Recent scandals over rewards for failure and misbehaviour particularly in the banking sector have certainly forced the financial services sector to re-think its bonuses and benefits.
In an attempt to promote a more responsible culture banks seem to be leaning towards delaying or capping employee benefits. However, the emphasis on risk-based operating control models is taking the responsibility of compensation and benefits away from HR and putting it in the hands of finance.
Boards obviously feel that only their finance departments are equipped to ensure control and governance around ‘compensation accounting’ and have the ability to analyse potential schemes and models.
While the need for financial skills is obvious, the fact that financial services organisations have such little faith in their HR departments should send alarm bells ringing. As a recent KPMG report on how chief executives view HR clearly shows many departments are stuck in a cycle of functional rather than effective HR. Only 15% of CEOs interviewed said HR added any value to their organisation.
Effective HR can dramatically improve decision-making abilities. After all, employees are an organisation’s biggest asset – and usually cost, too. However, in order for HR to move beyond being viewed as a silo merely responsible for legislative compliance and arbitration it needs to be able to supply accurate and timely information. By being able to add value at a strategic and operational level, HR might be able to defend its position within the financial services sector as the guardian of benefits and remuneration packages
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