Human Reource Management in Financial Services

Liberty Leading the People by Eugène Delacroix


Session 1: Introduction

Topic 1: Learning Outcomes

To understand the:

  1. Development of Human Resource Management (HRM) in Financial Services
  2. Contemporary issues and approaches in managing people in Financial Institutions
  3. Changes in the external and internal environment and their implications on HRM in Financial Institutions
  4. HRM policies for managing people
  5. HRM strategies that will contribute to the achievement of organizational objectives in Financial Institutions

The first class of Human Resource Management in the Financial Services Sector was headed by Liz Croft on the 17th of June 2009. HRM is based upon the philosophy that human capital are the most important resource of a company and therefore the management of people is an imperative for the success of the organization as a whole. Students were required to understand the recent development of HRM in the financial services sector like outsourcing. Besides that, emphasis is also placed upon the understanding of how HRM policies and strategies would contribute to the success of the organization as a whole.

“If managers wish to influence the performance of their companies, result shows the most important area to emphasize is the management of people”.

Paterson 1998

Among the recent trends in the managing of people in the financial services sector (FSS) includes the passing down of responsibilities of HRM to line managers, outsourcing, and the shared service concept.

HRM encompasses various roles that include:

  1. Employee welfare (reward and punishment)
  2. Employment legislation (interprets and implements)
  3. Industrial relations (cost and productivity)
  4. Professional traditions (standards of conduct)

The Role of HRM on the other hand, depends on:

  1. The culture of an organization and its structure
  2. Loss of security and the changing psychological contract
  3. Demographic factors (lower birth rates, demand for labour)
  4. The growth in part-time work, shifts
  5. The growth in teleworking

Topic 2: Outsourcing the HR Function

The practice of outsourcing is not a completely new one. For many years, companies use external companies to manage things ranging from pension to payrolls. The most common one would be to hire cleaning companies to clean the premises. The only difference is that the scale of outsourcing in recent years has increase at an ever greater magnitude.

In its essence, outsourcing involves contracting out services and activities traditionally provided in-house. Companies across the globe have found it easier to contract out operational activities and concentrate on specifying the results rather than the process. In today’s world, the issue is what we should outsource and what kind of operations should the company retain.

The three major benefits of outsourcing is that the company gains:

  1. Cost savings
  2. Skills and competencies
  3. Increased incentives and accountability

HR activities that can be standardised are likely to be a target for outsourcing while training programmes that must be tailored will normally be provided in-house.

However, outsourcing may pose serious problems in:

  1. Managing the relationship
  2. The development of distinctive competitive behaviour can be limited
  3. Matching of culture
  4. The insecurity of the outsourcing relationship can make it less receptive to change

Outsourcing contracts should:

  1. Specify the outputs
  2. Anticipate contingencies
  3. Monitor the work to be outsource
  4. Integrate the outsource work with in-house activities
  5. Develop partnership type of relations with outsourcing firms

Topic 3: Recent Trends

Among the recent trends in HRM includes the shared service approach whereby:

  1. The nature of the services are determined by the customer
  2. There are common provision of services
  3. It is available to a number of users

Common areas that are outsourced are:

  1. Recruitment administration
  2. Payroll changes
  3. Benefits administration
  4. Pensions administration
  5. Employee welfare support
  6. Training support and administration
  7. Absence monitoring

Issues and implications:

  1. What activities that central HR likely to retain?
  2. What support do line managers need in order to deliver effective HR practices?
  3. How many and what activities can be outsourced?

Session 2: The Strategic Roles of HRM

Perhaps the most important aspect about HRM is to get the right people to the right place and at the right time. For financial services that are selling intangible services, the people factor is an important aspect that could help the company achieve competitive advantage.

Learning Outcomes:

  • Distinguish between personnel and HRM
  • Identify the different perspectives of HRM
  • Discuss the relationship of HRM with Business Strategy
  • Evaluate the implications of pursuing alternative directions for HR policies

Major developments in personnel management came during the industrial revolution when production and manufacturing had to be coordinated by groups of people. The rise of personnel management in the 19th century was more or less paternalistic with the aim of looking after the welfare of workers and the responsibilities of employers. Generally, the theme of the day was that employers would look after you. In the last 20-30 years, HRM begin to rise in popularity and HRM policies are devised to help the company achieve their long-term strategies.

The HRM philosophy stresses that people are the most important asset and that people policies are essential in helping the organization achieve its broad base strategies. The main responsibility of HRM is to ensure that human capital are able to adapt to a changing and ever hostile environment.

Strategy is about:

  1. Long-term direction
  2. Scope of an organization’s activities
  3. Matching an organization’s activities with its environment
  4. Matching an organization’s activities with its resources
  5. How an organization positions itself and establishes competitive advantage

To develop effective HRM strategies, information is needed on the:

  1. Business strategy
  2. External environment
  3. Internal environment
  4. HR issues (productivity, motivation, communications, employee relations)

Main areas of HRM strategies:

  1. Recruitment and selection
  2. Development and training
  3. Rewarding

Areas that to look during strategy implementation:

  1. Organizational structure
  2. Leadership
  3. Management style
  4. Communication
  5. Identification and resolution blockages/resistance to change

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