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Unit 6: Compensation and Rewards

Notes

Corp Bank

he 1990s were a watershed for the Indian Banking Industry, and particularly for
Nationalized Banks which hitherto had a monopoly in the industry. Following the
Tderegulation of the financial sector, the bank has faced increased competition from
other financial institutions like Can Fin Homes Ltd, LIC Housing Corporation and
foreign private sector banks. These specialized financial institutions were giving tough
competition to Corporation Bank resulting in an intense squeeze on profit margins and
the need to make considerable efforts to retain its clientele. Under such pressure, Corp
Bank introduced new technology, new financial products and new reward system for
bank managers and staff. Information and communication technologies (ICTs) enabled
the bank to process much larger volumes of business and just as importantly, the new
ICTs themselves facilitated the development of new, technically-based products and
services (such as home banking, smart cards and debt cards) which Corp Bank started to
market to its customers.
Running parallel with these technical changes was the dismantling of the paternalistic
Human Resource Management system. In essence, Corp Bank’s bureaucratic culture and
its associated belief system for managers and staff of appropriate behaviour being
rewarded by steady promotion through the ranks was swept aside.
The new culture in the fast-changing environment, emphasized customer service and the
importance of measuring and rewarding staff according to their performance. The new
performance-related reward system was introduced at the board meeting held in June
2002. Mr N. K. Singh, Chairman and Managing Director of the bank said that the
proposed reward system would be a key strategy to maintain our reputation and market
share. He outlined that in future the salary of bank managers would be tied to their
leadership skills and the quality of customer service. Accordingly, the reward system
would link the manager’s pay to behaviour traits that relate to leadership and customer
service. The variable pay for both managers and staff would be based on what is
accomplished because customer service is central to Corp Banks’ strategic plan. A three
category rating system that involves not meeting customer expectations, meeting them
or far exceeding them is the essence of the new reward system.
Questions:
1. Outline the merits and limitations of Corp Bank’s proposed reward system for the
managers and staff.
2. Develop an alternative reward system for Corp Bank’s employees and explain why
it is superior to the proposed reward system.

Self Assessment
Multiple choice questions:
5. An organization can use a ……………… approach that focuses on the length of services.

(a) job evaluation (b) wage structure
(c) tenure-based (d) none of these
6. The minimum requirements of food should be …………… on the basis of net intake
of calories as recommended.
(a) calculated (b) generated
(c) arranged (d) none of these

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