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Abstract
Deutsche Bank has been taken to understand its organizational structure and various factors that are associated with its HR policies. This paper focuses on how the bank uses different HR policies to retain and attract talent.
Recently, due to the financial crisis, the company faced a greater blow to its employee retention and attraction. This led to the deviation of many current and future employees into other industries. However, there were various initiatives that the bank took to handle this situation.
This paper will help one to understand how the bank is using its strategies to foster growth and a better working environment for its employees. And the activities it is using to keep its employees motivated.
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Deutsche Bank AG Organizational Structure
Deutsche Bank was founded in 1870. It is a banking and financial services company headquartered in Frankfurt, Germany. DB currently employs over 100,000 employees around the globe. This is into retail banking, asset management, and corporate and investment banking. This company was founded by Hermann Zwicker, Anton Adelsson, Adelbert Delbruck, and others. The first director appointed by this bank was Wilhelm Platenius in 1872. This bank has handled several mega projects in the past like Northern Pacific Railroad in the US and the Baghdad Railway. This bank has won many prestigious awards such as Commodity Derivatives House, EMEA Structured Equity House, and others. The affiliated companies of this bank are Deutsche Bank – Investment Management, Deutsche Bank AG (Europe), and Deutsche Bank Group Asia. There are five major competitors to this bank. They are Barclays (Investment Banking), Credit Suisse, Goldman Sachs & Co., Morgan Stanley, and UBS (Bank, 2015).
The governance structure of the bank focuses on fostering diversity within the organization. New Head of Diversity has been appointed to look after this approach. The new Diversity team will come from the senior managers that are already within the organization. The bank is expecting to reach full governance process, and the performance measure for the same is set as collaboration between Global and Regional Diversity Councils
The governance of DB is well managed through top executives that have various impressive backgrounds. Its supervisory board consists of 20 executives and is headed by Dr. Paul Achletiner – chairman of the supervisory board of Deutsche Bank AG. Its management board is responsible for managing the company. The management board for the strategic management of resource allocation, financial accounting and reporting, risk management, and corporate control (Fischer, 2002). The chief executive of the company is John Cryan, with Jurgen Fistchen as co-chief executive officer.
As mentioned in the governance section, the company is run by a board of directors and supervisory committee. There is the Group of Executive Committee that includes the members of management boards and senior executives from its different divisions. The group of executive committee helps in the coordination of businesses around the world. The handles day to day management of the bank whether be it a regular review of various business segments, or giving advice to the board of management on any particular issue.
In 2014, the number of staffs employed on a full-time employment basis by Deutsche Bank Group was 98,138. There is the variation of around 1000 employees due to various selling and acquisition of various businesses. There was a reduction of 117 employees in this year.
The other division of DB, Corporate Banking, and Securities, the total number of staff went down by 150 due to different adjustments that were related to market development. On the other hand, its GTB (Global Transaction Banking network) show a surge in its employees' count by 52, and the credit for the same goes to various developments in Trade Finance. In Deutsche Asset and Wealth Management (Deutsche AWM), the count of employees reduced by 136 due to he divestment of Tinley in the UK and adjustments related to Sal. Oppenheim entities in Germany (Bank, 2014).
There is a good number of increase in the staffs in infrastructure functions. 1243 was the increased count of employees in infrastructure functions, and that is due to the growth of the bank's operating platform, and the strengthening of control functions such as compliance, audit, and risk.
When BHF-Bank situated in Germany was divested, the regional structure of this bank was affected. However, if the impact is not taken into consideration, then it can be said that there was no any major impact on the employee count, and it remained stable.
The interesting part to note here is, after 2010, the bank has seen improvement in its female managing directors and directors. The increase in female directors and directors could be seen as above 17 percent. Also, there was an increase in female officers that saw the increase up to 18 percent. According to the 2014 employee data by the bank, 42 percent of the employees are female, and it has remained stable since 2010 on a global level with slight fluctuations since 2010. The bank is following the equality policy that will help it in the long term (HR Update, 2012).
Deutsche Bank AG received a net income of 1.3 billion euros in 2014, and it had net income of 893 million euros in the year 2013. There are several factors that contributed to this achievement. They are: (i) reduction in net non-operating expenses of taxes by 1.2 billion euro, (ii) reduction in operating profit before taxes by 12 billion euros, (iii) reduction in additions to the fund for general banking risks by 200 million euro, (iv) and reduction in tax expense by 676 million euro. All these factors contributed to the improvement in net profit by 370 million euros.
The total assets of the bank have reached 1,520 billion euros as of December 31, 2014. This increase took place mainly due to increases of positive and negative market values of derivatives in the trading book.
After issuing 359.8 million new shares in June 2014, it saw an increase in its share holder's equity by 8.7 billion euros to 45.6 billion euros. This helped this bank propose a dividend of 75 Euro cents per share to its shareholders in 2014 (Markets.ft.com, 2015).
The bank's variable compensation pool in respect of the financial year 2014 and it was 2.7 billion euro. The 45 percent of the pool was deferred over three to five years and made subject to a combination of behavioral and performance-based forfeiture provisions.
The bank focuses on productivity and efficiency metrics to improve the profitability and revenue. It analyzes the transaction mix of a different role and determines the metrics that needs to be measured and what should be the standard at which those metrics will be compared. The bank uses a benchmarking model that helps it determine the staffing requirements along its whole branches and at different levels of the organization. Benchmarking helps it to address the current and expected issues and improve the responsibility among its people to achieve efficiently and effectively (Rodwell, Lam, and Fastenau, 2000).
The bank's staffing model helps the managers and supervisors to understand the situation at hand and then take action as per the need be. The model helps it to get the key activity volumes easily and then measure and analyze to reach a certain decision about any staffing needs.
The net increase in income of the bank slightly decreased by 43 million euro to 8.8 billion in the year 2014, due to the decrease in current income that was down by 440 million euro. The bank has observed an increase in its net commission income, which went up by 381 million euros to 7.2 billion euros. This profitability took place mainly due to a large extent of higher net underwriting fees, which moved up by 191 million euro (Deutsche, 2015).
Deutsche Bank market share was $27.14 in the third quarter of the current year, which fell by 5.7% from the previous quarter. Regarding customer acquisition, Deutsche Bank ranks second in trading rates and credit products related to the Group of ten countries. The bank has reached the third position. The company has raised 8.5 billion euros in capital in May. Deutsche Bank is the top ranked dealer by market share in Asia's foreign exchange market.
The investment policy of Deutsche Bank is focused on principal preservation through a stable net asset value with the good amount of flexibility for daily liquidity. The policy of this bank is transparent, and its investments only in rated instruments helped it earned the benefits.
The investment policy is to achieve a medium to long term positive investment performance, bearing in mind the opportunities and risks in the international capital markets (Deutsche, 2015).
There are various partners of DB in its different business functions. Recently is partnered with Microsoft, HCL, and IBM to launch a three innovation labs. This will be used for the development of financial technology for its use and is ready to invest 1 billion euros for the same within next five years.
The Deutsche Bank is using various strategy in its multiple business segments. However, it has major three segments that can be said as the important pillar of the bank. The first one is to increase the market share of the company through more customer acquisition in near future. This strategy will help to gain more share in near future in comparison to its competitors. The second strategy of this bank is to focus more on the employee welfare programs. This will help the bank achieve benefits regarding more employee retention and productivity (Cooper, 2015). Recently due to major economic downturns and, company saw a major blow to its employee policies. Now the company has improved a lot since 2008 and has in place better employee supportive systems. This has made this bank a good place to work. Now the third strategy of this bank is to work on financials of the company and improve share value that has seen a major slump in the decade. The company is planning to pool in more investors and investments that it can use to improve the company and gain more market value.
There are various risks associated with the proper business functioning of this bank. The major three are internal risks that are associated with the company like dependence of group's profit structure in certain situations that are internal to the company.
There is various ‘gap risk' that are associated with the company. This can be situations like compliance to regulatory issues, for example, according to Securities and Exchange Commission, Deutsche Bank has misstated various derivative portfolios during the financial crisis (Banjo, 2015).
Employee Relations and Retention
The long-term success of any company is always linked with the efficient and effective management of people. The employees of the company are the pillar that is used to implement all kinds of corporate strategies.
The above-mentioned sentence is the philosophy of this bank. Deutsche Bank has seen many cultural changes in its different facets of the business. It is focusing on turning the belief and values of the company into action with the help of its employees.
Though there were few challenges that were faced by this bank such as financial crisis that moved away good employees, and this effect also saw less number of talents getting attracted towards the bank (Presbitero, 2007). The company has initiated few changes bank in 2013 that could help it win back the lost trust among the employees, and it will also help it bring back more shareholders when they understand that the initiated change is being adopted by the employees.
DB has understood that human resource plays a key role in the transformation of a culture that includes risks and rewards and fosters teamwork and partnerships. The development of culture is important in this bank as it is the core concept on which the employees function and kept attached to the environment (Muller, 1999).
DB acknowledges that competition in the business world for the upcoming talents are fierce. Therefore, the company needs a right team that can use right resourcing methodologies to attract individuals that are qualified and has a stable track record. The employee acquisition methods will be specific to brand needs and requirements.
The company is focused on developing talent and creating responsible leaders that can understand the complete banking system and can contribute to the growth of DB.
Human resource department of the company is focusing on bringing more operational excellence into the company. This will be done by standardizing the information technology framework and contributing to the efficiency increment. It will help in bringing better organizational designs that can help place right people in the right roles at the right locations to foster growth and achievement.
The bank has also tried to redesign the reward structure that will help it in bringing more innovative thinking into the system (Bank, 2015). It is obvious that public perceive that compensation in the banking sector is worse, and the credit to this thinking goes to the recent financial crisis. The company is focusing on bringing the required changes to eliminate that image. The bank will redesign its compensation and benefits schemes that will help its strategic people to take more initiatives.
It is also working towards bringing the difference in the diversity. The first criteria for diversity will be gender based. As the mentioned initially that out of total employees, 45 percent are female, this will attract more such talents into the systems. The bank is trying to reward its people who have done well on its job and motivate those who are into innovative thinking (Woodhams, 2006).
The bank went through many financial challenges that impacted its image as an employer. Now it is working towards it to retain and bring more talents on board. The company is focusing on turning its values and beliefs into a business performance that can be measured. The major focus will be in fostering a culture that rewards performance equitably.
The HR department will play a major role towards the same by undergoing three implementation phase. The first phase would be to support and challenge everything. That is, when any words will not transform into actions, then it will be denoted as lack of progress. The second phase will be to harness the momentum. The bank is looking for employees that could act as a change agent and carry the culture of the bank to its various branches. The third phase will be to communicate effectively and efficiently. The HR department will be setting up a system that will focus on collecting feedback and calculating successes. This will help in bringing more consistency across the banking network. It will try to do this by mapping the values and beliefs of the company to its key people, its process, and the tools that are into implementation. To kick start this process, HR department took pulse survey to measure awareness among its people about the values and beliefs this company has established. It has also focused on conducting surveys that help the bank understand how its employees feel, think and act. This survey was aligned with values and beliefs with that of the bank (Loo, 1993).
The bank is working with different compensation methodologies as suggested by CRD IV of the European Union. It states that the ratio of fixed to variable remuneration for the senior employees should be 1:1, however, it can be increased 1:2 after the approval of shareholders. Deutsche Bank has implemented many recommendations that were made by the committee and still progressing towards the further successful implementation of rest of the recommended modules. There are new policies and processes in the decision making that are documented in the compensation.
The bank has considered variable compensation as the important element that can be used to retain talented employees and reward them on the way. This helps the bank to align the future performance of the Group with that of the compensation module and thus to foster more growth. However, it is very important that the bank should structure its compensation structure and process appropriately, for example, enhancing the variable compensation forfeiture provisions given increased industry forfeiture. It has also worked over modules that enhanced the disciplinary processes. To overlook this process, the bank established a GDOP on a permanent basis in 2014 to handle the decision making and recommendations (Annualreport.deutsche-bank.com, 2015).
The HR department has helped the bank in some initiatives. The one such initiative was bringing in place the efficient culture building mechanism to build a better base for the bank. The bank and its HR department are focusing on four strategic goals right now; they are focusing on better quality for clients, bringing more flexibility, placing controls more effectively, and improving the efficiency regarding costs. The HR department of the bank has focused on establishing a workstream that can help introduce the principles of organization design. This will help serve different purposes such as increasing the span of control, reduction in the management layers, consolidation of the similar functions throughout the bank. This will help in the further establishment of financial of non-financial benefits, and thus help in creating a model that will be more sustainable. This model will have different key components such as a culture that fosters collaboration, cost structures that are more competitive, talent improvement, and reduction of complex structure and setup. These will help in the establishment of the lean structure thus bringing more benefit and efficiency to the banking network of Deutsche Bank.
The HR department is working towards the creation of a sustainable environment that can foster motivation. The company is focusing on four key elements that can help is achieve its goal. They are (i) succession management, (ii) readiness, (iii) senior appointments, and (iv) personal development. The succession management will help in the better management of the corporate talents that are important for the company's future growth. The succession management will help the company to manage actively the future requirements of the company for its key positions. The other element is appointments of senior employees from across the bank. This identifies key senior talents and attracts them to the critical positions within the company. It helps in achieving cross-divisional mobility, and developments that are of high impact, and retaining the talents are the key to the success of the company.
The recruited employees are passed through various training modules. It includes theory, practice, and responsibility. The first two modules are used to learn the specialist skills and apply them on an everyday basis while responsibility helps the new employee to gain the soft skills that are very important for the success (Svoboda, 2001). Due to various market slumps and a decline in the reputation of the bank, it is facing a challenge in attracting talents from graduate colleges. The company is trying to face this challenge by implantation of targeted communication activities that are aimed at fresh graduates. Also, there are specific changes that are brought in training module to suit these types of candidates. This has helped the company achieve a good amount of trainees, and the interesting part is, this increase has brought diversity in it. Graduates from various cultural background join into the training programs, and eventually into the company.
To acquire the right talent, the company has implemented various methods. Programs such as ‘One Bank Leadership Program' from the company has helped it acquire cross-divisional talent breaking the barriers and enhancing the integration among divisions (db.com, 2015). It has also implemented modules that can help internal talents to grow within the company. The another factor that is taken into consideration is the keeping diversity in the recruitment of the talent regarding culture and gender. Attracting graduates and interns helps it to choose right talent as earliest as possible. These talents are used to do various researches and working through different case studies that solve various problems within the organization.
The company has also kept the focus on maintaining rewards that can help the employee work with full motivation. The first being the balance in the work and life. The bank provides flexible working hours that helps the employees work from within their comfort zone and thus helping more productivity and innovative thinking. It has also established family care unit around the globe. Currently, it has 400 childcare spaces near workplaces that help working mothers focus on their work and not to worry about their children.
The company also provides share plans in which employees of the bank get an opportunity to buy the share of the company. The shares create the feeling of ownership and association among the employees with the company. This helps them work with greater motivation and a feeling of association.
The bank also gives their employees sustainable retirement planning benefits. The bank is paying all its global pension obligations on its own. The Interesting thing is, in Germany, the bank gives its employees the option of occupational pension plan that works as a supplement for the employer in their social security benefits.
The bank understands that change cannot be imposed, it can only be fostered through showing examples. The leaders of the organization will show the change in adopting themselves. And then it can be assumed that employees will follow the lead.
Therefore, from recruitment to training, the main focus of the company is always on fostering leadership. To foster leadership, the company has also worked on different innovative ideas. For example, rolled out an e-learning module in 2013 to help people challenge their misconceptions or biases and improve decision-making ability. The name of the module was, "Great minds don't think alike – The power of different perspectives".
Also, the bank always tried to adopt the successful methods that are contributing well in other companies. The company has always tried to bring in tailored leadership programs for female employees to help them get to the podium they deserve.
The company has focused on delivering transparency through proper management of its employees. We saw various initiatives that company took and were in the process to take that can foster more growth and the opportunity to the employees working for the company and the company in turn. The major strategies adopted by the company can be said of the key factors that can contribute to attracting employees that are talented and looking for an environment to grow.
Orientation program for the bank is used to train the new candidate to get the overview of the organization. Also the idea of what work they will be performing and the things they need to learn to conduct their duty successfully. The orientation cost of the company is calculated by adding the cost of recruiting trainers, venue selection, food and lodging of the candidates, staffs and trainers, and other variables. Every year the orientation program cost the company almost USD 10,000 for one week.
The bank also conducts counseling sessions periodically, which helps its employees to stay motivated and work without any stress. The counseling is done most often by senior managers, or need be the bank hires external experts to counsel the employees on any particular issue. The cost of counseling depends on the number of employees taking part in it and also the charge an external counselor will charge, thus it various every year.
The average cost of completely inducting employees into the banking system is low than the value they are generating for the company. This is calculated as the difference of recruiting costs, salary, benefits they are given, social security and other expenses mandated by law, incidental expenses, and the employee productivity. The calculation of employee value addition to the bank shows that cost is lower than the value they add.
The absence rate in the bank is below average (comparatively other banks), and the reason behind is the good working environment of the bank that keeps them stick with their job enthusiastically. The absence rate is calculated as workdays lost due to absence divided by the product of average employee population and the number of work days available per employee (Huczynski and Fitzpatrick, 1989). The average absence rate of the employees of the bank is 15 percent. The absence rate affects the cost of the bank up to 5% that is huge in monetary terms.
It has been seen that most of the time, regular absenteeism de-motivates other employees. The reason behind is, the staffs who are present usually handle the job that had to be done by the absent employees. This increases useless workload over them and eventually reduces the productivity. However, the bank has taken some steps that have a positive effect on the employee absence rates such as light and fun filled environment, recreational activities, and others.
Employee turnover affects the overall productivity of the bank affects the bank in monetary terms (Ericksen). However, in comparison to other banks, it has fewer turnovers. We are taking 100 employees who have an average salary of per year is $50,000. As per the current attrition rate of 25 employees per year, and productivity of each employee as two times their salary. Then the annual cost of employee turnover cost comes to $646,404. The total employee turnover of this segment of employees is 25% that is considered too for such a reputed bank.
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