Interim Career Management - Essay Example

 Interim Career Management Scenario: - The Chief Executive Officer of Yestel Bank [any non specified Bank] in the UK has appointed me as the consultant to see the functions of their ‘advice and guidance clinic’. The purpose of this clinic is to allow the staff to speak confidentially about their feelings and ideas to take their career forward. The CEO of this company believes in constant staff training and enhancement of their professional qualifications so as to maximize their talent pool. Recently the organization has re-aligned its business strategy and wants to focus more as per need based approach to improve capital based ratios. At this juncture the chief executive officer would like his employees to go for professional certifications and hence the need of the ‘advice and guidance clinic’ where a free and fair discussion can be obtained. I have the charge of running this clinic. Need of career management and its implication Career Management: The concept of career management is very crucial to the individual and as well as to the organization. To the organization this is important because if the employee is not happy with his designated role then the company might face problem like attrition and inefficiency. Also employees have the tendency to add knowledge and increase their market value in job market. Many of the employees feel that they sacrifice a lot for the organization, the important question that arises is do they get back what they give Another important issue which arises is that can the expectation of the employees be compensated by the company. Moreover many organizations expect supreme commitment and performance and attach a performance related pay for their work. But the organization essentially deals with humans and not all of them can be encouraged to give the best with monetary rewards. Also, it is extremely important for the organization to know what an individual feels about his/her career. This evaluation is subjective. The individual thinks whether he is the best person for the job or not. He also tends to compare himself with his fellow colleagues Career management is important to answer these crucial questions. It is important as it helps us to adjust with the fast changes that have taken place over time. Career management tries to bring together the organization’s and individual’s expectations and tries to find a match. It tries to relate historical events to subjective experience The reason why career management is important today is that many people have to stay back in office for long hours as a result they find it difficult to maintain work life balance and as a result of this work gets adversely affected. (Herriot, 1992, pp.5-6) According to the fundamental model (Boxall and Purcell, 2003) it has found out that performance is as a result of three factors namely ability, motivation and opportunity. In an equation it can be represented as: Performance= Ability + Motivation +Opportunity. If any of the three things are less, performance is bound to be adversely affected. Hence, effective career management will help to maximize people’s abilities, provide motivational experiences and opportunity to deploy people’s skills and knowledge. Moreover cultural influences also play a very important role to people’s career. These days organization wants people to take responsibility of their own careers and this definitely requires cultural change within the organization. All these objectives of the organization can be better understood in a formal training (Purcell, 2003, p.5) Training is given to the employees of the organization so that they achieve more skills which may be soft skills as well as specific domain skills. These trainings are done mainly for two purposes. The organization wants its employees to hone/upgrade their skills so these same employees may be vested with more work, i.e. multitasking is possible. Other reason being that employees also undergo new course/training which boosts their mental confidence and also in the long run if they choose to change their present company then they will have an edge over others Also new trainings are also helpful and quite instrumental in getting promotion of the employees. However the catch is in all these trainings the organizational goals of the company gets more importance. It is to be noted that individuals have different attitudes towards learning hence the learning needs to be imparted in that way which is most effective. American psychologist Mr. David Kolb found out that there are two key aspects of learning process. These are: a) Each adult has four distinguished styles of learning methods namely, concrete experience, reflective observation, abstract conceptualization, active experimentation b) An individual can learn maximum when he/she is exposed to all four styles of learning. (Managing competencies and people development, 2007, p.41) It is through this complete experience an employee gathers psychological engagement with the organization. Over the years it has been observed that psychological agreement always operated well above the formal contract of employment between the employee and employer. The four steps of effective learning include: concrete experience where the individual learns by directly experiencing the event whereas in reflective experience he tries to learn what he should have done if he would have been there. He may gain knowledge about the incident directly or from some of his known acquaintance. The other forms of learning include abstract conceptualization where the individual gets to move from specific job training to a more general job aspect and he tries to apply all his experience from the training to this specific job. In the last method the individual tries to sort out what he will do different in future and practices it. The point, which should be noted, is that the training method for better career management will have a mix of all the given methods so that an employee had total experience Career management is extremely useful to gauge future opportunity, for instance in a bank when a young clerk saw that a fifty year old assistant bank manager has been shunted with non-job activities until retirement, she soon fell in line. I have observed one of the concepts people working in bank have is that people in bank generally do not lose their job unless charged with fraud, they keep hanging on to their job So one of the learning that is imbibed into their minds is well behavior even if it is at the cost of efficiency. Here the young clerk had learnt her lesson through reflective observation. (She saw the situation of her boss and decided to do differently) Ideally her boss should have discussed his career progress with the management. This would have given the bank opportunity to understand what the employee wanted and also allowed that individual to know a change in his career was inevitable. (Herriot, 1992, pp.7-8) Looking at the bigger picture, most of the banks these days have the permission to sell all types of financial products. This meant the banks had the advantage to distribute their risks among several products, but this meant more competition. So as to lead the competition, banks developed training methods for their employees, which would help the banks to earn more profit, however the design of the curriculum was not such that the employees had complete experience of learning. Also the bank tries to get international and spreads to other countries. At this juncture certain important issues related to career management needs to be addressed. One needs to consider how the career will be affected due to the expansion of the portfolio of the bank. He needs to take into account how important are his tasks to the bank at the present scenario and what all skills up-gradation might be required to fit the current role which his organization wants him to do. Individuals might also consider that there might be some sector specific factors which might affect his role in his organization. (Herriot, 1992, pp.31-32) Do Plan Review Conclude The diagram above depicts the learning cycle. Effective training is performed when a person goes through all the steps of structured learning cycle namely planning, doing, reviewing and concluding. (Managing competencies and people development, 2007, p.42) Managing financial information, systems and recent events A financial organization undertakes quite a few types of information as a part of their operations. like information about deposits from other banks, items payable, information about customer accounts, tax liabilities etc. There are a number of risks and uncertainties to which a bank gets exposed to like various types of financial risks. Latest technology is being used to understand the risks associated with various products. To measure the credit risk they maintain the bank book on three issues: Default probability- here the bank tries to find out the probability that the individual will default especially for short period. Credit exposure: the amount of outstanding obligation when the credit default occurs. Recovery proceedings: The amount of the default amount, which can be revered from the insolvency process. With this amount of information the banks will be able to evaluate the person before giving loan to that individual. Also in case of default the bank will be able to understand how much loss will it have to bear. This good practice goes a long way in ensuring that the banks do have a huge amount of non-performing assets (NPA’s). Financial information is also managed by applying a standard formula for the person who has applied for loan. Here the employment status, existing loans, credit history are some of the parameters which are seen by the bank before granting loans. Financial information is also obtained from standard credit rating agencies to find out more about the credit worthiness of the customer. As per regulations banks are also required to hold more capital in relation to outstanding credit exposures. Banks manage this particular aspect by credit scoring to avoid extending credit to all those who represent excessive credit risk, by setting credit risk limits.( Financial management in financial services organization, 2007, p.257) To gather information about client the banks generally get information from sources like press reports, government statistics, libraries, specialist directories, trade associations, internet. Specialist financial information is also sought from stock exchange and Bloomberg. The steps followed by the banks to evaluate loans include Preliminary Analysis to find out what exactly is its operation and its function. Also, knowledge about operations and how much manpower does the company employs is found out. Information about his competitors and his level of scaling up is also obtained. Knowledge about the shareholders and financial stability is also sought. Generally answer to these questions is sought from director’s message or chairman’s review or other external sources. From this analysis it is possible for the analyst to get a view of the context of the sector and the industry. This may further give answer to some of the questions or it might raise some very crucial issues, which must be investigated further. It is the duty of the manager to make sure that the financial information should be seen in overall light of the organization. The next step that is followed is ratio analysis that will help to get a clearer picture between different elements in the financial information. Through this ratio it is possible to understand the performance of the company over the years. It also tells the deviation from the actual to that of the planned performance. Crucial question like performance of the entity, information of the trend of profits, the ratio between debt-equity trade-off can be answered from these ratios. This will help to understand how well is that entity performing in the market and what is its position vis-a-vis other competitors. Banks are the places, which earn a lot many profits from variety of places. So the regulatory bodies need to look at the major categories of income and expense. The bank earns through interest income, i.e. the bank takes money from the general public and pays interest on it and also gives loan to other people at certain interest rates. The differences in interest rates help them to earn profits. Other non-interest profits include commission earned from selling investment products, charges levied on transactions. I have observed Operational expense include expenses incurred for marketing expense, recovery teams, making of policy etc, Regulatory bodies calculate the expense/income ratio to find out the condition of the bank. Regulatory bodies also look at the bank’s non-performing loan ratio. This is because all the deposits made from customer deposits are full; however there is no certainty that loans made to the borrowers will be repaid. Non-performing loan ratio reflects the underlying changes in lending business. Agencies and managers closely monitor these and these observations have a mark on the share prices of the bank. Internally within the bank this information is required, to avoid irrecoverability and also so that banks can reduce its regulatory capital while still meeting its capital adequacy issues. (Management information and managing financial performance, 2007, p.271) Recently the financial world in UK got shocked when Northern Rock reported that it had lent more than 1.8 million dollars as loan in 100% risky mortgages even after being bailed out by government. As a result the FSA (Federal services Authority) felt that two million houseowners face negative equity this year. It might be recalled that this Northern Rock collapsed in 2007 when other banks refused to bail it out. The treasury had to take emergency steps to guarantee bank’s savings, so that the bank still remained operational. After the bank failed to find a single buyer, it was completed nationalized in 2008. In other words the government bailed it out. (Winnet, 2009) Authorities have found out that the bank has given high-risk loans worth 125 percent of the property’s worth. In financial terms it is called’ together’ mortgages. These types of mortgages are more likely to default than ordinary loans. The problem aggravated as the authorities failed to intervene even the first symptoms was evident in 2004. Analysis shows that even the government had warned the treasury but the treasury failed to protect the interests of the bank and also it should have taken strict measures. Even the Chancellor is of the opinion that regulation needs to be more intrusive, because the steps of defaulting are too high and the taxpayer suffers because of faulty policies. As a fall out the director of Northern Rock finance Mr. David Jones was banned for lifetime and a fine of £320,000 was charged for permitting the bank to reveal lesser mortgage arrears than feasible. This fact also brought out that even after the bank was nationalized in February 2009, he still remained in a very senior position till April 2010. Thus fact remains some key personnel remained in power even after the bank asked for a bail out. Moreover, the regulators could not take steps, which can ensure that such dangerous/risky loans are not given. Through this extraordinary punishment the authority wanted to drive home a point that all FSA approved persons should take their individual job seriously or might face deadly consequence. The FSA's report says that from 2005 Northern Rock’s employees were under severe pressure to report arrears figures that were half the CML average. This was achieved this by deviating from the bank's policy/ FSA regulation on arrears. For example, where a possession order on a property was issued, but physically one has not possessed it, the figure was eliminated from the figures concerning arrears and possessions. This resulted in the exclusion of 1,917 loans. Although subsequent enquiries found out that the director was directly not involved in the reporting but he agreed to withhold the actual figures. It was found out that FSA and the banks generally follow broad guidelines rather than detailed rules and that is why frauds take place. (Treanor, 2010) As a result it has now been decided that more power should be vested in FSA, guidelines should be more detailed. Checks should be more frequent on banks by the FSA. If the law gets passed then the banks may need to add new systems to monitor, analyze and audit new processes. Some are of the opinion penalties will cause to change how the banks operate. The FSA is more likely to concentrate on other sensitive issues like insider trading, customer security and liquidity risk. They also need to ensure that the huge amount of sensitive data that is obtained doesn’t fall in wrong hands. When FSA came into power it included some more rules to the existing rules at that point of time thus creating larger and complex set of rules As a result the firms find it difficult to relate and follow all the rules. In wake of the various frauds detected FSA have come up with principles based regulation and hopes that it is best left to these firms/banks to decide how best they will align their business objectives and processes to the regulatory outcome specified. The FSA feels that it is neither possible nor desirable to write every rule that these firms might encounter. So it has outlined all eleven rules the firm should follow and thus provide backbone to the regulatory regime. It has been found out that in some cases disciplinary action has proved to be more effective than the statutory power of FSA. Moreover to comply according to the guidelines the FSA needs to put its limited resources of law enforcement in risky areas. Of late FSA has been accused of being a weak agency, as it has managed to impose only eight fines for insider trading. One more reason why FSA hasn’t been so effective is because of the huge manpower shortage. They have only 2900 employees to look after their operations and they regulate firms and banks where the staff strength is 1.1 million. As a result they find it difficult to keep a tab on all financial crimes and unlawful breaches of law as soon as they happen. (McCoy, 2008) Banking system and 4Ps The banks essentially sell intangible products called services. I have found out that when a customer chooses a bank, he essentially chooses a package of benefits over the rest of the banks. The customer does not essentially choose the features of the banks but relates more what benefits/advantages it can have by taking its services. Product: The general rule to be successful is to come up with products, which the customer is looking for. Extensive market research needs to be carried out to this effect. The product aspect includes everything from creation, development and its management. It includes the basic product and as well as the after sales service. But the problem that arises is that unlike products this cannot be felt or experienced. The tangible properties cannot be inspected and difficult to understand before its purchase. To overcome this problem marketing persons of banks try to associate tangible characteristics to their service offerings like the reach of its branches, number of ATMs installed testimonials of satisfied customers etc. If the bank would like to see itself as a technologically advanced bank, it would focus more on the sophisticated system it has implemented or the advantages of working with a sophisticated bank. The bank’s communication and advertisement should point at the technologically advanced side of the bank, computers, facilities like RTGS (Real Time Gross Settlement), NEFT and core banking to lure the customers. If the basic product appeals to me then, then I will come again and again for other associated products. Also the bank will find it easy to cross-sell other products like health insurance, medical insurance and stocks and shares. Majority of the products offered by the bank are generic in nature but there is a scope of making changes as per the need of the customer. There is a scope for finding the augmented and potential product. For example many young professionals like me would like to see a product, which has the benefits of both investment and pension. Such products have become a rage as they cater exactly to the need of a particular segment. (Identifying and responding to the customer needs, 2007, p.126; How to differentiate your brand: The 4Ps, N.D.) Price: Traditional means of pricing are not always relevant today, i.e. adding up the profits to the cost price does not necessarily give the right pricing. Managers these days try to bring down the cost by taking certain measures as a result making the product more competitive in the market. Customers associate higher price with good quality and if a company tries to bring down its prices then it is trying to launch a price war in order to capture the market and get more market share. Price is the most flexible component of the marketing mix and the most sensitive one as it has a direct effect on the sales and hence the revenue. Also if the prices of the products/services are hiked too much then the customers might go to some other banks. For example if the book keeping and service charges of making a draft are too much, then a person is likely not to avail the bank’s services. Also if the loans given out to general mass are charged more than the rates prevailing in the market then people will not be encouraged to take a loan, thus impacting the bottom lines of the bank. So, the products should be competitively priced unless the benefit promised in the product is of significance. That is why I have observed that, banks like HDFC and SBI float teaser rates for home loans and lure the customers so that they don’t feel the burden of interest in the initial few years. Also some banks have come up with additional top up loans to help the customers buy furniture to furnish their homes. (Identifying and responding to the customer needs, 2007, p.127; How to differentiate your brand: The 4Ps, N.D.) Promotion: No marketing campaign is ever complete without promotion, so these days promotions are very vital. They serve threefold namely they educate the customer about the product/service i.e. make them aware, how and where can they obtain it, and how to participate in the service process. Various examples of promotions used by banks these days include road shows, sponsoring certain events so that the brand recall is better. They also indulge in education of the customer so that they remain updated about the latest bank offerings. For example, ICICI bank updates its customers regularly about safe net banking. This in turn helps better brand recall of the bank. (Identifying and responding to the customer needs, 2007, p.129; How to differentiate your brand: The 4Ps, N.D.) Place: The place where the product is available should be close to the target market. In the last few years’ banks have undergone a sea of change technologically. They can offer a host of services through ATMs, Internet banking, mobile banking etc. This has helped to bring down the cost of per transaction. Banks also need to identify which method would suit their customers better. In the villages the customers prefer physical transactions more than other forms of payment. Modern banks like Citibank prefer that customers use online and ATM for transactions rather than coming to the bank. They discourage their customers to come to their bank for functions like withdrawing money. In fact they levy charges over such a transaction. Also banks are taking an extra step to increase their profits and also as a step towards customer convenience. Banks offer a service where the customers can get their draft prepared at home. All they need to do is order a draft and the bank will make it and get it delivered at their doorstep. (Identifying and responding to the customer needs, 2007, p.129; How to differentiate your brand: The 4Ps, N.D.) A professional starts his career by opening a salary account in his name. This is the first instance when a professional comes in contact with the bank. He continues with the bank if the services provided by the bank are satisfactory, he might take a loan facility if he finds the bank reliable. Thus, the association of the bank with that individual increases. Loan is followed by insurance. Banks manages to sell some more of its portfolio to him. All this is possible because over a period of time the bank could manage to instill confidence and faith within the minds of the customers. So it can be understood that banking is not about the product or the services rendered but the relationship and the personalized attention that they get goes a long way in maximizing the volumes of business of the bank. Executive Summary: In topical time career management is of utmost importance as it is beneficial for both the employee and the company as it allows both the parties to understand what the future stores for them. It is a scope where the aspirations of the employee can be matched with the objectives of the company. Additional benefit, which I can think is that it fosters good and harmonious relationship. For banks the FSA should keep a strict vigil so that frauds and violation of rules are brought to a minimum. I strongly feel that to do its job efficiently FSA should increase its headcount and new powers to be vested in them. For the business to flourish banks should come up with new products as per the needs of the mass. I strongly feel market research can help in this decision making process. Moreover newer means of delivery like e-payments should also be encouraged. Due consideration needs to be given to promotion so as to make the people aware of the new products launched by the company. Also they are needed to break through the clutter of competition. Pricing again should be done wisely as per the completion and the affordability. I believe that is where the customized products can play a big role. Reference: 1.       Herriot, P, (1992), The Career Management Challenge, London: SAGE, 2.       Winnet, R., (2009),”Northern Rock Lent 1.8 Million pounds in risky mortgages after government bail-out”, The Telegraph, retrieved on September 8,2010 from: http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/5017937/Northern-Rock-lent-1.8billion-in-risky-mortgages-after-Government-bail-out.html 3.       Treanor, J.(2010),“Former Northern Rock finance director banned for life and fined 320,000 pounds”, The Guardian, retrieved on September 8, 2010 from: http://www.guardian.co.uk/business/2010/jul/27/northern-rock-david-jones-fsa 4.       McCoy, D.(2008)”U.K.’s FSA Considering tougher  bank Regulation, Bank systems and Technology”, Bank Tech, retrieved on September 8,2010 from: http://www.banktech.com/news/showArticle.jhtml?articleID=205918170 5.        “How to differentiate your brand: The 4Ps” (n.d.), retrieved on September 8, 2010 from: http://www.singularitymanagerzine.com/Whitepapers2Brand4Ps.html 6.       Purcell, J. 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