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1 Copyright © Resolve 2004 Resolve Group HUMAN RESOURCES BENCHMARKING IN THE BANKING SECTOR Lindsay...
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Transcript of 1 Copyright © Resolve 2004 Resolve Group HUMAN RESOURCES BENCHMARKING IN THE BANKING SECTOR Lindsay...
1Copyright © Resolve 2004
ResolveGroup
HUMAN RESOURCES BENCHMARKING IN THE BANKING SECTOR
Lindsay FalkovExecutive Director: Resolve Group
2Copyright © Resolve 2004
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Outline of Presentation
Introduction
Methodology
Benchmarking results
Main conclusions
Introduction
Methodology
Benchmarking results
Main conclusions
3Copyright © Resolve 2004
ResolveGroup
Outline of Presentation
Introduction
Methodology
Benchmarking results
Main conclusions
Introduction
Methodology
Benchmarking results
Main conclusions
4Copyright © Resolve 2004
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Introduction
The purpose of the exercise was to strengthen data driven HR strategies and business alignment in the banking sector
Quantitative and qualitative data and benchmarking
Data issues:
Certain data were not sufficiently robust to use
General concerns regarding the data
Aggregate data skewed the results and limited analysis
Agreed that a good first round baseline is now in place
Focus Groups:
Encouraged dialogue on people measurement
Focused attention on internal benchmarking & measurement systems, and
Addressed the application of benchmarking results
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Outline of Presentation
Introduction
Methodology
Benchmarking results
Main conclusions
Introduction
Methodology
Benchmarking results
Main conclusions
6Copyright © Resolve 2004
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Saratoga human capital benchmarking measures key human resource management practices
CompareCompare: Set performance standards for human capital management. What have others achieved?
UnderstandUnderstand current HR performance & its impact on organisational performance. What are others doing?
Strategically alignStrategically align HR interventions with organisational objectives
Saratoga human capital benchmarking measures key human resource management practices
CompareCompare: Set performance standards for human capital management. What have others achieved?
UnderstandUnderstand current HR performance & its impact on organisational performance. What are others doing?
Strategically alignStrategically align HR interventions with organisational objectives
Methodology Why Saratoga?
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Largest database of HC metrics in the world representing over 20 million employees
Represented across Europe and the United Kingdom, the United States, Brazil, Mexico, Argentina and the Southern African Development Community
Standard methodology applied worldwide, guaranteeing
Validity and integrity of data Comparison of like with like
Private, public and parastatals
Largest database of HC metrics in the world representing over 20 million employees
Represented across Europe and the United Kingdom, the United States, Brazil, Mexico, Argentina and the Southern African Development Community
Standard methodology applied worldwide, guaranteeing
Validity and integrity of data Comparison of like with like
Private, public and parastatals
Globally AppliedGlobally AppliedGlobally AppliedGlobally Applied
Saratoga Institute and Dr Jac Fitz Enz ‘founder of human performance benchmarking and assessment’
Preeminent provider of human capital measurement and research in the world
20 years of longitudinal data collected
Comprises 7 measurement categories:Organisational Effectiveness Remuneration, Compensation & Benefits Recruitment Absence and Retention Training and Development Structure of the HR Function Occupational Health and Safety
Saratoga Institute and Dr Jac Fitz Enz ‘founder of human performance benchmarking and assessment’
Preeminent provider of human capital measurement and research in the world
20 years of longitudinal data collected
Comprises 7 measurement categories:Organisational Effectiveness Remuneration, Compensation & Benefits Recruitment Absence and Retention Training and Development Structure of the HR Function Occupational Health and Safety
Established CredibilityEstablished CredibilityEstablished CredibilityEstablished Credibility
MethodologyWhy Saratoga?
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MethodologyWhy a Bank Sector Seta study?
Removed the risk associated with a piecemeal approach
Ensured local & international comparisons
Allowed for more targeted measurement
Facilitated sector-wide analysis of results and implications
Addressed contextual factors such as:Employment equity and scarce skills
Location with Bank Seta assured individual anonymity
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MethodologyResearch Focus
Sample consisted of the four largest banks
Sector compared with European & US benchmarks
Individual banks compared with sector & international benchmarks
Benchmarking supported by qualitative research
Group level data collected for the 2003 financial year
Sector reports available to all participants & results presented in consolidated form only
Banks receive own reports
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MethodologyReports
Sector Report Human capital scorecards
Comparative analysis of SA & international bank sectors
Diagnosis of gaps & good practice analysis
Individual Bank Reports Human capital scorecards
Comparative analysis of individual bank, SA & international banking sectors
Diagnosis of gaps & good practice analysis
11Copyright © Resolve 2004
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Methodology
The benchmarking project process
Scorecard Scorecard productioproductio
n & n & verificatioverificatio
nn
Data Data collectiocollectio
nn
Gap Gap analysis analysis
&&ddiagnostiiagnosti
cc
Final Final ReportReport
Continuous Continuous ImprovementImprovement
Agree Agree basket basket
of of measurmeasur
eses
Focus Focus GroupGroup
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Outline of Presentation
Introduction
Methodology
Benchmarking results
Main conclusions
Introduction
Methodology
Benchmarking results
Main conclusions
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Main Findings
The SA banking sector’s per capita financial performance was relatively weak, while
The sector’s revenue and profit return on remuneration was comparatively high
The retail cost-to-income ratio was average, while the wholesale ratios were good on average
Average remuneration was comparatively low
Investment in training was comparatively good, though below average in relation to the management and professionals cohort
Incentive pay levels were on a par with peers
There was a strong focus on internal recruitment. One in four employees in the sector were affected, compared with an external recruitment rate of 12%
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Main Findings
Resignation rates were low, but for management and professionals they were still double the European rate
Around one in every five employees resigning were in their first year of service, while one in every 2½ had a tenure of between 0 and 3 years
Absenteeism was very low
Time-to-fill and acceptance rate data were not available from SA sector
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The Executive ScorecardLeveraging Human Capital Performance
Headline People MeasuresHeadline People Measures
HR DeliverablesHR Deliverables
Income per FTE
Income per FTE
Net operating costs per FTE
Net operating costs per FTE Profit per FTEProfit per FTE
Human Investment
Ratio
Human Investment
Ratio
Wealth Created per
FTE
Wealth Created per
FTE
ProductivityProductivity Value CreationValue Creation HR EfficiencyHR Efficiency
Remuneration / Revenue
True Labour Costs
Remuneration. / Costs
Average Remuneration
Outsource Rate
Training hours per FTE
Performance pay / Rem.
Resignation rate
Recruitment & promotion rates
HR Costs / Total Costs
FTE / HR FTE
HR Professionalism
Acceptance Rate & Time to fill
Absence rate
Demographic Representation
What
you have
What
you want
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Benchmarking Results
Executive Scorecard
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Benchmarking Results
Executive Scorecard
Headline MeasuresHeadline Measures
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Headline Measures
Average Revenue, Cost and Profit
1,293,106
1,680,1101,760,589
1,136,675
1,367,834
1,155,925
139,571
388,139
573,616
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
SArevenue
Europerevenue
USrevenue
SA cost Europecost
US cost SA profit Europeprofit
US profit
Av. Revenue per FTE Av. Cost per FTE Av. Profit per FTE
Ran
ds
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Headline MeasuresNet Income and Net Operating Costs per FTE
593,447
968,195
404,182
538,920
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
SA income Europe income SA costs Europe costs
Net Income per FTE Net operating cost/FTE
RA
ND
S
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Headline MeasuresAverage Cost-to-Income Ratios
67%
58% 59%
67%
87%
46%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
SA Retail UK Chile US Brazil Best inWholesale
Cost-to-Income Ratio
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Headline MeasuresHuman Investment Ratio
2.19
2.86
2.42
2.622.46
3.17
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
Mean 75th
SA Europe USRevenue – non-wage costsFTEs X average rem.
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Benchmarking Results
Executive Scorecard
ProductivityProductivity Measures Measures
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Productivity MeasuresAverage Remuneration by broad occupational
category
134,598
285,973
76,708
287,424
414,241
146,045
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
All employees Mgmt & Prof Non-Mgmt
Ran
ds
SA Europe
47%
70%
53%
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Productivity Measures Remuneration to Revenue & Cost Ratios
10.8%
20.5%
24.2%
12.5%
18%
29.8%
36.7%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
SA Europe US SA SA TP Europe US
Rem/Revenue Rem/Costs
% o
f Rev
enu
e an
d C
ost
Rem + outsource costs total costs
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Benchmarking Results
Executive Scorecard
Value Creation Measures
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33
38
24
36
24
2829
32
0
5
10
15
20
25
30
35
40
All employees 75th All Mgmt & Prof Non-Mgmt
SA Europe
Value Creation MeasuresTraining Hours per FTE
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Value Creation Measures Performance Pay to Compensation Ratio
13% 13%
25%
0%
5%
10%
15%
20%
25%
30%
Mean 90th
Performance pay as % compensation
SA Europe
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Value Creation Measures Resignation rates
10.9%
8.8%
11.7%11.7%
3.8%
20.3%
17.8%
9.90%
21.90%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
All employees Mgmt & Prof Non-Mgmt
SA Europe US
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Value Creation Measures Resignations by length of service
0%
5%
10%
15%
20%
25%
30%
35%
40%
0 - 1 years 1 - 3 years 3 - 5 years 5 - 10 years 10+ years
SA Europe US
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Value Creation Measures
Absence rate: The SA sector average rate was 1% compared with 3.6% in the European
sector
Time-to-Fill: The European and US mean scores were 40 and 32 The European and US 25th percentile scores were 22 and 25
Acceptance rate: The average acceptance rate the European sector was 92%
Cost per hire: SA average was R4,782, European average was 13,432 and the US
average was R11,516
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Benchmarking Results
Executive Scorecard
HR Efficiency Measures
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HR Efficiency
The SA Banking sector: had an HR professional complement of 51%, which is just below the
European average of 54%,
had a slightly lower average HR remuneration of R251,518 that is 88% of the European average but less than two thirds of the US rate,
had a higher average HR capacity of 75 FTEs per HR FTE compared to 84 in the US and 118 in Europe, but the SA sector tends to outsource more of its HR than European banks
had marginally lower HR costs than its peers in Europe and US, HR costs as a proportion of total costs equal to 0.5% compared with 0.5% and 0.75%, and HR costs per FTE of R7,360 compared with R8,676 and R7,734.
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Benchmarking Results
Management & professional Scorecard
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High-end skills performance
Management and professionals in the SA sector constituted ¼ of all employees compared with over 40% in Europe & the US
The average wage for this cohort was 70% of their European & US peers
They received 3 days training per FTE compared with 3.6 days in Europe
70% of the cohort had access to at least one training intervention in 2003,
There was a strong focus on internal recruitment, 23% of headcount, compared with an external recruitment rate of 10%
There was a net outflow of this cohort of 1% compared with a 5% increase in Europe
There is a healthy spread of youth & maturity in the tenure of executives in the sector – 29% between 0 and 3 years and 71% above 3 years
Absenteeism amongst this cohort was 1%
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Management & professional resignations
8.8%
3.8%
9.9%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
SA Europe US
SA Europe US
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Management & professional resignations by length of service
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
0-1 years 1-3 years 3-5 years 5-10 years 10+ years
SA Europe US
1 in 3
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Benchmarking Results
Training & Development Scorecard
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Training and development performance
SA sector’s training was on average more efficient than Europe but less so than the US, i.e. less spend for more output at less cost & with a lower capacity:
SA sector’s training spend of 2.8% purchased 4 days training per FTE & covered 73% of the workforce at a cost of R2,864 per FTE, with a training capacity of 252 FTEs per training function FTE
The European sector’s training spend of 2.6% purchased 3 days training per FTE & covered 67% of the workforce at a cost of R5,864 per FTE, with a training capacity of 306 FTEs per training function FTE
The US sector’s training spend of 1.9% purchased 5 days training per FTE at an average cost of R3,771 per FTE, with a training capacity of 247 FTEs per training function FTE
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Training and Development ScorecardAverage training hours per FTE by broad
occupational category
33
24
36
24
2932
41
0
5
10
15
20
25
30
35
40
45
All employees Mgmt & Prof Non-mgmt
SA Europe US
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Benchmarking Results
Equity Scorecard
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Employment Equity Performance
The banking sector’s workforce was 50% Black, one fifth African, and two thirds Female
According to the Saratoga benchmarking data the sector’s profile improved during 2003
The resignation rates for Black employees were just below the average for all employees, while the White employee rate was above average
One in four African and Indian employees resigning had a tenure of less than one year and 1 in 2 had a tenure of between 0 and three years
Training for African employees in 2003 was marginally below that of other groups in the sector
The average remuneration of African and Coloured employees was 50% and of Indian employees 68%, of the average White cohort wage. The Female cohort wage rate was 56% of the Male wage.
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Equity ScorecardCohort Stability: Cohort Recruitment and
Terminations
16%14%
16%
10%
14%13%
11%
14%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
African Coloured Indian White
External recruitment Total terminations
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Equity ScorecardCohort Flows
Proportional Effects Cohort Effects
Recruitment Terminations
African = 28% African = 21% +2.0%
Coloured = 20% Coloured = 16% +1.0%
Indian = 15% Indian = 11% +4.5%
White = 36%
SA
Banking
Sector
White = 51% -4.0%
100% 100%
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Equity ScorecardCohort Resignation Rates
10.9
10.3
10.6
9.7
11.5
8.5
9
9.5
10
10.5
11
11.5
12
All employees African Coloured Indian White
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Equity ScorecardCohort Resignations by length of service
0
5
10
15
20
25
30
African Coloured Indian White all employees
0-1 years 1-3 years 3-5 years 5-10 years 10+ years
1 in 2
1 in 2
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Equity ScorecardTraining hours and Learning coverage by race
32.3
34.0
35.0
34.2
74.3%
73.5%
70.0%
72.8%
30.5
31.0
31.5
32.0
32.5
33.0
33.5
34.0
34.5
35.0
35.5
African Coloured Indian White
67.0%
68.0%
69.0%
70.0%
71.0%
72.0%
73.0%
74.0%
75.0%
Training Hours Learning Coverage
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Equity ScorecardAverage remuneration by Race and Gender
R 85,768
R 86,700
R 117,339
R 173,004
R 187,303
R 105,000
R 0 R 20,000 R 40,000 R 60,000 R 80,000 R100,000
R120,000
R140,000
R160,000
R180,000
R200,000
African
Coloured
Indian
White
Male
Female
50%
68%
56%
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Agenda
Introduction
Methodology
Benchmarking results
Main conclusions
Introduction
Methodology
Benchmarking results
Main conclusions
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Main Conclusions
The results are largely related to retail banking
Grow revenue per capita and focus on higher margin activities
Increasing revenue is needed to sustain good revenue and profit return on remuneration
Continue good cost management, but reduce unit costs by raising the efficiencies of of IT platforms and core processes
There is still room for improving the resignation rate of the management and professional cohort
The tenure of resignations, especially amongst Black employees needs attention
The focus on internal recruitment should continue
Time to fill and acceptance rate data needs to be collected
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Main Conclusions
Training investment, outputs and efficiencies compare well with peers in Europe and the US, though there is a need to increase training for African employees in the sector
Race and gender remuneration disparities will need to be addressed through progression and external recruitment strategies into higher occupational brackets
The flow of employees in and out the sector, by levels / occupational categories, needs to monitored for equity and FSC purposes
The sector’s HR functions require regular review to be sure they have the capacity and skill-sets to respond to ever increasing and new demands
Interestingly, the SA sector appears to outsource more of its HR service than its European peers
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Lessons
Adequate time is needed for data collection and verification
Focus Groups to verify and engage data essential
Setting the baseline was difficult compared with future exercises, which will also compare and contrast external and internal longitudinal benchmark data
Future rounds must disaggregate – retail and wholesale and micro-lending sectors
Important missing data must be added next round
Workplace skills plan data, equity data and Saratoga data must be aligned to respond to the employment equity, skills development and human resources elements of the Financial Services Charter