HR leadership can chart a way out of the financial crisis

For the first time in my 10 years of writing about HR and reward strategies, the subject is at the top of the international political agenda.
All because misaligned performance pay has been a major contributory factor in the biggest financial crisis since the 1930s.

In the attempts by US political leaders to agree a $700bn (£380bn) rescue package for the banking system, one condition that the Democrats insisted upon was that banker and executive pay be curbed. And last month, in the UK, the chancellor Alistair Darling asked the Financial Services Authority to draw up fresh guidelines on pay to help prevent excessive risk-taking by the banks.
The political and economic ramifications of this drama will be huge, with the 'neo-liberal' model that has prevailed in the past two decades reaching crisis point. In this model there is a short-term transactional approach to hiring talent, a misalignment between people strategies and business strategies, and faith in a flawed approach to gauging market risk.
As statutory authorities take more control over the banking industry, there will be more regulation on pay, and it would be easy to assume that such regulation is the big story, and that the HR agenda of reward and people strategies plays a supporting role. But having spent four months researching the subject, my studies indicate that the opposite is the case. Internal stewardship of the banks - the matters of talent, hiring and firing, reward and risk management - almost certainly have greater importance than the regulatory regime.
It is not simply a case of curbing bonuses. The economic impact of decisions made by the banks is greater even than the sum of bonuses awarded. The more important priority, therefore, is better performance and risk management, with reward and people strategies supporting this.

Just an illusion

There are many flawed assumptions in the way in which the banks have operated. In the past decade many of them have gone against the evidence base built up by leading thinkers that ensure the close alignment of business strategy, reward policies and people strategy. Just last year, I asked myself: 'Why are the investment banks appearing to do so well? Everything they do on reward and people management is wrong'. The strong performance turns out to have been an illusion.
Banks were responsible for deliberate moves towards short-term, 'hire and fire' HR practices, relying on financial compensation as the only employee motivator. In the 1990s and 2000s, many banks ditched 'old-fashioned', long-term career planning and began treating people as if they were easily obtainable, easily disposable commodities, motivated only by money.
My research shows that, as well as perverse incentives in the bonus scheme, the banks had insufficient experience on trading desks and in the critical area of risk management. Crucially, they neglected the whole question of employee loyalty, thus exaggerating these incentives in the bonus structure. Of course, if the bonus is a life-changing sum of money, and the individual does not care about the future of the institution, why should they care about the long-term risk profile of the product?
The irony is that the deregulation of the financial markets may have worked perfectly well if only the banks had not been run on neo-liberal lines, but instead on the evidence and principles established by the human relations field - ie, if bonuses had been tied closely to longer-term performance, and skills and experience levels were matched to the needs of the business.
This is a historic moment for the HR profession. Its evidence and ideas would have prevented the crisis in the first place - or at least lessened its impact - and they can help chart a way out of it. It's time for some leadership.

 

White collar workers feel pressure amid financial crisis

White collar workers at Chinese branches of many multinational companies are now facing increased pressures and reduced salaries as their headquarters cut daily expenses to cope with the current global financial meltdown.
The crisis dealt its first blow by causing the closure of two toy factories in southern China's Guangdong Province in mid October. The move resulted in a loss of over 6,000 jobs. Since then, more businesses in China, especially multinationals whose headquarters are in the center of the financial storm, are facing tough times.
The recession in the financial market hit most companies that make a profit from banks and financial companies.
Wen Xiang, a mid-level manager at an American multinational company in Beijing, says he feels increased pressure in his job with his headquarters expecting more output despite scaling back on expenses.
Wen said his US-based headquarters wrongly expect businesses in China to remain strong, and are therefore pushing even harder on the local branch.
"But business has actually seen a decline with lesser demand. That means more responsibilities and less money to spend," Wen said.
However, employees from companies whose profits are less affected by the global financial turmoil and those who saw increased business opportunities are more optimistic about their jobs.
Nie Bomin, a Beijing-based employee of IBM, said his company will have to think twice before laying off employees as they are producing something valuable for the market.
The company, that focuses mainly on data management, is less affected and reported unexpected profits in first three quarters of this year.
According to a recent survey of 5,000 white collar workers by human resource website Zhaopin.com, 26 percent said they had postponed their plans to seek new jobs due to the ongoing financial crisis.
"During difficult times, it's best not to rush into anything new," Wen said.

 

What is the salary standard for white-collars who are working in China big cites?

According to data from professional statistics, below are the information shared for all white collars, so that you can leverage whether your income is higher than the standard provided. The data is collected by the employees who have 3-8 years experience and bachelor above education background:

Tier1: Hong Kong:
Macaw:
RMB 18500/month
RMB 8900/month
Tier2: Shanghai:
Shenzhen:
Wenzhou:
Beijing:
RMB 5350/month
RMB 5250/month
RMB 5020/month
RMB 5000/month

Tier3: Hangzhou:
Guangzhou:
Suzhou:
Xiamen:
Qingdao:
RMB 4980/month
RMB 4750/month
RMB 4300/month
RMB 4100/month

RMB 4000/month
Tier4: Nanjing:
Fuzhou:
Wuxi:
Tianjin:
Jinan:
Dalian:
RMB 3780/month
RMB 3380/month
RMB 3200/month
RMB 3150/month
RMB 3120/month
RMB 3000/month
Tier5: Zhengzhou:
Kunming:
Wuhan:
Haikou:
Changsha:
Sanya:
Chongqing:
Shenyang:
Urumqi:
Xian:
RMB 2880/month
RMB 2800/month

RMB 2680/month
RMB 2600/month
RMB 2480/month

RMB 2360/month

RMB 2250/month

RMB 2100/month
RMB 2100/month
RMB 2080/month
Tier6: Chengdu: Herbing:
Herbing:
Huhehot:
Guiyang:
Changchun:
Lanzhou:
Yinchuan:
Xining:
RMB 1900/month
RMB 1700/month
RMB 1700/month
RMB 1600/month
RMB 1500/month
RMB 1500/month
RMB 1100/month
RMB 1000/month