Report on Employee Retention Strategy of Eastern Bank Limited (Part-1)

EXECUTIVE SUMMARY 

Eastern Bank Limited (EBL) is one of the modern, fully online and technologically superior private commercial Banks in Bangladesh. Eastern Bank markets a wide range of depository, loan & card products. These products include different types of Savings & Current Accounts, Personal Loans, Auto Loan, Debit Card, Pre-paid Cards, Internet Banking, Treasury, Syndication, Corporate Banking and SME Banking services through a network of branches & centers countrywide.

EBL was formed as a public limited company in Bangladesh with primary objective to carry on all kinds of banking business in and outside Bangladesh.  The bank was formed on August 08, 1992. It commenced its business with four branches from 16 August 1992. The authorized capital of the Bank is Tk. 3300 million. The paid-up capital the Bank is Tk. 1,035 million.

At present, the bank has 34 branches throughout the country with about 1300 employees. The existing Board of Directors is 10. Mr. Mir Nasir Hossain is the Chairman of Board and Mr. Ali Reza Md. Iftekhar is the Managing Director & CEO.

For the financial year 2008, Credit Rating Information and Services Ltd. (CRISL) has upgraded the rating of Eastern Bank Ltd. to A+ from A rating in the long term and reaffirmed ST-3 rating in the short term. The above rating has been awarded on the bases of the bank’s good fundamentals such as good capital adequacy, good non funded earnings, good asset quality, good financial performance experienced top management and developed ICT.

It has been seen that up to June 2008, the operating profit for EBL has increased from the previous year which is 33.86% and the profit after tax for EBL is BDT 531.44 million. In the year 2007 after tax profit was BDT 232.33 million which has increased in a greater extent for the year 2008. Beside Earnings per Share (EPS) has also increased from TK. 21.33 to Tk48.79. This clearly indicates the growing performance of EBL during 2008. Nonperforming loan of EBL has been decreased from 4.31% to 3.50% which is a very good indication of the financial performance of EBL for the year 2008. The Return on Equity (ROE) has increased from 7.15% to 13.35%.

In the year 2008 (up to June 30), EBL experienced an excellent growth in its balance sheet. The total amount of loans and advances has increased from BDT 30,961.80 million to BDT 36,616.91 million. The total amount of deposit has increased from BDT 30,091.77 million to 35,741.55 million.

Despite of the excellent growth of the bank, EBL experienced a considerable percentage of employee turnover rates. And here comes the necessity of retention program for any organization. A comprehensive retention management program must be built on accurate information about why people are leaving a particular organization. In the absence of such information, wrong conclusions may be drawn about the causes of departure and ineffective means to combat it adopted.

Retention management strategy is quite necessary for any organization with a view to reducing the frequent employee turnover rateand to motivate the existing employees to be more goal-oriented. If the employee turnover rate is very frequent in any organization, it faces some problems as the duties and responsibilities of the departed employees go to the subordinates creating extra work pressure for them. Beside this an organization losses some training amount invested for the departed employee as well as the overall company reputation decreases with employee resignation. To hire and recruit a new employee is time consuming and costs the company money. So, in order to reduce the above problems and motivate the existing employees to achieve their goals, the need of an effective retention management program for any kind of organization is quite important.

The employee turnover rate for EBL in the year 2008 was 22% which grabbed the attention of Management Committee to focus on effective retention strategy. It has been found that due to a number of reasons the employees are leaving EBL. Among them the most reasons were getting better job in terms of career advancement and better compensation packages against the current job. Beside these, there were some other reasons for turnover including monotonous job, leaving for higher studies, deprivation, medical/health reason, internal politics, less scope for career advancement, retirement, leaving the country for abroad as an immigrant etc.The majority of employees who left the organization were recruited on contractual basis.

After conducting a survey among the resigned employees to find out the reasons behind their resignation a number of important issues have come front. About 57% resigned employees had excellent relationship with their line manager or immediate supervisor. Co-operation, friendliness and respectfulness of colleagues in respective department and other departments were excellent toward the resigned employees in EBL. According to the most of the resigned employees job environment was sound, conducive and favorable. Job security in EBL is quite high and fully secured for an employee if he/she does not commit any offensive work that violates the code of conduct or treated as misconduct as per the policy of EBL. It is also dependent on the performance and honesty of an employee and the compliance with the process and procedures of EBL.

Some dissatisfaction have also come front regarding the fairness in distributing job responsibilities in EBL and with the rigidity of working hours. Beside these the employees who are working on the contractual basis are somewhat dissatisfied with their consolidated pay and the tenure to be recruited as a permanent employee of EBL.

Considering the above issues EBL has already changed the job dimension to create internal motivation among the employees.  Beside this for the year 2009, EBL is going to conduct a salary survey among all the employees and based on the recommendations of the survey, the existing salary structure would be revised. A clear goal-oriented career path is going to be set-up for contractual employees in order to reduce the turnover rate among them. The bank also implementing internal job rotation for eliminating monotony of doing same job and providing an opportunity to gain new experiences, initiating internal job search in order to build up in-house talent in EBL reviewing performance bonus and increment and introducing policy regarding recruitment & selection, MTO, talent hunt and internship policy those are waiting for Board of Director’s approval.

Though EBL is not a high payee organization compared to market leaders, the excellent and open door work environment and totally performance driven career advancement opportunity have made many of the people to be a wining member of EBL. This is the key success factor of EBL.

1.0 INTRODUCTION

The role of commercial banks in the economy of our country is inevitable. These banks are one of the major sources of funds for individuals, small and medium sized enterprises and for many other organizations. These banks are also accelerating the export-import businesses in Bangladesh through opening L/C, dual card service (VISA, debit and credit card), providing export promotion funds and other necessary assistance. In a nutshell, our commercial banks are offering full range of consumer, corporate, international trade, foreign exchange, lease finance and capital market services in Bangladesh.

Eastern Bank Ltd. is one of the leading banking institutions in private banking industry providing mainly corporate banking services to flourish its business as well as to be a profitable one. The bank has different divisions like HR, Corporate Banking, Retail Banking, Service Delivery, Credit Risk Management, ConsumerFinanceCenter, Card Division, Treasury, NRB, etc.

Human Resources Department of Eastern Bank Ltd. is divided into three major areas which are recruitment and selection, training and development and compensation and benefits. These divisions are responsible for the recruitment of eligible employees, arrangement of different training for the employees both in home and abroad, providing compensation benefits including salary, festival bonuses, leave allowance, loan for internal employees, etc.

Employee turnover is a common scenario in any organization. There are many reasons for resignation for an employee from his/her existing organization. These may include many issues like getting a better job in terms of better compensation and better career advancement opportunity in other organization, dissatisfaction with current salary structure and other compensation packages, bad relationship with supervisor and conflict with the colleagues, rigid work environment and heavy work load, internal politics, sexual harassment, going abroad for higher study, leaving the country for abroad with family etc. Resignation of an employee initially creates some problems for organization until the vacant position is filled up by another employee. As a result of resignation the job responsibilities of the resigned employee goes to the subordinates that create extra pressure for them ultimately increasing job stress and reducing job performance for them. Yet, sometimes resignation creates some opportunities for the organization by hiring new talented employees, creating promotion opportunity for an existing employee, replacing with junior employees who cost low etc.

Having those advantages and disadvantages of resignation an organization should always implement effective retention strategy in order to motivate and retain employees as well as for the survival of the organization.

1.1BACKGROUND OF THE REPORT

Any academic course of the study has a great value when it has practical application in the real life. Only a lot of theoretical knowledge will be little important unless it is applicable in the practical life. So we need proper application of our knowledge to get some benefit from our theoretical knowledge to make it more fruitful when we engage ourselves in such field to make proper use of our theoretical knowledge in our practical life. By considering the above things, Internship Program has been designed for every student after the successful completion of academic courses.

As an Intern of Human Resources Division in Eastern Bank Ltd. the report has been prepared in order to analyze the employee retention management strategy of EBL as to find out the reasons of high employee turnover in EBL and EBL’s strategy to motivate a and retain its current employees. It has helped us to understand the reasons for employee turnover and to propose some ways to implement an effective retention management strategy for the future success of the organization.

1.2OBJECTIVE OF THE REPORT

The report has been prepared with a view to achieve a number of objectives. The objectives of the report have been broken down in the following ways:

1.2.1 Broad Objective:

•   To analyze the employee retention strategy of Eastern Bank Ltd.

1.2.2 Specific Objectives:

•   To identify the causes of high employee turnover in EBL.
•   To identify the employee turnover rate in EBL.
•   To identify the strategies of EBL to motivate and retain employees.
•   To propose some ways to increase the retention rate and prevent high employee turnover.
•   To recommend for the implementation of an effective employee retention strategy in EBL.

1.3SCOPE OF THE REPORT

The report has been prepared only on the employee retention strategy of Eastern Bank Ltd. This has been done to find out the reasons for high employee turnover from EBL and EBL’s strategy to motivate and retain its current employees. The report has only covered the above issues.

1.4METHODOLOGY

The report has been prepared following both qualitative and quantitative ways for which data and information have been collected from both primary and secondary sources.

1.4.1Type of Research:

As the questionnaires have been designed following both dichotomous and likert scales, the report has become both qualitative and quantitative in nature.

1.4.2 Kind of Information:

Both primary and secondary data have been collected to prepare the report.

1.4.3 Data Collection Method:

1.4.3.1 Sources of Data:

►      Primary sources

•   Two structured questionnaires for both the resigned employees and the HR Manager of EBL.
•   Informal interview with the supervisor and concerned persons of HRD in EBL.

►      Secondary sources

•   Human Resources Manual
•    Job description, Code of Ethics, monthly reports, journals etc.
•   Financial report and relevant files & documents.
•   Company website.

1.4.3.2 Nature of the Questionnaire: Two structured questionnaires have been used to collect the necessary data and information. Both of the questionnaires have been designed following open ended as well as close ended questions.

1.4.3.3 Sampling Plan:

►      Target Population: Resigned employees of EBL

►      Element: Individual

►      Extent: Resigned employees from Head Office and all the branches of EBL

►      Sampling Unit: All the resigned employees of EBL from October 2008 to January 2009

►      Sample Size: A sample size of 30 resigned employees have been taken for interviewed

►      Sampling Technique: Non probability convenience sampling

1.4.3.4 Scaling Technique:

Both dichotomous and likert scales have been used to analyze the questionnaires that have been designed for survey. Dichotomous scale has become helpful to analyze the qualitative questions and likert scale has been used in order to analyze the quantitative questions.

1.4.5 Analysis Plan:

In order to analyze and interpret data and information that have been collected from two structured questionnaires, two types of scaling techniques have been used. One is Dichotomous scaling technique by which qualitative questions have been analyzed and another is Likert scaling which has been helpful to analyze the quantitative questions.

Beside this a number of tables, charts and graphs have been used to analyze and interpret the collected data and information as to get the actual result of the report.  Weighted average satisfaction level of different attributes of the employees has also been measured through proper scaling. Qualitative information has thoroughly been analyzed to find out the reasons for employee turnover from EBL and the any employee retention management strategy that EBL has or is going to launch. Finally, some recommendations have been provided to EBL based on the findings of the analysis to overcome the problems of frequent employee turnover and to implement an effective employee retention strategy for the future success of EBL.

1.5  LIMITATIONS OF THE REPORT

•   Inexperience in the field of banking and HRD.
•   Unavailability of resigned employees and sufficient written documents as required making a comprehensive study.
•   Because of the business of the key employees, necessary data collection from them was somewhat difficult.
•   Most of the Information relating to the HR is highly confidential, so there is limitation to access in depth information relating to HRD.
•   Limited time for internship program.

1.6 Work Schedule:

2.0 PROFILE OF EBL

Eastern Bank Limited (EBL) is one of the modern, fully online and technologically superior private commercial Banks in Bangladesh. Eastern Bank markets a wide range of depository, loan & card products. These products include different types of Savings & Current Accounts, Personal Loans, Auto Loan, Debit Card, Pre-paid Cards, Internet Banking, Treasury, Syndication, Corporate Banking and SME Banking services through a network of branches & centers countrywide. Eastern Bank has its presence in major cities/towns of the country including Dhaka, Chittagong, Sylhet, Khulna and Rajshahi. Tracing its origin back to 1992, EBL is serving the individual and corporate clientele alike with remarkable success offering innovative banking services since then. Here is the brief profile of EBL:

• EBL was formed as a public limited company in Bangladesh with primary objective to carry on all kinds of banking business in and outside Bangladesh.
• The bank was formed on August 08, 1992.
• EBL commenced its business with four branches from 16 August 1992.
• The authorized capital of the Bank is Tk. 3300 million.
• The paid-up capital the Bank is Tk. 1,035 million.
• Address of Head Office of EBL: Jiban Bima Bhaban 10, Dilkusha C/A, Dhaka-1000

At present, the bank has 34 branches throughout the country with about 1300 employees. The existing Board of Directors is 10. Mr. Mir Nasir Hossain is the Chairman of Board and Mr. Ali Reza Md. Iftekhar is the Managing Director & CEO.

2.1 Brief History of EBL

The emergence of Eastern Bank Limited in the private sector is an important event in the banking industry of Bangladesh. Eastern Bank Limited was formed on August 08, 1992 and commenced its business as a scheduled bank with effect from August 16, 1992. EBL started its operation with one Head Office, two branches one in Dhaka and the other one in Chittagong. Its shares are listed with Dhaka and Chittagong Stock Exchange(s) Limited and are being quoted in the market regularly.

One of the objectives behind creation of this new bank was to give effect to the bank of Credit and Commerce International (Overseas) Limited in Bangladesh (Reconstruction) Scheme, 1992 framed by the Bangladesh Bank under section 77(4) of the Bank Company Act. EBL is listed in the Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. Currently the bank has 34 branches, 26 own ATMs, 65(91-96) shared Q-cash ATMs (excluding ours) and 5 Bills pay machines across the country. EBL also has 68, 772 Debit Cards (first of its kind in Bangladesh), 1,228 Cool Cards and 5,845 Lifestyle Cards. The Bank has a network of 34 branches on December 31, 2008.

2.2 VISION of EBL

To become the bank of choice by transforming the way they do business and developing a truly unique financial institution that delivers superior growth and financial performance and be the most recognizable brand in the financial services in Bangladesh.

2.3 Mission StatementS

• We will deliver service excellence to all our customers, both internal and external.
• We will constantly challenge our systems, procedures and training to maintain a cohesive and professional team in order to achieve service excellence.
• We will create an enabling environment and embrace a team based culture where people will excel.
• We will ensure to maximize shareholder’s value.

2.4 Objectives of EBL

Maximization of profit along with the benefits of employees is the main objective of the bank. In addition, the other objectives are:

• To be one of the leading banks of Bangladesh in terms of ROE and ROE
• To be the market leader in high quality banking products and service.
• Achieve excellence in customer service through providing the most modern and advanced state-art technological in the different spheres of banking
• Cater to a broader and differentiated segment of retail and wholesale customers.
• To grow its credit extension service to the commercials as well industrial sector;
• To increase its diversification of loan portfolio and geographical coverage
• To curd present operating expenses further so as to increase earning before tax
• To reduce the burden of nonperforming assets

2.5CAPITAL STRUCTURE AND SHAREHOLDERS OF EBL

In terms of Article 4 of Articles of Association and Clause 4 of the Scheme, the Authorized capital of the Bank (Initially) was Tk. 1000 million divided into 10,000,00 Shares of Tk. 100 each for subscription to the Government as “KA” Group, Financial Institutions as “KHA” Group and erstwhile BCCI depositors as Group as “GA” Group shareholders at the percentage of 20, 40 and 40 respectively but at present Authorized Capital of the Bank is Tk. 3300 Million. As per Clause 4(2) initial paid up capital was fixed at Tk. 600 million which was offered to the above groups of shareholders at the percentage mentioned above.

2.6 BOARD OF DIRECORS OF EBL

2.7 MANCOM MEMBERS OF EBL

2.8 MANAGEMENT HIERARCHY OF EBL

2.9 Organogram of HUMAN RESOURCES DIVISION

2.10 CREDIT RATING REPORT

Credit Rating Information and Services Ltd. (CRISL) has upgraded the rating of Eastern Bank Ltd. to A+ from A rating in the long term and reaffirmed ST-3 rating in the short term. The above rating has been awarded on the bases of the bank’s good fundamentals such as good capital adequacy, good non funded earnings, good asset quality, good financial performance experienced top management and developed ICT.