The Royal Bank of Scotland Group - the Human Capital Strategy

The Royal Bank of Scotland Group:  The Human Capital Strategy

Royal Bank of Scotland Group (The Group)

Year 2008

•  One of the largest banks in  the world by operating profit
• One of the most advanced human resource management support systems in the world. → GRUP’S HUMAN CAPITAL STRATEGY

GRUP’S HUMAN CAPITAL STRATEGY

• Quantitatively determine how the Group’s many employment practices improved and weakened overall business performance.
• How certain people measures (e.g. Turnover rates) affected business measures (e.g. Sales).
• The heart of the human capital strategy: Human Capital Toolkit.

BACKGROUND

• RBS dated by 1727.
• RBS and National Commercial Bank of Scotland merged (Scotland’s largest bank).
• 1980s, diversification of the businesses (e.g. car insurance company → Direct Line, enter the US banking market, online banking, joint venture with Tesco).
•  1990s, “Project Columbus”, sought to rejuvenate its retail banking division via superior service delivered through customer segmentation (new technology)

• It increased revenue, lowering its cost-income ratio (used to quantitatively determine how efficiently management was performing).

• 2000, new CEO who required his 10-member executive team to meet every weekday morning (“the meeting is without prior agreed-upon agenda”)

THE NATWEST ACQUISITION (2000)

Included in the Group’s offer document was a point-by-point outline of how integration would be managed, including potential cost saving, income gains, job losses, and delivery dates for new initiative.

The Group’s brands and businesses were organized into customer-facing units focused solely on growing revenues. 

As a result of the acquisition, creation of “manufactoring” to handle certain shared services etc.  and focused on efficiency-improving measures.

They introduced their human capital strategy progressively across the business, and supported their business leaders by getting them the right information to make informed people (evidence-based). It meant being able to measure the impact of the initiatives and to act quickly on information from employee surveys.

2007, The Group’s CEO “Integration is a core competency of ours”. 

THE GROUP IN 2008

Since 2000 the Group had nearly quadrupled in size.

Structurally, the Group was organized into four main operations division:

• Global Markets
• Region markets
• RBS Insurance
• Group manufacturing (IT).
• Other Group Functions: Support and advice the operating divisions.

Nowadays all banks offer similar products, so it is important customer service (RBS is focusing on this). This made HR management a strategic imperative.

HUMAN CAPITAL STRATEGY

 In 2008, a core focus of the RBS HR function was to help business leaders utilize key people measures (engagement, turnover, leadership effectiveness). The human capital strategy enabled the provision of this data with business data (customer service..).

INITIAL HUMAN CAPITAL MEASURES

1997-2000, Strong evidence-based HR function framed around consultancy model. Also, an annual HR customer survey and bi-annual activity review were introduced to ensure that HR function was focused on delivering the business’ priorities.  

TURNOVER AND ABSENCES

Years ago, short-term tenure (less than 12 months) was high in some of their business. Consequently, they intense focused on short-term tenure turnover, and absence. So, there was a saving in recruitment costs.

According to survey data:

• Good managers could only influence engagement to the extent that their span of control allowed.  
• Rewards programs, affected the whole organization but have less of an impact on engagement that leadership effectiveness.

EMPLOYEE ENGAGEMENT

2000, new human capital strategy, new metric → employee engagement ; “Say, Stay, Strive”.

• What employee said; increased retention (desire to be a member of RBS); and whether or not they exerted extra effort towards behavior that contributed to the Group’s success.

More engagement, superior business results.

BUILDING HUMAN CAPITAL BUY-IN

They created indices based on leadership effectiveness and linked to customer services, achievement of sales targets, staff absences and turnover.