The two main findings of an HR study carried out at small and medium-sized financial institutions in Germany, Austria, and Switzerland were (a) that it is extremely difficult for small financial institutions to solve personnel problems on their own and (b) that top quality sets banks apart from average service providers. The study was the work of zeb/business school, a Steinbeis Transfer Institute at Steinbeis University Berlin (SHB), in collaboration with the consulting company zeb.
The study involved 832 company directors, managers, and HR specialists at 527 financial institutions. It found that HR work at small and medium- sized banks is caught “between a rock and a hard place”: personnel costs are rising, fewer and fewer people are working in sales, and – more than anything – corporate banking needs to grow. Capacities in the HR department have slumped 30% in the last four years, HR development costs have risen 20%, and the demands placed on HR departments have intensified severely. Despite the lower headcount, HR managers are now expected to provide more professional support, recruit new corporate client consultants from empty pools of applicants, while still lowering HR costs in the long term. Industry associations have been demanding stronger sales departments for years – they should account for a good 60% of employees. In 2009, just under 50% of employees worked in sales; now only 43% do. According to the survey respondents, the lower headcount in personnel is unavoidable. Around 50% of respondents believe that they can reduce HR costs as required by simply not replacing people when they leave, although 16% stated that there could be job losses. However, a major drawback with losing people through “natural fluctuation” is that the average age of staff rises and there are no new up-and-coming replacements. To cover the future need for sales people through home-grown replacements, the number of trainees and people retained in sales would have to rise by one third. In reality, trainee numbers are stagnating.
Small and medium-sized banks are poorly equipped to win the battle for the best terms and conditions, but they can win the battle for customers. This will require a reorientation in sales, away from the focus on selling and advising people mainly on which product they need, to focusing on the frequency and quality of customer contacts, with clear task and quality goals. This entails a fundamental change in target-setting and incentive schemes, as well as staff management and development in sales.
The extent to which banking depends on personnel is reflected by the correlation between quality standards and financial indicators. Measuring the quality of HR managers according to benchmarks of the European Foundation for Quality Management (EFQM), the top 25% are above average in terms of costs and revenues: 96% of the quality of HR management is dictated by the cost of HR; 63% of the time it is down to the cost-to-income ratio (CIR); 55% of quality relates to net profits (after tax). But this does not necessarily mean that financially successfully banks are good in terms of HR management. “The primary hallmarks of good HR management are strong competences in change management and close support for managers,” explains the Steinbeis expert, Prof. Dr. Joachim P. Hasebrook, summarizing the results of the study.