The Cobblers last, digital marketing and reward.

Introduction

  I was in a branch of Timpson recently where I noticed a cobblers last.  This is a rare sight.  I am old enough to remember when most shoe shops had them in the shop window; a bit like the three balls above a pawn brokers shop.  In reward we have a number of tools that go in and out of fashion like the cobblers last.

Recently I undertook a post graduate certificate in digital marketing with Google Squared in order to make sure that I was using the most up to date tools of the trade, particularly for reward communications.  I learnt a great deal about curation, the customer journey, the importance of content and the enormous power of digital communication in this world that has moved far beyond the technology of the cobblers last.    It also helped refresh my thinking of the roles of imagery, imagination, innovation and illustration in communication.

 

Reward’s digital cobblers last

There are a large number of tools available to reward professionals to help get the message across – particularly in a world very largely dominated by digital communication.  I have used You Tube videos to demonstrate total reward concepts, Podcasts to discuss the latest pay regulations (and the CIPD produced some very informative broadcasts).  And Twitter to publicise interesting reward web content.    Blogs, both written and video, are a very good way to publicise changes and new initiatives in reward.  The raw power of modern personal computers linked with cheap yet sophisticated software packages for producing excellent videos and technically proficient podcasts puts the creative process in the hands of most of us. 

 

A few months ago I contributed a chapter on risk and reward to a new HR eBook, edited by David D’Souza, an OD professional, called “Humane Resourced”.  This excellent collection of HR blogs stormed to the top of the HR best seller list at Amazon and was even a top ten selling business book on the same platform.  Such is the power of the new media that makes publishers, film makers and broadcasters of us all. 

 

Networking has been around since the days that humans learnt to communicate further than they could shout.  There are some excellent digital tools for networking such as Google Plus and LinkedIn.  These tools will not just allow you to communicate, but find like-minded people and relevant professional groups for you to meet and join.   There are communities of interests available on any subject; and if you cannot find one to fit your interests, set one up….  I have an interest (but little talent) in photography, largely in the niche field of police and military vehicles; yet my Flickr photography mini site has had over 130,000 views; such is the power of the digital.

 

Proper and appropriate use of social media and digital technology means that you can generate a consistent message, a new meme, or brand image to a diverse and large audience at little cost except the not inconsiderable time resource and mental commitment to the cause.

 

Corporate realities – the Empire strikes back

We all live in a corporate reality where blogs, videos, podcasts and the like are controlled by the marketing and PR departments who have a strong fear of brand contamination or social media embarrassment.    I have two responses to this; having a firm grasp of digital media tools will enable reward practitioners to go to the corporate gate keepers with ideas and imagination to kick start some new reward communications.  Second, and perhaps more open to debate, large organisations are, with a few noticeable exceptions, slow moving and not nimble in a fast moving social media world.  Perhaps, just perhaps, reward could help move the paradigm.

 

Alternatively you make think the entire subject is just a load of old cobblers lasts.  

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Rewarding Reward Podcast http://www.idavidson.podbean.com/

Ian Davidson Reward podcast

I have produced the fourth podcast in the series “Views over the City”  http://www.idavidson.podbean.com This podcast covers pay and reward issues on a global basis.  This podcast includes:

For more on Banking remuneration see: https://iandavidson.me/2013/06/12/rebuilding-trust-in-the-city-of-london/

“I was at a recent meeting in the City of London to launch the document “Focus on rebuilding trust in the City” a Chartered Institute of Personnel and Development (CIPD) survey of staff in financial services in the City of London on trust and their employment relationship”

For more on Executive pay https://iandavidson.me/2013/06/18/balance-of-power-executive-pay-and-shareholders/

“There is considerable controversy over levels of executive pay.  There are a multitude of stakeholders or would be stakeholders pugnaciously striving for influence.  Remuneration committees are supposed to control executive remuneration.  However, as the MM&K recent survey shows, FTSE CEO Remuneration increased, on average, by 10% in 2012.  Why are shareholders allowing this to happen?”

For more on strong analytics:

https://iandavidson.me/2013/05/30/strong-analytics-3/

“As a reward specialist I am asked questions like, what is our pay inflation going to be next year?  I used to go away, do research and say 2.4% – having used the historic average.  Of course it was never exactly 2.4% so my boss would turn round and say – “but Ian, you said it was going to be 2.4%, you’re fired”.  If asked the same question now, I respond with an answer; “there is a 50% probability that it will be 2.4%; but there is as 10% probability it could be 4%, so we should factor that in to our budget.”

My new reward podcast give a wide view over the reward landscape as well as a fascinating conversation with innovation guru and author Peter Cook.

http://www.idavidson.podbean.com

If you would like a guest blog post or to guest blog post on this influential reward blog please get in touch.

blog@mauritius.demon.co.uk

Rebuilding trust in the City of London

 

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Introduction

I was at a recent meeting in the City of London to launch the document “Focus on rebuilding trust in the City” a Chartered Institute of Personnel and Development (CIPD) survey of staff in financial services in the City of London on trust and their employment relationship.  (I tweeted from the meeting #rebuildtrust )  The keynote speakers to an invited audience of senior City HR people and journalists were:

 

It was an informative meeting presenting both the survey results and material on initiatives taking place to build trust after the calamities, errors, poor judgement and near criminal activity in the City over the last few years, which has badly eroded trust in what was once a gold standard for honesty and integrity.

Both Peter Cheese and Andrea Eccles gave particularly good presentations from different ends of the initiative spectrum.  Peter spoke on the big picture and in particular the role that HR has to play in leading the changes.  Andrea spoke of the very important key initiatives at grass roots level that City HR are taking, working with the Lord Mayor’s City Values forum.

The key themes during the meeting were:

Each of these themes is explored below.

Culture

Culture has been identified by the CIPD in earlier work as being fundamental to the required changes in the City.  The survey indicated clearly that the existing culture is a long way from being what is needed.  45% of the participants said their employer put profit before values.  Only 47% of staff saw customers as their key stakeholder.  As one of the speakers said, “What is required is a return to the core values of caring for customers and caring for employees”. 

One interesting take on the subject was the suggestion that financial services organisations need to focus more on recruiting “ethical” people.  My own experience, backed up by the survey results, is that a lot of people join financial services to make money.  In order to be seen as successful and to make the big bucks you need to be aggressive and egotistical; otherwise how would you make deals worth millions of pounds?  Unfortunately, aggression and egotism are not good indicators of ethical behaviour.  This goes to the heart of the matter; it is very difficult to make lots of money in an ethical and customer focused way.  The demands on one hand, by shareholders and analyst to make shed loads of money on one hand, and on the other, regulators, politicians (especially the European Union) and media on the other trying to stop profitable activity.

The role of HR in leading the changes was highlighted several times.  Again the paradox between this approach and the role of HR in supporting the business to carry out its activities was evident.  A good example was a comment about the morality of HR being involved in compromise agreements in financial services.  It was alleged that these compromise agreements can (as in the case of the NHS) be used to gag whistle blowers.  The reality is that compromise agreements are an essential part of the HR toolkit.  It allows for the amicable separation between employer and employee, normally on a “no fault” basis.  In the fast paced and rapidly changing environment like financial services, there will be differences of opinion, strategy and personality clashes.  Compromise agreements lead to a civilised and low cost way of managing these situations.  The suggestion that HR should stop using them is really throwing the baby out with the bathwater.  HR has far more important tasks in providing the frameworks for culture change than worrying about compromise agreements.  It is getting tied up in the detail rather than working on the big strategic picture that often leads to HR being perceived as a barrier rather than an enabler.

There was some good news.  RBS, the largely state owned bank in the UK, was singled out for praise for its work in introducing a much more ethical and customer centred approach – something of which I have some personal experience. (And would like to have more if Rory Tapner is reading this).  Sadly examples of good practice are few and far between. 

Values

Part of the discussion on culture must include values.  City HR is leading a lot of work on the development of toolkits to help.  The presentation by Simon Thompson went in to detail on the work of the Institute of Bankers on professional standards and many big employers in the City have signed up to these standards and the educational and training frameworks that support these approaches. 

Professionalism

This was a key theme in the presentations.  Raising the level of professionalism is very important in defeating the current broken culture.  What do I mean by broken culture?  It is the behaviours that allowed the manipulation of LIBOR rates for profit; that mis-sold products including PPI and, perhaps, some derivative products for gain rather than the good of the customer.

The survey showed that only 30% of staff are in professional bodies with standards.

To work in HR in the City you need to be CIPD qualified, yet to work as a banker you need no qualifications at all

That quote summed up for me the entire issue around professionalism.  One can argue about professionalism and its meaning.  It does normally provide a framework of acceptable (and unacceptable) behaviour that can form the basis of reward on one hand and disciplinary action on the other.

There was a comment that there are a vast number of codes of practice, regulations, laws, (domestic and foreign) and guidance – some of which is in direct contradiction.  True, but no one said it was going to be easy.

I must again praise the work of City HR in providing structure and good practice for professionals in the City.  This slow drip drip drip of information, tools and frameworks are, over the long term, likely to prove to be a bigger boost to professionalism than grand culture change initiatives by those embedded in the current City ideology. 

Leadership

One of the more disappointing results from the survey was that 41% of the participants said that there was one rule for senior management and another of other staff.   Given that nearly all the speakers emphasized the key role of senior management and CEO’s in leading the culture change; there is still a big mountain to be climbed.  The fact that only 36% of “other ranks” are aware of their organisations values indicate that organisational leadership has a large communications issue on their hands; and what is leadership if it is not communication of the vision.

Risk Management

A key theme during the presentation and during the Q&A session that followed was risk management.  It is clear that the framework to support culture changes needs good human capital measures and strong analytics.  Why?  Two major reasons were discussed.  First, it is difficult to discuss change if it cannot be properly measured.  Second, in the world of financial services number crunching and risk analysis are part of the bread and butter of daily activity.  To have credibility, the change activity, particularly if led by HR, needs to adopt this approach.  When I worked in investment banking I sat on the Operational Risk committee and that experience led directly to my design and implementation of a reward risk framework.     Exactly the same type of approach can be used when thinking about risk and culture in the financial services environment.  It is this sort of fundamental change in thinking that is going to provide the scaffold for the success of the work in culture change.  HR does, on occasion, shy away from people metrics; yet they are an essential framework for designing interventions and supporting our businesses. 

Role of HR

There was a lot of discussion on the role of HR.  Here I must depart from the gospel according to the panel speakers.  There are two places the pressure for change will come; the first is from senior management.  There is a bit of an issue with this one.  Senior management got where they are by supporting and encouraging the status quo.  Much of this has been made in management literature; the ideology of management has support for the status quo deeply imbedded within it.  Asking senior management to support massive cultural change may be like expecting turkeys to vote for Christmas….  The second place is from the employees within the organisation.    It is possible, as history has shown, for small but articulate groups of people to push for change from within the organisation.  Given the above mentioned ideology that is a possibility but not a strong probability. 

If culture change becomes another HR intervention it has the possibility to be marginalised and not become part of mainstream business thinking.  The survey showed that a number of culture change initiatives have not worked so far.  Only 17% of participants saw the culture change in their organisation as being very effective.

Clearly HR does have a role in providing the toolkits, interventions, training and development necessary to carry out the culture change; but leading it is not, in my view, going to happen and if it does it is more likely to lead to a marginalisation of the change on the business agenda as so often happens with HR led initiatives.

HR does have a key role in modelling and supporting behavioural change as well as ensuring that the new generation of bankers coming through at least start with an ethical mind-set. 

Reward issues

Reward is at the heart both of what is “bad” in the City and what will help drive change.  But,

  • 73% of staff think that some people in financial services are overpaid
  • 67% say there is secrecy around pay for senior mangers
  • Only 36% see reward as being “fair”.

As reward professionals we have to stand up and be counted.  Discussion needs to take place on what is “fair” pay.  Pay systems have to be somewhat more open so there is a greater understanding of what people are being paid for,

Key tasks include:

  • Better advocacy of pay levels and differentials in organisations
  • Development of incentives to encourage professionalism
  • Development of reward and performance management that encourage thinking about how an objective is reached as well as the measure of the objective.
  • Being as open as is appropriate to stakeholders on our reward approaches and outcomes
  • Being an advocate both internally and externally for the reward systems and outcomes.
  • To bring measured, data led, rational debate to politicians, the media and other commentators to prevent or at least moderate the near hysteria around financial services and senior executive pay

Conclusion

The CIPD report is a timely looking glass in to the views of those who work in financial services as to issues of trust and reward.  It is well written and influential; I would recommend it to you. (Disclosure note; I undertook some analysis of the raw data in the report for the CIPD).  Both the CIPD and CityHR are clearly thought leaders in this field and their activities are to be applauded.  The report is an important part and input to the on-going discussion on this subject.

The report is also timely.  The results from the Banking Standards Inquiry by the UK’s House of Commons are due to be produced very soon.  Unfortunately it may be argued by some that it has been badly tainted even before release because:

  • The standards of politicians in the UK are at an all-time low and lecturing other people on ethics and standards is at best the pot calling the kettle black and at worst rank hypocrisy.
  • A lack of understanding of the world and work of financial services by MP’s who have seldom operated in the real world and those who have did so via the playing fields of Eaton (an elite fee paying school in England  attended by many of the UK cabinet and their advisors).
  • A large part of the problems with the collapse of trust in financial services is due to inaction by politicians and regulators who believed that light touch and not actually understanding what was going on was a good way to regulate a very complex, risky, global business.
  • A potential perception that there is a lot of band-standing and jealousy going on at Westminster village that does not aid credibility

I hope I am wrong and wait to read the report with interest.  However, the weight of history is against them; since when have politicians made anything better?

Failure is not an option unless we do want the politicians to bring their incredibly costly sledge hammers to smash some nuts that, it turns out on closer inspection, actually have nothing to do with the problem.

It is only by hard work based on sound data such as the CIPD report; and not taking some moral high ground and seeking to apportion blame; that will make the very necessary changes.  HR and reward in particular do have key roles to play.  At the end of the day there must be the drive and will in the Board room to make the required culture change a reality. 

#reward #rebuildtrust #CityHR #RBS #trust #financialservices #cipd #cityoflondon #stronganalytics #rewardmanagement #risk #riskinhr #hrblogs

 

 

 

Strong analytics

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Introduction

The UK’s CIPD has published its annual reward survey. The CIPD reward survey; http://www.cipd.co.uk/hr-resources/survey-reports/reward-management-2013.aspx  

Our findings show organisations responding to multiple contextual factors in their reward management choices.  Economic conditions continue to drive pay decisions for many. In the private sector, market competition and employee value are also key drivers, while in the public sector
more traditional forms of reward management prevail.”

The drivers of reward continue to be to attract talent and reward productive behavior.  I would argue that retention is less important that it used to be due to the lose labour market. The survey also looks at employee benefits; these can both support the social culture of a business and provide valuable, cost effective non cash engagement tools.

One key aspect that Charles Cotton, the CIPD Reward and Performance advisor, notes is that the reward profession is not particularly advanced in analyzing information in a way that is useful for the business.  Cotton goes on to note that

 

“Few employers are able to calculate the cost of their compensation and benefit programs, let alone be able to express this as a proportion of revenue, profit or economic value added.”

   

 

 

 

 

Strong Analytics

Reward and HR professionals have a number of tools to add value to the business case:

  • Strong analytics
  • Employee segmentation
  • Data visualisation

Our colleagues in Finance use KPI’s and key ratios to illustrate financial outcomes and we must do the same in reward. We must understand:

  • Key business segments and drivers
  • The timeframe – immediate, medium or long term, for the business strategies in those key segments
  • Key performers in those segments and responsible for those drivers

This information can drive our reward strategy.  By presenting appropriate strong analytics through data visualisation on the basis of appropriate segmentation gives a very powerful tool kit for us to work with and make recommendations to line management.

Asking the right questions

Any good analytical work and modelling starts with asking the right questions.  There is no point providing large amounts of statistical data and analysis without have a clear view of the questions we are using the data to answer.  This is a big issue with big data.  We have the data; but what do we use it to prove or disprove? 

Reward interventions must “do” something; be it reduce turnover, encourage managers to align with the interests of shareholders, or produce specific results.  Reward professionals must be able to show the outcomes of their products and programs.   For example, we must be able to show the relationship between our variable pay spend and the revenue generation, the return on capital employer (RoCE) and other key financial indicators.

Disclosure requirements

The “Say on Pay” requirements in the US and the regulations in the UK require the production of charts showing, for example, growth in relative total shareholder return against executive compensation.  We must extent this type of analysis through the organisation to show the stakeholders in the business; be they employees, executives, shareholders and regulators, that our reward program is progressive, does not reward failure and, as far as is possible, is “fair”.

I have argued in other blog posts that we are seeing the erosion of privacy around pay.  Within five years we will be reporting, as a minimum, on employees by bands of pay and more likely very detailed pay statistics on every employee in our organisation in the interests of “fairness” and transparency.

Strong Analytics II

There is little excuse for not providing strong analytics with appropriate data visualisation. Microsoft Excel provides some very good analytical and graphing tools and using the PowerPivot addin allows for the analysis of very large data sets and even the development of simple data cubes.  That is before we get in to many of the off-the-shelf compensation management tools and packages.

Here is an example of strong analytics presented through visualisation I produced from some sample data:

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The use of Microsoft Excel’s conditional formatting provides some intuitive “at a glance” analysis of bonus levels by department.  I thought about the type of questions the CEO might want to ask about the data and provided the answers in graphical and colour formats.

This second example shows a very simple graph of correlation between TSR and total remuneration for a FTSE 100 Executive.  It immediately shows the linkage between pay and performance; although TSR needs to be measured over a much longer time period, or alternatively normalised to remove the effects of the economic cycle, to provide a better analytic.

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Conclusion

As the CIPD survey noted, reward is, as always, becoming more complicated.  At the same time we are seeing far more scrutiny of pay by the largely uninformed politicians, regulators, shareholder advocacy groups and the media.  We must arm ourselves for this intrusion by preparing our toolkit of strong analytics to defend our positions and explain our philosophy.

 

CIPD Hackathon – Hacking HR to Build an Adaptability Advantage; A reward perspective

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Introduction

The UK’s HR professional body, the CIPD has recently set up a “Hackathon” to look at how HR can build an adaptability advantage.  A good idea with an interesting approach.  There appears to be limited consideration of how reward will support and enhance the approaches.  Reward has powerful implements in its tool kit to support change.   So I set my mind to an analytical structure to think about building adaptability advantage.

Wisdom of crowds – a challenge

I am a great believer in the wisdom of crowds.  Therefore I throw a challenge out to all those interested in reward, change, innovation and HR to generate ideas as to how the reward toolkit can be used to support adaptability advantage.

The reward blockers

Reward is largely designed to support existing behaviour.  So, in some organisations, it is used to support the status quo.  Rewarding behaviour that supports the organisation’s ideology and putting reward power in the hands of managers who have an understandable vested interested in supporting the status quo.  The challenge is to design an analytical reward framework that supports creative destruction, moving on from the status quo to a new organisational state and ideology.

A suggested framework – resource based strategy

I have used the resource based strategy framework as a starting place.  I know this may be consider a little old fashioned, but it works for me and if you have a better structure I would be very pleased to hear about it!  Using the resource based strategy approach we look at:

  • Resources
  • Capabilities
  • Competencies
  • Value Chain

that support adaptability and how we can use reward to support these factors.

Resources

What are the resources that support adaptability – how do we identify and cluster them?  Clearly people are the key.  But, what sort of people?  One could argue that it is the mavericks and free thinkers that lead the charge on adaptability.  Yet these types of people do not always fit or engage well with the corporate environment.  How do we reward the disrupters in our organisation without descending in to some Faustian pit of chaos?

Capabilities

How do we build organisational and personal capability to support adaptability?  What would the reward structure supporting such capability building look like?  Would we know it if we saw it, how would me measure it?  Organisational learning and routines would be key in building these capabilities – but it has always been an interesting question in the management of knowledge as to how we measure and reward organisational learning?  (Even ignoring the concept that organisations do not “learn” people do the learning).

To sustain competitive advantage our capabilities in adaptability must be hard to imitate – otherwise everyone will copy us and probability at a lower cost.    So we have to reward not only specific capabilities but those that are hard to imitate.  They may be hard to imitate because they are specific to our corporate environment – but to gain competitive advantage they must be so much more than just organisationally or sector specific.

Competencies

The competencies we need should flow out of the capabilities – or perhaps not?  What specific, observable, rewardable competencies are required and with what and how are we rewarding them?

Value chain

What are the internal and external value chains using our unique resources and capabilities that lead to adaptability advantage?  We must look to our clusters of resources and capabilities and how these are combined to give our competitive advantage.  What reward tools do we use to strengthen our value chains and the activities that support them; perhaps across enterprises and organisations, turning rigid barriers porous?

Conclusion

There are far too many questions and too few answers in this blog.  If the reward perspective; which is incredibility powerful in encouraging behaviour change can be harnessed, using the wisdom of crowds, to the task of “Hacking HR to Build an Adaptability Advantage” we will not only add enormous value to the process; but we will be key in ensuring its enduring success.  Over to you O wise crowds.

Banking Standards Inquiry

I had coffee with a former investment banking colleague last week. She complained to me that she had lost a lucrative deal because by the time she had got the compliance department to agree to the deal another bank had beaten her to the sale. I thought about this discussion when I read the CIPD’s excellent submission to the Parliamentary Commission on Banking Standards.
The CIPD submission makes a cogent argument that culture change is a necessity and standards of behaviour are key in tacking the current perceived malaise in banking across the globe. The problem from my viewpoint is that the nature of financial systems makes culture change in banking almost impossible. The reality of what happens “on the ground” makes change very difficult and a very long term project.
The arguments supporting this thesis are first that the entire financial services structure is built on the profit imperative. Investors giving money to fund managers expect above average returns. The fund managers and shareholders expect above average returns to reward their investment. That puts pressure on Boards to make above average profit; this pressure is then passed down the line to the coal face where revenue earning staff are under great pressure to produce profits both to keep their jobs and to make a bonus. It is difficult to see a situation where fund managers and shareholders say “don’t make me so much money” the obvious result of reducing risk.
The second argument, which is also reflected in the CIPD submission, is the issue of the labour market. High earning revenue makers such as traders as not a common species. The best beasts in the financial services jungle require high levels of self-belief, education, skills and intuition. Those with this skill set are far ahead of the herd in achievement of revenue generation and thus ruthlessly hunted by banks seeking to boost profits. The way this hunting is carried out is by financial incentive supported by a “self-reinforcing monolithic working culture”. Status is measured first by employer and second by earnings. So working for Goldman Sacs is seen as being of higher status than working for UBS for example. But money is the big differentiator; – bigger bonuses = higher status.
Proof for the above assertions can be seen just by reading the newspapers. Despite years of the banking crisis we are almost weekly hit by stories of alleged wrongdoing from the top of organisations – the recent disclosures around alleged LIBOR fixing; to the alleged wrongdoings of individual traders. It could be argued that due to the factors above, nothing very much has really changed in the culture and behaviours of those who lead, manage and work at the coal face of our financial services.
The CIPD submission to the Banking Standards Inquiry is an excellent document that highlights the key issues. The unfortunate truth is that diagnosing the ills is unlikely to lead to any early cure. An impression not aided by the body holding the inquiry being portrayed by the media as lacking the very culture and behaviour that it seeks to impose (if that were possible) on the banking sector. Pots and kettles anyone?