Rbs Reward Strategy free essay sample

RBS provides branch banking facilities throughout the British Isles, together with NatWest and Ulster Bank. Globally, RBS has a range of operations in Asia Pacific, Europe and North America. There are a number of RBS centres in sixteen North American states, thirteen European countries and eight major Asia Pacific cities. RBS has around 700 branches that are spread in many larger towns and cities throughout England, Wales and rest of the world but most of them are located in Scotland. Society of the Subscribed Equivalent Debt is from where the bank traces its origin. It was set up by the investors in the failed Company of Scotland to protect the compensation they received as part of the arrangements of the 1707 Acts of Union. In 1724, the â€Å"Equivalent Society† became the â€Å"Equivalent Company† that wished to move into banking. In 1727, the â€Å"New Bank† was chartered as the RBS. Archibald Campbell and Lord Ilay were its first governor. We will write a custom essay sample on Rbs Reward Strategy or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page In 1728, RBS was recognised as the first bank in the world to offer an overdraft facility. The headquarters of RBS in located in Edinburg, Scotland. RBS is one of the world’s leading financial services companies. It provides a range of retail and corporate banking services, consumer finance services, wealth management services and financial markets services. As of 2011, RBS serves more than 36 million customers worldwide and has more than 140,000 employees. In 2011, RBS recorded a net loss of 2. 04 billion when the operating CEO was Stephen Hester. RBS provides a full range of banking services under the RBS and NatWest brand. In addition, RBS also includes Citizens Financial Group, Direct Line, Churchill, Ulster Bank Group and other 40 brands. Its operations are diverse as a global business. For example, RBS bought a share in the second largest bank in China namely â€Å"Bank of China†, opening up new opportunities such as a new credit card business. REWARD STRATEGY – Review and Evaluation Employee Reward is about how people are rewarded in accordance with their value to an organisation. It is concerned with both financial and non-financial rewards and embraces the philosophies, strategies, policies, plans and processes used by organisations to develop and maintain reward systems. (Armstrong, 2009) Reward strategy helps an organisation to achieve business goals and stakeholders’ needs. It depends upon how effectively an organisation discriminates between poor and good performers, gives the best people opportunities and ties rewards to performance. NatWest was a company in which the reward system was dominated by status, politics and employee tenure, till the time RBS had acquired it. After RBS had inherited the company, it introduced a new system that held managers responsible for the goals specified and rewarded good performance over average performance. So now, the bank’s reward policies were designed to ensure that RBS was recognised as an employer of choice. For many years have management theorists tried to understand what makes people work harder than others. In RBS, some of the motivation factors identified by theorists can be seen. Herzberg and ‘two-factor’ theory In American industry, Frederick Herzberg (1959) carried out a large scale survey on motivation. His survey results led him to develop a ‘two-factor’ theory of motivation. Firstly, he established that if an employee’s basic need such as basic pay rate and suitable working environment were not met, it creates a source of dissatisfaction. Herzberg termed these as â€Å"hygiene factors†. Whereby on the other hand, the presence of less tangible factors such as challenging work and recognition for doing well, creates or increases work motivation. Herzberg termed theses as â€Å"motivators†. RBS has put in place the following Herzberg’s â€Å"motivators†; * Employees have a collective sense of achievement when the whole business does well. * Employees get recognition for good work. * Employees gain extra responsibility and advancement through regular performance reviews. * When employees do well in their work, the company rewards them. Maslow’s Hierarchy of Needs Abraham H. Maslow (1943) established a theory on staff motivation in which he referred to a â€Å"Hierarchy of Needs† which is usually drawn as a pyramid. At RBS, The theory of Maslow on staff motivation is also evident. According to Maslow, in this hierarchy, the most basic needs had to be satisfied before workers could look to the next level. Basic physical needs were needs such as food, shelter, warmth and bodily functions. Next stage requires that people had to feel safe in their environment. RBS provides the basic needs wherever it creates jobs. Maslow’s higher levels of needs are less easy to describe and less obvious but of great importance. Social need is the fact that we want to feel part of something we share in. RBS creates the opportunity for its employees worldwide to share in its mission and vision for the group. RBS does so by rewarding the employees who contribute to its success through hard work and commitment. Esteem needs refer to needs to feel valued. At RBS, the mindset of the organisation is that employees can make it happen for themselves. It provides opportunities to its employees in different ways such promotion or training and recognises their achievements. Through this, RBS employees can improve their self esteem. The highest level in the hierarchy is â€Å"self actualisation† that means we work hard in order to be as good as we possibly can be. RBS meets this by offering recognition, opportunities, promotion and the chance to develop a lifelong career with Group. Motivation through Total Reward â€Å"Total reward includes indirect as well as direct, and intrinsic as well as extrinsic. Each aspect of reward, namely base pay, contingent pay, employee benefits and non-financial rewards, which include intrinsic rewards from the work itself, are linked together and treated as an integrated and coherent whole† (Manus and Graham, 2003). The total reward at RBS focuses on the overall content and value of the pay and benefits package, and the needs of staff and Group as a whole. In other words, it is the value of everything that the staffs get in return for working for the bank. Result Based Payments Result based payment or Contingent pay deals with performance related pay e. g. skill competence, contribution, or service in the grade. It is described as consolidated when contingent pay is added to basic pay and when it is paid as cash bonuses it is called as variable pay. At RBS, the basic salary is only the starting point from which a number of additional bonus payments can be earned. RBS’ success is shared by it employees through it profit-sharing scheme. When the company meets its overall targets, it gives out a bonus to its employees that are worth 10% of their salary. Other than the profit-share bonus mentioned earlier, there is also a chance to earn an individual performance related bonus when employees achieve or exceed their personal targets. So at the end of the year, when the company or the individual does well, the additional payments may be quite substantial. Work/Life Balance RBS also offers its employees with flexible pension funding, paid holidays, health and medical benefits and a confidential advice service. Moreover, employees at RBS have a generous holiday allowance with the option of buying or even selling days. Employees also have the options of wide range of lifestyle benefits, childcare facilities, discounted shopping vouchers and RBS financial products such as currency exchange, mortgages, personal loans and banking at special staff discounted rates. Personal Development At RBS, the recognition of good performance by employees is by graded progression. Employees are encouraged to ‘make it happen’ through personal development at RBS. This means that RBS encourages employees to develop and grow their abilities and skills. By doing so, it not only helps the employees, but helps RBS to grow as a company. Employees identify the required development needs from the front line managers at their annual performance review that are documented in a personal development plan. PERFORMANCE MANAGEMENT – Review and Evaluation Performance management is a â€Å"continuous process of identifying, measuring, and developing the performance of individuals and teams and aligning performance with the strategic goals of the organization† (Armstrong, M. , 2009). Performance management is deemed to focus and improve the results from the individual or team by understanding the performance of an agreed framework of competence requirement, standards and planned goals. Performance management is a continuous process and this process involves the following stages: 1) Prerequisites. 2) Performance planning. 3) Performance execution. 4) Performance assessment. ) Performance review. 6) Performance renewal and re-contracting. Almost every role can be described in terms of specific job targets at RBS. By this method of performance management, managers can measure each individual’s performance and reward them accordingly. RBS employees agree with the job objectives and targets at the beginning of the year with the ir line manager. From then onwards, their performance is measured and reported. They will have a performance review at the end of the year. Based on the results and outcomes, additional payments are made which is an effective motivator for high performance. Some of the jobs are based on the achievement of targeted results. This means that a bonus will be paid if the employee achieves or exceeds the target. Such as the job of a corporate banker, who has a responsibility of gaining a certain number of new business customers each year. If he/she achieves the target or exceed it, he/she will be rewarded. At RBS, targets that are difficult to achieve (stretch targets) and are particularly challenging have a greater reward for achieving them. According to its head of human capital strategy Greg Aitken, at RBS, performance management for the leaders is based increasingly on non-financial measures. He claimed at a Human Resource Development conference, that the bank had to view customer service and employee engagement alongside financial performance as measures of success. He also acknowledged that the process of performance management should not be just simply box-ticking exercise, but should be a thorough detailed assessment. At RBS, remuneration is made up of fixed and performance related pay. Performance related pays is designed in such a way that it reflects the success or failure of the employees against the range of targets set for them, taking into account the context in which results were achieved. The bank uses a range of incentive structures that are designed to reinforce messages regarding what employees are being asked to achieve, and deliver pay for performance. Performance includes financial and non financial measures, risk performance and other relevant factors. While ensuring pay is warranted given business performance, they objective in determining bonus awards is to incentivise and motivate the desired achievements. At RBS, there is no clear focus on differentiation, therefore, the best performance and the best performers will continue to be rewarded. At RBS, performance assessment is based on a balanced scorecard of measures including employee management, customer management, risk and financial performance. Allocation of any variable reward from the annual incentive pool depends on functional, divisional and individual performance of the employees against the performance measures set at the beginning of the year. At RBS, individual performance assessment is supported by a structured performance management framework. The targets set are measurable, specific and communicated to the employees at the beginning of the year. RECOMMENDATIONS RBS has an effective reward and performance management systems. However, there is a certain room of improvement. In the reward system, it is very important to put compensation at the top because it is a major factor in the minds of potential employees. However, right strategy should also include incentive compensation plan which is directly related to the goals of RBS. Long-term rewards should be provided for key individuals at RBS. The employees notice the benefits being provided to them, therefore, if the bank does not match or exceed the benefit levels of their competitors, it would be difficult to retain and attract professionals. RBS must view performance management system by encompassing the following important elements: * The bank should determine whether it has the capability to embrace performance as a culture because without such capability or desire, the performance management system becomes a compliance activity rather than adding value to the organisation. * To ensure that employees have behaviour, competencies and skills that allow them to understand and use the performance management system. The methodology which should determine the â€Å"what, when and how† of the performance management. * Enabling technology for the benefit of the organisation and its employees. Conclusion RMPS involves far more than performing an annual appraisal and expecting performance to improve as a result. The cultural transformation to performance based can take years to achieve and requires committing necessary resources (Lathem et al, 2005). RBS operates a forward thinking Human Resources strategy by providing a world-class employment package that motivates its staff at every level. Motivation theory comes to life at RBS as effort is seen to be valued, achievement is recognised, individual progress is rewarded and long-life career is available. Moreover, individuals are made to feel a part of the bigger picture and there are motivators for all. REFERENCES Books and Journals: 1. Armstrong, M. , 2009, Armstrong’s Handbook of Human Resource Management practice, 11th ed. , Reading, London, Philadelphia, UK. 2. Armstrong, M. , 2010, A Handbook of Human Resource Management practice, 10h ed. , Reading, London, Philadelphia, UK. 3. Armstrong, M. And Baron, D. 1998, Performance management: the new realities, Reading, Institute of Personnel and Development, London. 4. Brown, D. , 2001, Reward Strategies from intent to impact, Reading, CIPD, London. 5. LaChance, S. , 2006. 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