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HUMAN RESOURCES MANAGEMENT IN FINANCIAL SERVICES ORGANISATIONS

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Human Resources M~agement in Financial Services Organisations: France and Britain Compared FRANK BOURNOIS, Senior Lecturer in Human Resources Management, Groupe ESC Lyon, I‘rmce; V~RONIQUE TORCHY, Research Fellow in ~~~a~ Resources Ma~age~e~~, Groupe LISC Lyon, France

F inancial Services Organisations (FSOs) are at the centre of numerous changes affecting the competence of their business as well as the way they operate; organisational features are evolving. What about Human Resource Management (HRM) practices? Are French HRM practices different from those in the UK? Are French and British HRM practices evolving in the same way?

The object of this article is to examine HRM practices in the Recruitment & Selection, Pay & Benefits and Training & Development fields and to account for similarities or differences between French and British FSOs.

The authors base their discussion on 17 personal interviews with human resources directors and human resources professionals of French and Elritish FSOs and on statistical tests on data resulting from 265 questionnaires; they claim that Human Resources Management practices are country-dependent, underlining the importance of macro-economic features.

a significant increase in the number of activities per- formed by firms in the banking sector. On the other, insurance companies, retailing firms, savings banks and mortgage finance institutions are already making significant inroads into traditional banking markets; savings banks in some European countries are beginning to move into corporate banking in a big way; the Post Office is also likely to be a more important com- petitor in some European countries.

Banks, insurance companies and insurance brokers and building companies are therefore part of the same industry as defined by Kay3 (the industry of financial services) and should therefore be studied altogether.

Main trends Europe is taking a close look at its FSOs. The first major step towards a Single Market in banking and financial services was the First Banking Coordination Directive of 1977. This removed most of the obstacles to freedom of establishment across the Community. The Second Banking Directive was adopted in December 1989, It attempted to go a step further than the First Directive by removing remaining obstacles to freedom of estab-

Ezinancial Services Organisations lishment and freedom of services. The central idea was the establishment of a single banking licence which

Trad.itional boundaries between banks, brokers and would be valid throughout the Community and which insurance firms are disappearing. As Schouppe,’ would create the opportunity for any credit institution Deputy Advisor and Strategic Planning Coordinator at authorised in one of the member states to supply bank- Banque Paribas Belgique, pointed out in EM], ‘Banks, ing services in all others. slving insti~tions, public credit insti~tions, brokers and insurance companies are all invading each other‘s The financial national regulations are mostly turfs’. This point is reinforced by Gardenes who states characterized by deregulation and disintermediation. that ‘Banking structure encompasses changes in the Though national situations were very different in the numbers, sizes, and comparative significance of banks recent past, convergences are now said to be stronger and other financial services organisations (FSOs) within than divergences.* Individual countries are encouraged a financial system. The term FSO is itself a reflection to deregulate their financial systems in order to match of structural change.’ On the one hand, there has been financial market developments in other countries.

EUROPEAN MANAGEMENT JOURNAL Vol 10 No 3 September 1992 315


Deregulation has stimulated further competition by opening up traditionally segmented markets to larger numbers of new competitors and new forms of competition, as mentioned earlier.

Just as the economic environment continues to change, so does the technology used to manipulate information. New technologies, especially data-processing, play a key role in different aspects of the financial service: on the production side, in assisting decision-makers, in help- ing professionals in their advice to customers and on the training side where the development of computer- based training is one example among others.5

Not surprisingly, such dramatic changes have con- fronted FSOs with a number of fundamental human resource problems. They have to adapt themselves to meet the new challenges involved by the evolution of the characteristics of the socio-economic environment. Two major features can be underlined.

0)

(ii)

There is an increased number of job losses. The ‘UK’s National Westminster Bank is expecting to lose lO,OOO-11,000 jobs over three or four years. The UK’s Midland Bank clipped 1,000 in 1990 with another 3,000 to come this year.6 These are only two of the better known cut-backs. There is a move from quantitative personnel management towards more qualitative personnel management. This move implies a quick and systematic improvement of commercial skills, the development of specific skills to meet the Informa- tion Technology challenge, the eradication or the drastic reduction of very simple front-office functions and the systematic development of managerial skills and corresponding abilities for middle and top managers.

Hiltrop7 underlines six emerging human resource management (HRM) strategies for European FSOs, three of which show a direct link with our own interests. He says there will be:

an increased emphasis on training: the pace of change in the financial services industry presents a special training problem. Each time a new product or procedure is introduced, all the staff of a bank or building society have to be trained quickly and simultaneously. more graduate recruitment. FSOs will tend to recruit more graduates, firstly because there is an increasing sophistication of products and technology; secondly because FSOs have raised their performance criteria to include things like languages, effective problem solving, leadership and creativity. They anticipate graduates will learn these skills more rapidly. the linkage of pay to performance. A move from seniority-based pay to performance-related payment systems will ‘unleash young people’s energies and creativity and encourage older employees to become more flexible’.

All these issues will be dealt with in the empirical and concluding parts of this article. The discussion which follows is in three parts: 1. The presentation of our methodology; 2. A statistical data analysis based on the chi-square tests results; 3. An in-depth analysis of some HRM issues, using the interviewees’ comments as well as questionnaire results. To preserve the interviewees’ anonymity, their comments will be shown in inverted commas and accompanied by their function (e.g. Personnel Manager) and by the kind of organisation they work in (e.g. British Insurance Company). The French interviews have been translated.

1 Methodology Two sources of information were used: questionnaires and interviews with human resources directors or human resources professionals.

The Price Waterhouse Cranfield (PWC) questionnaires constitute the basis of our statistical analyses. The PWC Project is an annual survey of trends in human resource management across Europe. It is based on a standard questionnaire covering major areas of human resource management such as human resource strategy, recruitment, pay and benefits, training and development, employee relations, flexible working patterns. The questionnaire was developed with the cooperation of business schools in each of the ten countries taking part in the survey (Denmark, Norway, Switzerland, United Kingdom, France, Spain, Italy, Germany, The Netherlands and Sweden). Each year, the same questionnaire is used in order to allow the analysis of developments over time. The questionnaire was tested, translated and distributed to a broad sample of personnel directors in the ten countries between November 1990 and February 1991. A total of 6300 organisations responded across all ten countries. In broad terms, the responses are said to be representative of the employment size, country of origin and sectoral distribution of the economy of each participating country. This is the largest survey of human resource management policies and practices in Europe.B

This particular investigation on FSOs concerns 265 organisations: 173 of them are British and they represent 12% of the total number of questionnaires collected in the UK, the other 82 are French and they represent 8% of the total number of questionnaires collected in France.

Limits are to be found as soon as international comparisons are carried out. It is difficult to analyse within a single framework different industrial relations traditions, different Iabour markets, different practices. This problem is accentuated by the fact that words, concepts, categories have different meanings when they are used in different countries. For example, Bournois9 warns that we have to be aware that the notion of cadre (manager) varies considerably between countries.

The questionnaire method implies that reality, i.e., HRM practices, has not been observed directly. It has been



J Figure 1 Investigative model of the research

cjbserved through the responses given by personnel managers on the practices in use in their organisations. In new disciplines like management sciences, ‘controlled 1 net hodological pluralism’ is welcome and as underlined tjy MartinetlO ‘no method has, a priori, the monopoly of rigour and reason.’

P here is nevertheless a need and a movement towards the incorporation of qualitative data into quantitative ; nalsyses.” The combination of different research methods can be achieved either by supplementing the field data with some statistical analyses or by supplementing a survey with a set of interviews to fill out the cluantitative analyses. We chose the second option and conducted interviews in France and in the UK among professionals of the personnel function to have a more detailed approach of what was actually done in ( Irganisations. Twenty personnel managers but also rc!cruitment managers, training managers, managing directors in charge of the personnel area were inter- \ iewed in France and in the United Kingdom between J !me and July 1991. The interviews were semi-structured ‘: nd covered a basic checklist of areas. As will be seen i I the concluding part of this research, they spon- t.lneously focused on areas unexplored by the c uestionnaire. The interviews, therefore, brought f jrward two kinds of information; information sup- porting and explaining the findings of the statistical a ‘~alyses and information underlining major points ( $vhlch were not mentioned in the questionnaire), where I rench and British practices differ.

Our investigative model is displayed in Figure 1. It has btten borrowed from a former investigative model and then adopted to our new investigative purposes.12

There are several tests available to test hypotheses. Since we are working on qualitative variables - country and IIRh4 practices - the chi-square test is the best suited to account for similarities and differences between the two countries we are working on. The chosen level of s @&cance for this research will be 0.05 (*) but if some

results are significant at the 0.01 (**) level or even the 0.001 (***) level, this will be mentioned so that information is not missed out.

2 France/UK: Comparisons Clearly, HRM practices vary according to the country in which they take place (22 cases out of 34 chi-square tests). The results are displayed in Table 1.

What are the main differences between French and British HRM practices? The existing differences can be brought together under three different headings.

(i) Formalisation There is a higher level of formalisation of policies among British FSOs. The result is correct for the following practices explored by the PWCQ: mission statement, corporate strategy, personnel/HR strategy, systematic evaluation of the personnel department. For example, the percentages of FSOs which do not have a mission statement in France and in the UK are very similar; 23.9% for French organisations, 21.1% for British ones. But the distribution between ‘Yes, we have a written mission statement’ and ‘Yes, we have a mission statement but an unwritten one’ account for the existing difference. 56.7% of French organisations have a written mission statement in comparison to 73.1% of British organisations having a written mission statement. This trend can be found for all the practices cited above and tends to reinforce d’Iribarne’s statement that ‘la r2gle peut garder un flou appre’ciable, puisque, de toute fqon, quand il s’ugit de l’appliquer, l’esprit l’emporte sur la lettre’.13

(ii) HRM tools Many differences are to be found in the methods used to arrive at a particular objective. For example, differences exist in the methods used to carry out manpower planning or in the methods used to analyse training needs. As far as manpower planning is concerned, the main difference lies in the ‘analysis of the labour market’ variable. This method is used by only 29.5% of French organisations whilst 74.5% of British organisations resort to it. The most favoured method in France and the most favoured method in the UK are nevertheless the same: the forecast of future skills requirements.

The differences in the methods of analysing training needs are again enormous. Two major points can be underlined:

. training audits and performance appraisal are widely used in the UK and not in France.

. both countries give favour to the same method: line management’s requests is the most cited method in the two countries.

Training seems to be much more monitored in the UK and is monitored in a much more formalized way. 41.6%

EL ROPEAN MANAGEMENT JOURNAL Vol 10 No 3 September 1992 317


of British organisations tend to resort to formal evaluation of training some months after the training courses take place. Only 22% of the French organisations do so.

(iii) Different Perceptions regarding the Environment Some of the differences are clearly linked to

environmental features. Among others, the following features can be mentioned:

. Different labour markets, which for example account for differences in the ‘job categories hardest to recruit’ and in the ‘specific populations targeted’ variables.

Table 1 Variation of HRM practices by country

Human resource strategy variables

What are the main objectives of personnel or human resource management in your organisation in the next three years?

Does the organisation have a mission statement? Does the organisation have a corporate strategy? Does the organisation have a personnel/HR strategy? Is the personnel/HR management strategy translated into work programmes and deadlines for the

personnel function? Is the performance of the Personnel department systematically evaluated? Do you carry out manpower planning? If yes, which methods do you use? Which of the following categories of data on the workforce do you collect and use for manpower planning? How far ahead do you plan your staffing requirements?

Recruitment and selection variables

Where are policies on recruitment and selection mainly determined? With whom does the primary responsibility lie for major policy decisions on recruitment and selection? Has the responsibility of line management changed over the last three years on recruitment and selection? Which job categories do you currently find hardest to recruit? Have you introduced any of the following measures to aid recruitment? Have you specifically targeted any of the following populations in the recruitment process?

Pay and benefits variables

Where are policies on pay and benefits mainly determined? With whom does the primary responsibility lie for major policy decisions on pay and benefits? Has the responsibility of line management changed over the last three years for pay and benefits issues? Has there been a change in the share of variable pay in the total reward package over the last three

years? Has there been a change in the share of non-money benefits in the total reward package over the last

three years?

Training and development variables

Where are policies on training and development mainly determined? Where does the primary responsibility lie for major policy decisions on training and development? Has the responsibility of line management changed over the last three years for training and development

issues? What proportion of annual salaries and wages is currently spent on training? Do you systematically analyse employee training needs? If yes, which methods do you use? If yes, which method is the most important one? Do you monitor the effectiveness of training? If yes, which methods do you use? In which areas have at least one third of your managers been trained? Do you provide training courses to update the skills of women returners? Which methods do you regularly use? Which areas will constitute the main training requirements in your organisation in the next three years?

The following codes indicate country-dependence: +*+ 0.001 level of significance; l * 0.01 level of significance; l 0.05 level of significance; 0 No statistical indication of country-dependence.

*** ** *t **

0 l

0 t*t

0 0

+*

0

0 *** *** ***

* ** **

0

***

***

0

**

***

t

**

***

0

0 1

0 tt*

0

318 EUROPEAN MANAGEMENT JOURNAL Vol 10 No 3 September 1992


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Different legal environments, which can partially explain the differences regarding non-money benefits.

What are the main similarities between French and British HRM practices? 5imilarities concern 12 cases out of the 34 chi-square ttxsts. They can be gathered under three sub-headings.

l‘here is only one similarity between French and British FSOs: the change of line management responsibilities is the ‘Recruitment and Selection’ field follows the same pattern. However, this result hides the fact that for ’ Training and Development’ issues as well as for ‘Pay 2 nd Benefits’ issues, a trend is common to all areas:

! there is almost no decrease in the responsibilities of line management. What differs is, do these responsibilities remain at the same level or do they increase?

The primary responsibility for major policy decisions for ‘!<ecruitment and Selection’ issues and for ‘Training and Ljevelopment issues lies in both countries with the ‘HR ciepartment with line management’ (principal trend) and with ‘line management with HR department’ ( ,econd trend). In both cases very few organisations let t ‘le primary responsibility lie with line management only c r with the HR department only.

7 he ‘Pay and Benefits’ issues show a different pattern since, in French organisations, the primary responsibility for major policy decisions lies with ‘line I--management with HR department’, ‘HR department tcith line management’ ranking second. The British situation is the opposite; ‘HR department with line nlanagement’ is the major pattern, ‘line management Y-ith HR department’ being the second one.

5irulegy us Tactics All the examined variables are HRM practices but they <‘orrespond to different levels of implementation in the organisation. For example, ‘carrying out manpower F ianning’ is a practice, ‘methods to carry out manpower F ,anning’ is another which is linked to the latter and 5‘. hich occurs at a lower level of implementation. 1: Tactices such as ‘carrving out manpower planning’ or , ‘monitoring the effectiveness of training’ are not c juntry-dependent but the methods used to carry out manpower planning, to analyse training needs, and those used in personnel management are country- dependent. I* Since reality is complex, it is not possible tc> say that the behaviour towards what has to be done ii commonly agreed whereas the methods are different. The general trend nevertheless goes in that direction.

hfairl Training Requirements in the Next Three Years The first four choices of areas which personnel managers

i think will constitute the main training requirements in their organisations in the next three years are the same ir 1 French and in British FSOs. They are ‘Computers and nt!w technology’, ‘Marketing and sales’, ‘People man-

Table 2 Main obJectives of human resource management in the next three years for FSOs (%)

France UK

Computerisation 2.86 3.6

development of strategy 0.66 4.23

Recruitment/retention 5.16 9.9 Retention issues 1.53 4 Pay and Benefits 5.16 6.5 Performance related issues 0.53 3.2 Training and Development 12.16 13.5 Efficiency/Productivity 0.66 7

Company Strategy 4.26 4.3

Manpower Planning 20.7 3

Career Planning 3.56 1.16

Performance Appraisal 2.86 1.1

Communication 11.2 1.93

agement and supervision’, ‘Business administration’. Even if French and British organisations do not give the same importance to each of these four requirements (‘Business administration’ is the most cited requirement in the UK; ‘Computers and new technology is the most cited requirement in France), this similarity constitutes an interesting finding.

3 Analysis of Specific Human Resources management Practices

What are the Main Objectives of Human Resource Management in the Next Three Years? What do FSOs want to do as far as their HRM practices are concerned? Table 2 displays the contingency table including the first 9 objectives cited by both countries (Valid TO).

Independently from the conclusion already stated that the main objectives of personnel and HRM are dependent on the country in which they are set, three main points can be underlined:

6)

(ii)

(iii)

The three areas under focus in this study - Recruitment, Pay and Benefits, Training and Development - are of vital importance for the surveyed organisations in both countries. There is an enormous difference of concern for manpower planning and communication issues, which are respectively the first and the third main French objectives. The emphasis put on Efficiency/Productivity and on Strategy Development by British organisations does not exist in French organisations.

What about Line Management Responsibilities? The PWC Project provides evidence about the trends in the allocation of line management responsibilities.

ELIKOPEAN MANAGEMENT JOURNAL VoI 10 No 3 September 1992 319


Table 3 Devolution of responsibilities to line management

Increased Same Decreased France UK France UK France UK

Recruitment 2nd trend 2nd trend Main trend Main trend - - Pay and Benefits 2nd trend 2nd trend Main trend Main trend - - Training and D. Main trend Main trend 2nd trend 2nd trend - -

The results displayed in Table 3 are explicit. They underline the reinforcement of line management responsibilities in HRM, especially in the Training and Development field. Either line managers are confirmed in their role or their responsibilities for HRM issues are increased. So far, mainly personnel departments have been in charge of HRM responsibilities. The respective roles of line management and personnel specialists are changing with more HR responsibilities taken up by line managers. This evolution is in accordance with the prediction of experts:

Dimitri WeissI mentioned ‘the tendency to have human resources managed by line managers’. In a survey of personnel management in the UK, MacKay and Torrington16 found that traditional personnel activities such as recruitment and selection, training, performance appraisal and employee relations are increasingly delegated to line managers. The fact that the devolution of training and development responsibilities to line management is the most marked characteristic confirms the role played by managers in the development of their colleagues or subordinates.17

This evolution also proved clear in our interviews: for recruitment as well as for training issues, line managers were consulted and often took the initiative. While in the past, branch managers were content to delegate human resource activities such as recruitment, selection and appraisal to professional staff in personnel departments, it seems that today, most FSOs wish to see employees at all levels of the organisation involved in the company’s management of human resources.

This evolution should not hide the differences existing between the two countries: as seen earlier, the evolution of line management responsibilities for Pay and Benefits and Training and Development issues is dependent on the country in which it takes place. The devolution of Pay and Benefits activities to line management is for example a stronger feature in France (46.8% of the surveyed organisations) than in the UK (only 24.6%).

Recruitment Issues Three issues are analysed: the use of graphology as a recruitment technique; the minimum requirements of FSOs for their new recruits and finally the job categories considered as the hardest ones to recruit for in both countries.

Graphology Graphology - ‘the examination of the features of handwriting in which the analyst draws inferences about the writer”* - was used by almost all the French interviewees and has been spontaneously mentioned by them. Graphology was used at different stages of the recruitment processes although ‘the evidence for the predictive validity of handwriting analysis in personnel selection (and other) situations is not great’. In the same vein, we follow our colleague Amado19 who strongly criticises the validity of graphology calling it a regressive and magic practice.

This finding should not be a surprise. A survey on patterns of selection conducted among six countrieszO showed that the country with the greatest divergence to the general trend was France and that the British pattern closely followed the pattern observed in other countries. In France, graphology is used in about 52% of vacancies whereas it is hardly ever used in the UK. Table 4 provides a view of the differences between France and the UK.

The use of graphology intervenes at two different stages in the recruitment process:

. at the beginning, to help filter out unsuitable candidates. ‘There is a first selection based on age, working experience and academic background. We then ask for a short handwriting analysis for the selected people. The information we get from this analysis is matched up with the information we

Table 4 The use of various methods of selection in France and in the UK

interviews

CV

References

Work sample

Personality Test

Assessment Centre

Graphology

Biodata

Astrology

France UK

97% * 92%

89% 86%

39% 74%

16% 18%

38% 13%

8% 14%

52% 3%

1 o/o 4%

6% 0%

l The percentage is not the percentage of applicants who are subjected to a particular predictor but a calculated index which should be a close approximation.



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get from the interviews.’ [personnel manager, French bank] ‘There is a first selection on the level of academic achievements - % of the candidatures are rejected at this stage. We then proceed to handwriting analyses and a further 50% are rejected. The analyses look for such general features as “autonomy” and “adaptability”, nothing more.‘ [recruitment manager, French bank]

. at the end, to provide complementary information about already selected people. ‘Graphology is used almost all the time to confirm choices’. [Assistant to the General Secretary, French bank] ‘We sometimes ask for handwriting analysis at the end of the recruitment processes for jobs where personality is crucial’. [Vice-Director, French Bank]

1, is interesting to understand how these people justify their enthusiasm for graphology: is graphology deemed as a good predictor of future job performance? as a scientific technique? as a technique among others? Graphology was never mentioned as a predictor of fllture job performance and was mainly considered as a means to filter out unsuitable candidates and to lessen the room left to doubt.

‘, t is a difficult task to evaluate the potential ofsomeone. With handwriting analyses and interviews, we lessen the room left to doubt.’ [Personnel Manager, French bank]

‘j f the handwriting analysis and the CVare OK, we meet the cm&date. lf the handwriting analysis is bad, the risk is to lcl’ie 11 good candidate. Since we receive lots of good applica- twns, we prefer losing good candidates than recruiting bad ok/es”. [Recruitment Manager, French bank]

Minimum Requirements for Entry Level In order to investigate the difference in the level of minimum requirements in terms of skills and academic a: hievements between France and the UK, it is neces- s,uy briefly to overview the main features of the French and British educational systems. This part reinforces the point adopted by many comparative studies on management styles, organisational patterns and industrial relations that institutional factors on the macro-level such as the educational system, collective labour relations and business-government relationship reinforce national identities.21 The emphasis here is put on eN&rcational systems.

The UK has the smallest percentage of students in comparison to the active population of all OECD countries with a figure of 3.84% where the American ficpre is 10.10% and the French one 5.41%.22 The conclusions arrived at in the Handy repor+ on how to improve the British educational system are rather tragic.

. Most managers in the USA, Germany, France and Japan have been educated to a higher level than in the UK. There is not yet a well-signposted and generally .

accepted route into business and management in the UK.

l Most of the 90,000 new managers-to-be will either receive no formal introduction to the new elements of business and management or will wait until mid-career, at which stage over one third will still receive nothing.

The report suggests that more students should stay in the educational system to age 18 and beyond and should receive a broader range of learning. it is said that ‘Three A levels and a degree in humanities is a poor match for a “baccalaureat” followed by a “Grande Ecole” in business or engineering with a “stage” of work assignment’.

In a research on High Potentials (Hipos) in Europe, Derrz4 found that ‘in a traditional British firm, a Hipo would usually emerge from an elite public school or university (perhaps from a known military unit), be a “gentleman”, converse knowledgeably about the classics, history and philosophy and approach business with a broadly humanist perspective.’ A debate exists on whether this non-reliance on Hipos with a technical business education should continue or should stop. In the UK, it is not necessary to have a business degree to have a career in business; the only purpose of a degree is to certify the attainment of a certain educational level. The implication is that it is possible to have a career in banking in the UK and work as a swaptrader or as a recruitment officer with a degree in ancient history or in biology. This situation is totally unimaginable in France and constitutes without any doubt a surprise for French people working with their British partners.

The above features help to understand the existing differences between FSOs as far as their requirements for new recruits are concerned. In British banks, the A level is traditionally the entry level for potential managers whereas the 0 level is the requisite qualifica- tion for clerks. UK banks still recruit at a low level of education: only 8 to 15% have an A level, the others have an 0 level. The proportion of graduates remains very low (1 to 3%).4 The recruitment of experienced managers is not yet a common practice but it is said to be one of the most important features of some growing British banks which acquire the skills they lack through these means. In France, the entry level for managers as well as for clerical staff is baccalaureat in a few cases and ‘bat + 2’ in others. The following comments of the French interviewees on this particular point reflect the French situation rather well:

‘We do not recruit beyond the bat + 2 level and bat + 2 is even rare. We expect our secretaries to have a maftrise LEA (Master’s degree in business and languages)‘. [Recruitment Manager, French bank]

‘Bat + 2 is the minimum entry level except for switchboard operators. We are not particularly fond of bat + 2 but we expect our recruits to hold qualified, complex and evolving jobs’. [Vice-Director, French bank]



Table 5 Job categories hardest to recruit

France UK

information Technology 22.85% 14.3% Financial specialists 3.3% 14% Professionals (other than

accountants, lawyers, financial, marketing and HR specialists) 3.3% 14.3%

Sales general 19.15% 5.2% Sales representatives 8.8% 0.85%

As a consequence, there is a difference of two to four years for the same job between France and the UK (bat - 0 level = 2 years; bat + 2 - 0 level = 4 years). The situation for graduates is similar. The entry level for graduates is ‘bat + 5’ or Grandes Ecoles in France. French managers still cherish the French elitist system and chase after Grandes Ecoles graduates rather than University graduates who have an equivalent level of training.

Job Categories Hardest to Recruit The job categories hardest to recruit are different in France than in the UK. Complete results are displayed in Table 5. The comments on this particular point will focus on three issues.

(i) The lack of Specialists in the UK The lack of specialists in the UK does not come as a surprise. As far as school-leavers or graduates are concerned, the previous section clearly indicates that there is a lack of management education, not to mention technical expertise. This was underlined by the Training Manager of a British bank, pointing out that ‘the UK system is just not vocational’. The precise and complex technical skills which are necessary to reach a good level of performance have therefore to be developed from within or bought on the external market among mid- career recruits.

(ii) The Lack of Salespeople in France The lack of salespeople in France can be explained in two different but related ways:

1. There is no management degree to train salespeople.

2. Salespeople in France are often at the bottom of the social ladder.

Social prestige is an important notion in French industry. As Barsoux and Lawrence25 put it, there is a devaluation of functions not associated with cleverness and intellectualism in French organisations and sales are mainly an area for self-taught persons.

This situation causes problems to personnel people. Indeed, as the sub-director of a French bank puts it ‘the hardest battle will take place at the sales and distribution level of banking products’. Most of the interviewees

deplored the lack of interest for sales-related functions among graduates:

‘Just try to put an ESSEC or HEC graduate in the field, it is impossible; it does not correspond to his/her image!‘ [personnel manager, French bank]. HEC and ESSEC are considered to be amongst the best schools in the business field.

‘It is hard to recruit for commercial functions since graduates are not particularly interested by jobs in the field’. [recruitment manager, French bank]

The problem existing at the graduate level is even worst for bat + 2 degree holders who are supposed to be the ideal targets for these jobs but are often not interested at all in them. This part can be summarised by the comments of the personnel manager of a French bank stating that: ‘British people are less sophisticated but more commercial than French people. They would sell their grandmother three times spot and buy her forward’!

(iii) The Need for IT specialists The ‘IT’ problem is encountered in both recruitment and training issues. The pace of change in the Financial Services industry makes it compulsory to recruit IT specialists to keep up or stay ahead of competition. The search for IT recruits has to be very flexible. Lloyds, for example does not necessarily look only for computer science or mathematics graduates to join its IT groups. Provided that applicants are bright and adaptable, they can be channelled into IT later. Here again, there is a lack of technical expertise available on the market.*”

Pay Issues Experts4 predict that FSOs wil have to motivate their people to the fullest because they are operating in a new and changing environment. They suggest that performance-related compensation will become more common and will partially replace seniority-based systems. Indeed, in order to implement business strategies and manage their HRM implications, it is impossible to use pay systems favouring attitudes and behaviour contrary to business objectives. Pay principles and business strategies have to be matched. The rationale behind this is that performance-related pay is considered as a motivator within organisations. As Kanter27 puts it, ‘the cost attack is one straightforward way for companies to become more competitive, at least in the short run. In the long run, however, pay varia- tions or rewards, contingent on specific measurable achievements of individuals at every level, are likely to be even more effective in stimulating employee enterprise and channeling behavior’.

Examples of FSOs having introduced performance- related pay are increasing in number. The National Westminster Bank introduced a scheme to link managers’ pay to their performance. This new system was set up to provide increasing differentiation between


HUMAN RESOURCES MANAGEMENT IN FINANCIAL SERVICES ORGANISATfONS

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different levels of performance and as a consequence accelerated the progress of high-flyers up the ladder and retarded the progress of plodders. In the NatWest C)cheme, for example, managers were able to earn bonuses of up to 20 percent of their salary depending

pay policy is performance- and bonus-re!ated. ’ [resources controller, British insurance company]

Training and Development Issues cn their performance.2R

The questionnaire leads to two main results.

(i) There is an increase of variable pay in both countries This evolution, which has been predicted and commented on by experts, is not country-dependent. In both countries, more than five out of ten organisa- tlons have seen an increase in the share of variable pay i’r the total reward package in the last three years. This t:end is all the more marked since only 1.2% of French (- rganisations and 4.7% of British organisations report ‘3 decrease in the share of variable pay.

Money Spent on Training It is impossible to evoke training issues without mentioning the Handy reporP3 and its conclusions that can be briefly summarised as follows: there is a British training problem. The core of it is that managers-to-be and current managers are not educated and trained well enough and that it is a major cause for the lack of com- petitiveness of British organisations. Even a brief literature review provides a large number of comments on the British training situation, underlining the acuteness of the problem.

A 1985 report” on industrial training included the two following statements:

(ii) There is an increase of non-money ‘~~tajn’s ~ture inte~afional com~et~ti~?eness and

benefits in the total reward package in economic performance will be significantly influenced

Elritish FSOs by the speed with which substantial improvements can

The case of non-money benefits is rather different. As be made in the scale and effectiveness of training by

for variable pay, almost no organisations report a g~tish compa?ljes’.

decrease in the share of non-money benefits ‘Few employers think training sufficiently central to (respectively 3.8% of French organisations and 8.3% of their business for it to be a main component in their cor- British organisations). The difference lies in the prefer- porate strategy; the great majorjty did not see it as an e’rce given by French organisations (85.9%) to the status issue of major ~mpo~ance - a few openly stated as qiio whereas 41.4% of British organisations increased much ‘* the share of non-money benefits in their total reward package. This situation can be explained by the fact that That improvement is necessary is spelt out in no the composition of reward packages is influenced by tax- uncertain terms in the Handy report. etficiency considerations as well as cultural and historical preferences. In France, benefits are in broad terms taxed . ‘Britain has neglected her managerial stock, [. . . ] ai the same rate as wages and salaries. At the other end quantity does not guarantee quality, but in crude o* the scale is Britain, where the lower taxation of non- statistical terms we should probably need to be doing money benefits makes them attractive. ten times as much as we now are as a nation, if all

would-be managers were to be relatively educated before The interviewees’ comments highlight some of the they start and were each to spend 40 hours a year in d : fferences in behaviour regarding performance-related o~~the-job fraining in addition to the other less p !y: quantifiable aspects of development’.

l ‘Within the group, my few people work on R The proportion of annual salaries and wages spent on commissjon basis. We do not like wild aduentz4rers. Only training in both countries not surprisingly reflects the 2% of the employed staff receive variable pay and the situation which has just been described. share of variable pay never exceeds 15% of fixed pay. ’ [recruitment manager, French financial services l More than 30% of British FSOs do not know how organisation] much money they spend on training. This

. ‘Some departments are more operational than others and happens rarely in France since organisations of

the people working there want to receive a percentage more than ten employees are compelled to fill in

of the profit they make: that is their claim. lt s~)ur~ds an annual form stating in detail training by cost,

totally unfair to me. I hefieve that bonuses should be type, length, category, sex of employee . _ .

. given to anyone working more than required. The

The level of money spent on training is much

pressure of the people working on the financial and higher in France than in the UK. 76.5% of the

money markets is such that even the President is not French FSOs spend 4% and above of their payroll

able to do what he would fike to do’. ]personnel on training, which represents almost four times

manager, French bank] the legal required level. Only 3.7% spend less than 2% compared to 47.3% on the British side. The gap

. ‘It is ve y important for business culture that managers’ brought to the fore by the Handy report therefore

EUl.!OPEAN MANAGEMENT JOURNAL Vol 10 No 3 September 1992 323


exists in the financial services industry. In all likelihood it will take time to bridge it: the imbalance is getting worse and worse over time and it will be more and more difficult for British organisations to keep up with their (French) competitors on the training side.

Some French interviewees were aware of this problem, mainly because they deal with British organisations for one or another reason:

. ‘The quality of French employees is far better than the quality of British employees. We note it in our organisations’. [personnel manager, French bank]

. ‘The current problem with British people is the training level ‘. [vice-director, French bank]

Methods Used to Monitor the Effectiveness of Training As Torrington and HalP” put it, ‘one of the most nebulous and unsatisfactory aspects of the training job is evaluating its effectiveness, yet it becomes necessary to demonstrate value for money’. And, as the Head of the Cadres et Dirigeants Department of a French bank puts it, ‘the return on investment is all the more difficult to evaluate since investments are huge‘.

Two main features characterise the results:

. The distribution of used methods is similar in the two countries: the two preferred methods are ‘informal feedback from line managers’ and ‘informal feedback from trainees’ and the least used method is ‘tests’ in both countries. Informal methods are therefore used more often than formal ones.

. As for the analysis of training needs, British organisations tend to use more methods at the same time than French organisations. They also tend to have a more formalised approach than French organisations. For example, they have recourse to ‘formal evaluation immediately after training’ in 65.9% of the cases (in comparison to 48.8% of French organisations) and to ‘formal evaluation some months after training in 41.6% of the cases, which is almost twice the number of French organisations using this method (22%). This lack of finesse (interest?) of French organisations is highlighted by the comment of the Assistant to the General Secretary of a French bank: ‘We use a formal grid only to evaluate training agencies. For the moment, we have other priorities than monitoring the effectiveness of our training’.

Conclusion This research based on statistical analyses and interviews leads in broad terms to the validation of the hypothesis that HRM practices can be dependent on the country in which they take place. It nevertheless

invalidates the hypothesis that there is a uniformity 01 practices because of ‘1992’ or because the rapidly- changing environmental features incite organisations tc respond to challenges in the same way. One can therefore wonder whether a European model of management exists.31

The building of Europe is accompanied by a move towards more mergers and acquisitions. Following Line,32 director of the Mergers & Acquisitions Department of Hambros Bank, we think that a precise knowledge of the country and of the practices allows opportunities to be grasped and an appropriate strategy to be developed. ‘Bref, la connaissance du pays determine si I’on joue a un jeu d’adresse ou a un jeu de chance.’ Our findings are therefore interesting within that framework. The major points to be kept in mind by HRM professionals going into or doing cross- Channel business in FSOs deal mainly with four areas:

. working patterns

. educational systems

. legal constraints

. pay systems

Cultural differences exist between France and the UK, which are broadly related to working patterns. There is for example a higher level of formalisation among British organisations;12 responsibilities are less clearly defined among French organisations; methods used tc implement particular policies are likely to be country- dependent. This set of differences is well-known to people working abroad or with foreigners.

What is also important for HRM professionals is the awareness of the impact of environmental features on HRM practices. For example, the differences in educational systems make the requirements for new recruits radically different from one country to the other. it is inconceivable for a British FSO starting a business in France not to hire Grandes Ecoles graduates. This is a question of credibility. In the same vein, a French FSO working in the UK, has to more or less comply with the British pattern of recruitment. The Training Manager of a French merchant bank based in London told us that the Bank followed the French elitist policy, therefore ‘chasing after Oxford graduates - preferably maths BSc holders’, but that they also hired people with A levels, which would not be imaginable in France.

Legal constraints differ according to the side of the Channel people work on. Social protection is also higher in France than in the UK and can partially account for the fact that Community Law on people’s rights is widely rejected in the UK on the basis that it might jeopardise the Thatcher government’s deregulatory approach. Not surprisingly, 1992 viewed as a set of legislative contraints was a British view among interviewees. The resources controller of a British insurance company said in that regard that ‘the Equal Pay and Equal Value legislation coming from Europe cause problems because we have been moving in the opposite direction for commercial reasons. ‘



-

FSOs must have a close look at the way they remunerate their people abroad. Different tax-efficiency considerations induce different ways of paying people, which may cause some problems in the consistency of pay s#:ales. The total British reward package will therefore tend to include more non-money benefits than the French one.

These latter differences should be kept in mind by business strategists so that their strategy proves to be c.)herent with the practices in force in the country in w,hich it takes place and so as to create coherence between the practices in force in the two countries under cl.nsideration. Even if most of the HRM practices examined are country-dependent in the financial services industry, displaying no evidence of uniformity, the debate on cultural specificity is far from being over.

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FRANK BUURNUXS, Centre de Reckerdte -UlU ChXS X257- Institut ~‘Adrn~nistm~ des Enfreprises ffAE) University @an Mot&n - Lyon RI, France 15, quai Claude Bernard - BP 0638 - 69239 Lyon Cedex 02 - France

2% Bourn&s is Ma&e de Con~ce5 (Senior Lecturers

in Human Resources ~a~g~~t. His current research interests are Strategic Human Resources ~~g~~t tHRM1, European HRM, Management Development and the detection and management of ‘high f&rs’. He directed the Price Waterhouse Cranfield Project for France between 1988 and 2991. Beside his teaching and research activities he acted as an internal consultant and researcher in the F&es and Polymers division of Rh~e-P~f~c, His latest kooks deal with the issue of HRM by line managers (39891 and ~~gement ~~e~o~~t in large European Companies (29%).

V~RONI@JE TQRCIW, ~~~~~~ ~~~~~ et Ressources ~~~~n~ Groupe ESC Lyon rZyon Graduate School of Business), 23 avenue Guy de cozfo?zgw, BP 374, 69132 Ecully Cedex - France

Vtfronique Torchy is a Graduate of El?HEC. She holds an MSc in Pewnnel Management f Wversity of

Manchester) and a postgraduate degree tDEA) in socio-economic management. She is currently a Research Fellow in Human Resources Management, MIPM. She studies managerial talent detect&n and comparative management and is mainly involved in the research programmes of the HRM Chair bqrported by Renault Whicules Industrieis, Merlin Gerin and Rh&e-Poulenc) at Groupe ESC Lyon.

326 EUROPEAN MANAGEMENT JOURNAL VoI 10 No 3 September 1992

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