.
Recently we experienced a fallout between the main banks (Bank of Cyprus and Hellenic) with the union of bank employees (ΕΤΥΚ) that resulted in strike action.
There were a number of reasons for this fallout but certainly, a major reason/obstacle is the demand by the banks to enforce a performance-based pay system.
So, why such an insistence by the banks? Is it really needed now, or can the banks wait for its implementation? Who will benefit from such a system? I will attempt to shed some light on the above questions.
My main argument, which I will try to prove below, is that the implementation of such a system is long overdue and is needed not only for the owners and management of the banks but rather for all its stakeholders – the shareholders and management, the employees, the partners, the customers, the creditors, and the overall community (taxpayer).
I should note here that this is not something new but rather standard practice in many organisations around the world.
Starting from the owners and the management of the bank, they want a fair system and one that would reward good performance.
The current one, of providing horizontal increase to all, without taking into account the efforts and the results of each employee is just not productive.
By introducing a system, where there is a small horizontal increase every year to all while the rest of the increases are allocated according to performance, makes much more sense.
This will improve productivity, reduce costs, and thus increase profitability at a time when the banking sector is suffering from low productivity, excessive operational costs, low profitability, and increased competition.
The employees would also benefit from such a system. They need stimulus, incentives to strive for, otherwise, they will end up being unhappy and uninterested in their job.
Good employees would look for something else (especially now that the economy is picking up), and the banks will be left with unproductive and unhappy employees.
The partners of the bank (real estate, law, accounting offices, etc) would also gain, working with motivated employees to create positive outcomes for all.
Turning to customers, they need good, fast, reliable, low-cost service from their bank. If they cannot get it, they will look for other banks or there is now the option of non-bank institutions that can service them (faster service with lower costs).
Given also the fact that the banks have reduced the number of branches and the number of total employees through voluntary retirement schemes, it is important that the employees left are motivated, efficient, and provide the excellent service that is needed.
Looking at the creditors (bondholders, depositors) they need healthy banks (with the necessary capital and liquidity) so that they feel safe in knowing they will get their money back.
It is not long ago that we had a major banking crisis and shareholders and creditors were completely wiped out.
We certainly do not want to encounter something similar ever again. This is important not only for creditors but for the overall community/taxpayer as well.
Having motivated, productive employees is a pre-requisite in my mind for a healthy bank and creates positive outcomes for all stakeholders.
I believe ΕΤΥΚ should welcome the proposed change of the pay system (now introduced by Hellenic Bank, but probably very soon by BoC as well).
It is a system that serves the interests of their members and they should embrace it.
I acknowledge that it is a change from the established practice, but the world is not static, it’s constantly evolving, and organisations should be able to adapt quickly to survive and prosper.
The above change to the system should not only be limited to the banking sector but rather should be extended to other areas including the public sector.
If we want to create a competitive and sustainable economy, the unions and the political system must allow for such changes to happen. Otherwise, we run the risk of falling behind our competition.
