CHAPTER ONE:

 INTRODUCTION

1.1    Background of the Study                

Employee is a paid worker in an organization under certain terms and conditions of service. Based on contractual obligation, the employee is expected to demonstrate his/her willingness to give time, energy and work hard to receive pay. The point of emphasis is that to what extent employee commitment enhances organizational effectiveness in banking industry. Reichers (1985) remarked that no organization can perform at its peak level unless each employee is committed towards the organization’s goal and work as an effective member of the team. Commitment is a process of identification with the goals of an organization.         

An organization is effective when set goals are achieved. Drucker (1977) explained that effectiveness is the extent to which the desired result is realized. It is possible to improve the organizational effectiveness through operational procedures, which are always mediated by the interactions of employees. Thus, the organization can never escape employees’ commitment. The fact is that organizational effectiveness is critical to the success of any business. In order to achieve increased and sustainable business results, organizations need to develop a strategy and engage employees usefully. The same is applicable to organizations that render banking services such as Commercial, Investment, Merchant, Mortgage banks and so forth.

Bank is an organization that provides various financial services of keeping or lending money to customers. Kock and Macdonald (2003:6) emphasized that “The average consumer needs a checking account, ATM services, small savings account, some brokerage services, an auto loan, insurance, and a home mortgage. Almost every financial firm can offer most of these services and the competition is fierce. Banks are finding it difficult to compete in the market for these products because the intense competition is driving the price for services to the bare minimum.” In view of intense competition and high technological development in the banking industry, employee commitment to achieve bank organizational goals is paramount.

To have impact on performance management, it is important to understand employees’ perception of effective management, since the process requires high involvement of employees’ commitment. Banks’ ability to perform efficiently means to obtain accurate information concerning its customers’ financial prospects, write effective contracts and to enforce them. This depends in part on the property rights, legal, regulatory, and contracting environments in which banks operate. Such an environment includes accounting practices, chartering rules, government regulations, and the market conditions. Differences in these features across political jurisdictions can lead to differences in the efficiency of banks across jurisdictions (Demirgüç-Kunt, Kane, and Laeven, 2007).