Has the value of the bank’s human capital increased?

More and more companies are asking what long-term value they’re creating across the full scope of their operations – not just for themselves, but also for their clients, employees and investors, and for society as a whole. *True Price recently launched the Impact Institute, which is committed to a social approach to assessing costs and benefits. Following previous analyses carried out on the bank’s behalf focusing on the real value of mortgages and on financing in the cocoa industry, the decision was recently taken to make a careful study of human capital at ABN AMRO.

For Adrian de Groot Ruiz, Executive Director of True Price, it was an exciting project, since ABN AMRO employees have a direct impact on the bank’s sphere of influence. “That’s why we decided to focus on value creation as it relates to the human capital of the bank as a whole and the return on employee development in particular,” he says. “We also wanted to find out how investments in staff training pay out in terms of value for the bank’s key stakeholders – for staff themselves, for starters. An employee can grow in terms of intellect and as a person. Beyond that, greater staff productivity translates into greater client satisfaction and better financial results for shareholders. But society at large benefits, too. Higher salaries and profits lead to higher tax revenues for the state. Even future employers benefit from this type of value creation. Should staff later move on to another employer, they can apply everything they’ve learned while working at ABN AMRO.” 

But the bank would probably prefer to avoid that last scenario, right? “You might think so, but that’s actually not the case,” replies Nicole Böttger, a People Development Consultant at ABN AMRO. “We think it’s important to encourage our staff to focus on their future employability. The days when a person stayed in the same job for life are over. Today, it’s about using all means available to develop yourself as a person in a way that’s right for you. And regularly changing employers benefits personal development.”

An increase in the value of human capital

So what did the analysis reveal? Adrian says, “Human capital is one of the ways in which ABN AMRO creates long-term value. We assess human capital the same way we do other assets – by calculating the market value of expected future earnings. As employees continue to learn and become more productive, future earnings and, by extension, human capital increase. The report gives a picture of total value creation bank-wide​ (PDF 912 KB).” 

In the coming years, ABN AMRO aims to become a learning organisation. Learning takes many forms, Nicole says. “We enable staff to learn in a number of ways. The golden rule is that 70 per cent of learning is done on the job, 20 per cent is learning from others and the remaining 10 per cent is through training and education.” So investing in employee training is one way to create value for society? Adrian nods, “Precisely. Defining exactly how much this should be is tricky. But it’s important because ABN AMRO invests a lot in training and education. Based on external data, we estimate that the average financial return on training is 60 per cent. The social return is higher, which we estimate to be around 240 per cent.” 

Those are great results, but what exactly do they tell us? “The amounts and percentages in the review are a starting point for discussion and are there to provide insight,” Adrian replies. “The main aim of this initial analysis is to raise awareness of value creation internally at the bank. You can view training as a cost, as an investment in the development of your staff or as a way to create value for society. And that’s what our analysis is helping to promote. By comparing the return on various training courses, it’s also enabling the bank to optimise the training on offer and to make better choices.”

A learning and development ecosystem

Nicole thinks the review will play a key role in accelerating the shift towards ABN AMRO becoming a learning organisation. “We want to move towards being an organisation in which employees take control of their own personal development,” she says. “At the same time, we’re increasingly operating as a fact-based, data-driven HR organisation. The ultimate goal is to create a new ecosystem in which staff are given training which on a given day might consist of a referral to a colleague, and a YouTube video or a LinkedIn learning course the next – all based on their individual profile and online behaviour. The fact that we’ll have a better grip on how employee development creates value will be a great incentive to better structuring the learning organisation we’re working to become.” 

Adrian hopes that organisations will focus more and more on value creation in the years ahead. “We think it won’t be long before organisations maintain a social or integrated profit and loss account alongside their financial P&L. In fact, we’re seeing a global trend towards the integrated P&L, whereby an organisation can show financial and non-financial value creation to all its stakeholders – be they clients, investors, staff or society at large. However, it could take between five and ten years before we’re all on the same page. In the short term, I hope that early adopters making demonstrably different decisions based on an integrated P&L will come forward and share their results, just as the bank is doing now.” Nicole hopes that more and more employees will embrace lifelong learning. “By becoming more aware that they learn from everything they do each day, staff will also come to appreciate just how valuable that learning is. That’s value creation, too, even if it’s at the micro level.”

*Since October, True Price will be focussing on the platform for consumers and organisations to research and improve the true price of products.