HRM Practices in Oman Arab Bank - Case Study Example

Introduction

Oman Arab Bank was formed in 1984 through the joint ownership by two financial institutions. The Arab Bank Group owns 49%, and OMNIVEST owns 51% of the total shares. It now has operations in more than 60 branches across Oman. The bank’s performance has been consistently excellent, with an average of 20% annual return on equity. The financial institution engages in various strategies to motivate its employees as it realizes that human resource is one among the important assets of an organization. Through employee motivation, it is defining a strategy for future sustainability and growth. When you emphasize personal growth and development as a way to influence employee motivation, not only do you help employees maximize their contribution, you also are improving the productivity of the company (OAB 2016). On that note, the main objective of the assignment is to present the following: a critical evaluation of three human resource management functions of the Bank (training, performance, and compensation) and the differences between the traditional and modern practices under each function; a critical analysis of the strategies used to motivate employees with regards to relevant theories of motivation; and suitable recommendations to improve the employee motivation strategies.

Training

Training is one of the Human Resource Management functions directed towards improving the employees’ performance. It thus forms a relevant function for any organization and needs to be taken seriously. For organizations, success and competitiveness are highly dependent on training and development. In fact, continuous learning and education have become a key factor for the success of individuals and organizations (Saks, Haccoun and Belcourt 2010). The bank develops and nurtures its employees through the implementation of various internal and external training and development programs. The members of staff get enrolled in the CBFS program as part of the bank’s strategic efforts to motivate and equip them with the necessary skills for success. The College of Banking and Financial Studies (CBFS) is a government organization which offers post-graduate studies, bachelor's, diploma, English as well as professional courses all centered towards nurturing business studies, relevant in the banking sector.

The difference between the traditional and modern HRM practices in Oman Arab Bank is that the bank has embraced a value-added paradigm by making HR managers to be strategic business partners and the employees being considered as a value-added resource. Many organizations have extended managing diversity programs beyond HRD programs and processes by changing HRM policies and programs to meet the special needs of the new workforce. Traditionally, Training entailed on-job, short-term courses as a formality without much involvement, since it was considered that the people hired for the positions were qualified and only need superficial training (Armstrong 2009). Currently, training is taken very seriously where both the management and the entire staff are strategically involved in a more proactive way to ensure that training is internalized in the organization with the aim of developing the individual as well as the organization for sustainable growth.

Performance

Performance management in an organization also forms part of the human resource management functions that entails the process whereby both managers and employees join forces in planning, monitoring, and reviewing the employees’ work objectives and overall contribution to the organization. Performance management is a strategy which relates to every activity of the organization set in the context of its human resource policies, culture, and style and communications systems. The nature of the strategy depends on the organizational context and can vary from organization to organization (Armstrong and Baron 2007). Recently, the bank introduced a reward program known as Mukafaati program aimed at enabling a collaborative working environment which is geared towards the management support of the staff in planning, reviewing and rewarding their efforts. This move is aligned with our long-term strategy of making OAB the ‘Employer-of-choice’ for all young Omani graduates (Muskat Daily 2015).

Through this program, employees can gain points on their performance and then redeem them for valuable rewards from leading global companies in the fields of travel, electronics, retail and hospitality industries. Employees have the option of choosing perfumes, watches, hotel stays and air tickets from their preferred brands. OAB assures its commitment to providing all means of incentive programs to its employees towards achieving excellence in job performance, and creating a positive work environment based on a teamwork spirit approach that leads to the continuous development of our bank (Muskat Daily 2015). Traditionally, the employee was expected to carry out his or her duty as per the job description, and under-performance would entail disciplinary action. There has been a shift from this practice as employees are actively involved with the management through motivation towards better performance. That can be seen through such incentives as the Mukafaati employee reward program.

Compensation

An employee compensation plan refers to all those payments made by the organization to employees for their contribution as workers in the organization. That includes salaries, wages and other benefits received by the employees. Examples could include hourly rates, piecework schemes, annual salaries, retirement benefits, health benefits, among others. Compensation is the remuneration an employee receives in return for his or her contribution to the organization (Kumar 2011). The total employee compensation includes the primary as well as other supplementary portions. The bank pays its employees the normal salary according to their job groups. It also contributes to other benefits like the insurance allowance, leave allowance, risk allowance and retirement benefits (OAB 2011). End of service benefits is accrued in accordance with the terms of employment of the Bank’s employees at the end of the balance sheet date, having regard to the requirements of the Oman Labor Law 2003.

The introduction of the Mukafaati program was also aimed at compensating employees for exemplary performance. The program was launched in 2015 and is aimed at rewarding its employees for professional development, outstanding performance, positive behavior and personal milestones. This program has the effect of transforming the bank’s traditional way of compensation to a more modern strategic form. That is owing to the fact that, the employee used to be compensated through the basic salary and other expected allowances like the leave allowances (Armstrong 2009). Now, the bank realizes the need to compensate those employees with exemplary performance, adding to the compensation that is already expected. Organizations whose employees feel they are recognized for excellent performance outperform companies whose employees do not. (1057 WORDS).

Critically analyze the strategies used by Oman Arab Bank to motivate its employees, drawing on Maslow’s Hierarchy of Needs Theory, Herzberg’s Two-Factor Theory, Alderfer’s ERG Theory, Expectancy Theory and Equity Theory.

One of the strategies used by the Bank to motivate its employees is through training. The bank enrolls its staff at CBFS to undergo training relevant for their job requirement in order to improve their performance. That enables the employees to develop themselves and get opportunities for growth through promotions. This way, they are able to fulfill their material, security, psychological, status and even self-actualization (Werner and Desimone 2009). Performance review meetings are also held to review the bank’s performance and strengthen management relationships which improve efficiency and customer service. That is a form of motivation as it enhances team spirit among the management and the employees which positively impacts on job performance, especially on customer services. Several motivational theories are rooted in the concept of needs (Werner and Desimone 2009).

Maslow’s hierarchy of needs

According to Abraham Maslow, people have different needs that can be broadly classified into five categories in a hierarchy ranging from the most primitive and immature to those that are civilized and mature in terms of human behavior. He argues that, once a need has been satisfied, it stops being a motivator and only those unsatisfied needs become the primary source of motivation. Maslow’s hierarchy of needs lists five categories of needs (Zakaria, Ahmad, & Malek 2014).

Self

actualization

Ego-status

Belonging

Safety

Basic (Psychological)

Abraham Maslow has been described as the spiritual father of humanistic psychology. According to him, people are conscious of the five needs and are motivated by them in ascending order. At Oman Arab Bank, through training, employees are offered an opportunity to develop themselves and may get promoted to higher levels of status and self-actualization. It also makes them have a sense of belonging to the organization as they feel that their welfare is well taken care of (OAB 2016). Through the incentives, they are able to gain a higher status as they are able to receive goods or services from prestigious organizations, and that motivates the employees to work harder in order to gain more points so that they can be able to maintain this new status (OAB 2016). Based on the strategy, it is seen that the bank is climbing the Maslow’s hierarchy. However, as compared to strategies of other banks, which include training of employees for various managerial positions and providing security through programs like share-based compensation, Oman Arab Bank’s strategies are on the road to improvement, but still far from effective.

Herzberg’s two-factor theory

Herzberg’s two-factor theory explains how the hygiene factors or motivators are used to satisfy the employees at work. In contrast to Maslow’s theory, this theory proposes that motivation is determined by the non-exclusive factors of job satisfaction and dissatisfaction. Herzberg claims that people have two sets of basic needs, one focusing on survival and another focusing on personal growth (French, Metersky, Thaler, and Trexler 1973). Based on this theory, there are hygiene factors and the motivators which make up the two sets. Hygiene factors refer to those elements that can cause dissatisfaction to the employees at the workplace and are independent of the actual work. Such elements may include job security, working conditions, leadership quality, and general relationships among the staff. The presence of these factors at the workplace does not motivate the employees because they are expected to be there. However, their absence could bring about a serious dissatisfaction to the employees, and that may negatively affect their performance. Motivators, on the other hand, are the direct source of motivation and are directly dependent on the work itself. Unlike the hygiene factors, their presence will directly affect the employee performance. Such factors may include recognition, advancement, job satisfaction, achievement and responsibility (French, Metersky, Thaler, and Trexler 1973).

Oman Arab Bank provides a good working condition for its employees, ensuring a good relationship between the management and the employees through training and regular meetings. This represents the hygiene factors which do not necessarily motivate the employees, but if they lack in the organization, it will bring dissatisfaction to its employees. Job dissatisfaction is achieved when the hygiene factors are absent or insufficient. Apart from that, the bank realizes that it needs to do much more than nurturing a good working condition for its employees (OAB 2016). That is the reason why it recently launched the mukafaati incentive program and invested in training to create a source of motivation in order to improve the employees’ performance. Based on the strategy, the bank is making commendable steps to motivate the employees. Through the implementation of mukafaati incentive program, employees feel recognized for their invaluable skills and effort.

Alderfer’s ERG theory

Alderfer’s theory is a condensation of Maslow’s five-hierarchy of needs theory into three major categories. These are relatedness needs, existence needs, and growth needs. ERG theory proposes that if a person becomes frustrated trying to satisfy currently activated needs, this frustration causes previously satisfied needs to activate and drive behavior (Arnolds and Boshoff 2002). Existence needs include all those needs which are in material and psychological forms, represented by the first two levels of Maslow’s hierarchy of needs pyramid. These are food, clothing, shelter, love and affection.

Relatedness needs to entail social needs as well as self-esteem. It is concerned with a person’s relationship with others including the family members, friends and colleagues at work among others. A person has these needs reflecting a sense of recognition by others as well as a sense of belonging in these relationships (Arnolds and Boshoff 2002). Just like in Abraham Maslow’s theory described above, Oman Arab Bank’s management realizes that the different levels of employees have different needs of motivation. For example, the subordinate staff may have a different source of motivators from those of the management level employees. It thus ensures that it provides all these factors ranging from benefits, additional incentives as well as training as a source of motivation to its employees (OAB 2016). The strategies may not match those of banks in other countries like allowances, retirement benefit programs and attend to individual needs, which are very effective, but, Oman Arab Bank is making efforts to motivate the employees though more effective strategies are necessary.

Expectancy theory

Expectancy theory, first proposed by Victor Vroom, assumes that motivation is a conscious choice process. He explained that a person’s behavior result from conscious choices that are made in order to maximize pleasure and minimize pain. He realized that people are unique from one another, and an employee’s performance will thus be based on personal factors such as work experience, personality traits as well as knowledge. He uses three variables to explain this. The variables are expectancy, instrumentality, and valence (Nimri, Bdair, and Al Bitar 2015).

Expectancy means that increased effort will result in increased performance, and this is dependent on the available resources, the right knowledge, and skills, and the necessary support needed to get the job done. Instrumentality means that a good performance will lead to a valued outcome. That will be affected by such factors as a clear understanding of the relationship between performance and outcome in terms of rewards, trust in the people concerned with rewarding the outcomes and transparency on the reward mechanism. Valence refers to the utility that an individual allocates on the expected outcome (Nimri, Bdair, and Al Bitar 2015).

Oman Arab Bank ensures that it increases the employee performance by allocating resources to facilitate training programs. Employee training improves their skills, thus, lead to the valued outcome (OAB 2016). The training and reward schemes used by the Bank are meant to encourage the employees to develop themselves through enrolling for training and improve their performance expecting rewards, in the form of improvement in status, and attainment of redeemable points for material goods from prestigious organizations. People will expend effort if they expect the effort to lead to performance and the performance to lead to a reward. Therefore, the bank strategies, in this respect, are effective.

Equity theory

Equity theory forms part of process theories because it attempts to explain the sequence of thoughts and decisions that energize, direct and control behavior. This theory was developed by John Stacey Adams. It explains that motivation is not determined by pay and conditions alone, and giving a pay rise or promotion to one person may have negative effects on others. It is all about fairness. When employees feel that management is just in the way it treats them all, they will be motivated, but if they feel that there is an element of unfairness or discrimination, they will feel demotivated (Skiba & Rosenberg 2011). The theory utilizes the terms input and output whereby, inputs represent all that an employee invests into the work while output represents all that they get out of the work. They expect there to be fairness in that, the more input one gives to the job, the more output one gets out of the job. Inputs entail the quality and quantity of an employee’s work in terms of hard work, skills, time, commitment, determination, and personal sacrifice and so on and so forth. Output entails the consequences of one’s actions which may be positive or negative. That may be in terms of employee benefits, job security, disciplinary action, recognition, among others (Skiba & Rosenberg 2011).

Equity is the distribution of rewards in direct proportion to the contribution of each employee to the organization. Oman Arab Bank ensures that there is equity in the way it treats its employees. For example, the training program is open to all those employees who have the necessary qualification as well as the interest to develop. The incentive program is also based on measurable factors, which ensure that there are no biases when selecting the people to be trained or the points awarded (OAB 2016). The two strategies are fairly effective. However, the weakness is that the strategies fail to support fully gender balance. The representation of a female employee in the bank is weak. Therefore, the areas of weaknesses should be rectified (1657 WORDS)

Based on your analysis, provide suitable recommendations to improve the strategies which are used to motivate employees in Oman Arab.

The Bank uses three main strategies to motivate its employees namely: training, the reward program as well as the performance review meetings. The strategies are working as they are but still, the bank could do much more to improve on these same strategies so that the employees will derive greater motivation from them. In order to survive in this global village, companies need to go in for strategic change as to how training or human resource development is viewed (Dedhia 2015). It is important for the bank to renew the competencies of its human resource through continuous training. An effective employee training will ensure the bank’s long-term growth through a strong human resource. In order to be more beneficial, a training program should be carefully planned and effectively implemented (Arsic, Milosevic, and Zivkovic 2015).

There is a need for clarity on the organizational policies and objectives as to why the program is undertaken so that the employees will know what is expected of them in such a program. The management needs to define the bank’s needs in light of the weak areas that would benefit from the training program. (Dedhia 2015) That will ensure that the program is not undertaken just for the sake of it but that there is a guaranteed value addition from the outcome. These needs should be incorporated into the Bank’s long and short-term goals to enhance the organization’s strategic objectives. The bank can then select those courses that suit its needs from the CBSF or better yet, get a more customized solution by developing its training module or purchase it from training companies (Arsic, Milosevic, and Zivkovic 2015).

The training program needs to be planned in such a way that only those individuals who are likely to benefit from the program are given priority. That will ensure that the bank’s resources are put to optimum use. Apart from the external training, the bank needs to have regular on-the-job training sessions especially for those employees who do not attend the external training (Arsic, Milosevic, and Zivkovic 2015). These training sessions should be carried out during slow periods or after business hours to avoid work interruptions. That will ensure a continuous human resource development culture. The bank should also ensure that there is a professional trainer to carry out these training within the organization. From among different functions of HRM, training and development are crucial (Dedhia 2015).

Investing in a new reward program poses a budgetary challenge for most organizations. However, these programs are beneficial for the organization in terms of employee motivation as they create a clear positive relationship between the employees and the management which inspires genuine employee engagement (Fisher 2005). Productivity is also enhanced through such programs as a result of employees being driven by meaningful appreciation, recognition, and rewards. In order to be more effective, the program should be supportive of the organization’s missions, strategies and overall goals, which should be incorporated in the day to day activities. There should also be regular consultations between the employees and the management on the feedback and as to what behaviors should be rewarded (Arsic, Milosevic, and Zivkovic 2015).

The program should as transparent and as simple as possible, being able to be applied at all levels of the organization so that everybody can participate. The membership of the nomination selection committee should consist of all staff levels for complete representation and should be changed on a yearly basis to allow for dynamism (Arsic, Milosevic, and Zivkovic 2015). There should also be constant top-down and bottom-up communications to allow for more understanding of the program, and it should be flexible enough to facilitate the incorporation of any new changes for it to be relevant. The regular use of individual or group performance improvement programs can help you identify what your current operating standards are, how your organization really functions, and what capacity for improvement there might be.

Performance review meetings held by the bank should be done regularly and more comprehensively. Currently, the performance review is done for the management and assistant management staff. It is also not held regularly. The positive outcome of such meetings could be improved by making them regular enough so that everybody is prepared and know beforehand what is expected of them (Arsic, Milosevic, and Zivkovic 2015). Also, all the employees from all departmental levels should be included to participate in the reviews, without confining them only to the management level. That will enable a more strategic approach to employee development whereby the whole organization benefits from the program. The management should also engage its employees in training about performance review so that they are well acquainted with what is expected of them. Training is needed to ensure that fair evaluations are provided to coworkers, particularly peers. Employees have to learn how to appraise performance objectively rather than provide subjective commentaries on a coworker’s performance (Lyster & Arthur 2007). (814 WORDS)

Conclusion

Motivation is one of the most basic elements of human behavior. Employee motivation forms an important part of the Human Resource Management function in any organization. A company’s future growth and sustainability are greatly determined by its workforce. A happy and competent workforce will deliver its efforts towards development and growth of the company. This happy workforce can be developed through motivation. Motivation may take different forms in terms of incentives that will boost the employees’ drive to perform better. There are five main motivational theories put forward by earlier philosophers that recognize the fact that employees need to be motivated in order for them to continue performing for the organization. That includes Abraham Maslow’s Hierarchy of needs theory, Herzberg’s two-factor theory, Alderfer’s ERG Theory, vroom’s Expectancy Theory and Adams’ equity theory. Organizations need to adopt the modern strategic approach to Human Resource Management practices in order to fit the changing needs of the employees as well as the external environment as characterized by globalization. In order for an organization to compete successfully in a global economy, they must be able to attract and retain the best employees possible. This can be achieved through the adoption of modern Human Resource Management practices. (204 WORDS)