An Overview Of The banking sector

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One of the biggest challenges for today's organizations is to meet the stakeholders need to remain competitive. The organizations are competing not only for the organizational resources but for the human resources as well, they strive to attract the skilled labor which could ensure the high quality of product and services thus become in a better position to satisfy the customer needs. The traditional bureaucratic systems are replaced by more decentralized setups where employees are given authority to respond quickly to the problems as they emerged in the work place.

Employees are the now becoming the most important assets of the company as a result the trend is towards investment in the training and development of the employees which leads to enhanced skills and more productivity. Now the retention of an employee is given more preference over recruiting more and more employees thus the benefits of the employees are of such type that ensures long term relation with the employees.

Keeping in view these trends the reports highlights the Human resource Practices of the banks like RBS and HSBC in detail and the comparison of each with the practices in banking industry.

Background of the study:-

The growth of an economy of a developing country is dependent on role played by its monetary institutions. The banking sector in Pakistan with the beginning of modern technology and strong competition is playing a key role in the development of economy to various sectors of industry like trade and commerce, agriculture and many others.

To know and practice the "People approach" in this complex and changing environment. Researcher selected Human Resources Management as a field to specialize in, and therefore researcher selected the compensation policies (a topic of human resource management) of banking sector.

Problem statement:-

What is the impact of compensation strategies on motivation and company's performance?

Objective of the study:-

To evaluate the impact of compensation on motivation and the performance of employees in the banking industry.

Scope of the Study:-

The scope of this study emphasis only on the "compensation policies, strategies, and reward system of the banking sector" and the main focus is the impact of the compensation strategies and policies. Emphasis has been laid to study their approach towards compensation strategy and reward system, compensation and benefits, performance appraisal.

Rational of the study:-

Motivation for research problem

Well I got motivated because I always heard about the employees getting motivated by the compensation strategies and performs well. I wanted to know the features it has and the main characteristics of compensation that really motivates employees and helps in performing in a better way.

Importance of propose work:-

It is important to know that how an employee actually gets compensated, what is the source and what are the criteria. When it comes to Compensation and reward system, we have to accept that it plays important role to motivate employee. If an organization using a fair compensation strategy then it will see positive impact of the employee's performance on the efficiency and results and more importantly the employees will get support to do well and attain the benchmarks. It will raise the morale, efficiency and good communication among the workers. The compensation strategy should be comprehensive and swift so it will be easy for every employee to understand the compensation strategy. It would motivate and support those employees who perform well and efficient.

The system provides development and advancement opportunities to the deserving employees. A good compensation system creates a positive and strong relationship between employer and employee. It helps an organization to be able to retain the best talented employees by providing them satisfactory compensation and it reduces the employee turnover. The success and stability of organization is measured with pay-package it provides to its employees. The compensation system which provides a value to the employee should be offered as it will actually helps an employee taking interest in its work.

Chapter # 02


The researcher proposes to conduct the research thesis on "The Impact of Compensation Strategies and Employee Benefits on Employee's Performance". The researcher will justify his point that why the researcher choose this topic for research work through the following studies of literature. The results of previous research works, while mixed, are likely to propose that, in some cases, ESOPs, profit sharing plans, and efficient employee strategies of management gives a positive result on limited actions of financial performance. Within the limitations of the study, the common result of this research is that strategy of employee management does impact firm financial performance. Management can implement various forms of employee compensation in an effort of support employee's interest with the organizations interest. ESOPs (employee stock ownership program) is introduced by the employee retirement and income security Act (ERISA) of 1974 and in this program stoke bonus plans are included in which minimum requirements are needed from employees.

Usually, the employee compensation system plays an important part in efforts to direct human resources well. It is important because it is at the backbone of the employment relationship, being of significant value to both employees and employers. Employees usually depend on wages, salaries, and so forth to provide a large share of their income and on benefits to provide income and health security.

We know that money is a powerful tool to motivate someone. Definitely, literature review of four motivational programs (individual monetary incentives, goal-setting, job redesign, and contribution in decision making) found that monetary incentives were related with the largest average increase in physical productivity (Locke, Feren, McCaleb, Shaw, & Denny 1980). So, changes in pay practices have the potential to considerable modified attitudes, behaviors, and organization functioning.

Compensation is something which is paid in exchange of work done or other considerations. Employee motivation will always be high when they see that the management take interests about their benefit and when they contribute in the process of management and when the management-labor environment is positive. If the workers feel they are being treated equally and with due respect, this attitude will develop into a more constructive and positive manner. According to Ghebregiorgis and Karesten, the organizations which pay more are usually able to attract and recruit outstanding people who play their role in organization's performance.

According to Arthur and Batt, the compensation has a positive impact on the organizational performance and it also significantly reduces the employee turnover in the organization. Organizations are continuously trying to improve the method of designing the pay system.

There are different compensation methods devised by companies which motivate employee productivity and performance. Companies are not bound by tradition when it comes to motivating and compensating employees. Getting involved in low cost or no cost programs improves performance and builds morale and commitment.

According to the above mentioned literature the researcher is proposing to study the impact of employee benefits and compensation strategies on the performance of an employee in a company in comprehensive detail as the above mentioned summary of some articles conclude that they are all of simple importance for any organization.

The another important thing is that Academics and Practitioners are becoming more interested to find the relationship between compensation plans of an organizations and employees motivation toward work which eventually impacts on the performance of organization. This study provides a relationship between compensation, employee's motivation and organization's performance. It proposes how different compensation plans impact on the motivation and organization's profitability.

According to Belkaoui compensation is positively linked with profits & sales. Compensation & Profits are directly linked to each other, the more benefits given to the employees the more are the profits achieved.

Successful companies need to attract and keep top performing employees. The employees who always perform well not only have the capabilities and talent to fulfill a particular business need or role, they also provide established performance record of success in achieving business goals. A strong business can be made for focusing on the rewards of top performance. To achieve desired business results, rewards of top employees should be focused. Reward programs are the most powerful tools employees have to affect employee behavior. It is also a commonly accepted form of recognition. Top performing people can be recognized and rewarded for their efforts with a compensation package that reflects their contribution to the success of the organization. It is a recipe for motivation, productivity and turnover problems. Monetary and non-monetary rewards were also categorized by age and gender, annual income, job tenure and job classification. Therefore the demand for top performers is constant and increasing need. In an economic upturn, the push to remain competitive necessitates increase the growth and performance. But if the top performing employees are not satisfied with this than the possibility of their turnover can be increase. The value of these performers who are the leaders of any company's workforce should be measured and rewarded.

If the motivation of employees will increase, it directly impacts the performance of the company in term of profitability. Both employers and employees identify that compensation plays a central role in enhancing the performance of the company though the relationship in indirect. This relationship has generated a great interest among researchers over the years. Compensation is something which is paid in exchange of work done. The organizations which pay more are usually able to attract and recruit outstanding people who play their role in organization's performance (Ghebregiorgis and Karesten 2007). According to Arthur (1994) and Batt (2002) compensation has a positive impact on the organizational performance and it also significantly reduces the employee turnover in the organization.

The way in which pay systems are designed by organizations is also of enormous importance. According to Murray and Gerhart (1998), Organizations are continuously trying to improve the method of designing the pay system. Guthrie (2000) explains in an article that there are two types pay practices i.e. skill-based pay and group-based pay. In skill-based pay systems, "pay is largely a function of the width and/or depth of knowledge and skills possessed by an employee" (p. 420). This type of pay system is the motivation for employees to improve their skill and knowledge regarding their job. In group-based pay plans, "group incentive system includes plans in which payouts are contingent on the achievement of group or unit goals" (p. 422). In group- based pay system, the whole group or unit is motivated and play its role in increasing the profitability of the organization.

There is another research that is related to compensation which is focused on the opportunity of investment. The firms that are growing with high rate actually they are paying higher level of compensation as compare to the firms with low rate of growth. Firms with higher growth provide compensation settlement and packages that are directly linked with the stock base benefits as compare to usual essentials of compensation. According to Gaver (1993, 1995) high growth firms' executives are getting long term benefits of compensation besides this non growth organizations gets a big percentage of pay from fixes salaries. His study also highlighted that long term benefit compensation can help in the reducing the cost of organization cost that actually exist from because of high degree of irregularity in information which is related to the decisions in business where one party have more information as compare to others. This information has been discussed in relation with growth firm. In the end of the day the executives/ upper level management get high and long term compensation benefits as compare to the non growth. It is necessary to know that executive compensation has different kind like extra salary (SALA), bonuses (BONU) and long term compensation (LCOM). The management should know that how to motivate the individual employee in the organization. They should design jobs that meet the demand of the organizations as well as skills and abilities of their employees. Job design should include organizational resources and individual preference Nowadays industries are applying some motivational theories to increase the productivity and good performance according to meet the specific needs of the organization. There are some pay-for performance programs such as price rate pay plans, wage incentive plans, profit sharing and bonus plans. There are also non performance based programs. For example employees can be given flexible working hours the staff can wear casual dress once a week; employees can get discounts on behalf of their company like gasoline, computer and office supplies; a discount program in which employees can get discounts for food, clothing and entertainment.

There is another program to motivate the employee that is relationship building program. There can be some extensive tea breaks where employees can have a chit chat with their seniors, a family oriented program where families of employees can be invited. These programs should be conducted at least once a year. Programs should not be competitive that employees have the feelings of winners and losers. In fact they should be given some chances to express themselves.



Research methodology:-

The research methodology will contain literature review that was conducted with the help of research papers and online journals, and articles. As far as population sample is concern the research will focus on Islamabad and it has the all the major banks and their regional offices so the researcher will use Islamabad as a sample for all industry. The main consideration of the research will be middle level managers and lower level managers.

Research Design:

The aim of this thesis is to study the behavior of employee's towards the compensation policies and strategies. The study primarily uses both quantitative and qualitative information and tools. For quantitative results, the research design involves descriptive research using survey method. For qualitative results the research design involves interactive interviewing and written descriptions by participants by asking people to describe their expectations from a mobile in verbal as well as written form.

Types of data:-

The research will be based on both primary and secondary data.

Sample data:-

The main focus of the study is on the following banks HSBC, CITI BANK, HBL, NIB, and RBS bank as sample, operating in Islamabad Pakistan.

Overview of Data Collection Techniques

Data-collection techniques allow us to systematically collect information about our objects of study (people, objects, phenomena) and about the settings in which they occur.

In the collection of data we have to be systematic. If data are collected haphazardly, it will be difficult to answer our research questions in a conclusive way.

Various data collection techniques can be used such as:

Using available information


Interviewing (face-to-face)

Administering written questionnaires

Focus group discussions

Projective techniques, mapping, scaling

1. Using available information

Usually there is a large amount of data that has already been collected by others, although it may not necessarily have been analyzed or published. Locating these sources and retrieving the information is a good starting point in any data collection effort. The advantage of using existing data is that collection is inexpensive. However, it is sometimes difficult to gain access to the records or reports required, and the data may not always be complete and precise enough, or too disorganized.

2. Observing

Observation is a technique that involves systematically selecting, watching and recording behavior and characteristics of living beings, objects or phenomena. Observation of human behavior is a much-used data collection technique. It can be undertaken in different ways:

Participant observation: The observer takes part in the situation he or she observes.

(For example, a doctor hospitalized with a broken hip, who now observes hospital procedures 'from within'.)

Non-participant observation: The observer watches the situation, openly or concealed, but does not participate.

If observations are made using a defined scale they may be called measurements. Measurements usually require additional tools. For example, in nutritional surveillance we measure weight and height by using weighing scales and a measuring board. We use thermometers for measuring body temperature.

3. Interviewing

An INTERVIEW is a data-collection technique that involves oral questioning of respondents, either individually or as a group. Answers to the questions posed during an interview can be recorded by writing them down (either during the interview itself or immediately after the interview) or by tape-recording the responses, or by a combination of both. Interviews can be conducted with varying degrees of flexibility. The two extremes, high and low degree of flexibility, are described below: Though in principle one may speak of loosely structured questionnaires, in practice the term questionnaire appears to be so hooked to tools with pre-categorized answers that we have decided to use the term interview guide for loosely structured tools. However, in reality there is often a mixture of open and pre-categorized answers. In that case we will still use the term questionnaire.

4. Administering written questionnaires

A written questionnaire (also referred to as self-administered questionnaire) is a data collection tool in which written questions are presented that are to be answered by the respondents in written form. A written questionnaire can be administered in different ways, such as by:

Sending questionnaires by mail with clear instructions on how to answer the questions and asking for mailed responses;

Gathering all or part of the respondents in one place at one time, giving oral or written instructions, and letting the respondents fill out the questionnaires; or

Hand-delivering questionnaires to respondents and collecting them later.

5. Focus group discussions (FGD)

A focus group discussion allows a group of 8 - 12 informants to freely discuss a certain subject with the guidance of a facilitator or reporter.

6. Projective techniques

When a researcher uses projective techniques, (s) he asks an informant to react to some kind of visual or verbal stimulus. Such techniques can easily be combined with semi-structured interviews or written questionnaires. They are also very useful in (Fads) to get people's opinion on sensitive issues.

7. Mapping and scaling

Mapping is a valuable technique for visually displaying relationships and resources. In a water supply project, for example, mapping is invaluable. It can be used to present the placement of wells, distance of the homes from the wells, other water systems, etc. It gives researchers a good overview of the physical situation and may help to highlight relationships hitherto unrecognized. Mapping a community is also very useful and often indispensable as a pre-stage to sampling. Scaling is a technique that allows researchers through their respondents to categories certain variables that they would not be able to rank themselves.

Collection of Data for the Project

The sample size used for this research is low and middle level managers of above mentioned banks. The data, which is collected for the purpose of study, is divided into 2 bases:

Primary Source: The primary data comprises information survey of "Factor Affecting the choice of handset brand and service provider brand by customers".

Secondary Source: The secondary data was collected from internet and references from Library. To know the response I will use the questionnaire method in sample survey.

I distributed questionnaire among my classmates, friends and relatives to collect the data and different views of different people.






Week commence

















Literature Reading and Draft

Methodology Reading and Draft

Conducting Telephone Interview

Analyzing Interview

Writing Analysis


Conclusion and Recommendations

Final Draft to Supervisor for Feedback

Making Necessary Improvements

Printing and Binding