HR Structure in Public Sector Banks Creating a Pool of Frustrated Middle Managers

HR Structure in Public Sector Banks Creating Pool of Frustrated Middle Managers

Public Sector Banks (PSBs) in India have long been seen as attractive career destinations due to their job security, good benefits, and structured promotion processes. However, as the banking landscape evolves, an increasing number of middle managers in PSBs are feeling the frustration of stagnation. While early career growth is often rapid, many employees find themselves stuck at mid-management levels, unable to progress further. This phenomenon is primarily due to the rigid hierarchical structure and promotion process that fails to adapt to the changing dynamics of the industry.

Understanding the Hierarchical Structure of PSBs

PSBs in India follow a well-defined hierarchical structure, with seven scales of career progression:

1. Scale I: Assistant Manager (Probationary Officer)

2. Scale II: Manager

3. Scale III: Senior Manager

4. Scale IV: Chief Manager

5. Scale V: Assistant General Manager (AGM)

6. Scale VI: Deputy General Manager (DGM)

7. Scale VII: General Manager (GM)

Traditionally, promotions were a mix of seniority, tenure, and performance, offering employees a steady progression every 5-6 years. However, the landscape has shifted, and the early career promotion process has accelerated, allowing officers to move up to Scale IV in just 12-14 years. This initial rapid rise is followed by long periods of stagnation, with limited vacancies in senior roles, creating frustration among middle managers.

The “Middle-Manager Trap”

The “middle-manager trap” is a situation where employees experience accelerated early promotions but find themselves stuck at mid-management levels for extended periods. This issue arises from a combination of factors:

• Rapid Early Promotions: Government policies aimed at rejuvenating the workforce have led to rapid promotions from Scale I to IV, often within a decade.

• Limited Senior Positions: There are fewer senior positions (AGM and above) compared to junior and mid-level management roles, causing a bottleneck for promotions.

• Rigid Promotion Criteria: Promotions to senior positions are based on stringent criteria, including performance evaluations and interviews, with seniority playing a major role. This often leaves capable middle managers waiting years for the next promotion.

• Lack of Lateral Opportunities: PSBs have a rigid generalist career path, offering little opportunity for employees to move laterally into specialized roles or departments, unlike private sector banks.

This combination of factors creates a frustrating scenario for middle managers who are ready for the next step in their careers but are unable to progress due to the structural limitations of the promotion process.

Impact on Public Sector Banks

The growing frustration among middle managers in PSBs has significant implications for the banks themselves:

1. Lower Employee Morale: Stagnation at mid-management levels leads to lower employee morale. Demotivated middle managers often lose their enthusiasm for driving innovation, mentoring younger employees, and effectively managing teams.

2. Decline in Productivity: The lack of career growth opportunities can reduce overall productivity. Middle managers are critical for the smooth functioning of banks, but when they feel stuck, they are less likely to be proactive and innovative.

3. Attrition: Historically, PSBs have seen low attrition rates, but in recent years, there has been a rise in mid-career exits. Frustrated with the lack of career progression, many talented middle managers are leaving for better opportunities in the private sector, where promotions are performance-driven and lateral moves are more common.

4. Resistance to Change: The banking industry is evolving rapidly, with private banks and fintech companies adopting new technologies and practices. However, demotivated middle managers in PSBs may be resistant to these changes, slowing down the bank’s ability to modernize and compete effectively.

Comparative Insights: Private Sector Banks vs. PSBs

In contrast to PSBs, private sector banks have a more flexible and dynamic promotion process:

• Performance-Driven Promotions: Promotions are primarily based on performance metrics, leadership potential, and contribution to business goals, rather than seniority alone.

• Lateral Career Opportunities: Private sector banks allow employees to move laterally between departments or into specialized roles, keeping career paths dynamic and preventing stagnation.

• Specialized Career Tracks: Employees can choose specialized roles, such as risk management, digital banking, or investment banking, allowing for more focused career growth.

• Frequent Promotions: Private sector employees typically receive promotions every 2-3 years, providing a steady and predictable career path.

This flexibility in career progression, combined with performance-based promotions, ensures that private sector employees remain motivated and engaged, reducing the likelihood of frustration.

Recommendations for Reform in PSBs

To address the frustration among middle managers, PSBs need to consider significant reforms in their HR policies and promotion processes:

1. Redesign the Promotion Framework: The current promotion structure needs to be revamped to ensure balanced career progression throughout an employee’s tenure. Introducing more frequent but less accelerated promotions could provide a more sustainable career path.

2. Create More Senior-Level Positions: By expanding the number of senior-level roles or introducing specialized leadership positions (e.g., heads of digital banking, risk management), PSBs could accommodate more middle managers, reducing the bottleneck at Scale IV.

3. Implement Lateral Career Moves: Providing employees with opportunities to move laterally into specialized roles or departments could help keep their career paths dynamic and reduce frustration.

4. Employee Development and Engagement: Regular training programs focused on leadership, innovation, and strategic thinking can keep middle managers motivated and prepare them for future roles.

5. Transparent Promotion Policy: Clear and transparent promotion policies, with a focus on merit-based advancement, will help align employee expectations and reduce discontent.

6. Introduce Career Flexibility: Offering job rotations, flexible assignments, or career sabbaticals can help middle managers rejuvenate and explore new opportunities within the organization.

The HR structure and promotion processes in PSBs, while effective in providing early-career growth, are inadvertently creating a large segment of frustrated middle managers. This discontent not only affects individual employees but also hampers the overall productivity and competitiveness of PSBs. By implementing key reforms and offering more career flexibility, PSBs can better manage the career progression of middle managers, ensuring a motivated and efficient workforce capable of driving the bank forward in a rapidly changing financial landscape.