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What the PNB scam reveals: The need for Human Resource management in India’s bureaucracy

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Worldwide, there has been a shift from ‘personnel’ to ‘human resources’, and focus on performance development, appraisal systems, career and employees’ professional development.

As the aftershocks from the Punjab National Bank fraud continue to reverberate, there are many questions about the sorry state of public sector banks. But managerial deficiencies in the public sector banks are symptomatic of a much deeper problem plaguing the public sector writ large: the weaknesses – and indeed the virtual absence – of the Human Resource (HR) function across a wide swathe of the public bureaucracy.

The personnel function within the bureaucracy in India is a minimal one, limited largely to hiring employees, paying them salaries, and dealing with benefits. Public attention is obsessed with the first, whether in the form of different qualifying exams or quotas for different social groups. What should be the mere starting-point – entry – is for all practical purposes the end-point as well.

Even more, this attention is largely directed at the All India Services with little to no attention on where the bulk of public employment occurs—at the state level. The sorry state of State Public Service Commissions is a testament that even at the starting line, there is ‘motivated disarray’ since that allows venality to slip through silently.

But many parts of the state can barely manage even the basic personnel functions, manifest in high vacancy rates in almost all parts of the government. To some extent this might be deliberate, a facile solution to keep a lid on expenditures. One might presume that good management information systems would keep a track of vacancies by function and office, and flag impending vacancies due to retirements etc. well in advance. And if in the process a position or department is identified as unnecessary, it should be shut down. However, clearly, this does not seem to be occurring.

For any organisation, paying salaries to its employees is a basic personnel function. But in some states, teachers, health workers and other public employees have to wait for months before getting paid, due to parlous state finances and weak systems. While technology has been able to alleviate the latter, the former will always be hostage to the vicissitudes of public finance. More importantly, the structure of wages has been increasingly out of step with prevailing market conditions, with salaries at the lower level much higher and those at senior levels much lower.

While the salary compression in the public sector is a worldwide phenomenon, and indeed the huge inequalities in the private sector is not an exemplar to copy, the reality is that in many crucial areas with a limited supply of talent, from surgeons to cyber-security professionals, the differences are too stark to attract good talent.

While there is at least a system-wide process to examine salaries and benefits in the central government, via the periodic reports of the Pay Commission, the states have no such mechanism, choosing, for the most part, to automatically link their employees’ salaries to the central pay commission. As a result, they seldom systematically examine how many employees they need, for what purpose, with what skills, and at what levels. The trend has been to simply freeze hiring and switch to contract labour, which is paid a fraction of the permanent employees, and hence unsurprisingly spend so much of their time trying to become ‘permanent’.

But for those within the system, there is another yawning lacuna: performance metrics that are tied to career progression. In a system where age is the natural escalator, and fealty to a politician the supernatural accelerator, the incentives for performance are not exactly strong. This is, even more, the case since exit other than retirement is deemed unnatural. If even the human body can adapt to limited intake but is poisoned rapidly if it cannot expel its waste, the bureaucracy can hardly be expected to be immune if the system husbands its waste like a miser hoarding his gold.

The personnel departments in the central and state governments are pitifully unsuited for the broader HR functions of the 21st century, which views an organisation’s employees as its biggest asset. Worldwide there has been a shift from ‘personnel’ to ‘human resources’, an acknowledgement of the value of employees as an organisational resource.

This broader view of HR puts employees as central to achieving an organisation’s overall objectives, and goes well beyond hiring to issues such as the design of work positions, performance development, appraisal systems, career and succession planning and employees’ professional development. The HR plays a critical role in helping establish the right organisational culture and climate in which people have the competency and commitment to better serve the ‘customer’– the public – and increase the effectiveness of the organisation.

The mindset in most public sector organisations in India is still rooted in the minimal century-old personnel function, instead of a strategic view of HR. Instead, in India the personnel ministries/departments are beset with the one task that they perform ceaselessly– transfers. For politicians, this is one of the biggest sources of patronage and nepotism, whose detrimental effects have been all too obvious, and the personnel department is the critical handmaiden for this purpose.

There is no unit within the government that is charged with performing the more broad-based HR functions. There is very limited expertise and almost no political will. Indeed, the political incentives are to keep the bureaucracy ineffective—why else would the public value politicians? There are few outside pressures either.

Activists incessantly press for more budgetary allocations for their causes, then chronically complain about poor implementation, but almost never press for a redesign of the innards of the State itself. Academics care about institutions as abstractions, not organisations where people matter. They will write papers about transfers of IAS officers, but that’s because data is available on the web, not because that’s what really matters.

Sadly, the HR function is the orphan in our understanding of what is needed to make a more effective State. And like Oliver Twist, if it does ask for more, it is unlikely to be forthcoming.

Devesh Kapur is Madan Lal Sobti Professor for the Study of Contemporary India and the director of the Center for the Advanced Study of India at the University of Pennsylvania.

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  1. I had worked in private industry for 5 years n now working in central government from last 5 years. …..

    Main difference is government organization does not have dedicated
    HR & Administrative department …..

  2. Devalla feels,firstly its an organized lapse,playing with public money.secondly, beurocrats,politicians,bank boards jointly have put the banking system on roads. Hr qualities are with human beings once they take up education,employment. They are responsible to society for their acts. Professionals its accountability. Its a failure and have to be tried? Auditors must keep their country in mind before selling ideas to corporates? Why not they be tried. Monitoring system has failed. The need of the hour in banking industry is new blood.

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