Role of HRM Practices in Promoting Digital Transformation in Banking Sector

Vandana Sachdeva
Assistant Professor, Selection Grade, Department of Management Studies, IIS (Deemed to be University) Jaipur, Rajasthan, India; and is the corresponding author. E-mail: sachdeva.van@gmail.com

Ankita Sharma
Research Scholar, Department of Management Studies, IIS (Deemed to be University), Jaipur, Rajasthan, India. E-mail: ankita827@gmail.com

Digital technology has enabled organizations to be adaptive and competitive in the dynamic work environment. Technology acceptance and adoption have taken the center stage for success and growth of any business. For effective digital transformation, organizations need competitive human resources management (HRM) practices, besides managing challenges and improving overall employee experiences. This paper examines selected HRM practices with regard to employee experience. It also seeks to find out if there is any significant difference in HRM practices and their impact on digital transformation in selected public and private sector banks. Primary data was collected through a structured questionnaire administered on employees of selected banks in Jaipur, Rajasthan. Secondary data was collected from books, reputed journals, and online sources. Data analysis and hypothesis testing were done through descriptive analysis, correlation, and independent t-test. The findings suggest that HRM practices have a significant impact on digital transformation, and that there is no significant difference in the impact of HRM practices on digital transformation in public and private sector banks.

Introduction

The integration of digital technology into all aspects of business has a major impact on the changes within the organization. It impacts how organizations work towards providing value to their customers and a holistic experience for their employees. Transforming an organization through embracing technology helps it position itself in a better manner, especially in the present era of change and globalization. The need for organizations to transform digitally is growing day by day. According to Kane (2017), "Digital Transformation is better thought of as continual adaptation to a constantly changing environment." The major idea behind digital transformation in any organization remains building a sound technical as well as operational foundation. It is important for organizations to evolve with time and be able to respond to the dynamic environment and changing needs of customers, market, and employees. It is important for organizations to keep pace with the global events and have a global perspective towards business. Organizational development should always be a key motivation for management. Such organizations provide not only value to its customers but also a holistic employee experience, which is very important for the organization's overall growth and profitability (Wognum, 2001). Digital transformation depends on several factors, and effective human resource management (HRM) practices play a significant role. HRM procedures are critical to facilitate the change that organizations need to bring in today with respect to their strategy, operations, and business models in order to adapt to the digital world.

Need for HRM Practices in the Digital Era
HRM practices like providing a digital work environment, digital culture, job autonomy, career progression, skill-based training and development, reward and recognition, HR Analytics, etc. (Amabile et al., 1996; and Lynn and Faruk, 2015) help in creating an overall culture of innovation, creativity, continuous improvement and technological acceptance and adoption in an organization. Leadership and supervision play an important role in employee growth. Employees' ability to manage workplace pressures should be strengthened by human resource practitioners. An open culture should be developed to encourage interpersonal communication skills (Hillman et al., 2023).

Effective management of such practices helps employees to have a greater perspective and thus aim for higher efficiency, effectiveness, and productivity. It also brings in a competitive advantage for any organization. Budhwar Pawan (2000) analyzes that HR professionals must address digital developments strategically and be aware of the diverse abilities needed to adapt. Any firm that intends to achieve a competitive advantage must have a strong focus on digital competency, which includes data analytics and a digital mindset. Being adaptable to change, customer-focused, collaborative, and creative are also significantly associated with a business that undergoes digital transformation (Van Den Berg et al., 2020). Programs and activities that focus on the skills and knowledge necessary for organizational growth and development must be strategically aligned with each other. It is essential for employees and management to work together strategically (Wognum, 2001).

This paper examines selected HRM practices and their impact on digital transformation in selected public and private sector banks, highlighting the role of HRM in improving digital transformation experiences.

The rest of the paper is organized as follows: In the next section, a detailed review of literature and synthesis of previous research on the impact of major HRM practices on outcomes related to digital transformation has been done, and the dimensions of the study are derived from the review of literature. Subsequently, the methodology is presented which involves quantitative analysis of survey data. Data analysis and hypothesis testing are done through descriptive analysis, correlation, and independent t-test. This is followed by results and discussion. Finally, in the conclusion, theoretical implications and areas for future research are highlighted, along with recommendations for organizations interested in implementing strategic HR initiatives that promote successful digital transformations.

Literature Review
Ajayi-Nifise et al. (2024) examined the role of HR in digital transformation in banking sector and how HR manages change. HR plays an important role in cultivating digital talent that is crucial for banks to survive and be competitive amid technological disruption. Bouncken et al. (2021) stated that organizations can apply digital technologies that enhance internal and external processes and also help in integrating current business strategies, training programs, management of digital talent, and aligning employees with digital objectives are of key importance. The study emphasized HR's role in driving successful digital transformation by effective change management and developing a digitally-skilled workforce.

Gadzali et al. (2023), in their qualitative study, found that HRM best practices are vital for organizations in their digital journey. The findings highlighted the significance of HRM strategies, including enhancing digital competencies, cultural shifts, effective leadership, organizational restructuring, talent management, performance evaluation, communication, flexibility, and risk management. These practices help organizations to have a competitive advantage by enhancing performance and being customer-centric. Nicolas-Agustin et al. (2022) suggested that talent acquisition, compensation management, performance management, employee development, employee engagement, and employee relations are just a few of the many tasks covered by HRM practices. To adapt their business practices to the new digital environment, businesses must adopt HR practices that promote innovative employee conduct. According to Dasari and Rama Devi (2023), HR analytics is one of the ways to achieve organizational excellence, and decision making needs to be based on data and evidence. HR analytics is very useful in changing the HR environment with informed decision making. Boudlaie et al. (2021) suggested that strategies such as enhancing digital competencies, cultural shifts, effective leadership, organizational restructuring, talent management, communication, flexibility, and risk management are significant in aiding competitive advantage and business success. Fregnan et al. (2020) reported that businesses now face issues as a result of workplace digital transformation. Such difficulties can only be addressed if there is a shift in thinking and a strategic acceptance of new and modern HRM practices rather than conventional ones. White (2012) opined that providing digital environment helps in changing the way of work accomplishment from individual and organizational perspective towards productivity and competitiveness. The approach to HRM should be more agile and flexible, with the ability to capitalize on technology and data. This, in turn, will lead to enhanced HR processes and decision making. New competencies such as digital, innovation and relational have been discovered to be particularly crucial for management in the digital era, driving organizational innovation and growth. Latif et al. (2019), through a case study approach, explored the evolving role of HRM in digital banking transformation of a Malaysian bank. The qualitative study revealed that HRM practices were aligned with the bank's digital strategy. Key priorities include engagement, talent acquisition and development, along with restructuring of HRM for digital readiness.

Objective
The main objectives of the study are to

• Understand the various HRM practices with reference to digital transformation in selected banks;
• Identify the relationship between HRM practices and digital transformation in selected public and private sector banks;
• Compare the digital transformation of HRM practices in selected public and private sector banks; and
• Assess the challenges faced in digital transformation with regard to HRM in the banking sector.

Hypothesis

Data and Methodology
The literature review served as the foundation for this study, involving a thorough analysis of research papers exploring various dimensions of HRM practices and their relationship with digital transformation. The papers were carefully examined based on criteria such as publication year (Table 1; Figure 1), publication status (Table 2; Figure 2), and specific study dimensions (Table 3; Figure 3). These dimensions encompassed digitalization, digital transformation, HRM practices, and innovative HRM practices, offering a comprehensive understanding of the evolving landscape of HRM in the context of digitalization. From this extensive review, key variables related to HRM practices emerged, including role clarity, career progression, work environment, job autonomy, and employee wellbeing, forming the basis for the study's investigation.

For the purpose of the study, necessary data was collected using both primary and secondary sources. A systematic and structured questionnaire (Appendix) was shared to collect primary data from the employees of the selected banks. The purpose of the questionnaire administration on employees was to collect data related to key HRM practices with reference to digital transformation. The questionnaire has different sections. The demographic profile of the respondents, including age, gender, educational qualification, working experience and department, has been given in Section A. Section B contains questions pertaining to the study's variables (work environment, job profile and role clarity, job autonomy, employee wellbeing, career progression, and digital transformation). The survey used a five-point Likert scale, with "strongly agree" signifying the highest level of belief and "strongly disagree" denoting the highest level of disbelief.

A total of 70 questionnaires were distributed to the employees of the selected banks. Out of the 70 responses, 20 were excluded due to insufficient data; the final analysis and hypothesis testing were performed on a sample of 50. 24 responses (48%) were gathered from public sector banks, and 26 (52%) from private sector banks.

Research Design and Sample
The study's research design is exploratory in nature. For this quantitative study, stratified and simple random sampling for data collection from both public and private sector banks was used. Strata has been formed for the pertinent data collection and analysis to gain a comprehensive insight on the impact of selected HRM practices on the digital transformation in the selected public and private sector banks. Based on bank equity indices and customer base, six banks from Jaipur, Rajasthan, were selected for the study and primary data collection. HDFC Bank, ICICI Bank, and Kotak Mahindra Bank were selected from the category of private sector banks, and State Bank of India, Bank of Baroda, and Punjab National Bank were selected from the category of public sector banks. Descriptive statistics and hypothesis testing were used to analyze the data. Cronbach alpha was used to assess scale reliability. In descriptive statistics, frequency, mean, and standard deviation were calculated. For hypothesis testing, Pearson correlation and independent t-test were used. Figure 4 represents the conceptual framework used for the study. The figure depicts the independent variables (HRM Practices) and the dependent variable (Digital Transformation).

Validation of the Data
Table 4 presents reliability statistics for dimensions like job profile, work environment, and digital transformation. Job autonomy, work environment and employee wellbeing show high internal consistency, while career progression and job role exhibit moderate reliability. Digital transformation shows a strong internal consistency. Table 5 reflects an overall high reliability (Cronbach's Alpha of 0.931) across the entire 16-item scale, suggesting strong internal consistency. These findings underscore the reliability of the scale in measuring factors related to HRM practices and digital transformation, enhancing the credibility of the study's results.

Results
Demographic Profile
Table 6 shows that male respondents outnumbered female respondents. It may be deduced that a majority of respondents' age was over 40 years and were postgraduates with more than

The results of the independent t-test (Table 23) depict that in all the cases the significant value of the selected variables of HR practices-work environment, career progression, employee wellbeing, and digital transformation-is more than 0.05. Therefore, the null hypothesis is accepted.

Discussion
Van Den Berg et al. (2020) underscored the importance of human resources for any organization, especially the banking sector, as they ensure that the talent they acquire possess the necessary digital skills and competence so that they can survive and adapt in such a competitive sector. The results of this study support the research finding derived from literature review. The results of Pearson correlation confirm a significant correlation between work environment and digital transformation, a moderate degree of correlation between digital transformation and career progression, and a moderate degree of correlation between digital transformation and job autonomy. The p-values of all the HRM practices were found to be less than 0.05. Therefore, the null hypothesis (H01) is rejected, inferring that there is a significant association between work environment, career progression, job autonomy and digital transformation. However, the results of independent t-test (Table 24) depict that for all the selected variables of HRM practices, the significant value is more than 0.05. Therefore, the null hypothesis is accepted, inferring that there is no significant difference in the mean value of the impact of HRM practices on digital transformation in both public and private sector banks considered for the study.

The banking sector is witnessing a shift in the way technology is incorporated in its day-to-day functioning. It is the key role of HRM to upskill its employees and nurture the organizational culture that is adaptive towards technology and digital friendliness. The study examined specific HRM practices that impact the digital transformation of public and private sector banks of Jaipur, Rajasthan. The results highlight the core HRM practices that relate to transformation efforts within the banking industry. The results support the findings derived from the literature review, which showed that HRM practices and digital transformation are moderately correlated. Specifically, practices like clear definition of job roles and role clarity, autonomy in work, prioritizing employee wellbeing and promoting career growth were all linked to the digital transformation initiatives of public and private banks. These findings emphasize the role of HRM in helping organizations adapt to advancements, boost employee engagement, and foster an environment conducive to digital innovation.

Furthermore, the study highlighted commonalities in HRM approaches of public and private sector banks with regard to transformation. Despite differing structures and operational frameworks, both sector banks laid emphasis on HRM practices that support digital transformation. This points to harmonization of HRM strategies across sectors concerning technology integration and preparedness for digitalization, showcasing how crucial HRM is in driving change within the banking sector. The study also reveals that while HRM practices play a role in enabling transformation, organizational commitment and leadership support are vital factors that influence the success of HRM endeavors. Banks that have leadership backing and a culture that values innovation often show success in their digital transformation initiatives, highlighting the significance of strong leadership and a supportive organizational culture.

Conclusion
It is concluded, based on the findings of the present study, that there is a significant correlation between digital transformation and various HRM practices in selected banks, and that there is no significant difference in the impact of various HRM practices on digital transformation in both public and private sector banks. The positive correlation between HRM practices and digital transformation initiatives highlights the important role HRM plays in helping banks to adapt to technological advancements and build the required culture of creativity and innovation. Though public and private sector banks differ in their organizational structure and design, the HRM practices of each category of banks had helped in smooth digital transformation, underscoring the universality of roles played by HRM practices in driving digital shift. Moving forward, employee wellbeing, work environment, job autonomy and role clarity will be very much essential for smooth digital transition and enhanced employee engagement, which in turn would help in maximizing the effectiveness of HRM initiatives and achieving successful digital transformation outcomes in the banking industry.

Implications: The findings also have significant practical implications from an organizational perspective, especially for the banking sector. Firstly, the study highlights how HRM can be strategically aligned with digital transformation objectives of the organization and help improve organizational readiness towards change and competitiveness, especially in banking. It also highlights that investing in enhancing the overall work culture and wellbeing of employees promotes a culture of innovation and easy digital transformation. Employee engagement through HRM practices, such as employee wellbeing, career progression and job autonomy, is instrumental in enhancing the development and growth of an organization as a whole and in improving adaptability and agility. The study highlights the critical need for strategic alignment of HRM practices and digitalization strategies within banking institutions. Strategies focused on effective management practices that enhance the overall work experience of employees should be prioritized and integrated into the overall organizational goals. Investment in human resources should be considered critical, and emphasis should be laid on comprehensive training and development programs towards fostering a culture of continuous learning and innovation. Communication and collaboration can further accelerate digital transformation by utilizing the collective knowledge, expertise, and insights. Embracing decision making that is focused and driven by data also remains essential for identifying the scope of improvement and innovation. In the competitive and dynamic business environment that the banking industry operates, it is essential to maintain a creative perspective for continuous improvement, evaluation, and adaptation to achieve long-run success through agility and sustained progress.

Limitations: A very small sample size was chosen (50) and the sample was restricted to select banks from Jaipur region. Future studies may use a larger sample size and include banks from various regions for more accurate results.

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