Editor’s Note: Banking Exchange thanks Crowe Horwath’s authors for this seven-part series and urges readers to post their own thoughts for the year in the comment section at the end of this article.
One of the challenges financial institutions face in the age of Big Data is how to quickly sort through vast amounts of customer and market data to discern the few pieces of critical information that are needed to make a decision. Human Resource departments face a comparable challenge as they analyze a growing pool of data about employment trends and concerns in an effort to devise more effective ways to attract, hire, motivate, and retain a talented workforce.
Take, for example, the annual Crowe Horwath LLP Financial Institutions Compensation and Benefits Survey, subject of this series. The 2013 survey responses by themselves offer a wide variety of interesting insights into human resource practices in U.S. financial institutions. But the real value of the research is achieved when banks use the survey results to improve the effectiveness of their employment practices.
This article, the conclusion of a seven-part series on the 2013 study, examines what the survey results tell us about the top human resource issues banks can expect to encounter in 2014 and beyond, and how they can begin to apply the findings in their own institutions.
Employee turnover: the next critical concern?
One of the most fundamental human resource metrics—a measure that always merits close attention—is employee turnover. As reported in the first article in this series, the survey indicates that turnover levels have begun climbing over the past few years, after declining significantly during the recession.
This trend could be attributed in part to a general sense among employees that the industry is recovering and there is less risk in pursuing new opportunities. In the longer term, however, the trend also could suggest that the retention power of traditional pay and benefits programs is not as strong as it used to be.
The idea that conventional compensation approaches alone might no longer be adequate is reinforced by industry experience. Quite often, institutions that are widely cited on lists of “best places to work” or “most desirable employers” maintain pay scales that are actually relatively moderate—sometimes even below average.
Beyond pay: total rewards
In many cases, institutions that rank highest in employee satisfaction and retention have made a conscious choice to pursue a “total rewards” approach, diverting a portion of their human resource budgets to relatively low-cost but high-profile rewards. Examples include formal initiatives, such as on-site child care and organized employee retreats, as well as small, impromptu touches such as occasionally ordering in lunch or arranging an after-work get-together.
Such efforts offer visible evidence of an institution’s interest in employee comfort, welfare, and work-life balance—and build loyalty and teamwork at the same time. The critical questions, of course, are how much of the budget to divert to such efforts and what types of programs to offer.
Here again, research, when applied thoughtfully, can point the way. Just as compensation surveys provide valuable external intelligence, employee surveys and questionnaires can provide essential internal intelligence to help management decide which benefits would be most appreciated and most cost-effective.
The key is to sift through the growing collection of external and internal data points to identify the “critical few” differentiating factors among the “trivial many” observations. With thoughtful analysis, organizations can identify employment practices that would actively support their culture rather than merely offering salary and benefits packages that match those offered by other institutions.
Measuring human capital management effectiveness
In the same way that research helps identify potential employee retention and motivational tools, carefully crafted research also can help measure and evaluate their effectiveness. Research that focuses on the employee population as an asset, rather than a cost, can be particularly useful.
The fifth article in this series explained that traditional human resource metrics—such as head count, absenteeism, and turnover—focus on the costs involved in recruiting, training, and managing the bank’s workforce.
Human capital metrics, on the other hand, measure the value that this workforce adds to the organization.
One particularly revealing metric is a calculation known as human capital return on investment (HCROI). HCROI is computed by first determining the additional profit an institution generates from its operations, over and above an agreed-upon minimum return it could expect from a conventional investment of capital. This added value is then divided by the total investment in personnel expenses. The latter includes compensation, recruitment, training and development, and all employee welfare programs.
When tracked consistently over time, the HCROI measure can help management quantify the value that is being added by its various performance incentives, employee training, management development programs, and other human capital initiatives.
As financial institutions address the evolving priorities and issues reflected in the compensation and benefits survey, HCROI and similar human capital metrics can help them evaluate the effectiveness of their existing initiatives and make a valid business case for implementing useful new tools and practices.
Be part of future research
Every year Crowe Horwath LLP surveys financial institutions throughout the United States about compensation trends, salary and bonus benchmarks, benefits, incentives, director compensation, and other human resource practices. The 2014 survey will be conducted this spring.
The survey is distributed through state banking organizations in a number of states and directly to individual financial institutions in others. If your organization is not already among the hundreds of annual survey participants, please contact your state banking organization, or email [email protected] for more information on how you can be part of this important research.
Editor’s Note: Bankers will also want to check out ABA’s Compensation and Benefits Survey. Read a summary from Banking Exchange’s “Bank Notes” section here. Contact Mike Mazur, senior manager, ABA Benchmarking Survey Research Group.
- Sterling Partners with Google Pay to Expand Digital Banking
- Fidelity D&D Bancorp to Acquire Landmark in $43.4M Deal
- BNY Mellon Enters Digital Assets Arena as Interest Grows
- Fed’s Quarles says stress testing innovations helped steer banks through Covid-19 crisis
- Wells Fargo sells $600bn fund arm to private equity firms