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HABIB BANK LIMITED

Crisis &Conflict

Management

Submitted to: Mr. ASIF SHEHZAD

Submitted by: SADAF JAMIL & SARA SANA

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COMSATS INSTITUTE OF INFORMATIONTECHNOLOGY

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HABIB BANK LIMITED

INTRODUCTION

Habib Bank Limited commonly referred to as "HBL" and head-quartered in

Habib Bank Plaza, Karachi, is the largest bank in Pakistan. The bank has anetwork of 1425 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, Oman, Singapore, Sri

Lanka, Turkey, UAE, UK & USA.

HISTORY:

HBL established operations in Pakistan in 1947 and moved its head office to

Karachi. Its first international branch was established in Colombo, Sri Lanka

in 1951 and Habib Bank Plaza was built in 1972 to commemorate the banks

25th Anniversary.

With a domestic market share of over 40%, HBL was nationalized in 1974

and it continued to dominate the commercial banking sector with a major

market share in inward foreign remittances (55%) and loans to small

industries, traders and farmers. International operations were expanded to

include the USA, Singapore, Oman, Belgium, Seychelles and Maldives and

the Netherlands.

On June 13, 2002 Pakistan's Privatization Commission announced that the

Government of Pakistan had formally granted the Aga Khan Fund for

Economic Development (AKFED) rights to 51% of the shareholding in

HBL, against an investment of PKR 22.409 billion (USD 389 million). On

February 26, 2004, management control was handed over to AKFED. TheBoard of Directors was reconstituted to have four AKFED nominees,

including the Chairman and the President/CEO and three Government of

Pakistan nominees.

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HBL has the largest Corporate Banking portfolio in the country with an

active Investment Banking arm. It encompasses product offerings and

services in Retail Banking and, in recent years, Consumer Banking as well.

HBL is expanding its presence in principal international markets including

the UK, UAE, South and Central Asia, Africa and the Far East.

RATING:

HBL is currently rated AA (Long Term) and A-1+ (Short term). HBL is the

first Pakistani bank to raise Tier II Capital from external sources.

PRIVATIZATION:

HBL was privatized in 2004 at the price of 22.4bn Rs. It was purchased by

AKFED (Aga khan fund for economic development) through a 3 step

bidding process involving the notice of interest, actual bidding and the take

over process held on 24th of February 2004.

Although, the process of privatization of HBL was initiated way back in

1997 when World Bank introduced Banking Sector Reforms Plan in

Pakistan during 1995.The government appointed Mr. Shaukat Tareen as the

president of HBL who introduced the foreign teams in HBLs management

which was the last effort made by the government in order to restore the

HBLs management system in its proper condition.

MAJOR TYPE OF CONFLICTS IN HBL

Most of the major conflicts in HBL belong to the category of policy driven

conflicts. After privatization of HBL, it had a major change in its structure

and policies. This change was necessary to overcome key problems

associated with the structure of the public owed company such as:

a) Over-staffing:

HBL before privatization had more than 31000 employees of

management and non- management cadres. They aimed to reduce this

number to 27000 employees with the help of its new policies.

b) Employee Expectations Coincide with HBL policy:

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In 2002: HBL employees perceived that it was their right that their child /

children would be employed at HBL. But, HBL followed merit based

system and they were interested in hiring skilled employees to satisfy the

companys as well as stake holders expectations

c) Political Pressure:Before privatization HBL was highly influenced by the governmental

policies as it was the largest financial institute under government control.

The economic policies of the country were also affecting the banks

policies. The problem occurred mainly because of the unstable political

situation in Pakistan which was causing the huge fluctuations in

governmental policies resulting in the inconsistency of HBLs policies

which led to the inefficient results. The motive of privatization was to

make HBL as independent as possible.

THE CONFLICT

Drastic transformation from public owned to private company gave origin to

resistance from the employees as a sudden change in structure was

unacceptable to them as they were used to work with previously defined

policies and system. It was hard for the employees to accept the new policies

and overall system, they resisted as they felt that new policies were not

employee friendly and this clash of interest ultimately resulted in conflicts.

HBLs retrenchment program was one of the bones of contention between

the employees and the management. HBLs aim was to create space for

more non operational and non clerical, technology oriented staff to generate

more effectiveness. They aimed to remove the permanent clerical staff and

get them on contractual basis. This sudden change generated the feeling of

uncertainty and disrespect among the employees and resulted in a huge

retaliation. HBL, however, provided them with compensation, packages and

even provided them new jobs in other organizations but despite these efforts

failed to gain the satisfaction of employees and to gratify them. Thats why;there are still few cases in litigation.

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DISPUTE RESOLUTION PROCESS:

Negotiation:

The then Senior Vice President of Human Resource Management and Head

of disciplinary department, Mr. Amin-ul-Huda Khan undertook the

negotiation process. The representatives of the affected departments

approached Mr. Amin- ul Huda and put forward their point of view that

usually was against the management. Mr. Amin used his experience and

expertise to minimize the conflict and to achieve the BATNA (Best

Alternative to a Negotiated Agreement). He made the employees agree to

most of his demands but some how, he dragged the employee to agree on

two or three points at least by making employees compromise on most of the

issues. His preference remained that management by any means should not

compromise as the option of mediation was still available.

MEDIATION & ARBITRATION

Despite of settling the issue through negotiations HBL fails to resolve the

issue of retrenchment of the staff as it was desired .The management as per

laid down policy started mediation process with the employees and the

management by appointing internal neutral and trustworthy representatives

from both sides .The mediators at the first stage of mediation played apassive role ;secondly the mediators intervene in steering the negotiations

and finally mediators moved towards a final settlement. Apart from it

arbitration policy was also followed to dig out and resolve management

issues without compromising on the new policies without any internal and

external pressure. As a result of negotiations, mediations and arbitration

HBL introduce proper compensation schemes for the employees.

HBL offered a voluntary golden hand shake scheme to its employees in

1997 .Through this scheme the employees were paid a handsome amount in

lump sum who desired to leave their positions .A large number of officersand staff members opted for this scheme considering it a wind fall .The

golden hand shake scheme proved so successful that it was renovated many

times in the year of 2001, 2005, and in 2010 even. Although the bank has to

allocate sufficient funds to this scheme but it greatly helped to resolve the

conflict of over staffing to a desirable extent, otherwise it would have

become a constant conflict for the all times

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LAYING OFF NON TECHNOCAL AND CONTRACT EMPLOYEES

There was a chunk of few employees who were initially hired on contract

basis and were required to b layed off after privatization because their

services were not realized fruitful for the financial uplift of the institution as

they were not related to core business of the bank. They included non-clerical staff, guards, peons, dispatch riders and drivers etc. They were about

40 to 50 contract employees. Instead of removing from service, these

employees were offered jobs of similar nature in other institutions of same

nature.

LITIGATION

Those who remained unsatisfied with the packages offered by the bankprefferd their cases in different courts of law. According to Mr. AMIN-UL-

HUDA there are still cases of litigation in different courts of law which are

yet to be resolved or yet to turn in favour of employees .HBL has

apportioned sufficient resources to fight court cases.

Time span

The privatization process of HBL initially started in 1997 and finalized in2004 .The management succeeded to resolve the major conflicts including

over staffing with the span of 3 5 years.

W/W SITUATION

The situation created after the resolution process may be considered as win/

win position.

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THE KEY PLAYERS OF PRIVATISATION

Although Mr. Shaukat Tareen (the then president of HBL) and Mr. Hafiz

Sheikh has played pioneer role to process of privatization successful, yet the

key players in this regard are:

R.ZAKIR MAHMOOD (PRESIDENT&CEO) Mr. Zakir Mahmood holds MBA and Masters of Engineering Degrees from

University of California, Los Angeles. He has extensive experience of over

28 years in international banking with two of the largest banks in the World.

He has extensive banking experience in Pakistan, Middle East and EuropeanMarkets. He is President and CEO of HBL since February 2000. Mr. Zakir

played a major role in restructuring and shaping up HBL for privatization.

SULTAN ALI ALANA(Chairman)

Sultan Ali Allana serves as Chairman of Habib Bank Limited. Mr. Allana

has been Director of Jubilee Holdings Limited since April 2006. He serves

as the Chairman of First Habib Bank Modaraba, Habib Bank Ltd. and

Director of New Jubilee Life Insurance Company Ltd. He serves as Director

of the Aga Khan Fund for Economic Development.

HBL ON THE ROAD TO SUCCESS

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The privatization of HBL made it a more vibrant financial institution. It

came out of its sickness and began to grow gradually. Prior to it, there was a

political influence in the management of Human as well as Financial

resources of the bank .Now it is working independently under different

Board Committees.

HBL in Pakistan and in the international market, is embarking upon three

areas of financial sectors i.e. corporate banking, Consumer banking and

investment banking with the mission statement of making customers

prosper, excellence in staffing and creating value for shareholders .It has

adopted high values of integrity, excellence, customer focus, meritocracy

and progressiveness Thanks to these values that HBL has enhanced its

network by increasing number of branches from 1470 -1494. In terms of

total deposits the bank has reported 332.102 billion RS increase over the last

six years. HBL has shown profit to the tune of RS 13 billion in 2009. The

percentage growth rate is 23.35% in profit in 2009 with respect to the

previous year

The analysis corroborates that HBL has become a progressive institution

after privatization and is successfully competing with its competitors in the

industry locally and globally.

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Organizational Structure of HABIB BANK LIMITED

PRESIDENT AND CEO

7 MEMBERS OF BOARD OF DIRECTORS

G.E, IOBG G.E, CPOD G.E, CPCS G.E, RBG G.E, CIBG G.E, ARM G.E, AGA

HEAD OF IT

HEAD OF HR HEAD OF FINANCE

SENIOR VICE PRESIDENTS

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VICE PRESIDENTS

ASSISTANT VICE PRESIDENTS

GRADE I OFFICERS

GRADE II OFFICERS

GRADE III OFFICERS

CLERICAL STAFF

NON-CLERICAL STAF

Products & Services

Individual customers

Car Loan

Credit Cards

Home Loan

Deposit Accounts

Banc assurance

Debit Card

Phone Banking

Fast Transfer

Mutual Funds

BUSINESS CUSTOMER

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Corporate Banking

Commercial Banking

Investment Banking

Islamic Banking

Cash Management

Zarai Banking

Global Treasury

Asset Management

Departments at head office

Administration

Small & Medium Entp. Group

Audit Branch

Special Operation Management

Central Finance

Division Treasury Operations

Central Operation

Division Financial Institution

Corporate Banking Group

Management Information System

Credit Administration

Customer Services & Quality

Treasury Operations

Marketing

Human Resource Division

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