Benchmark Study on HR Management Systems Banking sector SHORT REPORT. April Tax, People Services

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1 Benchmark Study on HR Management Systems 2010 SHORT REPORT Tax, People Services 2011 KPMG Limited, a company incorporated under the Companies (Guernsey) Law, as amended in 2008, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved.

2 HR Benchmarking is the comparison of the quantitative and qualitative indicators of a company s HR management system with the same indicators from other companies. Benchmarking is a handy tool for: planning headcount and personnel costs; assessing the effectiveness of HR management processes and the return on investment in human resources; making decisions that optimize personnel costs. In KPMG published the results of a benchmark study on HR management systems 2010: (hereinafter, HR Benchmarking ), that KPMG conducted from November 2010-February HR Benchmarking data from October 2009 September 2010 was gathered. All participants in the study operate in Russia, have varied ownership structures (Russian, foreign) and were drawn from various types of banks (universal, corporate, retail). Rate by net assets Top-10 18% Top-30 45% Top-50 82% Top % About 100 quantitative and qualitative indicators covering all of the main aspects of an HR management system were analyzed: financial and statistical data; headcount and support functions responsibilities (HR, finance); compensation and benefits; recruitment and onboarding; training and development; company s image and corporate culture. 2

3 General results of the Benchmark study Financial and statistical data This section covers basic HR department measures: personnel headcount and turnover, total personnel costs and the costs of main HR budget items. Headcount Headcount and payroll costs (% of all participants) Top management 0.43% 5.29% Front-office, middle management 6.12% 14.56% Front-office, specialists 18.14% 24.67% Middle-office, middle management Middle-office, specialists Back-office, middle management Back-office, specialists 1.00% 2.52% 1.83% 2.23% 3.52% 4.19% 5.82% 12.88% Cashiers and account specialists 6.36% 10.28% Support staff 27.05% 29.61% Headcount by employee category as % of total headcount Payroll costs by employee category as % of total payroll costs Support staff had the largest headcount (27.05%), front-office, specialists (24.67%), back-office, specialists (12.88%), cashiers and account specialists (10.28%). 3

4 Personnel costs Personnel costs structure 93.68% 3.54% 0.23% 0.13% Payroll Benefits L&D Recruitment Personnel costs were categorized as payroll, benefits, learning and development, recruitment and labor safety costs. The majority of personnel costs came from payroll 93.68%. All other costs were significantly lower: benefits 3.54%, training and development 0.23%, recruitment 0.13%. Personnel turnover Turnover is one of the main measures of HR efficiency. This year s turnover median value was 19.48%. The most common cause of turnover in 2010 was dissatisfaction over salary level. The second most common cause of turnover was personal reasons (HR Benchmarking-2009 results revealed career and professional growth as the second most common cause). 4

5 Headcount and support functions responsibilities In this section, we analyze the headcount and responsibilities of HR and finance departments. HR function According to HR Benchmarking results, in most cases (64% of all survey participants) the HR director was subordinate to the general director and in 55% of cases participated in managing the bank. Competency framework was used in 83% of foreign banks and in 40% of Russian banks. Considering HR headcount by process (as percentages of the total HR headcount), we should mention that personnel records and pension administration had the largest headcount (23.08% of participants) and learning and development (17.86% of participants). For all banks, the HR headcount ratio was higher than the finance headcount ratio (75 and 24 employees respectively). HR and finance headcount ratio (number of employees) Russian banks Foreign banks Finance HR Finance function According to HR Benchmarking results, accounting and tax specialists made up the largest part of the headcount (45.45%). Treasury s headcount was lower (8.02%), and budgeting s followed (7.94%) % of participants said that IFRS/US GAAP reporting functions were outsourced to external providers more often than other financial functions. 5

6 Compensation and benefits Compensation structure In this section, we analyzed the ratio between base and variable salary components (salaries and bonuses) from actual payouts in Compensation structure by employee categories in 2010 Front-office, middle management 80% 20% Front-office, specialists 80% 20% Middle-office, middle management 86% 14% Middle-office, specialists 90% 10% Back-office, middle management 87% 13% Back-office, specialists 92% 8% Cashiers and account specialists 93% 7% Support staff 91% 9% Salary Bonuses Salary reviews Most of the participants (91%) reviewed salaries on an annual basis; 9% semi-annually; and 73% reviewed salaries at irregular intervals. More than 90% of HR Benchmarking participants increased salaries in The average number of employees whose salaries were increased was 91% for top management and 100% for other categories. The average rate of increase was 10 17% for different categories and 9 23% for different function areas. 90% of HR Benchmarking participants planned to increase salaries by 10 15% in 2011 for employees in different categories and function areas. 6

7 Benefits The most widespread benefits in 2010 were health insurance and welfare assistance. Other widespread benefits included mobile phone compensation, corporate cars and employee loans (73% in all cases). Out of all survey participants, 55% provided sick leave compensation beyond statutory requirements to their employees, and 35% provided maternity leave compensation beyond statutory requirements. Median compensation for both benefits was 100% of the average salary for all employee categories. Recruitment and onboarding In this section recruitment and onboarding (adaptation) figures were analyzed. The data includes information on the total number of vacancies filled, the number of vacancies filled by recruitment agencies and the cost of closing one position by in-house recruiters. Recruitment According to results of the 2010 HR Benchmarking study, for each recruiter there were 156 job openings. The number of vacancies filled was 86.11% of total vacancies. The cost of closing one position by in-house recruiters in 2010 was RUB The highest number of vacancies was filled by external candidates (86.39%), and just 13.61% were filled by internal candidates. The results do not reach the best practice levels (30-40%). The number of vacancies filled by recruitment agencies was 0.62%. All survey participants noted referral programs, and just 28% of them provided a finder's fee. About 64% of banks practiced graduate recruitment programs; the percentage of employees hired upon completion of the last graduate recruitment program was 17%. Onboarding Onboarding is one of the most efficient and reasonably priced tools for significantly decreasing a new employee s period of professional, psychological and social adaptation. Though, most participants noted that there were no formal criteria for selecting counselors. The number of induction training hours per employee was 6 hours. 7

8 Training and development In this section, we analyzed training and development figures, such as the number of employees who received training, number of training hours per employee and number of promotions. Training Out of all participants, 73% used a training center (corporate university). In 2010, 80% of employees were trained. The number of training hours per one employee in 2010 was 10 hours. Career and succession pool 73% of HR Benchmarking participants had formal criteria for promoting employees. The average number of employees promoted in 2010 as a % of total headcount was 12%. A separate part of the survey was devoted to special development programs, particularly succession and talent pools. We defined talent pool programs as programs used to attract develop, promote and keep the most talented employees. According to this definition, the talent pool, as opposed to the succession pool, is aimed at developing the most talented employees core business competencies and not just at replacing key positions. Among survey participants, talent pool programs were more popular than succession pool programs (45% of survey participants had talent pool programs, and only 27% had succession pool programs). Performance appraisal Performance appraisal methods varied greatly by area of use: an assessment-center was most commonly used for recruiting and selecting candidates (45% of participants), knowledge checks and testing for training (64%) and performance appraisal for career development and compensation (54% and 64% respectively). 8

9 Company s image and corporate culture Programs to develop companies images have lately become an important aspect of companies corporate policy. According to HR Benchmarking results, 91% of participants practiced sponsorship and/or charity, and 82% used employer branding programs in About 82% of all survey participants had a code of conduct. About 82% of companies regularly conducted employee satisfaction surveys, while 64% conducted them once a year. 9

10 Full HR Benchmarking Report: Purchasing options Option 1. Sector report Analytical file (pdf), including characteristics of HR Benchmarking participants and survey key findings. Benchmarks for the whole market and for specific sectors (foreign banks, Russian banks, top-30 (by net assets), top-50 (by net assets), below top-30 (by net assets)) in mean, median, 25-th percentile and 75-th percentile format (Excel file). Price RUB30 000, VAT not included. Option 2. Report containing your company s data Analytical file (pdf), including characteristics of HR Benchmarking participants and survey key findings. Benchmarks for the whole market and for specific sectors (foreign banks, Russian banks, top-30 (by net assets), top-50 (by net assets), below top-30 (by net assets)) in mean, median, 25-th percentile and 75-th percentile format (Excel file). Percentile rank for every one of your company s benchmarks against the whole market and a specific sector. This option also allows you to compare your company s benchmarks with those of separate participants 1. Price RUB45 000, VAT not included. 1 For confidentiality reasons the minimum peer group size is 4 companies. 10

11 Participant s individual report (example) Payroll costs as % of total personnel costs Number of replies Minimum 25-th percentile Median 75-th percentile Maximum Your reply Percentile rank % 85.97% 93.26% 96.35% 98.56% 89.00% 35% Employee turnover Number of replies Minimum 25-th percentile Median 75-th percentile Maximum Your reply Percentile rank % 7.01% 11.78% 16.98% 45.95% 10.00% 40% Documented HR strategy Number of replies Yes No Your reply % 34.78% Yes If you are interested in participating in the next stage of HR Benchmarking or purchasing the report, please us at surveys@kpmg.ru or call our consultants: Alevtina Borisova Tax and Legal Partner aborisova@kpmg.ru Tel. (495) Maria Malinina Lyudmila Legkaya Tax and Legal Tax and Legal Senior Consultant Senior Consultant mmalinina@kpmg.ru llegkaya@kpmg.ru Tel. (495) Tel. (495) KPMG in Russia Head office, Russia and CIS Naberezhnaya Tower Complex, Block C 10 Presnenskaya Naberezhnaya Moscow Telephone: Fax: moscow@kpmg.ru 11