HSBC is not alone in needing to cut staff in some areas, while hiring in others. This is par for the course for a major financial institution needing to address the raft of pressures that come from maintaining a diverse, multi-skilled, and multi-market workforce.
The shake-up HSBC announced last week may have been inevitable in order for it to become more profitable in the face of investor pressure. However, despite significant staff and resource cuts across its business, its compliance functions are still expected to grow.
This is a common position for banks to be in. Recent history has shown that having robust controls and governance systems are non-negotiable business needs.
The risk of fines and public anger resulting from further breaches, such as the Forex and Libor scandals, continues to loom large. This means that virtually everyone in the financial services peer group is continuing a years-long process to secure top quality talent in the risk and compliance spaces. From an HR perspective, this brings three challenges; scarcity of talent, compensation and managing the staff currently in situ.
Scarcity of talent
As the world’s banks, financial services and even larger asset management firms are simultaneously looking for the same set of skills, competition for the best and most experienced compliance experts has become intense. This has been made made worse since the sudden elevation of prominence in the role has called for new skillsets. These include the ability to interpret and implement increasingly complex regulation, yet also the ability to think in terms of the less tangible aspects of compliance like culture, conduct, behaviours and values. Board members are desperate for compliance officers who are capable of communicating highly technical material at a level leadership can comprehend and act on.
Compensation crunch
In line with basic economics, scarcity drives market prices and as such, senior compliance candidates are commanding significant premiums to move. The rise over the past decade has been particularly noticeable. Since the skills required are in some cases highly transferrable, candidates can be entertaining offers from organisations of vastly different sizes. From an HR perspective, this makes operating within the realms of salary bandings for different corporate grades extremely challenging. In this climate, it is possible that non-salary factors such as flexible working may start having greater appeal.
Dealing with existing staff
‘Upgrading’ is a delicate topic, but one that most banks have had to face where compliance functions are concerned. The reality is that some of the long-standing staff may have been hired for a different time, and may not be equipped for the modern regulatory environment and the so-called ‘new normal’. Given the rate of change in the financial services world since 2008, this should come as no surprise. While some staff may need to be re-trained or replaced, talented and skilled compliance workers who have been in place for years provide a different challenge. The likelihood is that these talented and capable people are paid significantly less than those being brought in to augment the functions, rendering them much more vulnerable to poaching. This can be a significant management and HR challenge.
The challenges that HSBC’s recent announcement illustrate show no signs of abating in the near future. However, one could look back at the post-Enron/WorldCom era and the Accounting Policy function as an historical example of what happens when a price spike is created in terms of demand and compensation. Having previously been seen as an arcane subset of the back office, the new accounting regime and introduction of IFRS meant that these people were thrust into the spotlight and commanded huge salary premiums for a 3-5 year period. This bounce ultimately accommodated by the market as banks built large policy functions and/or developed staff from a junior level. The next few years will be quite frothy for the compliance market, but even as larger organisations make painful cuts elsewhere, ultimately both employers and candidates will settle into the ‘new normal’ of a large and prominent compliance function.
