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AROHAN

A New Age Urban Focused MFI

Amit Kumar Dutta


Roll No.
U210002
Ex-PGP – 2010-
13
Overview of the Company

In 2006 Arohan Financial Services Limited started microfinance operations


and since then the Company is providing financial services to urban and
rural population following Joint Liability Groups (JLGs) methodology. The
Company provides small tickets loans for tenure of 45-57 weeks without
any collateral security. At present Arohan is operating their business in
West Bengal and Bihar with two products viz. Saral Product (for
economically active women) & Bazar Product (for vendors in the
authorized markets selling household commodities, generally perishables).

By March 2014 Arohan aims to reach 2million customer with a portfolio of


Rs. 15,000 million.

1.00 Background

Microfinance is a manpower intensive industry and other than capital


human resource is the most important factor for its growth. Therefore
“PEOPLE” is the most important and valuable resource for Arohan as in the
form of its employees. Employees are the pillar of Aroahn as dynamic
people can make dynamic organizations. Effective employees can
contribute to the effectiveness of the organization. Competent and
motivated employees can take their company at the highest peak of
success and enable an organization to achieve its goals.

Therefore success of any micro-finance organization is greatly depends on


its human resource management system. The systematic attention to
human resources is the only way to increase organizational efficiency in
terms of productivity, quality, profits and better customer orientation. HR
can help in delivering of organizational excellence by focusing on learning,
quality, teamwork, and through various employee friendly strategies. MFIs
need strong human resource, not only recruit them but also retain them.

One of the major challenges for a MFI is its high attrition rate. Many MFIs
are also seriously considering the attrition problem. To achieve their goal
a strong group of employees is essential. Another challenge for Arohan is
to hire right people at right time in the middle level as well as senior level
management.

2.00 Objectives

The project aims at evaluating the overall Human Resource management


System and to assess its contribution towards the accomplishment of the
mission and objectives of Arohan. The study will also improve the work
performance of field officers by helping them realize and use their full
potential in carrying out organization's mission. In addition of that it also
provides feedback to the management and identifies the areas where
development efforts are needed to bridge the gap.

3.00 Research Methodology

In line with the objective of evaluating HR system all the HR personnel


were interviewed and policies were also reviewed. In addition of that both
resigned as well as existing staffs are interviewed. Among all 100
employees (including 40 resigned employees) physical interview was
conducted for 56 respondents across 10 districts in W.B and 6 districts in
Bihar. Telephonic interview was conducted for rest of 14 employees. We
have visited 25 branches including 7 branches in Bihar while conducting
interviews of active field officers.

4.00 Role of Human Resource Department

Initially when Arohan started its microfinance business that time there was
no separate HR department but with the continuous growth of the
organisation the need of a separate work group was felt and in middle of
2008 HR department has been formed.

At present HR department in Arohan is a well defined department handling


near about 1,200 employees successfully. The department is headed by
the General Manager, Mr. Ayan Chatterjee, who has a degree in
management from IRMA and also has a post graduate degree in
international human rights and refugee law. Prior to join Arohan Ayan has
10 years of experience in HRM.

Beside Ayan total 12 people are also backing up HR department for


accomplishment of HR functions. Out 12 employees in HR 2 are in the
position of manager and handling 5 executives each. Both the managers
are professionally qualified and have an experience in HR function in more
than 3 years. All the executives have an prior exposure in working in HR
department. In addition of that some of low level work of HR department
has also been outsourced to the external agencies.

In Arohan the activities of the HR department is being broadly classified


into following categories:

 Human Resource Planning


 Framing Human Resource Policies
 Recruitment and Selection
 Processing Salary, Incentive & other benefits
 Performance Appraisal System
 Induction, Training & Development

The responsibility of establish HR related objectives and policies are


primarily lying with the general manager of HR department. However
before deciding any policy related to human resource they have also
consult the issue with respective general manager of the operation.
Further if there is any major issue then decisions are being taken after
consulting the matter in the meeting of the SMG held on monthly basis.

Two major resources for any microfinance organisation are capital &
people and without timely supply of both these resources the growth of
the organisation is badly affected. Beside operation the manpower
requirement of other departments like accounts, IT etc. are very low. Out
of total manpower 95% manpower of the Arohan is representing field staff
who actually run the business and therefore requirement of field staff is
crucial. Typically they are not very educated and low level staff. There pay
packet is also not so attractive even though their jobs are very laborious.
Organisation could not be opened branch office if HR not able to provide
branch head as well as field officers on time and the growth of operation is
totally depends on performance of HR department. In comparison to field
staffs HO staffs are qualified and get an attractive pay packet. Therefore
recruitment of field staff and to sustain them in Arohan is the main
challenge for HR department.
5.00 Human Resource Planning

For HR planning HR department seat with line managers on quarterly basis


and they also take the help of operating people at the time of mass
recruitment as well as at the time training and development of new as well
as existing staff. They just facilitated the process of recruitment, selection
and training & development functions with the help of operation people.
The logic behind the strategy is that the line managers are in a better
position to select their people and providing require training as they have
better domain knowledge about their work.

Arohan has a standard system of HR planning. The main focus of HR


planning is to forecast the number of field staff as well as the people in the
level of middle management. As the staff strength of each branch is
standardised in Arohan (1 branch head and 6 field officers) HR planning is
basically quantitative in nature and forecasting of the field staffs are co-
related with the number of new branches that Arohan is going to open in
next few years. Yearly plans are bifurcated into monthly plans and
monthly requirement of field staff are decided after considering due
promotion of the field staff. Estimation is being done with respect of other
operational staffs on the basis of certain assumptions and thumb rules
such as one Area Manger for 10 branches, 1 Monitoring Officers for 5
branches and 1 Executive for 5 Monitoring Officers.

However other than field staff there is no systematic approach by which


requirements of other departments are decided. Forecasting is being done
on ad hoc basis as decided by the corresponding line manager.

After job analysis each individual position the job description as well as job
specification are being done with respect of field staff. However there is no
readily available job description and job speciation for other staff.

In Arohan there is an opportunity for a field staff to be promoted as a


monitoring officer or as a branch head. Similarly a branch head gets an
opportunity to be an area manager. However inconsistence in such
promotions affects the HR planning adversely. Further high attrition rate of
field staff is also a major problem for Arohan like other MFI. It also affects
HR planning badly. In addition of that it has been observed that other
functional department like accounts, IT etc. are not able to perform their
duty efficiently as they are not able to recruit right person on right time.

Further another challenge for Arohan is planning for the middle


management and the senior management positions as it is very difficult to
get right people for those positions. As microfinance sector has scaled up
it would be very difficult to get experience people within the industry.
Further the number of business institutes and management schools are
very rare who can produce people with required skill and knowledge. The
supply of graduates from IRMA, IIFM & XIMB is inadequate. In addition of
the graduates within the organization prefer to join in a bank instead of in
any MFI. Therefore the only alternative is to promote existing staff.
However in that case because of lack of professional qualification it would
be difficult for them to contribute effectively and efficiently. To address
the issue Arohan has taken a decision to sponsor people over the level of
executive for some management MDP. During last six months they have
send 2 Area Managers for MDP program organised by IIMC and XLRI.

Considering the different type of challenges Arohan may look after the
following alternatives for solution:

 Prepare a calendar for promotions so that inconsistence related to


promotions of field staff can be reduced. In addition of that carrier
planning and career concealing of prospective employee may also
be helpful for successful planning of promotions. In this case Markov
Analysis could have been done for better planning.
 Flow model may also be used for account for the attrition of field
staffs as it helps us to reduce the error margin while estimating the
attrition.
 Job analysis requires to be done with respect of each and every
position of staff working in different functional departments. Job
description and job specification should be decided and documented
for HO staff. As the size of support staff is not so big, work life study
as well as Delphi technique can be used for effective HR planning.

6.00 Recruitment & Selection

In case of field staff Arohan has a standard criteria and processes and
recruitment is being done on mass scale as required for the huge
expansion plan of the organisation. Sourcing of candidates are mainly
done through advertises in the local newspapers. In addition of that
candidates are sourced through employee referral scheme. Further
leaflets for recruitment are also distributed among the customer for their
reference. However in case of area manager Arohan does not have a
policy to recruit area managers from outsider. All the area managers are
being promoted within the organisation from the post of branch manager
as the position requires at least one year experience in core microfinance
operation.

The selection process comprises written test, test of public speaking and
group interview. Selection criteria is being standardised with respect of
qualifications and experience. Most of the selected candidates are higher
secondary pass and some of them are also checked through an external
agency.

In case of middle and senior management levels, generally sourcing of the


candidate is being done through advertisement in different job portal like
naukri.com, microfinancegateway.org and also through personal
reference. Selection process comprises 1st round interview, one day
branch exposure visit, psychometric tests and also a final round interview
at least by two GMs (General Managers). However the selection criteria for
middle level and for senior level staff is not standardised and the success
of right selection is totally depends on the panel of interviewer.

In absence of clear selection criteria as well as qualification for middle


level and senior level position Arohan suffers a lot to recruit right people
on right time. Further response from professionals is also very low as they
prefer to join in banks instead of any middle level MFI. To overcome this
issue job analysis of each position under middle and senior level
management is require to be done and selection criteria need to be fixed
on the basis of job description and job specification. Further graduates
from IRMA, XIMB can also be considered for middle level management and
are recruited through campus interview.

7.00 Rewards & Compensation

In Arohan all the field level jobs are standardised and well structured.
Reward and compensations of filed level staffs provided according to their
grade and 95% of the employees are field level staff. Quarterly incentives
are decided on the basis of customer acquisition, portfolio size and rate of
recovery. The objective behind such type of incentive structure is the
strategies for rapid growth. Further subsidies are also provided for food
and lodging by reimbursing salary of cook, cost of gas, room rent of field
officers.

Increments are made on yearly basis after considering the market rates.
For that salary of other MFIs are compared.

Other than field staffs salaries are not structured at all. Salary is being
decided on case to case basis after considering academic qualification as
well as experience and therefore it varies individual to individual. Yearly
incentives as well as increments are decided after taking feedback from
the immediate superior. Therefore chances of lobbing as well as politics
are high.

8.00 Performance Appraisal System

The overall performance appraisal system of Arohan with respect of field


staff is moderate. Process of promotion comprises feedback from
immediate superior, written test on policy and processes and an interview.
However in case of other categories of staff promotions are being done on
the basis of recommendation of departmental head which encourage
lobbing as well as politics within the organisations.

9.00 Maintenance & Retention of Staff

Because of the typical nature of work Arohan is facing a problem of high


attrition rate. To overcome such problem management has taken a lot of
preventive measures by which they can motivate their staff, maintain an
employee morale and job satisfaction. As a part of such corrective
measures different type of events are organised like inter office football
tournament, cultural evening, area-wise get together, yearly picnic etc. In
addition of that company is also providing support to their employees
through personal loans and advance. Further several facilities like PF,
Insurance (life & accident) and ESI etc. are also provided to bring security.

10.00 Training & Development

The induction program of Arohan for its field staff is very well designed
and structured system of induction for its field staff. Induction programs
comprise class room session as well as branch exposure visit and all the
candidates require attending 21 days induction program. At class room
session the mission and vision, organizational structure, processes and
procedures and basic concepts in MIS and accounting system are
discussed. During the training detailed operational policy as well as job
responsibilities are provided. In between the class room session they are
sent to the branches for on job training where are accompanied by one of
the experienced field staff who assist the candidate to learn his/her duties
and responsibilities. After completion of branch exposure another round of
class room is being organized to evaluate their knowledge and skills as
required for their job.

However for other category of staff Arohan does not have structured
training program. They are directly deployed in jobs after 5 days branch
exposure visit.

In case of internal promotion within the organizations a 7 days class room


sessions are organized before put into them on charge. In addition of that
short term training is also being organized frequently for developing soft
skills as well as analytical skills of existing employees.

In Arohan HR department is playing a role of a facilitator to organize and


design induction program. The hired the operation people like area
manager, manager and GM (General Manager) within the organization for
training. However in some cases professionals are being hired for
providing training on communication and attitude.

Even though Arohan has a well designed and structured training program
they are facing following problems which need to be addressed for fulfil
the objective of training –

 Less application of training skills in practical field


 Field staffs are not able suits their self for training because of their
low academic qualifications.
 inappropriate selection of participants
 Training is not being conducted on time because of non-availability
of trainer
 The middle and senior level manager does not have adequate time
for participation
 Lack of skills in the middle level management

To overcome the above mentioned issues following suggestion can be


considered:

 Before selection of any training program need assessment is


recommended and for that requirement of organisation as well as
requirement of skills for a particular task is need to be analysed.
After that training should be designed according to the requirement
of a particular staff. This process will increase application of skills
imparted through training program.

 Initiative to offer part time courses to acquire formal academic


qualifications may be helpful to develop the overall knowledge base
of the field staff. For that tie-up with different universities and
institutions is recommended.

 A dedicated team of trainer needs to be developed so that schedule


of training would not be affected.
 As it would be very difficult for middle level as well as senior level
staff to manage time after they get into their work an induction
program should be designed so that training would be provided
before they put into the jobs. Further they may be sent for a short
term MDP organised by different management schools and in this
case it may be used as a motivational tool.

11.00 Executive Summary

The overall HR system in Arohan is moderate. In specifically all the HR


processes related to field staff is well designed and structured. However
for other categories of staff there is a huge opportunity of improvement.
As the organisation is going for a major expansion they need a chunk of
field staff and considering the present HR system it would not be difficult
for Arohan. Further to cope up with the high attrition rate Arohan has
already taken different corrective measures and at present they are able
to control such attrition rate remarkably.

However for handling a large scale of human resource Arohan also


requires to hire professionals in middle level as well as senior level of
management. For that Arohan need to structure their HR processes like
HR planning, recruitment & selection, training & development, appraisal
system etc. To decide the need of human resource in middle as well as
senior level management job analysis requires to be done for each
individual position. As the size of support staff is not so big, work life study
as well as Delphi technique can be used for effective HR planning for
middle level as well as senior level staff.
Selection criteria should be determined on the basis of job description and
job specification. A schedule for induction requires to be designed after
need assessment of organisation, position and also the prospective
candidate. Reward & compensation should be decided on the basis
systematic job evaluation. Increment, promotions and also incentives
should be decided after systematic performance appraisal of the
candidate. For that different method of appraisal such as ranking method,
360 degree appraisal, critical incident method etc. can be used.

In addition of re-structuring HR processes related to middle level as well as


senior level staff following suggestions are being recommended for the
overall improvement of HR functions:

 For better planning of human resource a calendar for


promotions require to be prepared to reduce inconsistency in
promotion. In addition of that carrier planning and career concealing
of prospective employee may also be helpful for successful planning
of promotions. Further Markov Analysis could have been done for
better planning.

 Flow model may also be used for account for the attrition of
field staffs as it helps us to reduce the error margin while forecasting
manpower requirement.

 Before selection of any training program need assessment is


recommended and for that requirement of organisation as well as
requirement of skills for a particular task is need to be analysed.
After that training should be designed according to the requirement
of a particular staff. This process will increase application of skills
imparted through training program.

 Initiative to offer part time courses to acquire formal


academic qualifications may be helpful to develop the overall
knowledge base of the field staff. For that tie-up with different
universities and institutions is recommended.

 Introduce 360 degree feedback system as a tool of


performance appraisal so that lobbing as well as politics within the
organisation can be reduced.

 Create a specialist team of trainer to provide better quality of


training.