The Royal Bank of Scotland Group is an acknowledged leader in the field of human capital management (HCM) and devotes eight pages in its corporate responsibility report to documenting its people policies and how they support business performance. It has developed a global HCM strategy and suite of online tools to support decisions affecting 150,000 staff in 30 countries.

RBS reports the impact of its people strategy internally to the group board and executive management committee across a range of measures including absence, employee turnover and the overall effectiveness of its people strategy – “the usual touchstones for any organisation”, as the RBS group’s head of human capital strategy Greig Aitken puts it.

RBS consistently links HR measures with business impact, he says. This includes the detailed reporting of its employee survey results, management “bench strength” and succession as well as the impact of specific initiatives on productivity and performance.

“What the management sees is a consistency of HCM reporting and measurement from HR that has a significant focus on business impact rather than activity,” says Aitken.

“The objective in human capital management in RBS is to provide business leaders with a detailed understanding of how effective the group is at attracting, engaging and retaining the best people and how our people strategy drives business performance.”

The corporate responsibility report includes further information on the workforce composition, health, safety and well being, training and development, and remuneration.

The group’s HCM strategy was prompted by the acquisition of NatWest in 2000 and the need to measure the HR implications of the purchase. Since then, RBS has made 20 more acquisitions and has refined its HCM strategy into a practical measurement and reporting regime that covers 40 brands in 30 different countries.

“We genuinely believe what we do in this space is a strategic advantage,” says Aitken.

“We don’t want to give away how we do it, but we are keen to demonstrate to stakeholders and shareholders that the way we manage people has a direct link to the effectiveness of our customer service and the performance of the company.”

RBS’s human capital strategy (click image to see larger version)

Aitken works closely with finance, HR, marketing and sales to extract effective measures that can translate the way people are managed into tangible organisational benefits. Reducing employee turnover by 1%, for example, saves the bank around £30m in attraction costs.

Aitken and his team have been working with Harvard Business School and the bank’s survey consultants to identify what factors drive business performance, customer service and financial performance – and what management needs to do to improve them.

Aitken explains, “The prize is significant for getting HCM right, not just in cost management but in increased income and productivity. Understanding the effectiveness of our people strategy enables us to identify key hotspots and take action”

The 2005 RBS group corporate responsibility report says that significant efforts were made to reduce employee turnover, resulting in a 1.9% reduction in voluntary turnover to 10.5% – this translates into a saving to the group of nearly £60 million in attraction and onboarding costs.

How the bank retrieves and uses its HCM measures has matured significantly since the NatWest acquisition. Between 2000-04, Aitken says there was a lot of good human capital work taking place within individual divisions across the business. “The HR board, lead by [RBS global HR head] Neil Roden then agreed to develop a human capital toolkit that joined-up our global people resources to support our leaders make informed people decisions”.

The RBS group has created a global data warehouse that “pools” people data from systems across 30 countries into one application. Through a suite of interactive tools, including Business Objects reporting software, HR professionals are now able to interrogate the information via the company intranet.

The interactive tools are updated every month with quick facts designed to answer the 15 or so questions that are most commonly asked. “Human capital fast facts allow our HR professionals to press three buttons to get to it, so they can deliver insightful diagnostics at speed” says Aitken.

“Self-service toolkits give HR staff access to consistent, appropriate human capital measures that are benchmarked against business intelligence on our competitors.”

Aitken says the reporting infrastructure has built up the credibility of HR people, who sit on divisional management boards in a way that mirrors the finance function.

“Our HR people support the business on strategic issues,” he says. “In a way, it’s not about HR, it’s about what cross-functional information you need to support business decisions – this means functions linking up”.

Transforming HR into a strategic function is easy to say, but difficult to deliver, says Aitken.

“The challenge with absence, turnover, and employee survey data is that they are usually resident in different areas, so HR people spend 85% of their time analysing the data and 15% diagnosing. Our business partners want people to spend 15% getting the information and the rest of the time diagnosing issues, agreeing interventions and delivering value,” he says.

The way RBS manages its human capital has enabled the group to reap significant, tangible benefits. “The results of our independent employee survey are externally published each year and in our most recent survey we outperformed our global peers in every one of the 14 measured categories across the survey,” he says. Aitken highlights a 4% reduction in the group’s employee turnover rate in four years to 10.5%, resulting in multi-million pound savings in attraction costs.

Aitken is reticent to delve into the detail of the returns RBS has reaped, he says that his team would not continue to get budget commitments each year if it did not deliver results. The secret of this success, he says, is “focusing on output measures,not input measures … If you report the average training cost per person, you are missing the point. The key measure needs to be the value derived from the training – harder to obtain, but richer in insight” says Aitken.