May 2007

Recent IDS HR Studies

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March 2007
August 2006
Absence management
Alcohol and drug policies
842
828
i HR Studies Update
April 2007 Bonus schemes 843
April 2007 Childcare support 844 846 Employee engagement
Sept 2006 Clerical & secretarial pay 829 Feature
Oct 2006 Coaching in the workplace 831
June 2006 Employee health & well-being HR Update 823
Human capital measurement
Human capital measurement models are beginning to identify clear
June 2006 European Works Councils 824 links between HR metrics and initiatives on the one hand and
Nov 2006 Flexible working HR Update 834 business performance on the other. Drawing on the latest initiatives
at two of the leading players in this field, we show how employee
May 2006 Flexitime schemes 822 engagement has been identified as one of the key ‘human capital
July 2006 Harassment and bullying 826 drivers’ that can make a measurable difference to the bottom line.

Sept 2006 Hours and holidays 830

Case studies
Dec 2006 HR service centres 835
The Co-operative Group makes engagement a strategic priority
Jan 2007 Job evaluation Study+ 837
August 2006 London allowances 827 BT provides a ‘voice’ for staff with innovative ideas to share
Oct 2006 Long-term pay deals 832 The Royal Bank of Scotland Group links employee engagement to
improved business performance
May 2007 Managing stress 845
Feb 2007 Performance management 839 Employee commitment the key to success at Nationwide

July 2006 Promoting race equality 825 Deloitte sets up new employee brand team to drive engagement
Dec 2006 Secondments & volunteering 836 Building the employer brand at Cabot Financial
Feb 2007 Share incentive plans 840
GlaxoSmithKline looks to build engagement through health
Jan 2007 Shift pay 838 interventions
March 2007 Standby & call-out pay 841
Nov 2006 Violence against staff 833

www.incomesdata.co.uk
benchmarking HR policy and practice
 case study

The RBS Group links employee engagement to

improved business performance
The Royal Bank of Scotland Group is a world leader in human capital measurement activities. It has
developed a human capital model that correlates a range of HR metrics with business performance
indicators, showing how HR initiatives can have a direct impact on the bottom line. Employee
engagement is a key variable in the model – the group has shown that the more engaged
employees are, the greater the benefits for the business in terms of customer service and
productivity. The group continues to refine and extend its work in this area and has worked
extensively to align employee data with financial, marketing, sales, and customer information to
enable business leaders to make more informed people decisions.

The Royal Bank of Scotland Group (RBS) has
around 4,000 offices in 30 countries, serving 35
million customers. The group, which now has
around 135,000 employees, has quadrupled in
size in less than ten years. Its brands include RBS,
NatWest, Ulster Bank, Direct Line, Tesco Personal
Finance and Citizens Bank. It has a market
capitalisation of $127.5 billion. The UK accounts
for around 57 per cent of its operating profits.
People the key differentiator
RBS recognises that if it is to deliver its goal of
being ‘the world’s most admired bank’ and
outperform others in the sector, the contribution
and performance of its staff is the key
differentiator. To achieve this objective, RBS
places considerable importance on having HR
policies in place that impact positively on staff.
Furthermore, it has been able to show that by
improving employee engagement, measurable
improvements in business performance and
profit levels can result.
The employee proposition
By building a compelling employee proposition,
RBS seeks to attract, engage and retain the best
talent. The overall employee proposition (see the
diagram on page 18) consists of:
● total reward
● work itself
● recognition
● performance & development
● leadership
● relationships
● product brands and reputation
● work-life balance and physical environment.
RBS recognises that the extent to which each of
these elements influences whether employees
join, stay or leave the group is likely to vary at
different stages of their life and career. So, for
example, those who are young and without a
family, may seek a high base salary, high quality
management and generous holiday. In contrast,
those with a family may prioritise work location,
a flexible work schedule, availability of childcare
and role clarity. The make-up of the employee
proposition also determines the extent to which
employees are engaged with the business.
The group has calculated that, on average, it
takes ten months to repay the recruitment and
onboarding cost of a new recruit. It is, therefore,
important to be aware of what motivates and
engages new recruits so that they do not become
disillusioned and leave before contributing to
the business.
Using its human capital model, RBS can show
what elements of its employee proposition and
which HR initiatives bolster employee engagement
for different employee groups and, in turn, have a
positive impact on business performance.
The HCM model
At the core of the RBS human capital
measurement model is the concept that the
employee proposition drives engagement, which
then delivers superior business performance.
The model is populated by employee survey
data, employee data from the HR management
system and business performance data.
Correlations and links can then be sought
between these different elements to determine
the key drivers of engagement, which ultimately
has an effect on the bottom line.
Obtaining survey data
Before it can make any correlations or links
between HR and business metrics, RBS has to
establish what motivates employees in the first

i HR Studies Update 846 • May 2007 17

HR case study

The employee proposition at the Royal Bank of Scotland Group

• Working Hours • Leadership &

• Ways of Working Quality of Senior Team
• Workstation Design • Job Security

• Quality &
• Job-Related Skill Performance
Development Work-life • Image & Prestige
• Career Development Balance Leadership
• Role in Community
• Internal Mobility & Physical Product
• Performance
Performance Environment Brands &
Management
& Development Reputation
Engagement
• Informal
Recognition
Recognition Work Itself
• Informal Manager • Interest
Feedback Total Reward
• Formal, Non-Financial
Relationships • Autonomy
• System/Process
Recognition Programmes • Tools &
Resources
• Salary Element
• Variable Pay • Manager
• RBSelect • Colleagues
• Retirement Benefits • Clients/Customers
• Sharing in Success

place. It obtains reliable and compatible data
from across the group and across the employee
lifecycle through a number of different employee
surveys, including:
● employee opinion surveys
● joiner surveys
● leaver surveys
● targeted ‘pulse’ surveys.
These are supported and designed centrally to
avoid survey fatigue and ensure consistency of
approach. (The box on page 19 gives details of
the group’s annual global opinion survey.)
Measuring employee engagement
The surveys provide RBS with an understanding
of how employees judge their relationship with
the business. Rather than assessing levels of
‘employee satisfaction’ or ‘commitment’, RBS
uses what it regards as a much more relevant
measure – ‘employee engagement’.
A series of standard questions on employee
engagement allows meaningful comparisons to
be made and to be benchmarked against external
norms.
What is engagement?
RBS describes the distinction in the following
terms: if satisfaction is ‘How much I like things
here’ and commitment is ‘How much I want to
be here’, then engagement is ‘How much I want
to and actually do improve our business results’.
The characteristics of engaged employees
Engaged employees are likely to be those who:
● Say – consistently speak positively about the
RBS Group to colleagues, potential
employees, and customers
● Stay – have an intense desire to be a member
of the RBS Group
● Strive – exert extra effort and demonstrate
behaviours that contribute to business
success.
People data
Another key ingredient in the model is people
data (eg absence rates, labour turnover). The
group’s employee data is pooled into a single
data warehouse from 25 systems worldwide to
ensure consistent, reliable and single-source data.
The Group has global definitions of its people
metrics to ensure like-for-like comparisons for
key measures such as labour turnover rates. The
data can be segmented on the basis of tenure,
seniority, location, gender and age, for example.
Influences on engagement
RBS calculates which elements of the employee
proposition have the greatest influence on levels of
engagement and then prioritises the areas where
the company will get ‘the best bang for its buck’.
For example, the impact of a good manager can
have a significant impact on levels of
engagement. However, the organisational
impact of good managers is limited by their

18 i HR Studies Update 846 • May 2007


spans of control (ie they can have a very positive
impact, but normally only on a relatively small
number of people).
In contrast, while reward is a weaker driver of
engagement, it has an effect across the whole
organisation. Therefore, investment in the
design of an effective reward programme can,
nonetheless, deliver significant group-wide
returns. An example of this is RBSelect, the
group’s flexible benefits scheme. Analysis has
shown that engagement levels are up to 20 per
cent higher where employees choose at least
three flexible benefit options.
Impact on the bottom line
The various types of HR metrics allow RBS to
understand better what attracts people to the
organisation and what keeps them there. By
mapping the employee engagement scores with
other key people measures (such as the RBS
leadership effectiveness index) and against
business metrics (such as the customer service
index, branch profitability and productivity), it
can highlight any significant correlations.
Using various methods of statistical analysis, the
group has been able to demonstrate links
between employee engagement and productivity
and staff turnover.
The group’s findings show that increases in
engagement are matched by increases in
productivity and falls in employee turnover.
When the data is segmented by position, age
and tenure, it shows a positive correlation
between seniority and engagement, a positive
overall correlation between age and
engagement, and that those with the longest
service exhibit high levels of engagement
(although the highest levels of engagement are
found in the first year of service, with a
subsequent dip).
Positive effect on performance
The data shows that engagement drives above
average performance, with those branches
employing staff with high levels of engagement
experiencing the highest levels of sales in
relation to their targets. Similarly, there is a
positive correlation between the highest
customer satisfaction scores and high levels of
employee engagement.
In financial terms, a one percentage point
reduction in turnover is estimated to save the
business £30 million a year; similarly a 0.2
percentage point reduction in employee absence
can lead to annual savings of £6 million.
i HR Studies Update 846 • May 2007
The Royal Bank of Scotland Group
The RBS Group’s global employee opinion survey
Much of the data for the human capital model comes from the
responses to the 100 or so questions that make up the Royal Bank of
Scotland Group’s global opinion survey. This is carried out at the same
time every year in 30 countries and in nine languages. It covers
135,000 staff. The survey, completed anonymously, can be completed
online or as hard copy. The survey plays a key role in the group’s
employee listening strategy.
Standard set of questions
Questions are standardised across all of its operations, irrespective of
location, to enable easier comparisons. The latest survey saw greater
focus placed on leadership and management effectiveness, with 12
new questions on this area.
High participation rates
The group has an outstanding employee response rate of 87 per cent.
This is 20 per cent higher than the financial services norm.
Benchmarking the results
The responses are benchmarked against its global peers. In its most
recent survey (September 2006), RBS outperformed the global norm in
financial services in every one of 15 external benchmarking categories:
● communication
● employment security
● respect & diversity
● innovation
● image & competitive position
● recognition & reward
● co-operation and working relationships
● managing people & change
● RBS group leadership
● divisional leadership
● workload & work-life balance
● performance management & development
● efficiency
● customer focus
● job satisfaction & engagement
Communicating the results
The overall results are delivered by the chief executive, with each of
the group’s 4,500 divisions delivering local presentations. Online
reports are delivered to managers, who then cascade the key
messages down to their teams. An online survey results toolkit and an
action planning guide help promote consistency and ensure that local
action plans are agreed, communicated and triggered.
Acting on the results
As well as a report for each individual business unit and broader
business results, there is a breakdown of the top and bottom ten
scores and comparative data, set against key performance indicators.
How effective the group is in fixing problems brought to managers’
attention is key to maintaining a psychological bridge with
employees, while ensuring high response rates and high levels of
engagement. Examples of actions taken following the survey are the
setting up of a bureaucracy helpline – giving staff a way of alerting
managers to any unnecessary bureaucracy or administrative
procedures – and a more flexible employee recognition scheme.
19
HR case study
The Royal Bank of Scotland Group's Integrated Human Capital Measurement Model
Employee Segmentation & Demographics
Example Inputs
Global People Work-Life Balance &
Data Physical Environment
Joiner Survey
➡ ➡
Recognition
Leaver
Survey
Pulse Survey
Total Reward
Employee
Opinion Survey
Acquisition
Survey
Leadership Incentive Design &
Strategy
Supports Predictive Analysis and
Informed Business Decisions
Encouraging practical use
Rather than just another initiative from group
HR, the human capital model is intended to be a
living, diagnostic tool that businesses can use to
improve their performance and benefit the
bottom line. For example, businesses can
identify reasons why staff doing similar types of
work have different levels of productivity or why
their customer service scores differ.
Online human capital toolkit
To facilitate wider business ownership, more
than 1,000 HR staff across the group now have
access to a suite of online HR tools. Taken
together, these form an extensive HR
knowledge-base.
The toolkit has five workstreams:
● survey toolkit: access to opinion survey
analysis, joiner and leaver surveys as well as
support for running pulse surveys and
acquisition surveys – by simply clicking a
mouse, HR staff have access to all
presentations delivered at divisional, board
and executive level about the results of RBS
employee surveys; they can drill down further
from the top-level findings to compare the
survey results at the level of individual
questions and categories, and make internal
20
Leadership
Performance &
Development
Example
Business Metrics
➡
Relationships
Customer Service
Employee Branch Profitability
Proposition Productivity
Cross-selling Ratio
Staff Turnover
Financial Performance
➡
Work Itself
Product Brands & Reputation
Support Measurement of
Human Resource
and Business Initiatives
Engagement Attraction Business Programme
eg values & service
comparisons, for example, between different
call centres; staff can then access information
that shows how these figures correlate with
data on engagement and on management and
leadership effectiveness; one facility is ‘a pulse
survey in a box’, which allows quick surveys
to be carried out to a consistent template
● reporting toolkit: access to internal reports
such as the group board reports, workforce
profiles and access to external benchmarking
reports
● benchmarking toolkit: in partnership with
PricewaterhouseCoopers, competitor
benchmarking reports for each division as
well as functional benchmarking reports,
such as for technology, call centres and head
office departments; each business unit is able
to look for a suite of benchmark comparators
● research toolkit: access to internal research on
topics such as call centres, absence and
turnover; also direct access to external
research sites; staff can also commission
customised research straight from their laptop
● measurement toolkit: access to absence,
turnover, flexible benefits and Sharesave
toolkits – HR staff can compare the relative
internal performance of their business in
areas such as absence and turnover.
i HR Studies Update 846 • May 2007

Users also have access to HR Excellence (HR
leadership programme), What’s New
(information about new internal HR initiatives)
and Business Intelligence (a one-stop shop for
business information relating to the Group and
its competitors). When linking to various
websites, ‘silent authentication’, means that staff
do not have to repeatedly enter passwords.
Accessing the toolkit
The ‘human capital toolkit’ is on a dedicated
section of the RBS HR intranet. This provides a
single point of access from the desktop PC to all
human capital resources. Having all the HR
tools in one place avoids duplication and helps
promote best practice. Moreover, the toolkit has
helped to increase ownership of the human
capital measurement concept, embedding it at all
levels of the group.
As the introduction on the intranet explains: ‘The
toolkit helps you in the diagnosis of issues within
your business and is particularly valuable in the
scoping of projects, in building business cases and
comparing performance on people measures.’
The toolkit allows HR staff to align more
closely the service they offer with the needs of
the RBS businesses in which they work,
supporting their business in making informed
people decisions. HR business partners are on
the boards of the businesses for which they
work so can add value at a high level. This
means that there is something to show in
business terms for HR’s intervention.
Joining up decisions at the Royal Bank of Scotland Group
➥
Marketing HR Sales


Joined up approach
More informed people and business decisions
Staff
Engagement
 Customer
Satisfaction
Customer
Staff Opinion
Satisfaction
Survey
Index
i HR Studies Update 846 • May 2007
The Royal Bank of Scotland Group
The toolkit has been so successful, that it is soon
to be launched in North America at the group’s
Citizens Bank arm. The information base is
being extended to have more global content,
supporting businesses in Asia and the Middle
East. The aim is for the site to be a one-stop shop
for all in-country resources.
Human capital board
Indicative of the importance attached to human
capital measurement at RBS is the human capital
board, which manages initiatives at a strategic
level. Meeting quarterly and reporting to the
global HR board for the RBS Group, its
membership includes the head of human capital
strategy, directors from a number of the
businesses and HR directors, as well as the
group’s deputy chief economist. The make-up is
intended to ensure that any human capital
proposals are aligned to business needs.
The board agrees priorities over a two-year
timescale and discusses any emerging issues. For
example, after being highlighted at these
meetings, questions were included in the global
opinion survey to reflect the desire for greater
international analysis and to gauge the
effectiveness of the employee proposition
Discussion at such a senior level helps prioritise
human capital initiatives across the RBS Group,
while evaluating the effectiveness of any
proposals and then testing them against the
employee proposition.
➦
Financial
Service
Performance
 Business
Performance
Sales Performance
Customer and
Staff Measures
21
HR case study
Latest HCM initiative
One of the group’s latest initiatives is termed
‘Service Excellence Through People’. Working
with its partners ISR (employee survey research)
and Harvard Business School, an interactive tool
is being developed to enable HR and line
managers to see the links and drivers for key
measures such as employee engagement,
leadership, sales and customer service. This
initiative enables business leaders to view business
performance through a ‘single lens’ – delivering
insight into the effectiveness of RBS’s people
strategy and its impact on business performance.
Across all of its businesses, seven areas of
employee performance have been identified as
showing strong positive links with business and
customer service performance metrics. These
measures are:
● leadership
● engagement
● customer focus
● image and competitive position
● managing people and change
● efficiency and innovation
● performance management and development.
When mapped to the lead business metrics in
contact centres – such as average handling time,
call time, hold time, call wrap time and calls per
hour – the three centres with the highest score
across the seven people measures outperformed
all the remaining centres consistently in business
output. Essentially, higher scores across these
seven people measures evidenced lower average
handling time, greater calls per hour, less
customer hold time and shorter wrap time.
The concept is to be rolled out across the retail
branch network, where people metrics can be
22
matched against the customer service measures
and business and financial performance in the
UK and US.
This analysis will enable the businesses to focus
on bringing up the least performing branches to
at least the level of those performing at the
midpoint. The survey data will help make clear
the areas to focus on to foster that improvement.
Helping to make the case for HR
The growth of RBS since 2000 has been matched
by an increase in the importance of the HR
function. Informed people decisions are now the
norm, as the impact of initiatives can be
measured. The link between people – and
principally levels of engagement – and business
success is clear.
The evidence-based approach of the model
allows a focus on outputs rather than inputs.
Now, for example, while knowing the monetary
cost of training, HR business partners can show
the value that training adds – by making a
difference to the level of mortgage sales, for
example. Businesses can leverage the value of
staff and concentrate on HR initiatives that are
adding value.
Greig Aitken, Head of human capital strategy at
the Royal Bank of Scotland Group, sums up the
achievements of the HCM model: ‘Making
better use of all the data at the company’s
disposal and then digging deeper to identify links
and correlations creates a “line of sight”
between HR intervention and bottom-line
profitability. The human capital model is
influencing the future performance of the
organisation. It allows the group to demonstrate
a link between its people strategy, particularly
the prime role of engagement, and enhanced
business performance.’
i HR Studies Update 846 • May 2007