Evidence Based Reward Management by Michael Armstrong

Author:Michael Armstrong
Language: eng
Format: epub
Publisher: Kogan Page

In the next chapter we describe how the review component of evidence-based reward management is carried out.

Case study: an analytical but values-driven approach to managing reward and incentive arrangements at Standard Chartered Bank

Overview and background

Standard Chartered’s strategic intent is to be the world’s best international bank, leading the way in Asia, Africa and the Middle East, and it appears to be well on the way to achieving that aim. Headquartered in London and quoted on the London and Hong Kong stock exchanges, it is one of the UK’s top 25 companies by market capitalization. It employs more than 70,000 people representing 125 different nationalities and spread across some 1,700 branches and offices in 70 countries. Over 2,000 of its staff are on international assignments at any one time.

The company was formed in 1969 from the merger of two venerable banks: the Chartered Bank of British South Africa and the Standard Bank of India, Australia and China, both founded in the mid-nineteenth century. Its growth in the past five years has been particularly rapid. Almost uniquely amongst major financial institutions, it has continued to grow through the global economic recession, with its end of year results for 2008 showing operating income up by 26 per cent to almost $14 billion and operating profit growth of 13 per cent.

The bank’s reward policies, like all of its people management, are coordinated and assessed within a sophisticated framework of human capital management and measurement. But the alignment of reward policies with the Bank’s values is especially important, and this has been particularly evident in the review it has recently carried out of both its executive and bank-wide remuneration arrangements.

This occurred in the context of considerable media criticism of incentive practices in the financial services sector as a whole for their perceived role in contributing to the credit crunch and financial crisis, and a specific review being carried out by the Financial Services Authority. Standard Chartered reviews its reward and incentive arrangements on a regular basis, but the latest changes it has made to improve reward effectiveness in this context of industry criticisms illustrate both some of the core principles of effective incentive plans and the need to consider and manage reward in the wider context of the firm’s business strategy, management processes, and culture and values.

This case study is based on an interview with Dr Neil Cuthbertson, Group Head Reward at the Bank, with input also from Dr Tim Miller, the Director of People, Property and Assurance for the Bank.

Measuring and developing the contribution of people

To understand how reward policies and practices are developed and assessed at Standard Chartered, you first have to understand how the contribution of people and the policies to develop and grow that contribution are measured. The Bank’s approach to managing its human capital is highly structured and data and evidence-based, and consists of three distinct steps. First, understanding the sum total of talents, knowledge and skills of employees; second, developing the ability to grow and apply these

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