Three Centuries of Innovation | Article

Bank board tableThe Royal Bank of Scotland has shown a willingness to be innovative throughout its storied history that began on May 31, 1727. And in the last year of the 20th century, the bank, along with its human resources (HR) department continues to clear a path for others in the European banking industry to follow.

In 1728 the Royal Bank of Scotland, now one of the leading financial service groups in the United Kingdom, began its innovative ways by introducing the “cash accompt”, which allowed a merchant in good standing to draw on the bank without cash on deposit or collateral security. In the 1920s the bank introduced the savings account to attract small deposits and increase its customers. The “personal loan” was introduced in the 1950s and in 1972 the bank became the first British clearing bank to introduce a house purchase loan scheme for customers. In the following year it became the first Scottish bank to put all of its branches totally “on-line” for the processing of its accounting work. And on August 1 the HR department began outsourcing some of its functions to Hewitt, a global management-consulting firm that specializes in HR, continuing its trailblazing ways.

“We are going through an overall process at the Royal Bank of really clarifying what we should be spending time and effort doing,” says Tony Williams, head of HR services at the Royal Bank. “One of the things that we have decided strategically, is to move away from spending a lot of our time on what we call transactional activity. And we are looking to build much more value-added content to the human resources function’s role.”

One Step at a Time

The bank, which has more than 22,000 employees at 650 branches, is working the transition of HR functions in phases, which are likely to be spread out over two years, Williams says. The first item that Hewitt provided the bank was record keeping and member services for the Royal Bank’s flexible benefits plan. The member services include a call center that serves as a clearinghouse for queries on policies and procedures. In addition, some of the technology surrounding the call center provides reports to the bank as to what policies are getting the most queries. This allows the bank the opportunity to improve communications concerning certain policies.

Since August, the bank has added a tax-free pay plan and a share save plan to the mix, as well. And set to go up on July 1 are some HR related services associated with the distribution of induction booklets, management of the maternity leave process, and management of questionnaires and exit interviews for those who resign.

“We are trying to do this in a very planned and rigorous fashion,” Williams says. What we don’t want to do is move everything through very quickly.

There are a couple of reasons why they are progressing slowly, according to Williams. First, like many companies, a lot of time, effort and money is being consumed by approaching year 2000 issues. And second, implementing tasks in a phased way allows the Royal Bank to review Hewitt’s services at the end of each step, ensuring that it is going in the direction that the bank intends.

The flexible benefits plan, the cornerstone of the services provided to the Royal Bank, is a cafeteria plan by nature. There is a menu of benefit options from which employees can choose from depending on their individual situations. The flex plans that are implemented in the United Kingdom aren’t as oriented towards health schemes as they are in the United States because the United Kingdom has national health care. But the menu of benefits overall is much more broad based than in the United States. There are car lease options, grocery vouchers and child care vouchers that aren’t used by most U.S. companies, plus options that are used, like supplemental health care coverage, life insurance, etc. The plan introduces choice to employees and allows them to spend their additional benefits money that the organization provides them in ways that they see fit, Williams says.

Not Getting Complacent

Williams says that employee response to the new package of benefits has been broadly positive. “We would not be complacent enough to say that we have it absolutely perfect,” he says. “I think that what we have learned post-implementation is that the flexible benefits could have been even more broad than it already is. There are other things that we could have offered and different levels of those benefits that we might have offered.”

In response to this Hewitt and the Royal Bank have introduced a broader range of retail vouchers and a much broader health care plan this year. But Williams makes it clear that the outsourcing process is not something that a company can implement and get immediate benefits from. A company may not notice any significant breakthroughs in overall effectiveness for the first six months to one year.

“I think that you have to enter into this with a medium- or long-term view to really see the benefits of it, but the move to outsourcing is definitely something that I think progressive HR departments will move towards,” he says.

Financial institutions in the UK are going through quite a high degree of consideration of its future strategically, he says. There is a lot of pressure in the industry, and retention and recruitment of employees is probably one of its biggest issues.

“From an executive’s perspective, one who is leading a business in a very competitive market place, you have to make offers to employees that are as attractive as possible, and that doesn’t necessarily mean the highest cash offer,” he says. “It means can we put a proposition together that attracts the best candidates. And that is what we are striving for. One of the ways that we can do that is through a competitive and quality benefits program.”

Lessons From the Outsourcing Primer:

  • The Royal Bank of Scotland has been a trailblazer for other banks to follow for close to three centuries.
  • The Royal Bank began outsourcing some functions of the human resources (HR) department because of a decision to spend time less time on transactional activity.
  • The Royal Bank is also outsourcing to add value to an employee’s package of benefits.
  • Overall, response has been broadly positive, but the Royal Bank will continue to seek employee opinions to improve the services.
  • A competitive and quality benefits program will help with recruitment and retention.


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