Management
5.2 The Degree of Differentiation in Human Resources Management
Paola Schwizer
processes (Bank A, Bank B), which proves the fact that changes in operat- ing mechanisms are successive to changes in the structures. In the case of
"pure" divisional banks, human resources management is a task of the di- vision director, who is supported by professionals. The division is not autonomous in the field of promotions: everything is decided at head office level. This allows exchanges of personnel between the divisions.
Corporate bankers are former branch managers characterized by long experience in corporate relationship management and with a personal tal- ent for the corporate segment.
When looking at remuneration structures, we can observe significant heterogeneity in the basis (bank, unit, branch office performance, other pa- rameters, etc.) as well as in the methods of calculation of variable remu- nerations (at team level, individually and branch office level, etc.) as shown in Table 5.1. The research considers only the banks with relevant and significant information.
Table 5.1. Human resources management in corporate banking: features and de- gree of differentiation
Bank Specific Elements
Corporate Banker's remuneration
A CB's remuneration is variable under 50%; it can be attained in the medium term (3 years) on the basis of a scoring scheme related to profits generated (af- ter absorbed capital costs) and customer fidelity.
B Variable rate accounts for 5-10%.
C Fixed rate accounts for 85-90 % of remuneration D Fixed rate accounts for 85-90 % of remuneration
E Specific tools for CBs management are being defined. Since 2001 an incentive scheme has been introduced for managers (formerly only directors).
H Fixed rate accounts for 85-90 % of remuneration W Fixed rate accounts for 85 % of remuneration X Fixed rate accounts for 95 % of remuneration
Variable rate definition parameters
A Targets are defined at the beginning of the year (including quality parameters).
Branch managers distribute them among corporate bankers. They are shared and approved by HR managers and directors.
B Intermediation margin on branch/regional office portfolio (branch office in the start up phase); campaign bonus (not only monetary) starting when budget is met. This mechanism is quite similar in different divisions.
C Budget objectives
D The variable part is linked to corporate division.
E Incentive scheme is linked to profitability parameters. It is distributed among teams according to division objectives. A trade union agreement "forbids" any evaluation, distribution of objectives and bonus calculation on an individual basis. The same agreement urges for mcentiye standardization.
JBank Specific Elements
F Business area performance. Bonus is first of all given to team (bank general principle). The person is given a bonus if the bank, business unit or corporate branch have reached their objectives. Individual performance is evaluated on the basis of team performance.
H Division commercial budget and bank total income. No specific calculation criteria applied to corporate units.
W Division commercial budget and bank total income (substantially similar to that of other bank activities)
X Division commercial budget and bank total income (substantially similar to that of other bank activities
Other incentive factors A Career
B Career; non-monetary rewards for campaigns C None
D Being considered
E Career. Other forms of incentives (benefits) but limited to retail and private banking sectors
H None W Benefit
X Different types of benefits
Career paths of Corporate Bankers
A Possible developments involve the role of branch manager or private banker (not vice versa). Two particular growth models: young talents, as described by the different banks of the group, and key-roles (about 200 resources). Data- base used for professional development of different banks.
B Corporate banker is a transitional role toward branch manager or product spe- cialist. Career profiles are quite different in corporate and retail banking.
C Poor chances of vertical development, mainly toward branch or area manager.
D Career profile is now vertically defined in terms of "corporate banker assis- tant-corporate banker-branch manager" relation. Inter-division transfers to re- tail or large corporate are not excluded.
E Careers follow the organizational layers of roles in the commercial network.
The role of corporate banker has medium/long term permanence.
F The CB may become corporate branch manager or assume division head of- fice roles.
H Recent introduction of the position and career profile has not been defined yet.
Corporate banker assistant has direct access to corporate banker position and corporate banker to that of branch manager.
W Corporate banker represents the top of the career. There is a horizontal transfer between business areas/departments in business unit or head office.
X Process tends to be vertical toward branch network or head office.
Corporate bankers' career profiles have not been always defined: this creates uncertainty about motivation sources, where variable remuneration rates are limited to about 10% of the total amount and career prospects are not certain.
Evaluation systems have shown very different models of competence analysis that are used for the selection of corporate bankers and human re- sources for specialized branch offices (Table 5.2). Banks F and B show a high degree of differentiation even in the performance evaluation system.
Evaluation systems of potential are on average poorly developed.
Customer and staff satisfaction evaluation systems are not systemized and almost negligible. Only Bank W considers customer satisfaction evaluation of crucial importance and intends to combine it with remunera- tion.
Table 5.2. Corporate banker evaluation systems in the panel of Italian banks Human Resources
Evaluation Models
Banks with Corporate
Banker
Degree of differentiation
Performance Bank A None. Model is common to other posi- evaluation tions, except for some specific objectives.
MBO-link.
Bank B Evaluation based on performance, knowl- edge and behavior based on corporate di- vision input.
Bank C None. Model is common to other posi- tions, except for some specific objectives Bank E They are working on a new performance
evaluation system on line with Tableau de Bord (key performance indicators).
Bank F Performance indicators are different for corporate and retail units. The corporate division rewards profitability, develop- ment, efficiency and innovation (capacity to set sophisticated products) on a yearly basis and with different weighting de- pending on the markets (new, traditional, etc.) decided by the division director. The reward is given to the team and to the branch as a team. This is different from financial advisors incentive schemes which are designed on an individual ba- sis.
Bank D An integrated evaluation model based on perfom
Human Resources Evaluation Models
Banks with Corporate
Banker
Degree of differentiation
Potentials evaluation
Competence evaluation
being studied.
Bank H Yes, based on budget achievement. It is not differentiated.
Bank A Self-evaluation model of potentials and attitudes. Parameters are differentiated according to position. Manager assesses self-evaluation and a development path is commonly established.
Bank B Used for access to position of corporate banker (from assistant position) and branch manager (from corporate banker) and to higher positions.
BankB System is connected with performance evaluation. High differentiation.
Bank C High differentiation.
BankE Competence model already defined and used for skill assessment (from positions to role behavior). At the moment 150 people from Lombardy have been evalu- ated. In the course of 2004 evaluation will be extended to whole Group. Creation of professional families to be used as a base for differentiation in human resources policies.
Bank F High differentiation. Necessary compe- tencies are established by division direc- tor.
Bank A Ad hoc created model with external com- panies but not applied systematically. Fu- ture constant evaluation through CRM portal.
Bank E Interviews with those who had interacted with potential corporate bankers for evaluation of potential. After initial ex- perimentation, final clients evaluation.
Primary survey through call center to evaluate client interest in relationship ap- proach.
Bank A Only interviews with head-up. Climate analysis with external companies.
Bank B Only interviews with head-up. Future, climate analysis (now union obstacles).
Customer satisfaction evaluation
Corporate banker satisfaction
evaluation