How Fleet Bank Fought Employee Flight

By Haig R. Nalbantian and Anne Szostak

Executive Summary

To implement the concepts that we have studied in ‘Chapter 1’ of the subject ‘Human Resource
Management’, we have prepared a report of the article named as ‘How Fleet Bank Fought
Employee flight’. In this article we have practically implemented some concepts like Importance
of HRM, Goals of HRM, Functions of HRM like Staffing, Training and development,
Motivation and Maintenance, Human Resource Management challenges like Workforce
availability & quality and Diversity issues.

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Contents
Introduction.................................................................................................................................................3

Issues...........................................................................................................................................................4

Recommendations.......................................................................................................................................5

Conclusion...................................................................................................................................................6

References...................................................................................................................................................7

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Introduction

Companies invest one third of their revenue in Recruitment, Training and Development,
Management practices or any incentive plan but most of the time they even don’t know about the
return that they are getting from these investments, same as the case with Fleet Bank, which was
the second-largest financial services company in the US and seventh largest financial holding
company in the country. In 1990s there biggest concern was the Employees turn over which was
up to 25% annually and among some groups it was over 40%. That was hurting the Bank’s
Customer focused strategy big time. The company conducted some surveys regarding this issue
but employees were not giving correct information regarding their disposal because they did not
want to risk people whom they may need one day for a new job reference.

Then the company used Mercer’s Methodology to determine which workforce characteristics
and management practices most directly influences employees turnover. They focused on
employees just as they used to focus on consumer behavior and were able to found a direct link
between the turnover problem and the company’s busy history of mergers and acquisitions. The
company used the policy to close down the branches that exceeds permissible market share
within their regions. This involuntary turnover made the other employees to think that even their
job is not secure in this scenario. In the process they were also able to find that the highest
turnover was particularly in two groups. One in the employees who were very high performing
but still working on the same post for several years now and the other was consisted of the
employees who have recently concluded their post-graduate and under-graduate degrees. The
disposal of their managers and supervisors was also one of the big reasons for the turnover.

In view of these findings the company made some retention plans like increasing the Mobility
and Marketability of employees as well as making their contacts in the company more solid and
increasing their pay as well.

And due to these efforts the turnover rate declined dramatically, 40% among salaried employees
and 25% among hourly employees. The company saved $50 million.

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Issues

1. As far as Resource Management was concerned, Fleet Bank was rich in Financial Resource
as it was the second-largest financial services and seventh largest financial holding company in
the country. There was also no problem with the Physical Resources. But there was a problem
as far as Human Resources and Organizational Resources was concerned because there was
no system which could help employees to stay in the company and there most expert employees
were leaving the organization. In 1990s the biggest issue faced by the Fleet was the turnover of
potential employees. It was 25% annually and among some groups such as tellers and customer
services representative it was over 40%. This turnover was damaging the overall strategies
focusing the customer issues big time.

2. Employees were not willing to give correct information about their disposal. That indicates us
that there was a lack of trust of employees in the organization and it also depicts about the
cultural loop holes and formal reporting structure inside the company. In a survey that was
conducted in 1997 to know about the reasons for this turnover, the results suggested that there
are two reasons for their disposal i.e. inadequate pay and heavy workload. They company made
efforts to knock out this by tracking market pay more systematically and by offering more
flexible working arrangements on a trial basis in order to help relieve employees stress on the
job. But those efforts didn’t help the cause because the turnover rate was rising rapidly. The main
cause for this result was that employees were not giving correct reasons that was resulting their
disposal from the company. If they point instead to the way he company is run, they risk
antagonizing people whom they may one day need for a reference or job.

3. After they used Mercer’s methodology, they were able to find the direct link between turnover
and the company’s busy history of mergers and acquisitions. In particular, antitrust policy of the
bank in which the company required some branches to be closed down. According to
Hawthorne studies conducted in late 20s and its not the incentives that are required more by
employees but their in-between relations that matters most for them. This high rate of

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involuntary turnover let the other employees to think that even their job is insecure under these
circumstances and that was the biggest reason for this huge rate of turnover.

4. There was also a problem that they were not putting The Right Person at a Right Place
because the highest risk of turnover was in two groups: very high performing employees that are
in their current positions for two or three years and those employees who have recently
completed their postgraduate studies. This indicates that many deserving employees were not
getting promotions. That also means they were not promoting individual growth.

5. Fleet’s investigation also showed that higher turnover rates among managers had also hurt the
overall retention rate. Simply, if an employee’s supervisors left, the likelihood of that employee’s
leaving in the next year almost doubled. By this we can conclude that there was a problem as far
as Job Design is concerned because after the disposal of the manager the employees felt so
insecure that they were even willing to leave the job. Manager’s departure leaves an impression
on an employee that there are more opportunities outside the company and the employees will
also feel disconnected from the company.

6. If we talk about the companies like fleet, the biggest problem for them is that they invest over
1/3rd of their revenue in recruitment, incentive plans and management practices but they don’t
know about the value that they are receiving in return. Are their investments giving fruitful
results…?

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Recommendations

1. The companies must use sources other than those surveys or questionnaire that are filled by
the employees on their disposal because those surveys don’t reflect the true picture about their
leavings. Fleet used Mercer’s methodology and examined data collected from HR, Finance,
Operations and sales departments for the past four years. Then they were able to find that the real
reason for the employee’s turnover was the involuntary turnover. That let the other employees to
think that even their job is insecure due to those mergers and acquisitions. They found the three
key variables and worked on those. They were external market influences, organizational
influences and employee attribute.

2. Extra salary was not everything for the employees. Their main concern was the insecurity
about the job. Career progress and mobility of all the significant factors identified, those related
to career progress and development. Promotion and career growth with pay growth are the real
factors for the retention. It was found that the employees who were promoted in the prior year
were less likely to leave the job by 11%. The changing job strategy is also very handful for the
cause of retention.

3. Broadening the employee expertise and making them marketable also reduces the turnover a
great deal. It gave the compelling reason to work and stay in the organization and postponed
their departures. They value the skills and expertise that enable them to cope with the insecurity
of an active merger and acquisition environment even more than they value higher pay.

4. Internal job mobility is much more superior form of compensation because it promises better
protection then savings in event of job loss.

5. The employees who were high performers with who had just completed their under or post
graduate programs were more likely to go; the company urged their supervisors and managers to
make sure that they were satisfied in their current positions. Job fairs and seminars is also
another option.

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6. Increasing the growth of the employees is also another option of retaining them in there
current positions.

7. Incentives programs also reduce the turnover of the employees.

8. To reduce the negative effects of the manager departures on employees, Fleet acted to sure
those employees had strong contacts inside the company. So if their manager goes, they have
also strong links with the manager who will take his place.

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Conclusion
Well, after studying this article we are able to find that doesn’t matter how big is the company or
how much finance they hold, it’s the Human Resource that is required for them to excel in the
market. We were able to understand the importance of HRM and now we are also able to
understand those concepts that we have studied in Chapter 1.

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References
1. Article ‘How Fleet Bank fought employee Flight’.

2. Study Pack of HRM provided by Superior University.

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