INTRODUCTION One of the renowned names in Bangladesh financial market is Industrial Development & Leasing Company (IDLC) of Bangladesh Limited. It started its operation in the year 1985 as the pioneer leasing company to facilitate lease-financing and capital investment in industrial sector with the view of “Become the best performing and most innovative financial solutions provider in the country”. Over the years the company has evolved itself as a multi-product non-banking financial institution providing wide range of products and services.
In 1995, IDLC was licensed as a Financial Institution by the country’s central bank and during the last two decades, the company has grown in pace with the country’s growing economy. History of IDLC On May 23rd 1985, the IDLC of Bangladesh Limited was incorporated as a joint venture public limited company with the multinational collaboration of five foreign and three domestic financial institutions. The company maneuvered its strategic focus to service diversification in 1994 by launching its deposits schemes. In 1997, IDLC introduced Real Estate Financing and Short term Financing.
During the period of 1998 and 1999, the company broadened its activities into the areas of corporate financing, underwriting, issue management, syndication and other investment banking related services and evolved as a truly multi product financial institution. Major Ideologies & guiding principles of IDLC IDLC is a multi-product financial institution offering an array of diverse financial services and solutions to institutional and individual clients to meet their diverse and unique requirements. Following are the Major Ideologies & guiding principles that shape the organizational practice of IDLC.
Customer first: IDLC has grown with its customers, who are believed to be the center of all actions. As the crux of IDLC’s corporate philosophy, customer service gets the highest priority. Innovation: IDLC has continuously introduced new financial products for meeting the needs of the entrepreneurs in a complex & challenging business environment. The concept of innovation is in-built into the working culture. Professional Knowledge: IDLC is staffed with qualified professionals and innovative minds in the country.
Years of operational experience, large industrial database and competent workforce have gives them unparalleled advantages. Professional ethics: The professional at IDLC maintain the highest degree of financial and business ethics in all transactions with the clients. Over the last two decades, IDLC have put in bets efforts to meet the expectations of the clients and investors. One stop solution: Work at IDLC begins with the idea generation, and then goes on into the feasibility study followed by arrangement of financing to implement the project.
IDLC advises the clients, finance them and even arrange financing for them via different financing modes, namely: lease financing, term loan, bridge loan, syndication, bridge loan, syndication, ordinary shares, preferred shares and debentures. Mission, Vision, Goal, Philosophy & Objective For the Company: Relentless pursuit of customer satisfaction through delivery of top quality services. For the Shareholders: Maximize shareholders’ wealth through a sustained return on the investment. For the employees: Provide job satisfaction by making IDLC a center of excellence with opportunity of career development.
For the society: Contribute to the well-being of the society, in general, by acting as a responsible corporate citizen. Service Offerings IDLC Limited provides a wide array of products and services for retail, SME & corporate clients. Their product offerings include Lease Finance, Term Finance, Real Estate Finance, Car Loan, Short Term Finance, Structured & Corporate Finance, Merchant Banking, Term Deposit Schemes, Debentures and Corporate Advisory Services. During the past twenty years of its operation, IDLC has played a catalytic role in providing alternative source of term and capital asset financing.
The company also strengthened its presence in the country’s growing capital market with launching a wholly owned subsidiary-IDLC Securities Limited-which is offering full-fledged brokerage service for individual and institutional clients. IDLC Securities Limited bagged the 9th position in January, 2007 and 6th position in December, 2007 among the most active corporate members of Dhaka Stock Exchange (DSE). Name of Product LineProduct Name Structured Financing Syndication Advisory Service Merger & acquisition Securitization
Loan Enterprise Investment Center Real Estate Financing Real Estate Finance Home Loan Lease Financing Short Term FinancingFactoring of Accounts Receivable Work Order Finance Deposit Schemes Cumulative Term Deposit Annual Profit Term Deposit Monthly Earner Deposit Double Money Deposit Inter Corporate Deposit Merchant Banking ServicesIssue Management Underwriting Private Placement Portfolio Management Trusteeship Management Bridge Loan Financing Personal LoanCar Loan Personal Loan SME (Small & medium enterprise) Loan Market Worth & Multi-product Financing
IDLC’s unique institutional shareholding structure, compromising mostly of financial institutions, helps the company to constantly develop through sharing of experience and professional approach at the highest policy making level. The company has authorized capital of Taka 1,000,000,000 (10,000,000 shares of Taka 100 each) and paid up capital of Taka 150,000,000 (1,500,000 ordinary shares of Taka 100 each). IDLC has also established two wholly owned subsidiaries, IDLC Securities Limited and I, Cons Limited to provide customers with security brokerage solutions and IT solutions, respectively.
IDLC Finance Ltd as the first leasing & finance company of Bangladesh with multinational collaboration and the lead sponsorship of the International Finance Corporation (IFC) of The World Bank Group. Technical assistance was provided by Korea Development Leasing Corporation (KDLC), the largest leasing company of the Republic of South Korea. IDLC, which has now emerged as country’s leading multi-product financial institution, has amongst its external share-holders, international development agencies such s the Aga Khan Fund for Economic Development (AKFED) and German Investment and Development Company (DEG) besides the IFC. The other foreign sponsors include Kookmin Bank of the Republic of Korea in addition to KDLC and, all these institutions together hold 45% of the Company’s shares. Three Bangladeshi financial institutions – IPDC of Bangladesh Limited, The City Bank Limited, Sadharan Bima Corporation and the general public hold the remaining 55% of the shareholding in this public limited company listed with the Dhaka Stock Exchange. IDLC is on the list of the twenty largest capitalized companies in the country.
The unique institutional shareholding structure comprising mostly of financial institutions helps the company to constantly develop through sharing of experience and professional approach at the highest policy making level. An Overview on some products of IDLC Leasing IDLC offers lease financing for all types of manufacturing and service equipment including vehicles, computer and medical equipment to all the major industrial sectors. In leasing, the client has the full liberty to select the equipment, supplier and fix terms and conditions including price.
We will buy the equipment of the client’s choice. Term Loans Term loan is offered for corporate and project financing to establish project or to expand business or re-financing existing financing. IDLC’s Term Loan offers: ?Funding for specific purposes ?Competitive interest rates, fixed or variable ?Flexible terms ?Variety of collateral options Short Term Finance (STF) STF provides Factoring of Accounts Receivables and Work Order Finance services to assist in the finance and management of accounts receivables and maximize business growth. Home Loan & Real Estate Individual House Loan Scheme for Purchase of apartments ?Construction of house ?Renovation & extension of house ?Purchase/construction of house for the employees under corporate house finance scheme ? Office space/premises for professionals Developers’ Finance Scheme for: ?Construction of Apartments projects Corporate Finance Scheme for: ?Purchase of office space/chamber/display center ?Construction/purchase of commercial building ?Constructions of commercially viable projects like school, hotel, and hospital, etc ? Constructions of industrial buildings like factory, godown, warehouse etc. Corporate Finance Syndication services for large-scale investments ?Advisory services such as corporate counseling, project counseling, capital restructuring, financial engineering, etc. ?Merger and acquisition services ?Securitization of assets Merchant Banking ?Issue Management ?Underwriting ?Private placement of stocks ?Trusteeship management ?Bridge finance SME Division ?SME ?Retail Products Research Activities of IDLC Except for the regular functions, the credit risk management department is also responsible for conduction research activities on the industrial sectors of the country.
CRM department has identifies more than fifty industrial sectors of Bangladesh and planned to develop a database on those. This research-based program started mid-way in 2003 and has so far covered sixteen industries. This research activity can be regarded as a proactive approach. The results are used in preparing internal reports, developing credit risk assessment criteria and briefing the relationship management team in business development activities. Financial performance of IDLC 20012002200320042005Growth over 2004 Financial Performance Lease & Term Loan Execution1,3891,4051,8822,0302,56426. % House Finance Disbursements20929530051989873% Short term Finance portfolio630459500420387-7. 9% Lease Finance Portfolio3,3513,5614,1604,1744,71112. 9% Hose Finance Portfolio3575437271,0641,64354. 3% Operational Performance Operational Revenue5746637028591,00817. 3% Profit before Tax1841972132472657. 3% Profit after Tax9412111313415314. 2% 20012002200320042005Growth over 2004 Key Financial Ratios Debt Equity Ratio7. 37. 17. 57. 68. 815. 8% Return on Equity17. 620. 817. 818. 819. 01. 06% Earning per Share62. 780. 775. 489. 3101. 813. 9% SWOT Analysis of IDLC The SWOT analysis of IDLC can be as follows: Strengths
Weaknesses •Strong Corporate Identity •Distinct operating procedures •Strong employee bonding and belongingness •Operational efficiency •Efficient Performance •Empowered Workforce •No communication barriers •Strict adherence to compliance standard •Low paid up capital •More Focus on Volume •Low remuneration Package •Too Much Diversification •Less People in Liability Marketing •Lengthy Procedures Opportunities Threats •High demand of Housing loans •Opportunity in the Capital Market •Government & Regulatory Body’s initiative for market growth •Foreign Investment in Prospective Sectors •Local bank’s inefficiency Rivalry of Existing Competitors •Regularity control of government •Industrial downward trend due to recession, inflation & political instability LEASING INDUSTRY OF BANGLADESH Background While banking in Bangladesh is a widely practiced and popular service, the leasing sector is coming fast to provide term facilities, especially for machinery financing. Previously most kinds of financial support provided to institutions and individuals came from banks. However, the leasing companies entered into the market with a host of innovative product ranges with competitive pricing to service the customers.
In addition, stringent rules and regulations were instated to combat the default culture. Although the growth of the sector was slow during the first half of the 80s, in the 90s, the leasing sector grew at a tremendous rate, with immense opportunities. This may be attributed to the economic emancipation in Bangladesh that took place as a result of industrial growth particularly in the RMG, textile and agricultural sector. Lease finance has gained its popularity as an alternative mode to finance intermediate and long-term requirements related to machinery/vehicle financing.
The reasons for such popularity are: ?Off balance sheet item ?Tax benefits and ?Customized service as per the requirement of lessee. IDLC embarked into the leasing sector in 1985 to provide entrepreneurs requiring longer term financing with leasing facilities. The emergence of Non-banking financial Institutions (NBFIs) opened new avenues for an alternative source of financing. Taking the opportunity United Leasing Company entered the market in 1989 and was followed by Phoenix Leasing Company Ltd. in 1995. Thus in a span of about 10 years three leasing companies were licensed to operate.
Thereafter, 24 more financial institutions, previously known as NBFIs, were licensed by Bangladesh Bank as against 49 banks including NCBs, DFIs and private and foreign banks. In addition to leasing companies, housing finance institutions also emerged as a highly potential sector in light of the magnitude of the shortage of housing for the middle class and upper middle-income groups. Although House Building finance Corporation (HBFC) has been in the market for a long time, it failed to meet the increasing demands of the general public.
Taking the demand supply gap as an opportunity Delta Brac Housing (DBH) entered into the market following a professional approach towards management and client analysis. Following suit, National Housing Limited and few other leasing companies also entered into this un-served market. . Lease industry evaluation criteria All leasing companies primarily concentrate on three major areas for investment in the leasing sector: ? Work with Syndication & Asset Sales to win mandates for capital market issues & loan syndication ? Provide foreign exchange and cash management requirements. Finance trade, short term funded requirement and guarantee requirements Market and Funding Sources ?No over dependence on a single funds provider and preferably with ability to access the capital markets domestically and/or internationally. ?No significant mismatch of tenor of funding as compared to the average life of the asset portfolio or an ample liquidity buffer from well spread sources of funding. ?No significant mismatch of interest rate risk – lending on a fixed rate basis whilst funding on a floating rate basis, or an ample buffer in the net interest margin to hedge possible interest rate fluctuation ?
No significant foreign exchange exposure where liabilities are denominated in foreign currencies whilst the assets are denominated in local currency. Financial ?Satisfactory size of capital and leverage ?Adequate loan loss reserves provisioning ?Satisfactory profitability and interest service cover trends. Target Clients Credit and leasing companies, which are part of a financial institution, investment institution, or company of investment grade, which are not exposed to property lending. Products: Products offered may comprise the following: ?Foreign Exchange – maximum tenor of 12 months ?Trade Finance – maximum tenor of 12 months Overdraft facilities ?Loan Syndication and Asset Securitization. ?Cash Management – payments, collections and local account banking. ?Short term funding lines – maximum tenor of 12 months ?Long Term Loan on a selective basis – for MS ID and above ? Other products approved by the Banks market or product risk departments. Area of Activity of the Leasing companies Most leasing companies have aimed at building a balanced and matured portfolio of clients in the long run. The focus of leasing companies can be categorized into two sub groups: ?Organized and matured market segments, thus focusing on BMRE projects ?
Emerging growth market segments A sector wise study reveals that Leasing companies have concentrated mostly in the following areas: ?Textile and RMG ?Transportation- road, water and air ?Power, telecommunications and constructions ?Medical, professional & Commercial ?Agriculture and Energy General Investment Principles [ Most of the lease-finance companies in Bangladesh follow a guideline in their operations to ensure stronger performance and mitigate of default risk. A number of such principles include: ?High priority for finance given to export oriented projects, especially those based on local raw materials ?
Investment Financing to be diversified in terms of risk, location and type. Hence leasing firms will try to invest to have a diversified portfolio of clients to mitigate risk, especially business risk. Most leasing firms set a maximum limit on the percentage of exposure to paid-up capital. In addition, sector wise limits are also often set to ensure diversification. ?Lease facility is given after usually on the basis of a feasibility study in terms of technical, financial, marketing, economic and social parameters. Management capability and credit worthiness of the sponsors plays a vital role here. While considering leas applications, preferential consideration is given to projects that are sponsored by: oAudited accounts with history of profitable operations oSatisfactory gearing and other financial ratios oSatisfactory CIB information from Bangladesh Bank oAvailability of adequate security and guarantee (if needed). ?Support projects sponsored by proven successful entrepreneurs and investors. ?Support Balancing, modernization, replacement and expansion (BMRE) of the existing units ? Selective investment in sectors where market is saturated. ?Focus on sectors that bring inflow of advanced technology, managerial and technical skills. Leases to corporate houses are preferred to individual entities as the risk of default is higher with individual clients than with corporate clients. Operational Standards followed by Lease Companies Most leasing companies make the following considerations before entering into any investment: ?Return on Investment and financial charges: the yield is usually determined by keeping in view the interest rate prevailing in the country and the cost of borrowing. IRR is calculated after keeping a gross spread of around 4% above the cost of funds. ?Lease period and rental: Lease period is usually based on the economic life of the asset.
Firms mostly concentrate on duration ranging from one year to 5 years. However, most firms average on 36 to 48 months. Lease rentals are mostly paid on monthly basis, although quarterly or half-yearly arrangements are also made. ?Type of Equipment: Most of the plant and equipment leasing companies involve in are related to industry, construction, transport, agriculture, and service. While dealing with reconditioned/ used equipment, the companies look into the remaining accounting life and possible economic value of the asset before determining the lease period and rental.
However, most leasing companies do not prefer to invest in used / reconditioned equipment, as risk of damage is high. ?Limit on Net-worth: Most lease companies place a bar on the amount of exposure for any particular client. Often it is a certain percentage of the company’s net-worth. Leasing companies usually ensure that credit lines, cash balances, and short-term placements cover lease commitments. In addition, they also confirm that all lease equipment is covered by insurance in accordance with the prudent business practices. Monitoring of the lease facility
When a lease facility is opened, the client deposits post-dated cheques of monthly rental payments concurrently with the disbursement. Two post disbursement activities are immediately carried out: Delivery of leased Asset: It is ensured that the leased asset is being supplied at the stipulated time according to the specifications mentioned in the purchase order. The delivery is ensured with the presence of an officer. The time frame of the delivery is strictly followed to ensure utilization of the asset so that scheduled lease rental payments can be obtained in time without difficulty.
Installation and commissioning: Proper installation and commissioning of the leased assets is also ensured with the presence of an officer. The objective is to ensure that the leased asset is functional as scheduled. Leases are classified on the basis of overdue status: Overdue statusAccount considered as: No over-dues Regular account Overdue (maximum six months)Overdue account Overdue for more than six months Suspended account The data of the outstanding lease portfolio is formatted to generate two different types of reports from the automated computerized system, namely, Sector-wise Age Analysis and Client-wise Age Analysis.
From each of these two reports a trend analysis is carried out. External data are utilized. Sector-wise age analysis This report provides information on the sector-wise default level of the lease portfolio. If the default happens to be random in nature for a particular sector, the client-wise age analysis is emphasized. If any sector-wise default is evident the following further analysis is carried out. 1. Industry Sales Analysis: This analysis is carried out by collecting data from the external sources to find the causes of the sector-wise sales decline.
The nature of the causes (temporary or permanent) is also analyzed. 2. Industry Profitability Analysis: This analysis is carried out in order to find out the fluctuation of the profit margin of the sectors. The causes of the fluctuations are also analyzed to uncover the nature of the fluctuations (temporary or permanent) 3. Industry liquidity Analysis: This analysis is carried out in the context of national economic activity, monetary condition to find out the immediate liquidity situation of the industry and be prepared to face the reality of the business. 4.
Industry change Analysis: This analysis is carried out to find out changes in the industry in terms of technology, investment, development of substitute product, etc. Client-wise age analysis This analysis is carried out to discover the clients’ integrity and sincerity to pay the lease rentals, their business profitability, and effectiveness of their business strategy in the context of present business situation. The objective is to adopt correct strategy to recover the investment Strategy of Recovery The strategy of recovery is based on the age of overdue of the lease facility.
The recovery strategy of the leasing operation is adopted the individual client basis in the light of the conclusion derived from the sector-wise age analysis and client-wise age analysis. The various recovery actions in order of intensity may be phone call, letter, client visit, Reminder (1st and 2nd), higher level visits, letter to guarantor, final letter for legal notice, legal notice, report to Central Bank and to other agencies, Termination of lease, Ask the guarantor for payment or encashment of security and litigation. Lease financing procedure
While banks often take months to complete a credit line for a client, leasing companies are capable of completing the formalities within one or two weeks. This benefit is brought about by the simplicity of the procedure through which client evaluation takes place. The following flow chart is a generalized prototype of the leasing procedure. ItemsAs per IAS-17Bangladesh Practice Income Statementa. Initial Direct Cost to be charged t income at the inception of lease. a. Lease rentals as income on straight line or other systematic basis representing the time pattern of rental schedule. b.
Finance income to be allocated to produce a constant periodic return on outstanding net investment. Depreciation as and expense as per interest method matching with rental schedule. Balance sheeta. Gross Investment in Lease (MLP + Un-guaranteed residual value)Lease equipment under lease asset caption as asset after deducting accumulated depreciation thereon. b. Unearned Income (Gross Investments in lease- present value of this investment in lease) as liability. DisclosureBasis used for allocating income to produce a constant rate of returnBasis or charging depreciation of lease asset.
Practical Situation in Bangladesh Regulatory Perspective Leasing Companies are regulated by Financial Institutions Act, 1993 of Bangladesh. Leasing Companies (as well as all other NBFIs) are regulated / monitored by the central bank and have to report their detailed position to the central bank semi annually. Some of the features of the Financial Institutions Act are as follows: Capital Adequacy: NBFIs must maintain Capital of 6% against their outside borrowings. Statutory liquidity: 5%
Limit / Cap for obtaining public deposits: No cap but can borrow maximum of BDT 5 million from individual depositor Provisioning norms / classifying loans and maintenance of reserve there-against : Leasing companies have to maintain 1% of their total lease asset as general provision and the major players maintain the following norm for provisioning : ?2-3 installment default : 3-5% ?4-6 installment default : 20-25% ?6-12 installment default : 50% ?More than 12 installments : 100% Irregular Leases Irregular leases can be classified in following types: . Lease under suspension: When and overdue of lease crosses a specific number of rentals leasing company treat the lease as suspended lease and for suspends leases they do not accrue any rental or charge depreciation until the lease comes under normal position. b. Lease under termination: When a lease becomes terminated, leasing company do not accrue rental of charge depreciation thereon. c. Lease under partial termination: Same as leases under termination, the company applies the same procedure for terminated part of lease only. . Foreclosure of lease: On receiving information from Monitoring Department of a leasing company regarding foreclosure of a lease Finance Department passes necessary voucher. e. Lease under litigation: Same as foreclosure of lease. EXISTING HR PRACTICES Introduction The purposes of the study of the paper will be the current Human Resources practices in IDLC Limited and to find out the strategic approaches to improve and achieve sustainability in its Human Resources operation and support the company as a strategic partner.
The paper will be a study carried out to understand the current Human Resources practices in IDLC Limited and the strategic approaches it is taking to align with the Company’s strategy and objectives. This will help me to assess the depth and sustainability of the HR practices of the Company and the competitive HR analysis. There is no properly established well articulated Human Resources Department in IDLC Limited. To support the organization’s smooth flow of operation and ontinuous improvement, Human Resources Department should work as a strategic partner in the Company. The Strategic Human Resources practice in IDLC Limited currently is not creating a value in the Company with the department’s own vision and objectives aligning with the organization’s Vision, Commitments and Objectives. So, Human Resources Management is all about the people in the Company. It is just not only nurturing the people in the Company but also to create more values to deliver the Company as a strategic partner and as a whole team in the best possible way.
Strategic human resource management (SHRM) is concerned with the contributions human resource strategies make to organizational effectiveness, and the ways in which these contributions are achieved. While theory and research have addressed both issues, much of the initial work focused on the former. This consisted primarily of large-scale survey studies in which various measures of human resource activities or programs on the one hand were statistically related to one or more measures of firm financial performance e. g. , return on investment, return on assets, and stock values on the other (Boxall & Purcell, 2000 and Delery & Shaw, 2001).
Although plagued by some rather serious conceptual and methodological shortcomings, collectively these studies produced results credible and positive enough to keep SHRM scholars intrigued and pushing forward (Wright & Gardner, 2002). The field of HR strategy differs from traditional HR management research in two important ways. First, SHRM focuses on organizational performance rather than individual performance. Second, it also emphasizes the role of HR management systems as solutions to business problems (including positive and negative complementarities) rather than individual HR management practices in isolation.
But strategic means more than a systems focus or even financial performance. Strategy is about building sustainable competitive advantage that in turn creates above-average financial performance. The simplest depiction of the SHRM model is a relationship between a firm’s HR architecture and firm performance. The HR architecture is composed of the systems, practices, competencies, and employee performance behaviors that reflect the development and management of the firm’s strategic human capital. Above-average firm performance associated with the HR architecture reflects the quasi rents associated with that strategic resource.
For the most part, prior SHRM theory has focused on the nature of the HR architecture. The architectural metaphor (Becker & Gerhart, 1996; Becker & Huselid, 1998, Lepak & Snell, 1999; Wright, Dunford, & Snell, 2001) is important because it highlights the locus of value creation in SHRM. Although strategic human capital is reflected in the “human” assets in the organization, it is created and managed through the organizational system reflected in the HR architecture. The notion of the HR architecture as a value-creating system raises the question of the appropriate locus of strategic value creation.
Emphasis in the SHRM literature ranges from the HR system, the resulting workforce skills and competencies, employee commitment and engagement, to employee performance. Within this architectural framework, emphasizing the importance of the HR system as the most important strategic asset. First, it is the source of value creation in the subsequent outcomes in the HR architecture. Second, it has the potential for greater inimitability based on how it is aligned with the firm’s strategy. Finally, unlike human capital, it is immobile.
With a few exceptions (Becker & Huselid, 1998; Huselid, Beatty, & Becker, 2005; Huselid, Becker, & Beatty, 2005; Wright et al. ), there has been little effort to extend SHRM theory in a way that formally integrates the mechanism through which the HR architecture actually influences firm performance. Gerhart (2005), for example, has recently suggested that SHRM move closer to the individual level by emphasizing HR’s impact on employee relations and attitudes. Recent developments in the strategy literature, however, suggest a particularly valuable direction for theoretical work in SHRM.
With all these issues and frameworks keeping in the mind with the alignment of theoretical practice and practical implementation, the study would be carried out to understand the current Strategic Human Resources Management (SHRM) practices in IDLC Limited and the strategic approaches it is taking to align with the Company’s strategy and objectives. The depth and sustainability of the HR practices of the Company to gain a sustainable competitive advantage will be assessed through out the study. Objectives of the Study I have got an opportunity to work within a modern financial firm in my internship period.
It was conspicuous to me that there is no existence of proper Human Resources Planning in the Company. As the Human Resources Department is mainly involved with Administrative job rather than fulfilling core HR functional demands, the planning is also absent with HR view. The HR department of IDLC limited does not work as a team to support ass strategic and tactical issues of the company. The team is totally lethargic and reactive. There are scopes to overcome Business and HR challenges and improve the department’s performance by continual and sustainable development by establishing a proper HR department.
So my objectives of the study will be: ?To identify the current arrangements and HR Issues of the Company. ?To identify business and HR challenges and critical success and facilitating factors. ?To identify the strategic approaches and tactics to improve the department’s performance by continual and sustainable development. Significance of the Study As I have stated earlier that my objectives of the study will be to identify the current arrangements and HR Issues, business and HR challenges and critical success and facilitating factors of the Company.
Moreover, I would identify the strategic approaches and tactics to improve the department’s performance by continual and sustainable development. So this study would also help IDLC Limited to know the gaps they have in the performance and the ways to improve it. The management will be well aware of the issues they need to focus to attain sustainable development. Simultaneously the employees will also be benefited because well articulated Strategic Human Resources practice would help the employees in both short term and long term perspectives.
In today’s world having a profound Human Resources Department is not a competitive advantage; rather it is a competitive necessity. So I believe that my study would not only help the organization to prosper but also its stakeholders too as a part of the community. Moreover, Bangladesh is a labor intensive country and HR is a fresh issue here. To utilize the human resources in proper way and to build competitiveness through modern, proactive HR practices would also benefit the country a lot. I believe that some portion of my study will also create significance regarding this issue.
Methodology As I have chosen to perform a qualitative analysis on Human resources Management practices of IDLC Limited, the research will be largely depend on my observations of the Human resources Management practices of IDLC Limited while working in the Company. My observations of the HR practices in the organization and my theoretical knowledge would help to identify and assess the depth and sustainability of the HR practices of the Company to gain a sustainable competitive advantage and to meet my study objectives.
In order to find the information I need in order to accomplish my study I will be taking direct interviews of the professionals in the Company. The research is basically based on primary data that is interview. The research shall contain only primary data for sorting out the probable areas for improvement and its way to the solution as I am going to perform a qualitative research. Primary data will be collected to find out and analyze the current arrangements and HR Issues, business and HR challenges and critical success and facilitating factors of IDLC Limited
Existing Human Resource Management Practices: The Human Resources Management (HRM) function includes a variety of activities, and key among them is deciding what staffing needs the Company to have and whether to use independent contractors or hire employees to fill these needs, recruiting and training the best employees, ensuring they are high performers, dealing with performance issues, and ensuring their personnel and management practices conform to various regulations. Activities also include managing employer’s approach to employee benefits and compensation, employee records and personnel policies.
The key Human Resource Management functions that a company must follow can be summarized as below: ?Human Resource Planning ?Job Analysis ?Recruitment and Selection ?Orientation and Induction ?Performance Management ?Compensation & Benefits ?Training & Developments ?Career Management ?Industrial and Employee Relationship ?HRIS Usually small businesses (for-profit or nonprofit) have to carry out these activities themselves because they can not yet afford part- or full-time help. However, they should always ensure that employees have and are aware of personnel policies which conform to current regulations.
These policies are often in the form of employee manuals, which all employees have. Observing the Human Resources systems and discussing with other employees of IDLC Limited it was conspicuous to me that there is no existence of proper Human Resources Planning in the Company. As the Human Resources Department is mainly involved with Administrative job rather than fulfilling core HR functional demands, the planning is also absent with HR view. Prompt functional and administrative decision and necessary action is taken according to the situation.
There is absence of forecasting, objective setting, gap analysis and integrated strategic approaches. Consequently, instead of HR Planning being a “proactive approach”, in IDLC it is a “reactive approach”. HR Planning Human Resource Planning gathers and uses information to support decisions about investing resources in HR activities. This information includes future objectives, trends, and gaps between includes future objectives (George T. Milkovich, John W. Boudreau, 1996). The human resource strategy is developed once the corporate and business level strategies have been established.
The HR strategies involve taking the organization’s goals and objectives and translating them into a competitive, consistent, integrated, complementary set of programs and policies for managing employees. The first component of HRM strategy is HR planning. The key facet of HR planning is that it is a proactive process. It attempts to plan and anticipate what might happen in the various domains of the organization’s internal and external environments and to develop plans to address this event prior to their actually happening.
Rather than react to changes in the industry, marketplace, economy, society, and technological would, human resource planning ensures that the organization will be able to adapt in tandem with these changes and maintain the fit between the organization and its environment (Jeffrey A. Mello, 2005). There is no existence of proper Human Resources Planning in the Company. There is absence of forecasting, objective setting, gap analysis and integrated strategic approaches. Consequently, instead of HR Planning being a “proactive approach”, in IDLC it is a “reactive approach”.
There are no HR strategies that involve taking the organization’s goals and objectives and translating them into a competitive, consistent, integrated, complementary set of programs and policies for managing employees. Job Analysis Job analysis is a systematic process of collecting data and working judgments about the nature of a specific job (George T. Milkovich, John W. Boudreau, 1996). Job analysis is a systematic process of determining the skills, duties, and knowledge required for performing jobs, in an organization.
It is an essential and pervasive human resource technique (R. Wayne Mondy, Robert M. Noe, 2007). Job analysis is the procedure for determining the duties and skill requirements of a job and the kind of person who should be hired for it. There are two products of job analysis: 1. Job description 2. Job specification. Job description is a list of a job’s duties, responsibilities, reporting relationships, working conditions, and supervisory responsibilities one product of a job analysis.
Job Specification is a list of a job’s “human requirements” (Knowledge, Skill and Ability) that is the requisite education, skills, personality, and so on another product of a job analysis (Gray Dessler, 2003). The general purpose of job analysis is to document the requirements of a job and the work performed. Job and task analysis is performed as a basis for later improvements, including: definition of a job domain; describing a job; developing performance appraisals, selection systems, promotion criteria, training needs assessment, and compensation plans.
There are several ways to conduct a job analysis, including: interviews with incumbents and supervisors, questionnaires (structured, open-ended, or both), observation, and gathering background information such as duty statements or classification specifications. In job analysis conducted by HR professionals, it is common to use more than one of these methods (wikipedia). Compensation is integrally related to job analysis. The job evaluation process that determines the relative worth of jobs is based largely on how the job is described in the formal job description.
Along with the job analysis, job evaluation influences the basic compensation structure for the organization, including the job classes and individual and job wage rates. Job analysis is the process of examining jobs in order to identify the key requirements of each job. A number of important questions need to be explored: ?The title of the job ?To whom the employee is responsible ?For whom the employee is responsible ?A simple description of the role and duties of the employee within the organization. IDLC Limited does maintain such type of documented job descriptions for its employees.
They create a position, and then they recruit a person for that position who performs different types of tasks all of which are not related to that position. Anyone is asked to solve any type of problem without considering his/her own responsibilities. It happens because of not having any specific responsibilities assigned to a particular position. As there is no specific job description for the position, consequently absence of job specification is common. Due to dearth of the practice of proper job description and job specification documentation, job evaluation is not properly done.
A proper job evaluation helps to identify the depth and breadth of a particular job outcomes and involvement required and to align with compensation and benefits packages should be offered for the specific position without being biased. As a result, most of the jobs are not evaluated according to the importance of the particular jobs and tasks. Ultimately this results to employee dissatisfaction and high turnover. Recruitment and Selection Recruitment is the process of identifying that the organization needs to employ someone up to the point at which application forms for the post have arrived at the organization.
Selection then consists of the processes involved in choosing from applicants a suitable candidate to fill a post. Recruiting individuals to fill particular posts within a business can be done either internally by recruitment within the firm, or externally by recruiting people from outside. From the firm’s point of view, the strengths and weaknesses of an insider will have been assessed. There is always a risk attached to employing an outsider who may only be a success ‘on paper’. There are some advantages of internal recruitment such as: ?Considerable savings can be made.
Individuals with inside knowledge of how a business operates will need shorter periods of training and time for ‘fitting in’. ?The organization is unlikely to be greatly ‘disrupted’ by someone who is used to working with others in the organization. ?Internal promotion acts as an incentive to all staff to work harder within the organization. The disadvantages of recruiting from within are that: ?The Company will have to replace the person who has been promoted ? An insider may be less likely to make the essential criticisms required to get the company working more effectively ?
Promotion of one person in a company may upset someone else. (The Times 100, 2008) External recruitment makes it possible to draw upon a wider range of talent, and provides the opportunity to bring new experience and ideas in to the business. Disadvantages are that it is more costly and the company may end up with someone who proves to be less effective in practice than they did on paper and in the interview situation. Recruitment and selection process is vital because of its results’ involvement in the long term. A wrong hiring can end up with lots of jeopardy in future.
The recruitment and selection process of IDLC Limited is not clear and identified. In the process of scrutinizing and selecting for a particular position, it is also ambiguous that how they make the final decision. Sometimes some positions are filled up with candidates with references even though their background, experience and human skill requirements do not match with the job. Subsequently, the Company loses its opportunity to be effective and efficient in its operation. Orientation and Induction Orientation is the guided adjustment of new employees to the company, the job, and the work group (R.
Wayne Mondy, Robert M. Noe, 2007). Orientation successful organizational entry and maintenance is the objective of employee socialization. Socialization is the continuing process by which an employee begins to understand and accept the values, norms, and beliefs held by others in the organization. New employees need to know, accept, and demonstrate behaviors that the organization views as desirable, in other words, learning the ropes and how to skip them. The overall process involves turning outsiders into insiders.
Orientation involves becoming aware of the social and organizational rules and expectations (George T. Milkovich, John W. Boudreau, 1996). The aim of the orientation and induction process is to familiarise the new intake of graduates with the organization, their job and their workplace. Through a properly conducted induction program, new graduates become integrated into your organization, acquiring the knowledge, skills and attitudes that make them successful contributors to your organization (The Graduate Grapevine – Number 2, December 2005: Orientation and Induction).
New workers in a firm are usually given an induction program in which they meet other workers and are shown the skills they must learn. Generally, the first few days at work will simply involve observation, with an experienced worker showing the ‘new hand’ the ropes. Many large firms will have a detailed training scheme, which is done on an ‘in-house’ basis. This is particularly true of larger public companies such as banks and insurance companies. In conjunction with this, staff may be encouraged to attend college courses to learn new skills and get new qualifications.
Some of the recognized benefits of a properly managed induction program include: [[[ ?Improved morale and a reduction of the new graduate’s anxiety ? Increased productivity ?Facilitated learning and lower training costs ?development of a team spirit and camaraderie among the new graduate intake ? Ensures the graduate understands the performance requirements and standards expected. In general, IDLC Limited introduces its newly recruited employees with other existing employees at the very first day of his/her joining.
Then the new employees are taken to the conference room for a short session to inform and delicate the employees about the rules and regulations of the Company. But there can be more involvement in the orientation and induction process of the Company. Induction is supposed to be “love at first sight” for a new employee with his/her organization. The activities of the orientation program presented by IDLC Limited are not enough to attract a new employee and also to give him/her a thorough idea and inception of business of the Company.
Performance Management Performance assessment or performance appraisal is the process that measures employee performance. Employee performance is the degree to which employees accomplish work requirements (George T. Milkovich, John W. Boudreau, 1996). Perhaps the most important relationship for individuals in the organization is that between compensation and performance appraisal. Especially where performance-based pay exists, the results of the performance evaluation are significant. Without the ability to measure performance (based on ttributes, behaviors, or outcomes) in a reliable and valid way, linking such an important reward as pay to the results may lead to diminished motivation and lowered performance. Where promotions are available, the performance evaluation system can have added significance to the extent that promotion is a reward for performance. The purpose of establishing performance management culture in the company serves several issues regarding- ?Establishing SMART objectives ?Gap analysis ?Fulfilling objectives ?Identify training and individual development needs
The job of a manager in the workplace is to get things done through employees. To do this the manager should be able to motivate employees to do a particular job and then should give feedback about the performance after a specific time. But that’s easier said than done. Performance management practice and theory are difficult subjects, touching on several disciplines. Human nature can be very simple, yet very complex too. An understanding and appreciation of this is a prerequisite to effective employee motivation in the workplace and therefore effective management and leadership.
IDLC Limited arranges one-to-one session between the line manager and the subordinate to discuss about the promotion and bonuses for his/her performance. There is no other appraisal for the performance of an employee except promotion and a little amount of cash bonuses. The criteria’s for getting promotion are not identifiable and it is also unpredictable. So, there is absence of the integrated HR activities such as identifying training and individual development needs, establishing SMART objectives, gap analysis and fulfilling the objectives. Compensation & Benefits
When the Business decides about its Business Strategy and HRM Management Team decides about correct HR Strategy – it is a moment to create and implement a correct Compensation and Benefits Strategy for the organization. The HR Strategy helps to navigate and set goals for HR Employees, managers and employees in the organization and it sets their expectations from the organizations. When the organization sets itself as a low cost provider of services, then HR Strategy cannot state the highest quality of employees is the goal. The quality is always expensive.
Even with human capital (HR Guide, September, 2007) The correct Compensation and Benefits strategy depends on overall HR Strategy and it has a huge influence on the rest of the organization. Compensation Strategy is about the costs of the organization and it can have a huge impact on total profit of the organization. Setting the correct Compensation and Benefits Strategy needs a lot of interaction with the Business and Business Leaders as they will be final users of the strategy and it can hugely limit their activities. The business strategy is the main limit for the compensation strategy.
A quality focused organization with expensive products can afford to employ quality staff. The organization focused on mass market with average products does not need to employ quality sort of employees and it can save a lot of money from the payroll (HR Guide, September, 2007). The compensation strategy sets the position of the organization on the job market. And it has to be in line with any other HR Strategy – mainly in recruitment, training and development. But many organizations forget about the need of alignment and they lose money and efficiency.
IDLC Limited is one of those organizations. Almost every organization in the financial services industry must review its incentive compensation plans to ensure that they do not again contribute to a crisis in the sector. IDLC Limited should also do their business in same manner but they do not. Furthermore IDLC Limited does not carry the essential task to meet more stringent requirements from shareholders and regulators when it comes to sharing risk and taking a longer term perspective on profit and loss sharing.
Reviewing and developing compensation and benefits for executives is missing in the organization that actually ensures that successful employees are recognized and rewarded but within the current financial constraints and without strict control over the way employees engage and commit their firm’s capital. Compensation and benefits is not only recognition for an employee for his/her performance but it is also a tool that attracts, motivates for performance and retains potential employees in the organization.
Without properly aligned compensation and benefits strategy with a firm’s business strategy a firm cannot be productive. IDLC Limited is suffering from this phenomenon due to lack of well structured, transparent, job and merit based compensation and benefits system. Training & Developments New employees need to know what is expected of them and what their responsibilities are, and they have to be trained properly to carry out these responsibilities effectively. A concerned employer will provide a career path for each employee and will provide the opportunities to develop all employees to their fullest potential.
Also, employees need feedback on their performance to experience job satisfaction or to find out where they can improve. In organizational development, leadership development is the strategic investment in, and utilization of, the human capital within the organization (Leadership Skills Training and Development – by Joe Farcht). In the belief that the most important resource that an organization possesses is the people that comprise the organization, some organizations address the development of these resources.
In today’s marketplace, a well-trained workforce is no longer a competitive advantage; it’s a competitive necessity (Wikipedia). Training and development is an ongoing process with the personal and professional development. Training and development enables its people to discover their own personal leadership skills and qualities in an enterprising, safe and supportive learning environment, which make working with British American Tobacco Bangladesh’s talented and emerging leaders both a pleasure and a privilege. Training takes place in the following ways: On the job – learning skills through experience at work ?Off the job – learning through attending courses. Generally IDLC Limited offers its employees a communication skill course in British Council for self development. Other than that, they also arrange some seminars, lecture sessions for different levels of employees without considering the fact “needs assessment”. As there is no proper performance management system, IDLC Limited does not have proper measurement scale for the performances and thus they are unable to assess the training and development needs of the employees.
The actions of the ‘so called training’ presented by IDLC Limited are not actually enough to train and develop an employee. Therefore, the Company fails to spot and coordinate the core activities of Training and Development: ?Talent identification and management ?Individual development planning ?Management development ?360-degree feedback ?Succession planning ?Mentoring ?Coaching Career Management Career development encompasses career management and career planning. Career planning is the process through which individual employees identify and implement steps to attain career goals.
Career management is the process through which organizations select, assess, assign, and develop employees to provide a pool of qualified people to meet future needs (George T. Milkovich, John W. Boudreau, 1996). Now that the job-for-life covenant between employer and employee has been superseded by an insecure and uncertain job market, career management has become a necessary survival skill rather than being an activity pursued by people born with a silver spoon in the mouth.
Job security is now based on knowledge, skills and added-value rather than length of service or loyalty to an employer. Career management is nothing more than a small investment of time, money and energy to protect the major source of revenue – one’s job. Career management is nothing without a properly articulated Performance management system as both are integrated with many other organizational and HR components. Performance management is not well designed in IDLC Limited, so is not the career management.
The management does not provide any career guideline or show any clear path for an employee that de-motivates the employees because everyone wants to see his/her personal growth and up-gradation along with the organization’s. IDLC Limited, being failure to provide such kind of the support towards its employees facing the problem of retaining potential people in the Company consequently. Industrial and Employee Relationship The term ’employee relations’ was conceived as a replacement for the term ‘industrial relations’ but it’s precise meaning in today’s workplaces needs clarification. Industrial relations’ is generally understood to refer to the relationship between employers and employees collectively. The term is no longer widely used by employers but summons up a set of employment relationships that no longer widely exist, except in specific sectors and, even there, in modified form (CIPD Research, 2004-05). Engagement offers managers a framework for monitoring a range of indicators, including employee attitudes and behaviors, of the state of the employment relationship.
But beyond that, it represents an aspiration that employees should understand, identify with and commit themselves to the objectives of the organization they work for. It means being more strategic and seeing the ‘bigger picture’. It means being familiar with a wide range of techniques and skills, including mediation and communications. But, ultimately, it may also mean asserting more strongly the employee interest and agenda. This may not fit well with a management culture still based on ‘command and control’: it’s a genuinely transformational message.
But without some significant progress in this direction, both high-performance working and strategic business partnering are unlikely to succeed. (CIPD Research, 2004-05) In IDLC Limited the environment for working is very good and friendly. The workplace is well cultured maintaining Company rules and regulation that also adds value in employee’s mind about the organization. The cooperative state of mind in the management side for the junior level employees also encourages the new employees to learn quickly and be productive. It also increases the productivity and efficiency level of the Company.
HRIS The Human Resource Information System (HRIS) is a software or online solution for the data entry, data tracking, and data information needs of the Human Resources, payroll, management, and accounting functions within a business. Normally packaged as a data base, hundreds of companies sell some form of HRIS and every HRIS has different capabilities. Pick your HRIS carefully based on the capabilities you need in your company. (Human Resources Information System (HRIS) – by Susan M. Heathfield). Typically, the better The Human Resource Information Systems (HRIS) provide overall: ?
Management of all employee information. ?Reporting and analysis of employee information. ?Company-related documents such as employee handbooks, emergency evacuation procedures, and safety guidelines. ?Benefits administration including enrollment, status changes, and personal information updating. ?Complete integration with payroll and other company financial software and accounting systems. ?Applicant and resume management. An effective HRIS provides information on just about anything the company needs to track and analyze about employees, former employees, and applicants.
Your company will need to select a Human Resources Information System and customize it to meet your needs. With an appropriate HRIS, Human Resources staff enables employees to do their own benefits updates and address changes, thus freeing HR staff for more strategic functions. Additionally, data necessary for employee management, knowledge development, career growth and development, and equal treatment is facilitated. Finally, managers can access the information they need to legally, ethically, and effectively support the success of their reporting employees.
IDLC Limited is disadvantaged from all of the above benefits – a HRIS can provide. PROPOSED PLAN IDLC Limited must need to establish a Human Resource Management Department if they want to establish an aggressive countrywide presence and to be the prospective organization in front of the industry and involve more people. They should and must empower a dynamic Human Resource Department to support the organization’s sound, well-articulated strategy. IDLC Limited has not any proper Human Resource department.
But, it must be understood and learned from the modern business society that human resource is the key factor of any kind of business in this world. Without a different human resource department, all the factors regarding human, their skills, and all other factors cannot be possible to manage. It would be scattered. That is why, at very first it is recommended to have a totally clear, singular human resource department is very much essential for IDLC Limited. Doing the project it is clear that there is not any specific Human Resource Department but is aware and has perfect practice of some vital human resource issues.
Though IDLC Limited is performing really well without the department but when they are going into further broad market and operate countrywide then they must consider the perfect practice of the issues and adept HR department that can help their mission of establishing a global presence to accomplish by putting right people in the right place at right time. Now if they decide to expand the business, extend their product line and customize them to establish an aggressive countrywide presence and gain more market share they would need to increase their human resource.
Now they are looking for a smooth operation to launch new products developed to serve countrywide markets. So the strategy they are following may work well but if there are more people, span of control will be higher and it would be a bit difficult to arrange and maintain such vital resource without a proper HR department or a HR manager who can at least design the finest HR plans most suitable for the organization. Design a HR Department IDLC Limited must design a HR department where the people will be graduated from Human Resource Management major.
The people will work like a team and the HR team will be designed to perform certain jobs: Business Plan and Organizational Design Planning Team HR will work with IDLC Limited to help them understand and quantify the number of staffing hours needed to meet service and/or production levels forecast for the year ahead. Staffing Team HR will work with IDLC Limited to understand how existing resources are deployed and to develop options for change to achieve optimal staff resource allocation across and within organizational functions, and to identify options for their organization into departmental units.
Business Process Improvement for Human Resources and Personnel Team HR will have a team of knowledge/experience based process improvement project managers/facilitators with extensive experience in supporting IDLC Limited in the review and improvement of HR/personnel processes. People Re sourcing, Staff Reward and Development Team HR will work with IDLC Limited to understand, analyze and interpret the people implications of its strategic direction and develop strategic plans and action based plans to support the achievement of business goals in terms of people re sourcing, staff reward and staff development.
Adapting to Business Change Team HR works with IDLC Limited on projects to achieve increased or decreased staffing levels, as well as more complex programs to change the mix of jobs/skills needed within a work force. This includes support on projects to recruit staff, redeploy staff, and from time to time reduce numbers through natural wastage or redundancy. HR Department Start-Up In order to simplify the process and help IDLC Limited to create an outstanding HR Department, a comprehensive HR Department Start-up Checklist that covers the following categories, have to consider: •Recruitment & Selection Employment Policies and Procedures •Personnel Files •Employee Relations Issues •Employment Law Compliance •Record-Keeping Issues •Employee Communication •Employee Departure It is not that
