the culprit of management sudden decisions and surprises. Such distorted

communication channels lead to employees giving different meanings to the same picture

since every organization comprise of diverse mental filters causing more conflicts at

personal level between employees .

2.8.2.8Inflexiblity Of Application

Similarly to the problems above, inflexibility of application and allocation of

rewards, application and policies was another factor of disturbance in the process.

Employees do not know what HBL’s management expects of them at certain events and

therefore most of the employee’s only aim to work at moderate performance levels since

management’s criteria of reward is unpredictable like the management itself. Therefore,

people do not want to work hard and get no return rather they find it better to work

consistently at a medium pace and not being rewarded which would at least not

demoralize them at the end.

2.8.2.9Poor Application Of Resolution Procedures


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Moreover, poor application of resolution procedure, that is in areas only where

management feels it is important is another problem. HBL’s managers just believe what

they see and see what they believe and start resolving and working on it by simply

forcing employees to follow what it dictates without welcoming any feedback, opinions

or suggestions from employees being the other half that makes up the organization.

Example, during the union negotiation sessions, the union representations are

forced to agree on management’s choices and issues through a sound mediator whose

popular and in good books of all employees and someone who the employees look up to

so that management can get the other party convinced at its point on emotional grounds

and can satisfy its demands at the cost of leaving its workforce feel dissatisfied and

simply being won on emotional rather than professional grounds.

2.8.3 HBL Did Not Involve Employees In Policy Implementation And It Amplifies

Problems In Dispute Resolution Processes Of HBL

While resolving conflict HBL did not balance competing interest of both the

organization and the employees and the senior managers specifically were not

collaborating with the employees to present the best opportunity to meld them in ways

that are mutually beneficial for both the system and the employees. They were not willing

to contribute their information, expertise and energy in order to give benefit to each other

while resolving conflict due to which many problems arises in dispute resolution

processes of HBL. The management did not allow employee participants to get involved

in the process of implementation of policy and due to which employees did not gain a

better understanding that why management were implementing this policy, what was the

goal of the organization and what will be the future outcomes after implementing this


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policy. While resolving conflict management does not allow employees to challenge

conventional wisdom and management’s mental models by participating in dialogue and

employees were not able to convey their view of what really goes on in the workplace

and what issues are real and not real.

When the dispute resolution process persisted, management did not effectively

communicate the result to all employees due to which they were unable to understand the

extent or level of reduction in conflict. Moreover, while resolving conflict at HBL, their

management did not conduct employee surveys that request written input on the issues

being considered in the dispute resolution process and did not give emphasis to employee

focus groups that facilitate discussion of the issues being considered and did not invite

oral feedback from employees about their perception in the whole dispute resolution

process.

2.8.4Policies Were Not Updated And Employees Were Not Well Aware About The

New Policies In HBL

The workforce and the nature of work have changed dramatically in HBL over the

years, and they continue to change with the increasing speed more specifically in banking

sector but HBL did not keep their employees well informed about the new policies. The

management of HBL did not address the changing need of employees in their policies

due to which further conflict arises. The managers and policy administrator did not

continually implement, administer and reexamine and change all of an organization’s

policies by keeping in mind the changing needs of employees with the passage of time

and with the ups and downs in the economy but rather than that they just focus on the

company’s interest and the growth of the organization and did not update policies at the

exact time when it was actually needed. The policies did not intend to ensure workplace


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effectiveness, justice, fairness and peace among the employees at HBL because the

management did not update policies when needed.

2.8.5Management At HBL Did Not Balance Forces For Change And The Forces For

Stability While Resolving Conflict

In the dispute resolution process of HBL management just focuses on forces for

change and did not focus on balancing the forces for stability as well. When the

management did not focus on balancing both the forces, it takes too much time to resolve

conflict because the forces for stability are at one side and they continuously make effort

not to adopt changes at HBL whereas HBL wants to achieve its target by mainly focusing

on forces for change and they surprise employees while announcing the policy and did

not give acceptance time to employees. In resolving conflict, the drive to change did not

exceed the target’s resistance and did not create a disequilibrium that unfreezes the status

quo. While resolving conflict, the resistance which is the action of the targets to maintain

the status quo further increases.

2.8.6Employees Misunderstand The Facts

When management resolves conflict, due to miscommunication in the dispute

resolution process employee misunderstand the facts and further resistance arises when

employee have incorrect perceptions and misunderstandings about whether a change is

good or bad for them. The employees have different information that management has.

Because of a closed style, poor communication and negligence in the dispute resolution

processes, management did not involve employees in the decision process or did not

share with them all the information behind a planned change due to which further

misunderstanding arises in the dispute resolution system of HBL. And when employees

did not have a clear picture about what was going on in the organization they were more

likely to assume the worst and resist. When sometimes management shared a little bit


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information about the change, employees also did not believe what they hear because of a

lack of trust in the management of HBL.

2.8.7the Management Of HBL Did Not Conduct An Appropriate Discharge

Discussion:

They did not conduct such discussion in which the employee is advised of his

discharge is the single event most likely to occur in order reduce the cost and for the long

term growth for the organization. In the dispute resolution process, the person holding the

discussion was not fully trained and the meeting was not be carefully planned often

scripted and rehearsed because the senior manager did not fully aware about the facts and

reasons behind the conflict. They did not use person to person discussion when advising

individuals of a dismissal for downsizing instead they use a hybrid of both phone call and

other impersonal communication. While resolving conflict, the senior manager did not

directly get to the point and present the bad news and they did not stated the reason for

the termination in a few short sentences and did not tell the person that he has been

terminated due to which the expectation level of employees further increases.

The management cop out and make the discharge seem unjustified in an effort to

avoid hard feelings. The management of HBL also did not listen to what the employees

has to say and answer their questions honestly and concisely. The management while

resolving conflict did not explain initially all severance details about how long the

employees will be paid, how insurance will be handled , references, outplacement

services and other information of importance the employee being discharged. They did

not even explain the exit procedures such as when and how the employee should vacate

the workplace.

2.8.8No Job Security for The Employees


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In the past, employment at HBL was typically seen as long term relationship

between HBL competing in expanding markets and hourly wage workers or salaried

managers. But today’s employment relationship at HBL is very different. Increased

participation of young workers and fresh graduates, the prevalence of part-time or

temporary workers, increased risk of permanent job loss, and other similar factors have

changed the basic employment contract and introduced continuing uncertainty into the

employment relationship for the remaining employees after retrenchment as well due to

which problems arises in the dispute resolution system and the main problem is that while

minimizing conflict, another issue of job security for the temporary and for the remaining

employees arises as well.

2.8.9 Management Did Not Provide Proper Confidential Avenues (No Proper

Counseling Or Discussion Platform)

Management of HBL did not ensure that the dismissal discussion itself was

private means that it was not conducted behind closed doors but also handled so that

employees in general do not know it was taking place. The management did not carefully

consider that what information was to be shared with the remaining employees, who have

a legitimate interest in what has happened. Employees did not believe that the dispute

resolution processes will foster fair resolution of the process and fulfill their rights.

2.8.10Management Of HBL Did Not Make A Disciplined, Balanced Discharge

Decision:

Employees felt that supervisors and managers forgot about their feelings and they

thought only about the interest of the organization while resolving conflict. Other

managers fail to take needed action because of the potential cost and disruption to the

organization. While resolving conflict, delaying appropriate discharge allows bad

behavior to spread to others, impacting the broader organization performance. The

management did not thoughtfully balance the potential pros and cons of dismissing


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employees while resolving conflict. In the dispute resolution process, the management

did not ensure that affected employees have an opportunity to present their case, with

help from an employee union representative if requested. Initially the management did

not clearly articulate a defensible reason for all dismissals. The management did not

provide for a pre decision review by higher levels of management, a peer committee,

external lawyers, or other knowledgeable individuals.

2.8.11No Proper And Policy:

There was no formal ADR policy statement at HBL that establishes the rules for

resolving disputes, provides due processes, and fosters a full understanding of the dispute

resolution options available to the organization’s employees and because of this further

problem arises in the dispute resolution system. There was no fair and impartial

investigation of disputes.

2.9 Recommendations and Suggestions For Improving And Refining The

Dispute Resolution Process At HBL

It is time that the organizations such as HBL realize that conflict cannot be

resolved by firing the coach or trading a player. Conflict is inevitable. If it is handled

well, it can lead to constructive dialogue, needed change and ultimately resolution. If it is

handled poorly or left unresolved, it can disrupt relationships, affect on the job

performance and lead to costly and time-consuming litigation. A dispute resolution

system preserves relationships, provides durable resolution of disputes, preserves

confidentiality, avoids litigation, and maintains management’s control over the process.

Large businesses are finally embracing Dispute Resolution Systems in the workplace and

are finding that a majority of conflicts are being resolved.


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Following are some of the suggestions, recommendations for managements of the

organizations like HBL as to how to design and implement an effective dispute resolution

system in the workplace, minimizing problems in resolving conflicts:

2.9.1 A Dispute Resolution System Should Involve Everyone:

A dispute resolution system has to involve everyone. Management employees,

owners, CEOs and Presidents cannot be exempt from participating in the system. It is not

a system designed by a consultant for the non exempt employees. In a small organization,

all employees, owners and managers interact with one another on a daily basis. The

organization becomes instantly dysfunctional if an employee(s) refuses to communicate

with other employees. It is a must that all employees communicate with each other

(Moreno, 2004).

2.9.2 A System That Resolves All Conflicts

Organization that employs employees has advantages and disadvantages:

everyone knows everyone else, including all about their personal lives. This can create

conflict in the workplace, if HBL has an employee always complaining to a co-employee

about her couch potato husband, her unruly teenager or her desk chair that is hurting her

back. These complaints cannot be ignored and must be addressed. Many large

organization views a dispute resolution system as only addressing filed actionable claims

such as sexual harassment, discrimination, workers’ compensation or wage and hour

violations. However, a dispute resolution system addresses all conflicts in the workplace,

whether they are actionable claims, other workplace disputes or personal employee

complaints. For the co-worker who has to listen to the personal complaints of a co-

worker, this can create an intolerable working environment. For the employee who has

many personal issues, this must affect her work performance. Many personal complaints

or workplace disputes are usually a precursor to a claim that is actionable. Addressing

those conflicts will make happy employees and decrease the actionable disputes. This

does not mean that the employer becomes a therapist (Moreno, 2004).


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However, it does require an employer to address employee morale and personal

complaints that maybe disrupting not only to the complaining employee’s work

performance, but that of the co-employee (Moreno, 2004).

2.9.3 The Identification Of The Natural Emergence Of A Person Who Handles All

Conflicts

Organizations are fortunate because usually an employee emerges who has the skills

and talents to handle disputes. This person is liked by the employees and the employees

confide in this person, because the person listens, keeps all complaints confidential, is fair

minded and knows who to approach to resolve complaints. This person becomes an

ombudsman. The person is trusted by both management and non-management and is not

necessarily a human resource professional.

Organizations do not have to spend time and monetary resources to locate or

develop the person who will become the champion of resolving conflicts and becomes a

natural emergence. Through this natural emergence of the person who handles disputes in

a small organization, this person must insure confidentiality, be a good listener, fair

minded, and know who to approach or who should handle a dispute in order to get the

dispute resolved. And the management at HBL should take keen interest and identify who

this person is and how he can affect the conflicts and the environment and how to with

tackle him (Moreno, 2004).

2.9.4 Look To External Sources When Needed-Assures Neutrality

Organizations sometimes try their best to resolve disputes internally, but some

employees see the internal methods as an employer dominated system with no chance of

a fair resolution. HBL should embrace external features. And they should recognize that

proceeding to binding arbitration is costly. As a result that before any formal claim is

filed; they must offer the employee the use of external mediation, by an independent

mediator. HBL’s management must offer a list of mediators and the employee chooses

the mediator, after the employee has had an opportunity to speak with the mediators


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regarding their credentials or bias in favor of the employer. Providing the use of external

mediators that are not associated with the organizations assures more neutrality. It has

been seen and believed that a system that utilizes both internal and external features,

demonstrates to the employees that the employer values the employees by spending time

and money to have a dispute resolved by a neutral party (Moreno, 2004).

2.9.5 Eliminate the Misconception That It Takes Large Monetary Resources To

Implement A System

Many organizations complain that they do not have the resources to implement a

dispute resolution system. It does not take monetary resources to resolve conflicts.

Resolution of disputes involves an employer’s willingness to address conflicts, to listen,

and to take steps to resolve them. Conflicts have to be addressed and there is an employee

who has the natural attributes to handle employee conflicts as mentioned above.

Management should tap in on those resources and before knowing it, management at

HBL will easily develop a workplace dispute resolution system, without expending large

sums of money (Moreno, 2004).

2.9.6 An Ongoing Process-Updating Policy with Changing Trends

Management at HBL should update the policy regularly with the changing times

and needs. A workplace dispute resolution system is similar to a house, it can stay

standing for 50 or 60 years, but during those years it needs to be remodeled with updated

parts in order to replace those components that have worn out or retired. A workplace

dispute resolution system is an ongoing process that is ever changing and requires

continual assessment. The framework may stay the same, but a change in management or

new disputes may arise that will require different methods to address those disputes. If

the workplace dispute resolution system evolves from the ground up, there is more

likelihood that the framework will remain but the methods used in resolving disputes may

change. It is a continuing metamorphosis (Moreno, 2004).


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2.9.6.1Elimination Of Bureaucratic Attitude And Encouraging Friendly

Environment

When HBL was a public entity, the bureaucratic attitude of management was

okay, but as soon as it is privatized, the expectations, needs, interests of people have

changed so there is a need to change and implement such a friendly and different

environment that everyone feels comfortable and satisfied.

2.9.6.2Satisfying Both the Parties Ina Conflict

Finding a way to satisfy both parties in a conflict will ultimately be good for the

company. Management should take such steps that when resolving a conflict none of the

party remains unsatisfied, i.e. none of them feels that their interests and needs are not

considered or fulfilled and ensure them satisfying both sets of concerns.

2.9.6.3Effective Pre And Post Dispute Resolution Process

HBL needs a pre and post dispute resolution analysis so that there is a proper

analysis or interpretation of where the organization wants to be and where it actually is

after implementation of the process of resolution and also there are proper guidelines

giving directions to take about the conflict resolution process. Hence, it should be

unproblematic to realize that whether the organization have achieved its desired

objectives and state or not.

2.9.6.4Ethical Management

There needs to an ethical management and also management ethics, so that

employees learn the same from the management.


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2.9.6.5Surface and Solve Conflict As Soon As Possible

Resolving conflicts creates more conflicts. If the management has firstly or

previously attempted to address and fulfill the needs and interest of its employees, the

counterproductive conflict would not have reached to this level or new conflicts wouldn’t

have rise.

2.9.6.6Learning from Conflicts

In HBL, they lack effective resolution process, they should see if their dispute

resolution process is effective or not in resolving conflicts, and also they should see that

the same thing and conflicts does not repeat and rise again, i.e. they should learn from the

conflicts.

2.9.6.7Management Should Be Flexible

Management should create such an attitude and should be flexible enough, that

employees come to them openly and freely with their problems. And management should

create an environment for employees so that they feel that their interest and needs will be

considered and valued.

2.9.6.8Use of Collaborative Power

In order to build trust, openness and respect among management and employees,

management should use collaborative power rather than coercive power.

2.9.6.9Accurate Information Without Manipulation


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Management should take the initiative to provide the same and standard information

to its employees regarding the change and implementation or any other important step, as

it will help then in keeping all of them in the same page. And also this is how there is no

miscommunication and misinterpretation of messages.

2.9.6.10Dispute Resolution Process In Black And White

The management should announce or should have dispute resolution process in

black in white and should have a designated department for it. Management should

spread or announce a common message among all of its employees in order to ensure

uniformity all over the departments and branches. This can be in the form a code of ethics

and a code of conduct for all of its employees all over the country. And they should also

mention DRP in the policy in detail so that everyone in organization has clear cut idea

that what will be the processes, what will be the technicalities if a conflict rises.

Management should know the advantages and disadvantages of dispute resolution

process.

2.9.6.11DRP Fostering Long-Term Relationships

The dispute resolution process should foster a healthy and long-term relationship

between employees, colleagues and management, in order to ensure work relationships

and increased organization’s productivity. That will definitely eliminate feelings or

hatred, dissatisfaction not only among employees but also managers, management and

employees.

2.9.6.12Allotment Of Empowerment To The Employees

Management should provide a certain degree of empowerment to its employees, so

that they also have power, resources and they feel secure and safe and do not feel


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insecure for their jobs. Also management should change attitude as employee’s fear of

the management’s bureaucratic attitude, which leads to failing collaborative meetings.

2.9.6.13Proper Flexibility of Application, Allocating Rewards And Encouraging

Employees

There should be flexibility of application, policies and proper allocation of reward

system. And also management should mention that what level of performance they

expect from the employees and at which level they will be appreciated and will be

provided with rewards, this will definitely help the management to encourage them and

so everyone then will be willing to work hard and work according to the interests of the

organization.

2.9.6.14Feedback From The Parties Involved

Management should welcome some kind of feedback, suggestions and opinions

from the employees, so that they get to know what are the major and repeated problems

involved in the conflict and what DRP should be followed and what modifications should

be made in the process. This will also lead to increased employee trust on the

management. HBL could:

Ask what alternate behavior could have been used (Weeks, 1992).

Ask them to put themselves in HBL’s shoes to understand how HBL was affected

by their behavior (Weeks, 1992).

Focus on the positive by reminding them of past examples when their fair

behavior resulted in good partnership resolution (Weeks, 1992).

2.9.6.15Tips for management during Negotiation or DRP


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Management of HBL should be objective: support both sides, even if privately

they prefer one point of view (Torr, 2004).

Management should be supportive: use caring language. Provide a non-

threatening learning environment, where people will feel safe to open up (Torr,

2004).

Management should not be judgmental: actively discourage judgments as to

who was right and who was wrong. Do not ask "Why did you?" Ask "What

happened?" And "How did you feel?" (Torr, 2004).

Encourage suggestions from the Parties. Resist advising. If suggestions are

really needed, offer as options not directives (Torr, 2004).

Win/Win: work towards wins for both Parties. Turn opponents into problem

solving partners (Torr, 2004).

Get agreement from both Parties about a basic willingness to solve the problem

(Torr, 2004).

Let each Party say what the problem is for them. Check back that each Party has

actually understood the position of the other Party (Torr, 2004).

Guide conversations towards a joint problem-solving approach and away

from personal attack (Torr, 2004).

Encourage Parties to look for answers where everybody gets what they need

(Torr, 2004).

Reframe negative statements into a neutral description of a legitimate present

concern (Torr, 2004).

2.9.7 Findings from the interview with Mr. Amin ul Huda

Conflict varies from situation to situation and from organization to organization.

Not all organizations face the same kind of conflict nor all conflicts can be

handled the same way as handled previous ones. Sources of conflict range from a

difference of opinion, difficult working conditions, or unrealistic work expectations


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through to discriminatory behavior such as racism or sexism, poor communication, or

non-compliance with organizational norms or values. Instead, HBL can learn about any

flaws and mistakes in the conflicts arising, in order to minimize the likelihood of

conflicts in the future.

Conflict can be between individuals and groups, groups and managers, groups and

groups etc.

Conflict between individual People has differing styles of

communication, ambitions, political or religious views and different

cultural backgrounds. In our diverse society, the possibility of these

differences leading to conflict between individuals is always there, and

HBL must be alert to preventing and resolving situations where

conflict arises.

Conflict between groups of people When ever people form groups,

they tend to emphasize the things that make their group "better than"

or "different from" other groups. This happens in the fields of sport,

culture, religion and the workplace and can sometimes change from

healthy competition to destructive conflict.

Conflict within a group of people even within one organisation or

team, conflict can arise from the individual differences or ambitions

mentioned earlier; or from rivalry between sub-groups or factions. All

leaders and members of the organisation need to be alert to group

dynamics that can spill over into conflict.

No specific department titled conflict management:

There was no specific department named or titled conflict management and didn’t

exist in HBL however two departments look after the disputes and their resolution they

are Human Resource and IR and Disciplinary department which aims to resolve pre exist

problems. Other organizations also do not have specific department. Example: Toyota’s

management (pre examinant). So it is not necessary to have any special department or


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subdivision for resolving and handling conflicts instead, the more important thing is the

dispute resolution system, how it is designed, carried out and implemented, is it effective

or not. In HBL this all is handled by HR, IR and disciplinary department.

Socio Political environment increases chances of conflicts:

Forces such as socio political environment also increase the likelihood of conflicts

occurring in the organizations. As people work together, know each other interacting with

each other they get mixed, start socializing and start forming groups. And many of the

people are very much concerned about who is getting what rewards, appraisals etc. Also

professional jealousy also exists i.e. politics.

System: Input – Process – Output

Important for the company to have a strong feedback cycle:

Feedback is of 2 types: Internal and External. It’s very important for the company

to have strong feedback cycle in order to minimize conflict and uncovering the

suppressed conflicts. Providing and listening to feedback is certainly something they

spend a lot of time doing in their own office. A Marketing Director eagerly recognizes

that client feedback is a better indicator of her performance than close ratios and costs-

per-lead. Facilitation staff meets regularly to review the feedback and determine which

things will be continued, which HBL will be done less of, and which will be stopped.

Feedback begets change. Internal feedback is just as important as external feedback, and

sometimes harder to get. Even if the team isn't the type to offer feedback (positive or

constructive), one can establish systems that will facilitate those processes, over time

making feedback a component of the company’s culture. The final outcome is a set of

2.9.8 Rationalization Of Human Resource Is Done By HBL.

Major conflict at HBL: Overstaffing

Major conflict that arose was of overstaffing. HBL was then very much concerned

not to supply too many employees. Overstaffing can create problem in ways that a work


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of 1 person is done by many people, also resources and other possessions are spent on

them, which is a waste, so downsizing was needed at HBL. Overstaffing can become the

reason of de-motivation, ultimately affecting the core objective of the organization that is

maximum profitability as it increases cost. (Example of other government owned

institution is PIA)

Feedback Cycle: Different Inputs.

Arbitration:

Arbitration did not exist with this particular name at HBL but do work with this

unorganized way. The appointment of an independent person to act as an adjudicator (or

judge) in a dispute, to decide on the terms of a settlement. Both parties in a conflict have

to agree about who the arbitrator should be, and that the decision of the arbitrator will be

binding on them all. Arbitration differs from mediation and negotiation in that it does not

promote the continuation of collective bargaining: the arbitrator listens to and

investigates the demands and counter-demands and takes over the role of decision-maker.

People or organizations can agree on having either a single arbitrator or a panel of

arbitrators whom they respect and whose decision they will accept as final, in order to

resolve the conflict. Arbitrator is a legal person and his decision will be followed by both

employees and management.

CBL Negotiations:

If arbitration fails, HBL goes for negotiations:

Official negotiations are also done at HBL, when things get out of control or are

not solved through arbitration. Depending upon the situation and time, the way the

negotiations are to be conducted differs. The skills of negotiations depend and differ

widely from one situation to the other. Negotiation process takes one month at HBL. It is

at times beneficial in the organizations in order to resolve conflicts.

Types of Conflicts at HBL:


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Pay raise issues mostly create conflicts, when bonuses, rewards are not

given at proper time and in proper amount. These kinds of problems

also rise because of the inflation

KESC employees (around 7000 employees) argued for their right, but

government did not support them. i.e. a difference of interests and

rights or "Disputes of right" and "disputes of interest"

These all issues occur in transactional activities. Such as in systems, policies,

procedures and climates at HBL. Transformational are like major conflict emerges, and

cultural values are involved here which creates conflicts.

Downsizing:

In 1997: 29000 employees were working at HBL they were downsized to 13000;

the case is in litigation now. In organization they have complex and heterogeneous

structure. In these cases HBL has no issues or problems because a certain amount goes to

the company’s lawyer every month, and he handles the case. But the people involved or

individuals seek difficulties because lawyer’s fees are expensive and they can’t afford

these fees for too long.

Re-entrenchment:

In 2007: Conflict because of re-entrenchment occurred that was attempted to be

minimized by offering various packages and incentives for the employees. Means people

were given incentives and other facilities or other job opportunities and were asked to

leave jobs from HBL.

Employees’ expectations from management:

In 2002: HBL employees perceived that it is their right that their child / children

get employed at HBL but HBL followed merit based system and they were interested in

hiring skilled employees to satisfy the company’s as well as stake holders expectations.


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And that’s the right choice, because if they started hiring on sources HBL will be biased

at hiring employees, instead the best way is to hire on merit, who are more capable

candidates.

MCB and UBL transformed but they overcome their conflicts less than HBL,

HBL is growing transformational 10% more than them because they re-entrenched the

employees very peacefully gave incentives and bonuses.

Reason for entrenchment:

Driver’s salary exceeded Rs.20000. This is wrong because an MBA now a day’s

hardly gets a job of Rs. 10000, and a driver was given Rs.20000, which is a big

difference. So it was decided after downsizing that the driver’s salary will be included in

each executive’s salary, and now it’s his choice to hire a driver or not, and that driver’s

salary is around Rs.7000.

Competing Internationally:

One of the reasons for HBL was also that HBL competes internationally that is

why it has to hire skillfully appropriate workforce and for that they need to create space

to accommodate them. HBL manages conflicts better than other companies.

Outsourcing of Employees:

Employees such as peons, guards, and drivers were outsourced from another

company. This is because in order to avoid conflicts in a way that nor there will be a

similar staff nor there will be groups, and there will be least probability of conflicts

arising.

Management’s Role in resolving conflicts:

Management at HBL is involved and is a key role player in surfacing, handling

and resolving conflicts at HBL at group, individual and organizational levels. This also


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gives rise to and also encourages a collaborative stage, where everyone at management

level is involved in resolving conflicts and also parties involved are asked for feedbacks

and suggestions.

Mediation after negotiation:

Mediation takes place after negotiation, if employees resist accepting new terms

and sticking to two or three points. This takes place when employees and groups are not

at all ready to accept the decisions of the management and they call for strikes, threats

etc.

The Mediator:

Then mediator talks or deals with him on the basis of his talent, personality and

skills. Mediator in HBL is a well known and popular among both employees and

management and he/ she is the person who knows well the goal of organization that as

the competition increases has to be reduced by covering extra cost, expenses as it hinders

the growth of organization that is the penetrating disease. Mediation drag the employee to

agree on further two or three points but still in the employee do not agree on even one

point arbitration takes place.

Employees hired at temporary work basis:

At HBL there are no permanent operational employees hired instead they all are

hired on a temporary basis contracts.

Role of Work Councils:

Personality conflict chewing pan, talking loud on cell phone, Negative attitude of

employees are monitored by these councils. Most of the time employees did this on

purpose to give an impression that they are more powerful than the management. These

conflicts at HBL have also rise, such as not following the dress coat, negative attitude or


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any practice against the terms mentioned in the code of conduct. Accountability or check

the dress code and other matters at regular intervals is necessary in any organization

2.10 Summary

Change is inevitable in organizations. The trend today is toward the learning

organization, which embraces continuous learning and change. Managers should think of

change as having four elements—the forces for change, the perceived need for change,

the initiation of change, and the implementation of change. Forces for change can

originate either within or outside the firm, and managers are responsible for monitoring

events that may require a planned organizational response. Techniques for initiating

changes include designing the organization for creativity, encouraging change agents, and

establishing new-venture teams. The final step is implementation. Force field analysis is

one technique for diagnosing restraining forces, which often can be removed. Managers

also should draw on the implementation tactics of communication, participation,

negotiation, coercion, or top management support.

Also discussed are specific types of changes. Technology changes are

accomplished through a bottom-up approach that utilizes experts close to the technology.

Successful new-product introduction requires horizontal linkage among marketing,

research and development, manufacturing, and perhaps other departments. Structural

changes tend to be initiated in a top-down fashion, because upper managers are the

administrative experts and champion these ideas for approval and implementation.

Culture/people change pertains to the skills, behaviors, and attitudes of employees.

Organizational development is an important approach to changes in people’s mind-set

and corporate culture. The OD process entails three steps—unfreezing (diagnosis of the

problem), the actual change (intervention), and refreezing (reinforcement of new attitudes

and behaviors).


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CHAPTER 3: RESEARCH METHADOLOGY

3 METHODOLOGY

In this chapter, the outline of the methodology that is used in the research and the

theoretical basis behind the approach and their definitions will be explained. After

mentioning the research purpose, according to research process onion, the first layer

raises the question of the research philosophy. The second layer considers the subject

of the research approach that flows from our research philosophy. Thirdly, the research

strategy will be examined and the fourth layer is about time horizons which are applied

to the research. In the fifth layer data collection method will be identified, and then the

validity and reliability of the research will be explained.

3.1 Research Approach


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The research approach is deductive when a theory and the hypothesis (or

hypotheses) are developed and a research strategy is designed to test the hypothesis, or it

is inductive when the data is collected and the theory is developed as a result of the

data analysis. The deductive approach owes more to positivism and inductive approach

more to phenomenology, although it is believed that such labeling is potentially

misleading and of no practical value.

This research is deductive because first the hypotheses are developed and then the

research strategy is designed.

3.2 Research Strategy

Research strategy is a general plan of how to answer the research questions

that have been set. What matters is that the strategy that is appropriate for the

research question(s) and objectives be chosen (Saunders et al., 2000).Saunders

explained that the research strategy is employed as follow:

3.2.1 Experiment

Experiment is classic form of research that owes much to natural sciences and

also social sciences, particularly psychology. It involves the definition of theoretical

hypothesis, selection of samples and allocation of them to different experimental

conditions, introduction of planned changes, measurement on some variables and control

of other variables.

3.2.2 Survey

Survey method is very popular and common business strategy research. Surveys

allow the collection of a large amount of data from a sizeable population in a highly

economical way. Based mostly on the questionnaires, the data are standardized and allow

easy comparison. It is also easily understood. But much time is spent in designing

and piloting the questionnaire. After that on analyzing the results even with the aid of an

appropriate computer package the disadvantage is that by the survey method the data


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collected may not be as wide ranging as those collected by qualitative research

methods. There can be limited number of questions. Another threat is that the

questionnaires might be answered not completely by the respondents. There are also

other data collection devices that belong to the survey category such as structure

observations and structured interviews where standardized questions are asked from

all interviewees. Questions “what” and “how” tend to be more the concern of the survey

method.

3.2.3 Case Study

Case study is the development of detailed, intensive knowledge about a single

case, or a small number of related cases. This strategy is of particular interest when the

purpose is to gain a rich understanding of the context of the research and the

processes being enacted. Case study can be a very worthwhile way of exploring a

theory. The case study approach has considerable ability to generate answers to the

questions “why” as well as “what” and “how”.

3.2.4 Grounded Theory

Grounded theory is often thought of the best example of the inductive approach.

It is better to think of it as a combination of induction and deduction. In grounded

theory data collection starts without the formation of an initial theoretical framework.

Theory is developed from the data generated by series of observations. These data

lead to the generation of predictions that are then tested in further observations.

3.2.5 Ethnography

Ethnography is to interpret the social world the research subjects inhabit in the

way they are interpreted. This is obviously a research process that is very time consuming

and take place over an extended period of time.

3.2.6 Action Research

Action research is the part of the organization within which the research and


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the changing process are takes place. So action research differs from other forms of

applied research because of its explicit focus on action, in particular promoting change

within the organization.

In this research, survey method is employed to have an analysis on the model of

customer loyalty in banking industry of Pakistan. In order to find the factors and also

the relationship between these factors, a questionnaire is designed. For doing so the

factors of models which were mentioned in the literature review are used. Because

one of those models is for e-commerce industry, I had to check the factors to see

whether they are appropriate for banking in Pakistan or not. So I had a discussion with

some experts in banking industry to show them the factors which were going to be used

in the new model.

After the discussion all of the considered factors were accepted. after

finalizing the factors the questionnaire of those researches were combined together,

then among those questions some had little changes, some were eliminated, some

were added and the rest were not changed. Then a complete translated questionnaire

was ready.

3.3 Time Horizon

It is believes that most research projects undertaken for academic courses are

necessarily time constrained. When planning for the research there are two options in the

time perspective:

3.3.1 Cross Sectional

Cross –sectional, a study in which a group(s) of individuals are composed into

one large sample and studied at only a single point of time.

3.3.2 Longitudinal

Longitudinal, a study in which an individual or a group of individuals is


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observed over a period of time.

In this research cross –sectional study is performed.

3.4 Data Collection Method

The gathering of data may range from a simple observation at one location

to a grandiose survey of multinational corporations at sites in different parts of the world.

The method of research can determine how the data are collected. Questionnaires,

standardized tests, observational forms, laboratory notes, and instrument calibration logs

are among the devices used to recover raw data (cooper and Schindler, 2003).

3.4.1 Sampling

If we collect and analyze data from every possible case or group member, this

will be termed a census. However, for many research questions and objectives like this

research it will be impossible to collect or analyze all the data available owing to the

restriction of time, money and often access. Sampling techniques provide a range of

methods that enable us to reduce the amount of data that is needed to be collected by

considering only the data from a sub-group rather than all possible case elements As in

this study there are many constraints on budget and time for surveying the entire

population and it is impracticable to survey the entire population, sampling provides a

valid alternative to the census (Saunders et al., 2000).

3.4.1.1 Population

A population consists of all elements-individuals, items, or objects-whose

characteristics are being studied. The population that is being studied is also called

the target population (Mann, 1995).The population in this research consists of the

bank customers.

3.4.1.2 Sampling Frame

The sampling frame for any probability sample is a complete list of all cases in


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the population from which your sample will be drawn (Saunders et al., 2000). As the

research questions in this study concern bank customers, so the sampling frame is a

complete list of all banking customers in Pakistan.

3.4.1.3 Suitable Sample Size

Determining sample size is a very important issue because samples that are

too large may waste time, resources and money, while samples that are too small may

lead to inaccurate results. According to (Saunders et al., 2000) researchers normally work

to a 95 percent level of certainty. This means that if your sample were selected 100 times,

at least 95 of these samples would be certain to represent the characteristics of the

population. The margin of errors describes the precision of the estimation of the

population. For most business and management researches, researchers are content to

estimate the population’s characteristics to within plus or minus 3-5 percent of its true

values. This means that if 45 percent of the sample is in certain category, the estimation

for total population within the same category will be somewhere between 42 and 48

percent.

According to (Cooper and Schindler, 2003) the formula for calculating the sample

size is as below:

(+,-) 0.05 = desired interval range within which the population proportion is

expected (subjective decision)

1.96(σρ) = 95 percent confidence level for estimating the interval within which

the population proportion is expected (subjective decision)

σρ = 0.0255= standard error for the proportion (0.05/1.96)

pq = measure of sample dispersion(used here as an estimate of the

population dispersion).

n=pq /σ2ρ

In this research, after running the 30 questionnaires, a sample size was calculated.

And the result shows 280 questionnaires.

N= 0.24*0.76 /0.0255 2 =280


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In order to have an accurate model I ran 400 questionnaires, and I got 392 back. From

this number, 388 were completely useful. So again at the end of he research I tested

the above formula to see whether the sample size was enough or not. The result

shows that by 295 questionnaires would be enough, but as I mentioned above I had more

questionnaires.

n= 0.26*0.74 / 0.02552 = 295

3.4.1.4 Response Rate

While employing all probability samples, it is very important to consider the

response rate. According to (Saunders et al.,2000), response rates in business surveys are

usually as low as 15-20 percent for postal surveys and also response rate of between 50

to92 percent for questionnaire surveys and of 73 to 99 percent for telephone interviews.

Therefore I asked the customer in my sample population to fill the questionnaires. Those

who didn’t want to participate mentioned the lack of time was the reason. The response

rate in this research performing the above method of data gathering was calculated as 97

percent and this is because the questionnaires were given one by one and face to face.

According to (Saunders et al., 2000) the actual sample size of this research is

calculated by this formula:

N=n*100/ (response rate)

N=280*100/97 =288

This means by spreading 288 questionnaires, I could have the minimum

sample size which is 280, but as I mentioned previously, I had 400 questionnaires

and got 392 filled, among them some were useless, and 388 were gained completely

useful.

3.4.1.5 Sampling Technique

According to (Saunders et al., 2000), sampling techniques can be divided into two

types:


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a) Probability or Representing Sampling

The chance or probability of each case being selected from the known population

and this is usually equal for all cases. It is most commonly associated with survey-based

researches where you need to make interfaces from your sample about a population

who answer your research questions or meet your objectives.

b) Non-Probability or Judgmental Sampling

The probability of each case being selected from the total population is not

known and it is impossible to answer research questions or to address the objectives

that require making statistical inferences about the characteristics of the population. Then

the first 4 banks which have the most market shares in the banking industry of Pakistan

similar to Beerli et al. (2004) were chosen. This choosing was because of the time and

money limitations .Then for each bank, the same number of branches was chosen

randomly. Then the same number of questionnaires was given to the respondents at the

main door of each branch.

3.4.2 Collecting Primary Data Using Questionnaire

It is noted that the greatest use of questionnaires is made by the survey strategy.

Questionnaires can therefore be used for descriptive research, such as that undertaken

using attitude and opinion questionnaires and questionnaires of organizational practices

will enable you to identify and describe the variability in different phenomena.

3.4.2.1 Questionnaire Design

Because of the reasons mentioned above I used a self-administered questionnaire

method for collecting the primary data. More importantly replicated a study that had been

done in Taiwan by (Lin and Wang, 2006) and in Spain by (Beerli, Martin, Quintana,

2004)’s questionnaire. Hence in this research I combine those two questionnaires and

added some more to them.

First the duplicated questions were omitted. Then because of the different

environment between the banking industry of Pakistan and other countries, questions had


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to be checked to see whether they needed localization changes or not. Some of the

questions were edited for this reason. And a few questions were added to some of the

factors. After that they were translated accurately to Farsi for being simple to be

understood by the respondent.

It is argued that, to achieve a response rate as high as possible, you need to

explain clearly and concisely why you want the respondent to complete the survey on

the first page. Regarding this issue a covering letter was provided for the first page.

The questions in the questionnaire tried to find the factors of customer loyalty in

Pakistan. The above opinions were measured by requesting respondents to indicate,

on a five-point Likert-type scales, anchored on “1 = to a very little extent” through “5 =

to a very great extent”, their agreement or disagreement with a series of statements

that characterize the factors for loyalty model of the customers in banking industry in

Pakistan.

Likert scales were developed in 1932 as the familiar five-point bipolar

response format most people are familiar with today. These scales always ask people to

what extent they agree or disagree with something, approve or disapprove something

and believe something to be true or false. There's really no wrong way to do a Likert

scale, the most important thing is to at least have five response categories (Likert,

1932).The questionnaire also contained some personal questions to reach to some

contextual sense of the answers collected such as name, age, position, etc.

3.4.2.2 Pilot Testing

According to (Saunders et al., 2000) the purpose of the pilot test is to refine

the questionnaire so that respondents will have no problems in answering the

questions and there will be no problems in recording the data. For small-scale

questionnaires, it is unlikely to have sufficient time or financial resources for such

testing. However, it is still important to have the questionnaire pilot tested. For most

questionnaires the minimum number for a pilot is 10 (Fink, 1995).


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Although these questionnaires were used before but because of the little

changes that have been done I needed to have a pilot test. The pilot test was done in three

stages. The first stage was done by some banking experts to see whether the factors of

this model are proper in this environment or not. All of them agreed with the factors

except the factor “trust” which was in the m-commerce model, and the reason is

because of the different nature of these two industries.

For this reason, I ran a short questionnaire to see whether this factor could have

influence on the loyalty or not. The questionnaire with its analysis results are shown in

appendix B. approximately all of the respondents mentioned that they trust the banks in

Pakistan and by having this result and the experts’ comments this factor wasn’t used.

The next stage was done for becoming sure of the simplicity of the questionnaire.

So 20 questionnaires were given to the customers of the bank to see whether the

questions were understandable or not. In this phase I was beside each customer

during the filling process and I took notes of all of their comments. After doing the

pilot test some little editing was done. The last phase of the pilot test was done by

30 customers to see whether every thing was ok with the questionnaire or not.

Fortunately I got the positive answer.

3.4.2.3 Some Approaches to Gain Access

Feasibility is an important determinant of what is chosen for research and how to

undertake the research (Saunders et al., 2000). Access is a problematic area. “The reality

of undertaking a research project may be to consider where you are likely able to gain

access and develop a topic to fit the nature of that access.” Several strategies can be used

to gain access. The strategies that he mentions are:

Allowing yourself sufficient time

Using existing contacts and developing new ones


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Providing a clear account of purpose and the type of access required

Overcoming organizational or individual concerns about the granting of access

Identifying possible benefits to the organization or individual in granting you

access

Using a suitable language

Facilitating ease of reply when requesting the access

Developing your access on an incremental basis

Establishing your credibility with intended participation

In this research a lot of time was spent on gaining access.

3.5 The Credibility of the Research Finding

According to (Saunders et al., 2000) reducing the possibility of getting the wrong

answer means that attention has to be paid to two particular points in the research design:

3.5.1 Reliability

3.5.2 Validity

3.5.1 Reliability

This is about the results of each investigation, which have to be reliable. If

nothing changes in a population between two investigations for the same purpose, it is

reliable. (Robson, 1993) asserts that there may be four threats to reliability:

3.5.1.1 Subject Error

Subject error has to do with the time the interview is carried out. It is of great

importance to select a neutral time and date.


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3.5.1.2 Subject bias

Subject bias is a great problem in organizations where the management is of an

authoritarian character and the interviewee(s) might say what the manager wants

them to say, not what they feel.

3.5.1.3 Observer Error

Observer error can be lessened with a high degree of structure to the interview

schedule.

3.5.1.4 Observer bias

Observer bias is a question about how the interviewer interprets the data

received. As we dispensed the questionnaires during the exhibitions we really did not

face the subject error. For reducing the subject bias, we tried to make the respondents

certain that their answers would be considered confidential. Since the questionnaire was

designed as a survey format, we did not face the observer error or the observer bias. A

minimum (Cronbach, 1951)’s Alpha value of 0.7 indicates reliability of the

questionnaire.

3.5.2 Validity

Validity is concerned with whether the findings are really about what they appear

to be about (Saunders et al., 2000). There are three tests for validity:

3.5.2.1Construct validity

Construct validity, establishing correct operational measures for the concepts

being studied.

3.5.2.2 Internal validity

Internal validity, (for explanatory and causal studies only, not for descriptive

or exploratory studies) establishing a causal relationship, whereby certain conditions

are shown to lead to other conditions.


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3.5.2.3 External validity

External validity, establishing the domain to which a study’s findings can be

generalized. If a question can be misunderstood, the information is said to be of low

validity. In order to avoid low validity, we piloted the questionnaire after translating it

into Farsi. In addition, meetings were arranged in a semi-interview environment and

questionnaires were given to the respondents face-to-face, so that if they faced any

difficulties while filling out the questionnaire, the ambiguity could be explained. By

doing so, the validity was increased.

CHAPTER FOUR: DATA ANALYSIS

4 Data Analysis & Interpretations

The empirical data collected have a lot of problems in analysis, its viability,

handing, missing scenarios and its outliners are aspects that relates with its

interpretations. My data is mainly constituted on the questionnaires and interview’s

answers. I selected the most valid data through inferential & descriptive statistics

methods.

1. Primary Reason For Leaving The Company

1. Benefits 7. Better Job Opportunity

2. Commute 8. Conflict with Other Employees


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3. Conflict with Manager 9. Family Reasons

4. Job Expectation 10 Not Challenging

5. Pay 11 Personal Reasons

6. Reallocation/Move 12. Working Conditions


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2. Time Period You Been Thinking About Leaving The Company.

1. One Month or Less 2. One To 5 Months

3. More Than 5 Months


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3. Satisfied With The Company You Work For.

1. Extremely Dissatisfied 2. Very Dissatisfied

3. Neither Satisfied nor Dissatisfied 4. Very Satisfied

5. Extremely Satisfied


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4. Your Working Experience

1. Much More Positive than Negative

2. More Positive than Negative

3. More Negative than Positive

4. Much More Negative than Positive


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5. Experiences Are More Negative Than Positive, What Factors Are Responsible.

Select All That Apply.

1. My Performance Evaluation and the Outcome

2. My Role, Responsibility and/ or Title

3. Job Training

4. My Boss

5. My Co-Workers

6. My Compensation

7. Change in Compensation Package

8. Company Savings Plan

9. Medical Benefits and Insurance

10. Relocation

11. Vacation Time

12. Other


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6. Flexibility of the Company With Respect To Your Family Responsibilities?

1. Very Inflexible 2. Somewhat Inflexible

3. Neither 4. Somewhat Flexible

5. Very Flexible


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7. A Clear Path For Career Advancement

1. Strongly Disagree 2. Somewhat Disagree

3. Neither Agree or Disagree 4. Somewhat Agree

5. Strongly Agree


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8. Satisfaction With Your Position At This Company

1. Very Satisfied 2. Somewhat Dissatisfied

3. Not Satisfied nor Dissatisfied 4. Somewhat Satisfied

5. Very Satisfied


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9. Part Of Pay Play In Your Decision To Leave The Organization

1. 20-40% 2. 40-60%

3. 60-80% 4. 80-100%


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10. Working Conditions Affect You To Leave Your Job

1. Yes 2. No


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11. Rate The Morale In Your Company

1. Low 2. Very Low

3. High 4. Very High


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12. This Company Have Done Anything To Encourage You To Stay

1. Yes 2. No


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Data Analysis & Interpretations

In this chapter the results of the statistical analysis will be presented. The

statistical analysis has been done by SPSS software and for the modeling part, has been

done by LISREL software. Then some suggestions will be given according to the results.

4.1 General Information

In the questionnaire, we asked for some general information from the employees.

The result shows that the most active employees are the ones between 30 and 55 and are

graduated. Also the results show that most of them have official occupations. This

could be because of their education.

4.2 Analysis of Factors

4.2.1 Quality

As it was mentioned in the second chapter, quality is one of the most

important factors which have a main role on making a employees loyal or churner. In the

banking industry, the product is equal to the service. It means that a employees perceives

a service which in the employee’s view can be the same as a product of another industry.

In the previous models the authors considered quality as only one factor. So in this

research also at first the quality of the service in banking industry is considered as just

one category.

After the questionnaires were given to the respondents and I got the filled

ones back, by analyzing them in SPSS software I noticed that there could be two

categories for quality. Then by having the correlation between the questions it seemed

that it could be divided in to two separate groups. By focusing on the common attributes

of each group it became clear that we could break up the service quality in the banking

industry into two parts and name them: tangible quality(in which the perceived quality


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can be seen) and intangible quality(in which the perceived quality can’t be seen).

The Cronbach’s alpha, which was gained from these questions after running

the questionnaires, were 0.92 which was a very high one. This means that the questions

were reliable and also valid. But by having a deeper look at them and considering the

situation in Pakistani environment, and also having the factor analysis, these questions

could be separated into two groups. Questions 1 to 9 are in tangible group and the

others are in intangible group. Again after separation, Cronbach’s alpha was tested.

This time the result of the first category was 0.84 and the result of the second was 0.90.

They show that the division is done correctly.

4.2.2 Satisfaction

Satisfaction in banking industry means that the product or service which is offered

to the employees makes him/her satisfied and meets his/her expectations. This means that

the employees feel good to have the service from that bank another time. In the

competitive environment which the competitors are trying to have the other’s

employees, this antecedent can be vital. By this, the company can gain more profit. The

direct monetary profit and the indirect one which can be for example advertising by

word-of-mouth process or etc can be the means of profit gaining.

This factor in this research is measured by four questions that are brought in table

7, and the test for reliability of these questions was done. The result of Cronbach’s alpha

is 0.78 which is a good one and shows that the questions were chosen properly and they

are reliable.

1. This bank doesn’t meet my needs.

2. The bank I work with is far from my expectations of an ideal bank.

3. According to my experiences, I’m satisfied with this bank.

4. In comparison to other banks, I consider this bank and its services successful.


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The factor analysis for this part was done and the result shows that these

4 questions are correlated for banking industry in Pakistan. It means that all of these

questions are trying to show one thing, which is satisfaction in the banking industry. The

table below shows the mean and the variance of the questions which are answered

by the employees. It seems that most of the employees answer higher than average. The

respondents felt particularly strong about the 3rd question because it has the highest mean

in the survey and less highly rated question is the second one, with the average mean of

2.98. In the table the average of the mean and variances are shown.

4.2.3 Switching Cost

As it was mentioned in chapter 2, switching cost means the price (internal

or external) which a employees should pay for moving from one company or brand

and choosing another. According to what has been said in the previous researches, there

are some barriers for the employees in defection time, so they don’t feel that it is

simple to move.

This factor in this research is measured by three questions, which are mentioned in the

table.

1. To change to another bank involves investing time in searching for information

about other banks

2. To change to another bank involves much effort in deciding which other bank to

use

3. To change to another bank involves a risk in choosing another bank which might

turn out not to satisfy me

These questions were analyzed by SPSS software and Cronbach's alpha 0.71 was

gained, which is a completely reliable result. Then again factor analysis was done for

these questions and the result shows that the questions are trying to identify the

switching cost factor. As the following table is showing, the mean and std. Deviation


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are showing that the questions were understandable for the employees, and all of the

respondents had approximately a common understanding.

By paying attention to these points, managers can understand that finding

information about the services of the new banks is the most time and energy consuming

activity for employees and they don’t feel easy to do this. So by simplifying these

activities they can gain more employeess. Also the average of the variance and the mean

scale in table is showing that the questions have a common concept in the employees’

point of view.

4.2.4 Choosing

This factor is trying to find the importance of employees choosing power. When a

employees decides to choose a company for getting some sort of services, for

example a bank to have the financial services, if the selection of that target

company is done by considering some factors, then being loyal to that company in the

future is more possible and probable. At the beginning, four questions were designed to

estimate the factor, but by having the factor analysis for the results of the pilot test, the

forth question was eliminated. After elimination the analysis was done again and the

gained Cronbach’s alpha for this factor for the remained 3 questions is 0.71. Also factor

analysis has been done for the questions and the result shows that they are trying to

represent one factor.

The result of mean and Std. Deviation of the questions are as below.

1. Before choosing a bank I consider its advantages and disadvantages.

2. The decision which I make for choosing a bank for the first time is very

important

3. Before choosing a bank, I compare it with other banks.


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As it is shown in the results of the table 14, the highest mean and the lowest std.

Deviation are for the first question, and this shows it is important for a employees

to consider the advantages of the service provider. And also the average of the means and

the variance of the questions of the choosing factor are as below. All of the

components of both tables prove that these questions are completely understandable

and bring a common idea to the respondents.

4.2.5 Habit

As it was mentioned and explained in chapter 2, habit is an important factor

which 40-60% of the employees purchase the services because of habitual behavior. In

banking industry, habit can be made because of different things which are asked among

the below questions.

1. I use this bank because my family also uses it.

2. I use this bank because I am admitted as a member of this bank by my office or

family

3. I use this bank because it is near my office or home.

4. I use this bank because it has many branches.

5. I use this bank because this is the first bank which I used its services.

6. I’m used to using of the services of this bank.

After doing the analysis on the result of the pilot test, the questions were reduced

from 8 to 6 main ones, and the other two questions were not representing the habit factor.

In this part the Cronbach’s alpha which was gained from the respondents’ answers is 0.73

and it shows the reliability of the questions. Also by having the factor analysis on the

answers, the results prove that the questions are attempting to find this factor. The table

shows the results of mean and Std. Deviation of the questions which are related to the

concept of habit. Also the average of the mean and variance in the next table proves that

the questions are designed correctly and have the same meaning for the employees.

Among the above questions, the third question has the highest meaningful result and


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the first one has the lowest score. Also the sixth question has the lowest std. deviation and

the second has the highest. Also as a result, the distance between the branch and the

office or home is the most important for the employees, so it can be an important

point to be considered by the managers.

4.2.6 Loyalty

All of the factors which are mentioned above are designed to identify the

employee’s loyalty in banking industry in order to create a model in the Pakistani

industry. To do so, in addition to the elements which were designed and discussed

above, some questions are trying to show the loyalty factor directly. Table is showing

them.

1. I would always recommend my bank to the others.

2. It would be difficult to change my beliefs about this bank.

3. I would always use this bank’s services.

4. I am a loyal employees to this bank.

5. I do not like to change to another bank because this bank sees my needs.

6. Even if close friends recommended another bank, my preference for this bank

would not change.

7. My intention to use the services of this bank would not be changed.

The results show that highest mean value for the loyalty questions is for the first

one; this can help the managers to understand that a loyal person would

automatically advertise the services, and it could be an indirect profit program for the

banks. Also the results show that the questions have the same meaning for the

respondents.


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4.3 Factors Relationship And Suggestions

After defining the questions and the factors in the software, the relationships

between them have been extracted out and explained as below: The analysis shows that

satisfaction has a link with loyalty. This link is very strong, and it shows that if the bank

managers want to make the employees loyal, they should have some special strategies

to satisfy the employees. When a employees is satisfied with the received services or

the products of a bank, he/she doesn’t want to take the risk of changing or moving

to other competitors.

For this reason, managers should always consider the needs of the employees. It

can be the current needs or the ones which could be desired in the future. This means that

the managers should have a team which can estimate the future requirements by

having the fast movement in the world and technology, specially in the developing

countries like Pakistan, this movement could be a little faster, so the research team of the

banks should consider the environment and by having the focus on the culture

requirements estimate the future needs of the employees. Also the managers should

consider the competitive environment, and should think out of the box to offer the best

and to satisfy the employees.

The next link which is going to be explained is habit. Habit also has a relationship

with loyalty. The t-value of the analysis for this relationship is more than 2, and this

shows that this relation ship exists. When a employees stays with a bank to have

some sort of services, it can have two reasons. First this employees is really

satisfied with the current services and the next reason could be the habitual behavior.

It means that some sort of reasons is related to the factor Habit. Some of the

most important habitual reasons are measured in this research like the family

influence, or the distance which can make a employees find the habit of using a

special bank services. In finding the loyal employees, this category also can be

considered. But it is not as serious as the satisfied employees. Because if the cause of


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the habitual behavior, like the distance or other reasons, change the employees

would stop the habit.

The employees managers should find this category and to minimize the risk of

defecting of these employees, they can find a way to change this group of employees

to satisfied ones. By doing this, the number of loyal employees is not changed at the

moment but the number of satisfied ones and also the number of future loyal employees

is changed. The next link which is valid, and its t-value is greater than 2 is the link

between switching cost and loyalty. By analyzing the answers of the three questions of

this part, the relationship between the loyalty of the employees and the switching cost can

be explained as below:

When a employees is not sure about the new bank which might be chosen, it

makes him/her not move simply and suddenly. He or she thinks that should spend more

time in order to be able to make a good decision. This process makes the employees stay

more with the current bank, because he/she considers the risk of not being satisfied with

the new bank and tries to think more about switching. By doing so, staying with the bank

for a longer time is more possible than choosing a new one carelessly.

The next factor that has a valid relationship with loyalty is choosing. In this factor

when a employees tries to find a new bank for having financial transactions, he or she

tries to compare the different banks with each other. And at last the best one will

be found (almost it is in his/her point of view), so because of the effort that the

employees puts for selecting the bank, he/she would be more satisfied with the services

of the new bank. In long time, this can make a long-term relationship, and the employees

who tries to compare the banks and select the proper one would be more satisfied and

loyal. By this explanation, the link between choosing and satisfaction becomes clear. So

the managers of the banks can give this permission to the banking industry’s

employees to have some sort of clear information about the services and also about

the bank itself.


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Choosing can have a big role in making a new employees a loyal one. The next

factors which are going to be discussed are the quality factors. As I mentioned in the

previous parts, in the main model, the researchers analyze the quality as one factor. But

by having a deeper look at this element, I found that it could be separated into two

factors, and I decided to measure them separately and find each one’s relation with

loyalty. The first category is about tangible qualities. This means the feasible

perceived quality in the branches or wherever the employees has the services, fore

example, the beauty or the neatness of the materials, has influence on the loyalty of the

employees. It is important for the employees to have the financial services in a tidy way.

Also the other element that affects this factor is the advertisements and the interest

for the employees’ investments. Intangible factor is about the infeasible quality .It also

can be named as behavioral quality, like the respectfulness of the bank’s staffs. This

factor has also an important relationship with the loyalty of the employees. Both of

these factors got the valid t-value in the analysis, but in comparison the tangible quality

has a greater coefficient with loyalty. This shows that the viable perceived quality has a

greater role in making a employees loyal or defector.

The bank managers should focus their strategies on offering the financial services

with considering these two factors. The mentioned elements can make the current

employees a loyal one. Also these two factors have influence on the satisfaction of the

employees. It means that by providing a better service, banks can make their employees

more satisfied. At the next step, they can make them loyal. As the analysis shows, these

two factors have influence on loyalty and satisfaction. Quality factors have also

influence on switching cost. It means that when a employees receives a good quality

(tangible or intangible),his/her expectations of the banking services increase, so at the

switching time, he wants to get more in the other new banks, and this makes the

movement not simple.


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Quality factors have relationship with choosing. When a bank is offering the

financial services in a qualified way, and the employees perceived quality (tangible

or intangible) is high, at choosing time, he/she wants to compare the new bank’s services

with perceived one. This can also influence the new employees’ choosing decisions.

This is because of the effectiveness of word of mouth; new employees will come toward

to have their financial services in the mentioned bank. Also managers can advertise

on the employees perceived quality by having some researches on it and representing the

results to the public. Also quality factors have relationship with habit. This is because

when a employees gets a good service quality, this remains in his mind and when needed

he is likely to go the same place again.


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CHAPTER FIVE: CONCLUSION

5.1 Purpose Conclusion

Habib Bank Limited (HBL) is considered first commercial bank of Pakistan. HBL

has grown its branch network and become the largest private sector bank with over 1450

branches across the country and a customer base exceeding five million relationships.

Study was conducted to know the impact of customer relation officer activities on

the performance of bank and for this purpose Habib Bank Limited was selected. HBL is

very conscious about its employees and very much importance is given by bank to their

valuable satisfaction. Bank also follows employee's crisis management because role of

employee's crisis management in banking sector is most important and it enhances the

business and performance of the bank.

Employee's crisis management helps to acquire strong and satisfied workforce

and maximizes the business of the bank. Through close relationship with employee, bank

obtains more deposits and efficiency.

5.2 Implications & Findings

The present report indicates that the following features:-

1. Better job opportunities in outer market & pay are the main reasons for increasing

attrition rate.

2. The employees do not feel valued by their employer.

3. The working environment in the company also make them to leave their job.

4. Performance Appraisals are not given at regular intervals so that the Employee feel

motivated for its work.


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5. The work schedule is very much inflexible & Stressful

However an effective retention policy could be followed to make the employees

stay in the company starting form recruitment and selection of employees, providing an

effective pay packages and compensation, outlining an efficient career development path

for employees and most importantly catering to their emotional, mental and family needs.

Also practices should be followed to bring the ex-employees back in the company.

5.3 Recommendations

The majority of research on the response of employees to downsizing has

centered on layoff victims; few studies have focused on the people who survived the

layoff. But, these tips will assist you with the emotional aspects of coping with the loss of

your coworkers.

1) Recognize that your emotions are legitimate and that time passing is necessary

for the intensity of your current emotional response to die down. In organizations

where managers recognize and acknowledge this emotional component in a

downsizing, employees return to productivity much sooner.

2) Recognize that you may need to experience each of the stages of loss described

in Kubler-Ross’s groundbreaking studies about grief.

3) Seek access to your supervisor; assuming your supervisor is readily available

and perceived by you as concerned about employees, and honest, reliable and

competent, your time with your supervisor should help you feel reassured.

4) Attempt to recreate the daily patterns you experienced prior to the layoffs.

While much time in an office is invested by employees in talking about the

situation after layoffs, the sooner you can recreate your prior patterns, the better

for your mental health.

5) Treat yourself with kindness. Now is the time to eat a portion of your favorite

comfort food. Got chocolate? Share with coworkers. Bring in a casserole or


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cookies that coworkers can share. Small gestures mean a lot in the post layoffs

workplace.

6) Talk out your feelings with coworkers who are likely experiencing loss just as

you are. You can comfort one another. Your significant others outside of your

workplace make good sounding boards, too.

7) Pay attention to the needs of the coworkers who were laid off. These are your

friends and they are experiencing serious issues with self-worth and loss, too. So

many people tie up so much of their identity and self esteem in what they do for a

living that a layoff is a major blow to their sense of themselves, their competence

and self worth. You do them a kindness, and you will feel better, too, if you

continue your weekly lunch date with your laid off coworker. Let your laid off

former coworker vent and listen to see how you can lend support. Sometimes,

active listening is all they need.

8) You will feel as if you have a proactive mission and purpose when you connect

your laid off coworkers to your connections on Facebook, LinkedIn, and the

other online social networks. Anything you can do to help them expand their

networks and effectively job search will be valued by your friends.

9) Communication is critical following a layoff. But, remember that the middle

managers who would generally communicate are also experiencing loss and

concern about their own jobs. (Often managers are the first to be laid off.) If you

are not receiving the communication you need from your manager, seek it out by

asking questions and spending time with him or her. Go after what you need;

don’t wait for communication to flow downwards.

10) Hopefully, your organization has recognized the importance of valuing the

remaining employees. But, if the opportunities for reward, recognition and

valuing seem slim, volunteer to head up an employee morale committee. The

committee can do much to bring fun and motivation back into the workplace

following layoffs. Think ice cream socials, popcorn machines, and potluck

lunches; the activities don’t need to be expensive.


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http://jobsearch.about.com/


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COMMENTS

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