Prepared by: Arkadiusz Dardas, Chief Specialist at the Cooperative Banking Department 

Digital transition in the financial sector nowadays encompasses not only customer service and service sales but also – increasingly – human capital management. Cooperatives banks, being a major component of the banking system in Poland, are now facing challenges due to the implementation of modern digital HR solutions. The solutions are no longer just a development strategy but become one of the prerequisites for preserving competitiveness, improving operational efficiency and effective employer branding.

Despite real progress in digitalisation in the financial sector, the level of HR process digitalisation at cooperative banks remains uneven. Many solutions that those banks use in their human capital management are very different, in terms of methods, from the standards existing in large complex organisations. This is particularly evident in the automation of HR processes, the use of HR analytics or the implementation of advanced talent management systems.

Cooperative banking, based on the relational HR model and traditional organisational structures, is facing new challenges due to digital transition. The barriers emerge from both financial restrictions and mandatory legal rules or specific features of the ownership structures of those institutions. It is estimated that more than 70% of financial organisations worldwide have implemented at least one digital solution in HR management, but many Polish cooperative banks still remain only at the stage of initial, partial digitalisation of HR processes.

Major barriers that slow down the pace of digitalisation in HR management at cooperative banks include:

a) high implementation costs of new technologies,
b) inadequate level of digital competence of staff,
c) conservative organisational culture,
d) limited scale of business of some institutions.

Cooperative banks, as organisations that are deeply rooted in a local environment, attach great importance to employment stability and interpersonal relations. In practice this involves predominance of traditional HR models, which contributes to a slower pace of adaptation of digital tools. At the same time, the bank’s business – as in every organisation – is based on the performance of basic managerial functions, especially the organisational function. In this context, human resources should be seen at the organisation’s most valuable capital¹, and the method of using this capital is one of the key determinants of growth and efficiency².

As emphasised by M. Klimontowicz³, each staff member at a financial institution is a co-creator of its success. A high level of competence of teams and the management staff has a direct effect on the quality of services and the competitive position of the institution⁴. For this reason, it becomes vital to implement modern HR management strategies⁵ based on the concept of knowledge management⁶. An effective HR policy, based on the knowledge and experience of staff, contributes to higher satisfaction of staff, better quality of services, and an effective and sustainable achievement of the bank’s goals⁷. Banks, like other organisations, operate based on defined structural components. According to H. J. Leavitt’s model⁸ the basic components of every organisation include: people, structure, technologies, and tasks[CH1.1]. The components are closely interdependent: a change to any of them will trigger ripple effects across the other areas of the organisation’s operations. In practice, this means that the implementation of new HR technologies requires simultaneous changes in the organisational culture, management processes and competences of staff, especially managers.

In many cooperative banks, processes such as recruitment, onboarding, staff assessment, skills development or HR documentation management are still carried out in a traditional way – using paper workflows or distributed IT tools. Meanwhile, increasing regulatory requirements, demographic changes and escalating competition for qualified employees make further digitalisation in HR management an important component in building the organisational resilience of the banking sector.

What is gaining particular relevance now are solutions that enable:

a) electronic circulation of HR documents,
b) remote performance of training processes,
c) automation of administrative processes,
d) analysis of staff data to support management decisions,
e) development of digital competences among staff.

In practice, many cooperative banks are focusing on the digitalisation of administrative and HR processes. Much less development is happening in terms of analytical tools, talent management systems or AI-based solutions.

When analysing the digital transition process, one should distinguish the concepts of digitisation and digitalisation, which are used interchangeably in literature, even though they refer to different things. Digitisation means conversion of analogue data into digital form. An example in the HR area could be the transfer of personnel documentation from paper form into electronic databases.

Digitalisation is broader in meaning and refers to the use of digital technologies to transform the organisation’s operating model. It encompasses not only data conversion but also a change of business processes, governance methods and organisational relations. From this perspective, digital technologies are becoming a tool in building new organisational value and improving operational efficiency of institutions⁹.

One of major areas of digitalisation in HR management is recruitment. Applicant Tracking Systems (ATS) allow organisations to automate the analysis of candidates’ applications, speed up selection procedures and increase the accuracy of matching candidates’ competences with the requirements of positions. Solutions of this kind also support the automation of communication with candidates and improve their experience during recruitment.

The current main trends in modern HR management include:

a) the automation of HR and payroll processes,
b) the implementation of e-learning platforms,
c) the use of predictive analytics,
d) the development of talent management systems,

e) the use of artificial intelligence in personnel processes.

Digitalisation in HR management means using digital technologies to streamline HR processes, increase operational efficiency and improve the experience of staff and candidates. According to the relevant literature, digitalisation in HR management consists in replacing traditional management methods with solutions facilitating automation of processes, analysis of data, and customisation of human capital management tasks.

In practice, digitalisation in HR management involves transformation of areas such as:

a) recruitment and selection,
b) skill development,
c) work efficiency assessment,
d) remuneration policy,
e) internal communication,

f) staff document management.

Modern Human Resource Management (HRM) systems allow for, among others:

a) keeping electronic personnel files,
b) automatic calculation of salaries,
c) self-service for staff,
d) training and competence management,

e) monitoring HR indicators.

Another essential utility comes from Learning Management Systems (LMS), which enable performance of training tasks in digital form. These solutions enable personalised arrangement of learning pathways for staff, skill analysis and creation of training recommendations, using AI.

Along with the development of information and telecommunication technologies, the progressive computerisation of organisations’ information systems can be observed. Importantly, ‘information system’ is not a synonym for ‘IT system’. An information system covers a wider range of processes related to the gathering, processing and use of information in an organisation, while an IT system is a technological component of an information system.

Digital transition in HR management is also becoming the subject of intense scientific research. Analyses performed in the financial sector show that the implementation of digital solutions contributes to:

a) improved operational efficiency,
b) higher satisfaction levels among staff,
c) reduced administrative costs,
d) efficient choice-making,

e) better talent management.

HR analytics is becoming increasingly relevant: it enables data-driven decision-making. Analytical tools can be used to monitor performance indicators, predict staff turnover and analyse the level of team involvement.

Examples of using HR analytics in practice include:

a) predictive models for employee turnover,
b) organisational sentiment analysis,
c) optimisation of remuneration and benefit systems,

d) identification of skill gaps.

Digitalisation in HR management also affects organisational culture and work models. 

The key changes include:

a) development of remote and hybrid work modalities,
b) higher organisational flexibility,
c) more efficiency in internal communication,

d) more transparency in HR processes.

Despite many advantages, the implementation of digital solutions in the HR area also involves major challenges. What remains particularly visible is the resistance of some staff members to the changes and the necessity to constantly develop digital competences. Implementation of new technologies also requires appropriate financial investments and preparedness to function within a new operational model.

It is worthwhile to stress that digitalisation in HR management is not limited to implementation of IT systems. The key is to change the way the organisation is governed and to build a culture that is open to technologies and digital skill development. The effectiveness of new solutions depends, in fact, not only on the quality of the tools, but also on the level of their acceptance among all staff members, including managers.[CH7.1]

For cooperative banks, it is pivotal to maintain balance between the modernity and the relational nature of the institution’s operating model. HR process digitalisation should support staff and improve work organisation, rather than remove direct organisational relations, which represent a material value in cooperative banking.

Cybersecurity and protection of staff personal data are also gaining in prominence. Digital HR processes involve processing large amounts of sensitive data, which requires high standards of security, regulatory compliance and raising employees’ awareness of digital threats.

Yet, the development of remote and hybrid work modes forces the adaptation of HR processes to new organisational models. This applies to both internal communication and performance of training tasks, periodic assessment or recruitment. Modern technologies may offer the management staff with crucial support in this area.

In the long run, the level of digitalisation of HR processes may become one of critical determinants of cooperative banks’ competitiveness in the labour market. Younger generations of workers today expect modern working tools, quick access to information and flexible career opportunities. Institutions that will not be adapting their HR processes to these expectations may face difficulties in acquiring and maintaining talent.

Digitalisation in HR management also supports the achievement of strategic goals regarding operational efficiency and knowledge management inside an organisation. The use of data and analytical tools enables more effective planning of employment, forecasting competence needs and better management of staff development.

In the years to come, the level of digitalisation of HR processes will likely become one of the crucial measures of cooperative banks’ organisational maturity. Digital transition in the area of human capital management has ceased to be merely a technological project and is now being integrated into the strategic approach to developing an organisation, building operational security and strengthening  long-term stability of the banking sector.

The views expressed in the articles published on the UKNF’s Blog are the personal views of the authors and do not necessarily reflect the official position of Komisja Nadzoru Finansowego (KNF) or Urząd Komisji Nadzoru Finansowego (UKNF).

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¹ J.M. Moczydłowska, ‘EMPOWERMENT – nowe spojrzenie na aktywowanie potencjału ludzkiego organizacji, [EMPOWERMENT: a new perspective on the mobilisation of human potential at organisations]’, Zeszyty Naukowe Wyższej Szkoły Humanitas. Zarządzanie, 2014, No 1, p. 72.
² A. Grzybowska, ‘Kapitał ludzki w kontekście funkcjonowania banku [Human capital in the context of the functioning of a bank’, Optimum. Studia Ekonomiczne, 2012, No 1 (55), pp. 85–98.
³ M. Klimontowicz, Aktywa niematerialne jako źródło przewagi konkurencyjnej banku [Intangible assets as a source of bank’s competitive advantage], CeDeWu, Warszawa, 2013, pp. 99, 101.
⁴ Ibidem
⁵ M. Adamiec, B. Kożusznik, ‘Zarządzanie zasobami ludzkimi [Human resource management]’, in: Aktor – Kreator – Inspirator, Wydawnictwo ARKADE, Katowice, 2000.
⁶ M. Kłak, Zarządzanie wiedzą we współczesnym przedsiębiorstwie [Knowledge management in a modern enterprise], Publisher: Wydawnictwo Wyższej Szkoły Ekonomii i Prawa im. prof. Edwarda Lipińskiego w Kielcach. Kielce, 2010.
⁷ D. McNaughton, Banking Institutions in Developing Markets. Volume 1: Building Strong Management and Responding to Change.[CH8.1] Publisher: Key Text. Warsaw, 1995, p. 23; M. Klimontowicz, Aktywa niematerialne… [Intangible assets...], op. cit., pp. 95–104.
⁸ H. J. Leavitt, Applied Organizational Change in Industry. Structural, Technical and Human Approaches, W: W. W. Cooper, H.J. Leavitt, M. W. Shelly II (editor), New Perspectives in Organizational Research, John Wiley&Sons, New York 1964, p. 56; K. Krzakiewicz, S. Cyfert, Podstawy zarządzania organizacjami [Introduction to business management], Publisher: Wydawnictwo Uniwersytetu Ekonomicznego w Poznaniu, Poznań 2020, pp. 12–14; M. Grzyb, ‘Charakterystyka modelu Leavitta w kontekście funkcjonowania banków [Characteristics of the Leavitt’s model in the context of bank functioning]’, Management and Quality, 2022, volume 4, No 2, p. 178.
⁹ M. Sidor-Rządkowska, Ł. Sienkiewicz (2023). Cyfrowy HR. Organizacja w warunkach transformacji technologicznej [Digital HR management. Organisation at times of technological transformation], Warsaw, Wolters Kluwer Polska.