The Royal Bank of Scotland Group measures engagement to help demonstrate the link between its people strategy and business performance
Since the late 1990s, the Royal Bank of Scotland Group has transformed itself from a medium-sized UK bank with 35,000 employees, through organic growth and a series of acquisitions. The Group now includes NatWest, Coutts & Co, Churchill and Direct Line insurance in the United Kingdom, Citizens in the US, and Ulster Bank.
In order to meet the new challenges posed by this growth strategy, the human resources (HR) function has similarly transformed itself from transactional administration into a business-focused and value-driven business partner. It uses centres of excellence, business-facing human resources teams and shared services.
Now, in 2008, the group has one of the most advanced HR management support systems in the world. The group's human capital strategy has been implemented since 2000 and seeks to quantitatively determine how the group's many employment practices have improved, and weakened, overall business performance. Specifically, the human capital strategy assesses how certain people measures (such as turnover rates and managerial effectiveness) affect business measures such as sales and customer service.
At the heart of its human capital strategy is the human capital toolkit, a suite of online tools available to HR managers via the group's intranet site. The toolkit is fed with data from a global data warehouse and a group-wide annual survey of employees compiled into a set of categories and benchmarked against other large, diversified financial services firms. In addition, managers can perform a large number of tasks through the toolkit, such as commissioning surveys and individual research tailored specifically to their business, analysing branch-level employee data, or reviewing best practices worldwide.
The core principle of the human capital strategy is a belief in the power of accurately measured people data in demonstrating how HR initiatives affect bottom line financial metrics.
The aggregation of this people data and subsequent analysis, with the help of the toolkit, has allowed the group to come to precise conclusions about the financial effects of employee behaviour. For example, an analysis of the group's human capital data indicated that a staff member's "break-even" point in terms of profitability was ten months. In order to determine this, the group calculated the overall cost of recruitment and onboarding and set it off against income. Because of the costs associated with hiring new employees, such as recruiting and training them, the effects of employee turnover, particularly for those who left in the first year, were quantified to the degree that the group viewed a 1% reduction in overall turnover as £30 million in savings annually. Similarly, the group predicted that a 0.1% reduction in absences would save £3 million annually.
In 2000, the group developed a new metric - employee engagement - and determined that more engaged employees produced superior business results. Engagement is primarily manifested in three ways: first, what employees say, for example, do they consistently speak positively about the group to colleagues, potential employees and customers?; secondly, increased retention, so do they have an intense desire to be a member of RBS?; and finally, whether or not they exert extra effort, also known as discretionary effort, in relation to behaviour that contributes to the group's success.
Making better use of all the data at the company's disposal and then digging deeper to identify links and correlations creates a "line of sight" between HR intervention and bottom-line profitability. The human capital model is influencing the future performance of the organisation. It allows the group to demonstrate a link between its people strategy, particularly the prime role of engagement, and enhanced business performance.
Greig Aitken is group head of employee engagement at the Royal Bank of Scotland Group
Best practice tips
- Get the basics right, including staff turnover, absence, and customer satisfaction.
