Employment Relationship at Saudi Arabia British Bank - Essay Example

Employment Relationship at Saudi Arabia British Bank (SABB) SABB is a Saudi Joint Stock Company established from the take over of the operations of The British Bank of the Middle East in the Kingdom of Saudi Arabia. Since that time, SABB has grown into a network of over seventy branches that includes thirteen exclusive women's branches and more than two thousand employees (SABB 2006: 12). SABB offers services in investment banking, commercial banking, private banking, and Amanah Islamic Banking. We will study the employment relationship at the SABB Branch on Al-Hassa Street in Riyadh, Kingdom of Saudi Arabia, one of twenty-one SABB branches in Riyadh and that has a Ladies Branch exclusively for women to transact their banking business. The Bank Manager is Mr. Fahad Al-Sharari. Since 2002, SABB has implemented a strategic plan called "Putting Customers First". Under this plan, customers would be the primary focus of the bank instead of giving more priority to products and services. The plan called for a total internal re-organization of the Bank to train employees to be focused and to align the delivery of its services to both corporate and personal customers (SABB 2002: 14). SABB's confidence that the plan will deliver benefits to its customers, the shareholders, and the Bank as part of its vision to be the leading financial services group in Saudi Arabia is shown by the successful increases in net income from SAR 830 million to 2.5 billion, assets from SAR 41.92 to 65.9 billion, and deposits from SAR 31.5 to 48.5 billion from the end of 2001 to the end of 2005 (SABB 2006: 16-17). SABB is the leading provider of value added and innovative Islamic financial product and services in Saudi Arabia. This is achieved while following principles of Shari'a whose core investment and market guidelines are to follow the Islamic Shari'a, honesty and integrity, professionalism, strong customer focus, and excellent reputation (SABB, 2006: 9). Importance of Employment Relationship There are many reasons why the employment relationship is important in SABB. The main reason is that SABB is a service organization that relies on customer contact and satisfaction for its business. It will be successful if the customers of the Bank are happy with how the employees perform their work of service. This is why employees have to be first satisfied with their relationship with the Bank, because if they are not, this lack of satisfaction will be reflected in poor service quality to the customers. Poor customer service quality results in poor performance, because customers will not deposit their money in the Bank or buy the financial services that the Bank offers. The need for quality customer service is the main reason why the Bank put into effect their "Putting Customers First" strategic plan. Research has shown that in service companies like retail banks, the quality of the customer relationship can give the bank an advantage over its competitors by attracting more customers (Keltner 65-68). The Bank's customer relationship strategy requires that it upgrades its employment relationship to help bank employees to meet the different needs of its customers, not only for personal banking products and services but for the Bank's more profitable private, corporate, and investment banking products and services. Like other banks all over the world, most of its low value-added transactions like cash deposits and withdrawals, bank balance inquiries, questions about basic products and services are all done through Automatic Teller Machines, Telephone Banking, widely available Point of Sale (POS) terminals in retail outlets all over the Kingdom, and the Internet where it is cheaper to deliver the service. The cost to the Bank is lower because technology is used to serve customers by processing their transactions (Morisi 32). This will allow high value-added services like private, investment, and corporate banking to be transacted face-to-face in the Bank's branch network. The use of technology allows the Bank to reach more customers and deliver services of a high quality, but without good employment relationships, bad customer contact experience has a negative impact if customers get the impression that they are not as appreciated like the Bank's high value-added clients. Through a continuous human resource development program, the Bank can assure that all of its employees treat each and every customer in a special way. This will stop customers from feeling bad about their service experience and stop them from deciding to put their money in another competing bank. Another reason why the employment relationship is important is that part of the Bank's strategic plan is the Saudization of the Bank, where the number of non-Saudi employees has decreased from 42 percent in 1994 to 18 percent (SABB 2006: 12). This means that the Bank's employment culture is changing and that more locals are being hired to take over the jobs formerly done by non-Saudis. The main impact is in the organization of the work place, the matching of workers with jobs, and in how wages and the terms of employment are set. The Bank has to make many adjustments to ensure that high quality well-paid jobs are available to the locals to motivate them to perform as well as or better than their foreign counterparts, and that the Bank's worker pay schemes are competitive compared to other banks in the Kingdom. If the Bank does not take care of this component of the employment relationship, it will lose local workers and need to replace them with new employees that have to be trained at extra cost in the culture, products, and services of the Bank. One other positive effect is to show its present and future Saudi employees that they can have a very fulfilling career with the Bank, starting with lower positions, and through training and experience they can go higher to supervisory and management positions. The Bank has to show its workers that if they stay for many years, they can have job satisfaction, will be allowed to practice their creativity, and will enjoy the opportunity to earn higher salaries and reach a higher status in their work life. Employment Relationship Changes There are many reasons for the change in employment relationship in the last ten years. The first is the difference in focus from products and services to customer service quality. This change in marketing strategy resulted in some changes in the Bank's employment relationship strategy. Second, the Saudization of the bank's employees has an impact on work organization, job matching and planning, and career planning. Two other reasons for the change in employment relationship are the increasing use of technology and the current concern for security. Before the change in strategic plan, the Bank was focused on its products and services, and management targets are in terms of the quantity of products and services the Bank has to sell and that customers will buy. This may have resulted in, for example, many bank accounts with very low balances that do not allow the Bank to earn an acceptable return on its investments in office space, human resource development, and technology. With the new focus on customer relationships, there is a change in skill requirements for the workers of the Bank. In the past, a teller only needed to know how to count the cash, place it in a drawer, check the paper forms, and press some buttons on a machine to produce a receipt. Now, with a new focus on high-value added products and services as part of its customer-focused strategy, the Bank's workers have to develop a comprehensive knowledge of financial services like pricing of loans for homes and businesses, the best combination of investments in stocks, commodities, bonds, property and other real assets, the principles of risk and return, and all other types of financial investment instruments that should all comply with Shari'a principles. When the new customer focus plan was implemented, bank workers had to learn how to sell and should be familiar with technologies that increase productivity and allow them to help customers make investment and banking decisions. Technology is a major factor in the last ten years. The upgrading of the employment record system means that workers are monitored closely with the use of modern technology. This resulted in workers having to develop their sense of discipline, coming to and leaving work on time, meeting work productivity measures in terms of revenues per employee or transactions per hour, recording customer contacts through the telephone that allows faster and more reliable feedback for satisfactory or poor performance, and monitoring the linkages across customer accounts, loans, mortgages, and investments. The Bank has divided its markets into different segments: Individual Solutions (8 services and 6 packages) that includes Private Banking (4 services), Business Solutions (3 products), SABB Takaful (insurance), and SABB Investments. SABB, like most other banks, are targeting wealthy individuals and small business clients who may have access to capital markets. By giving customized service and financial advising, SABB entered into the world of relationship banking characterized by giving the client a single, broadly skilled banker to serve all the client's financial needs. SABB uses a relationship strategy to increase the number of high-end accounts and revenues from these accounts by providing wide services. This results in more satisfied repeat customers, which is more important in the long-term for the Bank instead of short-term high volume sales to a mass market through price incentives. In the past, relationship banking was used for corporate business clients but several banks like SABB are applying it to retail banking. This is easier by developing insurance and investment products that allow the Bank to convince clients to deposit most of their funds in one bank instead of depositing it in several banks. Relationship banking changed the work organization of SABB. In the relationship banking approach, skilled bankers who sell different products to repeat customers use branches as the focal point to sell a wide range of financial services. The shift is from an assembly-line model to a "case management" model where the Bank gives each customer a single, broadly skilled employee (Davenport and Nohria 12). With the help of new technology, private bankers have access to all product and customer information. Another effect of a more customer focused strategy is the growing number of women employees in the Bank, not only to take care of the Ladies Branches as part of market segmentation, but also because of the shortage of skilled workers for the banking sector. This has resulted in some branches allowing part-time work arrangements for women with other obligations (higher studies or family related). 12 percent of SABB's employees are women. In their Ladies Branch like the one at Al-Hassa Street, all the employees from the branch manager to the youngest employee are all women (SABB 2006: 12). The Bank needs highly skilled and well-informed private bankers among their employees, so the level of education of its workers is going up. This means that workers are more difficult to satisfy, have higher working requirements, and are perhaps more intelligent and questioning than previous employees under the traditional structure. The Bank's employment relationship has to change from that of a low-skill business to a knowledge organization where each worker is aware of his or her value and would therefore expect to be treated as a valuable asset. The Bank, in order to meet the needs of customers who need complex financial services and those who are satisfied with low-cost technology based transactions for basic financial services, reorganized its branch system from one based on geographic markets and branch networks to a centralized system with reduced operational costs and staffing. This creates and supports a united strategy for the entire Kingdom. SABB is now divided into functional and support groups serving the whole network. Back office functions were consolidated to reduce costs and increase productivity. The last change is in SABB's security systems to protect the bank, its workers, and customers. This resulted in stricter screening procedures before hiring a new employee. All these have had important effects on staffing, task content, and quality of jobs at the branch level, all of which are key factors of the employment relationship. Implications on Human Resource Management There are a number of implications for the practice of Human Resource Management (HRM) at SABB resulting from changes in employment relationships arising from changes in marketing focus, technology, and security. In a company like SABB, training has a more important role because of the need to de-skill (remove an obsolete skill), up-skill (learn a better way of performing a task), upgrade (learn new skills for new tasks), and retrain (for a new job, for example, from teller to salesperson). Developing new financial products and services also requires that private bankers or salespeople learn how these products and services work before they can sell it to clients. This will require studying all the possible questions and concerns of clients so that these could be addressed. One report highlighted the fact that in one year, the bank's staff attended a total of "21,551 man-days of internal and external training, including programs in Islamic banking and finance" (SABB 2005: 12-14). The HRM at SABB must encourage all staff to obtain accreditation in Islamic banking and finance and professional accreditation in their chosen area of interest, be it banking, finance, or investment. This will satisfy the clients of the Bank that their private bankers are competent and qualified to give advice on investments and that their funds are properly managed. Career planning is another implication on SABB's HRM policies. As the quality and value of its employees improve, it will be more challenging to get them to stay. Good people are always in demand to be employed, not only in the Kingdom but also in other developed countries, so SABB's HRM has to look for ways to help employees achieve their full potential. This would require developing programs on employee development, talent management, management techniques, job profiling on an on-going basis and regular compensation and benefits surveys to ensure that all employees are rewarded well for doing their best for the Bank. This can be part of the Bank's HRM program of motivation and incentives to get maximum effort, productivity, and results from its employees. Combining cultures - bankers and technology people - is another challenge the Bank has to address through its HRM programs. While bankers are front-liners who are pressured to sell to clients, technology people are back-office support workers who provide the bankers the internal services needed to satisfy external customers. Both types of workers are important so helping them work together is important to avoid security and administrative problems and ensure confidentiality of customer information (account balances, transactions, personal details, etc.). HRM must plan parallel programs of training, career planning, and motivation and incentive schemes for the technology workers. Lastly, HRM must develop a management development program that will meet the unique requirements of SABB: the need for new products and services, its plans to grow and expand together with the Saudi economy, and to keep its status as the number one bank in the Kingdom. All of the Bank's accomplishments to this day make it a good model for other banks in the region to follow. SABB can continue being the premiere financial institution of its kind in the Kingdom and in the world only if it can continue to improve itself from inside, instead of relying on factors outside itself like a business crisis. HRM can contribute to this goal by effectively managing the Bank's employment relationship. Works Cited Davenport, T. H., & Nohria, N. "Case management and the integration of labor." Sloan Management Review 35 (1994): 11-23. Keltner, B. "Relationship banking and competitive advantage: Evidence from the U.S. and Germany." California Management Review 37 (1995): 45-72. Morisi, T. (1996). "Commercial banking transformed by computer technology." Monthly Labor Review August (1996): 30-36. SABB. Saudi British Bank: 24th Annual Report and Accounts 2001. Riyadh, 2002. SABB. Saudi British Bank: 27th Annual Report and Accounts 2004. Riyadh, 2005. SABB. Saudi British Bank: 28th Annual Report and Accounts 2005. Riyadh, 2006. Read More