Instead of introducing health care programs they think will control medical costs, the company has developed a health data management system that projects the financial impact of new programs before they're established.
Furthermore, instead of waiting to see what effect legislative, demographic and economic changes will have on its workforce, the bank has created a strategic diagnostic that describes potential courses of action for any number of internal and external events.
These and a host of other innovative programs that have made First Chicago a leader in strategic human resources. The HR function is such an integral part of the bank's business strategy that no major business decisions are made without the department's input. In fact, Jim Alef, corporate senior vice president and head of human resources, is an active member of the bank's vice council, comprised of the company's 15 top-ranking employees. Moreover, he reports directly to the bank's Chairman Barry Sullivan.
The company's proactive approach to human resources even has caught the attention of the Harvard Business School, which is using case studies from First Chicago as curriculum in its MBA and doctoral programs, as well as in professional development courses for HR executives.
For its efforts, First Chicago has been recognized as one of PERSONNEL JOURNAL's 1991 Optimas Award winners. The award is given annually to companies that display an excellence in human resources management in 10 categories, which range from managing change to global outlook. First Chicago is the winner in the General Excellence category.
The HR programs that make First Chicago a leader can be traced back to 1985, a time when the bank began an intensive review of the strategic questions it was facing. Future challenges certainly would require smart decisions related to marketing, lending and acquisitions. But the bank also realized that staffing, benefits, training and employee programs should be given equal weight. In essence, the HR department had to be as strategically oriented as every other business function.
This new emphasis on logistics and planning was part and parcel of Sullivan's desire to put First Chicago at the top of the list of the country's great financial institutions. His message to human resources was clear: He expected nothing less than the best and he was prepared to give whatever support was needed.
The momentum to address the company's HR challenges started almost immediately. Policy and issue papers were developed and new programs were investigated with a watchful eye on cost containment. As Alef explains, "We empowered our HR people to use the gifts the good Lord gave them...to open their eyes to larger possibilities."
Every week since that time, Alef has met with staff members to discuss issues the bank is facing and provide a broad perspective on business concerns. They talk about how those issues might affect human resources and they identify potential solutions. "This way," he says, "employees are given an understanding of how their jobs fit into the overall operation."
The result of these efforts was the development of HR programs that fit into each of the categories established for the Optimas Award: Vision, Innovation, Global Outlook, Financial Impact, Managing Change, Competitive Advantage, Quality of Life, Partnership and Service. In addition, all of this happened while First Chicago was acquiring 10 banks and closing or downsizing 15 others, both domestically and internationally. These programs are profiled below.
The Human Resources Strategic Diagnostic.
This comprehensive document is First Chicago's attempt to get in front of the major issues impacting human resources management. Created in 1989, and continually updated, the diagnostic helps the bank identify and examine the major internal and external forces that have or will have HR implications. More than mere ideas or theory, the diagnostic is jammed with substantive data on issues ranging from politics and social attitudes.
Health Care Strategy Review.
Recognizing that trends in health care costs indicate 20% to 30% annual increases, First Chicago felt compelled to study these trends and develop cost containment options. The upshot of these efforts is the Health Care Strategy Review, published by the bank last year. The report provides an overview of national health care spending trends, summarizes the efforts of the other employers to contain medical costs, details the bank's current health care principles, and reviews First Chicago's past successes in health care management.
More importantly, the review crafts strategic alternatives for the structure of First Chicago's health care program during the next five years. Extensive options for cost control are provided, in addition to a detailed plan of action for the upcoming year.
Integrated Health Data Management System.
About three years ago, First Chicago began working with a software development firm to create a management information system that would allow the company to track health care expenditures and determine the effectiveness of proposed programs. The resulting Integrated Health Data Management System combines costs such as hospitalization, on-site treatment, short-term disability, mental health and program administration in what may be the first comprehensive corporate medical database in the nation.
The integrated systems software tracks the costs of specific programs, monitors the impact of the program changes, links the programs and their impact of expenditures to the cost and use of other programs, and models the effect of proposed changes in the benefit plan.
Responding to employee inquiries is a tough job for any company and for First Chicago, it was no different. With more than 17,000 employees to manage, the human resources staff was losing a lot of productive time answering routine questions related to benefits. The solution was ASK HR, a 24-hour, PC-supported, touch-tone inquiry system developed in conjunction with AT&T.
This innovative marriage of technology and human resources provides answers to more than 100 questions, including those related to vacation, sick leave, current job opportunities and training. Employees also can order forms through ASK HR and prompt the system to connect them with an HR representative.
According to AT&T, ASK HR is the most-extensively scripted service of its kind in the country. The automated system's speed-dial feature and published menu allows callers to move quickly to each information item without long delays. In place less than a year, the system currently responds to an average of 1,200 calls per month.
Global Corporate Bank.
When First Chicago began to reorganize with a more-strategic focus, one of the first major developments was the formation of the Global Corporate Bank (GCB). According to Alef, the GCB was the company's way of joining its overseas and domestic operations into a single business entity.
"The GCB was less a question of expansion than of taking all of our entities and applying to them the same strategy and managerial approach," he explains.
Before, for example, the trading operations or merchant banking departments would maintain separate books, separate compensation and benefits systems and separate hiring policies. By blending the operations, HR issues are addressed based on the well-being of the entire GCB. All decisions related to human resources, including hiring, promotions and titling, are determined by representatives —or partners—from each business entity.
"This approach allows First Chicago to provide strategic and functional human resources leadership on a global basis," says Alef.
Informal HR Advisory Group.
An additional effort by the bank to acquire a global perspective on HR issues currently is achieved through ongoing involvement with the multi-cultural human resources advisory group. Representatives from First Chicago participate in regular, informal meetings with HR practitioners and academics from all parts of the world.
"We wondered," says Alef, "if we would learn anything from a multi- cultural council comprised of some of the best HR people we could find." The answer is an emphatic "yes," as First Chicago has acquired insight into Global HR issues that it wouldn't have otherwise. "Through this group, we get academic and practical input on a variety of issues, and we learn about what's working in other countries and in other companies," he says.
Pensioner health care.
According to Tom Adams, section head and vice president of human resources, First Chicago "solved" the long-term health care liability issue by transferring the cost of medical coverage to existing and soon-to-be pensioners in exchange for increased pension benefits of $350 per month. This recent charge is estimated to reduce expenses to the corporation by approximately $2 million per year.
Training and development.
First Chicago's HR department manages a corporate training facility which, in 1990, provided close to 50,000 participant days of training. This training center saves the corporation approximately $1.7 million annually over the cost of comparable external facilities.
Basic skills training.
The bank's strategic diagnostic indicated that basic skills deficiencies among non-exempt (clerical and operational) employees and applicants would increase in the 1990s. If left unattended, First Chicago, as all major employers, would have difficulty finding qualified people to staff non-exempt positions. In response, the HR department developed a series of programs to address basic skills deficiencies.
One element of this effort was First Futures, a non-exempt recruiting program that builds relationships, and a subsequent pipeline of candidates, with high schools, colleges and community- based groups. Other projects include: Job Power, an entry-level training program to identify candidates who wouldn't have been hired through normal recruitment because of a lack of basic skills or experience; English at Work, a program to enhance written communication skills of individuals in secretarial resources; and Gearing for Excellence Through Communication, a program to develop and enhance the communication skills of tellers.
Direct Source Recruitment.
Four years ago, the executive and professional recruiting department was given the mandate to reduce search-fee expense while maintaining service levels. To achieve this, the department restructured its staff with a search firm focus and implemented a recruiting technique known as direct sourcing. With this process, candidates are identified through no- cost sources and are contacted directly by a First Chicago recruiter.
No-cost sourcing involves research on companies that employ people with the kind of experience First Chicago is looking for. Involvement with trade associations also produces leads. Additionally, recruiters at First Chicago may call competitors and ask employees for the names of colleagues who may be interested in a career move.
Once a lead has been identified, the bank's recruiter assumes responsibility for assessing the candidate's suitability for the position, convincing the candidate to consider opportunities at the bank and offering the position.
Alef believes direct sourcing gives the company a distinct competitive advantage because of the speed with which candidates are located and jobs are filled. "We are able to find top-quality talent cheaper and faster than our competitors," he says.
Today, more than 85% of positions are filled through no- or low- cost sources, including campus recruitment and classified advertising, as opposed to 70% a few years ago. Furthermore, direct sourcing is saving the company approximately $1 million annually in search firm fees.
Quality of Life
It isn't the existence of cutting-edge programs that demonstrates First Chicago's dedication to its employees' quality of life. Rather, a number of established programs are providing consistent benefits to the company and its workforce.
Chief among them is the Prenatal Health Program. Created in 1987, it provides quality information about prenatal health to employees, thereby reducing expenses associated with complications during pregnancy and delivery. Each pregnant employee or female spouse of an employee who participates in the prenatal wellness course receives a waiver in the health care deductible for her child's care during his or her first year of life. Records available through the health data management system indicate a substantial drop in the number of caesarean sections since the program begun.
Other quality of life programs include a full range of wellness services and free mammography screenings for employees and female spouses.
The Bank Mobile is a partnership effort in which First Chicago, in cooperation with community and school leaders, visits area high schools and walks students through a model of a bank. Students are told about the different jobs available in a bank, what the teller's role is and so on. Subsequently, students who show an interest in banking and meet a set of basic qualifications are hired into special training programs that combine basic skills enhancement with on-the-job training for entry-level positions.
According to Alef, the kids hired are those who might not have had many job opportunities otherwise. "This is a win-win situation," he explains. The bank wins by creating an interest in banking among students and identifying entry-level candidates, and the community wins by exposing students to new career opportunities. The Bank Mobile also serves as an excellent marketing tool.
In 1989, First Chicago adopted two inner-city neighborhoods—one predominately Hispanic, the other African American. The bank works closely with educators, small business owners and church leaders in these neighborhoods to provide jobs, loans and business advice. As with the Bank Mobile, this partnership effort is a way of solving community issues that have business and social dimensions.
Virtually all of the human resources programs developed at First Chicago during the last few years were developed in an effort to service the bank's overall strategic mission. The basic skills training efforts were in response to a concern from line managers; ASK HR was in response to employee requests; GCB was a response to management's new integrated focus.
"All of our HR programs serve the bank's mission," Alef emphasizes. "If they didn't, we wouldn't have them."
Despite First Chicago's progress in HR management, Adams admits there's still work to be done. For starters, there's the complicated issue of dependent care and defining what constitutes a family. "We need to be increasingly sensitive to how families function," he says.
Other ongoing areas of concern are reward and compensation, an issue that's "never solved," and employee development, particularly for those workers who are in what appear to be dead-end jobs. Although these challenges remain, Adams sees an ever-expanding role for the HR function. "In the last five years, we've become increasingly a part of the decision-making process at the bank," he says. "We assist with business strategy development by defining the HR implications of those strategies.
"It's much more rewarding," he adds, "to be a thinking participant on the front end of a decision, rather than someone who undoes the damage created by those decisions."
Personnel Journal, November 1991, Vol. 70, No. 11, pp. 50-56.