The Use And Aims Of Managing Human Capital Business Essay

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"The Royal bank of Scotland (RBS) has built up a powerful reputation for its sophisticated use of employee attitude data to build human capital. The RBS Group has over 140000 staff based in 30 countries. Its brands include NatWest, Direct Line, Tesco Personal Finance, Coutts and Ulster Bank. In an organisation of its size, understanding the effectiveness of its people strategy and employee proposition is a strategic imperative. RBS has developed a human capital strategy that provides its business leaders with a detailed understanding of how effective the group is at attracting, engaging and retaining the best people and how its people strategies drives business performance" (Holbeche, 2009).

Chapter 1: Research of Staff Recruitment, Training, Motivation and Reward Systems

1.1 Recruitment:

RBS is interested in attracting and hiring the very best people in the market. RBS is committed to providing the applicants with a candidate experience that is vigorous, apparent and gives them the power to make choices (

A two way process

RBS wants to make sure the recruitment process works for the person, as well as for the Group. Applicants selection experience will vary based on the role you have applied for but will typically include the following stages:

Application stage

Whether the applicants apply directly to the Group through its careers website or through its staff referral scheme, RBS will ask the applicants for some background information - this typically involves completing an application form or submitting a CV/resume.

The recruitment team will let the person know what to expect next, share information about what it's like to work here and answer any questions regarding the applicants' query.

For some roles, the applicants may also have an initial phone interview. This helps authority assess their skills, background and experience so that the team can take the decision and the selected candidate will be invited for next stage of the hiring process. Phone interviews usually take about 30 to 40 minutes (

Interview stage

Interviews are usually conducted face-to-face in our offices with one of the recruiters or a line manager.

Further selection stages

The next stages will vary based on the role the applicants have applied for. In some cases a face to face interview will be the final stage in the process (

Making the offer

Assuming everything has gone well for both of the authority and the candidates; RBS will make them an offer. This is a very important part of the overall process. (

1.2 Training:

The management of RBS believes that regular training and development helps the Bank's human resource in acquiring professional skills and proficiency that in turn gives RBS a sustainable edge over their peer banks in the today's competitive business environment. Partial learning for all is therefore one of the priority areas at RBS ( The objectives of training activities are to keep RBS' employees abreast of latest professional knowledge and skills in all areas of banking and reinforce a passion for the highest quality of customer service at all levels (Tanwani & Imran 2009). One training course (of a minimum duration of one full day) is a mandatory to all employ in a calendar year. Branches, Area Offices and Head Office Divisions/Departments are to send their nominations for training courses before two weeks to the start of a training course ( Employees can also take the initiative and get themselves nominated through their supervising officers for training courses relevant to their needs (Tanwani & Imran 2009).

The RBS has the most modern state-of-the-art training facilities at its Training & Development Center (TDC) and a committed training team to look after most of the training needs of its employees (

The group recruits fresh MBAs batches and other post graduates through a competitive process and offers them widespread three months training, at the end of which they are posted to various branches and offices of the Bank (Tanwani & Imran 2009). Management trainees are further required to go through on the job training through a structured rotation program ( The Bank also recruits fresh graduates as Operation Officers, Cash Officers and Customer Service Officers through a competitive process for induction into mainstream general banking operations (Tanwani & Imran 2009). The duration of the training program in these positions is four to six weeks and frequency of the batches depends upon staffing requirements of the Bank.Alternatively, external training consultants or can be invited to conduct training programs for RBS employees whenever deemed necessary (

1.3 Motivation

"Frederick Hertzberg (1959), carried out a large-scale survey into motivation in American industry. The results of his survey led him to develop a 'two-factor' theory of motivation.

Firstly, he established that if an employee's basic needs (such as a suitable working environment and a basic rate of pay) were not met, then this creates a source of dissatisfaction. Hertzberg termed these 'hygiene factors'. On the other hand, the presence of less tangible factors, such as the provision of challenging work and recognition for doing well, can create or increase work motivation. Hertzberg termed these 'motivators' ( RBS has put in place several of Hertzberg's 'motivators':

• employees get recognition for good work

• they have a collective sense of achievement when the whole business does well

• they gain extra responsibility and advancement through regular performance reviews

• when RBS people do well in their work, the company rewards them (

The theory of Abraham H. Maslow (1943) on staff motivation is also evident at RBS. Maslow referred to a 'Hierarchy of Needs' which is usually drawn as a pyramid. According to Maslow, the most basic needs on this hierarchy had to be satisfied before workers could look to the next level. Basic physical needs were things like shelter, food, warmth and bodily functions. Next, people had to feel safe in their environment ( RBS provides these basic needs wherever it creates jobs. Maslow's higher levels of need are less obvious and less easy to describe but of great importance. Social needs refer to the fact that we want to feel part of something we share in. RBS creates the opportunity for its community of employees worldwide to share in its common goals and vision for the group. It does this by rewarding the people who contribute to its success through their commitment and hard work (

The next level - 'esteem' - refers to our need to feel valued, that what we do matters. The RBS mindset is that employees can 'make it happen' for themselves. It provides opportunities for all employees through promotion or training and then recognises their achievements ( Through this RBS employees can improve their self-esteem. At the very top of Maslow's hierarchy is our human need for 'self actualisation'. This means we work hard in order to be as good as we possibly can be. RBS meets this by offering recognition, promotion opportunities and the chance to develop a lifelong career with the Group." (

1.4 Reward:

The employee's Reward is the value of everything employee gets in return for working with the Group. It's design to:

Reward excellence, by providing a direct link between pay and performance

Pay policy of the Group support their business goals and recognize the pursuit and accomplishment of individual goals. Pay progression is performance based and combined with their variable pay and offers high performing individuals opportunity to maximize its level of reward (

Market competitiveness

Salary levels are benchmarked for all employees, against the specific market for the business in which they work and the talents, skills and competencies they bring to the Group. High performances have the chance to be among the best paid in their market (

Allow for customization

The reward structure of the RBS allows for customization both at the divisional level and by each individual employee. As a result each division or country has own salary and bonus or intensive arrangement. It also means that where ever possible employees have choice over the delivery of elements of their reward package (

Chapter 2: Current Policy and Staff Rewarding Systems

According to Maslow, workers are not motivated by the money only. Individuals are motivated by different things. Motivation can be about shaping a worthwhile career or it may involve having more flexibility with time. As an example, at the start of one's career, help to pay off his/her student loan may be more important to you than retirement planning. ( Employees at the RBS Group enjoy Total Reward - a specific benefits package calculated by RBS that goes far beyond salary. It offers benefits for each member of staff that includes not just money, but also personal choice in working hours and security (

The RBS Total Reward package also offers flexible pension funding, health and medical benefits, paid holidays, and a confidential advice service. Employees have a generous holiday allowance (between 25 and 30 days for full-time staff), with the option of buying or even selling days. Employees may also choose from a wide range of lifestyle benefits, including discounted shopping vouchers, childcare facilities and RBS financial products, such as mortgages, currency exchange, personal loans and banking at special staff discounted rates (

At the core of the package is a competitive salary based on skills and experience regardless of where in the world RBS staffs are based. Providing competitive pay means comparing what you are offering against salaries for similar jobs in other financial services companies ( All staff receive their salary credited monthly to their staff bank account. The terms and conditions of their employment specify the basic rate of pay and any further payments that they may be eligible to receive (

However, within RBS the basic salary is only the starting point from which a number of additional bonus payments can be earned. All employees share in RBS' success through its profitsharing scheme. If the company meets its overall profit targets, then all employees will receive a bonus worth 10% of their salary ( On top of the profit-share bonus, as mentioned before, there is also the chance to earn an individual performance-related bonus when employees achieve or exceed their personal performance targets, for example, a project manager who delivers the project ahead of time and within budget. So in a year when the company does well and the individual performs well, the additional payments may be quite substantial.

Whilst money may be an incentive to go to work; at work, pay cannot motivate people to give more. Theorists have long understood that staff need a combination of motivators ( This is why RBS offers so many non-financial rewards which can improve personal lifestyle.

One of the most important motivators for RBS employees is the recognition of good performance by graded progression. At RBS, people are encouraged to 'make it happen' through personal development. This means RBS encourages employees to grow and develop their skills and abilities. This in turn helps RBS to grow as a company ( Employees identify development needs with their line manager at their annual performance review. These are documented in a personal development plan. Development can involve more training, attending courses or gaining new understanding and skills. This can improve the prospects of promotion and allow employees to move up the organisation and increase their Total Reward.

RBS also believes in giving its people the chance to help put something back into their own communities ( Wherever RBS operates, the Group supports community involvement in projects that matter to its people. For every pound raised for charity by a member of staff, RBS will double-match the donation, making every pound raised count three times. In the last year, groups of RBS employees have supported many fundraising projects for local communities and charities ( These have included:

• a 'pirate kidnap' in South Wales for a youth charity

• taking part in the Microsoft UK Challenge for the NSPCC

• cycling across the Himalayas for British Wheelchair Sport (

The RBS Group also contributes to various projects throughout the UK to improve communities and the lives of the people involved ( For example, over the last two years it has provided funding and advice to:

• the regeneration programme of a housing estate in Scotland. This won a national award

for including the local residents

• the development of a hospital in Portsmouth and four schools across the country

• the provision of free-access cash machines in deprived areas in Scotland

• the setting up of school banks where students manage the banks themselves to learn a

practical approach to numeracy and personal finance (

Chapter 3: HRM Strategies of RBS

The head of human capital strategy of RBS Group, Greig Aitken stated that RBS reports the impact of its people strategy internally to the group board and executive management committee across a range of measures including absence, employee turnover and the overall effectiveness of its people strategy - "the usual touchstones for any organisation" ( According to his opinion RBS consistently links HR measures with business impact. This includes the detailed reporting of its employee survey results, management "bench strength" and succession as well as the impact of specific initiatives on productivity and performance" (Stokdyk, 2007). What the management sees is a consistency of HCM reporting and measurement from HR that has a significant focus on business impact rather than activity ( "The objective in human capital management in RBS is to provide business leaders with a detailed understanding of how effective the group is at attracting, engaging and retaining the best people and how our people strategy drives business performance" (Stokdyk, 2007).

The group's HCM strategy was prompted by the acquisition of NatWest in 2000 and the need to measure the HR implications of the purchase. Since then, RBS has made 20 more acquisitions and has refined its HCM strategy into a practical measurement and reporting regime that covers 40 brands in 30 different countries (

The RBS Group genuinely believes what the group do in this space is a strategic advantage. Mr. Aitken stated, "We don't want to give away how we do it, but we are keen to demonstrate to stakeholders and shareholders that the way we manage people has a direct link to the effectiveness of our customer service and the performance of the company" (Stokdyk, 2007).

Chapter 4: Cost Implication for the RBS

The RBS Group grew in size, it became imperative to be able to show how its HR strategies were contributing to measurable improvements in business performance and following through to the bottom line ( By helping to reduce staff turnover or absence or by increasing productivity, for example, HR activities could make a real difference and make or save the company money. RBS has calculated that a cut of 0.1 of a percentage point in absence leads to an annual saving of £1.1 million and a one percentage point reduction in staff turnover can save the group over £20 million a year (IDS HR Study).

More than 90% of Royal Bank of Scotland shareholders had voted against the bank's pay and pensions policy at its annual general meeting in Edinburgh in the month of April 2009 (

Mr. Aitken, current head of the human capital strategy of RBS Group works closely with finance, HR, marketing and sales to extract effective measures that can translate the way people are managed into tangible organisational benefits (Stokdyk, 2007).

The Royal Bank of Scotland Group (RBS) is to inject more than £800 million of tax-payers' money into its employees' pension schemes which have fallen into deficit after investing in RBS shares (

According to its annual report, the bank plans to invest £807m in order to fund its various pension schemes. This includes the pension pot of former chief executive Sir Fred Goodwin, which the report confirms rose from £8.3m to £16.3m when he left RBS in November 2008 ( The pension funds have fallen from a surplus of £115m into deficit of £1.99 billion in the past 12 months because of falling stock markets (Washington, 2009).

A spokesman at RBS also said the amount needed to fund the pension schemes had risen sharply following the acquisition of ABN AMRO, whose defined benefit (DB) pension scheme is now being fully funded by RBS (

The RBS final salary scheme was closed to new members in 2006, with around 65,000 staff still accruing benefits, while the main fund has another 165,000 pensioners and deferred members (Washington, 2009).

This comes at a time when Ann Clwyd, a backbench Labour MP, is reportedly set to propose the Bankers Pensions (Limits) Bill, which will call for former executives of banks that have been bailed out by the government to have their pensions capped (

Chapter 5: Recommendations

In our view, the most potent action HR managers can take to ensure their strategic contribution is to develop a measurement system that convincingly showcases HR's impact on business performance. To design such a measurement system, HR managers must adopt a dramatically different perspective, one that focuses on how human resources can play a central role in implementing the firm's strategy. With a properly developed strategic HR architecture, managers throughout the firm can understand exactly how people can create value and how to measure the value-creation process (Tanwani et al, 2009).

In this report the reporter is complying some of the decisions taken by the RBS Group chairman which may effective to recover the losses in the past several years.

The group decided no bonuses or pay increases will be made to staff associated with the major losses suffered in 2008 (

As it was mentioned before that the board executive directors will not receive any bonus for the year 2008 performance and no pay increase in 2009 (McKeever,2009).

The Group will not pay any discretionary cash bonuses in year 2009 for the performance in the year 2008. Only legally binding guaranteed bonuses will be paid. Total cash bonus payments for the year 2009 will amount to £175m. Therefore total cash spend overall will have been reduced by more than 90% (

The existing profit share bonus scheme, value 10% of salary, will not be paid for the year 2008, and will be terminated for all future years. An equivalent payment will be made as part of the existing monthly award package to staff below managerial grade, beginning in 2009. The average salary for this group is £18,979 (

In individual cases up to 100% of these deferred awards will be subject to forfeiture at the judgment of the remuneration committee and if future losses arise in relation to their 2008 activities. Awards will therefore be based on sustained long-term performance, not on short-term revenue generation (

Chapter 6: Suggestion

At the end of the report it is emerged that Sir Fred Goodwin, former chief executive of the Royal Bank of Scotland (RBS) Group, was to receive an annual pension of almost £750,000 and had been paid an advance of almost £3 million, in the face of RBS posting a pre-tax loss of £40.7 billion for the year ended 31 December 2008 (Sullivan, 2009). "The re-evaluate, conducted by FSA chairman Lord Turner, also noted that high levels of remuneration in banks, particularly big bonuses paid to executives and traders involved in activities that generated significant losses, had been the subject of intense public interest during the financial crisis" (

RBS had appointed two management gurus to help its HR team through the huge restructure at the state owned bank ( Dave Ulrich and David MacLeod were hired to talk to the bank's HR staff about organisational change, talent and staff engagement ( In the same year 2009 Ulrich spoke at the Public Sector People Managers' Association's annual conference for two hours at a cost a cost of about £30,000 ( In order to keep the company's budget expenditure low these types of expenses should be reduced.


Holbeche, L (2009) Aligning Human Resources and Business Strategy, (2nd Ed.), Oxford: Elsevier Ltd. 

IDS HR Study 783 October 2004 at

IDS HR Study 783 October 2004 at

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Stokdyk, J (2007) Case Study: How Royal Bank of Scotland's derives value from human capital management at

Storey, J (2007) Human Resources Management: A Critical Text, (3rd Ed.), London: Thomson Learning.

Sullivan, N (2009) Human Capital management can add value to an organization, Employee Benefits.

Tanwani, M & Imran, S (2009) recruitment and selection, Performance appraisal & Training and development at The royal bank of scotland - Pakistan : National University of Computer and Emerging Sciences.

Washington, T (2009) RBS injects GBP800m into pension scheme, Employee Benefits.