Despite industry consolidation and the market downturn, there is still hiring going on at a number of financial institutions.
Lehman Brothers, the US investment bank, recently announced it is preparing to hire around 300 staff in Europe over the next year. ABN Amro, the Dutch Bank, is forging ahead with US expansion with the formation of a new North American financial institutions coverage team, and HSBC is exploiting the M&A downturn by building up an M&A team in Italy.
At the same time, profits are down and costs are rising fast at many institutions. The fourth-largest listed German bank, Commerzbank, which has seen aggressive expansion in its investment banking operations, has also become the most recent to reveal a slide in earnings amid a cost/income ratio that has deteriorated to 75.6% from 61.8% a year earlier.
Amid the rising pressures of competition, HR departments are keen to keep a low profile, and extremely reluctant to comment further on strategies they were willing to discuss only six weeks ago. Michael Moran, formerly at Meridian Consulting and now head of Penna Group-owned City of London headhunter BBM Associates, says: 'Life for HR departments is volatile and not easy. Markets are turbulent by definition. Investment banks need to hire rapidly at times and retrench rapidly at others. But HR knows you need to become an 'employer of choice' so that people want to work for you regardless of what happens in the marketplace.'
Becoming an employer of choice these days means differentiating your organisation in the first instance, and establishing a clear in-house strategy before you seek to lure the right talent. As if that were not hard enough in itself, remuneration alone is no longer the issue. Concerns about work/life balance and career progression are taken far more seriously than ever before.
Investment bank HR departments vary enormously in how they deal with the recruitment process. Headhunters say there are certain banks where they avoid HR at all costs because of the bureaucratic mire in which they become enmeshed. Where hiring initiatives have been foisted upon the department from elsewhere within the bank, HR can also give the impression of not having 'bought in' to the true worth of a concept, such as diversity.
At a bulge-bracket bank such as Goldman Sachs, the notion of aiming to be an employer of choice has been firmly established for some time. The investment bank has also had considerable success in integrating its recruitment function with its internal appraisal and development programmes in order to better identify and attract the right talent.
'Goldman has set up a an extremely efficient system where feedback is centralised and schedules are centralised. The line managers remain the guys calling the shots in hiring decisions. They look for the talent, rather than just defining the particular job,' says a specialist headhunter.
Goldman Sachs effectively has a mini-HR department in each division. In the investment banking division (IBD) it is headed by David Schwartz. He used to work in corporate finance at Goldman before moving to Norman Broadbent to work as a headhunter. His role at Goldman now is to manage issues of compensation, retention and mentoring and work with the HR department to make sure that the IBD's needs are being met.
Schwartz's role is replicated in every division, although the teams in some divisions are larger than in others. These teams help with both lateral hires and with graduates, says Kate Aitken, head of graduate recruitment at Goldman Sachs.
It is difficult to quantify exactly how many people a firm such as Goldman has working on HR, but from its website alone it is clear that there are 15 or more devoted to this function in London. In credit risk management and advisory Louise Armitage is another home-grown Goldman product, while Erica Kelly was hired from headhunter Norman Broadbent for lateral as well as campus recruitment.
Goldman also operates an internal referral scheme, where people are incentivised to refer friends and family for interview within the organisation. 'There is no specific mandate to go out and poach people, but as far as working here is concerned everyone is an internal headhunter working for Goldman,' says a source close to the bank.
JP Morgan (as it then was) used a programme whereby it rotated young trainees from the line into focusing on HR for between three to 24 months. 'It was a really good idea. It didn't do their careers any harm at all. Young guys could bring new people in, form bonds and then act as mentors to them,' says the head of HR at an investment bank who is an ex-JP Morgan employee.
Headhunters say JP Morgan was also forward-thinking in its use of an internal 'job matching' process set up more than five years ago to ensure the right fit for anyone who had to move out of a job.
Kristin Breuss, responsible for mentoring in the investment banking programme at Goldman Sachs in London, is also co-head of professional development training globally. She says trying to quantify 'people-related' issues is taken extremely seriously within the organisation, and is part of the 360-degree appraisal process that eventually feeds into compensation.
Appraisal techniques, both on 'soft' issues of importance to employees and on competency skills, are increasingly being used in varying levels of degree in financial institutions. They are also being seen as increasingly important for maintaining diversity, which has become the current buzz-word in HR departments, particularly in the US.
All the larger US investment banks have appointed heads of diversity and are anxious to be seen as proactively supporting a wide recruitment initiative. Ian Dodds, head of the diversity practice at consultant Kinsley Lord-Towers Perrin, says: 'The HR departments in the financial sector have tended to progress recruitment through interviews. They are looking for 'fit' and end up with replication.'
He has considerable experience with training people involved in the selection process at investment banks. Although the concern about diversity originated in the US, the European banks will not be able to escape EU Council Directives on Managing Diversity in Europe which were clearly laid out in March, he says. As a result, Kinsley Lord-Towers Perrin has, along with other consultants, done a significant amount of work with financial institutions on diversity.
Dodds says: 'It's a minefield for the investment banks. Interviews and psychometric tests can themselves be biased. You can train people to assess through competency-based processes, but people doing the assessing also invariably have their own lenses.' He points out that investment banks are having to recognise there are some fundamental differences between cultures, and one is no better or worse than another. Even within Europe the differences can create problems.
'I remember one group session very well. A continental European stood up and said 'you Anglo-Saxons live to work, while we in Europe work to live' and there was a shocked silence,' says Dodds.
Understanding and developing 'fair' remuneration policies, allowing work/life balance, encouraging job flexibility, recognising diversity, taking on board cultural differences, and understanding the very humanity of their people seems like a lot to put on the plate of any HR department. As if that were not enough, they also have to deal with making sure they provide environments people want to work in.
Philip Augar, the author of The Death of Gentlemanly Capitalism and an ex-investment banker, says: 'On the whole, banks are pretty unpleasant places to work. You have lots of people in a limited space and the physical surroundings can be awful.'
The US banks have led the way in the provision of facilities such as gyms, open spaces, childcare facilities and leisure centres, but others are set to follow. Augar points to the wave of new office locations that are attempting to cater to the needs of embattled office workers in search of decent working environments.
William Hill, managing director of Schroder Property Investment Management, is marketing one such business park development near Chiswick in west London, which offers smaller businesses such facilities as gyms and pools on a communal basis.
He says: 'Canary Wharf may have broken the way forward in persuading people that issues such as work environment mattered enormously when hard-nosed employers couldn't see the point of spending the money.'