Introduction

Habib Bank Limited commonly referred to as "HBL" and headquartered in Habib Bank Plaza Karachi, Pakistan, is the largest bank in Pakistan. The bank has a network of over 1450 branches in Pakistan and 55 branches worldwide. It has a domestic market share of over 40%. It continues to dominate the commercial banking sector with a major market share in inward foreign remittances (55%) and loans to small industries, traders and farmers. Overseas, it has operations in the following countries: Afghanistan, Australia, Bahrain, Bangladesh, Belgium, Canada, China, France, Hong Kong, Iran, Kenya, Lebanon, Maldives, Nepal, Netherlands, Nigeria,

Review of Literature
There are number of HR practices that could be tested in connection with employee performance. A number of research articles had already been published e.g., The Impact of Human Resource Management and Work Climate on Organizational Performance by Garry A. Gelade and Mark Ivery The Effect of Human Resource Management Practices on MNC Subsidiary Performance in Russia by CARL F. FEY The Impact of Human Resource Management Practices on Turnover, Productivity and Corporate Financial Performance by Mark A. Huselid How HR & Training Practices Can Boost Worker Performance (IOMAs Report on Managing Training and Development) Human Resource Practices and Organizational Performance: Can the HRM-performance linkage be explained by the cooperative behaviors of employees? By Dr. Mattijs Lambooij The impact of HR practices on the performance of business units by Patrick M. Wright, Timothy M. Gardner and Lisa M. Moynihan[6] The Impact of Human Resource Management Practices on the Performance of European Firms by Paul Gooderham, Kristen Ringdal and Emma Parry Human Resource Strategy to Improve Organizational Performance: A Route for British Firms by Fang Lee Cooke Human Resource Management, Organizational Performance and Employee Well-Being by David Guest Rated to exhaustion? Reaction to performance appraisal processes by Brown M. and Benson J. Performance appraisal systems: determinants and change by Brown M and Heywood J.

 Equity-based compensation for employees: firm performance and determinants by Frye M. B The importance of HR practices and workplace trust in achieving superior performance: a study of public-sector organizations by Gould Williams J. Human Resource Management, Corporate Performance and Employee Wellbeing: Building the Worker into HRM by Guest D. Challenges and prospects of HRM in developing countries: testing the HRM-performance link in Eritrean civil service by Teseema & Soetersurkey, UAE, UK & USA.

History
Mohammed Ali Jinnah, Pakistan's founding father, realized the importance of financial intermediation while he was campaigning for the creation of a separate homeland for the Muslims of India. He persuaded the Habib family to establish a commercial bank that could serve the Indian Muslim community. His initiative resulted in the creation of Habib Bank in 1941, with HO in Bombay (now Mumbai), and fixed capital of 25,000 rupees. The bank played an important role in mobilizing funds from the Muslim community to finance the All-India Muslim League's campaign for the establishment of Pakistan. Habib Bank also played an important role in channeling relief funds to the people hurt in the communal riots and violence that preceded the departure of the British from India. After Pakistan was born in 1947, Habib Bank, at the urging of Governor-General Jinnah, moved its headquarters to Karachi, Pakistan's first capital. This gave Karachi its first commercial bank of the newly formed Islamic Republic of Pakistan. The Habib family owned and managed the bank until the Pakistan government nationalized it on 01 January 1974.

1951 HBL opened the first of 3 branches in Sri Lanka. 1952 HBL established Habib Bank (Overseas). 1956 HBL opened first of 5 branches in Kenya. 1957 or 1958 HBL opened a branch in Aden. 1961 HBL opened the first of what would become 6 branches in the UK. 1964 HBL opened the first of 4 branches in Mauritius and a branch in Beirut. 1966 HBL opened the first of 8 branches in the UAE.

1969 HBL opened first of 3 branches and an OBU in Bahrain. However, HBs branch in Aden is nationalized. 1971 HBL opened an OBU in Singapore and a branch in New York. 1972 HBL opened the first of 11 branches in Oman. HBL constructed Habib Bank Plaza in Karachi to commemorate the banks 25th Anniversary. 1974 The government of Pakistan nationalized HBL and HBL merged with Habib Bank (Overseas). 1975 HBL opened a branch in Belgium. HBL also merged with Standard Bank, a Pakistani bank. 1976 HBL opened a branch in the Seychelles, the first of two branches in Bangladesh, and a branch in the Maldives. 1979 HBL opened a branch in the Netherlands. 1980 HBL opened a branch in Paris and another in Hong Kong. 1981 HBL established Nigeria Habib Bank with 40% ownership. HBL also opened a representative office in Teheran. 1982 HBL opened a branch in Khartoum. 1983 HBL opened branch in the Karachi EPZ and a branch in Istanbul. 1984 HBL established Habib American Bank in New York with a branch each in Manhattan and Queens, and a US International Banking Facility. HBL also opened a branch in California. 1987 HBL opened in Australia. 1991 The Habib Group established a separate private bank, the Bank AL Habib, after private banking was re-established in Pakistan. HBL opened a branch in the Fiji Islands, and took over the Pakistani branches of failed bank, BCCI 1992 In Nepal HBL acquired 20% of Himalayan Bank. 1995 HBL established a representative office in Cairo. 1990s HBL established Habib Finance (Australia), and Habib Finance International Limited, Hong Kong. 2000 HBL established Habib Canadian Bank. 2002 On June 13, 2002 Pakistan's Privatization Commission announced that the Government of Pakistan had granted the Aga Khan Fund for Economic Development (AKFED), a subsidiary of the Aga Khan Development Network, rights to 51% of the shareholding in HBL, against an investment of PKR 22.409 billion (USD 389 million). HBL's UK operation came close to being shut down due to regulatory issues with the Financial Services Authority. The issue was resolved by converting the operations to a subsidiary. Then Habib Bank Limited and Allied Bank of Pakistan merged their operations (Habib contributed its 6 branches and Allied its 4),

into a new bank, called Habib-Allied International Bank, in which Habib Bank has a 90.5 percent shareholding, while Allied Bank has 9.5 percent. Simultaneously with the transfer of business to the new bank, both Allied and Habib Bank close down all independent operations in the UK.

2003 HBL received permission to open a branch in Afghanistan. 2004 On February 26, the Government of Pakistan handed over management control of Habib Bank to AKFED. The Board of Directors was reconstituted to have four AKFED nominees, including the Chairman and the President/CEO and three Government of Pakistan nominees. 2006 HBL sold the operations that it had established in Fiji in 1991 to Bank of South Pacific. 2009 HBL was granted permission to open Remnibi accounts in China. It already has training and shareholding arrangements with Urumqi Commercial Bank. Oman, Singapore, Sri Lanka, Tanzania,

Questionnaire
Section 1
Please tick the appropriate answer or fill in the box 1. What is your Designation?

2. How long you have been employed in to this Bank (years)

3. What is your highest qualification? Matriculation Intermediate Bachelor Masters M.Phil/MS Doctoral 4. What is your native language? Urdu

English Punjabi Sindhi Pashto Balochi Sairiki Others 5. What is your Martial Status? Married Un-married 5a. What is your Gender? Male Female

Section: 2

E employee performance 7. I am satisfied with my existing Job

Strongly Disagree 1 Disagree 2 Neutral 3 Agree 4 Strongly agree 5

8. The working environment is comfortable

Strongly Disagree 1 Disagree 2 Neutral 3 Agree 4 Strongly agree 5

Section: 3

Compensation practices 9. Compensation system communicate your output

Strongly Disagree Neutral Agree Strongly

Disagree 1

agree 5

10. Compensation system is enough to meet basic needs

Strongly Disagree 1 Disagree 2 Neutral 3 Agree 4 Strongly agree 5

Strongly Disagree 1

Disagree 2

Neutral 3

Agree 4

Strongly agree 5

17.

I am satisfied with PEP

18. Performance evaluation has a lot to do with my salary

Strongly Disagree 1 Disagree 2 Neutral 3 Agree 4 Strongly agree 5

Section: 5 Promotion practices 19. Promotion policy is satisfactory

Strongly Disagree 1 Disagree 2 Neutral 3 y Agree 4 Strongly agree 5

20. Provision of Priority to merit in Promotion

Strongly Disagree 1 Disagree 2 Neutral 3 Agree 4 Strongly agree 5

Analysis of responces

Mission
To be recognized as the leading financial institution of Pakistan and a dynamic international bank in the emerging markets, providing our customers with a premium set of innovative products and services, and granting superior value to our stakeholders shareholders, customers and employees

Services
Habib Bank offers the basic range of banking services to its customers, to include Commercial, Corporate, Investment, and Retail Banking, Treasury, and Islamic Banking.

Controversy
Habib bank has long been scrutinized by intelligence officials monitoring terrorist money flows. On July 18, 2007, Mariane Pearl, the widow of Wall Street Journal reporter Daniel Pearl, filed a lawsuit against Habib Bank Ltd over the 2002 abduction, torture and murder of her husband. The pending lawsuit alleges the bank and its subsidiaries knowingly conducted financial transactions and provided account services on behalf of Al Akhtar Trust, a Pakistani based charity trust. Al Akhtar Trusts accounts have been used to provide financial support to terrorists. However, HBL claims to have frozen Al Akhtar Trusts accounts several years before Daniel Pearls abduction. On October 24, 2007, Pearl's lawsuit against HBL was formally dropped. Lawyers for Mariane Pearl noted that Habib Bank Limited and the other defendants in the case had not answered the lawsuit filed in

July (although Habib Bank Limited had denied ever supporting terrorism), but they otherwise did not explain their reason for dropping the action The U.S. Federal Reserve Board and the New York State Banking Department criticized Habib Bank Limited for failing to address deficiencies in its compliance with U.S. antimoney laundering laws. After the U.S. Federal Reserve Board threatened formal charges, though none were filed, Habib Bank Limited agreed to strengthen the banks compliance. More specifically, the Fed ordered HBL to strengthen its transaction monitoring systems and the filing of "suspicious activity reports" on transactions that do not fit the routine business patterns of the bank's customer base.

HR Practices Compensation
Compensation is a systematic approach to providing monetary value to employees in exchange for work performed. Compensation may achieve several purposes assisting in recruitment, job performance, and job satisfaction. Compensation is a tool used by management for a variety of purposes to further the existence of the company. Compensation may be adjusted according the business needs, goals, and available resources. Compensation may be used to:

Recruit and retain qualified employees. Increase or maintain morale/satisfaction. Reward and encourage peak performance. Achieve internal and external equity. Reduce turnover and encourage company loyalty. Modify (through negotiations) practices of unions.

Recruitment and retention of qualified employees is a common goal shared by many employers. To some extent, the availability and cost of qualified applicants for open positions is determined by market factors beyond the control of the employer. While an employer may set compensation levels for new hires and advertise those salary ranges, it does so in the context of other employers seeking to hire from the same applicant pool. Morale and job satisfaction are affected by compensation. Often there is a balance (equity) that must be reached between the monetary value the employer is willing to pay and the sentiments of worth felt be the employee. In an attempt to save money, employers may opt to freeze salaries or salary levels at the expense of satisfaction and

morale. Conversely, an employer wishing to reduce employee turnover may seek to increase salaries and salary levels. Compensation may also be used as a reward for exceptional job performance. Examples of such plans include: bonuses, commissions, stock, and profit sharing, gain sharing. Compensation will be perceived by employees as fair if based on systematic components. Various compensation systems have developed to determine the value of positions. These systems utilize many similar components including job descriptions, salary ranges/structures, and written procedures. The components of a compensation system include:

Job Descriptions

A critical component of both compensation and selection systems, job descriptions define in writing the responsibilities, requirements, functions, duties, location, environment, conditions, and other aspects of jobs. Descriptions may be developed for jobs individually or for entire job families.

Job Analysis

The processes of analyzing jobs from which job descriptions are developed Job analysis techniques include the use of interviews, questionnaires, and observation.

Job Evaluation.

A system for comparing jobs for the purpose of determining appropriate compensation levels for individual jobs or job elements. There are four main techniques: Ranking, Classification, Factor Comparison, and Point Method.

Pay Structures.

Useful for standardizing compensation practices. Most pay structures include several grades with each grade containing a minimum salary/wage and either step increments or grade range. Step increments are common with union positions where the pay for each job is pre-determined through collective bargaining.

Salary Surveys.

Collections of salary and market data May include average salaries, inflation indicators, cost of living indicators, salary budget averages Companies may purchase results of surveys conducted by survey vendors or may conduct their own salary surveys. When purchasing the results of salary surveys conducted by other vendors, note that surveys may be conducted within a specific industry or across industries as well as within one geographical region or across different geographical regions. Know which industry or geographic location the salary results pertain to before comparing the results to your company.

Policies and Regulations

Different types of compensation include:

Base Pay Commissions Overtime Pay Bonuses, Profit Sharing, Merit Pay Stock Options Travel/Meal/Housing Allowance Benefits including: dental, insurance, medical, vacation, leaves, retirement, taxes...

Performance appraisal
Performance appraisal, also known as employee appraisal, is a method by which the job performance of an employee is evaluated (generally in terms of quality, quantity, cost and time). Performance appraisal is a part of career development. Performance appraisals are regular reviews of employee performance within organizations. Generally, the aims of a performance appraisal are to:

Give feedback on performance to employees. Identify employee training needs. Document criteria used to allocate organizational rewards. Form a basis for personnel decisions: salary increases, promotions, disciplinary actions, etc. Provide the opportunity for organizational diagnosis and development. Facilitate communication between employee and administration Validate selection techniques and human resource policies to meet federal Equal Employment Opportunity requirements.

A common approach to assessing performance is to use a numerical or scalar rating system whereby managers are asked to score an individual against a number of objectives/attributes. In some companies, employees receive assessments from their manager, peers, subordinates and customers while also performing a self assessment. This is known as 360 appraisal forms good communication patterns. The most popular methods that are being used as performance appraisal process are:

Management by objectives 360 degree appraisal Behavioral Observation Scale Behaviorally Anchored Rating Scale

Trait based systems, which rely on factors such as integrity and conscientiousness, are also commonly used by businesses. The scientific literature on the subject provides evidence that assessing employees on factors such as these should be avoided. The reasons for this are two-fold: 1) Because trait based systems are by definition based on personality traits, they make it difficult for a manager to provide feedback that can cause positive change in employee performance. This is caused by the fact that personality dimensions are for the most part static, and while an employee can change a specific behavior they cannot change their personality. For example, a person who lacks integrity may stop lying to a manager because they have been caught, but they still have low integrity and are likely to lie again when the threat of being caught is gone. 2) Trait based systems, because they are vague, are more easily influenced by office politics, causing them to be less reliable as a source of information on an employee's true performance. The vagueness of these instruments allows managers to fill them out based on who they want to/feel should get a raise, rather than basing scores on specific behaviors employees should/should not be engaging in. These systems are also more likely to leave a company open to discrimination claims because a manager can make biased decisions without having to back them up with specific behavioral information. In the PTF Report it was claimed that although annual Reports by ministries and departments are obligatory, they are hardly ever prepared and submitted to government, and where they, they are scanty and hardly confirms with any standards, either in terms of contents or format. The recommendation was that there should be target setting by ministries where concrete and measurable achievement can be inferred (PTF Report Section 10 Sub10.1). A number of researchers have reported that HR practices are positively

linked with organizational and employee performances. The focus and thrust of these studies have been towards developed countries. Little research has been done to test the HR performance link in developing countries like Pakistan. Our study was an attempt to test the relationship between HR practices and employee performance in Pakistans banking sector. The management of Habib Bank Limited is also emphasizing the growth and development of its bankers with various initiatives. In this situation it is important to find out the determinants which can enhance the employee performance in Habib Bank Limited. The objective of this study was to facilitate the decision makers in Habib Bank Limited across Pakistan to follow the HR practices which can improve the performance of Habib Bank Limited employees.

Theoretical Framework

HR Practices
There are number of HR practices that could be tested in connection with employee performance. Teseema & Soeters (2006) have studied eight HR practices and their relationship with perceived employee performance. These eight practices include recruitment and selection practices, placement practices, training practices, compensation practices, employee performance evaluation practices, promotion practices, grievance procedure and pension or social security. Huselid (1995) used eleven HRM practices in his study which are personnel selection, performance appraisal, incentive compensation, job design, grievance procedures, information sharing, attitude assessment, labormanagement participation, recruitment efforts, employee training and promotion criteria. This study examines the relationship between three HR practices i.e. compensation, promotion and performance evaluation and perceived employee performance. Pakistan is a developing country with very low per capita income and above three practices which have a relatively direct impact on financial earnings and social status of an individual may be considered the major determinants of employees performance. This is the reason these practices have been selected for this study.

Compensation Practices
Frye (2004) examined the relationship between equity based compensation and firm performance and found positive relationship between the two. He argued that for human capital intensive firms compensation plays a crucial role in attracting and retaining highly skilled employees. As banks are capital intensive organizations, compensation practices of a bank can be of great help in hiring and keeping hold of highly skilled and competent bankers. Incentive pay plans positively and substantially affect performance of workers if combined with innovative work practices like flexible job design, employee participation in problem-solving teams, training to provide workers with multiple skills, extensive screening and communication and employment security (Ichniowski et al., 1997). High performance work practices (including compensation) have a statistically significant relationship with employee outcomes and corporate financial performance (Huselid, 1995). Significantly positive correlation has been reported between compensation practices and perceived employee performance by Teseema & Soeters (2006). On the basis of above mentioned literature and arguments it can be safely assumed

that compensation practices are correlated with the performance of employees. However the relationship needs to be tested in banks of Pakistan. H1: Compensation practices are significantly and positively related with perceived performance of banks in Pakistan. Promotion Practices Financially successful companies like HP (Hewlett-Packard) promote and develop from within (Truss, 2001) Teseema & Soeters (2006) found significantly positive correlation between promotion practices and perceived employee performance, however HR outcomes was used as mediating variable. HR practices including vacancies filled from within have been found positively correlated with work satisfaction and life satisfaction with values 0.24 (P=<0.001) and 0.15 (P=<0.001) respectively (Guest, 2002). Synergetic systems of HR practices (including merit promotion decisions) lead to higher performance of an organization (Park et al., 2003). On the basis of above mentioned literature and arguments it can be safely assumed that promotion practices are correlated with the performance of employees. However the relationship needs to be tested in banks of Pakistan. H2: Promotion practices are significantly and positively related with perceived performance of banks in Pakistan. Performance Evaluation Practices Performance appraisal represents, in part, a formalized process of worker monitoring and is intended to be a management tool to improve the performance and productivity of workers (Brown and Heywood, 2005). Employee commitment and productivity can be improved with performance appraisal systems (Brown and Benson, 2003). Appropriate explanation and supervision of performance lead to higher job satisfaction and professional commitment amongst teachers. This is also true when performance appraisal is low. Commitment to teaching is a function of teachers attitude towards performance appraisal system. (Rahman, 2006).Possibility of performance appraisal is enhanced by complementary human resource management practices like formal training and incentive pay and performance appraisal leads to greater influence of productivity (Brown and Heywood, 2005). On the basis of above mentioned literature and arguments it can be safely assumed that performance evaluation practices are correlated with the performance of employees. However the relationship needs to be tested in banks of Pakistan. H3: Performance evaluation practices are significantly and positively related with perceived performance of banks in Pakistan. Methodology The questionnaire was based on questionnaire used by Teseema & Soeters (2006) for measuring impact of various HR practices on

employee performance. The reason for selecting this questionnaire is that it was used to study the impact of same variables as in present study and was well tested on reliability and validity scales. Questionnaire that was administered consisted of three HR practices which are Compensation Practices, Promotion Practices and Performance Evaluation Practices and Perceived Employee Performance The questionnaire was well tested by researchers on internal consistency and other measures. According to Teseema & Soeters (2006) alphas for Compensation Practices, Promotion Practices and Performance Evaluation Practices and Perceived Employee Performance are .82, .74, .73 and .74 respectively. All alphas range between .73 and .82 which is acceptable. The response was required on five point Lickert scales (endpoints: 1 = strongly disagree, 5 = strongly agree). Participants: The participants included employee of Habib Bank Limited. A total 120 questionnaires were distributed however 102 were received back making response rate as 85% and a sufficient sample size was collected for analysis of results.

Conclusion
The impact of HR practices (Compensation Practice, Promotion Practice, and Performance Evaluation System) on the employee of HBL, have given us a chance to conclude that; 1. The criteria of performance quantification lacks skills & techniques which is effecting the performance of employee in HBL 2. The pay difference between the different hierarchical levels is a frustrated factor among the employees of HBL 3. The presence of bureaucracy system is effecting the performance of employee 4. Career path is not properly defined 5. Job security is a major factor of dissatisfaction 6. Job timing hours increase turnover 7. At regional level responsibilities are given instead of authority, which is affecting promotion policies and performance evaluation practice. 8. Delegation of authority lacks which promotes subjectivity instead of objectivity 9. HR department lacks professionals 10. The low morale of upper management affecting the overall efficiency of the employees of HBL 11. Compensation Discrimination was observed

Findings
Demographics n=102 Description Gender Male Age 18-25 26-35 33 36-45 25 46-55 25 56-65 2 Qualification Matriculation Intermediate 18 Bachelor 61 Masters 18 MS/M. Phil 1 PhD 0 Marital Status Married Un Married 27 Frequency 102 17 32.35% 24.50% 24.50% 1.96% 5 17.64% 59.80% 17.64% 0.98% 0% 75 26.47% %age 100% 16.67%

4.90%

73.52%

The demographics are not used in the present study to find out their relationship with employee performance. The objective of Table is to show composition of respondents to have a better understanding about their response and results for present study. The respondents are male. Majority of the respondents hold a Bachelor degree which at present is the minimum requirement to become a banker. The martial status of the respondents is an important demographic in the present study as having a married life and children increase responsibility on individuals and mostly work life conflict situation arises when there is an imbalance between work and family life. Agree Disagree Neutral Agree Disagree Neutral EP 133 31 6 EP 65% 31% 4% PP 61 122 21 PP 30% 60% 10% CP 122 51 31 CP 60% 25% 15% PEP 143 41 20 PEP 70% 20% 10% Mean 2.25 1.36 0.33 Mean -

SD= standard Deviation, EP= Employee Performance, CP= Compensation Practices, PP= Promotion Practices, PEP= Performance Evaluation Practices

Recommendations
* The delegation of authority should be adopt in HBL * Objectivity should be promoted instead of Subjectivity * Performance quantification methods should be improved and should
and includes better techniques and skills * Better Career Paths should be defined to the employee of HBL * There should be less Pay Scale difference between the different Hierarchical level in HBL * Promotion Policy should be revised and should include less hierarchical level. * Specialized HR Specialist should be hired at top level * HBL needs a separate HR department at regional level as well. * There should be a less span of control. * Compensation Discrimination should be avoided it will provide motivated employees to HBL * Eid bonuses, hospital allowances and Petrol Ceiling should be separated from monthly Pays

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