Human capital in the banking sector: an exploratory study of Sri Lanka and New Zealand

Abstract

Businesses around the world proclaim their employees as being the corporation’s most valuable resource. The field of human capital (HC) is not a new one and, studies focussing specifically on HC and its importance to organisations have been published in the academic press for several decades (Amit & Zott, 2001; Barney & Wright, 1998; Wernerfelt, 1984). However, despite continuous research attention, HC remains underdeveloped and an under- researched concept (Gambardella, Panico, & Valentini, 2015; Lewis & Heckman, 2006; McDonnell, 2011). Thus, this research contributes and extends the existing knowledge on HC to provide a comprehensive understanding by exploring the following questions: “How does the banking sector define the phrase HC?” Why does the banking sector deem HC and measuring, managing, and reporting on HC to be important?” “What attributes of HC do banks measure, manage, and report?” and” How do HC and measuring, managing, and reporting on human capital information (HCI) in Sri Lanka differ from those practices in New Zealand?” A qualitative case study is employed as a research approach in this study and the banking sector is chosen as the case sector. Data is collected from 10 banks in two countries, Sri Lanka and New Zealand, via conducting interviews, and gathering information from available secondary sources. The coding process resulted in descriptive codes, categories and finally themes, which are used as a basis to build a comprehensive and interesting narrative about HC in the banking sector in a developing country, Sri Lanka and a developed country, New Zealand. This study shows that the term “human capital” is defined by the Sri Lankan banks as “a cluster of competences, diversity, engagement and values of employees” whereas, in the New Zealand context, the term “human capital” was operationalised as “a cluster of competences, values, diversity and knowledge of employees.” This study examined why banks recognised the importance of HC to the banking business, with the Sri Lankan banks in particular revealing that HC has the potential to enhance overall productivity and efficiency, assist adherence to compliance requirements, ensure banks’ survival, achieve sustainable success and enhance business performance. Except for ensuring banks’ survival, other reasons were endorsed by the banks in New Zealand. Banks’ evidence identifies categories of HC information that they measure, manage, and report. In particular for Sri Lanka, nine information categorises were identified: training and career development, resourcing, attrition and retention, compliances, employee relations, employee welfare, diversity and equity information, health and safety, efficiency, and informal information. Confirming the Sri Lankan banks’ measuring, managing, and reporting practice, the New Zealand banks also revealed that they measure, manage, and report all the above information categories except informal information, such as family background, schools attended and parents’ profession. The findings further suggest that the banks in Sri Lanka and New Zealand use these measured, managed, and reported employee information for two main purposes: internal management and external reporting. Overall, findings suggest that although some disparities existed, the importance of having HC and measuring, managing, and reporting on HCI practices in these two countries were homogeneous.