As the year winds down, mark down February 13th 2010. That is Chinese New Year. And what falls around that date are holidays and payment of annual and discretionary bonuses are paid in Asia. Of course there are some firms that don't follow that pattern (and some are off by a month or two) but many do and you need to be cognizant. Revised compensation packages are usually done as this time too.
The bonuses in Asia seem to represent a lot more than what they are or should be. It has become an "obligatory right" rather than performance recognition tool. Everyone likes raises but they like bonuses even more. Personally I think you can get away with a good bonus and no raise but you are not given the same level of appreciativeness if you give a pay small rise with no bonus. People far too often rely on discretionary bonuses to pay tax demands, holiday vacations, etc.. You can say it may be short-sighted, but cash bonuses are king. Other incentives, including stock options, are often frowned upon. The first counter-argument you get is if I wanted UOB shares, I would have bought them myself. Rightly or wrongly, the bonus is an intricate part of the total pay package. Irrespective of the economic climate, bonuses are seen as a direct correlation of how much the firm values the employee. Yes, that is what a bonus should reflect, but it is taken to the extreme in Asia, especially among the Chinese. Little or no bonus and you've "dissed" the person. There is no satisfactory excuse for why I didn't get a good bonus. If you want to disenfranchise a person and/or want them to resign, a lack of bonus gets through louder and clearer and any more subtle approaches or performance evaluations. Once out, people compare and contrast bonuses and self-worth. People are much more willing to talk or brag or bitch about bonuses than actual salaries. You cannot hide that fact that so-and-so got that much and so-and-so got this much. This is not just your institution but across the industry. Everyone seems to know much bonuses were paid by the big players like HSBC and Citi. You need not match the big or frivolous players in bonuses but you need to ensure that you understand what the message you are sending with bonuses. Be prepared for the aftermath and morale changes.
Although I am biased, I think that a "token" bonus or pay rise needs to be paid to everyone you want to keep. To the industry outsider, we are not talking about Wall Street-type, multi-million dollar investment bank pay outs. Trust people are 2nd class citizens when it comes to Private Banking bonuses. We are talking about a few months salary for a team of 10-40 people which will not add up to even US$1 million. If you can't afford that, or can't foresee when you will recover that outlay then you are not in business, you are delaying foreclosure. I am not advocating an indiscriminate payout. I am merely saying that you will be sending a powerful message out when paying (or not paying) bonuses. Take the time to ensure it is the correct message you are sending. Now how you pay the bonus and to whom is the challenge.
Many that award bonuses feel bound by the company's bonus pools and think their hands are tied. You got to fight for what you believe in. Who you retain is as much a succession planning issue as who you bring in or who you let go.
There will those that feel insulted by the bonus they got or didn't get. They will leave. Admittedly, this is a problem that affects mainly low and middle ranks. It may happen instantly if they have something already lined up. The bonus has been the only thing keeping them around the past few months. It may take a while in this subdued market for others, but this bonus rift is usually irreparable. It's only a matter of time. Will you be prepared when they do? Do you have a succession plan? Although a touchy subject, you need to monitor them closely in the interim period. Some will do something spiteful. I can't recall where I first saw it, but I found a related/secondary article by Aaron Lim:http://www.pressreleasecirculation.com/content.asp?ID=152550&ArticleCategory=Technology
The same is happening at your competitors. Is there someone you covet? Are there needs you need to fill? This is an opportune time to recruit.
I suspect that all the large trust companies, particularly the bank-run ones, have some succession plan on paper for senior management. Some companies make it mandatory to have a plan on record. It goes like: if Joe goes, then Mary moves up. Good you have a plan, but is Mary really ready to take over? Too often this succession plan is made by Joe and Joe's boss. Joe's boss knows nothing so it's really Joe's opinion. Joe may have a vested interest too. Sometimes Joe is grooming a successor, giving tidbits and practical experiences and opportunities to do Joe's job. Other times, the deputy is just a glorified title and that person has as much preparation or ability to replace the incumbent as some guy walking down the street. The question you need to ask is do you have a good Mary or a bad Mary or just average Mary?
Most trust operations rely on continuity to some degree. Someone must know the rules and practices. It would be nice if they knew the client too. Unlike private banking where individual people skills are more important than organizational awareness, it is somewhat difficult to plug someone in from a different organization at senior levels. It takes maybe a year for senior people to truly understand your business, from systems, to work flows, to risk appetite, to working with interested parties (lawyers and bankers) to people above and below them when switching firms. You may have to partially carry them and be on guard for them screwing up
on some area. It takes a rather energetic person with initiative to successfully adapt to a new environment. This makes Mary seemingly the best option for succession. However, new blood can do many things for an organization. A new hire may bring new and better ways of doing things. New or different skill sets. They bring new energy and could shake up the status quo. My experience is that new senior hires need to be isolated and protected. Not everything new is for the better. Some in the organization will resist change. You need to be able to isolate and contain. Like a lab experiment, if it goes bad, then only a batch goes with it, not the entire lab. Unless you plan on "cleaning house", changes should be well thought out. A few years ago, one major Swiss bank trust company in Singapore hired a high profile trust head only to see this person bitch about everything and embarked on a mission to make this company a mirror of his old company. Needless to say, it was messy, acrimonious and ended in divorce. So they ended up promoting the long time deputy. The deputy wasn't ready and the company is now on it's fourth Head in as many years. Tailspin.
For smaller trust companies, there is no in-house successor. The key executive was the trust business. The fact is you may never fully replace the person that built that business. A few firms have seen their trust business close down as no one was able to replace the departing trust person. Here, the key to succession is not always tied to finding a replacement. How you are able to shuffle responsibilities and tasks among the people you have may go a long way in ensuring your trust business survives. You may be left wounded but not left for dead. Know what gaps you have to fill and do not fixate on finding the perfect replacement. Here, being market savvy helps. Know who's out there so you don't need uncover every rock when you do need to go find someone. Here's where having a succession-consciousness helps. CPAs are generally quite good act training up their successors as that was a typical CPA firm structure. A typical 8-10year career path where Partners trained the managers. Managers trained the Seniors. The Seniors trained the Juniors. People had to work they way up the ranks. They were forced to delegate. They were forced to work in teams. Only the cream rose to the top. How many organizations hire Juniors with a view that are going to Partners? How many actually have a career path designed? That type of organizational training is virtually non-existent in the trustee business. How much emphasis on grooming and training your next generation of managers has your organization made? For those that do run some training, it is usually the department head talking about a few subjects to the rest of the team. Silo training equal silo employees. Who has the big picture in the organization? Are you sure your department head is good/competent and getting the right message across? Are they molding good successors or just molding people into their own likeness?
Do a quick survey.....ask each of your employees if they feel they are ready to step into their boss' shoes. How many jobs in the organization do they think they can fill? The answer will tell you how much succession planning you need to do over the holidays. The answer will tell you how to allocate the bonus pool. The answer will tell you how to revise the pay packages. The answer will tell you how many new hires you will need.
Hate to see you get caught with your pants down when Chinese New Year comes around.
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