7 Annual Conference of Microfinance Institutions, Warsaw, Poland 27-29 May 2004

7th Annual Conference of Microfinance Institutions, Warsaw, Poland; 27-29 May 2004
Managing for Success:

Effective Human Resource Management
in Microfinance Institutions
7th Annual Conference for Microfinance Institutions
Warsaw, Poland
27 – 29 May 2004
Kim Pityn
VP of International Operations
Human Resource Director
Jennifer Helmuth
Assistant Manager for
Human Resources
Isn’t “Human Resources”
just being nice to staff?
Why do we need systems
to do this?
We don’t have time for
Human Resource
Management — trying to
reach self-sufficiency is much
more important.
Human Resource Management
Workshop Objectives
1. Understand the importance of effective

Human Resource Management (HRM).
2. Recognize the primary HRM functions.

3. Become familiar with key HRM tools and
systems.
Human Resource Management?
Human Resource Management (HRM)
provides an effective work force in
order to meet the goals of the
Microfinance Institution.
Important?
• It is one of two major resources: capital and
people.
• Finance is essential, but it is only a tool in the

hands of our people.
• Staffing is the major share of a MFI’s

operating budget.
Microfinance Institution’s top
managers are beginning to
recognize that success
depends upon careful
attention to human resources
not simply finances!
CAPA…
a successful
Romanian MFI
a successful organization?
• An interdependent network of individuals,
each contributing to the success of the
mission.
• The success of an organization is

significantly dependent upon the success of
its individuals
To be successful, staff need:
• To know their organization’s mission
• To know their role
• To know what is specifically expected of them
• To have the capacity, resources, and
environment which makes success possible
• To receive encouragement, constructive
feedback, and opportunities to develop and
improve
CAPA: Owning the Vision
At a planning meeting,
CAPA’s long term strategy was illustrated
by showing each branch as a sun on the
projection screen. Every employee was
given a pair of sunglasses and told
“The future is so bright, we can only look
at it with sunglasses.” No one laughed.
Staff have owned this vision and have
worked hard to make it happen.
~ CAPA Final Report, February 2004
Model of Human
Resource
Management
Model of Human Resource Management
Human Resource Management Model

Current Context (other MFI’s Strategies and MFI’s Culture: Mission
MFIs, gov’t laws, economy, Structure: Goals, and Vision, Informal
political climate, etc.) Organizational chart Procedures
Human Resource Functions
Plan for Future Recruitment and

Human Resource Selection
Needs Policies
Training and Salary, Benefits,

Development Bonus System
Performance
Management
Review & Evaluation of Human

Resource Activities
HRM Stakeholders
• Society
• Organization/Owners
• Employee
HRM and Society

• Respond to society’s needs and challenges
• Consider and manage social priorities
• Understand and adhere to laws
CAPA: Responding to Needs
“We were 14 people in the beginning. The

market was a mess, and the economy was
declining. There was no reason for us to
pursue this venture, other than to follow our
dreams to support small entrepreneurs in
Romania’s transition to a market economy.”
HRM and the MFI

• Increase organizational effectiveness
• Support achievement of organizational goals
• Appropriate to organizational size and needs
CAPA: Supporting the Goal
“When we developed the methodologies

and operations, we were always planning
for when we would have a great deal of
activity with many clients. We were
building for that one day we would
become a bank.”
HRM and the Employee

• Support the employee’s contribution to
the organization
CAPA: Environment for Growth
At CAPA, people are the most important

asset. An example of this is an administrator
hired in 1999. He came from a manual
labour background, and now he is working
toward a degree in economics. “I never
dreamed that I can do so many things. And
without CAPA this could not happen.”
~CAPA Final Report, February 2004
Important:
These three stakeholders are beacons that
help guide the strategies and day-to-day
activities of the HR department. Not every
HR decision affects the three stakeholders
every time or in the same degree …
Trade-offs occur!
Key Activities of Human Resources
• Human Resource Planning

• Human Resource Policies
• Salary and Benefit Administration
• Human Rights and Labour Laws
• Recruitment, Selection and Orientation
• Performance Management
• Training and Staff Development
• Communications and Counselling
Human Resource
Management
Structure
Human Resource Management Structure

• The responsibility for human resource
management activities rest with each MANAGER.
• If a MANAGER does not accept this responsibility

then HR activities will only partially get done.
• HR department provides strategies, systems, tools

and support to Managers to ensure effective staff
management!
Evolution of HRM
A. Start-up or 1- 20 staff
• HR functions are spread among employees
• Administration/Finance Department
manages salary and benefits, payroll, and
maintains employee files
• Executive Director is involved in all HR

functions (recruiting, firing, salary etc)
Evolution of HRM
B. 20 – 50 staff
• As an organization grows the complexity
and importance of HR increases
• Designated HR Administrator for HR

administrative functions
• Reports to Manager of Finance and

Administration or other senior level
manager
Evolution of HRM
C. More than 50 staff
• HR department with specialized functions
and departments
• HR Manager reports to Executive Director;

may participate in Senior Management
Team
• Average: 50 –100 employees per one

human resource staff
CAPA: Managed Growth
“CAPA has grown from one branch of 14
employees to a complex institution of 4
branches, multiple satellite offices and 48
employees. The foundation for this capacity
was built with external management
assistance, but in the last two years
Romanian management has growth with
achieved quality and efficiency.”
Organization of Human Resource Management Structure
Always remember:
Buy-in from Senior Management,

key stakeholders and the Board
is essential for the success of
Human Resources.
Human Resource Management:
Systems and Tools

• Human Resource Policies
• Recruitment and Selection
• Salary and Incentive Systems
• Staff Performance Management
Human
Resource
Policies
Human Resource Policies
Human Resource Policies?

HR policies are rules and procedures
designed to provide a clear structure for
Human Resource Management.
HR Policies Important?
• Consistency
• Fairness
• Efficiency
• Establishes rights/responsibilities of both
employees and the employer
• Documents these rights/responsibilities

• Legal compliance
HR Policy Challenges
• Time/money to create and administer
• Impersonal, regimented
• Focus on rights/entitlements
• Can’t cover every situation
CAPA: Little by Little
“Even if only a draft version is available…

since the first moment, the institution
should have at least a skeleton of a
procedures manual and HR manual. Little
by little, the team can build up these
manuals based on experience and
learnings from other institutions.”
What to Include in HR Policies

• Mission statement and organizational
background
• Purpose of the policy
• Scope of policy
• Effective date of policy
• Definitions
• Administration and policy updates
Table of Contents
Sample HR Policy
Human Resource
Policy Handbook
CAPA: Success is Staff
“The first, and foremost reason for CAPA’s

success is staff. All the best procedures,
policies, and methodologies will not be
hugely successful if the staff are not involved
in owning the mission of the institution.”
Always remember…
There are exceptions to every rule.
Recruitment
and
Selection
Recruitment and Selection
Recruitment and Selection?
• The search for qualified applicants

• The evaluation and decision of which candidate
is the best match with the job and organization
• The job offer to the final candidate
the Recruitment and Selection

Process?
• Establish Search Committee
• Define Needs: Task and Person
• Source Candidates
• Review Resumes
• Interview
• Test
• Check References
• Make A Decision
a Recruitment and Selection

Process important?
• Clearly defines the requirements necessary to fill the job
vacancy
• Provides tools to compare candidates effectively

• Reduces subjective judgments
• Ensures compliance with legal requirements
• Minimizes tendency to hire friends/family
• Avoids the cost of making a bad hiring decision
Table of Contents
Sample Recruitment Manual
Recruitment
Manual
CAPA: Importance of Fit
“It is natural that any organization that

hires people, fires people, too. People
need to be honest and competent. If a
person working for CAPA does not
respect the rules or does not fit in, it is
better to let that person go.”
Salary and
Incentive Systems
Salary and Incentive Systems
Salary and Incentive Systems?
Internal structures to help management

provide a fair compensation package
that motivates staff.

important?
• Internal equity
• External competitiveness
• Attract, retain and motivate employees
• Communication and transparency
Incentive Systems: Advantages

• Improve Productivity
• Encourage and reward specific performance
areas
• Increase remuneration opportunity for staff

• Offset financial risk (fixed costs) to institution
• Increase competitiveness of MFI
Successful Incentive Systems

• Incorporate and reflect the goals of the MFI
• Must be fair
• Include all staff members
• Are transparent and simple
• Are not less than 20% and not more than
70 % of total remuneration
• Are continually reviewed and updated

• Balance between the “individual and team”
CAPA: Part of the Whole
“CAPA’s progress to date is due to

capacity building, core values, and a
strong incentive program combined with
a performance appraisal program.”
~ CAPA Quarterly Report, April 2002
Non-Financial Incentives
• MFI’s mission
• Training opportunities
• Promotional opportunities
• Benefits (health, sabbatical)
• Achievement awards and recognition
• Good working environment
• Share options
Always remember…
Financial compensation is only
part of the reward employee
receive from the work
experience.
Staff
Performance
Management
Staff Performance Management
Staff Performance Management?

• Process for managers to communicate job
expectations and specific goals to employees
• System to monitor and evaluate the

employee’s performance in reaching those
goals.
the Staff Performance Management

Process?
1. Set individual
performance objectives at
the beginning of the year
3. Annual review
year end
2. Ongoing coaching and

feedback throughout the year
An organization can only reach its maximum potential if

each employee develops and achieves goals that support
personal and organizational success.
the Staff Performance Management

Process?
• Consistently and systematically supervising staff
• Promoting and supporting successful
performance, not just reprimanding and
correcting poor performance
• Building trust through one-on-one communication

• Including staff in planning and monitoring their
own work

Important?
Overall Organizational
Objectives
• Aligns individual
goals with the Regional and/or
MFI’s goals Divisional Objectives
Departmental or Team
Objectives
Individual Objectives

Important?
• Communicates general standards of

performance: valued knowledge, qualities
and skills
• Helps employees reach higher levels of

performance… increases productivity

Important?
• Provides a tool to address performance

problems
• Facilitates staff development and training

plans at both the individual and
organizational level
Table of Contents
Sample Performance Management
Process
Performance
Management
Process
A 100% retention rate may

not necessarily reflect
good HR practices.
CAPA: Continuous Improvement
“The performance management process

(PMP) that was implemented two years
ago had mixed reviews. With the
assistance of a consultant, CAPA staff
modified the process to fit their needs.”
~ HR Consultancy Report, January 2003
Always remember…
One of your most important

tasks is helping your staff
to be successful.
Human Resource
Management is an
ongoing process.
CAPA: HRM as Strategy
“CAPA management continues to update

policy procedures, internal controls
and make plans for Human Resource
development. These indicate a strategic
view from management – seeing ahead
and addressing potential areas
in a manner to prevent crisis,
rather than wait and adjust.”
~ CAPA Quarterly Report, September 2002
A final word…
Perhaps the best
Return On Investment
an organization will realize
is the investment in their
staff.

7 Annual Conference of Microfinance Institutions, Warsaw, Poland 27-29 May 2004

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7th Annual Conference of Microfinance Institutions, Warsaw, Poland; 27-29 May 2004

Managing for Success:

1. Understand the importance of effective

2. Recognize the primary HRM functions.

• Finance is essential, but it is only a tool in the

• Staffing is the major share of a MFI’s

• The success of an organization is

~ CAPA Final Report, February 2004

Human Resource Management Model

Human Resource Functions

Plan for Future Recruitment and

Training and Salary, Benefits,

Review & Evaluation of Human

HRM and Society

“We were 14 people in the beginning. The

~ CAPA Final Report, February 2004

HRM and the MFI

“When we developed the methodologies

~ CAPA Final Report, February 2004

HRM and the Employee

At CAPA, people are the most important

~CAPA Final Report, February 2004

Key Activities of Human Resources

• Human Resource Planning

Human Resource Management

• If a MANAGER does not accept this responsibility

• HR department provides strategies, systems, tools

• Executive Director is involved in all HR

• Designated HR Administrator for HR

• Reports to Manager of Finance and

• HR Manager reports to Executive Director;

• Average: 50 –100 employees per one

~ CAPA Final Report, February 2004

Buy-in from Senior Management,

Systems and Tools

Human Resource Policies?

• Documents these rights/responsibilities

“Even if only a draft version is available…

~ CAPA Final Report, February 2004

What to Include in HR Policies

“The first, and foremost reason for CAPA’s

~ CAPA Final Report, February 2004

There are exceptions to every rule.

Recruitment and Selection?

• The search for qualified applicants

• The job offer to the final candidate

the Recruitment and Selection

a Recruitment and Selection

• Provides tools to compare candidates effectively

“It is natural that any organization that

~ CAPA Final Report, February 2004

Salary and Incentive Systems?

Internal structures to help management

Salary and Incentive Systems

Incentive Systems: Advantages

• Increase remuneration opportunity for staff

Successful Incentive Systems

• Are continually reviewed and updated

“CAPA’s progress to date is due to

~ CAPA Quarterly Report, April 2002

Staff Performance Management?

• System to monitor and evaluate the

the Staff Performance Management