Financial Times, "Did IT work? Persuading staff to stay was driver behind new system"
By Stephen Pritchard
Published: May 28 2008 01:27 Last updated: May 28 2008 01:27
The global banking industry might be suffering from the credit crunch, but the sector is still expanding in Russia. Penetration of banking services – especially among consumers and small and mid-sized businesses – remains lower than in markets such as western Europe and many banks in Russia are enjoying double-digit growth.
But with growth comes a number of challenges, especially when it comes to managing one of any bank’s key assets: its people. The experience of National Bank Trust, one of Russia’s top 10 retail financial institutions, is in many ways typical. Trust ranks among the top three Russian banks, measured by the size of its branch network. It operates in 180 local markets and has seen its workforce grow from 2,400 people in 2004 to 7,000 today.
Efficient management of a growing but also highly dispersed workforce is a challenge, admits National Bank Trust’s president, Nikolay Fetisov. The bank has turned to technology both for the day-to-day management of personnel issues, and in order to maintain high standards of customer service.
“The issues the banks face in Russia are pretty much identical to those in other markets such as western Europe,” says Mr Fetisov. “That is ensuring high levels of service, ensuring asset quality, and how fast credit decisions are taken.” Attracting, and retaining, good staff is critical to success.
A few years ago, Russia’s banking sector offered highly competitive salary packages, for branch staff as well as head office specialists. But rising pay in other industries has closed the gap. At the same time, competition between banks for senior staff, such as head office officials and branch managers is strong, says Mr Fetisov.
“That was the main driver to put in more technology and support systems that deal with HR management within the organisation,” he explained. The new systems, he says, had to deal with high levels of staff turnover and ensure that knowledge stayed with the bank. “Either you employ a lot of trainers and coaches or you use technology.”
Training materials and manuals are now delivered to branch staff through the IT system, in the shape of SAP’s Learning Solution. This covers most functions, Mr Fetisov says, and allows the bank both to automate training for new recruits and to maintain product and process knowledge throughout their careers. The system also handles testing, which for some jobs has to be done every three months.
The bank, which had not previously run SAP software, also deployed the vendor’s human resources management (HRMS) package. The bank went through a formalised process of vendor selection including a market review and employing a consultant to confirm internal recommendations. Russian systems integrator IDS managed the SAP deployment.
One of the most immediate benefits of the new system was more efficient reporting on the bank’s payroll. Payroll accounts for 67 per cent of costs. “To manage this part of our expenses, we need to employ the most up-to-date technologies and methods,” says Mr Fetisov.
Efficient processing has made it much easier for the bank to account for variable wage costs, such as monthly bonuses, and government-mandated regional additions to pay.
“Previously, the technology was Excel and e-mail,” Mr Fetisov explains. “It took two to three months to gather the information, which is not really up to date.” Payroll reports are now typically produced within 24 hours. “We have saved 3-5 per cent [of payroll costs] through better and more timely management of people, and due to the fact that the information is available within 24 hours not 60 days. Even a 3 per cent saving is quite significant.”
The savings go a long way to offsetting the cost of the HRMS investment, which Mr Fetisov puts at up to $600,000.
“If you look at it in terms of HRMS, it is a chunky number, but go into the details – the need to account for 7,000 personnel in more than 220 branches in a territory between Kaliningrad and Vladivostock – and it is a fairly substantial project in terms of technology, but also changing HR management processes in order to optimise them. The savings justify the expense.”
But updating HR administration was also relatively straightforward, as there was only one main point of integration with the bank’s central financial systems. The remaining links were for HR and general management. Trust employs a matrix reporting system, so data needs to be available to the head of HR, the head of retail sales in Moscow, but also to line managers. “Line managers have access to the system for day-to-day matters,” says Mr Fetisov. “They can check personnel issues and payroll status.”
Line managers have next-day information on all employees and on any particular branch.
“This is something where it is difficult to estimate the economic value. But there is a value, because it allows people to take the right decisions in a more timely fashion than they used to,” Mr Fetisov says.