PROJECT REPORT ON

“Human resources management in India”

SUBMITTED
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR
THE AWARD OF DEGREE

MASTERS OF COMMERCE
By

NAME: Rachna Anil Vishwakarma

ROLL NO: 4977264

M.COM (SEMESTER IV)

S.I.W.S
N.R SWAMY COLLEGE OF COMMERCE & ECONOMICS
SMT. THIRUMALAI COLLEGE OF SCIENCE
337, SEWREE – WADALA ESTATE,
WADALA, MUMBAI – 400 031
MAY 2021

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 CERTIFICATE

S.I.W.S

NAAC RE-ACCREDITED B

This is to certify that Mr./Miss Rachna Anil Vishwakarma, a student of S.I.W.S.

N.R Swamy College of Commerce & Economics studying in MASTER OF
MANAGEMENT (Semester IV) whose project is entitled “ Human resources

management in India” in the academic year “2021-2022.” The information submitted is

true and original to the best of the knowledge and belief.

(Signature of Project Guide) (Signature of Principal)

(Signature of Vice-Principal) (Signature of External Examiner)

Date of submission: 10 May 2021

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 DECLARATION

I, the undersigned Miss / Mr. Rachna Anil Vishwakarma, here by, declare that the work

embodied in this project work titled “Human resources management in India” forms
my own contribution to the research work carried out under the guidance of DR. DEEPTI
SADVELKAR, is a result of my own research work and has not been previously submitted to
any other University for any other Degree/ Diploma to this or any other University.

Wherever reference has been made to previous works of others, it has been clearly indicated
as such and included in the reference. I, here by, further declare that all information of this
document has been obtained and presented in accordance with academic rules and ethical
conduct.

Name and Signature of the learner

Certified by

Name and signature of the Guiding Teacher

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 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous, and the depth is so
enormous.

I would like to acknowledge the following as being idealistic channels and fresh dimensions
in the completion of this project.

I take this opportunity to thank the University of Mumbai for having given me a chance to do
this project.

I would like to thank our Principal Professor (Dr.) USHA SUKUMAR IYER for having
provided the necessary facilities required for completion of this project.

I would like to thank our Vice-Principal (Self-financing) PROF.AYYAPAN IYER for his
moral support and guidance.

I would also like to express my sincere gratitude towards my project guide DR. DEEPTI
SADVELKAR whose guidance and care made the project successful.

I am also grateful to Dr. M.V. Vaithilingam, Visiting Faculty, SIWS College, Mumbai for
his valuable suggestions in view of necessary inputs for this project.

I am sincerely thankful to each and every person who directly or indirectly helped me in the
completion of the project especially, my parents and peers who encouraged and supported
me throughout this project.

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 INDEX

Chapter 1: Introduction

1.1 DEFINATION

1.2 INTRODUCTION

1.3 PURPOSE AND FUNCTION

1.4 HRM organizational objectives

1.5 ADVANTAGES OF HUMAN RESOURCE MANAGEMANT

1.6 CHALLENGES

1.7 TRENDS IN HUMAN RESOURCES MANAGEMENT

Chapter: 2 Research methodology

2.1 Objectives
2.2 Scope of the study
2.3 Limitations of the study
2.4 Significance of the study
2.5 Data collection
2.6 Techniques used

Chapter 3: Literature review

3.1 Definition and meaning and meaning of customer relationship management (CRM)
3.2 Importance of CRM
3.3 Components of CRM
3.4 Types of CRM
3.5 Techniques of CRM
3.6 Effect of CRM on customer satisfaction, customer benefits, customer profile, improving
CRM within a firm, and application of CRM in practice
3.7 Criticism on CRM

Chapter 4: Results and discussion

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Chapter 5: Conclusions and Suggestions

Bibliography

Appendix

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CHAPTER 1 INTRODUCTION

1.1 DEFINATION

Many great scholars had defined human resource management in different ways and with
different words, but the core meaning of the human resource management deals with how to
manage people or employees in the organisation.

Edwin Flippo

Human Resource Management as “planning, organizing, directing, controlling of

procurement, development, compensation, integration , maintenance and separation of human
resources to the end that individual, organizational and social objectives are achieved.”

The National Institute of Personal Management

(NIPM) of India has defined human resources – personal management as “that part of
management which is concerned with people at work and with their relationship within an
enterprise. Its aim is to bring together and develop into an effective organization of the men
and women who make up enterprise and having regard for the well – being of the individuals
and of working groups, to enable them to make their best contribution to its success”.

According to Decenzo and Robbins, “Human Resource Management is concerned with the

people dimension” in management. Since every organization is made up of people, acquiring
their services, developing their skills, motivating them to higher levels of performance and
ensuring that they continue to maintain their commitment to the organization is essential to
achieve organsational objectives. This is true, regardless of the type of organization –
government, business, education, health or social action”.

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1.2 INTRODUCTION

Human Resource Management is the process of recruiting, selecting, inducting

employees, providing orientation, imparting training and development, appraising the
performance of employees, deciding compensation and providing benefits, motivating
employees, maintaining proper relations with employees and their trade unions, ensuring
employees safety, welfare and healthy measures in compliance with labour laws of the land
and finally following the Orders / Judgements of the concern High Court and Supreme Court,
if any.

Human Resource Management deals with the management functions like planning,
organizing, directing and controlling

 It deals with procurement of human resource , training & development and

maintenance of human resource.
 It helps to achieve individual, organizational and social objectives

Human Resource Management is a multidisciplinary subject.

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  It includes the study of management, psychology, communication, economics
and sociology.
 It also deals with building team spirit and team work.
 It is a continuous process.

Human resource management as a department in an organisation handles all aspects of

employees and has various functions like human resource planning, Conducting Job
analysis, recruitment and conducting job interviews, selection of human resources, Orienting,
training, compensating, Providing benefits and incentives, appraising, retaining, Career
planning, Quality of Work Life, Employee Discipline, black out Sexual Harassments, human
resource auditing, maintenance of industrial relationship, looking after welfare of employees
and safety issues , communicating with all employees at all levels and maintaining awareness
of and compliance with local, state and federal labor laws.

The historical rule of thumb for Human Resource staffing requirements is one full-time
professional Human Resource person should be hired for every 100 employees. The actual
ratio for a business can vary depending upon factors such as the degree of HR centralization,
the geographic distribution of the employees served, the sophistication level of the
employees, and the relative complexity of the organization.

Amazon: Thinking of a crazy retail giant and leader, Amazon is what comes into the mind.
The company, which was primarily a bookseller, has established itself in nearly every
industry. Amazon is known for being one of the leading retail companies of the world which
educates, inspires and informs its customers regarding the products and services which sells
for various different companies. The company has established various stores across the world
in the biggest countries like Germany, United States of America, Canada, Japan and France.
The ability of operating virtually provides the company with the opportunity of offering a
wide range of products and services including music titles as well as books. Amazon is
known for selling almost every kind of consumer product ranging from clothes, fashion
products, shoes, bags, accessories, jewelleries, electronics, toys, home decor, etc.
(Bloomberg, 2019a). The organization allows its clients for doing product listing on its

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website. The clients are required for using correct subject information and title concerned
with the relevant product. Then, the outcomes of the subject information in this human
resource management in amazon company are posted on the basis of availability and
popularity. Besides, the results are also posted regarding the concerns of the subject
information's relevance.

For the ones who wish to post music files and songs are required for giving the input of the
correct keyword of the subject information and artist or album name. Furthermore, the
organisation also utilises various different search tools for helping its clients in their hunt for
different products. Amazon is known for working with various different companies,
magazines, studios and interest groups in order to ensure that all their products are available
online (Ritala, Golnam and Wegmann, 2014). The partners of the company are assisted in the
promotion and selling of their products to the customers. The company packs and dispatches
the products on the behalf of its partners. Besides, Amazon also performs customer service
responsibilities as well as billing duties on the behalf of its business partners, post to which it
provides weekly and monthly reports regarding the same kind of activities. The firm has been
able to generate average annual revenue of US $232 billion, while having a total of 647,500
employees (as on 2018) in its workforce across the world (Bloomberg, 2019a).

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1.3 Purpose and function of HRM

In this amazon human resource management it is discussed that the human resource
management plays a significant role in the success of any business organisation of
company (Snell, Morris, and Bohlander, 2015). Amazon understands such
significance of having the necessary talent for performing various responsibilities
and duties for the success of the company. Amazon's strategic objectives are closely
aligned to the strategic objectives of the HR by the human resource management
function of the firm. The company believes that employees and workers are one of
the greatest contributing factors towards the success of any organisation. In the case
of Amazon, companies committed towards improving and enhancing it skills of the
workforce by the means of efficient development and training programs. As such, the
self actualization and job satisfaction of the employees in staff members would be
enhanced. It was been discussed in this human resource management in amazon
company primary functions of human resource at Amazon includes selection and
recruitment, training and development, compensation management, maintenance of
good relationship among employees and ensuring legal and ethical compliance
(McDonald and Hite, 2015). These functions help in promoting workplace
environment for the employees that is productive and helps the employees and
workers in performing up to their potential. The human resource functions of the
company have held the employees in maintaining good attitude and moral standards
within the company. The purpose of the human resource management at Amazon is
promoting cordial and self respect working relationships with the workers and
employees. The HR managers of the company work towards the satisfaction of the
individual needs and requirements of all the workers by providing them with a
coordinating environment. The workplace environment of any business should help
in promoting the group as well as individual performances within the organisation.

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Workplace planning

A set of procedures which is utilised by the human resource management of an organisation

for managing the workers and obtaining the best potential out of them refers to Workforce
planning (Othman, Bhuiyan and Gouw, 2012). The primary goal of workforce planning of an
organisation is ensuring its success in the long run and realising maximum amount of profits
and revenue from its operations. Amazon utilizes operational as well as strategic planning of
workforce for achieving its long term as well as short term objectives (Adogla and Collins,
2014). The planning of the strategic workforce of the company helps in forecasting and
planning for its workers in a way which helps in ensuring that the right talents are hired at the
right time for performing the appropriate duties and responsibilities for achieving the
organisational objectives and goals (Armstrong and Taylor, 2014). Strategic workforce
planning is utilised by Amazon for responding to the changes of the future within the
workforce. The company also uses planning of the operational workforce where the
deficiencies and issues which occur within various operational levels are mapped or corrected
(RetailDive, 2017).

Performance management

As discussed in this human resource management in amazon company that the management
of performance of Amazon is tailored for the specific requirements of the company.
Strategies of performance management of the company help in focusing upon alignment of
the performance with the significant objectives and goals. The strategies of performance
management are utilised by Amazon which help in promoting the necessary behavior within
the workers. The policies of the company are quite flexible and relevant support to the
Employees and workers for enabling them to achieve the objectives and goals of the
organisation. The system of reward management used by Amazon helps in enhancing the
motivation and retention of employees, and improves their performances. Bonuses, health
insurance covers and pension benefits are provided by the organization for motivating its
employees (AmazonJobs, 2019).

However, there were several reports from the media in the year 2008 regarding harsh
treatment of the employees of the company (Forbes, 2015). Although the allegation was

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nicely excited by the media, the response of Amazon was appropriate. A proper structure
where democratic representation of the employees is implemented should be established
within the organization. This would help in the promotion of the good relationship between
the employees and the management of Amazon.

Microsoft

Microsoft is known for being one of the ideal places for working. The organization has won
various awards for its commitment towards diversity, flexibility within working arrangements
and innovations. Microsoft has always been a market leader in the context of its revenue. The
company has been able to generate average annual revenue of $15 billion, while having a
total of 80,000 employees in its workforce across the world (Bloomberg, 2019b). Such
statistics make the company one of the biggest and best technology firms of the world.

It has been inferred in this human resources management in microsoft employees of the
company have the access to most of the existing resources, from periodical libraries, to
source code libraries and intranet to research laboratories. The work of the manpower of
Microsoft is considered to be on technology’s cutting-edge and personally challenging.
According to the belief of the company, the employees are provided with whatever
technologies and tools they require for the achievement of the best possible outcomes; and
the employees of the company are expected for creating entertainment and software products
which can potentially be sold for millions of copies across the globe. At most of the locations,
the office campuses of the company are known for being the benchmark of technological
hubs, with forested trails, fir trees, basketball courts, shuttle buses, and even snow-capped
mountain vistas for the employees to use.

It is observed in this human resources management in microsoft primary recognition of the

employees of Microsoft is known as an intellectual fuel and the workers are provided with
numerous beneficial resources and plans. Such aspects have been designed for retaining the
employees. The Chief of Human Resource of the organization, who joined in 2005, began
reshaping the HR strategies of the company for making their more customized and innovative
for individual employee requirements. As a Human Resource perspective, the primary
emphasis was project the company as one that is driven by its employees. As a business
organization, the company offers a high amount of flexibility to its employees and workers in

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the form of flexible benefit plans and flexible working arrangements. These practices of the
company have widely been considered as one of the best employer and HR practices by
companies and employers.

Human resource strategy

According to this human resources management in microsoft performance cultural model has
been adopted by the Microsoft Corporation as the best approach for driving its success. All
the important human metrics have been measured and categorised in accordance with the
growth pyramid. The amount of investment made by the company in the internal and external
surveys is quite substantial can put raise the company in the form of a leader in this context
across the whole industry. In the contemporary times of organisational restructuring and
reception, human resource is expected by businesses for understanding and manpower needs
of the organisation, helping in the development of strategic plans in the context of the
employees, identification of issues and problems related to talent before the business of the
organisation is impacted by them and very importantly, identification of new and emerging
business strategies. At the Microsoft Corporation, the Human Resource Department is made
responsible and accountable for the maximization of the value of its manpower asset for
driving the success of the organisation. The core functions of human resource managers, and
the practices and procedures of the same have been divided among the structures of the
vertical tower for making sure that the flow of information is easier and transparent. The
functions which irrelevantly independent also help the business needs of Microsoft to be
more closely measured and aligned from the perspective of a functional unit. The
management of Microsoft often refers its organizational cultural as facilitative. The company
has made significant amount of investment towards the development of its workers and
employees and provides high amount of support for the optimum career growth of its
workforce.

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Recruitment and selection

Recruitment policy of Microsoft is dependent upon its belief of hiring the right people greater
important than hiring only for filling job positions. As the company expanded, entertaining its
old and basic principles however had to bring a few changes in its methods when the number
of employees required within the organisation could not be source from colleges and
universities only. Practices of recruitment of the company continue to remain active instead
of being passive. The company believes in head hunting the best level of staff. More than 300
recruiting experts help in finding, monitoring and recruiting search staff from other
organisations. The right type of people is preferred over the right type of level of skill during
recruitment of employees within the company.

Employee satisfaction

Microsoft attempts at catering the requirements of its workers and employees by recognising
the fact that majority of them are comprised of fresh college graduates. This is the reason
why Microsoft sets up its offices in the form of campuses instead of just parking space and
work space. The environment that is provided by Microsoft includes every individual
employee having the freedom of decorating their workspace according to their will.
Microsoft has been providing its employees with employee satisfaction by the means of
giving them the opportunity for development and growth. Employee satisfaction as afforded
by the company by the means of encouragement of horizontal transfers and encouragement of
the employees for developing themselves by changing jobs. The top level management of the
company is required for coaching the lower level of management and helping them in their
development and learning. Such practices have been designed by the company for increasing
the satisfaction and commitment of the employees towards the company, while maintaining
the same level of spirit which was present when the organisation was born. Three aspects of
tasks which impact the level of job satisfaction of an organisation are the tasks perceived
value, physical strain degree and job complexity. Such aspects are managed by Microsoft by

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making sure that the perceived value of the tasks remains high and by providing high
complexity to the high achievers. The communication of such high value takes place within
the organisation by the means of culture which has been maintained by the company since a
very long time.

Conclusion

It can be concluded from the human resources management in Microsoft and amazon human
resource management that an efficient human resource department not only acts in the form
of a business partner to the company, but also assists in the shaping of the overall business
and operational strategy of the firm. The manner in which the human resource practices and
strategies have been intertwined at Amazon as well as Microsoft is an instance of how
businesses of giant organizations are run with common vision and objectives and how these
organizations make money for their employees and investors. The amount of investment
which have been made by Amazon and Microsoft for their employees and how well the
cultures of work are aligned to the business strategies of the two organizations by their
human resource managers is clear from the results which have been posted by both the
companies, year after year. These are one of those companies which are envied as well as
admired by businesses, investors and even ardent rivals. The recent changes and alterations
which have taken place at both the companies, sometime due to recession, indicate towards a
move or plan which could potentially change the ways the companies are looked at. The
outcomes of these activities can be clearly observed only once the economy is placed back in
upward motion. However, in the current time period, the principles and practices which
Amazon and Microsoft stand by, can be acknowledged and admired in true earnest. The loss
of reputation and public image is a result of layoff exercises, however, a business
organization which aims at standing and surviving through such harsh times, must do
something significant and necessary which others might not have previously. HRM
assignments are being prepared by our human resource assignment help experts from top
universities which let us to provide you a reliable assignment help online service.

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 1.4 HRM organizational objectives

Below are 8 main HRM objectives with in-depth elaboration respectively:

 Achieve organizational goals

 Work culture
 Team integration
 Training and Development
 Employee motivation
 Workforce empowerment
 Retention
 Data and compliance

Achieve organizational goals

HRM function starts here. One major HRM objective is to fulfill organizational goals.
Utilizing human resources to achieve business requirements and goals is very important for
an effective HRM.
Organizational objectives include workforce handling, staff requirements like hiring and
onboarding, payroll management, and retirement. To succeed at the organizational objectives,
HR requires efficient planning and execution. Without a set parameter for goals and mission
and resources, HRM is incomplete. After you know your resources and planning at the place,
achieving HRM objectives is not so difficult.
Some more objectives are explained further.

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Work culture

When it comes to handling HRM effectively and following objectives, employee and work
environment are the prior factors. Work culture plays an important role in defining HRM and
business performance.
An HR manager needs to be active while calling for strategies to foster better work culture.
Automated activities like leave approvals, reimbursement request acknowledgment, etc. can
help you. Quick operations and empowerment to employees help in creating positive vibes at
the workplace. Developing and maintaining healthy and transparent relations among team
members and teams contribute to building a good example of a work culture. Adopting the
right solutions like employee management software can solve more than half of your job.
Small steps like short and sound onboarding processes can help build a good image of the
workplace.

Team integration
One of the prime roles and objectives of HRM is to make sure the team coordinates
efficiently. Easy communication is the need for teams at an enterprise. An HR here must
ensure a tool to assist in making the integration easier and smooth.
Proper connection between individuals is a must to ensure productivity. To make HR
management successful, you need to search for better integration portals to make data
availability easier for people. Functional objectives like team integration are to produce
streamlined operations and tasks.
A right tool like the self-service portal can bring employees closer to HR folks.
Training and Development
Workforce being effective and performing are two important and basic elements to work
upon for achieving your basic objectives at an organization. With proper training and
providing future opportunities, employees feel safe and organized.
Effective employment is highly dependent upon the training practices. Providing
opportunities to employees is one great step to ensure workforce management.
There might be difficulties such as planning, scheduling, training sessions, and evaluation of
each on-boards. To lessen the pain, solutions like training management software can help you

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with auto-reminders, easy scheduler, reporting, and tracking capability. The HR manager can
ensure effective training practice at the firm.

Employee motivation
The prime objective of HR folk is to keep things on the right path. Keep distractions and
negative vibes away. For this, the employees need to be attended to and kept motivated
throughout. How can HR motivate employees?
Give powers to them. Take their views on things. Involve them in weekly meets or decisions.
Even if it is a fresher, let them join. Keep the morale always high. Employee recognition like
yearly appraisal based on their performance can too help.
An automated feedback system for performance appraisal management can keep your
employees motivated and ensure productivity throughout the service. When the employees
are satisfied and fulfilled, nothing else can prevent you from losing your objectives and goals.

Workforce empowerment
Talking about employee motivation, nothing can work better than empowering them.
Empowering them with tools like ESS (employee self-service) portal can help save HR
efforts too.
With the portal, employees can themselves apply for approvals and track them through their
mobile phones. Be it leave request, generating payslip, checking PF account, remaining
leaves, upcoming holidays, manager details, or anything, HR intervention is least required.
Now, you no more need to knock on HR’s desk for small queries.
What else could empowering workforce take? How would you ensure the right workforce
engagement? Effective HRM measures can definitely help. Look for easy employee
management tips.

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Retention
Providing leadership qualities and opportunities, a healthy working area, and employee
retention are some prime objectives and deliverables of the HR managers. Keeping
employees retained and motivated needs to be a top priority for HRM.
Other than employee hiring, onboarding, and training cycle, keeping the employees retained
for long is the biggest challenge AKA objective of the HR people. It often occurs that
employees leave the organization within 2 months of onboarding. It can be due to ineffective
training management or a rough hiring process.
Employee experience needs to be carefully attended. Keeping your employees retained can
help maintain a good state of employee turnover. To keep it stable, the HR manager needs to
learn the best retention tips for business.

Data and compliance

Functional and organizational objectives also include managing company/ employee data and
managing compliances. Managing payroll compliances and keeping the company out of any
penalties or fine is a huge challenge for HR people and managers.
Even a small error or miscalculation can owe you huge penalties and even may lose respect.
When committing to tasks like employment and payroll, you need to be careful about laws
and regulations. The objective here is to keep any unwanted claims at bay for smooth
functioning.
Automated software like the HRMS system can help you keep errors at the side and leave no
window for owing any penalty from IRS. It is the responsibility of HR to follow IRS
guidelines and standards for effective employment at the company. Stay assured with all the
legalities.

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1.5 ADVANTAGES OF HUMAN RESOURCE MANAGEMANT

1. Secure Top Talent. 

Attracting industry-leading talent takes a big commitment. It requires time, energy and
finances. Businesses report that on average, it takes about 23 days to find the right candidate
for a job, but the best candidates are off the market in 10 days. If your business is more
technical or in a specific niche, this timeline changes. Once you find a qualified candidate,
you’ll still need to conduct interviews. If you don’t ask the right questions during this
process, you can end up hiring the wrong employee. This can have financial drawbacks of
$10,000 or more—depending on the length of time they were employed.
Instead of wasting time posting to irrelevant job boards and ads, you can work with
a professional employment organization (PEO) to help secure top talent. By defining your
company culture based on your mission, vision and values, you’ll attract strategic talent.
You’ll have access to industry-specialized expertise and insights to make informed decisions
more efficiently.

2. Stronger Onboarding

Even if you find the perfect candidate that will work well with your company, onboarding
can make or break their future. Your company’s onboarding process is how you make a first
impression on your new hire, welcome them to your company and prepare them for success
in their role. When handled poorly, onboarding can have adverse effects and set your new
employee up for failure. By working with a PEO, you’ll have access to expert guidance and
time-tested onboarding procedures—so your new employees can hit the ground running.

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3. Improve Employee Retention

Companies with high turnover rates tend to lose money and eventually, deter top talent. For
every employee that leaves and needs to be replaced, you’ll spend about 33% of that
position’s salary. Unfortunately, many small businesses don’t understand why the turnover is
occurring. Human resource management companies can help you understand the reasons for
turnover with a detailed analysis of compensation in targeted markets. While you might need
to increase the salary for certain positions to retain employees, you’ll save money in the long
run.

Strategic HR solutions from a qualified company can boost employee engagement,

performance and improve team building. Real-time feedback may uncover hidden issues, find
solutions to problems and make sure that your employees feel valued. By utilizing proven
performance management tools, you can transform your employees into productive and
effective teams. Team building can help your employees reach their full potential, which may
lead to increased company productivity and higher profits. And with continuing education
opportunities, you’ll give your employees resources they need to learn relevant information
and stay up to date on industry specifications.

Keeping your employees safe while they’re on the job is also an important facet of HR. By
utilizing risk mitigation programs and industry-specific assessments onsite, you may reduce
the likelihood of workplace injuries. If they do occur, you’ll have access to a strong workers’
compensation program.

4. Access to Big-Company Employee Benefits

Small businesses are often limited in their employee benefits packages, but when you team
up with an experienced PEO, your business’ size no longer limits benefits. You’ll receive
access to a variety of insurance carriers with great options for spouses and pets, plus perks for
employees. This will keep your current employees happy and help you attract industry-
leading talent. You’ll gain access to a broad range of health coverage and retirement plans as
well as voluntary benefits such as critical accident and illness policies, access to auto and
home policies, commuter benefits and more.

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TriNet is proud to partner with leading health insurance carriers that include access to
premium benefits beyond medical, dental, vision, life, disability, retirement and transit.
Not only can you offer more desirable employee benefits, you’ll have relief knowing that the
TriNet sponsored medical benefit plans comply with employee benefits regulations and
the Affordable Care Act (ACA). You’ll have expert support and guidance to navigate this
complex environment, a plan administrator to accept fiduciary responsibility and peace of
mind knowing that your medical plans meet coverage requirements.

5. Fewer Compliance Issues

There are potentially hundreds of individual rules and regulations with which HR
departments are required to comply. If you’re not trained in this area of expertise, staying in
compliance becomes a full-time job. You’ll need to ensure your company is in line with all of
the applicable rules and regulations that impact employment and employee relationships. This
includes everything from hiring, benefits, payroll and termination.
Even the smallest companies are required to uphold compliance regulations. If you only have
a few employees, this takes away valuable time and energy from running and growing your
business. By outsourcing your HR, you’ll be able to help protect your business and gain the
confidence that you have resources to help with the ever-changing employment-related
regulations and compliance obligations. Experts will be there to act as your HR ally and assist
with federal, state and local regulations while helping with certain employment- related
inquiries. They can also assist you to create a well-documented trail to help protect you if
legal issues arise.

6. Access HR Anytime, Anyplace

One thing that makes HR more difficult is the dependence on office-based resources to get
things done. By teaming up with an outside PEO, you’ll have access to a comprehensive HR
software platform with self-service and mobile tools that allow you to manage your HR in
real time. This allows you to save time and energy while gaining immediate access to the
insight you need to make the right decisions.
Your employees will benefit from an HR technology platform as well. They’ll be able to
view pay stubs, make changes to Form W-4s, enroll in benefits, update direct deposit info,

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request time off and more. This technological integration gives you access to the HR data you
need anytime, anyplace.

7. Help Save Time and Energy

One of the most beneficial aspects of partnering with an HRM company is the time and
energy that you may save. By having a thought leader for your HR requirements, you’ll free
up valuable time to grow your business and develop your products and services.

The first step in benefiting from HRM is making the decision. According to SHRM, 54% of
small businesses handle human resources internally, using a PEO with comprehensive HR
solutions will allow you to focus on company growth without the accompanying challenges.
By teaming up with an HR service provider like TriNet, you’ll be free to focus more on your
people and growing your business. To help free SMBs from HR complexities, TriNet offers
access to human capital expertise, benefits, risk mitigation and compliance, payroll and real-
time technology. Contact us to learn more about how your small business can benefit today.
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1.6 CHALLENGES

RECENT TRENDS AND CHALLENGES IN HUMAN RESOURCES

MANAGEMENT IN INDIA

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INTRODUCTION

Human resources management plays a vital role in the organization and gives much
importance, people are the most important resources in an organization. With the increase in
competition, locally or globally, organizations must become more adaptable, resilient, agile,
and customer-focused to succeed. And within this change in environment, the HR
professional has to evolve to become a strategic partner, an employee sponsor or advocate,
and a change mentor within the organization. In order to succeed, HR must be a business
driven function with a thorough understanding of the organization’s big picture and be able to
influence key decisions and policies. In general, the focus of today’s HR Manager is on
strategic personnel retention and talents development. HR professionals will be coaches,
counselors, mentors, and succession planners to help motivate organization’s members and
their loyalty. The HR manager will also promote and fight for values, ethics, beliefs, and
spirituality within their organizations. The management of HR is complex and problematic
because the individuals as workers hardly adapt or voluntarily embrace the objectives of the
organization. As individuals, the employees have needs, aspirations, motivations, desires and
interests which influence their behavior at work but unfortunately these objectives are
sometimes in conflict with the corporate objectives of the enterprise. In reconciling this
conflicting interests Human Resources Management and Planning are useful tools employed
in harmonizing the needs of the employees with the goals and objectives of the organization
on a continuous basis. In a nutshell, the primary task of HRM is to ensure that the
organization HR are utilized and managed effectively. HR practitioners are saddled with the
responsibility of designing and implementing policies and programmers that will enhance
human abilities and improve the organization’s overall effectiveness.

CHALLENGES OF HUMAN RESOURCES MANAGEMENT:

1. Recruitment and selection: Finding a suitable candidate for the job from a large number of
applicants is a basic problem for the human resource manager. They have to make suitable
changes from time to time in the selection procedure and see to it that the candidate is up to

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the mark fulfilling the job requirements. If required, the candidate should be provided with
training to get quality results.

2. Emotional and Physical Stability of Employees: Providing with the wages and salaries to
employees is not sufficient in today’s world. The human resource manager should maintain
proper emotional balance of employees. They should try to understand the attitude,
requirement and feelings of employees and motivate them whenever and wherever required.

3. Balance between Management and Employees: The human resource manager has a
responsibility to balance the interest of management and employees. Profits, commitment,
cooperation, loyalty, and sincerely are the factors expected by management, whereas better
salaries and wages, safety and security, healthy working condition, career development and
participative working are the factors expected by employees from management.

4. Training, Development and Compensation: A planned execution of training programs and

managerial development programs and managerial development programmes is required to
be undertaken to sharpen and enhance the skills and to develop knowledge of employees.
Compensation in the form of salary, bonus, allowances, incentives and perquisites is to be
paid according to the performance of people. A work or letter of appreciation is also to be
given, if some of them have done their jobs beyond expectations to keep their morale up

5. Performance Appraisal: This activity should not be considered a routine process by the
human resource manager. If employees are not getting proper feedback from them, it may
affect their future work. A scientific appraisal technique according to changing needs should
be applied and the quality of to should be checked from time to time.

6. Dealing with Trade Union: Union members are to be handled skillfully as they are usually
the people who oppose the company policies and procedures. Demands of the union and
interests of the management should be matched properly

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7. Change management Since this is generally not a focal point of HR professional training
and development, change management represents a particular challenge for personnel
management. The WFPMA finds that This may also be the reason why it is cited as the
foremost issue as HR continues to attempt to help businesses move forward. An intensified
focus on training may be needed to develop added competencies to deal with change
management.”

8. Leadership Development As the second of the biggest challenges for human resource
management, leadership development needs to be a critical strategic initiative. HR
professionals are faced with being expected to provide the essential structures, processes,
tools, and points of view to make the best selection and develop the future leaders of the
organization

9. HR Effectiveness Measurement: HR also need to measure results in terms of transaction

management, as well as in terms of the positive influence on a business. Utilizing metrics to
determine effectiveness is a beginning of a shift from perceiving HR’s role as purely
administrative function to view the HR team as a true strategic partner within the
organization

10. Retaining and Rewarding Talented Candidates: Around 59% seasoned HR professionals
believe that in the next few years, major battle will be retaining talented and well-performing
candidates. Moreover, it is going to become even worse to recognize and reward the real
performers as the market competitiveness is growing and that needs more collaborated efforts
to establish loyalty among employees.

11.Developing Future Leaders: With growing options for top performing candidates,
employers are in a great jitty over how will they build the future pillars of the organization.
The rising employee turnover rate is giving recruiters really a tough time with implementing
practices to enhance employee engagement and make them stay for long in the organization.
Over 52% HR people have a serious concern over building next generation organizational

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leaders.

12. Establishing Healthy and Cooperative Corporate Culture: Corporate culture has become
one of the deciding factors lately. Elevating market demands makes companies work more to
grow, expand and sustain within the volatile market scenarios. This, thus directly or indirectly
affects the organizational culture, as every resource is over-occupied with loads of work that
may affect the healthy work culture at office leading more to clashes or office chaos.

13. Attracting Top Talent to Organization: During any job interview, a candidate’s job is to
sell himself to the recruiters. Similarly, the recruiters also need to sell themselves before the
candidate. It is now more important as the talent shortage is making every organization strive
to bring in the best talent and become the most preferred choice among available options.
Around 36% recruiters feel that it is the need of the hour to establish a corporate culture that
will attract best candidates to your organization.

14. Elevating Human Capital Investments: Around two-fifth of HR professionals indicate that
the biggest challenge for the coming decade will be acquiring human capital and optimizing
human capital investments. On deeply analyzing the challenges, one thing that is clear is that
the most difficult challenge that’ll crop up is retaining good employees and attracting best
candidates. This entails that HR professionals need to develop talent management tactics that
can effectively contribute in attracting, retaining and rewarding top performing employees.
But what the organizations can do for countering this skills shortage and ensure that they find
right candidates? Here are the major responses to this…

15. Flexible Work Arrangements: Millennials just love it! The coming generation of
employees emphasizes on working in flexible set-ups and the major concern must be kept on
giving results and not on working in a traditional 9 to 6 set-up. This does not disrupts the
company decorum or discipline, it will just allow individuals to work the way they want and
exhibit better productivity. Even 40% HR pros believe that this can be a wining factor.

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16. Clear & Transparent Work Culture & Open Leadership: Employees demand it greatly,
but are seen rarely! That’s a fact! Maximum organizations fail to establish a culture of clear
and transparent work communication or open leadership that somewhere affects the
employee morale and his dedication to work. 37% have indicated that if communication
barriers are removed, then the organization can attract more candidates.

17. Career Advancement Opportunities for Employees: If the company takes employee career
development seriously and strives to work for it as well, then definitely you can shine out
over your competitors who are also looking to grab talented prospects for the same jobs.
Around 26% professionals have indicated this as a problem and major factor for increased
attrition rate.

18. Better Compensations: Undoubtedly, money matters If you have a start performer, you
need to take good care of the compensation you offer. These days employers are largely
playing on this factor with awarding employees lucrative reward packages and attracting
more talent towards them. Thus, recruiters need to fold up their sleeves to attract the real
talent to themselves to stay ahead of their counterparts. Recruitment processes are the first
interface of candidates with the company and this need to be the best of all. The employer
must sell the organization to the candidate and the boarding candidate must also feel elated
on joining the same. Apart from other factors, one is that of technology upgraded-ness. Now
is the time of the cloud and one has to be up on technology as every candidate wants to get
smoother recruitment application and processing. An effective Recruitment Management
System must be there that can take care of channelized processing from application to on-
boarding while the HR people can work on other retention and acquisition tactics.

1.7 TRENDS IN HUMAN RESOURCES MANAGEMENT

1. Globalization and its implications Business today doesn’t have national boundaries – it
reaches around the world. The rise of multinational corporations places new requirements on

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human resource managers. The HR department needs to ensure that the appropriate mix of
employees in terms of knowledge, skills and cultural adaptability is available to handle global
assignments. In order to meet this goal, the organizations must train individuals to meet the
challenges of globalization. The employees must have working knowledge of the language
and culture (in terms of values, morals, customs and laws) of the host country. Human
Resource Management (HRM) must also develop mechanisms that will help multicultural
individuals work together. As background, language, custom or age differences become more
prevalent, there are indications that employee conflict will increase. HRM would be required
to train management to be more flexible in its practices. Because tomorrow’s workers will
come in different colors, `nationalities and so on, managers will be required to change their
ways. This will necessitate managers being trained to recognize differences in workers and to
appreciate and even celebrate these differences.

2. Work-force Diversity In the past HRM was considerably simpler because our work force
was strikingly homogeneous. Today’s work force comprises of people of different gender,
age, social class sexual orientation, values, personality characteristics, ethnicity, religion,
education, language, physical appearance, marital status, lifestyle, beliefs, ideologies and
background characteristics such as geographic origin, tenure with the organization, and
economic status and the list could go on. Diversity is critically linked to the organization’s
strategic direction. Where diversity flourishes, the potential benefits from better creativity
and decision making and greater innovation can be accrued to help increase organization’s
competitiveness. One means of achieving that is through the organization’s benefits package.
This includes HRM offerings that fall under the heading of the family friendly organization.
A family friendly organization is one that has flexible work schedules and provides such
employee benefits such as child care. In addition to the diversity brought by gender and
nationality, HRM must be aware of the age differences that exist in today’s work force. HRM
must train people of different age groups to effectively manage and to deal with each other
and to respect the diversity of views that each offers. In situations like these a participative
approach seems to work better.

2. Changing skill requirements Recruiting and developing skilled labor is important for any
company concerned about competitiveness, productivity, quality and managing a diverse

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work force effectively. Skill deficiencies translate into significant losses for the organization
in terms of poor-quality work and lower productivity, increase in employee accidents and
customer complaints. Since a growing number of jobs will require more education and higher
levels of language than current ones, HRM practitioners and specialists will have to
communicate this to educators and community leaders etc. Strategic human resource planning
will have to carefully weigh the skill deficiencies and shortages. HRM department will have
to devise suitable training and short term programs to bridge the skill gaps & deficiencies.

3. Corporate downsizing. Whenever an organization attempts to delayer, it is attempting to

create greater efficiency. The premise of downsizing is to reduce the number of workers
employed by the organization. HRM department has a very important role to play in
downsizing. HRM people must ensure that proper communication must take place during this
time. They must minimize the negative effects of rumors and ensure that individuals are kept
informed with factual data. HRM must also deal with actual layoff. HRM dept is key to the
downsizing discussions that have to take place.

4. Continuous improvement programs Continuous improvement programs focus on the long

term well-being of the organization. It is a process whereby an organization focuses on
quality and builds a better foundation to serve its customers. This often involves a
companywide initiative to improve quality and productivity. The company changes its
operations to focus on the customer and to involve workers in matters affecting them.
Companies strive to improve everything that they do, from hiring quality people, to
administrative paper processing, to meeting customer needs. Unfortunately, such initiatives
are not something that can be easily implemented, nor dictated down through the many levels
in an organization. Rather, they are like an organization wide development process and the
process must be accepted and supported by top management and driven by collaborative
efforts, throughout each segment in the organization. HRM plays an important role in the
implementation of continuous improvement programs. Whenever an organization embarks on
any improvement effort, it is introducing change into the organization. At this point
organization development initiatives dominate. Specifically, HRM must prepare individuals
for the change. This requires clear and extensive communications of why the change will

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occur, what is to be expected and what effect it will have on employees.

5. Re-engineering work processes for improved productivity Although continuous

improvement initiatives are positive starts in many of our organizations, they typically focus
on ongoing incremental change. Such action is intuitively appealing – the constant and
permanent search to make things better. Yet many companies function in an environment that
is dynamicfacing rapid and constant change. As a result continuous improvement programs
may not be in the best interest of the organization. The problem with them is that they may
provide a false sense of security. Ongoing incremental change avoids facing up to the
possibility that what the organization may really need is radical or quantum change. Such
drastic change results in the re-engineering of the organization. Re-engineering occurs when
more than 70% of the work processes in an organization are evaluated and altered. It requires
organizational members to rethink what work should be done, how it is to be done and how to
best implement these decisions. Re-engineering changes how organizations do their business
and directly affects the employees. Re-engineering may leave certain employees frustrated
and angry and unsure of what to expect. Accordingly HRM must have mechanisms in place
for employees to get appropriate direction of what to do and what to expect as well as
assistance in dealing with the conflict that may permeate the organization. For re-engineering
to generate its benefits HRM needs to offer skill training to its employees. Whether it’s a new
process, a technology enhancement, working in teams, having more decision making
authority, or the like, employees would need new skills as a result of the re-engineering
process.

6. Contingent workforce A very substantial part of the modern day workforce are the
contingent workers. Contingent workers are individuals who are typically hired for shorter
periods of time. They perform specific tasks that often require special job skills and are
employed when an organization is experiencing significant deviations in its workflow. When
an organization makes its strategic decision to employ a sizable portion of its workforce from
the contingency ranks, several HRM issues come to the forefront. These include being able to
have these virtual employees available when needed, providing scheduling options that meet
their needs and making decisions about whether or not benefits will be offered to the

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contingent work force. No organization can make the transition to a contingent workforce
without sufficient planning. As such, when these strategic decisions are being made, HRM
must be an active partner in these discussions. After its entire HRM department’s
responsibility to locate and bring into the organization these temporary workers. As
temporary workers are brought in, HRM will also have the responsibility of quickly adapting
them to the organization. HRM will also have to give some thought to how it will attract
quality temporaries. This is sometimes done on consultancy basis. Consultancy work is often
a short time basis and to re-invent the organization’s operation such a workforce of
consultancy is vital.

7. Mass Customization There is a lot going on already within HR concerning mass

customization, the optimal combination of mass production with customization. We’ve seen
companies basing employment arrangements on learning styles and personalities, allowing
employees to choose between lower base pay and higher bonuses vs. higher base pay and
lower bonuses, and changing from career ladders with a straight shot to the top to career
lattices where a sideways move is considered a good career move. Here, HR has done a great
job of applying HR principles to its own traditional functional processes. HR will need to
take the tools of marketing around customization for consumers and clients and applying
them to the task of talent segmentation. The key is to optimize. At one extreme, a personal
employment deal for every individual would be chaotic. At the other extreme, defining
fairness as “same for everyone” risks missing important benefits of customization, and in fact
may be unproductive and unfair. Thus, HR should develop principles for understanding the
optimal level of customization in the employment relationship. Moreover, because
customization will often mean that different groups of employees receive different
employment arrangements based on their needs or the way they contribute, HR must develop
principles that equip leaders to explain these differences to employees. Our work suggests
that while many HR managers understand the need for customization and differentiation in
principle, they resist it because they simply don’t feel well-equipped to explain them. It is far
easier to say, “We do the same thing for everyone, so it’s out of my hands.” The concept of
fairness is sometimes confused with treating everyone the same.

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8. Decentralized work sites Work sites are getting more and more decentralized.
Telecommuting capabilities that exist today have made it possible for the employees to be
located anywhere on the globe. With this potential, the employers no longer have to consider
locating a business near its work force. Telecommuting also offers an opportunity for a
business tin a high cost area to have its work done in an area where lower wages prevail.
Decentralized work sites also offer opportunities that may meet the needs of the diversified
workforce. Those who have family responsibilities like child care, or those who have
disabilities may prefer to work in their homes rather than travel to the organization’s facility.
For HRM, decentralized work sites present a challenge. Much of that challenge revolves
around training managers in how to establish and ensure appropriate work quality and on-
time completion. Work at home may also require HRM to rethink its compensation policy.
Will it pay by the hour, on a salary basis, or by the job performed? Also, because employees
in decentralized work sites are full time employees of the organization as opposed to
contingent workers, it will be organization’s responsibility to ensure health and safety of the
decentralized work force.

9. Employee involvement For today’s organization’s to be successful there are a number of

employee involvement concepts that appear to be accepted. These are delegation,
participative management, work teams, goal setting, employee training and empowering of
employees. HRM has a significant role to play in employee involvement. What is needed is
demonstrated leadership as well as supportive management. Employees need to be trained
and that’s where human resource management has a significant role to play. Employees
expected to delegate, to have decisions anticipatively handled, to work in teams, or to set
goals cannot do so unless they know and understand what it is that they are to do.
Empowering employees requires extensive training in all aspects of the job. Workers may
need to understand how new job design processes. They may need training in interpersonal
skills to make participative and work teams function properly.
10. Technology With the current technological advancement and its projection in the future,
it has brought in new eyes in the face of HRM. A number of computerized systems have been
invented to help in the HRM of which they are seen as simplifier of HR functions in
companies. Large or multinational organizations using some of the human resources
information systems are reaping big. You do not have to stay in a particular location to do

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your duties but you can do on a mobile basis. For instance the paper work files are being
replaced by HRMIS which may be tailor made or Off the Shelf. These systems help in
handling a lot of data on a chip other than having a room full of file shelves. What HRM is
concerned with here is the safety (confidentiality) of the data/information of staff, and
therefore it is at the forefront of having to train personnel in operating such systems and
developing the integrity of such personnel to handle the sensitivity of the matter.

11. Health With the emergence of the wellness clubs and fitness centers together with the
need for having healthy workforce, it has emerged that HRM has to move to another step like
having to subscribe for its employees to such clubs, paying health insurance services for the
staff. This is not only a productivity strategy but also a strategy used to attract and retain
valuable employees. In the current situation as it is now especially with the outbreak of
HIV/AIDS epidemic, it has been seen to be of value to have infected and affected employees
have special attention so that they can have confidence of support from the employers. With
its effect leading to stigmatization, HRM has to think of counseling and guiding such
employee so that despite of the effect they (employee) remain productive. Cancer is another
kind of issue that has seen the current trend in HRM look closer to health and wellness of
employees. Cancers of all types are endemic to employees. Couple with other communicable
and none communicable diseases HRM has no option other than to advice management to
invest in health care packages that will revitalize the performance of the affected and infected
employees’ Therefore for HRM to continue showing relevance it has shifted to providing
health services to staff through health insurance, sensitization, and free medical treatment
bills. This has seen high results in not only in performance but also in attraction and retention
of highly qualified personnel.

12. Family work life balance Over a long time now in HRM history it has been a big debate
about family life work balance. Employees have been on toes of the employers to see if there
could be justice done and on the other hand employers have been keen to minimize the effect
of the same. The fact is a happy family is equal to a happy workforce. With the current trend
HRM have to work it out that every employee’s family to some extent is a happy one.

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Therefore investing in what may seem out hand for the organization is inevitable. It is time
HRM to convince management to organize family day out for the staff and their families,
sacrifice sometimes for days off to enable employees to attend to their family issues. The
employment laws unlike from the past now allow family leaves and above all you have
parental leave (paternity and maternity). In this moment the member of the family is not
missed. Time off your duty is to enrich one with family chore which help identify the
employee with the organization. From break of family affairs of course an employee is
rejuvenated and recognizes that the employer values him so much to the extent that he/she is
allowed to visit, stay and enjoy family bond. Still it is realized that the family bond is a cost
to employer in terms of time but it is a great motivator the employee which leads to high
productivity. Therefore the HRM has to stay tuned the the dynamics of family needs of
employees and go a step ahead to provide development assistance like loans to meet family
needs and social development.

13. Confidentiality The current trends have been seen as new challenges in the terms of costs
especially in the short run but for organization to strive well in this competitive market to
together with the labor mobility it is imperative important to rethink the HRM in terms of the
current trends at all levels. It goes without say that as longer as there are no clear defined
human resource management strategies in the given organization there is definitely a problem
boiling in the same organization or an explosion is bound to happen. With the current trend in
managing the most valued organization resource, organizations have to dig deeper to
maintain.

Chapter: 2 Research methodology

History of Human Resource Management

36
Everything you need to know about the history of human resource management. The
correct period of the origin of HRM is debatable subject but its activities have been
performed since ancient times.

HRM appears to have its origins in the United States in the 1950s but it did not gain
wide recognition until the beginning of the 1980s and in the U.K. until the mid to late
1980s.

In India, the origin of human resource management can be traced to the concern for
welfare of factory workers during the 1920s.

The Royal Commission on Labour recommended in 1931 the appointment of labour

officers in order to protect the workers from the evils of jobbery and indebtedness to
check corrupt practices in recruitment and selection in Indian industry, to act as a
spokesman of labour and to promote an amicable settlement between the workers and
management.

In this article we will discuss about the history of human resource management.

The phases are:- 1. Early Phase 2. Industrial Revolution 3. Scientific Management 4.

Classical Organization Theory 5. Human Relation Movement 6. Behavioural Science
Movement 7. Organization Development Movement 8. Modern Movement.

Also learn about the two most important periods in the history of HRM in India. They are:- 1.
Development before Independence and 2. Development after Independence.

History of Human Resource Management – From Early Phase to Modern Movement of

HRM

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History of Human Resource Management – Origin of HRM Since Ancient Times: Early
Phase, Industrial Revolution, Scientific Management and a Few Others

The correct period of the origin of HRM is debatable subject but its activities have been
performed since ancient times. It appears to have its origins in the United States in the 1950s
but it did not gain wide recognition until the beginning of the 1980s and in the U.K. until the
mid to late 1980s.

1. Early Phase:

The concept of organisation was well understood by Moses around 1250 B.C. The Chinese,
as early as 1650 B.C. had originated the principle of division of labour. Around 1800 B.C. the
minimum wage rate and incentive wage plans were included in the Babylonian Code of
Hammurabi. In India, Kautilya mentioned various concepts such as job analysis, selection,
and development and performance appraisal in his book Arthasastra.

2. The Industrial Revolution:

The foundation of industrial revolution was laid between 1850 to 1875. This period was
characterized by the development of machines and technology made rapid progress. The
result was an increase in job specialization and the enterprises started grouping but the
working and living conditions of the labours were poor and their working hours were long.

The employers were only interested to meet production targets rather than satisfy workers’
demands. As a result of the prevailing poor working conditions and low wage rates the
adversarial relationship between employers and labours was established. This lead to gradual
evolution of systematic attention towards welfare of workers and laid the foundations of the
HRM.

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3. Scientific Management:
In early 1900s, Frederick Winslow Taylor advocated scientific management. This was an
instrument which brings the logic of efficiency to management.
The salient features of this approach are:
(i) Scientific selection of person on the job;
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(ii) Systematic analysis of job;

(iii) Breakdown the job into small mechanical elements then rearrange into their most
efficient combination;
(iv) Employees must be trained carefully by supervisors so that they performed the task as
specified by prior scientific analysis;
(v) A fair piece rate system of wage;
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(vi) Overqualified workers should be excluded from the job;

(vii) There should be close cooperation between managers and non-managers.
Taylor believed that the above techniques could be used by management to increase
efficiency and output in the work place. This approach was accepted by workers and
managers because it placed a strong emphasis on the mutual benefit of productivity; the
organisation produced more and increased its profits, while workers made more money and
lived.
D. C. Wilson and R. H. Rosenfeld, 1990, have listed some of the key reason for the
gradual decline of scientific management:
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(i) Workforce became a critical factor in the organization;

(ii) Increasing complexity of markets and products;
(iii) Political, social and cultural changes; and
(iv) Organizations became large and more complex
4. Classical Organization Theory:

Another contribution to management thought was popularized by Henry Fayol in 1929 in the
form of Classical Organization Theory. He listed fourteen principles. These must be flexible,
and adaptable to large variety of changing and special conditions.

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These are:
(i) Division of labours
(ii) Authority
(iii) Discipline
(iv) Units of command
(v) Units of direction
(vi) Subordination of individual interest to the general interest
(vii) Remuneration
(viii) Centralization
(ix) Hierarchy of authority
(x) Order
(xi) Equity
(xii) Stability of sense
(xiii) Initiative
(xiv) Esprit de corps

Fayol found that the activities of industrial undertaking can be divided into six groups:

(i) Technical (production);

(ii) Commercial (buying, selling and exchange);
(iii) Financial;
(iv) Security of property and persons;
(v) Accounting; and
(vi) Managerial.

He further identified five specific functions must perform by all manners in the organization.

There function are:

(i) Planning;
(ii) Organising;
(iii) Commanding;
(iv) Coordinating; and

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(v) Controlling
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Mr. Fayol known as “Father of Modern Management Theory” because his perceptions are
considered valid by management experts and practitioners even today.
5. Human Relation Movement:
Human relations means the relations between person to person and in respect of organization,
the relations between management and employees. The success of organization depends upon
harmonious relations between employers and employees. This lead to turn in higher
productivity of the organization.
The Hawthrone experiments conducted by Elton Mayo and his colleagues at the Western
Electric Company concluded that the employee productivity was affected by social and
psychological factors. Supervisors and managers should develop effective human relations
skills in counseling employees.
It emphasized the necessity for management to recognize the need of employees for
recognition and social acceptance.
The message was that interpersonal relationships should be fostered for the fullest realization
of the potential of individual and groups. Accordingly some concepts such as social system,
informal. Organisation, group control of behaviour, equilibrium and logical and non logical
behaviour entered in the field of human relations.
The good human relations can be created by constant contact with the employees, empathy
and understanding of their problems and needs, their good will and cooperation. In short,
worker should be treated as a human being. As per views of Barnard in year 1938;
(i) Natural Groups – Employees tend to form natural groups in the organization to satisfy
their social needs.
(ii) Upward Communication – Two way communications system (Top to Bottom and Bottom
to Top) is the best method for receiving the feedback from the workers.
(iii) Cohesive Leadership – Cohesive leadership should ensure effective and coherent
decision making with organization.
Thus, human relations are not merely sentimental requirement of an organization but they are
perquisite to higher productivity and with better understanding and team work, maximum
productivity can be achieved at minimum cost. Therefore, it is the responsibility of the
management to look after the total wellbeing of the individual worker in the organization. A
happy worker is an asset to the organization. He turns out more work in less and less time.

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6. The Behavioural Science Movement:
This movement came during early 1960s.
In 1959, Peter Drucker wrote:
An effective management must direct the vision and effort of all managers towards a
common goal.
His concept was based on goal directed leadership means “management by objectives” or
“MBO”.
Again in the year 1973, he wrote:
“Each member of the enterprise contributes something different, but all must contribute
toward a common goal. Their efforts must all put in the same direction, and their
contributions must fit together to produce a whole-without gaps, without friction, without
unnecessary duplicating of effort.”
MBO require major effort and continual commitment, it gives rise to system of joint target
setting and performance review. Each employee or supervisor or manager is interactive with
his superior and actively involved in setting his own goals. He further wrote in year 1974.
The greatest advantage of MBO is perhaps that it makes it possible for a manager to control
his own performance. Self-control means stronger motivation – A desire to do the best rather
than do just enough to get by. It means higher performance goals and broader vision.
MBO and self-control asks for self-discipline. It forces the manager to make high demands
on himself. It is anything but permissive. It may well lead to demanding too much rather than
too little……………….
MBO and self-control assumes that people want to be responsible, want to contribute, want to
achieve, and that is a bold assumption………
But MBO and self-control is more than a slogan more than a technique, more than a policy
even. If is, so to speak, constitutional principle.
In short, MBO refers to:
(i) Establishment of goals and objectives;
(ii) Formulation of action plans; and
(iii) Reviewing and modifying human behavior.
Douglas Mc Gregor, 1960, described two sets of assumption about the nature of person at
work.
(a) Theory ‘X’:
Stands for the set of traditional beliefs that is pessimistic, static and rigid which holds
that:

42
(i) Employees dislike work and tend to avoid it;
(ii) They will shrink responsibility and seek formal direction;
(iii) They seek security and display little ambition, and
(iv) They must be corrected and controlled.
(b) Theory ‘Y’:
Is concerned with a different understanding of person at work. This theory is optimistic,
dynamic and flexible with an emphasis on self-direction and the integration of individual
needs with organisational demands.
Theory Y assumes that:
(i) Employees like work under proper conditions;
(ii) They will exercise self-direction and self-control when committed to objectives;
(iii) The average person can learn to accept and seek responsibility; and
(iv) The capacity for creativity is solving organizational problems is widely distributed
among the population.
Drucker and Mc Gregor paved the way to the HRM philosophy that human resource policies
and programmes must be built into the strategic objectives and plans of the business and must
also aim to get everyone involved in the achievement of these objectives and plans.
Abraham Maslow (1954) propounded a theory regarding hierarchy of human needs also
human as Deficit Theory Motivation. He divided human needs into five categories.
In ascending order, they are:
(i) Physiological Needs – These are basic to life such as food, clothing, sex, etc.
(ii) Safety Needs – For protection against danger and deprivation.
(iii) Social Needs – To be given love affection belonging and acceptance by others.
(iv) Esteem Needs – For self-esteem, recognition appreciation in the eyes of others.
(v) Self Actualization – For realising and fulfilling one’s potential, also known as self-
fulfillment.
Maslow acknowledge that his hierarchy was flexible. A lower need does not have to be
fulfilled completely before a higher need emerges. According to Maslow, if you want to
motivate an employee, you need to understand where that employee currently is on the
hierarchy and focus on satisfying those needs at or above that level. In under develop
countries the workers give top priority to lower order needs.
The most influential member of the behavioural science school was Frederick Herzberg.
He concluded that individuals have two different categories of needs:
(i) Hygiene Factors (Maintenance Factors):

43
These factors are related to the context of the job and were classified as dissatisfies because
they do not lead to growth but only prevent deterioration. These are-company policy and
administration, salary, working conditions, relationships with supervisor, peers, and
subordinates, quality of supervision and status.
(ii) Motivators:
They are related to the content of the job. Their existence would yield feelings of satisfaction.
On the other hand, if they are not present they do no prove highly satisfying. These factors
are-achievement, recognition for accomplishment, responsibility, opportunity for
advancement and growth.
This theory is also called the dual factors theory and the Motivation Hygiene Theory of
Motivation. The most basic implication of the theory is that in order to maximize human
productivity, it is necessary to satisfy employees maintenance needs and provide the
opportunity to gratify their motivation needs. This theory has made a significant contribution
toward improving manager’s basic understanding of human behavior and to the importance
of job content factors in work motivation.
The behavioural science movement made two very useful, contribution to HRM:
(i) It underlined the importance of integration and involve or participation; and
(ii) It highlighted the idea that management should accept the need to improve the quality of
working life as a means to obtain increased motivation and improved results.
7. The Organization Development Movement:
This is another integrated type of approach of behavioral scientists, whose opinion were
summarized by Bennis (Organizational Development, Addison Wesley, 1969) as follows:
(i) A new concept of man based on increased knowledge of his complex and shifting needs
which replaces an over simplified, innocent push button idea of man.
(ii) A new concept of power based on collaboration and reason, which replaces a model of
power based on coercion and threat.
(iii) A new concept of organization values, based on humanistic and democratic idea which
replaces the mechanistic value system of bureaucracy.
Organization Development (OD) is an intervention strategy that used group processes to
focus on the whole cultural of an organization in order to bring planned change. It seeks to
change beliefs, attitudes, values structures and practices so that the organization can adopt
better technology and live with the pace of change. OD emerged largely from applied
behavioural sciences and the most widely accepted and comprehensive definition has been
developed by W. L. French and C. H. Bell. 1991.

44
“Organization Development is a top management supported, long range effort to improve an
organization’s problem solving and renewal & processes, particularly through a more
effective and collaborative diagnosis and management of organization culture with special
emphasis on formal team work, temporary team and inter group culture with the assistance of
a consultant facilitator and the use of the theory and technology of applied behavioural
science, including action research.”
In short, OD are improvement strategies focused on shaping a desirable organizational
cultural with the help of trained consultants and behavioral science techniques. The
techniques of OD may involve laboratory training, managerial grid training, survey feedback,
team building, process consultant, job enrichment, behaviour modification, job redesign,
stress management, career and life planning, management by objectives, sensitivity training
(T-Group), role playing, gaming, and behaviour modelling as part of the overall approach.
8. Modern Movement:
Any discussion of HRM has to come to terms with at least three fundamental problems:
(i) HRM is derivative of a range of antecedents, the ultimate mix of which is wholly depend
upon the stance of the analyst and which may be drawn from an eclectic range to sources;
(ii) HRM is itself a contributory factor in the analysis of the employment relationship;
(iii) It is difficult to distinguish where the significance of HRM lies – whether it is in its
supposed transformation of styles of employee management in a specific sense, or whether in
a broader sense it is in its capacity to sponsor a wholly redefined relationship between
management and employees which overcomes the traditional issues of control and consent at
work.
An early model of HRM, developed by Fombrun Tichy and Devanna (1984); introduced the
concept of strategic HRM by which HRM Policies are inextricably linked to the formulation
and implementation of strategic corporate and/or business objectives.
The key levers are to be used to seek not merely compliance but commitment. This he does
by making a classificatory matrix of 27 points of difference between personnel and IR
practices and HRM practices.
‘Light Fit’ between HR Strategy and Business Strategy:
HRM assumes a more important position in the formulation of organisational policies. A
more flexible model was developed by Beer and his associates (1984) at Harvard University.
The model recognises the legitimate interests of various groups and that the creation of HRM
strategies would have to recognise these interests and fuse them as much as possible into the
human resource strategy and ultimately the business strategy.

45
Guest (1987), asserts that the combination proposition which include strategic integration,
high commitment, high quality and flexibility creates more effective organisations.
The combination of these proposition leads to a linkage between HRM aims, policies
and outcomes are given below:
1. Strategic integration means the ability of organisations to integrate HRM issues into their
strategic plans.
2. High commitment is concerned with both behavioural commitment and attitudinal
commitment.
3. High quality refers to managerial behaviour including management of employees and
investment in high quality employees.
4. Flexibility means functional flexibility with an adaptable organisational structure with the
capacity to manage innovation.

History of Human Resource Management – Evolution of HRM

The evolution of human resource management in India can be divided into four phases:
1. Beginning phase
2. Legal phase
3. Welfare phase
4. Development phase
1. Beginning Phase:
Over many centuries India has absorbed managerial ideas and practices from around the
world. Early records of trade, from 4500 B.C. to 300 B.C., not only indicate international
economic and political links, but also the ideas of social and public administration. The
world’s first management book, Arthashastra, written by Chanakya three millennium before
Christ, codified many aspects of human resource practices in Ancient India.
This treatise presented notions of the financial administration of the state, guiding principles
for trade and commerce, as well as the management of people. In this book Chanakya has
mentioned about HR concepts like job analysis, selection, procedures, executive
development, incentive systems and performance appraisal etc.
The minimum wage rate and incentive wage plans were included in the Babylonian Code of
Hammurabi around 1800B.C. The socio-cultural roots of Indian heritage are diverse and have
been drawn from multiple sources including ideas brought from other parts of the old world.

46
2. Legal Phase:
Human resource management in India dates back to the Report of the Royal Commission on
Labour in India (1929-31) which recommended the appointment of labour officers to deal
with recruitment in order to check corrupt practices in industries in India with respect to
selection of workers. They were also accountable to represent the workers and to protect their
interests.
During Second World War these labour officers were entrusted to handle grievances. After
independence of India, the Factories Act, 1948 made it mandatory for the appointment of a
labour welfare officer in every factory having 500 or more number of employees. In 1950s,
two professional bodies, the Indian Institute of Personnel Management (IIPM) Kolkata and
the National Institute of Labour Management (NILM) Mumbai, came into existence.

3. Welfare Phase:
The area of personnel function increased during 1960s. It covered labour welfare,
participative management, industrial relations and industrial harmony etc. The human
relations movement in Western countries put impact on Indian organizations in this period.
Proceeded by legal phase, this phase gave rise to harmonious industrial relations and good
HR practices. This year also witnessed the development of an emerging field called personnel
management.

4. Development Phase:
At the end of 1960s and in 1970s, the HR professionals gave more emphasis on
developmental aspects of human resources. The emphasis was on striking a balance between
employee demands and organizational requirements. Professionals began to talk and discuss
about Human resource development in seminars, conferences and academic meets.
In the year 1980 the professional bodies IIPM and NILM merged to form a single body, i.e.
National Institute of Personnel Management (NIPM) at Kolkata.
During 1990s HRM faced the challenges of liberalization, privatization and globalization.
These forced the organizations to put emphasis on employee capability, productivity, quality
of product/service, customer satisfaction etc. Organizations became more heterogeneous in
terms of gender, age, race, ethnicity, sexual orientation, and inclusion of other diverse groups.
A diverse workforce, for instance, includes women, people of colour, the physically disabled,
senior citizens, and gays and lesbians. Managing this diversity has become a global concern.
Not only India but even the whole world is facing this issue.

47
History of Human Resource Management – 2 Main Periods of HRM in India: Development
before Independence and Development after Independence
Over the past decade or so, human resource management has shed its old personnel image
and gained recognition as a vital player in corporate strategy. In recent years, many
organizations have come to realize that among the various resources available to an
organization, human resource is the most valuable. When an organization acquires physical
resources such as machines, it knows exactly what the machine is going to produce, how
much it is going to produce, how it is going to produce, and the cost involved in its
operations. But, that is not so with human resources.
Unless one gets to know the tools and techniques of managing human resources, one may
find it difficult to manage or even relate to human resources. When organizations fail to
accomplish their goals, it is always due to poor management of human resources. Managers
at Electronics Arts, the world’s largest producer of computer games, state that commitment to
human resource is one of the company’s four worldwide goals.
One can see the relationship between the commitment to human resources and the bottom-
line. Whatever may be the nature and size of the organization,’ the work of organizations is to
get things done through people. Thus, the greatest challenge faced by organizations is the
management of human resources.
Human resource management basically deals with finding the right people, placing them in
the right place or jobs, training and developing them for better performance, providing for
and sustaining their motivation through quality of work life so that employer and employees
can attain their rewards and become committed.
The financial statements of many firms proved that effective human resource management
had a positive impact on strategic performance, including higher employee productivity and
stronger financial results. How a company uses its human resource may be the single most
important factor in sustained competitive success.
How human resources are treated in an organization depends on the philosophy of the
organization towards human resource management. In this respect, the Japanese corporations
stand out distinctly. Over a quarter of a century ago, Abeggelen identified life-time
employment (Shushinkoyo), seniority-based reward system, and company-based labor unions
as the three pillars of Japanese human resource management.

48
At Honeywell, one of the leading American companies, the human resource management
philosophy seems to be one of creating positive climate and relationships and providing
maximum employment stability and opportunity for personal development. In companies
such as Union Oil, human resource planning is integrated into the strategic corporate
planning process thus giving it a high priority.
Hewlett-Packard is another global company noted for its human resource practices. The “HP”
spirit prevails throughout the organization and the company considers this as one of the real
strengths and contributing factors in their success. The employees take pride in identifying
with the company. Throughout the company, participative style of management forms the
foundation of its human resource management.
Mills contends that when human resource development works properly, unions and
employees themselves benefit equally with management. When the quality of work life is
improved in an organization, a win-win structure emerges. In Tung’s view the human power
is a key ingredient to the successful operation of a multinational, without which technology,
capital, and know-how could not be effectively and efficiently utilized or transferred from
corporate headquarters to the various subsidiaries in the world.
In India and several other Asian countries, the development objectives are hampered by the
neglect of human resource management. Since human resource is available in abundance, the
decision-makers tend to take a lethargic attitude and neglect human resource planning. This
attitude slowly affects the other areas of human resource development, such as raising the
skill level of employees through training and development, motivating people in the right
direction, and providing quality of work life.
Various branches of the United Nations Organization and particularly, the International Labor
Organization have focused their attention on developing human resources in the Asian region
by setting up full-fledged vocational training institutes, which focus on improving the quality
of workforce through vocational education and training.
The human resource management function receives greater importance in Japanese
companies. Lifetime employment and seniority determine most of the human resource
activities and decisions related to them. Decisions at the hiring stage are crucial when people
are going to be retained in the organization until their retirement.
Heavy emphasis is placed on training and development, and induction process is thorough
and lengthy, and brings new recruits into the organizational family. The bonus and fringe
benefits constitute a major portion of the compensation structure. Unions are company-based.

49
Unions tend to support the efforts of their companies to improve profitability since they
realize that their demands can be met only if the company succeeds.
The role of multinational companies in modernizing the human resource functions in India is
significant. A high degree of objectivity can be seen in recruitment and selection, promotion,
transfers, assessing performance, and reward systems. Slowly and painfully, the local
companies are feeling this impact. Without such objectivity, they may have to sacrifice
efficiency and success.
Evaluation of the concept of HRM in India and in other countries differs from each other. In
western countries—UK and USA—the business provide better labour welfare facilities
voluntarily; whereas in India management relations were developed mainly due to the
unsatisfactory recruitment and selection system, more and more labour agitations and
statutory provisions of various acts to improve the working conditions of labour in industry
evolution of HRM in India can be studied under two periods—
(i) Development before independence, and
(ii) Development after independence.
(i) Development before Independence:
Before independence there was no significant effort on the part of employer or employees in
the industrial field to have a lasting atmosphere of industrial relation. In 1930, labour welfare
activities were initiated by some Indian business enterprises like TATA Business group,
British India Corporation and so on started appointing labour welfare officers to look after the
interests of working’ people.
This process was the outcome of 1920 Industrial unrest in India. This unrest was an eye
opener for the government and it took some interest in this field to resolve better industrial
relation. Before and during the World War II, the British Government was the important
agency to improve industrial relation in Indian industries.
In 1934, it became mandatory for the industries employing 500 or more workers in the State
of Bombay, must employ Labour Welfare Officer to settle the labour disputes with Labour
Commissioner. At this stage, Labour Commissioner became the Chief Conciliation Officer.
This initiative has been taken up in other states of India to appoint the Labour Welfare
Officer.
(ii) Development after Independence:
In 1947, the Government of India took remarkable steps in the field of Industrial relation with
the help of Central Labour investigating committee many enactments were passed in the field
of industrial relation like Industrial Disputes Act, 1947, Factory Act, 1948 with provision of

50
appointing a Lab our Welfare Officer in every factory, employing 500 or more workers for
the purpose of helping the management in providing welfare measures to the needed
employees, as stated in the Act.
During this period urgency of appointing Human Resource or Labour Officer is being felt
even in such industries, where there is no legal compulsion to appoint Welfare Officer. It is
because there is need of such agency to guide the management undertaking difficult labour
problems by providing specialised services.
Therefore industrial relation became an important subject of management of personnel.
Government also understood this need and arranged for training centres and institutes
imparting training in industrial relation. In 1949, the first institute of industrial relation was
started in India. Thereafter Indian Institute of Labour Relations, Indian Institute of Personnel
Administration, Calcutta, Indian Labour Institute, Indian Institute of Labour Relations,
Bangalore and many other training centres have come into being.
During 1975, the Government of India declared a state of emergency and took several
administrative reforms to eradicate bonded labour and that gave way to bring the scheme of
workers’ participation in Indian industries. Thereafter, in 1978 a bill was introduced called
“Industrial Relation Bill.” In 1982 the Government amended general labour laws including
Industrial Disputes Act and many other legislations regarding labour.

History of Human Resource Management – 5 Phases of Development: Earlier

Philosophy, Movement for Increasing Efficiency and Productivity and a Few More
Although it is difficult to trace the origin of the modern philosophy of human resource
management, certain stages of its development can be determined. Broadly speaking, the
stream of the philosophy of human resource management can be divided into five phases.
First Phase – Earlier Philosophy of Personnel Management:
The history of human resource management can be traced to England, where masons,
carpenters, leather workers and other crafts people organised themselves into guilds. They
used their unity to improve their work conditions. During the first phase, an attempt was
made by industrialists like Robert Owen to pay attention towards improving the working and
living conditions of workers.
J. S. Mill and Charles Babbage, who were contemporaries of Robert Owen, also contributed
towards the development of personnel management. Although Babbage was a mathematical
management scientist, he took equal interest in the human element also. He stood for the

51
integration of management’s and workers’ interests. He stressed that workers should get a
fixed pay according to the nature of their work, plus a share in profits and bonuses for their
suggestions for improving productivity.
The contribution of Henry Varnum Poor lies in his recognition of human factor for the
success of an enterprise. Subsequently, the human factor has started getting the desired
importance by and by.
Second Phase – Movement for Increasing Efficiency and Productivity:
Towards the end of the 19th century, there developed a scientific approach towards
management. At that time, there were a number of difficulties in the way of industrial
production and thus in the way of accomplishing the desired objectives of the organisation. It
was with the intention of solving these problems with the help of science that the scientific
approach came into popularity.
During the second phase, an employee was considered as an ‘economic man’, introduction of
scientific methods in recruitment, selection and training was recommended and human
element in industry was recognised. Frank Gilbreth, Lillian Gilbreth, F. W. Taylor and Henry
L. Gantt were other main authors who contributed towards the growth of personnel
management.
Henry L. Gantt stressed that in all problems of management, the human element is the most
important. Edward A. Filene was another noted contributor in this direction. He was very
much concerned with human elements in his business.
Third Phase – Beginning of Welfare and Industrial Psychology:
Around 1900, there started a phase of labour welfare in the labour movement. This movement
was aimed at the physical, economic, social and educational betterment of the workers.
Hence, employment departments started coming into existence for the recruitment and
selection of workers.
To begin with, these departments were entrusted with the job of recruitment and selection of
workers and the maintenance of employee records. However, later on, these departments
were asked to look after the training, labour welfare administration, and lay-off and
retrenchment of workers.
The employment departments can be called the precursors of the modern personnel
departments. Thus, during the third phase, the labour welfare movement was initiated, the
human element in industry was recognised, and a personnel department was established in an
organisation for the first time in 1914. Hugo Munsterberg, who is acknowledged as the father
of industrial psychology, applied psychology in the service of industry.

52
Henry Ford, the well-known industrial autocrat, established a personnel department called the
Sociological Department in 1914. He was concerned about the attitude and behaviour of
workers and worried about labour turnover.
Fourth Phase – Growth of Human Relations Concept:
Initiation of human relations approach in personnel management was the major contribution
during the period. Human relations approach in personnel management was a reaction to the
dehumanising aspect of scientific management started by Taylor and his associates and
followers.
Due to mechanical approach of the management towards workers, they lost their overall
involvement in the organisation and pride in their job. But to say this is not to say that Taylor
and others had been totally indifferent to the cause of workers. The point is that their primary
concern was to increase efficiency and productivity of the workers through scientific
methods.
But at the same time, they also made efforts in the direction of giving physical and mental
ease to the workers in the discharge of their duties. They also laid emphasis on the mutuality
of interest between the management and the workers. What was mainly lacking in the scien-
tific approach was the indifference towards the individuality of the worker.
He was primarily considered as an ‘economic man’. Not much heed was paid to his emotions,
sentiments, group behaviour, personality and so on. Although a beginning in this direction
had already been made by Hugo Munsterberg, Lillian Gilbreth, Walter Dill Scott, Henry
Ford, B. Seebohm Rountree, Edward D. Jones, Harrington Emerson, Oliver Shelton and so
on, it were Elton Mayo, F. J. Roethlisberger and their associates who after conducting the
famous Hawthorne experiments at Hawthorne plant of the Western Electric Company
between 1927 and 1932 stated that an organisation is a social system and that in order to
accomplish the desired objectives of the organisation, the management should adopt human
relations approach towards its personnel.
Elton Mayo is regarded as the father of human relations approach, the focus of which was ‘to
study human behaviour at work’. Douglas McGregor, W. F. White, Lyndall Urwick, Mary
Parker Follett and so on were the other authors who contributed to the human relations
approach.
The crux of the human relations approach was that a worker should not be considered only as
a factor of production. He/she is a human first and worker afterwards. Hence, he/she has
his/her own desires, wants, attitude, emotions, sentiments and so on. It is, therefore, the

53
primary responsibility of an effective management to adopt a human relations approach
towards it personnel.
Economic depression, growth of trade unions, the Second World War and the management
literature published during this period also gave impetus to human relations approach. This
led to the establishment of personnel department in various organisations.
Today, everybody including the psychologists, sociologists, economists, managers, and so on
recognises the significance of the study of human relations and tries to understand the human
behaviour.
They, instead of regarding a worker as an ‘economic man’, extend a humanly treatment to the
worker considering him a lively thing who is motivated by desires, ambitions, hobbies, likes
and dislikes, and so on. The role of behavioural sciences in the field of personnel
management is also getting momentum, especially since 1960.
Fifth Phase – Modern Period (1950-Present):
Remarkable advancement of human relations approach, MBO, HRM, HRD, human capital
management, SHRM and so on are some of the major contributions during the fifth phase of
personnel/HR management. The fifth phase started in 1950. This period is usually called as a
period of refinement and extension of earlier achievements.
There has been an equally remarkable advancement in the human relations approach as is
evident from the rapid development in the field of personnel management, industrial relations
and the allied areas. One of the latest developments is ‘MBO’. In it, specific objectives are
jointly established by the supervisor and his/her subordinates.
These objectives should be related to the need of the organisation, realistic and attainable,
expressed as far as possible in quantitative terms and controllable. A periodic review of the
achievements of these objectives is again done jointly, and necessary corrective steps are
taken if the achievements are below the target. However, this system of MBO has its own
limitations.
The renowned authors who have contributed in this period include R. B. Blake and J. S.
Mouton, Douglas McGregor, Rensis Likert, Chris Argyris, Harold Koontz and Cyril
O’Donnell, L. R. Sayles, F. E. Fiedler, G. E. Kimball and so on. It is difficult to prepare a
complete list of the contributors. However, today, management is quite a developed science
as well as an art.
In the recent decades, a new wind is blowing in management literature which is fast driving
out the traditional term ‘personnel management’ and substituting a new term ‘HRM’. A lot of

54
developments have taken place in the realm of HRM, including international HRM and
SHRM. ‘Human capital’ management is a recent development.

History of Human Resource Management in India: Introduction, Stages, Limitation

and Emerging Horizons
Introduction:
In India, the origin of human resource management can be traced to the concern for welfare
of factory workers during the 1920s. The Royal Commission on Labour recommended in
1931 the appointment of labour officers in order to protect the workers from the evils of
jobbery and indebtedness to check corrupt practices in recruitment and selection in Indian
industry, to act as a spokesman of labour and to promote an amicable settlement between the
workers and management.

During the 1960s the personnel function widened beyond the welfare aspect. Three major
areas of practice, viz. labour welfare, industrial relations, and personnel administration
emerged as a complimentary parts of personnel management. During the 1980s due to new
technology and other environmental changes, human resource development became the major
issue.

During 1990s the overwhelming role of human factor in industry has been realized. Growing
awareness about the significance of human side of organization has led to the development of
human resource management.

Stages of Human Resource Management in India:

The concept of human resource management has developed through the following
stages:
1. First Stage-Labour Welfare:
The concern for the welfare of the workers in the management of the business enterprises has
been in existence since ages. The business operated at the small scale and the trend of trade
union was established. The mediator was appointed who was known as Labour Welfare
officer; this Labour Welfare Officer worked for improving the employer-employee relations.

2. Second Stage-Personnel Management:

55
During the 1960s the personnel function began to expand beyond the welfare aspect.
Industrial Relations and Personnel Administration integrated into the emerging profession
called Personnel Management. Simultaneously the massive thrust given to the heavy industry
in the context of planned economic development.

3. Third Stage-Human Resource Management:

By the 1970s, a shift in professional was discernible. It shifted from concern for welfare to a
focus on efficiency. In the 1980s professionals began to talk about new technologies, Human
Resource Management challenges, and Human Resource Development. Further, in 1990s the
emphasis shifted to human values and productivity through people and with this the subject
of Human Resource Management has grown into a matured profession. 

Limitations of Human Resource Management in India:

HRM approach helps in creating work culture in the organisation but it has some limitations,
which affect its effectiveness.

Some of these limitations are:

1. Recent Origin:
HRM lacks universal approved academic base as it is of recent origin. It is defined differently
by the different people. Some consider it as a new name of personnel management and some
have named their traditional personnel department as human resource management
department. Therefore, with the passage of time an acceptable approach will be developed.

2. Lack of Top Management Support:

HRM requires the support of top level management. HRM can only be implemented
effectively, if it receives the cooperation of the top level management. Because of positive
attitude of the top management this work can effectively be handled by the top level
management.

3. Improper Implementation:
The human resource management can be effectively implemented by assessing the
development needs of the employees. The needs and aspirations of the employees should be
considered while developing the policies and strategies under human resource management.

4. Inadequate Development Programme:

56
HRM requires the implementation of various programmes like career planning, training,
development, counseling etc. HRM requires the atmosphere of learning in the organisation.
In reality the actual results are not coming from the HRM as the HRM programmes are only
confined to the class rooms lectures.

5. Inadequate Information:
Some organisations do not have the required information about their personnel. The HRM
cannot be effectively implemented in the absence of required information and the database.
Therefore, there is a need for the collection of the required information about the
organisation’s employees before implementing the HRM system.

Emerging Horizons in Human Resource Management in India:

Due to the changing business environment, the human resource managers have to face more
problems in the management of workforce. There is a continuous change in each and every
component of business environment i.e. political, social, economic etc., as a result there is a
change in the nature and scope of the human resource management.

Some of the important changes, which are taking place in the human resource
management:
1. Increase in the Size of Workforce:
Due to the increase in the size of the enterprises and the emergence of multinational
corporations in the country, the number of employees working in the firms has also increased.
The human resource managers face the challenge of managing the new and increased
workforce who is more aware of its rights.

2. Changing Composition of Workforce:

The Composition of the workforce is also changing and creating the new problems for the
human resource managers. These days there is easy to take education and employment
opportunities to the minority groups who are becoming the important source of manpower in
the organisations. The number of working women is also increasing. So human resource
managers have to consider all these changes while formulating the human resource policies.

3. Increase in Education Level:

The level of education have also increased due to the technological progress and increase in
the number of educational institutions. Educated workers are more aware of their rights and

57
human resource managers have to consider them while formulating the policies for
motivating the educated workers.

4. Technological Advancement:
Due to the advancement of technology, the automation and computerization of the
organisations is taking place, which are making the job and skills of the employees obsolete.
The new techniques of production are giving rise to the unemployment problem, which can
be solved by properly assessing the manpower requirements and training the redundant
employees in the alternative jobs. These problems are making the job of human resource
manager more tough and complicated.

5. Change in Political Environment:

Government works for the welfare of the workers and the society. It interferes in the business
to safeguard the interest of workers, consumers, and the image. Government participation in
the business, trade, and commerce had posed many challenges before the management.

6. Changes in Legal Environment:

The human resource managers have to anticipate the future changes in the legal environment
and prepare the organisation to face them without any interruption in the day to day working.
It is the duty of the human resource manager to abreast with the changes taking place in the
legal framework within which the industrial relation system is functioning.

7. Mobility of Professional and Technical Workforce:

Today employees have more technical and professional qualifications, which are demanded
by many organizations’. Due to this the mobility of workforce increases, which poses the new
challenge for the human resource managers.

8. Organisational Development:
In the coming years many changes will be made by the firm for improving the organisational
effectiveness. Therefore, top management has to be continuously involved in the
development of human resources. Further, the human resource managers will have to develop
the work culture conducive to the organisational development.

9. New Work Ethics:

58
The human resource managers will have to develop new work ethics for setting up and
enforcing new work standards. Changing work ethics will require the redesigning of the jobs
for providing the challenge to the employees. They should be provided with the flexi time
policy.

10. Development Planning:

Human resource managers should have to be actively involved in the development planning
and the research for anticipating the impact of environmental changes on the organization and
its employees.

11. New Personnel Policies:

New and better personnel policies will be required for the workforce of the future. The
human resource managers have to concentrate on the goal oriented performance appraisal;
development oriented training system, team building, participative management etc.

12. Industrial Relations:

Even though so many efforts are made by the government, yet on industrial relations front not
much improvement has taken place. Many factors are responsible for the industrial unrest. In
the coming time, the inter union rivalries would grow more and might create many problems
for the human resource managers.

Management of human relations in the future will have to face new challenges and take up
new responsibilities. Thus the jobs of human resource managers will be more complicated in
the future. The managers will have to treat human resources as vital instruments in achieving
the goals of the organization.

1.1 Historical background of the problem

Customer relationship management (CRM) is a technology for managing all

your company's relationships and interactions with customers and potential
customers. Pioneered by Robert and Kate Kestnbaum, database marketing

59
collected and analysed customer information. Using statistical modelling, that
data was then used to help customize communications with other potential
customers. In 1986, ACT introduced the business world to contact management
software. Essentially a digital rolodex, ACT allowed for the efficient storage and
organization of customer contact information. Goldmine and other vendors also
released CMS programs throughout the 80s. Near the close of the decade, the
proliferation of personal computers and the advent of server/client architecture
paved the way for an explosive growth in software development.

The beginning of the 90s brought the first major step toward true CRM software.
Early innovators like Brock Control Systems helped push the evolution of contact
management software toward sales force automation (SFA). SFA took many of
the features of database marketing, automated them, and combined them with
contact management. This provided businesses with much more useful customer
information. It also automated business tasks like inventory control, and sales
tasks like customer interaction tracking. In 1993, Tom Siebel left Oracle to create
Siebel Systems. While at Oracle, Siebel tried unsuccessfully to convince CEO
Larry Ellison to package and sell their internal sales application

60
as a standalone product. Siebel Systems quickly became the leading SFA provider on the market.
By 1995, SFA and contact management had evolved to closely resemble modern CRM software.
However, this emerging product still didn’t have a proper name. A number of terms like enterprise
customer management (ECM) and customer information system (CIS) were in use. According to
then Director of Marketing at Pivotal Software, Sharka Chobot Stuyt, it was Pivotal that first coined
the term CRM, which won out. The last half of the decade brought huge changes to the CRM
industry. Enterprise resource management (ERP) vendors like Oracle and Baan entered the CRM
market, hoping to use their size and ERP in-roads to dominate the industry. Unlike other software
companies that were transitioning to CRM, SAP entered the market with the sole purpose of
capitalizing on emerging applications. All of this competition pushed CRM vendors to provide a
broader suite of services. More marketing, sales, and service applications were added to CRM on a
near-constant basis.

The year 1999 was a busy year for the CRM industry. A number of notable, high-value acquisitions
consolidated the overall market, while emerging e-CRM vendors provided fierce competition.
Using intranet, extranet, and internet, e-CRM vendors offered a level of intra-organizational
collaboration that hadn’t previously been available in the CRM industry. CRM also made its first
foray into the mobile market, with the introduction of Siebel Handheld. The 90s came to an end
with the debut of the first major Software as a Service (SaaS) vendor. Geared toward smaller
businesses, Salesforce was initially ignored by larger vendors. Under the leadership of Mark
Benioff, Salesforce eventually grew to rival CRM industry giants like Siebel Systems.

Like most software industries, the CRM industry was hit hard by the bursting of the dot-com
bubble. The entire industry retracted, with giants like Oracle reporting license losses of more than
twenty- five percent. Due to a reluctance to use “dot-com” technologies, e-CRM vendors were hit
the hardest. In the early years of the 00’s, Paul Greenberg’s book “CRM at the Speed of Light”
suggested a more comprehensive CRM system that manages all business relationships. By the end
of the decade, this became the common thinking across the CRM industry. Through the middle of
the decade, interoperability with legacy software became more important. Software giant Microsoft
entered the CRM market with Dynamics CRM, and Oracle acquired Siebel and numerous other
enterprise application vendors. In 2007, Salesforce created the next big change in the CRM
industry. Force.com introduced the world to cloud-based CRM. Force.com addressed the criticism
that cloud-based applications weren’t customizable. Social CRM exploded onto the market with the
introduction of ComcastCares— an application that focused more on interaction than transaction.
Most large corporations quickly followed Comcast’s example, solidifying the place of social CRM.
Through the end of the first decade, and up to the present day, cloud-based and SaaS CRM

61
solutions continue to integrate more features like customer service and social CRM. Cloud-based
and SaaS CRM solutions

62
 continue to gain popularity, largely due to their lower initial cost and easy integration with mobile
devices (Staff Writer, 2013).

Customer relationship Management (CRM) appears to be a simple and straightforward concept, but there are
many different definitions and implementations of CRM. At present, a number of different conceptual
understandings are associated with the term "Customer Relationship Management (CRM). There
understanding range from IT driven programs designed to optimize customer contact to comprehensive
approaches for the establishment and design of long-term relationships. The effort to establish a meaningful
relationship with the customer is characteristic of this last understanding (Barnes 2003).

CRM is a holistic process of acquiring, retaining and growing customers. It includes all in-line and off-line
relationship management. (Strauss et al. 2003). As gray and Byun (2001) expound; CRM is an abbreviation
for customer relationship management, not customer relationship marketing. Management is a broader
concept than marketing because it covers strategic management, human resources management, marketing
management, service management, knowledge management, sales management and research management
and development management. Thus CRM requires organizational and business level approaches, which are
customer centric, to doing business rather than a simple marketing strategy.

The banking industry is facing an ever-increasing level of competition around the world as the dynamics of
the business change. Technology, commoditization, deregulation and globalization forever changed the face
of banking (Joyner 2002). Banks have understood the need to capitalize on the new technologies to gain
advantage in the competition by exploiting their customer base, brand value and costly infrastructure
investments in order to increase profits, as there's a direct link between the customer satisfaction and the
profitability. CRM is the strategy which enables the banks to analyze the customer profiles, to detect their
needs and potential profitability areas and establish the necessary actions the achieve customer satisfaction,
competitive advantage and thus the profitability. From the customer's points of view, the competition brings
them various choices and increases their bargaining power. Today, customers are looking for various
benefits from a bank; better service, lower transaction fees, higher interest rates, a sign of prestige, new
products access from different channel and etc. this scheme forces the banks to look for new ways a satisfy
customers before any other bank or financial institution does.

Critical Success Factor of CRM: CRM is a holistic approach, which needs alignment of different aspects
of a business. Management and leadership, change management, human resources and using right
technologies are the critical success factors of CRM.

Management and leadership: Leaders/Mangers in a bank should have an important role by sharing CRM
team’s vision with management. The leaders’ role has to be facilitator for implementing CRM. Effective
Leadership skills result in CRM success. Innovative mangers works with his team, makes decisions by
consulting his team, whilst still maintaining control of the group as well as appreciate all the feedbacks in the
63
organization related with CRM implementation and strategies and tries to integrate people into it. Because

64
CRM is the backbone of communication, manager communication and coaching skills is the important in
CRM implementation any banks.

Change Management: “CRM is an evaluation. Change is inevitable." When new IT systems, software, etc.
are deployed, the way people doing their jobs would also change, so cultural change adaptation is crucial. It
can be also called as Multi Pronged Change Strategy. Instead of rushing, CRM team can prefer a gradual
change. Workshops and brainstorming meetings with sales, marketing, and customer service staff and shared
their CRM strategies can be conducted. Banks do train employees and first of all, they tried to change
employees’ mindset from operation centric ones to customer centric ones. Change management is crucial to
promote user adaptation. Major focus is based on training to achieve adaptation.

Information Technology (IT): Nowadays many banks began to deploy new technologies according to their
needs. With advanced technologies, it gets the advantage of doing tasks faster and more accurately. There
are various software for CRM like Siebel systems for operational CRM; Teradata for data warehouse;
Unica’s Affinium for campaign management; SAS for data modeling activities. Banks also develop a task
manager program that helps sales representatives to see 360-degree of customer view.

Human Resources: CRM is the backbone for communication. For a successful CRM implementation,
human resources management of a company is very important. Integrating employees into strategies and
training them is very important to adapt them to change. Employees are the interface of the company, so they
will highly affect the bank’s image.

CRM for Competitive Advantage: Competition is at the core of the success or failure of a bank as well as all
the firms. According to porter (1985), competitive strategy is the search for a favorable competitive position
in an industry, the fundamental arena in which competition occurs. Competitive strategy aims to establish a
profitable and sustainable position against the forces that determine industry competition. There are various
strategies that can be adopted which will procure a bank competitive advantage in an industry. In this study,
Poter’s “Generic Strategy Framework” and Treacy & Wieserma’s “Value Disciplines Model” are discussed
and adapted to banking industry which will be helpful to understand and evaluate the positioning strategies
of banks in terms of their CRM strategic and implementations. Strengths and weaknesses of these strategies
and their applicability to banking industry are argued; comparisons are conducted accordingly.

Generic Strategic Framework: “Competitive advantage grows fundamentally out the value a firm is able to
create for its buyers that exceeds the firm’s cost of creating it. Value is what customers willing to pay and
superior value stems from offering lower prices than competitors for equivalent benefits of providing unique
benefits that more than offset a higher price.” (Porter 1985, p.3) The theory consists of three main strategies
(cost leadership, differentiation and focus) which are shown in the figure 2.1 while cost leadership and
differentiation strategies address a whole industry, focus strategies address specific or small clusters of
customers within an industry.

65
Cost Leadership: The strategy requires a firm (bank) to serve at the lowest cost in the industry. Economies
of scale, unique technology that is not available to other firms, using cost effective channels are some of the
ways for being able to use the strategy. The strategic logic of cost leadership strategy requires a firm to be
cost leader, not one of the several firms vying this position.

For banking sector, a broad target cost leadership strategy itself is not a good strategy as it decreases the
profit margins extensively which will soon be followed by other banks. That's why there is no significant
difference in general interest rates, loan rates, transaction fees of bank in a stable economy and banking
sector.

Differentiation: The aim of the strategy is to be unique in the industry and this uniqueness must be valuable
for customers. The uniqueness can be one or a set of dimensions. Areas of differentiation can be: product
service, marketing, sales, image, delivery and etc.

In banking sector, differentiation can be crafted by a single or a set of these dimensions. While brand
differentiation and product differentiation would be applicable for broad targeting service, marketing and
delivery differentiation strategies would be suitable for narrow scope targeting. A broad target service
differentiation is not for banks they are looking for profitability. That is why today many banks use customer
segmentation to service its customers rather than given the same service to all customers.

Focus Strategy: The focus strategy involves concentration on particular buyer groups, geographic areas or
product/market segments. By selecting a particular segment group or group of segments, company attempts
to tailor its strategy to service the needs of its segment better than the competitors. A focus strategy may
emphasize differentiation or cost advantage (Payen). Events based marketing is an example of focus
differentiation strategy (marketing differentiation), which matches customer transactions to tailored
marketing and sales pitches Priority banking is another example of focus differentiation strategy (service
differentiation), which aims to give better service to more profitable customers of a bank. Today customers
look for individualize service from their banks and banks highly use focus differentiation strategies to satisfy
customers. Banks use "cost focus strategy" mostly for profitable customers in order to retain them by
increasing their switching cost.

It can be synthesize that, for banking sector, board target differentiation strategies are likely to attract the
potential customer, while narrow target differentiation strategies (focus strategy) are likely to retain bank's
existing profitable customers and allocate the bank's resources more effectively. For example, brand, image
of the bank is an important why for bank to differentiate themselves from all the other banks and attract
potential customers. Launching innovate products is another why of attracting potential customers.

Michael Porter (Porter 2006, cited in Streeter 2006) states his thoughts, about competition and banks, in a
recent banking conference. Porter thinks that banking sector is entering an era of strategic positioning. To
succeed in the new era, companies have to deliver something unique, but most banks do what others do,
66
what he calls, to competition. He stated that "The worst thing you can do is compete with your rival on the
same

67
things. If you do, the competition almost always becomes a destructive arms race. Strategy, is striving to be
unique, which required choices."

As it can be understood, porter insists the successful firms can only compete with one generic strategy, in
isolation of other generic strategies. For many researchers this viewpoint is not accurate. What should be
pointed out is the successful firms tend to compete with multiple strategies. Contingent strategies are
important for their survival. (Hall 1983; Ham brick 1983; Wright, 1986, cited in Wright et al 1988)

The other critical view for porter's monolithic strategy comes from Wright (1986 cited in Wright et al.), he
expounds that in a fragmented industry like banking, where there the many players in different sizes, it is
difficult to be successful with adapting one generic strategy.

In banking industry, a sustainable competitive advantage can be gained with a blend of different strategies,
but a powerful focus differentiation strategy in service cannot be neglected. Products and price can be easily
copied. Service is more difficult to imitate than a product because service requires customer input and
involvement (Payen 2006).

Today, building a competitive advantage is based on how well a bank serves its customer CRM is
differentiation strategy that banks can use to acquire, grow and retain profitable customer relationships, with
the goal of creating a sustainable competitive advantage.

In the following part, another important competitive advantage strategy framework will be discussed and
comparisons will be done with porters' Generic Strategies framework

Value Discipline Model Porter’s “Generic Strategies Framework” alone is not enough to understand the
positioning strategies of banks in terms of CRM. Porter’s focus on industry structure is a powerful means of
analyzing competitive advantage in itself, but it has been criticized for being too static in an increasingly fast
changing world. For a deeper understanding, Michael Treacy and Fred Wieserma’s “Value Disciplines
Model” has been examined. This model is another important strategic framework for market positioning
which has the following 3 positioning strategies: • Operational excellence • Product leadership • Customer
intimacy

CRM can be strategically embedded particularly in two of the three value disciplines (1) Operational
Excellence, and (2) Customer Intimacy. With customer intimacy, Wieserma (1998) shows how companies
can profit from establishing closer, more co-operative customer relationships. With operational excellence,
firms aim to have economical, efficient processes whose resulting delivered values to customers are low
prices and service convenience. (Wieserma & Treacy 1996).

Firms applying customer intimacy focus on knowing the customer and building close relationships with
these customers. CRM is often solely related to the customer intimacy value discipline. If CRM is embedded
in a customer intimacy strategy, then CRM will be relationship-oriented. Firms embedding CRM in an

68
operational excellence strategy focus on cost- reductions and raising the quality of the customer interaction
process through process improvements (Verhoef and Langerak 2002).

69
Challenges of Implementing CRM: The challenges faced by many of the banks whilst implementing CRM
can be summarized as the followings:

(1) Getting management sponsorship

(2) Quality of customer data
(3) Alignment issue (Alignment of people and processes)
(4) Lack of skilled people
(5) Determining the right time for customer needs
(6) Using customer data more intelligently
(7) Incorporating customer data and customer preferences to the customer data base
(8) Using right technologies
(9) Real time data cross all customer channels
(10) Having 360- degree view of customers (Single view of customers)

The retail banking market is fiercely competitive and saturated (Pili 2006). The competition is forcing banks
to find new ways of satisfying customers and quick adaptation to changes. The competition among the banks
itself is also very major domestic players on the arena. Banks are aware of this fact and exploit new trends to
continue their existence in the market. CRM is one of these trends that are highly adopted by many banks.

The satisfaction level of customers who agree that they are treated as a valued customer is the measuring part
for CRM's success in the bank. This could be attributed to the distinctive communication capabilities, which
target to establish an emotional link with the customer. This is highly related with organizational learning
philosophy and adaptive culture of the banks.

Application of CRM in Banking Sector Based on the discussions made above, appropriate and effective
application strategies of CRM are given to improve bank's competitive position in the market.

Changing Mindsets: Customer Centric, Adaptive, Innovative Culture-Any bank's long heritage brings rigid
and conservation mindsets together which makes the change adaptation difficult, which is essential for CRM
as mentioned in the "Critical Success Factors of CRM" part. Although this rigidity seems to be decreasing, a
mindset change is needed for the bank.

The rigidity of management and the conservative hierarchical organization structures decrease the speed of
CRM implementations and operation in banks. Banks can use any other good bank which is implementing
CRM as benchmarks, which have more flexible and innovative cultures and where organizational structure is
flatter. The charge of mindsets must start from the management level and continue to the all the level of the
organization with the support of management. At this point a paradigm shift is needed which can be
summarized as follows:

(1) A customer centric and relationship-oriented culture must be adopted instead of operation centric and
sales oriented culture.
70
 (2) Management's attitude to employee must be proactive instead of being reactive; instead of employee
compliance, continuous improvement must be supported.
(3) Training culture must be improved to organization learning philosophy where self-learning is
supported.
(4) Employee must be empowered in order to carry on their responsibilities faster and efficiently.
(5) Teamwork and coaching must be developed, instead of individuation.
(6) Measurement basis must be objective, fair and transparent. Employee must be motivated by rewards
and supportive attitude of their managers.

Leaders play an important role in this change process. So that banks can invest in experienced professionals
with leadership skill, which can influence the organization to encourage and convince for change. Banks also
must consider employee career development and leadership training. They can overcome the problem of
absence of skilled people regarding with CRM by training employee with the help of leadership coaching.

Mission statement of bank must be revised and statements that are stressing the customer focused, innovative
culture must be put in place. This focus must be supported with in-house training and the message should be
clearly passed down to each level in the organization to ensure solid commitments.

Organizational Learning Philosophy: Organizational learning is more than providing training sessions to
employees when it is needed; it is a philosophy. Banks must introduce organizational learning philosophy to
nurture new and expansive patterns of thinking where innovative thinking is supported. Organizational
learning philosophy consists of a fast adaptive culture, which is an important core competence for today's
banking industry. Leadership coaching can help in adaptation process. Also e-leanings about technical and
non-technical issues can be provided via intranet connection of Banks. Banks can exploit organizational
learning philosophy while implementing its CRM strategies employees and customers are the end user of
CRM strategies and implementations, so that it can capitalize on their feedbacks, expectations, satisfaction
and dissatisfaction points to improve its strategies and implementations. Banks can conduct regular
discussion sessions with employee and customers. New products, services of the bank can be shared and
customers' offering for better products and services than its competitor can be learned customers' further
expectations can be sought which would be crucial for further product and service design. This help bank to
understand needs of customer's factor competitors, which result with innovative product and services. This is
also an impotent way to explorer and rectifies problems face by users quickly, which paves the way for
operational excellence and customer intimacy. All these mindset changes will help banks to overcome the
alignment problems, alignment of people and processes, which are obstacle in the CRM success.

Building Brand Image: If banks seem to have an introverted culture; it must adopt a more extroverted
culture to promote its brand. This needs a change in mindsets from management level to employees’ level.
By using CRM, it can build strong relationships with customers. The successful service excellence and
customer intimacy strategies can result with good word of mouth which is the most effective way of
71
advertisement. Employees can play a critical role in building a strong brand. Banks must equip its employee
with necessary

72
mindsets and skill so that they will play as an ambassador role in promoting brand identity. Banks have some
CRM capabilities that the order banks don't have so it must promote its superior capabilities better a build a
strong brand. They can use more advertisements on TV, newspapers, and magazines, Internet etc. By using
CRM capabilities, banks can find out customers' needs and expectations faster than rivals and accordingly
can launch innovative products and services. Innovative products attract new customers and promote brand
as a pioneer in the market.

Re-Integration of Operational Analytical and Collaborative CRM: Although many banks have very high
analytical CRM capabilities, they have deficiencies in operational and collaborative CRM. So banks can
overcome the challenge of insufficient quality of customer data by using an integrated CRM system and
interacted channel management. To enhance its operational CRM, bank should adopt the mindset changes to
equip its sales force with necessary mindset and skill to integrate them to new processes. To improve
customer service automation and collaborative CRM capabilities, banks should use an "Interacted channel
management" Online banking is very crucial for today' bank's customers. So banks should direct its
customers of online channels, which reduce cost and increase speed of transactions for both parties. It will
also ease the tracking of customer information. Various systems such as web-chat and call back services to
its communication channels add value to CRM. Also, banks must develop its telephone banking. And all
channels must be integrated with each other.

Effective Use of ATMs: ATMs are very important for the bank choice of people. Banks have to capitalize
on their ATMs better by expanding their branch network, locating ATMs into strategic points where they
can each more people. With new ATMs in existence, customers can update their information, which is a
strategic way to improve customer data. As it is a new service. Introduction brochures must be placed near
ATMs, explaining their use and also a demo may be put into web site, which shows which transactions can
be done by ATMs and may show all the ATM transactions step by step. So that customer feels more
confident when they first use it. Because people are afraid to their bankcards might get caught in the ATMs
because of any misuse.

Increasing Switching Cost: In order to retain customers and increase existing customers' share of wallet,
Banks must develop strategies that will increase switching costs. It can increase switching cost with
excellent service, customer intimacy and focus differentiation strategies. By building emotional links with
customers and making they feel as a valued customer. Other tactics are giving more reward points and using
competitive pricing and promotion strategies. Promotion may be important for credit card holders.

Focus on Private and Premier (Priority) Banking: Many banks already practice private banking and
priority banking but in order to incorporate CRM to the highest, it should be strong player in private market.
One of the main aim and ultimate goal of CRM is to retain and acquire must profitable customers, which
affect overall the profitability of bank. To attract more private banking customers, banks must offer more
individualize and attractive products and services to these customers. And its advertisement and packing
73
must be done well. On the other side, like what some other banks do, banks can use referral programs. In
return shopping vouchers

74
can be offered to customer who can introduce a private banking customer successfully. To retain private
banking customers, more waiver and discounts must be used. To increase their profitability, their saving can
be attracted by educating and advising them about the financial markets and financial products. Banks
should also pursue the strategy to grow profitability of customer who is not highly profitable at the moment
but have the potential to become.

Lastly as universally understood customer satisfaction is very important for the aim of CRM, effective and
efficient customer satisfaction management strategy should be enabled to analyze the customer profiles, to
detect their needs and potential profitability areas and establish the necessary actions to achieve customer
satisfaction, competitive advantage and thus the profitability. To sum up, any banks can exploit CRM in
order to gain competitive advantage over its rivals and increase their customer base for having bigger slice of
pie.

Customer relationship Management (CRM) appears to be a simple and straightforward concept, but there are
many different definitions and implementations of CRM. At present, a number of different conceptual
understandings are associated with the term "Customer Relationship Management (CRM). There
understanding range from IT driven programs designed to optimize customer contact to comprehensive
approaches for the establishment and design of long-term relationships. The effort to establish a meaningful
relationship with the customer is characteristic of this last understanding (Barnes 2003).

CRM is a holistic process of acquiring, retaining and growing customers. It includes all in-line and off-line
relationship management. (Strauss et al. 2003). As gray and Byun (2001) expound; CRM is an abbreviation
for customer relationship management, not customer relationship marketing. Management is a broader
concept than marketing because it covers strategic management, human resources management, marketing
management, service management, knowledge management, sales management and research management
and development management. Thus CRM requires organizational and business level approaches, which are
customer centric, to doing business rather than a simple marketing strategy.

The banking industry is facing an ever-increasing level of competition around the world as the dynamics of
the business change. Technology, commoditization, deregulation and globalization forever changed the face
of banking (Joyner 2002). Banks have understood the need to capitalize on the new technologies to gain
advantage in the competition by exploiting their customer base, brand value and costly infrastructure
investments in order to increase profits, as there's a direct link between the customer satisfaction and the
profitability. CRM is the strategy which enables the banks to analyze the customer profiles, to detect their
needs and potential profitability areas and establish the necessary actions the achieve customer satisfaction,
competitive advantage and thus the profitability. From the customer's points of view, the competition brings
them various choices and increases their bargaining power. Today, customers are looking for various
benefits from a bank; better service, lower transaction fees, higher interest rates, a sign of prestige, new
products access from different channel and etc. this scheme forces the banks to look for new ways a satisfy
75
customers before any other bank or financial institution does.

76
Critical Success Factor of CRM: CRM is a holistic approach, which needs alignment of different aspects
of a business. Management and leadership, change management, human resources and using right
technologies are the critical success factors of CRM.

Management and leadership: Leaders/Mangers in a bank should have an important role by sharing CRM
team’s vision with management. The leaders’ role has to be facilitator for implementing CRM. Effective
Leadership skills result in CRM success. Innovative mangers works with his team, makes decisions by
consulting his team, whilst still maintaining control of the group as well as appreciate all the feedbacks in the
organization related with CRM implementation and strategies and tries to integrate people into it. Because
CRM is the backbone of communication, manager communication and coaching skills is the important in
CRM implementation any banks.

Change Management: “CRM is an evaluation. Change is inevitable." When new IT systems, software, etc.
are deployed, the way people doing their jobs would also change, so cultural change adaptation is crucial. It
can be also called as Multi Pronged Change Strategy. Instead of rushing, CRM team can prefer a gradual
change. Workshops and brainstorming meetings with sales, marketing, and customer service staff and shared
their CRM strategies can be conducted. Banks do train employees and first of all, they tried to change
employees’ mindset from operation centric ones to customer centric ones. Change management is crucial to
promote user adaptation. Major focus is based on training to achieve adaptation.

Information Technology (IT): Nowadays many banks began to deploy new technologies according to their
needs. With advanced technologies, it gets the advantage of doing tasks faster and more accurately. There
are various software for CRM like Siebel systems for operational CRM; Teradata for data warehouse;
Unica’s Affinium for campaign management; SAS for data modeling activities. Banks also develop a task
manager program that helps sales representatives to see 360-degree of customer view.

Human Resources: CRM is the backbone for communication. For a successful CRM implementation,
human resources management of a company is very important. Integrating employees into strategies and
training them is very important to adapt them to change. Employees are the interface of the company, so they
will highly affect the bank’s image.

CRM for Competitive Advantage: Competition is at the core of the success or failure of a bank as well as all
the firms. According to porter (1985), competitive strategy is the search for a favorable competitive position
in an industry, the fundamental arena in which competition occurs. Competitive strategy aims to establish a
profitable and sustainable position against the forces that determine industry competition. There are various
strategies that can be adopted which will procure a bank competitive advantage in an industry. In this study,
Poter’s “Generic Strategy Framework” and Treacy & Wieserma’s “Value Disciplines Model” are discussed
and adapted to banking industry which will be helpful to understand and evaluate the positioning strategies
of banks in terms of their CRM strategic and implementations. Strengths and weaknesses of these strategies

77
and their applicability to banking industry are argued; comparisons are conducted accordingly.

78
Generic Strategic Framework: “Competitive advantage grows fundamentally out the value a firm is able to
create for its buyers that exceeds the firm’s cost of creating it. Value is what customers willing to pay and
superior value stems from offering lower prices than competitors for equivalent benefits of providing unique
benefits that more than offset a higher price.” (Porter 1985, p.3) The theory consists of three main strategies
(cost leadership, differentiation and focus) which are shown in the figure 2.1 while cost leadership and
differentiation strategies address a whole industry, focus strategies address specific or small clusters of
customers within an industry.

Cost Leadership: The strategy requires a firm (bank) to serve at the lowest cost in the industry. Economies
of scale, unique technology that is not available to other firms, using cost effective channels are some of the
ways for being able to use the strategy. The strategic logic of cost leadership strategy requires a firm to be
cost leader, not one of the several firms vying this position.

For banking sector, a broad target cost leadership strategy itself is not a good strategy as it decreases the
profit margins extensively which will soon be followed by other banks. That's why there is no significant
difference in general interest rates, loan rates, transaction fees of bank in a stable economy and banking
sector.

Differentiation: The aim of the strategy is to be unique in the industry and this uniqueness must be valuable
for customers. The uniqueness can be one or a set of dimensions. Areas of differentiation can be: product
service, marketing, sales, image, delivery and etc.

In banking sector, differentiation can be crafted by a single or a set of these dimensions. While brand
differentiation and product differentiation would be applicable for broad targeting service, marketing and
delivery differentiation strategies would be suitable for narrow scope targeting. A broad target service
differentiation is not for banks they are looking for profitability. That is why today many banks use customer
segmentation to service its customers rather than given the same service to all customers.

Focus Strategy: The focus strategy involves concentration on particular buyer groups, geographic areas or
product/market segments. By selecting a particular segment group or group of segments, company attempts
to tailor its strategy to service the needs of its segment better than the competitors. A focus strategy may
emphasize differentiation or cost advantage (Payen). Events based marketing is an example of focus
differentiation strategy (marketing differentiation), which matches customer transactions to tailored
marketing and sales pitches Priority banking is another example of focus differentiation strategy (service
differentiation), which aims to give better service to more profitable customers of a bank. Today customers
look for individualize service from their banks and banks highly use focus differentiation strategies to satisfy
customers. Banks use "cost focus strategy" mostly for profitable customers in order to retain them by
increasing their switching cost.

It can be synthesize that, for banking sector, board target differentiation strategies are likely to attract the
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potential customer, while narrow target differentiation strategies (focus strategy) are likely to retain bank's
existing profitable customers and allocate the bank's resources more effectively. For example, brand, image

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of the bank is an important why for bank to differentiate themselves from all the other banks and attract
potential customers. Launching innovate products is another why of attracting potential customers.

Michael Porter (Porter 2006, cited in Streeter 2006) states his thoughts, about competition and banks, in a
recent banking conference. Porter thinks that banking sector is entering an era of strategic positioning. To
succeed in the new era, companies have to deliver something unique, but most banks do what others do,
what he calls, to competition. He stated that "The worst thing you can do is compete with your rival on the
same things. If you do, the competition almost always becomes a destructive arms race. Strategy, is striving
to be unique, which required choices."

As it can be understood, porter insists the successful firms can only compete with one generic strategy, in
isolation of other generic strategies. For many researchers this viewpoint is not accurate. What should be
pointed out is the successful firms tend to compete with multiple strategies. Contingent strategies are
important for their survival. (Hall 1983; Ham brick 1983; Wright, 1986, cited in Wright et al 1988)

The other critical view for porter's monolithic strategy comes from Wright (1986 cited in Wright et al.), he
expounds that in a fragmented industry like banking, where there the many players in different sizes, it is
difficult to be successful with adapting one generic strategy.

In banking industry, a sustainable competitive advantage can be gained with a blend of different strategies,
but a powerful focus differentiation strategy in service cannot be neglected. Products and price can be easily
copied. Service is more difficult to imitate than a product because service requires customer input and
involvement (Payen 2006).

Today, building a competitive advantage is based on how well a bank serves its customer CRM is
differentiation strategy that banks can use to acquire, grow and retain profitable customer relationships, with
the goal of creating a sustainable competitive advantage.

In the following part, another important competitive advantage strategy framework will be discussed and
comparisons will be done with porters' Generic Strategies framework

Value Discipline Model Porter’s “Generic Strategies Framework” alone is not enough to understand the
positioning strategies of banks in terms of CRM. Porter’s focus on industry structure is a powerful means of
analyzing competitive advantage in itself, but it has been criticized for being too static in an increasingly fast
changing world. For a deeper understanding, Michael Treacy and Fred Wieserma’s “Value Disciplines
Model” has been examined. This model is another important strategic framework for market positioning
which has the following 3 positioning strategies: • Operational excellence • Product leadership • Customer
intimacy

CRM can be strategically embedded particularly in two of the three value disciplines (1) Operational
Excellence, and (2) Customer Intimacy. With customer intimacy, Wieserma (1998) shows how companies

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can profit from establishing closer, more co-operative customer relationships. With operational excellence,
firms aim to have economical, efficient processes whose resulting delivered values to customers are low
prices and service convenience. (Wieserma & Treacy 1996).

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Firms applying customer intimacy focus on knowing the customer and building close relationships with
these customers. CRM is often solely related to the customer intimacy value discipline. If CRM is embedded
in a customer intimacy strategy, then CRM will be relationship-oriented. Firms embedding CRM in an
operational excellence strategy focus on cost- reductions and raising the quality of the customer interaction
process through process improvements (Verhoef and Langerak 2002).

Challenges of Implementing CRM: The challenges faced by many of the banks whilst implementing CRM
can be summarized as the followings:

(11) Getting management sponsorship

(12) Quality of customer data
(13) Alignment issue (Alignment of people and processes)
(14) Lack of skilled people
(15) Determining the right time for customer needs
(16) Using customer data more intelligently
(17) Incorporating customer data and customer preferences to the customer data base
(18) Using right technologies
(19) Real time data cross all customer channels
(20) Having 360- degree view of customers (Single view of customers)

The retail banking market is fiercely competitive and saturated (Pili 2006). The competition is forcing banks
to find new ways of satisfying customers and quick adaptation to changes. The competition among the banks
itself is also very major domestic players on the arena. Banks are aware of this fact and exploit new trends to
continue their existence in the market. CRM is one of these trends that are highly adopted by many banks.

The satisfaction level of customers who agree that they are treated as a valued customer is the measuring part
for CRM's success in the bank. This could be attributed to the distinctive communication capabilities, which
target to establish an emotional link with the customer. This is highly related with organizational learning
philosophy and adaptive culture of the banks.

Application of CRM in Banking Sector Based on the discussions made above, appropriate and effective
application strategies of CRM are given to improve bank's competitive position in the market.

Changing Mindsets: Customer Centric, Adaptive, Innovative Culture-Any bank's long heritage brings rigid
and conservation mindsets together which makes the change adaptation difficult, which is essential for CRM
as mentioned in the "Critical Success Factors of CRM" part. Although this rigidity seems to be decreasing, a
mindset change is needed for the bank.

The rigidity of management and the conservative hierarchical organization structures decrease the speed of
CRM implementations and operation in banks. Banks can use any other good bank which is implementing
CRM as benchmarks, which have more flexible and innovative cultures and where organizational structure is
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flatter. The charge of mindsets must start from the management level and continue to the all the level of the

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organization with the support of management. At this point a paradigm shift is needed which can be
summarized as follows:

(7) A customer centric and relationship-oriented culture must be adopted instead of operation centric and
sales oriented culture.
(8) Management's attitude to employee must be proactive instead of being reactive; instead of employee
compliance, continuous improvement must be supported.
(9) Training culture must be improved to organization learning philosophy where self-learning is
supported.
(10) Employee must be empowered in order to carry on their responsibilities faster and efficiently.
(11) Teamwork and coaching must be developed, instead of individuation.
(12) Measurement basis must be objective, fair and transparent. Employee must be motivated by
rewards and supportive attitude of their managers.

Leaders play an important role in this change process. So that banks can invest in experienced professionals
with leadership skill, which can influence the organization to encourage and convince for change. Banks also
must consider employee career development and leadership training. They can overcome the problem of
absence of skilled people regarding with CRM by training employee with the help of leadership coaching.

Mission statement of bank must be revised and statements that are stressing the customer focused, innovative
culture must be put in place. This focus must be supported with in-house training and the message should be
clearly passed down to each level in the organization to ensure solid commitments.

Organizational Learning Philosophy: Organizational learning is more than providing training sessions to
employees when it is needed; it is a philosophy. Banks must introduce organizational learning philosophy to
nurture new and expansive patterns of thinking where innovative thinking is supported. Organizational
learning philosophy consists of a fast adaptive culture, which is an important core competence for today's
banking industry. Leadership coaching can help in adaptation process. Also e-leanings about technical and
non-technical issues can be provided via intranet connection of Banks. Banks can exploit organizational
learning philosophy while implementing its CRM strategies employees and customers are the end user of
CRM strategies and implementations, so that it can capitalize on their feedbacks, expectations, satisfaction
and dissatisfaction points to improve its strategies and implementations. Banks can conduct regular
discussion sessions with employee and customers. New products, services of the bank can be shared and
customers' offering for better products and services than its competitor can be learned customers' further
expectations can be sought which would be crucial for further product and service design. This help bank to
understand needs of customer's factor competitors, which result with innovative product and services. This is
also an impotent way to explorer and rectifies problems face by users quickly, which paves the way for
operational excellence and customer intimacy. All these mindset changes will help banks to overcome the
alignment problems, alignment of people and processes, which are obstacle in the CRM success.
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Building Brand Image: If banks seem to have an introverted culture; it must adopt a more extroverted
culture to promote its brand. This needs a change in mindsets from management level to employees’ level.
By using CRM, it can build strong relationships with customers. The successful service excellence and
customer intimacy strategies can result with good word of mouth which is the most effective way of
advertisement. Employees can play a critical role in building a strong brand. Banks must equip its employee
with necessary mindsets and skill so that they will play as an ambassador role in promoting brand identity.
Banks have some CRM capabilities that the order banks don't have so it must promote its superior
capabilities better a build a strong brand. They can use more advertisements on TV, newspapers, and
magazines, Internet etc. By using CRM capabilities, banks can find out customers' needs and expectations
faster than rivals and accordingly can launch innovative products and services. Innovative products attract
new customers and promote brand as a pioneer in the market.

Re-Integration of Operational Analytical and Collaborative CRM: Although many banks have very high
analytical CRM capabilities, they have deficiencies in operational and collaborative CRM. So banks can
overcome the challenge of insufficient quality of customer data by using an integrated CRM system and
interacted channel management. To enhance its operational CRM, bank should adopt the mindset changes to
equip its sales force with necessary mindset and skill to integrate them to new processes. To improve
customer service automation and collaborative CRM capabilities, banks should use an "Interacted channel
management" Online banking is very crucial for today' bank's customers. So banks should direct its
customers of online channels, which reduce cost and increase speed of transactions for both parties. It will
also ease the tracking of customer information. Various systems such as web-chat and call back services to
its communication channels add value to CRM. Also, banks must develop its telephone banking. And all
channels must be integrated with each other.

Effective Use of ATMs: ATMs are very important for the bank choice of people. Banks have to capitalize
on their ATMs better by expanding their branch network, locating ATMs into strategic points where they
can each more people. With new ATMs in existence, customers can update their information, which is a
strategic way to improve customer data. As it is a new service. Introduction brochures must be placed near
ATMs, explaining their use and also a demo may be put into web site, which shows which transactions can
be done by ATMs and may show all the ATM transactions step by step. So that customer feels more
confident when they first use it. Because people are afraid to their bankcards might get caught in the ATMs
because of any misuse.

Increasing Switching Cost: In order to retain customers and increase existing customers' share of wallet,
Banks must develop strategies that will increase switching costs. It can increase switching cost with
excellent service, customer intimacy and focus differentiation strategies. By building emotional links with
customers and making they feel as a valued customer. Other tactics are giving more reward points and using
competitive pricing and promotion strategies. Promotion may be important for credit card holders.

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Focus on Private and Premier (Priority) Banking: Many banks already practice private banking and
priority banking but in order to incorporate CRM to the highest, it should be strong player in private market.
One of the main aim and ultimate goal of CRM is to retain and acquire must profitable customers, which
affect overall the profitability of bank. To attract more private banking customers, banks must offer more
individualize and attractive products and services to these customers. And its advertisement and packing
must be done well. On the other side, like what some other banks do, banks can use referral programs. In
return shopping vouchers can be offered to customer who can introduce a private banking customer
successfully. To retain private banking customers, more waiver and discounts must be used. To increase
their profitability, their saving can be attracted by educating and advising them about the financial markets
and financial products. Banks should also pursue the strategy to grow profitability of customer who is not
highly profitable at the moment but have the potential to become.

Lastly as universally understood customer satisfaction is very important for the aim of CRM, effective and
efficient customer satisfaction management strategy should be enabled to analyze the customer profiles, to
detect their needs and potential profitability areas and establish the necessary actions to achieve customer
satisfaction, competitive advantage and thus the profitability. To sum up, any banks can exploit CRM in
order to gain competitive advantage over its rivals and increase their customer base for having bigger slice of
pie.

1.2 Basic relevant concepts

CRM: (1) CRM is an information industry term for methodologies, software and usually Internet
capabilities that help an enterprise manage customer relationships in an organized way. (2) CRM is
the process of managing all aspects of interaction a company has with its customers, including
prospecting, sales and service. CRM applications attempt to provide insight into and improve the
company/customer relationship by combining all these views of customer interaction into one
picture.
(3) CRM is an integrated approach to identifying, acquiring and retaining customers. By enabling
organizations to manage and coordinate customer interactions across multiple channels,
departments, lines of business and geographies, CRM helps organizations maximize the value of
every customer interaction and drive superior corporate performance. (4) CRM is an integrated
information system that is used to plan, schedule and control the pre-sales and post-sales activities
in an organization. CRM embraces all aspects of dealing with prospects and customers, including
the call centre, sales force, marketing, technical support and field service. The primary goal of CRM
is to improve long- term growth and profitability through a better understanding of customer
behaviour. CRM aims to provide more effective feedback and improved integration to better gauge
the return on investment (ROI) in these areas. (5) CRM is a business strategy that maximizes
profitability, revenue and customer satisfaction by organizing around customer segments, fostering

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behaviour that satisfies customers, and implementing customer-centric processes.

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Strategic CRM is a core customer-centric business strategy that aims at winning and keeping
profitable customers.

Operational CRM focuses on the automation of customer-facing processes such as selling,

marketing and customer service.

Analytical CRM is the process through which organizations transform customer-related data into
actionable insight for either strategic or tactical purposes

Companies implementing CRM: Many companies have implemented CRM. Early adopters were
larger companies in financial services, telecommunications and manufacturing in the USA and
Europe. Medium-sized businesses are following. There is still potential for the CRM message to
reach smaller companies, other worldwide markets, not-for-profits and new business start-ups.

Customers and partners of those companies: The customers and partners of companies that
implement CRM are a particularly important constituency. Because CRM influences customer
experience, it can impact on customer satisfaction ratings, and influence loyalty to the supplier.

Vendors of CRM systems: Vendors of CRM include Oracle, IBM, SAP and SAS. There has been
considerable consolidation of the CRM vendor marketplace in recent years. PeopleSoft and Siebel,
two of the pioneering CRM vendors, are now integrated into Oracle. IBM has been integrating
analytic solution providers as it builds a more comprehensive analytical CRM capability. Vendors
sell licences to companies, and install CRM software on the customer’s servers. The client’s people
are trained to use the software.

CRM cloud solutions providers: Companies implementing CRM can also choose to access CRM
functionality on a subscription basis through hosted CRM vendors such as salesforce.com, Right
Now (part of Oracle), Microsoft Dynamics and NetSuite. Clients upload their customer data to the
host’s servers and interact with the data using their web browsers. These service providers deliver
and manage applications and other services from remote sites to multiple users via the Internet.
These companies are also known as Software as a Service (SaaS) firms or Application Service
Providers (ASPs). Clients access CRM functionality in much the same way as they would use eBay
or Amazon.

Social media players: Facebook, Twitter and some other platforms are building enormous

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communities that generate valuable data about people’s preferences, activities, friends and wants.
We predict a major battle between the major social media players and companies with large
numbers of customers for the analysis and use of that data.

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Vendors of CRM hardware and infrastructure: Hardware and infrastructure vendors provide the
technological foundations for CRM implementations. They supply technologies such as servers,
computers, hand-held and mobile devices, call centre hardware and telephony systems.

Management consultants: Consultancies offer clients a diverse range of CRM-related capabilities

such as strategy, business, application and technical consulting. Consultants can help companies
implementing CRM in several ways: systems integration, choosing between different vendors,
developing implementation plans and project management as the implementation is rolled out. Most
CRM implementations are composed of a large number of smaller projects, for example: systems
integration, data quality improvement, market segmentation, process engineering and culture
change. The major consultancies such as Accenture, McKinsey, Bearing Point, Braxton Group and
CGEY all offer CRM consultancy. Smaller companies sometimes offer specialized expertise.
Peppers and Rogers provide strategy consulting. Dunnhumby is known for its expertise in data
mining for segmentation purposes.
Banks deal with a large number of individual retail customers: They want CRM for its analytical
capability to help them manage customer defection (churn) rates and to enhance cross-sell
performance. Data mining techniques can be used to identify which customers are likely to defect,
what can be done to win them back, which customers are hot prospects for cross-sell offers and how
best to communicate those offers. Banks want to win a greater share of customer spend (share-of-
wallet) on financial services. In terms of operational CRM, many banks have been transferring
service into contact centres and online in an effort to reduce costs, in the face of considerable
resistance from some customer segments.

Auto manufacturers sell through distributor/dealer networks: They have little contact with the end-
user owner or driver. They use CRM for its ability to help them develop better and more profitable
relationships with their distribution networks. Being physically disconnected from drivers, they
have built websites that enable them to interact with these end-users. This has improved their
knowledge of customer requirements. Ultimately, they hope CRM will enable them to win a greater
share of enduser spend across the car purchase, maintenance and replacement cycle.

Technology solution vendors manufacture or assemble complex bundles of hardware, software and
implementation that are generally sold by partner organizations: For example, small innovative
software developers have traditionally partnered with companies such as IBM to obtain distribution
and sales. Other companies have copied Michael Dell’s direct-to-customer (DTC) channel strategy
for personal computers. CRM helps these DTC companies to collect customer information, segment
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their customer base, automate their sales processes with product configurator software and deliver
their customer service online.

Consumer goods manufacturers deal with the retail trade: They use CRM to help them develop
profitable relationships with retailers. CRM helps them understand costs-toserve and customer
profitability. Key account management practices are applied to strategically significant customers.
IT-enabled purchasing processes deliver higher levels of accuracy in stock replenishment.
Manufacturers can run CRM-enabled marketing campaigns that are highly cost-effective (Francis
and Stan, 2015).

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 CHAPTER 2

RESEARCH METHODOLOGY

2.1 Objectives

This project has the objectives such as:

(1) to understand definitions, meaning, basic concepts and importance of customers relationships
management;
(2) to study the components, types, techniques of customer relationship management; and
(3) to examine the effect of customer relation management on customer satisfaction, customer
benefits, customer profile, improving CRM with in a firm, and application of CRM in
practice.

2.2 Scope of the study

This study will help the students to to understand definitions, meaning, basic concepts and
importance, components, types, techniques of customers relationship management; and
examine the effect of customer relation management on customer satisfaction, customer
benefits, customer profile, improving CRM with in a firm, and application of CRM in
practice.

2.3 Limitations of the study

This study is based on the secondary information available from various literatures, but not
the primary data which has the advantage of being first-hand and original. As the researcher
has limited time, she could not involve primary data.

2.4 Significance of the study

Customer relationship management is an integrated approach that manages a company’s

interactions with the existing and future customers. It helps to identify, acquire and maintain
customers for successful growth of the business. It enables business organizations to plan &
coordinate to reach across different departments and channels. A CRM model use smart technology
for organizing, automating, synchronizing sales, customer service, marketing, and technical support.

What is CRM meant for?

The customer relationship management models help the businesses to monitor and control the
business activities along with addressing end-to-end customer requirements. Besides, CRM focuses

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 to –

(1) Create database describing the customers, their purchasing behaviors and their relationship with
the company.

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(2) Provide enough details to the business firm that help in understanding client needs. This is how
business enterprise is able to meet the expectations and offer appropriate products/ services
matching well with their pocket and requirements.
(3) Prepare documentation presenting information about the past purchases of the customers.

THREE Phases of CRM

Customer relationship management mainly covers three main aspects of customer life cycle; namely:
acquisition, retention and extension.

(1) Acquisition – This focuses more on employee promotion, managing their profiles, sending direct
emails, customer service, incentives and services.
(2) Retention – It benefits customers and add value to the customer selection by adopting loyalty
schemes, promotions, community, extranets and personalization.
(3) Extension – The customer selection is extended by direct emails, onsite promotions and learning.

In today’s competent era, it is important for every business organization to work on the customer
relationship management model for making the business processes more organized and profitable.
There are countless reasons to implement CRM in a business environment. CRM may:

(1) Help the business marketing departments for identifying and targeting their potential clients,
managing business marketing campaigns and discovering qualified leads.
(2) Establish individual relationship with the happy customers.
(3) Boost sales and streamline existing processes.
(4) Provide accurate information to the employees required for improving customer services and
understand their needs better.

CRM is a faster way to:

(1) Identify and handle problems/ complaints of the clients regarding business processes.
(2) Monitor all the sources of contact between the company’s potential clients and the business
organization.
(3) Bestow employees with essential information on the product specifications, technical support and
product use criterions.
(4) Schedule and manage follow-up sales and conduct periodical calls for assessing the customer
satisfaction rates & their repurchase probabilities.

CRM is leading businesses to:

(1) Identify business prospects and help them in converting to potential clients.
(2) Close sales on a more effectual note.

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(3) Allow clients to conduct business transactions easily and faster.
(4) Offer better services and improved customer support following specific sales.

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 No doubt, customer relationship management leads to great customer services which directly give
benefits to the customers and convince then for giving repeat business. All this helps in improving
the business profitability that improves the return-on-investment graph. Don’t give second thought
while implementing CRM solutions to your business as this approach has been successful in
bringing endless benefits to business enterprises.

2.5 Data collection

This project work uses only secondary information, i.e., website.

2.6 Techniques used

No statistical figures are used in this project work.

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 CHAPTER 3

LITERATURE REVIEW

3.1 Definitions and meaning of customer relationship management

Customer relationship Management has three important elements to its success story. They are
people, process and technology. People within the organisation like staff and managers need to
support customer relationship management (CRM). Customer relationship Management process
must be properly investigated and planned to support the CRM initiative and locating the right
technology to enhance the processes, provide staff with the best data as well as being user friendly.
(Wikipedia)

According to Buttle, F (2008) Customer Relationship Management (CRM) is the ‘core business
strategy’ that combines internal processes and functions, and external networks, to create and
deliver value to targeted customers at a profit. It is grounded on high quality customer related data
and support by information technology. Customer relationship management can further be defined
as a complete set of activities covering all functions of the organisation, relating with and
supporting a consumer. Such activities build customer satisfaction by way of providing to their
needs, and want over a long period of time (Wimshurst & Mackay, 2002).

According to Starky, Woodcock (2000) Customer Relationship Management is defined as a

business attitude. ‘Customer Relationship Management (CRM) is an IT-enhanced value process,
which identifies, mature, combine and focuses the various capabilities of the organisation to the
customers opinion in order to deliver long term exceptional customer value, at a profit, to well-
known existing and future customer segments.’

Other Authors such as Rigby, Reichheld, and Schefter (2002) in their definition described that
‘Customer Relationship Management (CRM) affiliates business processes with customers strategies
to build customer loyalty and to increase profit long term. ‘In their definition the words technology
and software were not cited. In order words the authors believes that customer relationship
management (CRM) is seen as a set of customer strategies and processes, supported by the pertinent
software, for the purpose of improving customer loyalty and ultimately, corporate profitability (UK
Essays, 2015).

The art of managing the organization’s relationship with the customers and prospective clients refer
to customer relationship management. Customer relationship management includes various
strategies and techniques to maintain healthy relationship with the organization’s existing as well as
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potential customers. Organizations must ensure customers are satisfied with their products and
services for higher customer retention. Remember one satisfied customer brings ten new
customers with him

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 where as one dissatisfied customer takes away ten customers along with him. In simpler words,
customer relationship management refers to the study of needs and expectations of the customers
and providing them the right solution (MSG Management Study Guide).

Customer relationship Management (CRM) appears to be a simple and straightforward concept, but there are
many different definitions and implementations of CRM. At present, a number of different conceptual
understandings are associated with the term "Customer Relationship Management (CRM). There
understanding range from IT driven programs designed to optimize customer contact to comprehensive
approaches for the establishment and design of long-term relationships. The effort to establish a meaningful
relationship with the customer is characteristic of this last understanding (Barnes 2003).

CRM is a holistic process of acquiring, retaining and growing customers. It includes all in-line and off-line
relationship management. (Strauss et al. 2003). As gray and Byun (2001) expound; CRM is an abbreviation
for customer relationship management, not customer relationship marketing. Management is a broader
concept than marketing because it covers strategic management, human resources management, marketing
management, service management, knowledge management, sales management and research management
and development management. Thus CRM requires organizational and business level approaches, which are
customer centric, to doing business rather than a simple marketing strategy.

The banking industry is facing an ever-increasing level of competition around the world as the dynamics of
the business change. Technology, commoditization, deregulation and globalization forever changed the face
of banking (Joyner 2002). Banks have understood the need to capitalize on the new technologies to gain
advantage in the competition by exploiting their customer base, brand value and costly infrastructure
investments in order to increase profits, as there's a direct link between the customer satisfaction and the
profitability. CRM is the strategy which enables the banks to analyze the customer profiles, to detect their
needs and potential profitability areas and establish the necessary actions the achieve customer satisfaction,
competitive advantage and thus the profitability. From the customer's points of view, the competition brings
them various choices and increases their bargaining power. Today, customers are looking for various
benefits from a bank; better service, lower transaction fees, higher interest rates, a sign of prestige, new
products access from different channel and etc. this scheme forces the banks to look for new ways a satisfy
customers before any other bank or financial institution does.

Critical Success Factor of CRM: CRM is a holistic approach, which needs alignment of different aspects
of a business. Management and leadership, change management, human resources and using right
technologies are the critical success factors of CRM.

Management and leadership: Leaders/Mangers in a bank should have an important role by sharing CRM
team’s vision with management. The leaders’ role has to be facilitator for implementing CRM. Effective
Leadership skills result in CRM success. Innovative mangers works with his team, makes decisions by

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consulting his team, whilst still maintaining control of the group as well as appreciate all the feedbacks in the
organization related with CRM implementation and strategies and tries to integrate people into it. Because

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CRM is the backbone of communication, manager communication and coaching skills is the important in
CRM implementation any banks.

Change Management: “CRM is an evaluation. Change is inevitable." When new IT systems, software, etc.
are deployed, the way people doing their jobs would also change, so cultural change adaptation is crucial. It
can be also called as Multi Pronged Change Strategy. Instead of rushing, CRM team can prefer a gradual
change. Workshops and brainstorming meetings with sales, marketing, and customer service staff and shared
their CRM strategies can be conducted. Banks do train employees and first of all, they tried to change
employees’ mindset from operation centric ones to customer centric ones. Change management is crucial to
promote user adaptation. Major focus is based on training to achieve adaptation.

Information Technology (IT): Nowadays many banks began to deploy new technologies according to their
needs. With advanced technologies, it gets the advantage of doing tasks faster and more accurately. There
are various software for CRM like Siebel systems for operational CRM; Teradata for data warehouse;
Unica’s Affinium for campaign management; SAS for data modeling activities. Banks also develop a task
manager program that helps sales representatives to see 360-degree of customer view.

Human Resources: CRM is the backbone for communication. For a successful CRM implementation,
human resources management of a company is very important. Integrating employees into strategies and
training them is very important to adapt them to change. Employees are the interface of the company, so they
will highly affect the bank’s image.

CRM for Competitive Advantage: Competition is at the core of the success or failure of a bank as well as all
the firms. According to porter (1985), competitive strategy is the search for a favorable competitive position
in an industry, the fundamental arena in which competition occurs. Competitive strategy aims to establish a
profitable and sustainable position against the forces that determine industry competition. There are various
strategies that can be adopted which will procure a bank competitive advantage in an industry. In this study,
Poter’s “Generic Strategy Framework” and Treacy & Wieserma’s “Value Disciplines Model” are discussed
and adapted to banking industry which will be helpful to understand and evaluate the positioning strategies
of banks in terms of their CRM strategic and implementations. Strengths and weaknesses of these strategies
and their applicability to banking industry are argued; comparisons are conducted accordingly.

Generic Strategic Framework: “Competitive advantage grows fundamentally out the value a firm is able to
create for its buyers that exceeds the firm’s cost of creating it. Value is what customers willing to pay and
superior value stems from offering lower prices than competitors for equivalent benefits of providing unique
benefits that more than offset a higher price.” (Porter 1985, p.3) The theory consists of three main strategies
(cost leadership, differentiation and focus) which are shown in the figure 2.1 while cost leadership and
differentiation strategies address a whole industry, focus strategies address specific or small clusters of
customers within an industry.

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Cost Leadership: The strategy requires a firm (bank) to serve at the lowest cost in the industry. Economies
of scale, unique technology that is not available to other firms, using cost effective channels are some of the
ways for being able to use the strategy. The strategic logic of cost leadership strategy requires a firm to be
cost leader, not one of the several firms vying this position.

For banking sector, a broad target cost leadership strategy itself is not a good strategy as it decreases the
profit margins extensively which will soon be followed by other banks. That's why there is no significant
difference in general interest rates, loan rates, transaction fees of bank in a stable economy and banking
sector.

Differentiation: The aim of the strategy is to be unique in the industry and this uniqueness must be valuable
for customers. The uniqueness can be one or a set of dimensions. Areas of differentiation can be: product
service, marketing, sales, image, delivery and etc.

In banking sector, differentiation can be crafted by a single or a set of these dimensions. While brand
differentiation and product differentiation would be applicable for broad targeting service, marketing and
delivery differentiation strategies would be suitable for narrow scope targeting. A broad target service
differentiation is not for banks they are looking for profitability. That is why today many banks use customer
segmentation to service its customers rather than given the same service to all customers.

Focus Strategy: The focus strategy involves concentration on particular buyer groups, geographic areas or
product/market segments. By selecting a particular segment group or group of segments, company attempts
to tailor its strategy to service the needs of its segment better than the competitors. A focus strategy may
emphasize differentiation or cost advantage (Payen). Events based marketing is an example of focus
differentiation strategy (marketing differentiation), which matches customer transactions to tailored
marketing and sales pitches Priority banking is another example of focus differentiation strategy (service
differentiation), which aims to give better service to more profitable customers of a bank. Today customers
look for individualize service from their banks and banks highly use focus differentiation strategies to satisfy
customers. Banks use "cost focus strategy" mostly for profitable customers in order to retain them by
increasing their switching cost.

It can be synthesize that, for banking sector, board target differentiation strategies are likely to attract the
potential customer, while narrow target differentiation strategies (focus strategy) are likely to retain bank's
existing profitable customers and allocate the bank's resources more effectively. For example, brand, image
of the bank is an important why for bank to differentiate themselves from all the other banks and attract
potential customers. Launching innovate products is another why of attracting potential customers.

Michael Porter (Porter 2006, cited in Streeter 2006) states his thoughts, about competition and banks, in a
recent banking conference. Porter thinks that banking sector is entering an era of strategic positioning. To
succeed in the new era, companies have to deliver something unique, but most banks do what others do,
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what he calls, to competition. He stated that "The worst thing you can do is compete with your rival on the
same

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things. If you do, the competition almost always becomes a destructive arms race. Strategy, is striving to be
unique, which required choices."

As it can be understood, porter insists the successful firms can only compete with one generic strategy, in
isolation of other generic strategies. For many researchers this viewpoint is not accurate. What should be
pointed out is the successful firms tend to compete with multiple strategies. Contingent strategies are
important for their survival. (Hall 1983; Ham brick 1983; Wright, 1986, cited in Wright et al 1988)

The other critical view for porter's monolithic strategy comes from Wright (1986 cited in Wright et al.), he
expounds that in a fragmented industry like banking, where there the many players in different sizes, it is
difficult to be successful with adapting one generic strategy.

In banking industry, a sustainable competitive advantage can be gained with a blend of different strategies,
but a powerful focus differentiation strategy in service cannot be neglected. Products and price can be easily
copied. Service is more difficult to imitate than a product because service requires customer input and
involvement (Payen 2006).

Today, building a competitive advantage is based on how well a bank serves its customer CRM is
differentiation strategy that banks can use to acquire, grow and retain profitable customer relationships, with
the goal of creating a sustainable competitive advantage.

In the following part, another important competitive advantage strategy framework will be discussed and
comparisons will be done with porters' Generic Strategies framework

Value Discipline Model Porter’s “Generic Strategies Framework” alone is not enough to understand the
positioning strategies of banks in terms of CRM. Porter’s focus on industry structure is a powerful means of
analyzing competitive advantage in itself, but it has been criticized for being too static in an increasingly fast
changing world. For a deeper understanding, Michael Treacy and Fred Wieserma’s “Value Disciplines
Model” has been examined. This model is another important strategic framework for market positioning
which has the following 3 positioning strategies: • Operational excellence • Product leadership • Customer
intimacy

CRM can be strategically embedded particularly in two of the three value disciplines (1) Operational
Excellence, and (2) Customer Intimacy. With customer intimacy, Wieserma (1998) shows how companies
can profit from establishing closer, more co-operative customer relationships. With operational excellence,
firms aim to have economical, efficient processes whose resulting delivered values to customers are low
prices and service convenience. (Wieserma & Treacy 1996).

Firms applying customer intimacy focus on knowing the customer and building close relationships with
these customers. CRM is often solely related to the customer intimacy value discipline. If CRM is embedded
in a customer intimacy strategy, then CRM will be relationship-oriented. Firms embedding CRM in an

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operational excellence strategy focus on cost- reductions and raising the quality of the customer interaction
process through process improvements (Verhoef and Langerak 2002).

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Challenges of Implementing CRM: The challenges faced by many of the banks whilst implementing CRM
can be summarized as the followings:

(21) Getting management sponsorship

(22) Quality of customer data
(23) Alignment issue (Alignment of people and processes)
(24) Lack of skilled people
(25) Determining the right time for customer needs
(26) Using customer data more intelligently
(27) Incorporating customer data and customer preferences to the customer data base
(28) Using right technologies
(29) Real time data cross all customer channels
(30) Having 360- degree view of customers (Single view of customers)

The retail banking market is fiercely competitive and saturated (Pili 2006). The competition is forcing banks
to find new ways of satisfying customers and quick adaptation to changes. The competition among the banks
itself is also very major domestic players on the arena. Banks are aware of this fact and exploit new trends to
continue their existence in the market. CRM is one of these trends that are highly adopted by many banks.

The satisfaction level of customers who agree that they are treated as a valued customer is the measuring part
for CRM's success in the bank. This could be attributed to the distinctive communication capabilities, which
target to establish an emotional link with the customer. This is highly related with organizational learning
philosophy and adaptive culture of the banks.

Application of CRM in Banking Sector Based on the discussions made above, appropriate and effective
application strategies of CRM are given to improve bank's competitive position in the market.

Changing Mindsets: Customer Centric, Adaptive, Innovative Culture-Any bank's long heritage brings rigid
and conservation mindsets together which makes the change adaptation difficult, which is essential for CRM
as mentioned in the "Critical Success Factors of CRM" part. Although this rigidity seems to be decreasing, a
mindset change is needed for the bank.

The rigidity of management and the conservative hierarchical organization structures decrease the speed of
CRM implementations and operation in banks. Banks can use any other good bank which is implementing
CRM as benchmarks, which have more flexible and innovative cultures and where organizational structure is
flatter. The charge of mindsets must start from the management level and continue to the all the level of the
organization with the support of management. At this point a paradigm shift is needed which can be
summarized as follows:

(13) A customer centric and relationship-oriented culture must be adopted instead of operation
centric and sales oriented culture.
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 (14) Management's attitude to employee must be proactive instead of being reactive; instead of
employee compliance, continuous improvement must be supported.
(15) Training culture must be improved to organization learning philosophy where self-learning is
supported.
(16) Employee must be empowered in order to carry on their responsibilities faster and efficiently.
(17) Teamwork and coaching must be developed, instead of individuation.
(18) Measurement basis must be objective, fair and transparent. Employee must be motivated by
rewards and supportive attitude of their managers.

Leaders play an important role in this change process. So that banks can invest in experienced professionals
with leadership skill, which can influence the organization to encourage and convince for change. Banks also
must consider employee career development and leadership training. They can overcome the problem of
absence of skilled people regarding with CRM by training employee with the help of leadership coaching.

Mission statement of bank must be revised and statements that are stressing the customer focused, innovative
culture must be put in place. This focus must be supported with in-house training and the message should be
clearly passed down to each level in the organization to ensure solid commitments.

Organizational Learning Philosophy: Organizational learning is more than providing training sessions to
employees when it is needed; it is a philosophy. Banks must introduce organizational learning philosophy to
nurture new and expansive patterns of thinking where innovative thinking is supported. Organizational
learning philosophy consists of a fast adaptive culture, which is an important core competence for today's
banking industry. Leadership coaching can help in adaptation process. Also e-leanings about technical and
non-technical issues can be provided via intranet connection of Banks. Banks can exploit organizational
learning philosophy while implementing its CRM strategies employees and customers are the end user of
CRM strategies and implementations, so that it can capitalize on their feedbacks, expectations, satisfaction
and dissatisfaction points to improve its strategies and implementations. Banks can conduct regular
discussion sessions with employee and customers. New products, services of the bank can be shared and
customers' offering for better products and services than its competitor can be learned customers' further
expectations can be sought which would be crucial for further product and service design. This help bank to
understand needs of customer's factor competitors, which result with innovative product and services. This is
also an impotent way to explorer and rectifies problems face by users quickly, which paves the way for
operational excellence and customer intimacy. All these mindset changes will help banks to overcome the
alignment problems, alignment of people and processes, which are obstacle in the CRM success.

Building Brand Image: If banks seem to have an introverted culture; it must adopt a more extroverted
culture to promote its brand. This needs a change in mindsets from management level to employees’ level.
By using CRM, it can build strong relationships with customers. The successful service excellence and
customer intimacy strategies can result with good word of mouth which is the most effective way of
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advertisement. Employees can play a critical role in building a strong brand. Banks must equip its employee
with necessary

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mindsets and skill so that they will play as an ambassador role in promoting brand identity. Banks have some
CRM capabilities that the order banks don't have so it must promote its superior capabilities better a build a
strong brand. They can use more advertisements on TV, newspapers, and magazines, Internet etc. By using
CRM capabilities, banks can find out customers' needs and expectations faster than rivals and accordingly
can launch innovative products and services. Innovative products attract new customers and promote brand
as a pioneer in the market.

Re-Integration of Operational Analytical and Collaborative CRM: Although many banks have very high
analytical CRM capabilities, they have deficiencies in operational and collaborative CRM. So banks can
overcome the challenge of insufficient quality of customer data by using an integrated CRM system and
interacted channel management. To enhance its operational CRM, bank should adopt the mindset changes to
equip its sales force with necessary mindset and skill to integrate them to new processes. To improve
customer service automation and collaborative CRM capabilities, banks should use an "Interacted channel
management" Online banking is very crucial for today' bank's customers. So banks should direct its
customers of online channels, which reduce cost and increase speed of transactions for both parties. It will
also ease the tracking of customer information. Various systems such as web-chat and call back services to
its communication channels add value to CRM. Also, banks must develop its telephone banking. And all
channels must be integrated with each other.

Effective Use of ATMs: ATMs are very important for the bank choice of people. Banks have to capitalize
on their ATMs better by expanding their branch network, locating ATMs into strategic points where they
can each more people. With new ATMs in existence, customers can update their information, which is a
strategic way to improve customer data. As it is a new service. Introduction brochures must be placed near
ATMs, explaining their use and also a demo may be put into web site, which shows which transactions can
be done by ATMs and may show all the ATM transactions step by step. So that customer feels more
confident when they first use it. Because people are afraid to their bankcards might get caught in the ATMs
because of any misuse.

Increasing Switching Cost: In order to retain customers and increase existing customers' share of wallet,
Banks must develop strategies that will increase switching costs. It can increase switching cost with
excellent service, customer intimacy and focus differentiation strategies. By building emotional links with
customers and making they feel as a valued customer. Other tactics are giving more reward points and using
competitive pricing and promotion strategies. Promotion may be important for credit card holders.

Focus on Private and Premier (Priority) Banking: Many banks already practice private banking and
priority banking but in order to incorporate CRM to the highest, it should be strong player in private market.
One of the main aim and ultimate goal of CRM is to retain and acquire must profitable customers, which
affect overall the profitability of bank. To attract more private banking customers, banks must offer more
individualize and attractive products and services to these customers. And its advertisement and packing
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must be done well. On the other side, like what some other banks do, banks can use referral programs. In
return shopping vouchers

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can be offered to customer who can introduce a private banking customer successfully. To retain private
banking customers, more waiver and discounts must be used. To increase their profitability, their saving can
be attracted by educating and advising them about the financial markets and financial products. Banks
should also pursue the strategy to grow profitability of customer who is not highly profitable at the moment
but have the potential to become.

Lastly as universally understood customer satisfaction is very important for the aim of CRM, effective and
efficient customer satisfaction management strategy should be enabled to analyze the customer profiles, to
detect their needs and potential profitability areas and establish the necessary actions to achieve customer
satisfaction, competitive advantage and thus the profitability. To sum up, any banks can exploit CRM in
order to gain competitive advantage over its rivals and increase their customer base for having bigger slice of
pie.

3.2 Importance of customer relationship management

Customer Relationship management is the strongest and the most efficient approach in maintaining
and creating relationships with customers. Customer relationship management is not only pure
business but also ideate strong personal bonding within people. Development of this type of
bonding drives the business to new levels of success.

Once this personal and emotional linkage is built, it is very easy for any organization to identify the
actual needs of customer and help them to serve them in a better way. It is a belief that more the
sophisticated strategies involved in implementing the customer relationship management, the more
strong and fruitful is the business. Most of the organizations have dedicated world class tools for
maintaining CRM systems into their workplace. Some of the efficient tools used in most of the
renowned organization are BatchBook, Salesforce, Buzzstream, Sugar CRM etc.

Looking at some broader perspectives given as below we can easily determine why a CRM System
is always important for an organization.
(1) A CRM system consists of a historical view and analysis of all the acquired or to be
acquired customers. This helps in reduced searching and correlating customers and to foresee
customer needs effectively and increase business.
(2) CRM contains each and every bit of details of a customer, hence it is very easy for track a
customer accordingly and can be used to determine which customer can be profitable and
which not.
(3) In CRM system, customers are grouped according to different aspects according to
the type of business they do or according to physical location and are allocated to different
customer managers often called as account managers. This helps in focusing and
concentrating on each and every customer separately.
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(4) A CRM system is not only used to deal with the existing customers but is also useful in
acquiring new customers. The process first starts with identifying a customer and maintaining

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 all the corresponding details into the CRM system which is also called an ‘Opportunity of
Business’. The Sales and Field representatives then try getting business out of these customers by
sophistically following up with them and converting them into a winning deal. All this is very
easily and
efficiently done by an integrated CRM system.
(5) The strongest aspect of Customer Relationship Management is that it is very cost-
effective. The advantage of decently implemented CRM system is that there is very less need of
paper and manual work which requires lesser staff to manage and lesser resources to deal with.
The technologies used in implementing a CRM system are also very cheap and smooth as
compared to the traditional way of business.
(6) All the details in CRM system is kept centralized which is available anytime on fingertips.
This reduces the process time and increases productivity.
(7) Efficiently dealing with all the customers and providing them what they actually need
increases the customer satisfaction. This increases the chance of getting more business which
ultimately enhances turnover and profit.
(8) If the customer is satisfied they will always be loyal to you and will remain in business
forever resulting in increasing customer base and ultimately enhancing net growth of business.

In today’s commercial world, practice of dealing with existing customers and thriving business by
getting more customers into loop is predominant and is mere a dilemma. Installing a CRM system
can definitely improve the situation and help in challenging the new ways of marketing and
business in an efficient manner. Hence in the era of business every organization should be
recommended to have a full-fledged CRM system to cope up with all the business needs.

3.3 Components of customer relation management

The main components of CRM are building and managing customer relationships through
marketing, observing relationships as they mature through distinct phases, managing these
relationships at each stage and recognizing that the distribution of the value of a relationship to the
firm is not homogeneous. When building and managing customer relationships through marketing,
firms might benefit from using a variety of tools to help organizational design, incentive schemes,
customer structures, and more to optimize the reach of its marketing campaigns. Through the
acknowledgement of the distinct phases of CRM, businesses will be able to benefit from seeing the
interaction of multiple relationships as connected transactions. The final factor of CRM highlights
the importance of CRM through accounting for the profitability of customer relationships. Through
studying the particular spending habits of customers, a firm may be able to dedicate different
resources and amounts of attention to different types of consumers (Reinartz, et. al. (2004).

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Relational Intelligence, or awareness of the variety of relationships a customer can have with a firm,
is an important component to the main phases of CRM. Companies may be good at
capturing demographic data, such as gender, age, income, and education, and connecting them with

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 purchasing information to categorize customers into profitability tiers, but this is only a firm's
mechanical view of customer relationships. This therefore is a sign that firms believe that customers
are still resources that can be used for up-sell or cross-sell opportunities, rather than humans looking
for interesting and personalized interactions (Jill, 2014). CRM systems include:

(1) Data warehouse technology, used to aggregate transaction information, to merge the information
with CRM products, and to provide key performance indicators.
(2) Opportunity management which helps the company to manage unpredictable growth and demand,
and implement a good forecasting model to integrate sales history with sales projections.
(3) CRM systems that track and measure marketing campaigns over multiple networks, tracking
customer analysis by customer clicks and sales.
(4) Some CRM software is available as a software as a service (SaaS), delivered via the internet and
accessed via a web browser instead of being installed on a local computer. Businesses using the
software do not purchase it, but typically pay a recurring subscription fee to the software vendor.
(5) For small businesses a CRM system may consist of a contact management system that integrates
emails, documents, jobs, faxes, and scheduling for individual accounts. CRM systems available for
specific markets (legal, finance) frequently focus on event management and relationship tracking as
opposed to financial return on investment (ROI).
(6) CRM systems for eCommerce, focused on marketing automation tasks, like cart rescue, re-engage
users with email, personalization.
(7) Customer-centric relationship management (CCRM) is a nascent sub-discipline that focuses on
customer preferences instead of customer leverage. CCRM aims to add value by engaging
customers in individual, interactive relationships (Reinartz, et. al., 2004).
(8) Systems for non-profit and membership-based organizations help track constituents, fundraising,
sponsors' demographics, membership levels, membership directories, volunteering and
communication with individuals.
(9) CRM not only indicates to technology and strategy but also indicates to an integrated approach
which includes employees’ knowledge, organizational culture to embrace the CRM philosophy.

3.4 Types of customer relation management

The customer relationship may be classified into the following categories:

(1) Strategic: Strategic CRM is concentrated upon the development of a customer-centric business
culture (Buttle and Maklan, 2015). The focus of a business on being customer-centric (in design and
implementation of their CRM strategy) will translate into an improved CLV.

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(2) Operational: The primary goal of customer relationship management systems is to integrate
and automate sales, marketing, and customer support. Therefore, these systems typically have a
dashboard that gives an overall view of the three functions on a single customer view, a single page
for each customer that a company may have. The dashboard may provide client information, past
sales, previous marketing efforts, and more, summarizing all of the relationships between the
customer and the firm. Operational CRM is made up of 3 main components: sales force automation,
marketing automation, and service automation.
Sales force automation works with all stages in the sales cycle, from initially entering contact
information to converting a prospective client into an actual client. It implements sales
promotion analysis, automates the tracking of a client's account history for repeated sales or future
sales and coordinates sales, marketing, call centers, and retail outlets. It prevents duplicate efforts
between a salesperson and a customer and also automatically tracks all contacts and follow-ups
between both parties (Buttle, 2003).
Marketing automation focuses on easing the overall marketing process to make it more effective
and efficient. CRM tools with marketing automation capabilities can automate repeated tasks, for
example, sending out automated marketing emails at certain times to customers, or posting
marketing information on social media. The goal with marketing automation is to turn a sales lead
into a full customer. CRM systems today also work on customer engagement through social media.
Service automation is the part of the CRM system that focuses on direct customer service
technology. Through service automation, customers are supported through multiple channels such
as phone, email, knowledge bases, ticketing portals, FAQs, and more.

(3) Analytical: The role of analytical CRM systems is to analyse customer data collected through
multiple sources and present it so that business managers can make more informed
decisions. Analytical CRM systems use techniques such as data mining, correlation, and pattern
recognition to analyze the customer data. These analytics help improve customer service by finding
small problems which can be solved, perhaps by marketing to different parts of a consumer
audience differently. For example, through the analysis of a customer base's buying behaviour, a
company might see that this customer base has not been buying a lot of products recently. After
scanning through this data, the company might think to market to this subset of consumers
differently, to best communicate how this company's products might benefit this group specifically.

(4) Collaborative: The third primary aim of CRM systems is to incorporate external stakeholders
such as suppliers, vendors, and distributors, and share customer information across
groups/departments and organisations. For example, feedback can be collected from technical
support calls, which could help provide direction for marketing products and services to that
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particular customer in the future.

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 (5) Customer Data Platform: A customer data platform (CDP) is a computer system used by
marketing departments that assembles data about individual people from various sources into one
database, with which other software systems can interact. As of February 2017 there were about
twenty companies selling such systems and revenue for them was around US$300 million.

3.5 Techniques of customer relation management

(1) Tailored, Automated Email Marketing Campaigns

We recently published an article on our blog about how CRM and email marketing intersect.
Indeed, if you have CRM software, it’s incredibly easy to integrate it with your email marketing
campaigns to create comprehensive and converting campaigns. You can get alerts letting you know
when your customers or potential customers are opening your emails. It can go even more in-depth
than that, as you can see which links customers are most receptive to. Those alerts let you plan the
perfect follow- up at exactly the ideal time. Not only that but CRM features can aid you in lead
nurturing. This is due to the deep segmentation that CRM software is capable of, which we’ll
discuss later in this article. With customizable email templates that include interactive elements,
you’re sending the kind of email content your customers actually want to open and read. Interactive
content can be anything from little email mini-games to a simple video. Then there are marketing
automation tools so you can send mass tailored emails to all your audience segments. Finally, CRM
and email can integrate to improve your social media marketing.

(2) Social CRM for More Meaningful Interactions

Social media and CRM are so buddy-buddy that there’s even a term for combining the two: social
CRM. What exactly is social CRM? It’s a modern way of customer communications by reaching
out to customers via social media channels like Twitter or Facebook. It can also include email, chat,
text, and even phone communication, but social media activity is the star. Since it’s CRM software
we’re talking about here, the marketer already has a detailed view of each customer. That allows
communications to be more meaningful and effective. There’s another element of social CRM that
is equally as important as conversions and customer retention. It’s customer support. After all, for
improving customer relationships by keeping your customers happy, you want to answer their
questions and meet their requests. Yet, according to data from call service company Yonyx that
happens far less often than it should. They found that more than half of companies (55 percent) did
nothing with the social CRM customer feedback they received. This is a wasted opportunity. Yonyx
adds that a good chunk of customers (17 percent) seek social media for customer support
purposes. Social media platforms can also guide purchasing decisions, said 20 percent of the

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respondents.

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You can’t always expect that the interaction will be a positive one, at least not initially. Negativity
is common, as a portion of customers (35 percent) who seek out your company will do so to
complain. Still, if you can turn their complaints around, you could see more customers in the future.
Yonyx notes that when customers have a good experience with a company, roughly 70 percent
would tell their family and friends about it.

(3) Cloud-Based CRM Gives Way to Mobile CRM and So Much More
To say that cloud-based data storage is growing is an understatement.
Statistica, a stats resource, found that 1.8 billion people across the world were on the cloud in 2017.
Whether personal or work-related data, they entrusted their information to Internet-based servers.
Today, there’s what’s known as cloud-based CRM. This is when your CRM software is stored in
the cloud. What’s so convenient about cloud CRM? Everything! You and your staff, no matter how
big or small, need only an Internet connection to track your CRM. Did we mention you can do this
anytime from anywhere? There’s no need to be tied down to your office computer. Whether it’s a
weekday night or a weekend, you can bring your CRM with you. All you need is a stable Internet
connection to do so. As you can imagine, this can be revolutionary for businesses looking for more
detailed customer insights. New leads are always entering your pipeline, after all, and the job of
parsing through and segmenting them never seems to end. Cloud CRM makes it easy so no
potential customers slip through the cracks. Not only that, but you can render your contact
management efficient with your cloud CRM by keeping customer contact data up-to-date, send
emails to your mailing list at virtually anytime, and quickly contact your sales teams and/or
marketing teams. According to another article on SuperOffice, this year, companies will shell out
$127 billion on cloud CRM solutions and other services. Back in 2014, companies were only
willing to spend
$56.6 billion. This shows you how much the cloud has grown in four very short years.
EngageBay’s free CRM solution helps you organize all your email contacts, track deals and the
sales pipeline to grow your sales, and build meaningful customer relationships.

(4) Mobile CRM Marketing Continues to Grow

Without cloud CRM, we’d never have mobile CRM. After all, with cloud-based CRM, we
marketers can use our CRM marketing tools of choice anywhere, anytime. That includes any tech as
well, such as smartphones, tablets, and other mobile devices. Like the cloud gives us the freedom to
target every customer and reach our sales goals around the clock, so too does mobile CRM. With a
secure app, we can take our customer insights and marketing campaigns with us anywhere, and all
in our pocket, too. According to Innoppl Technologies, it’s possible to meet more sales goals with
mobile CRM solutions. Of those sales reps they surveyed, 65 percent of them said they were
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surpassing quotas with the use of mobile CRM. The rest of the respondents, 22 percent, were not
using mobile CRM yet still achieved their sales quotas…the hard way. Why make marketing harder
than it has to be?

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 (5) Deep Segmentation and Personalization for that Perfectly-Tailored Approach
As we mentioned in our article about email marketing and CRM, with the software, you can
segment your audience more specifically than ever before. The powerful insights you can gain into
your leads and customers give you the power to watch your leads go through the customer journey
until they come out on the other side as loyal customers fostering long-term customer loyalty. CRM
software helps you guide your leads through every step of that journey. You can send marketing
emails and other content during the awareness stage, engage and nurture with them, and then gently
push them towards product or service purchases. There’s one great way to ensure your lead will
successfully complete the customer journey. It’s personalization. Here’s an awesome CRM
marketing strategy example about personalization from HubSpot. Kyle Jepsen, the company’s
Academy Sales Professor, had reached out to a video company called Vidyard. What followed was
a 51-second extremely personalized video. According to HubSpot, though, Cole mentioned certain
topics he had spoken about with Kyle as well as the names of some colleagues. Now that’s
personalization.

(6) Retain Customers at All Levels of the Journey

As a marketer, you’re not only interested in bringing in new leads, but also retaining every customer
you already have. There are several ways you can do that with CRM software. The first of these is
within the software itself. Whether you use cloud-based CRM, mobile CRM, or another solution,
you know that all your customer data is easily accessible through the software. Instead of digging
through databases and contacts lists, it’s all there for you to parse through anytime you need to. You
can update customer information and even cut unresponsive dead-ends if need be. You can also

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choose to re-engage with these former customers through specialized email campaigns. If the re-
engagement campaign fails, then so be it. With a combo of CRM and marketing automation, it’s
possible to reach out to former customers without putting a lot of manhours into it. Personalization
is another useful

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 way to retain customers. We just talked about personalization, and it’s come up many times on this
blog, too. Finally, you can track the interactions your customer has from start to finish. As
mentioned, CRM gives you a bird’s eye view into a lot of important metrics. Who is opening your
emails? Who is clicking links, and which links? Who’s making purchases and how often? By
knowing this, you can determine who your most loyal customers are and who may be eligible for a
re-engagement campaign.

(7) Search Marketing and CRM Go Hand-in-Hand

Another of our recommended CRM marketing techniques and best practices is using it alongside
search marketing. Search marketing, as you surely know, is a means of marketing to improve your
search engine standing. You can pay for search engine marketing if you must, but CRM software is
useful even if you don’t. How? You already have detailed information and insights into your
customers, including their demographics, interests, pain points, and purchasing behavior. Now you
just have to take that information and use it in search marketing. For instance, you can use the
demographic customer data you have to tailor your ads. Your advertisements can also be
geolocated, so if a customer recently went to one of your bricks and mortar stores, they’ll get ads
for their area. Depending on customer behavior, you can also target specific ads and emails to
various customer segments. Perhaps you want to re-engage with abandoned cart users. If someone
reached out to your customer service teams, they’d see a different message. You’d have yet a third
running campaign for longtime customers. The potential for the intersection of search marketing
and CRM is nearly endless, making way for marketing CRM. While it’s always important to respect
the privacy of your leads and customers, if they gave you information, you can use it to market to
them.

(8) Predictive Analyses

Provide Accurate Insights and Points of Improvement. Finally, the predictive analyses capabilities
of a CRM tool are one of its most valuable assets. We marketers always wish we could look into a
crystal ball and predict the future. That’s why we make trends list and predictions for the year
ahead. How accurate those trends and predictions will be is always up for debate. If you want more
accurate predictions that are actionable as well, turn to your Saas CRM software. Its predictive
analyses use real-world customer data gathered from your leads and customers. It can predict areas
in which you need to improve and those in which you excel. Combined with the detailed analytics
your CRM software can provide you and you should have a more comprehensive picture of your
marketing campaigns than ever before. That allows you to reap future successes and appeal to your
customers in a way that suits them best and thereby, improve customer relationships.

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(9) Use CRM Contact Fields for More Personalization

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 Although we’ve discussed personalization several times in this article, you can never have too many
methods for making your emails more intimate. One such CRM method you can use is known as
CRM contact fields. As this list shows, you can choose a field based on all sorts of criteria. This
includes:
How often the customer uses or buys a product
Their location
Their job department
Their clothing size
Their spouse’s name and their wedding anniversary
Their birthday
If you have this information, then you might as well play up to it and use it to its fullest in your
marketing efforts. The level of personalization you can achieve thanks to CRM is essentially
unparalleled. Store all your contacts in one place. Stay organized, make meaningful decisions, and
close more sales. CRM software is on the rise, and the bottom line is that its ascent is not slowing
down a bit. More and more marketers and business people are learning the value of this software.
By gaining invaluable insights into your customer base, you can convert leads and retain loyal
customers, be it a small business or an enterprise. The marketing CRM techniques and best
practices we shared in this article should help you meet your goals. With the end of the year upon
us, now is the perfect time to begin planning ways you can succeed in 2020. With CRM,
automation, social media, emails, and more, that success can be right around the corner.

3.6 Effect on customer satisfaction, customer benefits, customer profile, improving CRM within a
firm, and application of CRM in practice

(a) Customer satisfaction

Customer satisfaction has important implications for the economic performance of firms because it
has the ability to increase customer loyalty and usage behaviour and reduce customer complaints
and the likelihood of customer defection (Bolton, 1998; Fornell, 1992). The implementation of a
CRM approach is likely to affect customer satisfaction and customer knowledge for a variety of
different reasons.

Firstly, firms can customize their offerings for each customer. By accumulating information across
customer interactions and processing this information to discover hidden patterns, CRM
applications help firms customize their offerings to suit the individual tastes of their customers. This
customization enhances the perceived quality of products and services from a customer's viewpoint,
and because the perceived quality is a determinant of customer satisfaction, it follows that CRM

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applications indirectly affect customer satisfaction. CRM applications also enable firms to provide
timely, accurate processing of customer orders and requests and the ongoing management of
customer

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 accounts (Mithas, Krishnan and Fornell, 2005). For example, Piccoli and Applegate discuss how
Wyndham uses IT tools to deliver a consistent service experience across its various properties to a
customer. Both an improved ability to customize and reduced variability of the consumption
experience enhance perceived quality, which in turn positively affects customer
satisfaction. Furthermore, CRM applications also help firms manage customer relationships more
effectively across the stages of relationship initiation, maintenance, and termination (Piccoli and
Applegate, 2003).

(b) Customer benefits

With Customer relationship management systems, customers are served better on the day to day
process. With more reliable information, their demand for self-service from companies will
decrease. If there is less need to interact with the company for different problems, customer
satisfaction level increases (Leach, 1999). These central benefits of CRM will be connected
hypothetically to the three kinds of equity that are relationship, value, and brand, and in the end to
customer equity. Eight benefits were recognized to provide value drivers (Richards and Jones,
2008).

(1) Enhanced ability to target profitable customers.

(2) Integrated assistance across channels
(3) Enhanced sales force efficiency and effectiveness.
(4) Improved pricing.
(5) Customized products and services.
(6) Improved customer service efficiency and effectiveness.
(7) Individualized marketing messages also called campaigns.
(8) Connect customers and all channels on a single platform.
In 2012, after reviewing the previous studies, someone selected some of those benefits which are
more significant in customer's satisfaction and summarized them into the following cases
(Mohammadhossein and Zakaria, 2012).

(1) Improve customer services: In general, customers would have some questions, concerns or
requests. CRM services provide the ability to a company for producing, allocating and managing
requests or something made by customers. For example, call centre software, which helps to
connect a customer to the manager or person who can best assist them with their existing problem,
is one of the CRM abilities that can be implemented to increase efficiency.
(2) Increased personalized service or one-to-one service: Personalizing customer service or one-
to-one service provides companies to improve understanding and gaining knowledge of the
customers and also to have better knowledge about their customers' preferences, requirements and

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demands.
(3) Responsive to customer's needs: Customers' situations and needs can be understood by the
firms focusing on customer needs and requirements.[36]

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(4) Customer segmentation: In CRM, segmentation is used to categorize customers, according to
some similarity, such as industry, job or some other characteristics, into similar groups. Although
these characteristics, can be one or more attributes. It can be defined as a subdividing the customers
based on already known good discriminator.
(5) Improve customization of marketing: Meaning of customization of marketing is that the firm
or organization adapt and changes its services or products based on presenting a different and
unique product or service for each customer. To ensure that customer needs and requirements are
met Customization is used by the organization. Companies can put investment in information from
customers and then customize their products or services to maintain customer interests.
(6) Multichannel integration: Multichannel integration shows the point of co-creation of
customer value in CRM. On the other hand, a company's skill to perform multichannel integration
successfully is heavily dependent on the organization's ability getting together customer information
from all channels and incorporate it with other related information.
(7) Time saving: CRM will let companies interact with customers more frequently, by
personalized message and communication way which can be produced rapidly and matched on a
timely basis, and finally they can better understand their customers and therefore look forward to
their needs.
(8) Improve customer knowledge: Firms can make and improve products and services through
the information from tracking (e.g. via website tracking) customer behaviour to customer tastes and
needs. CRM could contribute to a competitive advantage in improving firm's ability of customer
information collecting to customize products and services according to customer needs.

Examples: Research has found a 5% increase in customer retention boosts lifetime customer profits
by 50% on average across multiple industries, as well as a boost of up to 90% within specific
industries such as insurance. Companies that have mastered customer relationship strategies have
the most successful CRM programs. For example, MBNA Europe has had a 75% annual profit
growth since 1995. The firm heavily invests in screening potential cardholders. Once proper clients
are identified, the firm retains 97% of its profitable customers. They implement CRM by marketing
the right products to the right customers. The firm's customers' card usage is 52% above the
industry norm, and the average expenditure is 30% more per transaction. Also 10% of their account
holders ask for more information on cross-sale products.

Amazon has also seen great success through its customer proposition. The firm implemented
personal greetings, collaborative filtering, and more for the customer. They also used CRM training
for the employees to see up to 80% of customers repeat.

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 (c) Customer profile

Customer or consumer profiles are the essence of the data that is collected alongside core data
(name, address, company) and processed through customer analytics methods, essentially a type of
profiling. A customer is abstracted to information that sums up consumption habits so far and
projects them into the future so that they can be grouped for marketing and advertising purposes.

(d) Improving CRM within a firm

Consultants argue that it is important for companies establishing strong CRM systems to improve
their relational intelligence. According to this argument, a company must recognize that people
have many different types of relationships with different brands. One research study analyzed
relationships between consumers in China, Germany, Spain, and the United States, with over 200
brands in 11 industries including airlines, cars and media. This information is valuable as it
provides demographic, behavioural, and value-based customer segmentation. These types of
relationships can be both positive and negative. Some customers view themselves as friends of the
brands, while others as enemies, and some are mixed with a love-hate relationship with the brand.
Some relationships are distant, intimate or anything in between.

Analysing the information: Managers must understand the different reasons for the types of
relationships, and provide the customer with what they are looking for. Companies can collect this
information by using surveys, interviews, and more, with current customers. For example, Frito-
Lay conducted many ethnographic interviews with customers to try and understand the relationships
they wanted with the companies and the brands. They found that most customers were adults who
used the product to feel more playful. They may have enjoyed the company's bright orange colour,
messiness, and shape.

Companies must also improve the relational intelligence of their CRM systems. These days,
companies store and receive huge amounts of data through emails, online chat sessions, phone calls,
and more. Many companies do not properly make use of this great amount of data, however. All of
these are signs of what types of relationships the customer wants with the firm, and therefore
companies may consider investing more time and effort in building out their relational
intelligence. Companies can use data mining technologies and web searches to understand relational
signals. Social media such as social networking sites, blogs, and forums can also be used to collect
and analyze information. Understanding the customer and capturing this data allows companies to
convert customer's signals into information and knowledge that the firm can use to understand a
potential customer's desired relations with a brand.

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Employee training: Many firms have also implemented training programs to teach employees how
to recognize and effectively create strong customer-brand relationships. For example, Harley
Davidson sent its employees on the road with customers, who were motorcycle enthusiasts, to help
solidify relationships. Other employees have also been trained in social psychology and the social
sciences to help bolster strong customer relationships. Customer service representatives must be
educated to value customer relationships and trained to understand existing customer profiles. Even
the finance and legal departments should understand how to manage and build relationships with
customers.

(e) Application of CRM in practice

Applying new technologies while using CRM systems requires changes in the infrastructure of the
organization as well as the deployment of new technologies such as business
rules, databases and information technology.

Cal centres: Contact centre CRM providers are popular for small and mid-market businesses. These
systems codify the interactions between company and customers by using analytics and key
performance indicators to give the users information on where to focus their marketing and
customer service. This allows agents to have access to a caller's history to provide personalized
customer communication. The intention is to maximize average revenue per user, decrease churn
rate and decrease idle and unproductive contact with the customers.

Growing in popularity is the idea of gamifying, or using game design elements and game principles
in a non-game environment such as customer service environments. The gamification of customer
service environments includes providing elements found in games like rewards and bonus points to
customer service representatives as a method of feedback for a job well done. Gamification tools
can motivate agents by tapping into their desire for rewards, recognition, achievements, and
competition.

Contact centre automation: Contact-center automation, CCA, the practice of having an integrated
system that coordinates contacts between an organization and the public, is designed to reduce the
repetitive and tedious parts of a contact centre agent's job. Automation prevents this by having pre-
recorded audio messages that help customers solve their problems. For example, an automated
contact centre may be able to re-route a customer through a series of commands asking him or her
to select a certain number to speak with a particular contact centre agent who specializes in the field
in which the customer has a question. Software tools can also integrate with the agent's desktop
tools to handle customer questions and requests. This also saves time on behalf of the employees.
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Social media: Social CRM involves the use of social media and technology to engage and learn
from consumers. Because the public, especially young people, are increasingly using social
networking sites, companies use these sites to draw attention to their products, services and brands,
with the aim of building up customer relationships to increase demand.

Some CRM systems integrate social media sites like Twitter, LinkedIn, and Facebook to track and
communicate with customers. These customers also share their own opinions and experiences with
a company's products and services, giving these firms more insight. Therefore, these firms can both
share their own opinions and also track the opinions of their customers.

Enterprise feedback management software platforms combine internal survey data with trends
identified through social media to allow businesses to make more accurate decisions on which
products to supply.

Local-based services: CRM systems can also include technologies that create geographic marketing
campaigns. The systems take in information based on a customer's physical location and sometimes
integrates it with popular location-based GPS applications. It can be used for networking or contact
management as well to help increase sales based on location.

Business-to-business transactions: Despite the general notion that CRM systems were created for
customer-centric businesses, they can also be applied to B2B environments to streamline and
improve customer management conditions. For the best level of CRM operation in a B2B
environment, the software must be personalized and delivered at individual levels.

The main differences between business-to-consumer (B2C) and business-to-business CRM systems
concern aspects like sizing of contact databases and length of relationships.

3.7 Criticism on CRM

Companies face large challenges when trying to implement CRM systems. Consumer companies
frequently manage their customer relationships haphazardly and unprofitably. They may not
effectively or adequately use their connections with their customers, due to misunderstandings or
misinterpretations of a CRM system's analysis. Clients who want to be treated more like a friend
may be treated like just an exchange party, rather than a unique individual, due to, occasionally, a
lack of a bridge between the CRM data and the CRM analysis output. Many studies show that
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customers are frequently frustrated by a company's inability to meet their relationship expectations,
and on the other

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side, companies do not always know how to translate the data they have gained from CRM software
into a feasible action plan. In 2003, a Gartner report estimated that more than $2 billion had been
spent on software that was not being used. According to CSO Insights, less than 40 per cent of
1,275 participating companies had end-user adoption rates above 90 per cent. Many corporations
only use CRM systems on a partial or fragmented basis. In a 2007 survey from the UK, four-fifths
of senior executives reported that their biggest challenge is getting their staff to use the systems they
had installed. Forty-three per cent of respondents said they use less than half the functionality of
their existing systems. However, market research regarding consumers' preferences may increase
the adoption of CRM among the developing countries' consumers (Joachim, 2002).

Collection of customer data such as personally identifiable information must strictly obey customer
privacy laws, which often requires extra expenditures on legal support. Part of the paradox with
CRM stems from the challenge of determining exactly what CRM is and what it can do for a
company (Monica, Therasa and Wong, 2003). The CRM paradox, also referred to as the "dark side
of CRM" (Nguyen and Simkin, 2013) may entail favoritism and differential treatment of some
customers.

CRM technologies can easily become ineffective if there is no proper management, and they are not
implemented correctly. The data sets must also be connected, distributed, and organized properly so
that the users can access the information that they need quickly and easily. Research studies also
show that customers are increasingly becoming dissatisfied with contact centre experiences due to
lags and wait times. They also request and demand multiple channels of communications with a
company, and these channels must transfer information seamlessly. Therefore, it is increasingly
important for companies to deliver a cross-channel customer experience that can be both consistent
as well as reliable.

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 CHAPTER 4

RESULTS AND DISCUSSION

The information on definition and meaning, nature and importance, models and techniques of
stress management and their application was collected, analysed and discussed in detail with
the help of relevant websites.

Customer relationship management

Customer relationship management (CRM) is the combination of practices, strategies and

technologies that companies use to manage and analyze customer interactions and data
throughout the customer lifecycle. The goal is to improve customer service relationships and
assist in customer retention and drive sales growth. CRM systems compile customer data
across different channels, or points of contact, between the customer and the company, which
could include the company's website, telephone, live chat, direct mail, marketing materials
and social networks. CRM systems can also give customer-facing staff members detailed
information on customers' personal information, purchase history, buying preferences and
concerns (Figure 1).

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Figure 1: Customer relationship management

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 Components of CRM

At the most basic level, CRM software consolidates customer information and documents it into a
single CRM database so business users can more easily access and manage it.

Over time, many additional functions have been added to CRM systems to make them more useful.
Some of these functions include recording various customer interactions over email, phone, social
media or other channels; depending on system capabilities, automating various workflow
automation processes, such as tasks, calendars and alerts; and giving managers the ability to track
performance and productivity based on information logged within the system.

 Marketing automation. CRM tools with marketing automation capabilities can automate repetitive
tasks to enhance marketing efforts at different points in the lifecycle for lead generation. For
example, as sales prospects come into the system, it might automatically send email marketing
content, with the goal of turning a sales lead into a full-fledged customer.

 Sales force automation. Sales force automation tools track customer interactions and automate
certain business functions of the sales cycle that are necessary to follow leads, obtain new
customers and build customer loyalty.

 Contact center automation. Designed to reduce tedious aspects of a contact center agent's job,
contact center automation might include prerecorded audio that assists in customer problem-solving
and information dissemination. Various software tools that integrate with the agent's desktop tools
can handle customer requests in order to cut down on the length of calls and to simplify customer
service processes. Automated contact center tools, such as chatbots, can improve customer user
experiences.

 Geolocation technology, or location-based services. Some CRM systems include technology that
can create geographic marketing campaigns based on customers' physical locations, sometimes
integrating with popular location-based GPS (global positioning system)
apps. Geolocation technology can also be used as a networking or contact management tool in order
to find sales prospects based on a location.

 Workflow automation. CRM systems help businesses optimize processes by streamlining mundane
workloads, enabling employees to focus on creative and more high-level tasks.

 Lead management. Sales leads can be tracked through CRM, enabling sales teams to input, track
and analyze data for leads in one place.

 Human resource management (HRM). CRM systems help track employee information, such as
contact information, performance reviews and benefits within a company. This enables the HR
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department to more effectively manage the internal workforce.

140
 Analytics. Analytics in CRM help create better customer satisfaction rates by analyzing user data
and helping create targeted marketing campaigns.

 Artificial intelligence. AI technologies, such as Salesforce Einstein, have been built into CRM
platforms to automate repetitive tasks, identify customer-buying patterns to predict future customer
behaviors and more.

 Project management. Some CRM systems include features to help users keep track of client project
details such as objectives, strategic alignment, processes, risk management and progress.

 Integration with other software. Many CRM systems can integrate with other software, such as call
center and enterprise resource planning (ERP) systems (Figure 2a-2c).

Figure 2a: Components of CRM

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Figure 2b: Meaning of CRM

142
Figure 2c: CRM

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CRM implementation

Choosing the right customer relationship management (CRM) solution is crucial, but key steps are
needed to make it work for your business. Whether you're replacing CRM or you’re a first-time
user, your implementation strategy is critical. Nowadays, a CRM is the hub for all customer-
facing activities, and solutions exist for every business regardless of size or industry. With the
right CRM, your business can deliver timely, automated, targeted communications to customers to
personalize the customer journey. Working with a tool that elevates customer experience (CX)
advances the sales process, customer service and retention. Communication between departments
also improves with timely access to information. But every department needs to be heard when a
new CRM is planned. Getting sales involved is as important as involving marketing, customer
service and every other customer-facing function. If your CRM doesn't work for every
department, it's a problem for the whole company. And when a new CRM is accused of "wasting
time," it is more often an implementation failure (Figure 3a-3b).

Figure 3a: CRM implementation

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Dimensions of CRM

A factorial analysis suggests that relationship marketing is a multidimensional construct

consisting of four key dimensions: trust, communication, empathy and commitment (Figure 4).

Figure 4: Dimensions of CRM

145
CRM process

CRM process involves the activities and strategies that companies use to manage their
interaction with current and potential customers. Successfully collecting information about
your customers allows you to understand them more. In turn, you can improve your products
and services based on their demands (Figure 5).

Figure 5: CRM process

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CRM application clusters

Some of the more common capabilities of CRM software are: Sales force automation: allows the
sales force to focus on the most profitable customer. To define CRM, you should first understand its
history. CRM is an acronym that stands for customer relationship management. Customer
relationship management is any tool, strategy, or process that helps businesses better organize and
access customer data (Figures 6a-6b).

Figure 6a: CRM application clusters

147
Figure 6b: Using application software

148
CRM service

A company's relationships and interactions with customers and potential customers. ...
A CRM system helps companies stay connected to customers, streamline processes, and improve
profitability (Figure 7).

149
Figure 7: CRM service

150
CRM Support

Customer relationship management (CRM) is a technology for managing all your company's
relationships and interactions with customers and potential customers. A CRM system helps
companies stay connected to customers, streamline processes, and improve profitability (Figures
8a- 8b).

Figure 8a: CRM support

151
Figure 8b: Types of CRM software

152
Customer relation manager system

A CRM system essentially provides a central place where businesses can store customer and
prospect data, track customer interactions, and share this information with colleagues. It allows
businesses to manage relationships with customers, helping the business to grow (Figure 9).

Figure 9: Customer relationship manager system

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CRM approaches

In the late 1990s and early year of the 21th century, CRM was offered up as the next wave of
marketing. The tools and techniques that would make traditional marketing obsolete.
The automated approaches that would make customer relationships automatic and would enable
the marketing organization to shell anything to anyone they chose. CRM was the single solution
that would solve every marketing problem. Simply install the software, plug in the customer data
and sit back and watch the profiles roll in. But it wasn’t that simple. It wasn’t that easy. And, it
simply didn’t work that way. Millions of dollars anp pounds and yen and Euros were spent on
CRM systems, software and structures but, not enough seemed to come back (Figure 10).

Figure 10: Links between different CRM approaches

154
CRM development

Organisations invest in customer relationship management (CRM) solutions to streamline their

customer-centric processes and boost profitability in sales and marketing. A well-designed CRM
solution is a platform where employees get everything they need to build, improve and retain
customer relationships. Companies that don’t invest in an integrated CRM solution may miss out on
growth opportunities and fail to maximize business relationships. At Solid studio, we deliver
complete CRM solutions that allow to log and track customer interactions to a 360° view on the
company’s relationship with their customer base (Figures 11a-ab).

Figure 11a: CRM development

155
Figure 11b: Checklist for improving user adoption

156
 Types of CRM application

Operational – this type allows you to better manage your business based on the customer data you
collect.
1. Analytical – a kind of CRM that allows for data visualisation, giving you better insights about your
customers, their interactions with your business, and the possibilities.
2. Collaborative – here, the emphasis lays in the way you can interact with your vendors and
distributors based on shared customer data.
3. Campaign management – a combination of analytical and operational CRMs, used to run sales or
marketing campaigns using the contact information gathered in the system.
4. Strategic – this type puts customers first, allowing you to use the information about customers and
market trends to make better business decisions (Figures 12a-12d).

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Figure 12a: Application component of CRM system

158
Figure 12b: Type of CRM application

159
Figure 12c: Application of web data mining

160
Figure 12d: Application method of CRM as big data

161
Benefits of CRM

The use of CRM systems can benefit organizations ranging from small businesses to large
corporations, through: (1) Having customer information such as past purchases and interaction
history easily accessible can help customer support representatives provide better and faster
customer service.
(2) Collection of and access to customer data can help businesses identify trends and insights about
their customers through reporting and visualization features. (3) Automation of menial, but
necessary, sales funnel and customer support tasks (Figures 13a-13c).

Figure 13a: Benefits of CRM

162
Figure 13b: Examples and benefits of social CRM

163
Figure 13c: Focal points for CRM solutions

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 CHAPTER 5

CONCLUSIONS AND SUGGESTIONS

Customer relationship management (CRM) is the combination of practices, strategies and

technologies that companies use to manage and analyse customer interactions and data throughout
the customer lifecycle. The goal is to improve customer service relationships and assist
in customer retention and drive sales growth. A CRM system helps companies stay connected
to customers, streamline processes, and improve profitability.

Customer relationship management (CRM) is a technology for managing all your

company's relationships and interactions with customers and potential customers. Pioneered by
Robert and Kate Kestnbaum, database marketing collected and analysed customer information.
Using statistical modelling, that data was then used to help customize communications with other
potential customers. In 1986, ACT introduced the business world to contact management software.
Essentially a digital rolodex, ACT allowed for the efficient storage and organization of customer
contact information. Most large corporations quickly followed Comcast’s example, solidifying the
place of social CRM. Through the end of the first decade, and up to the present day, cloud-based
and SaaS CRM solutions continue to integrate more features like customer service and social
CRM. Cloud-based and SaaS CRM solutions continue to gain popularity, largely due to their lower
initial cost and easy integration with mobile devices

Customer Relationship management is the strongest and the most efficient approach in maintaining
and creating relationships with customers. Customer relationship management is not only pure
business but also ideate strong personal bonding within people. Development of this type of
bonding drives the business to new levels of success.

The main components of CRM are building and managing customer relationships through
marketing, observing relationships as they mature through distinct phases, managing these
relationships at each stage and recognizing that the distribution of the value of a relationship to the
firm is not homogeneous. When building and managing customer relationships through marketing,
firms might benefit from using a variety of tools to help organizational design, incentive schemes,
customer structures, and more to optimize the reach of its marketing campaigns. Through the
acknowledgement of the distinct phases of CRM, businesses will be able to benefit from seeing the
interaction of multiple relationships as connected transactions. The final factor of CRM highlights
the importance of CRM through accounting for the profitability of customer relationships.

The customer relation management is of different types such as strategic, operational, analytical,
collaborative, and customer data platform. The techniques of CRM are tailored, automated, e-mail
marketing campaigns, social CRM for more meaningful interactions, cloud-based CRM giving way
165
to mobile CRM and so much more, continuous growth of mobile CRM marketing, dep segmentation

166
and personalization for perfectly tailored approach, retaining customers at all levels of the journey,
search marketing and CRM going hand-in-hand, predictive analyses, and using CRM contact fields
for more personalization. CRM has significant effect on customer satisfaction, customer benefits,
customer profile, improving CRM within a firm, and application of CRM in practice.

Though the CRM has received much attention in the industrial world because of its innovative
approaches and techniques for the development of customer relation, it has been criticised by few
studies stating that customers are frequently frustrated by a company's inability to meet their
relationship expectations, and on the other side, companies do not always know how to translate the
data they have gained from CRM software into a feasible action plan. CRM technologies can easily
become ineffective if there is no proper management, and they are not implemented correctly. The
data sets must also be connected, distributed, and organized properly so that the users can access the
information that they need quickly and easily. Research studies also show that customers are
increasingly becoming dissatisfied with contact centre experiences due to lags and wait times. They
also request and demand multiple channels of communications with a company, and these channels
must transfer information seamlessly. Therefore, it is increasingly important for companies to
deliver a cross-channel customer experience that can be both consistent as well as reliable.

Proper understanding of the customer behaviour, needs and problems with friendly and productive
approaches in maintaining their relationship will enhance for customer relationship management
towards the welfare of the customers and development of the companies in the industrial world to a
greater extent.

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