HR: The Invisible Men

Upon being told that President Calvin Coolidge had just died, Dorothy Parker (American poet, wit and satirist) responded, “How can they tell?”

Sadly, I fear that the same words could be applied to the HR Profession unless something changes pretty soon.

Over recent months, the pages of the national press have been filled with the debate and moral outrage over the excesses of the bonuses paid within the UK banking system. Yet the contribution from the HR community has been practically non-existent.

Comment on the situation from either individual HR Directors within the banking sector (and here’s a challenge: name one!) or the CIPD has been less than negligible. The profession seems to be increasingly populated by Invisible (and Inaudible) Men.

Call me old-fashioned, but I thought that reward and recognition was part of HR’s remit?

Or perhaps the HR function is simply aiming to outsource any activity beginning with the letter R. Recruitment: pass it to a third party; Redundancy: we’ll get an outplacement consultancy to manage that; Reward and Recognition: that’s something for the Remuneration Committee.

At this rate, HR will resemble the Cheshire cat in Alice in Wonderland:

This time it vanished quite slowly, beginning with the end of the tail, and ending with the grin, which remained some time after the rest of it had gone.

“Well! I’ve often seen a cat without a grin,” thought Alice; “but a grin without a cat! It’s the most curious thing I ever saw in my life!” 

Dear HR colleagues: there one thing beginning with R that can’t be outsourced: Responsibility. It’s time to take it and make the profession’s views heard. Failure to do so is to risk allegations of irrelevance.

And we don’t want that, do we?

Missing, Presumed Dead.

Scotland Yard have today announced that they have called off the investigation into the apparent disappearance of eight UK Business Executives, many supposedly drawn from the HR community, who have been reported as missing over recent months. A spokesman for Scotland Yard said that an evaluation of the evidence had led to the conclusion that none of these individuals had actually ever existed in the first place, and that they appeared to be some form of Urban Myth. Scotland Yard have, however, released details of the “missing” persons, and stated that in the unlikely event that any of the following individuals are sighted by members of the public, they should contact their local police station.

The Eight Mythological Executives are:

A banker who has left the UK to work overseas as a result of the pressure on the financial community to control remuneration.

An HR Director who argued that Executive bonuses unfairly rewarded those at the top of organisations while penalising those lower down.

An HR professional who believed that their company’s performance management system was actually a little bit too simple.

A Learning and Development Manager who could state with absolute certainty how much money his company had spent on training last year.

An HR professional who can point to an incontrovertible link between training activities and an increase in company profit.

An HR Director possessing empirical evidence that there is a direct link between large bonus payments for senior managers and financial performance.

An HR Director who yearns for the day when his function will be rebranded as “Human Capital.”

An HR Director who believes that she has better control over her function now that all transactional activities have been outsourced.

Readers of HR Case Studies have been asked to assist Scotland Yard with their enquiries. If any of you believe that you have ever seen any of the above individuals, please leave a comment below.

Why? Why? Why?

OK, dear readers. Examine the following three statements:

If you pay exceedingly generous bonuses to a select few individuals at the pinnacle of any management hierarchy, it will inevitably lead to those businesses being better managed, and consequently improving shareholder value.

If you remove the ability of employees to request the right to work flexibly, it will inevitably lead to increased productivity within the workforce.

If you remove the practice of collective pay bargaining in the NHS and education sector (presumably requiring each region to undertake such activities independently), this will also boost productivity.

All three of the above statements are ones which form the backdrop to much debate within the UK’s management community at the moment.

OK, the debate is never put in such stark terms, although the recent proposals put forward by the Institute of Directors for the drastic curbing of employee rights come pretty close to it.

'Axe' public sector union rights, say business leaders

Management, especially where it involves people, is never a precise science, and therefore the laws of cause and effect don’t exactly apply.

But for a generous bonus culture to lead to better financial performance or reduced rights for employees to lead to improved productivity there must in theory be an unbroken chain of causality that can be observed and investigated.

If the statements above are true, it doesn’t matter how many links there are in the chain, but there must be a connection between the cause and the effect.

Can someone help me out here: why do we believe that our generous bonus culture has led to increased financial performance? And why do we believe that reducing the rights of employees will similarly lead to increased productivity?

I’m not looking for an explanation of every link in the chain. Just the first one will do.

Sorry seems to be the hardest word. Especially when it costs $500 million

Readers of HR Case Studies will be familiar with the strength of emotion that the mention of Goldman Sachs seems to evoke in the public on both sides of the Atlantic.

Comments about “doing God’s work” and hectoring the masses to "tolerate the inequality (of bankers’ bonuses) as a way to achieve greater prosperity for all” were inevitably destined to raise the temperature of the debate over salary and bonus levels in the investment bank.

However, displaying a surprising change of heart, the bank issued a long-overdue apology yesterday for its role in the global financial crisis and announced a $500 million (£299 million) pledge to small businesses.

Lloyd Blankfein, the chief executive of the bank, (and the guy who appears to have a divine mandate) said:

“We participated in things that were clearly wrong and have reason to regret ... We apologise.”

 He added that the bank was “very concerned” about the criticism it received for accepting a $10 billion bailout, only to return quickly to paying multimillion-dollar bonuses.

On Monday, members of US Trade Unions protested outside the bank’s Washington office, calling for the bank to donate its (wait for it . . . $23 billion!!) bonus pool to homeowners facing eviction.

The bank said yesterday that it would put aside $500 million for donations, loans and grants to community development organisations.

Times Online: Goldman boss says sorry and pledges cash

• “Our reputation is very important to us,” said Lloyd Blankfein yesterday. In the light of his comment, do you see the apology as a praiseworthy altruistic gesture, or just good image management?

"Doing God's work" at 85 Broad Street, New York

WARNING! If it’s been a difficult (or an expensive) weekend, you might need to sit down with a strong coffee before reading this.

An article in yesterday’s Times Online outlined the fortunes of the men and women who turn up for work each day at the relatively anonymous offices at Number 85 Broad Street, New York.

The select few who work here make more money than many small countries.

These are the Masters of the Universe of Tom Wolfe’s Bonfire of The Vanities.

These are the financial megastars who, once they have become filthy rich by 40, frequently parachute into some of the most senior political posts in the US, understandably prompting accusations that they "rule the world."

Even in this time of global recession, Lady Fortune has smiled with favour on those who work behind the brass-trim glass doors of this prestigious establishment. Average pay this recessionary year for the 30,000 staff is expected to be a record $700,000. Top earners will get tens of millions, several hundred thousand times more than a cleaner at the firm.

Welcome, dear readers, to 85 Broad Street, the home of Goldman Sachs.

Times Online: I'm doing 'God's work'. Meet Mr Goldman Sachs

New Statesman: Goldmans boss says he does "God's work". Who does he think he's kidding?

• Is this morally acceptable?

Gordon Brown: the new Dirty Harry?

As readers of HR Case Studies will be aware, pressure has been mounting for government intervention on the payment of excessive bonuses, particularly to bankers. Apparently Gordon Brown has now said that "enough is enough" when it comes to the old system, and he is threatening to "ban the old bonus system" and force banks to act in a more responsible manner.

With rhetoric reminiscent of Dirty Harry, the PM is promising to “clean up the system once and for all," with tough new measures which will "represent the toughest action of any country in the world. We are not going to stand by and return to the bad old days,"

The next few weeks will therefore see the introduction of (quake in your boots, all you bankers) a new Business and Financial Services Act. It’s claimed that the act will "ban the old bonus systems and make it impossible for firms to go back to using them."

Brown to "ban old bonus system"

• Who are the organisations and campaign groups who have been urging for a change in legislation on bankers' bonuses?
• What progress has been made by other countries on this issue?
• Is it feasible for such legislation to be imposed, or can the end to the existing bonus system only come through self-regulation within the finance sector?
• Update No. 1: Alistair Darling adds his voice to the demand for an end to the bonus culture. Cut bonuses, Darling tells banks
• Update No. 2: Robert Peston offers thought-provoking insight to the changes to the bonus system. Labour bets on bashing bankers

The bankers' bonus row becomes global

Although the UK has already rejected the idea of imposing a cap on excessive bonuses for bank executives, other countries concerned about how best to recover from the recession seem to be giving the idea their support. The French finance minister has already stated that France is ready to launch an "onslaught" against large payouts, and her view has been given support by ministers from other EU countries.

UK Chancellor Alastair Darling is expected to suggest a compromise that bonus payments should be paid out over five years and in the form of share options rather than cash, with the bulk of the bonus being paid in the final two years, and with the possibility that the bonus will have to be paid back if the bank's performance subsequently dips.

It now seems inevitable that the issue of bonus payments to banking executives will dominate the discussions at the G20 summit in Pittsburgh later this month.

Bonus row opens up G20 divisions

• Will the UK be able to withstand the pressure from other countries to impose some form of cap on bankers' bonuses?
• Why do you think that the UK is standing alone on this issue?
• The French Finance minister Christine Lagarde has said that excessive bonuses had contributed to the global financial crisis and needed to be capped to avoid problems happening again. Do you agree with her statement?
• Suggestion for teachers: This debate will inevitably develop over the next month. Use the reports on (e.g.) the BBC website to chart the progress of the UK's view in the lead-up and during the G20 summit

No.10 takes a stand on bankers' bonuses

Although he refused to endorse the comments already made by Lord Turner, UK Prime Minister Gordon Brown has taken the debate over reform within the global financial sector to a new level with his statement that pay and bonuses should be based on long-term success not short-term speculative gains. In an interview with the Financial Times, he also stated that banks should “claw back” bankers’ rewards if their performance suffered in subsequent years. Mr Brown said he hoped that the G20 leaders meeting in Pittsburgh this month would provide a forum for further global debate on the issue, and made it clear that although he supported attempts to tackle the high pay of bankers, this was not an action that the UK could take unilaterally. The debate has already started to be addressed within other European countries, where leaders have also called for steps to be taken to prevent excessive risk-taking by large banks. In Berlin on Monday, Germany's Chancellor, Angela Merkel commented that “No bank should be allowed to become so big that it can blackmail governments.”

Financial Times: Brown pledges bonus clampdown

• Is some form of reform over the pay of senior managers within the financial sctor now inevitable?
• Why is taking a stand on this not an issue that the UK would wish to take independently?
• What are the risks of reform being introduced in Europe, but not in the other economies of the developed world?
• What preparations might the HR Directors of financial institutions be making in advance of such reform being introduced?
• Gordon Brown has stated that "pay and bonuses should be based on long-term success not short-term speculative gains." What might a remuneration package that rewards such factors look like?