Pwc vietnam 2013 vietnam banking talent study

The Talent Gap: A review of human capital in Vietnam’s banks March 2013 Preliminary version

www.pwc.com/vn

A publication by the People and Change Team – PwC Vietnam

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Foreword

Dinh Thi Quynh Van

General Director,

PwC Vietnam

Banks in Vietnam have prospered in recent years, with significant growth and healthy profit margins. The situation however is getting more difficult as the cost of labour continues to rise, as economic conditions slow down, with problems of non-performing loans and increasing regulatory change . Looking forwards, as banks set out on ambitious transformation and growth journeys, getting the right people with the right skills into the right roles has never been more important.

Vietnam’s banking leaders have cited the talent factor as a key challenge to achieving further planned growth. The competition for talent is increasingly fierce. The current profile of skills and capabilities of the banking workforce does not match the demands of the next ten years.

At the same time, demographics in the workplace are changing. More than 70% of the workforce in Vietnam’s banks are ‘millennials’1. This group will shape the world of work for years to come. Attracting, developing and retaining the best of these millennial workers is critical to future business. Sophisticated mastery of technology, high expectations, demand for progressive culture and thirst for rapid career development – are some of the things that set millennials apart.

So how should pro-active banking leaders respond? In this report, we explore some of the key trends, issues and concerns of banks in Vietnam. We also provide suggested recommendations for overcoming these hurdles.

I hope this report serves as a useful reference point as you map out the human capital plans for your organisation and look forward to the possibility of assisting your bank in meeting these challenges as they unfold.

Dinh Thi Quynh Van

General Director, PwC Vietnam

1PwC defines ‘Millenials’ as those born between 1980 and 2000, sometimes known as ‘Generation Y’

2 March 2013 The Talent Gap: a review of Human Capital in Vietnam's Banks

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Contents

Introduction.................................................................................. Executive Summary....................................................................... Key Findings

1. Attracting talent………………………………….……………………. 2. Developing internal talent..………………….…………………… 3. Retaining and rewarding employees.....……………………… 4. Leadership and succession planning..………………………… 5. People processes and systems

10 Recommended priorities for banks.......................................... Appendices: Metrics formulae……………………………………..…………….…………… About PwC’s People and Change Team........................................ Acknowledgements....................................................................... For further information.................................................................

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Introduction

This paper examines the key human capital issues and trends facing banks in Vietnam, from the perspective of bank CEOs and HR Directors. ‘Talent’ is one of those hot topics we hear a lot about within the Vietnam banking circuit. But so far there has been little hard research into this critical topic. We sought therefore through this study to develop some hard facts and figures about the talent landscape and the true issues at hand. In addition we have highlighted good practices already taking place in banks and from Vietnam’s FMCG sector and proposed action areas for the future.

The report was prepared based on data collected from 11 banks in Vietnam during December 2012 to March 2013. Information was collected through two key methods:

1. CEO & HRD Interviews: face to face interviews were conducted with CEOs and HR Directors.

2. Organisation Questionnaires: data collected from participating banks relating to human capital. For list of key metrics and formulae, refer to the Appendix.

The average bank in the report had annual revenue of 7,860 Bn VND ($378m USD) and 1,630 employees. The participating banks were: ANZ, Citibank, Deutsche Bank, DongA, HSBC, Oceanbank, PG Bank, Standard Chartered, Techcombank, Tien Phong and VIB.

This report was prepared by the People and Change team of PwC Vietnam, part of the Advisory service line, and sponsored by PwC Vietnam’s senior leadership. The team included Dinh Thi Quynh Van (General Director), Ian Lydall (Chairman), Stephen Gaskill (Partner), Edward Chien (Director), Pamela McGill (Associate Director), Vu Thi Le Lan (Associate Director) and La Tran Minh (Assistant Manager).

The team was supported by PwC Saratoga Asia-Pacific Centre based in Singapore. PwC Saratoga is the world’s leading source of workforce measurement and analytics ; it has leveraged technology and measurement to help organisations maximise return on HR investment for more than 30 years.


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Executive Summary

“The banking market in Vietnam is still in an early stage of development; just 13% of the population have bank accounts, compared to 40 – 45% in neighbouring Malaysia and Indonesia. There is significant scope for growth and reasons to be optimistic. Having said that there are more than a few challenges which lie ahead – the utmost of which is ensuring we have the right people with the right skills to lead our business” Sumit Dutta, CEO HSBC Vietnam

Vietnam’s banking leaders remain cautiously optimistic about the future of the sector, but highlight some of the key challenges which will mark out the landscape of the sector.

The context in Vietnam

Several forces are converging to change dynamics in Vietnam’s banks.

• Regulatory change. Banks face ongoing and significant upheaval as local and international regulations rapidly change. Change in policies, culture and structure creates a need for strategic HR support.

• Rising people costs. The cost of salaries in Vietnam has increased steadily in the past 5 years with no measurable improvement in productivity. With the rising costs set to continue, productivity will be increasingly important.

• Resource and skills mismatch. Talent is in short supply and the skill level of the current workforce does not match future plans. Programmes to develop and retain talent are needed.

• A younger workforce. Increasing numbers of millennials in the workplace with new demands and high expectations. Banks need to re-think their corporate structures, talent and reward strategy to keep and motivate this demanding group.

• Risk of collapse. The situation in many banks is unsustainable, issues such as non-performing loans will require re-structuring and transformation. This creates a new and urgent demand for change and the specialist technical and transformational skills.


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Key findings

To better understand the talent challenges in Vietnam’s banks, we listened to viewpoints from CEOs and HR Directors and gathered key data. Our research revealed significant challenges and concerns in five key areas: attracting talent, developing internal talent, retaining and rewarding employees, leadership and succession planning and people processes and systems.

1. Attracting talent

Unabated hiring

• The ability to attract and recruit the right talent is fundamental to executing banks’ growth strategies. Banks are continuing to recruit aggressively and most CEOs told us that this would continue. Hiring rates are currently at 19%2. However less than half the recruitment is growth driven. The rest is to replace leavers from existing roles due to turnover.

• Retention of new joiners is a good metric for the effectiveness of recruitment. Currently >15% of new hires leaves in the first year, but many banks are not measuring this. This is a real and growing cost to banks.

Fierce competition

• Competition for talent in the market has never been more fierce, with 70% of external

recruits coming from competitors. As key skills become more scarce, competition and costs go up. In particular, competition for senior and middle management levels and specific skills such as risk management, strategic transformation and relationship managers are in the highest demand.

• Most banks look to the competition for new hires (almost exclusively) but some cite success in international recruitment or from other industries, for instance sales and customer service professionals are top notch within FMCG.

• Banks also need to think more broadly. Millenials are looking beyond just financials when evaluating employers. Inflated salaries may attract new employees, but it won’t make them stay and it won’t provide the best value for money.

2Hiring rate is defined as the number of new hires as a proportion of the total number of staff in the company


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2. Developing internal talent

Building not buying

• Shortages in the external talent pool means that banks need to build skills from within. This takes time and well-considered, multi-faceted programmes for training, coaching and on-the-job learning. We observed that half of the banks surveyed do not have a dedicated talent function within HR. Many banks noted challenges with their structures, which made lateral movement difficult for staff.

Lack of mobility

• Since many Vietnamese, particularly women, are not geographically mobile this makes it harder to implement national or international secondments or rotations.

Rising expectations

• 70% of the current banking workforce are millennials. They are demanding and discerning - they want good development, coaching and learning as standard.

Managing the rookies

• We found that 38% of the current workforce is a ‘rookie’, which means they have less than two years tenure. This is relatively very high and creates a risk of instability and lack of knowledge.

3. Retaining and rewarding employees

Lack of incentives to stay

• Attrition, although it has slowed down, is still a problem. Resignation rates are 14% with around half of those resignations from high performers. Leavers cite ‘better packages’ and ‘lack of career advancement’ as the top two reasons for leaving.

Inflated salaries tempt talent

• Local banks are offering inflated salaries to tempt experienced staff from the international banks. This is working to a point, but anecdotal evidence suggests that retention is a challenge.

Mismatch of rewards?

• Most banks are offering blended flexible benefits, with health-care and life insurance, social activities and gifts and share options listed as the top three. However, what is not clear is whether this is the right blend of rewards to satisfy the workforce demographic which is strongly biased towards ‘millenials’. It was noted that the year-on-year pay increases have slowed dramatically from 19% in 2009 to just 5% in 2012. Likewise promotion rates dropped from 61% to 12% in the same period.

“In general the level of skills is still developing. Many staff lack basic skills like communication, enquiry skills and team-work. We need effective programmes to build up our staff in the long-term. This will take time.” CEO, An International Bank in Vietnam


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4. Leadership and succession planning

An evolving process

• While most banks do have a formal process to identify and develop future leaders and succession plans, many noted that this is quite a new process. Some felt unsure as to the effectiveness of the existing programmes and the criteria which were being applied. It was interesting to note that just 25% of key leadership positions are filled by named successors. Clearly banks are working in the right area, but there is still some room to improve.

Lack of leadership skills

• Many leaders cited lack of leadership skills as a critical gap – skills such as communication, coaching and strategy are in short supply and take time to develop. Most banks have programmes in place, some of which include executive coaching and tailored training.

5. People systems and processes

Changing role of HR

• The role and perception of HR is changing rapidly towards a more strategic and value-adding function. For some banks however, HR is struggling to keep pace with the new demands of the role. Critical HR hours are skills being tied up in administrative tasks, such as payroll.

• Expectations from CEOs on the HR function are high. HR professionals need to continue to grow their skills in communication, change management and in-depth knowledge of the business in order to become effective business partners.

Measure to manage

• Most HR functions have regular reporting in place. Effective measurement will be of increasing importance, particularly in relation to measuring and managing improvements in workforce productivity and the value-for-money from HR services.

Just 25% of

key leadership positions are filled by named individuals from the succession plan

“There is a shortage of qualified managers in the whole banking industry. In order to grow sustainably, DongA Bank will try to mitigate the downside of our ‘family culture’ while preserving that spirit.

Mr Le Tri Thong, Deputy-CEO, DongA Bank


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The findings highlighted in this report create a clear call to action: Vietnamese banks need to do more to develop their people, and to compete to overcome the talent gap. Here we highlight 10 priority recommendations.

Attracting talent

1. Cast the net more broadly

Redefine the recruitment talent pool more broadly looking for instance to other industries, internationally or to input from retirees.

2. Upgrade hiring and on-boarding processes

Establish stream-lined effective processes for attracting and recruiting the right candidates at scale and pay more attention to retention and support for new joiners.

Develop internal talent

3. Maximise training

Review employee training programmes and ensure you are getting the most from your investment in training.

4. Pay attention to line managers

Invest in line managers to improve quality of ‘on-the-job’ coaching and development taking place.

Retaining and rewarding employees

5. Keep your people happy, keep your people

Invest in employee engagement programmes, measure engagement regularly and use the results to inform staff development as well as rewards.

6. Look beyond financial rewards

Re-shape rewards to meet new workforce demographics, paying close attention to the millennials’ needs.

7. Differentiate the pay bill

Set rewards strategically and focus investment on mission critical roles and high performers.

Leadership and succession Planning

8. Equip leaders

Invest in coaching and training for leaders in soft skills.

People processes and systems

9. Invest strategically in HR

Simply put, if you want to attract and develop the best people, you need a high performing HR function. Invest to develop HR professionals and streamline HR processes for instance HR shared service centres. Re-focus HR hours to value-adding activities.

10. Systematic and analytical approach to HR

Upgrade HR measurement capability and pay close attention to workforce productivity and employee engagement.

10 Recommended Priorities for Business

The findings highlighted in this report create a clear call to action: Vietnamese banks need to re-think recruitment, retention and reward policies and to do more to develop talent. Here we highlight 10 priority recommendations.


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10 Recommended Priorities

Attracting talent



Develop internal talent

3. Maximise staff training, linking to strategy






Leadership and Succession Planning

8. Equip your leaders



10. Take a systematic and analytical approach to HR


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1. Attracting Talent

Banks in Vietnam are facing significant challenges attracting and acquiring talent.

Unabated hiring

As banks in Vietnam embark on ambitious growth plans, the ability to attract the right talent becomes increasingly important.

As shown in Figure 1 below, the external recruitment rate for Vietnamese banks is 19% on average. This compares to an Asia Pacific average of 27% for banks. Vietnam’s banks therefore appear to be hiring at a slower rate compared to banks in the APAC

region, which may be explained by the recent-slow down in the Vietnamese market.

As business confidence in Vietnam grows, we can expect hiring levels to increase in the coming years.

Interestingly, our analysis suggests that the current levels of recruitment are linked to replacing those who have left, rather than just growth.

The external recruitment rate is 19% on average

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Bank 1 Bank 3 Bank 4 Bank 5 Bank 7 Bank 8 Bank 9 Mean APAC

Figure 1: External recruitment rates

Bank names are not disclosed to protect confidential information. Some participants are missing because this information was not provided. APAC = Asia Pacific, this is the average value for banks in Asia Pacific from PwC’s Human Capital database, Saratoga.


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Detailed examination of recruitment practices reveals that less than 50% of new hires were made to fill a newly created role; the remaining hires were to fill existing roles that became vacant as a result of turnover.

Retention of new joiners is a good metric for the effectiveness of recruitment. Currently >15% of new hires leaves in the first year, but many banks are not measuring this. New-hire turnover causes inefficiency and is very costly.

Fierce competition

As recruitment rates rise, many banks are struggling to find candidates with the right skills and experience for the job. This is resulting in a number of challenges – banks are forced to relax hiring criteria or to pay a premium to compete for ‘in demand’ talent. We can see that 70% of new hires are coming from the competition, and for some banks this figure is as high as 99%. In particular, competition for senior and middle management levels and specific skills such as risk management, strategic transformation and relationship managers are in the highest demand.

This competition is driving up the cost of salaries to the point where some specialised roles are more expensive in Vietnam than in more traditionally expensive labour markets such as London or New York.

Local banks tend to be more willing to inflate salaries to attract talent. This trend is also apparent in many other countries in the region.

Some banks cite success in international recruitment or from other industries, for instance sales and customer service professionals are top notch within FMCG. As international banks shift operations increasingly to Asia, this is resulting in redundancies among experienced bankers in the West. This creates a new untapped talent pool ripe for recruitment, if suitable compensation and local on-boarding can be developed.

Increasing salaries is not a tenable long-term solution for banks. Banks need to think more broadly. In addition, millennials are looking beyond just financials when evaluating employers. Inflated salaries may attract new employees, but it won’t make them stay and it won’t provide the best value for money. There must be increased focus on holistic rewards and on internal training and competency development programmes for staff. We explore how banks are developing internal talent more in Section 2 and how banks are retaining and rewarding employees in Section 3.

>70% of

external hires are being ‘poached’ from the competition

Depending on job, costs of new-hire turnover can be up to 100% of annual salary for managerial and professional staff, and up to 150% for senior management


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2. Developing Internal Talent

Building not buying

With a shortage of available external talent, internal staff development programmes are of increasing importance. Building skills takes time and requires a well-considered, multi-faceted programme for training, coaching and on-the-job learning. Some banks noted successes with using recently retired bankers who provide a wealth of knowledge and experience and have the time to spare, to act in the capacity of external ‘coach’ or trainer. Some banks also cited a ‘mind-set’ challenge among some management, who were either unwilling or unable to act as effective coaches or mentors for more junior staff. Many banks noted challenges with their structures, which made lateral movement difficult for staff. Banks need to build a culture of nurturing and developing talent, among their current middle and senior managers.

Lack of mobility

One overwhelming challenge we heard, most acutely from the international banks whose workforces are dominated by females, is that of lack of mobility. Due to close familial cultures and ties, it is more difficult for the Vietnamese and particularly women to accept national or international assignments. This is one of the critical methods used to develop ‘home-grown’ talent in other developing markets, so creates a relative disadvantage to Vietnam. Having said that, one international bank reported success in over-coming this, by developing programmes that worked for their women. This was through a combination of effective communication of the benefits of the programme, effective supporting policies, such as remuneration and travel policies and making the assignments short, 3 months to 2 years, depending on circumstances.

“Staff choice is an important principle that we uphold – so our staff are not forced to take overseas placements rather this is provided as an opportunity and a choice for advancement.”

Huynh Thi Ngoc Truc, HR Director, HSBC Vietnam


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Rising expectations

As noted previously, a clear finding from the study is the prevalence of millennials among today’s banking workforce - 70% on average and as high as 84% in one bank. PwC’s research into millenials3 reveals what truly sets them apart. This generation has grown up with broadband, smart-phones, laptops and social media being the norm, and expect instant access to information. This is the first generation to enter the workplace with a better grasp of a key business tool than more senior workers. Millenials behave differently too. Their behaviour is coloured by their experience of the global economic crisis and this generation places much more emphasis on their personal needs than those of the organisation they work for. Millenials tend to be uncomfortable with rigid corporate structures and turned off by information silos. They expect rapid progression, a varied and interesting career and constant feedback. The particular characteristics of millennials requires a focussed response from employers. They want a flexible approach to work, but with regular development, feedback and advancement. They tend to value similar things in an employer brand that they do in a consumer brand. These are all characteristics that banks need to actively address in their people and reward programmes.

70% of the workforce are millennials, for whom skills development is of critical importance

Managing the rookies

The ‘rookie ratio’ measures the proportion of employees who have been with the company for less than two years. We found that 38% of the current workforce are ‘rookies’. While an injection of fresh talent into the organisation has its advantages, excessively high levels can create problems in maintaining a strong organisational culture, and retaining critical knowledge and relationships. The loss of productivity and time when a critical employee leaves and the expenses related to re-training should not be underestimated. A further consequence of high rookie ratio is that learning and development activities become biased towards technical learning (“learning for today”) at the expense of developmental learning (“learning for tomorrow”). This is because businesses are forced to focus on the core operational knowledge amongst their short-term employees, further exacerbating the issues around the development of the future leadership pipeline.

3 Millenials at work: Reshaping the workplace in Financial Services, 2012

38% of the workforce are rookies, or those with less than two years at the company


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3. Retaining and rewarding employees

Lack of incentives to stay

Attrition seems to have slowed down in recent years, perhaps associated with depressed market conditions. However this still presents a problem for many banks. We measured the rate of voluntary resignations and, where known, the proportion of those which came from high performers. We found an average resignation rate of 14% with around half of that coming from high performers on average. Interestingly only four of the participating banks provided data on the number of resignations from high performers.

Figure 2: Resignation rates

Bank names are not disclosed to protect confidential information. Where data is missing this information was not provided. APAC = Asia Pacific, this is the average value for banks in Asia Pacific from PwC’s Human Capital database, Saratoga.

This begs the question whether banks are paying enough attention to retention of their most important people – their high performers. The rate of resignations may reflect disengagement among the workforce. A study conducted by the Corporate Executive Board found that employees who are most committed to their organisations give 57% more and are 87% less likely to resign than those who consider themselves disengaged4. Leavers cite ‘better packages’ and ‘lack of career advancement’ as the top two reasons for leaving.

4 Corporate Executive Board, ‘The role of employee engagement in return to growth’, Bloomberg Business Week, August 2010

The voluntary resignation rate is 14% but only 5 banks provided data about resignations from high performers

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Bank 1 Bank 3 Bank 4 Bank 5 Bank 6 Bank 7 Bank 8 Bank 9 Bank 10 Bank 11 Mean APAC


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“Sometimes when staff do leave, we find there is a queue of people hoping to come back, and some have come back successfully. I think staff are attracted to come back because of our strong corporate culture and staff development programmes. Our culture is a strong advantage, we are very diverse with a global outlook and we reward our people based on merit."

Brett Krause, Managing Director of Citibank, Vietnam

Promotion rates have dropped significantly from 61% in 2009 to 12% in 2012

Mismatch of rewards?

Among the flexible benefits on offer, health-care and life insurance, social activities and gifts and share options were listed as the top three by popularity. It is clear that banks are paying close attention to the pay bill, with almost all banks indicating that they review pay benchmarks regularly to set compensation levels. There has been a steady year-on-year slow down in pay increases from 19% in 2009 to just 5% in 2012. Likewise promotion rates dropped significantly from 61% to 12% in the same period. We know that millennials are are particularly interested in advancing their careers, therefore its likely that this slow-down in promotions will have had a detrimental impact on their engagement.

Inflated salaries tempt talent

As noted previously, we can see that there is fierce competition among the banks for talent, and the vast majority of external recruitment comes from the competition. We observed a strong trend among local banks to offer very high salaries, compared to their international banking peers, to tempt experienced staff. This is working and it is hard for young talent to pass up the generous packages and advancement on offer. The evidence however suggests that while large packages will attract new talent, it won’t make them stay. Retention of staff requires a more sophisticated and whole-sale overhaul of corporate structures, policies, compensation and rewards. While we can see that most banks do adopt a flexible approach to benefits, its not clear to what extent these have been tailored and optimised to meet the specific demands of the millennials in the workplace.


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4. Leadership and Succession Planning

“Our staff have strong technical skills but need to develop key management capabilities, especially people management skills.”

Mr Nguyễn Hưng, CEO, Tien Phong Bank

An evolving process

While most banks do have a formal process to identify and develop future leaders and succession plans, many noted that this is quite a new process. Some banks for instance have not yet created a link between their employee performance management process and succession plan. Some of the HR Directors we spoke to felt unsure about the effectiveness of the existing programmes. They said that the process for identifying talent was not clearly defined. “We have a talent pool but without clear criteria and definition, sometimes talent is chosen by ‘feeling’ rather than through a clear, transparent process”, HR Director, a local bank. We noted also that just 25% of key leadership positions are actually filled by named successors from the succession plan. Clearly banks are working in the right area, but there is still some room to improve.

Lack of leadership skills

Many banks cited lack of leadership skills as a critical gap and this is an area of attention. Skills such as communication, coaching and strategy are in short supply and take time to develop. We noted also in Section 2 that the high proportion of ‘rookies’ (those with less than 2 years of service) detracts attention onto urgent technical training and away from developmental training of this kind. Having said that, almost all of the banks indicated that they have specific targeted development programmes for their leaders. Most banks have programmes in place, some of which include executive coaching and tailored training.

Just 25% of

key leadership positions are filled by named individuals from the succession plan


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5. People processes and systems

Changing role of HR

The role and perception of HR is clearly changing. What was once a largely transactional and operational support function is moving rapidly towards a strategic and value-adding business partner. Some banks are further ahead on this journey than others. For instance some banks have re-structured their HR teams to reflect the new role of ‘business partners’. In order to be successful the business partners need to have good knowledge of the business and the confidence and communication skills to be a credible voice at the table.

Figure 3: Proportion of HR hours by tasks

For some banks however, HR is struggling to keep pace with the new demands of the role. Critical HR hours are skills being tied up in mostly administrative tasks. Figure 3 shows the proportion of time dedicated to each HR task.

“Our HR business partners join management meetings, understand financial dynamics and the strengths and development needs of our key staff and they work together with the business units on decisions, challenging the business in some cases. I coach my team that HR has an equal stake in the success of the business as any of the other business functions.”

Anna Stennett, HR Director, ANZ Vietnam

We can see that on average 61% of HR hours are spent on transactional HR such as Admin, Payroll and Recruitment, versus just 35% on average on Strategy and talent management.

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Bank 1 Bank 2 Bank 3 Bank 4 Bank 5 Bank 6 Bank 8 Bank 9 Bank 10 Bank 11 Mean

Other

Culture

Admin

Payroll

Recruitment

Talent management

Strategy


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“The role of HR has changed a lot and is still changing. I expect a lot from HR in terms of its strategic role – for instance strategic organisation design, supporting leadership and line managers on things like performance management, succession plans and scouting the market so we know who is out there.” Tareq Muhmood, CEO ANZ Vietnam

“We invest a lot in developing our HR Business Partners to ensure they have the knowledge and skills needed to fulfil their demanding role”, HR Business Partner, Multi-National MNC

High expectations

CEOs and HR professionals alike have high expectations from the role of HR. The strategic role creates new demands for skills and knowledge, perhaps not traditionally associated with the operational HR of the past. HR professionals need to continue to grow their skills in communication, change management and in-depth knowledge of the business in order to become effective business partners. We spoke to an HR Business Partner at one of the leading multi-national FMCG companies in Vietnam. She told us about the adjustment in attitudes and mind-set from the business, which happened gradually over the past ten years. “In general it has been very positive. It took some adjustment from business leaders, to start to see HR in a different way, from a supporting role to more of a true business partner.”

“It’s important that the business partners are very professional, competent, knowledgeable about the business, confident and able to contribute to business decisions, lending the Human Resource lens on key decisions”. We should not underestimate the challenges this brings about for HR professionals. They now need to build new skills and knowledge to do the role justice. Leading firms invest heavily in growing HR talent from within, and particularly the business partners. For instance, they complete regular shadowing and management traineeship programmes to get insight in different parts of the business. They are also trained for instance on financial acumen and other core business skills.


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Fewer than half of the banks surveyed have regular reporting on workforce productivity but all said it was important

Measure to manage

We found that most of the banks surveyed have regular HR reporting and measurement in place. However, we identified some gaps in what is being measured. All banks highlighted staff productivity as a critical challenge facing the organisation in the next 12 months, but fewer than half of the banks measure and report on workforce productivity. We looked at two high level productivity measures across the banks:

• Human Capital Return on Investment (HCROI): measures the commercial return received for every dollar (or equivalent currency unit) that is invested in the workforce.

• Remuneration / Revenue: remuneration costs as a proportion of total revenue.

For Vietnam’s banks the HCROI (average) = 1.89. Therefore for every dollar invested in the workforce, $1.89 is returned to the business, compared to a benchmark of 2.57 on average for banks in Asia. Lower relative returns in Vietnam may be driven from slower top line growth recently and rising salary costs.

Remuneration / Revenue = 15%, which compares favourably with the benchmark for banks in Asia Pacific which is 26%. We noted considerable variation across the banks. For some banks, these metrics are less healthy and will continue to worsen if escalating salary costs do not abate. Effective measurement will be of increasing importance, particularly in relation to measuring and managing improvements in workforce productivity. HR departments need to be adept at understanding and reporting on productivity measures. Businesses also need to invest in the reporting infrastructure to enable this kind of analysis to be done without the creating a heavy administrative burden. In addition to top-line productivity measurement, it will be increasingly important to manage the productivity and value for money from back office support functions, such as HR, IT and Finance.


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We found significant variation across the banks – with some reporting as many as 135 FTEs for every 1 in HR and some as few as 37 or 50

Variable size and shape of HR

We measured the number of Full-Time-Equivalent (FTE) staff within each HR department and compared this to the total number of FTEs in the organisation. This is good metric to measure the relative size and cost of the HR function. We found significant variation across the banks – with some reporting as many as 135 FTEs for every 1 in HR and some as few as 37 or 50. We would expect economies of scale, so the larger the organisation the fewer HR FTEs that may be needed relative to the total size of the workforce. However this trend was not observed in most cases. The average number of FTEs per HR department FTEs was 77, compared to a benchmark of 91 in banks in Asia Pacific. This means that on average HR departments are relatively large in Vietnam, which may be a product of the out-dated local HR regulations or of clunky, paper-based internal HR processes.

However business need to be wary if their HR departments are relatively too small, for instance banks 3 and 4. Where HR resources are scarce, these organisations are likely to suffer in terms of the quality of HR support available, and particularly support for the longer term strategic parts of HR such as talent development and succession planning. The trick is to pay attention to measure and optimise the size and value from HR. HR hours should be re-directed to those value-adding tasks, while minimising administration. We can learn for instance from leading FMCG firms which have established HR shared service centres to take away and industrialise operational processes such as payroll and administration. This lets HR focus on the business priorities.

Figure 4: FTEs per HR Department FTEs

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10 Recommended Priorities for Business

The findings highlighted in this report point to a new and complex challenge for banking leaders – how to respond to develop differentiated people programmes to overcome the talent gap? There is a clear call to action: Vietnamese banks need to rethink recruitment and rewards policies and to do more to develop and execute a strong, considered talent strategy. Those which do not risk failure to meet their business goals and impact on profits.

Banks need to refocus efforts and investments on those employees who will be most valuable to their businesses in light of the future business strategy.

Here we highlight 10 priority recommendations to help banks to better manage talent to meet future growth plans. These priorities are informed by the issues highlighted within the research and taking into account lessons learned from participating banks and best practices recommended by HR professionals from the FMCG sector.

Attracting talent


As competition for talent heightens, banks should define their recruitment talent pool more broadly – looking for instance to other industries, internationally and input from retirees. This will in turn bring about new needs for effective internal training and on-boarding programmes.


HR needs to have stream-lined effective processes for attracting and recruiting the right candidates at scale. This can be a costly and consuming drain on precious HR resources if not. Taking advantage for instance of new advances in recruitment software and candidate assessments may help. In addition, greater attention must be afforded to retention and support for new joiners. Banks need to ensure they have effective on-boarding training, and ‘buddying’ schemes to help new employees to get up to speed rapidly and become productive members of the workforce.


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Developing internal talent

3. Maximise training

Review employee training programmes and ensure you are getting the most from your investment in training. Only two banks from those surveyed are currently measuring the return on investment in training. Ensure the training plan links closely with growth strategy and targets the crucial roles in the workforce. Build in rotational assignments, secondments, external accredited training schemes and coaching.


Invest in training and communication for line managers to improve quality of ‘on-the-job’ coaching and development taking place. This may require a mind-set change and appropriate incentives to bring lasting change. Appoint formal ‘career coaches’.



Invest in employee engagement programmes, measure engagement regularly

and take note of the results. Use this to inform staff development as well as rewards.


Re-shape rewards to meet new workforce demographics, paying close attention to the millennials. Look beyond the financial and take advantage of flexible benefits models, technology and career development opportunities.


Set rewards strategically and don’t fall into the trap of spending too much on non-critical roles or poor performers. Focus investment on mission critical roles and high performers. Consider new types of benefits which will drive retention– e.g. Long term savings or shares.

Leadership and Succession Planning

8. Equip leaders

Invest in coaching and training for leaders in soft skills. Spend more time on succession plans and appoint formal coaching and training for key successors.



Help HR to fill the role of strategic business partner. Invest to streamline HR processes to free up administrative time, for instance HR shared service centres. Re-focus HR hours onto more value-adding activities. Recognise the new skills needed from your HR team and invest in their development, particularly in business knowledge through rotations.

10. Systematic and analytical approach to talent

Upgrade HR measurement capability to provide the right data at the right time, so that decisions are fact based. Pay close attention to metrics highlighted within this report such as workforce productivity and employee engagement.

“We need to focus on developing our talent from within. We have had great success for instance with our Local Corporates team who have grown significantly in stature and maturity in

recent years” Louis Taylor, CEO, Standard Chartered Vietnam


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In Summary

How banks react now to the talent gap will shape the success or otherwise of business performance for years to come. The absence of a sufficient and engaged talent pool may constrain the growth of the business. Without mitigating action now, the future potential of the organisation may not be realised. Banks cannot afford to be complacent or reactive.

Leaders in forward-thinking banks are already actively pursuing a range of approaches to close the gap. Many are investing in leadership development programmes, reviewing benefits packages and pursuing non-financial schemes such as clearer career models to enable progression and greater development opportunities. Others are redoubling measures to train employees with critical business skills and emphasising the importance of planning for succession.

Our insights suggest that organisations that do not adopt a

radical shift from the status quo risk being left behind. Rethinking your talent management strategy is critical and banks should take urgent steps.


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Appendix: Metrics formulae

We analysed data submitted by banks for over 50 metrics. For the purpose of this report we have highlighted 7 key metrics.

Human capital impact

Human Capital Return on Investment (HCROI)

X:1 (Profit before tax + Compensation + Benefits) ÷ (Compensation + Benefits)

Remuneration / Revenue % (Compensation + Benefits) ÷ Revenue

Human capital engagement

Resignation rate % Resignations ÷ Headcount

Resignation rate <1 year % Resignations <12 months of service ÷ Headcount < 12 months of service

High performer resignation rate

% High performer resignations ÷ High performer headcount

External recruitment rate % External recruits ÷ Headcount

HR Structure and productivity

FTEs per HR Department FTE

X: 1 FTEs ÷ HR Department FTEs


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About PwC’s People and Change Team

Our People and Change team help businesses to create sustainable success through their most valuable assets: people. Our team of Vietnamese and foreign professionals can help with the full range of people and change issues your company may be facing. As part of the PwC global network, we offer these services along-side our legal, tax, financial and consulting services from our offices in Ho Chi Minh City and Hanoi. Our key services fall into three key areas:

1. Talent management Helping you to attract, develop, retain, reward and deploy the right people into the right roles in your business. You may need to rapidly grow the workforce, to tackle high turnover or to identify and nurture your leaders of tomorrow - we use a fact based approach to identify the specific elements of talent management which will drive the most value in your business and industry . Key services include:

• Talent management plan • Leadership development • Performance management • Rewards and remuneration • Leadership and succession planning • External brand and

recruitment • Culture assessment and

transformation • Capability and training • Employee engagement

2. Organisation change We help our clients prepare for, manage and deliver all kinds of change from mergers and acquisitions to implementing new technologies. Our services cover the end-to-end change process from strategising and planning the change, engaging leaders and staff, implementation and measuring benefits. Key services include:

• Change Management • Communications • Change Impact Assessment • Change Strategy and

Planning • Change Readiness • Post merger integration • HR Due Diligence • Technology related change

3. Organisation effectiveness

We can help you to re-shape your workforce and processes to ensure you have the basic building blocks in place and / or to increase the efficiency and effectiveness of your workforce. We will also help you to transform your internal HR support, systems and reporting so that it adds value to the business. Key services include:

• Operating model and organisation design

• Process improvement • HR strategy and

transformation • Human capital analytics • HR shared services • HR technology systems • Workforce planning • Knowledge management • Job description development


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Acknowledgements

PwC Vietnam would like to acknowledge and thank those who contributed to make this study possible. 1. Participating banks: firstly we would like to thank the 11 banks who participated in the

study: ANZ, Citibank, Deutsche Bank, Dong A, HSBC, Oceanbank, PG Bank, Standard Chartered, Techcombank, Tien Phong and VIB. Thank you to the CEOs, Deputy CEOs and HR Directors who gave generously of their time out to talk to our team. Thank you to the HR teams who prepared and submitted the questionnaires.

2. PwC Saratoga: we would like to acknowledge the invaluable support and expertise provided by PwC Saratoga Asia-Pacific Centre based in Singapore. PwC Saratoga provided guidance on the research methodology, particularly on selection of suitable HR metrics and they also provided data from Asia Pacific banks to enable regional comparison.

3. The Institute of Manpower, Banking and Finance (BCT): for consulting with us about the scope of this study and sharing your insights into the key talent issues among Vietnam’s banks.

4. HR colleagues at from the FMCG sector: we would like to thank colleagues from HR departments of leading FMCG firms in Vietnam, who met with us to discuss their experience in talent development and shared lessons learned we can apply in the banking sector.


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For further information

To discuss the issues highlighted in this report, please contact our team.

Hanoi

Ho Chi Minh

Ian Lydall +84 903 721147 [email protected]

Edward Chien +84 978 937 499 [email protected]

Dinh Thi Quynh Van +84 903 466 979 [email protected]

Vu Thi Le Lan +84 912565612 [email protected]

Pamela McGill +84 909 668 290 [email protected]

Stephen Gaskill +84 909 229 467 [email protected]

La Tran Minh +84 168 529 3120 [email protected]

www.pwc.com/vn www.pwc.com/saratoga


http://www.pwc.com/vn

http://www.pwc.com/saratoga

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Pwc vietnam 2013 vietnam banking talent study

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