Introduction
Farmers exchange bank was established in the year 1908 in Neshkoro, Wisconsin. The bank was formed mainly to serve the farmers community and other local communities of the region. The main objective of the bank is to maintain customer integrity and customer satisfaction. The main customers of the bank are the rural people, which consist of mainly farmers. Since the rural people are reluctant to enter into banking transactions, the bank has appointed the employees from those respective communities and encouraged the rural people to do business. This is a better strategy adopted by the bank in order to improve the business.
This strategy adopted by the bank attracted a large number of customers to the bank. The bank maintains a healthy relation ship with the customers and the customers are treated in person. The cashier and the loan officers are more close to the customers since they are the persons who are in close contact with the customers. They maintain the secrecy of the customer in accordance with the provisions of the Gramm-Leach-Bliley Act, Title V (Privacy Act), which is governing the privacy of the consumer’s non public personal information. Non public personal information is the financial information which could be identified personally and which could not be detected from any other personal sources.
Every employee of the bank is bounded to maintain the secrecy of the customers. This is considered as the greatest strength of the human resource management of the bank. The bank will not disclose any personal or financial details of the customer to the third party and in exceptional cases, with the permission of the customer; they may provide some necessary details. The bank has got a commitment to the customers with respect to their privacy expectations. The main philosophies of the HR department regarding the maintenance of the privacy are
- the customers are provided a privacy notice in advance describing the policy of the bank in using their personal financial information responsibly and protecting them. The employees of the bank are local people, so they will know the needs of the customers readily and they will act accordingly,
- they maintain the employees in the highest standard so as to ensure the confidentiality of the information of the customers;
- to maintain the personal medical information about the customers, which will not be used for marketing purposes or to analyze the credit worthiness of the customers;
- combination of safeguard measures are being adopted in order to provide unauthorized access or criminal use of the information of the customer.
The employees of the bank are given necessary training, technology and they are tested again so that they maintain accuracy, timeliness and security of the information that is collected from the customers. The information that is collected from the customers for one purpose will not be used for any other purposes with out the permission of the customer. This principle of the bank has greatly contributed to the success of the firm and increased the profitability of the business.
The customers are usually provided services at reasonable cost. The satisfied customer is the greatest asset of the bank and they are the marketing channel for the bank. The mouth to mouth marketing of the customers have helped the bank to spread the business and also to expand the business to other communities also. The bank has also opened branches in Marquette, Waushara, Wautoma and other green lake countries. It offers traditional banking services like accepting deposits and lending loans. They provide variety of loan facilities to the customers, like home loans, vehicle loans, commercial loans, agricultural and other agricultural related loans.
Their main aim is to customize the loan so as to fit the financial needs of the customer. They also provide account facilities like regular checking accounts, student checking account, senior customer checking accounts, economy and priority checking accounts, Now account, Money market deposit accounts etc. In addition to the traditional banking facilities, the bank also offer modern financial services and other non banking services. The main services include depository services, notary service, visa card check, money management services, money orders etc. It offers valuable service to the customer in a convenient and pleasant atmosphere in all major rural communities. This has proven to be advantage to the bank since the rural population is high and they got more attracted to the banking services.
Assessment of the issues
Despite of growth of the economy and increased competition, the bank continued to follow their face to face personal banking service, which resulted in tremendous growth and excellent earnings. Since the wants of the customers were more, they were forced to open branches in the nearby communities also. In spite of the incredible growth of the bank, the bank was facing some difficulties in meeting the employee requirements in tune with the growth of the bank.
This was the greatest failure from the part of the human resource management. They failed to employ enough employees according to the growing necessity of the bank, which reduced the relationships with the customers. Since the employees are authorized to satisfy the customers and to maintain the secrecy, a reduction in the number of employees naturally affected the customer satisfaction. The existing employees cannot meet the growing customer needs and also failed to treat the customers in person, which resulted in the dissatisfaction of the customers. Customers need for commercial loans, vehicle loans and other agricultural and real estate loan were ignored by the bank.
The loan requirements were so high that there was huge pressure on the existing employees. They failed to verify the credit worthiness of the loan applicants, and they also stated financing the customers without proper verification of the documents. The human resource department also failed to provide new procedures so as to ensure that the details provided by the customers were in order. At this time there was no proper reporting, decentralization and delegation of duties, which worsened the situation of the bank. Here comes the importance of HRM.
Recommendations
HR plays a very important role in every organization in spite of huge growth of the organization. The growth of human resources should be in tune with the operations of the business. It is more significant especially in the service industry since it is the continuously growing sector and new and sophisticated changes are happening in that sector. According to this growth, they should also meet the needs of the customers. Thus HRM plays an important role in the banking sector.
Human resource managers should anticipate employee requirements and also anticipate the changing needs of the customers. In the case of the farmers exchange bank, the Human resource department failed to know in advance the need for human resources. Due to the expansion of the branches, they failed to consider consolidation and motivation. There should be a visible climate in the organization, so as to anticipate the future requirements of the human resources. In order to have clear information regarding all the requirements of the organization, the bank need to maintain an efficient Management Information System (MIS).
An efficient MIS provides information regarding the past, present and also predict future events, both internal and external to the organization. Through MIS, relevant data could be collected, which can be used for future purposes. It helps in planning and control and also helps in improving the quality of the organization. Even with the context of improved complexity and diversity of the business, it helps the management to predict the future requirements. It also provided detailed procedures so as to ensure that all the procedures of the business are in order and there is no confusion or complications due to increased business procedures.
Even though there is information overload, MIS convert the larger amount of data in a summarized manner, which makes the decision making easy for the managers. Farmers exchange bank was also suffering from defective departmentalization and delegation. This is also due to lack of effective communication with in the organization and due to the lack of co-ordination from the part of management. MIS monitors the operations of all levels and by this way, it successfully encourages decentralization in the organization MIS helps in successfully measuring the performance of the employees and also in making appropriate changes in the organizational plans and procedures.
It also brings co-ordination between different processes in the organization so that the communication between the systems will be made effective and in turn will effect in efficient management. It makes the planning and controlling process in an organization much easier and helps the management in evaluating and improving the performance of the existing employees. Along with the implementation of the MIS, the existing employees should be given proper training so that they can improve the performance even in the context of improved business and improved technologies. Through training, the quality of the existing employees can be improved.
Training also improves the job knowledge and also the skills of the employees can be improved. Personal growth can be also achieved due to training. It also develops an optimistic approach towards profit making and also the overall growth of the organization. In the case of the farmers exchange bank, there was a shift in the routine and repetitive process to more complicated process due to the expansion of the branches and also growth in the business.
If they have given sufficient training and retraining, this problem may not have aroused. Along with the problems with in the bank, the regulation of The Federal Deposit Insurance Corporation (FDIC) and other government agencies also severely affected the farmers exchange bank. The regulations of the FDIC cover four financial reporting areas like preparation of the audited annual financial statements, management reporting to the FDIC and compliance with the laws and regulations, establishment and maintenance of effective audit committee and also preparation of independent auditor’s attestation report regarding the internal control structure.
This regulation has brought pressure on the affected banks, since they were unable to prepare the financial statements and report promptly to the FDIC. In between there was a severe drought during the 1990s, which adversely affected the bank. The majority customers of the farmer’s exchanges are from the rural area and are farmers. They depend upon agriculture for their livelihood and repay the loans from the returns generated from agriculture and allied activities.
Due to severe drought, their income was drastically reduced, which in turn affected the repayment of to the bank. These are situations, which are not under the control of the bank. In order to meet such situations, the bank has to be cautious and they should provide the farmers with sufficient insurance facilities so that the farmers will get the claims if there are any unforeseen contingencies. This amount could be used to repay the loans of the bank, so that the bank is not put to financial difficulties. The dues of the farmers exchange bank were increased due to the growing overdue. The management again revised its strategy in order to improve the performance of the bank.
The revised strategy again gave stress to the personal approach, but since the current staff strength was low, they were unable to provide such personal services to the customers. Here comes the importance of providing training to the employees in areas like loan portfolio management, credit analysis and collection. This will make the employees of the bank to effectively manage the loan portfolio. By effectively managing the loan portfolio of the banks, the overdue can be reduced. There should be a constant procedure that should be prescribed to the employees so that the loan is verified looking on the credit worthiness of the customers. This will make the more the loan portfolio management more effective and convenient.
A retrenchment strategy can be adopted, which will help in reducing the diversity of bank’s operations. This strategy will also reduce the unwanted expenditure of the bank so that it will become financially stable. This strategy makes sure that the facilities are being provided to the existing customer only, which means the loan facility will be provided only to the existing customers only. This will make the documentation process easy and the credit worthiness of the loan applicants can be ensured. This strategy will also reduce the time to monitor the accounts of the existing customers and take necessary action if there is any default. The strategies should be adopted according to the policies and procedures of the bank.
The strategies should also depend upon the size and functions of the of the bank. It should also focus on the existing issue and solve it in time so that the future growth of the bank is not affected. The farmers exchange bank is not giving stress to expansion of the existing business or market development. So they should give stress to retrenchment strategy which manages the business with the existing employees and also with the existing customers. An increase in the number of employees or number of customers will again cause cost problems, which will in turn affect the earnings of the bank.
Conclusion
In short it could be concluded that the human resource management of the bank plays an important role in the growth and development of the organization. The bank should give importance to the Management Information System, which will help in keeping adequate information related to all aspects of the organization. It will definitely help the organization in the future development and also to maintain the quality of the organization. It will also help in effective delegation and departmentalization which is lacking in the farmers exchange bank. According to the growth and expansion of the business new procedures should be adapted to suite the requirements of the firm.
The growth and expansion of the firm will in turn require employees according to the increasing needs, which should be met by recruiting adequate number of qualified people. They should be given proper training so that they will be integrated with the business environment and perform accordingly. The retrenchment strategy will also help the bank in limiting the business with the existing employees and concentrate more on the existing business rather than going for expansion.