RESEARCH AND PRACTICE
IN HUMAN RESOURCE MANAGEMENT

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Lawler, J.J. & Siengthai, S., (1997). Human Resource Management and Strategy in the Thai Banking Industry, Research and Practice in Human Resource Management, 5(1), 73-88.

Human Resource Management and Strategy in the Thai Banking Industry

John J. Lawler & Sununta Siengthai

Abstract

Using secondary data (1988 – 1994) as well as that from indepth interviews with human resource managers of banks in Thailand it is found that Thai banks have a well established employment system. However, with the globalization process and the government deregulation policy, Thai banks are experiencing more competitive environment. Large banks in particular have undergone organizational restructuring. More awareness is given to the importance of the personnel function and human resource management as a strategic factor to enhance their competitiveness.

Introduction

The Thai economy has experienced rapid economic growth since the mid1980s. Since 1990 in particular, due to the government’s deregulation policy, the country has been more exposed to the global economy. This is the result not only of foreign direct investment that has poured into the country (particularly that of Japanese multinational corporations since 1987) but also the decentralization policy of the government a priori has generated more investment in the other regions of the country. The income redistribution policy as translated into the investment promotion programs by the Board of Investment has in fact led to the expansion and growth of various manufacturing and service firms. The growth of the private sector can be seen by the fact that the employment level of the nation has been growing at a fast rate. From 1988-1993, there were more job vacancies than job applications. However, the number of employed has increased at a slower rate at all levels of educational attainment (Table 1). The figures seem to suggest that in the process, growth and expansion of the private sector has been subject to various hindrance, not only insufficient infrastructure but also lack of appropriate manpower skill. Worse yet, the competition within particular industries has led to the high turnover and poaching of personnel. This leads to our question of human resource management and strategy in a particular industry such as banking which has long acted as the main activator and push factor to the economic development process of the country. We will sketch the conceptual framework and then review the banking industry to investigate its development over time and the current scenario of the industry. In this exploratory study, we have interviewed a group of personnel managers of banks both Thai local banks and foreign banks with respect to their human resource management process as a management tool for implementing their strategies. The survey results will be discussed and inferences will be made with respect to the employment practices of the banking industry.

Table 1
Rate of Growth of Job Positions Requiring No Work Experience by Educational Attainment
Level of Educational Attainment Rate of Growth
1992 1994
Pratom 6 (Grade 6) 29.73 8.18
Pratom 9 (Grade 9) 29.94 10.02
Pratom 12 (Grade 12) 33.21 13.71
Vocational College (Commerce) 31.18 10.60
Vocational College (Computer) 30.89 12.70
Vocational College (Mechanics) 30.87 8.83
Bachelor’s Degree (Social Science) 34.70 11.76
Bachelor’s Degree (Science) 36.66 7.87
Bachelor’s Degree (Engineering) 32.14 6.17

Source: Survey of the Office of the Committee on Wage, Ministry of Labour Protection and Social Welfare, 1994

HRM in Thailand: A Typology

A dominant theme in the contemporary human resource management (HRM) literature is the concept of strategy and strategic choice (Butler, Ferris, and Napier, 1991). The essence of this literature is that human resource managers need to align, or achieve linkage, between HR1vI practices and more general organizational strategies, such as those described by Porter (1985) and others. In such a strategic process, the HRM function should be carried out in a “proactive” manner, in which the future directions of the orgnaization are anticipated and to which the HRM function responds. In this section, we will provide an overview of the different styles of HRM common in modern sector firms operating in Thailand.

Prior research (Lawler, Atmiyanandana, and Zaidi, 1989) has identified four basic HRM systems most typically encountered in larger-scale, modern sector organizations. The authors differentiated between two styles typical of Thai- owned firms (family enterprises and publicly held corporations) and two that are common to foreign-owned firms (Western style and Japanese style). A synopsis of this typology follows. This provides a reference point for our examination of the banking industry, as we examine way in which the banking sector fits this typology, as well as perhaps deviates.

Family Enterprises

Virtually all private Thai firms began as family-owned and controlled enterprises. Today, some of Thailand’s largest corporations are still managed in this way, although pressures for change abound. Of course, the family enterprise system is common throughout much of Asia, as in the case of many of the Korean chaebols (Steers, Shin, and Ungson, 1989), Taiwanese firms, and the Chinese- owned companies of such other Southeast Asian countries as Indonesia, Malaysia and the Philippines.

According to Lawler et a]. (1989) the defining ideology of the “Chinese management system” is one of social control. These organizations tend to be hierarchical and autocratic, but formal systems of control, such as standard operating procedures and well-defined organizational structures, are generally absent. The control mechanism reflects the status differences in’ Thai society rather than any intentionally imposed system. It is also closely linked in many ways to Confucianism. As Chen (1991) notes, Confucianism demands the loyalty of subordinates and incorporates an elaborate system of reciprocal duties and obligations between superordinates and subordinates. Although Thailand is a Buddhist society and rooted in a tradition of Buddhism that came directly from India, rather than through China, the entrepreneurial Chinese families have introduced some degree of Confucian ideology into the workplace. However, Confucian practices are complemented by traditional Thai cultural practices often encountered in the workplace (as described by Sierigthai and Vadhanasindhu, 1991).

In terms of substantive HRM practices, family enterprises tend to have rather ad hoc systems and the personnel/HRM department is often little more than a payroll office. Informal networks are very important in obtaining a job in such an organization, as well as securing promotions. Of course, top jobs are mostly restricted to family members. Formal training programs are quite limited and such firms do not use practices such as job evaluation, formal performance assessment, well-defined job classifications, and so forth.

Publicly Held Corporations

The rapid growth in the Thai economy has meant that many of the traditional family enterprises have had to go into the stock market to raise new capital.

There are now around 300 firms traded on the Thai stock exchange. As a consequence of growth, coupled with the need for accountability to investors, these publicly held corporations have often found it necessary to professionalize managenient and introduce more technically advanced management systems. Interestingly, such firms tend to rely more on the Western management model rather than the Japanese model. Such firms have formal HRM sub-units and tend to rely on a range of staffing, compensation, and training practices. They may have a training department and have employees participate in regular training activities. The compensation system is likely to rationalized and techniques such as job evaluation and performance evaluation are apt to be utilized to some extent. However, these firms often continue to rely on networking and interpersonal influence. For this reason, Lawler et al. (1989) characterise the defining HRM ideology as one that combines both the social control of family enterprises and the rational control of Western firms.

Western Firms

Subsidiaries of Western multinational firms that operate in Thailand utilize HRIvI systems that are based on an ideology of rational control. There tends to be extensive reliance on standardized procedures for recruiting and staffing. These firms may have structured internal labor markets, but still hire extensively from the external labor markets, but still hire extensively from the external labor market. Compensation systems are rationalized and firms often pay above-market wages to attract high quality and experienced workers (thus reducing the need for extensive training). Job duties are fairly well defined and procedures for handling employment issues tend to be formalized. In general, Western firms utilize methods consistent with home-country practices. However, there are differences between American-owned and European-owned firms that are similar to the differences between American-owned and European-owned firms that are similar to the difference that exist in HRM practices between firms operating in European countries and the U.S. (e.g. greater rationalization of practices in American firms).

Japanese Firms

As with Western firms, Japanese subsidiaries in Thailand tend to operate in a manner that is fairly stereotypical of Japanese home-country practices. Lawler et al. (1989) characterised the defining ideology of these firms as one of acculturation. Workers are subject to extensive indoctrination programs in which they are inculcated with organizational values and norms, thus limiting the need for extensive formal control systems. Training, especially on-the-job training is widely used, there are relatively few job classes and there is often extensive cross-training. Employees are generally hired only at the entry level. Various participative management systems are used. However, Thai workers in Japanese firms are not as likely as their counterparts in Japan to experience extensive autonomy. Japanese firms rely on expatriate managers to a much greater extent that Western firms and this is a continuing source of friction.

Overview of Thai Banking Industry
Historical Sketch of the Industry (pre-1980s)

Table 2 lists 14 foreign banks which have incorporated in Thailand. Among the first commercial banks that were set up are the western-owned banks. These are the Hong Kong and Shanghai Bank in 1888, the Standard Chartered Bank in 1894, and the Indosuez in 1897. This was due to the fact that Thailand was forced to open up for trade with foreign countries by the Bowring Treaty with Britain since 1855, with France and the United States in 1956 and later on with other European countries and Japan. The last foreign commercial bank established in Thailand is European Asian Bank (now Deutsche Bank) in 1978. There has been no new bank established in the country since then. This is due to the country’s policy to limit the number of commercial banks as specified in the Commercial Bank Act 1962, until the deregulation policy in 1990.

Table 2
List of Foreign Banks in Thailand as of 1994
Name Nationality HQ Year Established
Hong Kong and Shanghai Bank British HK 1888
Standard Chartered Bank [1] British London 1894
Indosuez French Paris 1897
Four Seas Ltd. Bank [2] Singapore Singapore 1909
Security Pacific Asian [3] Taiwanese Taiwan 1919
Citibank, N.A., Bangkok [4] American N.Y. 1923
The International Commercial Bank of China Taiwan Taipei 1947
Bharat Overseas Bank Indian Madras 1947
Bank of America American San Francisco 1949
Sakura Ltd. Bank [5] Japanese Tokyo 1952
Bank of Tokyo Japanese Tokyo 1962
Chase Manhattan Bank American N.Y. 1962
United Malayan Bank Malaysia K.L. 1964
European Asian Bank [6] German Germany 1978

[1] formerly chartered bank
[2] formerly See Tai Hong Bank
[3] formerly Canton Bank
[4] taken over from Merchantile Bank
[5] formerly Mitsui Bank
[6] currently Deutshe Bank (Asia)

The first Thai commercial bank was a joint venture between the royal family members and the Chinese which was set up in 1904. It was then called the “Book Club” and now the “Siam Commercial Bank”.

Other than the Western-owned banks, the Chinese had been very influential in the Thai banking system. However, the fact that many commercial banks were set up with lack of expertise in banking operation had led to the bankruptcy of many Chinese-owned banks. This was due to the fierce competition among them. Among the 11 Chinese-owned banks set up during 1907-1938, only two are still operating now These are the Wang Lee Bank (now Nakornthon Bank) and the Tan Peng Soon Bank (now First Bangkok City Bank). It has been noted that although the Westerners have begun the commercial banking system in Thailand, the Chinese were indeed more influential and in fact became the base of the Thai banking system until now, This is because the Chinese have been important entrepreneurs of the country and have been well assimilated into the Thai culture and Thai community.

During the WWII (1941-1945), there was a significant change in the economic policy of Thailand due to the impact of the WWII. Such change has a direct impact on the development of the Thai banking system and in fact made it free from being dominated by the foreign banks (see Pipatseritham, 1993). During this period, the foreign-owned banks were nationalized and became Thai banks. There was only one Japanese bank left as foreign bank. However, after the war, the foreign banks which were nationalized started their operation as foreign banks again. There were many more Thai banks set up after the WWIJ period and the competition had led to the banking crisis in 1948 when the Government had to intervene (see Pipatseritham, 1993).

Developments in the Industry in the 1980s

The study of the development of the Thai commercial banking in the last century reveals that the system has been highly credited by the public. However, it also has been found that the growth of the banking system has led to higher level of oligopoly of these banks (Pipatseritham, 1993). This is well recognized that this has been done to the fact that the Government has limited the establishment of new banks. However, the existing banks can set up their branches all over the country. Thus, the Thai banking system is the branch banking system not the unit banking system as operating in the U.S. The foreign bank branches have been allowed to set up mainly as an exchange for theThai Bank branches to be set up in those countries. It is found that during 1967-1993, only two commercial banks were set up. These are the Thai Military Bank which was set up in 1957 and the Asia Trust Bank in 1965. The latter was changed to Sayam Bank and eventually merged by the government intervention into the Krungthai Bank due to the bank’s operating crises. Even though the Thai banking system is of oligopolistic nature, there exists a certain competition among the banks particularly through the establishment of new branches toincrease deposits and expand the bank operation. The competition has become more fierce when the bank started to modernize their operation by introducing technology in the 1980s such as computerizing its systern. The Automatic Teller Machine (ATM) is one such example. Other events also led to the higher level of competition such as the financial crisis and the floating of interest rates within the ceiling determined by the Bank of Thailand, etc.

Table 3 reveals the total assets of Thai banks from 1988-1994. The figures suggest the increasing trend of the banks’ assets. Bangkok Bank has been maintaining its rank as the largest commercial bank in the country through this period. We have attempted to measure the concentration ratio of the Thai banking sector by combining assets of 5 major banks [11. The ratios turn out to be high but decreasing slightly in the 1990s, i.e., from 71.5 in 1988 to 70.2 in 1994 (see Table 4). The concentration ratio seems to suggest the stability of the banks’operation. Table 5 suggests that the rate of growth of all banks except Krung Thai Bank and Bank of Ayudhya, experienced the decreasing rate of growth in 1994. In addition, these two banks seem to experience more fluctuating growth rates. However, the statistics available suggest that Bangkok Bank still maintains its position as the top bank in terms of assets (see again Table 4). The total assets of the Thai Farmers Bank Public Co. Ltd. is only 56.3 per cent of the Bangkok Bank. However, the gap is narrowing. Krung Thai Bank has become the second largest bank since 1994, if included as the semi-private banking institution. Its total assets are 61.6 per cent of that of the Bangkok Bank Public Co. Ltd. This seems to suggest to an extent that competition will be more fierce in the near future when considering that there are currently non-banks which came into the scenario.

Table 3
Total Assets of Thai Banks, 1988-1994
(End of December Balance Sheet)
Bank\Year (Unit: billions of baht)
1988 1989 1990 1991 1992 1993 1994
Total Assets 1,198.2 1,469.7 1,883.3 2,245.0 2,599.2 3,098.5 3,737.1
Bangkok Bank Ltd. 350.8 413.2 520.6 595.8 666.0 782.9 903.5
Thai Farmers Bank 156.4 200.2 266.1 308.1 363.6 441.6 508.8
Siam Commercial Bank 103.2 138.3 185.6 228.1 275.1 325.1 367,7
Krung Thai Bank 176.4 217.5 262.6 336.7 363.1 424.9 556.8
Bank of Ayudhya Ltd. 70.2 92.0 127.2 148.6 174.1 201.0 286.4
Thai Military Bank 69.6 84.7 103.4 126.2 153.4 193.4 227.8
First Bangkok City Bank 47.6 55.7 75.9 97.9 126.2 152.6 179.6
Siam City Bank 46.6 56.1 69.3 84.1 100.4 125.8 163.2
Bangkok Metropolitan Bank 44.7 54.6 67.4 74.7 89.2 112.3 134.0
Bangkok Bank of Commerce 38.2 47.6 65.5 79.5 101.1 121.0 144.4
Bank Of Asia 32.2 36.3 45.2 54.6 56.1 69.8 83.3
Union Bank 19.4 22.9 30.4 32.6 36.3 41.4 45.7
Thai Danu Bank 14.2 19.0 26.5 33.9 41.3 51.1 67.8
Sayam Bank 12.2 11.5 11.0 10.2 9.4
Nakornthon Bank 10.9 14.1 19.2 23.6 29.1 36.8 44.7
Laem Thong Bank 5.5 5.8 7.2 10.3 14.2 18.9 23.4

 

Table 4
Total Assets of 5 Major Thai Banks, 1988-1994
(End of December Balance Sheet)
Bank\Year (Unit: billions of baht)
1988 1989 1990 1991 1992 1993 1994
Total Assets of All Banks 1,198.2 1,469.7 1,883.3 2,245.0 2,599.2 3,098.5 3,737.1
Concentration Ratio: 71.5 72.2 72.3 72.0 70.9 70.2 70.2
BBL 350.8 413.2 520.6 595.8 666.0 782.9 903.5
TFB 156.4 200.2 266.1 308.1 363.6 441.6 508.8
KTB 176.4 217.5 262.6 336.7 363.0 424.9 556.8
SCB 103.3 138.3 185.6 228.1 275.1 325.1 367.7
BAY 103.3 92.0 127.2 148.6 174.1 201.0 286.4
Subtotal (in billions) 857.1 1,061.2 1,362.2 1,617.3 1,841.9 2,175.5 2,623.2

 

Table 5
Rate of Growth of the 5 Major Thai Banks, 1988-1993
(End of December Balance Sheet)
Bank\Year 1988 1989 1990 1991 1992 1993 1994
BBL 16.6 17.8 20.6 14.4 11.8 17.5 15.4
TFB 18.7 28.0 32.9 15.8 18.0 21.5 15.2
KTB 19.3 23.3 20.7 28.2 77.8 17.0 31.0
SCB 16.9 33.9 34.2 22.9 20.6 18.2 13.1
BAY 28.2 31.1 38.2 16.8 17.2 15.5 42.4

Table 6 suggests that foreign banks have played an insignificant role in Thailand. This can be seen from the fact that the total assets of foreign banks or banks incorporated abroad have been a small proportion of all Thai banks together. The foreign banks in Thailand simply act as source of fund for various businesses particularly the multinational companies operating in Thailand, foreign exchange services, merchant banking and other financial services such as swap, options, etc. [2] Thus, Bank of Tokyo and Sakura Bank as re-established in 1992 (formerly Mitsui Bank and then Mitsui Taiyo Kobe Bank) have been the major foreign banks in terms of total assets, while Citibank, Hong Kong Bank and Deutsche Bank are following suit. The increase of these Banks’ assets simply suggest the volume of foreign direct investment flow into Thailand. It is also observed that in 1993 when Bangkok International Bank Facilities (BIBF) and Bank for International Settlements (BIS) started, the assets of all foreign banks increased substantially.

Table 6
Total Assets of Banks Incorporated Abroad, 1988-1993
(End of December Balance Sheet)
Bank\Year (millions of baht)
1988 1989 1990 1991 1992 1993 1994
Total 54,495 79,369 91,643 15,180 135,059 197,459 120,335
Tokyo 10,843 17,512 20,155 24,925 24,586 36,528 50,936
Mitsui 10,527 16,733 19,188 21,971 24,213 38,768 n.a.
Citibank 6,102 8,998 13,225 15,509 19,504 32,493 40,697
Deutsche 5,013 6,693 7,689 8,966 10,466 18,004 22,349
Chase 4,513 5,186 4,398 6,696 8,279 8,397 11,533
Indosuez 3,558 5,015 5,962 7,811 7,632 10,953 18,445
Hong Kong 3,241 4,836 5,356 6,303 10,466 10,004 27,883
America 3,007 2,593 2,650 4,704 5,427 15,079 21,589.
Chartered 2,787 5,750 6,403 10,191 13,841 17,105 18,464
Malayan 1,688 1,203 1,151 1,234 1,087 1,183 1,144
Bharat 1,129 1,414 1,438 1,510 1,548 1,266 1,658
Canton 876 1,779 1,909 2,677 3,033 2,369 n.a.
China 747 1,032 1,234 1,508 1,563 1,976 2,547
Fourseas 464 626 885 1,177 1,269 1,424 3,100

With the government deregulation in 1990, expectation for the second wave of Japanese investment in Thailand and the emergence of many finance and securities companies as well as insurance companies, it is expected that these pressures will force a substantial change in these banks’ strategies and operations. This will in turn affect their human resource strategies.

Strategic Choices in Banking Industries

The rapid economic development and the globalization process has forced Thailand to deregulate its important economic sector, that is, banking sector. This had led to the efficiency improvement of banks’ operation as a whole as protectionisni is reduced. Many banks particularly large ones indicate that increasing their bank’s efficiency, expanding existing products and developing new services are the key areas that they will have to emphasize to maintain their competitiveness (Business Review, 1993:5 7). Large banks are now seeing their opportunities to increase their branch operation in the upcountry areas through the deregulation of the government to gain their economies of scale in operation. In contrast, many small banks will move into more wholesale banking through the BJBF transactions which was formerly informally performed by major banks. Most banks will turn to higher technology to improve their customer services, particularly information technology. Not many banks are going to open their branches overseas more than they already have even in the Indochina region. Some indicate that it is simply because they lack the strong Chinese ties necessary to build up a client base (Business Review. 1993:6 1). As earlier discussed, the commercial sector in many Asian countries, which are newly developing areas, has been dominated by Chinese. Banking, in particular, has been run by Chinese-origin families in these countries as well. Thus, for most banks which have less Chinese ties, the branching out overseas therefore does not seem to be profitable enough. For Thai banks then, competition among banks will still concentrate on increasing their market share within the country for the next decade.

Data Collection

In this study, we have interviewed the personnel or human resource managers of 10 banks, namely 6 Thai local banks and 4 foreign banks [31. Among the Thai local banks, three are regarded as large banks: Krungthai Bank, Thai Farmers Bank and Siam Commercial Bank. Two are medium-sized: Bangkok Bank of Commerce and Bank of Asia. One is small-sized: Thai Danu Bank. As earlier discussed and confirmed by the statistics, in terms of size, all foreign banks have not been playing a significant role in the economic development process of Thailand. In terms of income generated, foreign banks have done very well since it is of much smaller size. However, as our focus is on human resource management and industrial relations, it is interesting to compare them.

Discussion

In this study, many banks are concerned with the turnover problems at the lower level as most of them practice promotion from within system. The only point of entry at higher level seem to be due to the expansion of bank services such as BIBF and due to the more competitive environment where the finance corporations and insurance companies started to play a greater role in this business area. The flexible employment system is not used much. However, they do use contract employment with the cleaning and maintenance jobs and messengers.

Organizational Structure

There have been changes in the organizational structure of many banks particularly large banks. These changes have been implemented to improve the efficiency and reduce their cost of operation. Currently, the large banks have started their re-engineering process. This is to reduce the decision time and levels of hierarchy in the organization through the empowerment of the employees. It is expected that there will be a change in the management style from top-down management to more participative management in the banking industry which has been highly bureaucratic in the past. This is expected to increase efficiency and result in cost reduction for the organization and hence long-term competitiveness. However, in order to successfully implementing this concept without creating redundancy of labour, these banks will have to reinvest in their human resources to equip for whatever new tasks redesigned. All banks and particularly some small and medium-sized banks have very much developed their human resource system similarly to the government bureaucratic system. It provides white-collar type of routine jobs and job security since almost all the banks in this study have their own internal labour market.

Recruitment and Selection

Many banks have been listed in the Security Exchange of Thailand. This is one important factor that enhances their professionalism. Other factors include the fact that there is more competition in the industry and the new generation of managers who are better educated and well-trained in theif professions. In the earlier stages, when banks were first set up to provide financial services, banks used to recruit their employees who may graduate with any field of studies at all. However, over time, the business schools and vocational schools have been able to train more people in business administration. Therefore, banks can recruit and select the group of personnel with required skills. This has led to the improvement of these banks’ operation.

Most banks in this sample are proactive in their recruitment process. All but one local bank, Bangkok Bank of Commerce, use campus recruitment as their main strategy of recruitment. Other methods used include newspaper advertisement, word of mouth or employee referrals, head hunter (mainly for executive level), walk-in application, and labor market hiring halls at various places which are organized each year by the Ministry of Labour Protection and Social Welfare (former Department of Labour Protection and Social Welfare). The selection process of all banks in this sample include the written tests and interviewing session by the committee set up by the banks. Some banks may use the scholastic achievement such as the grade point average (G.P.A.) of these applicants as the first screening method if they have more than enough applicants for the particular position available. Due to the rapid economic development of the country and the deregulation policy, all banks have enjoyed the opportunities of the BIBF transactions and the permission of opening more branches in the upcountry areas. These developments in the banking industry have led to the smaller banks becoming less nepotistic in its recruitment process. Furthermore, what has been observed in ou interviews is that smaller banks were very much at a disadvantage when they are competing with bigger banks for the same pool of applicants. This has made them delay their hiring decisions of new employees to make sure that these selected applicants will not quit to join big banks after 2-3 months of their employment at these banks.

Training and Development

Most banks in our sample provide orientation programs for their new employees. Later on, these employees are expected to be acculturated into the bank’s system through on-the-job training. For the human resource development program, it has been found earlier that banks generally provide formal training programs for employees at the supervisory level and up (Siengthai, 1989). In this study, it is found that large banks have their own training centers and provide formal training programs. ‘Whereas for the executive development, these large banks will send their executives to the overseas training programs. There are variations in sophistication of training across major banks. For small and mediumsized banks, they have organized continuing training programs for their middlelevel managers from all branches. These are usually called “Mini-MBA” and it is about 300 hours of intensive training. These in-house Mini-MBA programs are usually run jointly with school of business of some particular universities. For even smaller-sized banks which are not included in our interview survey, where the personnel department does not have its own training facilities, employees at the supervisory level are usually sent to the training programs offered by the universities. In general, bank employees who want to pursue their graduate studies may do so but very few received financial support from the banks. All banks now prefer to hire their employees with bachelor’s degree. However, with the competition from non-bank institutions in the labour market for the same pool of labour, many banks in Thailand have lowered their requirement for the qualifications of their employees to those with vocational college diploma in business adniinistration area. This certainly necessitates these banks to focus more on human resource development activities to maintain the bank’s competitiveness. In the last decade, there has been job hopping particularly at the entry level and some at the middle-level management who quit to join non-banks institutions which provided better offers. To ensure that they will recouperate from their investment in training their personnel, some banks have requested their employees to sign the contract or create some bonding contract that requires the personnel which will receive a certain training to pay back to the bank in terms of time or cash if they would like to quit the organization.

Performance Appraisal

Most of the banks in this sample have an annual performance appraisal. Some, however, have the performance appraisals done twice a year. This is for the human resource development purpose for some banks. Most banks use their performance appraisals for the administrative purpose such as for pay raise and promotion consideration. Large banks generally have very elaborate systems of performance appraisal, such self-evaluation vs. supervisor evaluation. However, this is not very common. Large banks whose systems are very well-designed provide feedback to their employees after they have been evaluated. If the subordinates do not agree on any points, they can appeal to their supervisor and to the upper management. All banks have formal system of employee performance appraisal in that they have forms designed to measure or appraise employees for particular qualities or competencies. Some may emphasize teamwork, creativity, and business code of ethics, etc. other than interpersonal skills or managerial skills, or technical skills.

Compensation

Compensation in these banks vary. Most banks follow the market rate in each market segment. For example, the Thai local banks have their own market rates which are different from those of foreign banks. Thus, in order to be able to attract the job applicants, most banks will follow the market rates and will vary their fringe benefits to make their offers more attractive than their counterparts in the banking industry. The issue of external equity of pay seems to be an important one at the entry level. However, once become employees of a bank, the employees will also be compensated for their special skills, such as computer programming, accounting, or some other scarce skills. In general, for the Thai local banks, promotion from within practice has created a large internal labour market. Thus, seniority has been accounted for in the compensation administration. In contrast, the internal labour market is not so structured in the foreign banks. All banks provide bonuses to their employees but generally no other financial gains. They do not have prQfit sharing plans. Some incentive plans can be observed in the fact that most banks now considered their branches as their selling points and have these operate as profit centers. Thus, those which perform well will receive a larger percentage amount to be allocated to their own subordinate in the branch at the time of performance appraisal. So, it can be said that limited gainsharing is practiced.

Labour-management Relations

In this study, we find that most banks in our sample have unions, but some local banks such as Bangkok Bank of Commerce and Thai Danu Bank do not. In all foreign banks, there are unions. However, unions are usually organized at the bank tellers and non-supervisory level. According to the Labour Relations Act 1975, employees at the supervisory level cannot become union members. It can be said that unions in the banking industry are generally weak and their collective bargaining with the employers mainly include wages and fringe benefits. There have been no strikes. The unions are not very militant. The formation of bank unions is usually through bank employees’“network”. Among the Thai local banks, the Bangkok Bank [4] labour union has been giving advice to newly formed unions both in banking industry and other industries. In many banks in our sample, unions have been long established. It can be said that their relationship with the management has been collaborative. In one case (Bank of Asia), union was newly formed after the bank entered the Security Exchange of Thailand and the bank’s shareholder structure was changed. The owner withdrew from the management activities and promoted a professional manager to the top executive position (Managing Director). Furthermore, the bank started to recover after long period of profit loss. It is because of this latter together with the structural change of the bank, the human resource manager indicated that the union seem to be militant. However, some cultural elements seem to facilitate their relationship with the management. The union representatives addressed the manager by their seniority in age and work experience in their interaction with the management. Thus, a certain level of consideration was given to the management side. This makes the management feels that they can negotiate and work out the agreement which would V satisfy the needs of both sides. The impact of deregulation policy to increase competition in the labour market has also made many banks more responsive to their employees’ needs so that they can maintain their workforce. Some banks have also brought unions into their participative system of management.

Employee Involvement and Job Security

Most banks in this sample say that quality control circles (QCC) are now outdated. They do have some employee involvement activities and currently many banks have set up “empowered work groups.” Banks, in general, have provided what we can call “lifetime employment.” Many managers interviewed indicate that there are cases of disciplinary discharges which are normal for any business organizations. However, none has laid off its employees even the one which was merged to Krung Thai Bank, a public enterprise bank in which case all employees were still employed by the public enterprise bank which took over. It is noteworthy though that the re-engineering process of the large banks has somewhat created a sense of job insecurity among some employees particularly those at the lower level. This could lead to a negotiation of the labour and management in the banking industry. A new unionism maybe expected for the next decade if this organizational restructuring process spreads out to other industries which are now faced with inefficiency of operation when entering into the global market.

Conclusion

In general, our findings from the indepth interviews and other secondary data suggest that the bank employment system is quite well-established. In the changing competitive environment, many large banks are experiencing organizational restructuring. Most of them are proactive in their recruitment process and provide orientation program for their new employees. Large banks also have their own training centers and provide formal training programs. Most of them have an annual performance appraisal. Only some have the performance appraisal done twice a year which is for the purpose of human resource development. Most banks follow the market wage rates. Most of them do not have unions. We would say that the banking industry is sufficiently stable on average. Most of them have reached their maturity stage except the ones which are transforming their ownership, such as Bank of Asia which just reorganized its shareholders’ structure, and those which are going through the re-engineering process. These are the ones that would experience some changes in terms of labour-management relations. It is expected that there will be a repositioning of each side’s role. The attitude will be more of cooperative and the bargaining will be more of integrative bargaining. This is because the change is required for the organization as a whole to survive and at least maintain their market share in the new competitive environment.

Acknowledgements

This paper was originally prepared for the Conference on “Changing Employment Relations in Asia,” at the Chung-Hua Institute of Economic Research, Taipei, Taiwan, August 1994. We thank the human resource managers of various banks who have willingly provided us with their time and valuable information for this study. Thanks are also extended o Anya Khanthavit for helpful comments and relevant materials for this study and to Sariya Chotechakornpant for her library research assistance. We thank the unanimous referees for their comments and suggestions. Any errors contained herein are, however, our sole responsibilities.

Footnotes

[1] Five major Thai banks are Bangkok Bank Public Co. Ltd., Krung Thai Bank Public Co. Ltd., Thai Farmers Bank Public Co. Ltd., Siam Commercial Bank Public Co. Ltd., and Bank of Ayudhya Public Co. Ltd.

[2] The differences between the Thai commercial banks and foreign banks are as follows:

  1. Thai commercial banks can open their branches unlimitedly but foreign commercial banks can have only 1 branch unless it already had more than 1 branch before the Commercial Bank Act 1962 was promulgated.
  2. Source of Fund - Thai banks generate their sources of fund from savings and loans from their branches all over the country, while foreign commercial banks generate theirs through savings and loans from overseas. The latter group has its relationship with banks overseas, therefore, they can make a lower interest loans from them.
  3. Thai commercial banks has lower cost than foreign banks with regard to employees’ salary since they have lower base salaries.
  4. Thai commercial banks has various business networks since they can invest in various companies easily while foreign banks cannot do so because of the strict regulation.
  5. Thai commercial banks have their own executive board members in the country, so they can make decisions faster than the foreign commercial banks, hence more flexibility than foreign banks.

[3] In this study, the human resource managers or assistant managers of the following banks were interviewed: (Thai local banks): Bangkok Bank of Commerce, Bank of Asia, Krungthai Bank, Siam Commercial Bank, Thai Danu Bank, and Thai Farmers Bank, (for foreign banks:) Bank of America, Chase Manhattan Bank, Citibank, N.A. and Sakura Bank Ltd. The interviews were done during February-April, 1994.

[4] Bangkok Bank Public Co. Ltd. was not included in the interview. This fact is from the secondary source.

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