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Invest in people for a post COVID world

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Invest in people for a post COVID world 1

With the jobs market in flux, Tom Abbitt, Reed Banking expert, believes now is a time of opportunity for those in banking and finance to both attract new talent and support the potential of their employees in order to best position themselves as the economy looks to bounce back. 

The impact of the coronavirus pandemic on the businesses that help drive the UK economy cannot be underestimated. Lockdown restrictions, remote working, falling demand and general health concerns, have combined to apply commercial pressures to companies that were on sound financial footing of at the start of this year.

The health crisis has placed a huge financial burden on many organisations which were caught out by the seismic challenges our society has faced since early March.  The economic hit to the UK so far has been estimated at £192 billion by the Office for Budget Responsibility, with the figure escalating globally to over £7 trillion according to the Asian Development Bank.

As a result, the current downturn that has followed is no surprise, and bleak predictions of up to five million job losses have been made by our own chairman James Reed, painting a job loss scenario on par with that last witnessed in the 1930s.

The government has stepped in to help where it can with business support and has recently announced the new Jobs Support Scheme designed to continue underpinning the jobs market once the furlough scheme ends at the end of October.

Under these terms qualifying workers will now receive up to 77% of their normal salary level until next March with the aim of keeping people employed. The chancellor says that employees will have to work for at least a third of their normal hours to qualify for the new scheme and that the government and the employer will then cover part of their salary for the remaining hours not worked.

Further company assistance such as the extension of payback timeframes from six to ten years for business loans taken out during the pandemic, as well deferring this year’s VAT payments – a move that will help 500,000 businesses –  will also help alleviate the mounting pressures being felt by both SMEs and larger corporations who have seen turnover fall in recent months.

The present circumstances are forcing business leaders to relook at what they need as they turn away from monitoring public health and begin to focus once more on the longer-term status and recovery of their companies.

Key to that longer-term recovery will be the people within, and people welcomed to, an organisation. But those in the banking and finance sector will not only be central to the recovery of their own companies, but to the recovery of all businesses and individuals in the UK. The talent in the banking and finance sector has the potential to shape the future landscape of the UK – and this is a privileged position, but it has other sides too.

Banking and Finance employees under stress

The position of those in the sector is not only a privileged position, but a stressful one. As such, a company’s relationship with its workforce, and how it cares for them, will be directly linked to how it seeks to build future talent pools and therefore critical to any recovery.

The general praise heaped on workers who have adapted to working productively from remote locations during the pandemic, is a telling and timely reminder that without its people a company is essentially nothing. And in the coming months the UK will be asking them to do the same, or continue to do the same, again.

Piling on more of this pressure is giving some in the banking and finance sector the will to move. And while this is troublesome for those companies they are leaving, it presents a moment of opportunity for companies who wish to plan for a post-COVID future.

Taking advantage to recruit out of recession

Research has shown that in previous recessions it has been the companies that have resisted the urge to cut budgets that have rebounded far more quickly, when compared to those that actively retrenched across the board.

With power in the jobs marketplace moving from the candidate (who has benefitted in recent years from high employment levels) towards active recruiters, organisations are strongly placed to be able to add the best talent available to their existing workforces. And this shows in our Keep Britain Working Job Index as applications in banking roles reached 6% higher in August, with the jobs listed in the sector 15% lower, making competition fierce.

There is an opportunity here to get onto the recruitment front foot in the current employment environment. And it could pay dividends over the short, medium, and long-term.

To do this successfully, companies must not become complacent, we know that they will have to demonstrate that in this time of extreme stress, they can be the best place to work.

Attracting talent by promoting mental health

Those in the banking and finance sector should still work hard to present themselves in the best possible light and seek to attract and retain staff thanks to a holistic approach to employees.

A strategy that focusses on critical areas such as demonstrating proven career progression, providing opportunity for individual development, fair and competitive remuneration and a commitment to staff wellbeing, is essential to stand out from the crowd.

In recent research from Westfield Health, a third of employees said that they want to see long term changes to the way they work and 29% of workers stressed the need for enhanced mental health support in the workplace. The companies which can demonstrate they are proactively planning to ease the pressure on their teams will be the ones better placed to succeed in the race to secure the best talent.

Ultimately, it is people that create great places to work and help build the type of company we all admire. That is why it is so important in the present circumstances not to lose sight of the value of the human capital organisations have at their disposal.

Working alongside trusted recruitment organisations who can help connect available talent with company need, must remain a top priority as businesses navigate through current difficulties aiming to be ahead of the pack when the bounce back takes off.

Like investment in other areas of a business, investing in the people and the talent that will support the rebound and future commercial success of a firm in our sector should not just be an aspiration, it should be a central focus going forward.

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Deloitte: Middle East organizations need to rethink their workforce in the wake of COVID-19

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Deloitte: Middle East organizations need to rethink their workforce in the wake of COVID-19 2

Organizations in the Middle East have had to take immediate actions in reaction to the COVID-19 pandemic, such as shifting to remote and virtual work, implementing new ways of working and redirecting the workforce on critical activities. According to Deloitte’s 10th annual 2020 Middle East Human Capital Trends report, “The social enterprise at work: Paradox as a path forward,” organizations now need to think about how to sustain these actions by embedding them into their organizational culture.

“COVID-19 has created a clarifying moment for work and the workforce. Organizations that expand their focus on worker well-being, from programs adjacent to work to designing well-being into the work itself, will help their workers not only feel their best but perform at their best. Doing so will strengthen the tie between well-being and organizational outcomes, drive meaningful work, and foster a greater sense of belonging overall,” said Ghassan Turqieh, Consulting Partner, Human Capital, Deloitte Middle East.

According to the Deloitte report, many organizations in the Middle East made quick arrangements to engage with employees in the wake of the pandemic through frequent communications, multiple webinars where senior leaders addressed employee concerns, virtual employee events, manager check-ins, periodic calls and other targeted interactions with the workforce.

The report also discussed how UAE and KSA governments have reexamined work policies and practices, amended regulations and introduced COVID-19 initiatives to support companies and the workforce in the public and private sectors. Flexible and remote working, team-building and engagement activities, well-ness programs, recognition awards and modern workspaces are among the many things that are now adding to the employee experience.

Key findings from the Deloitte global report include:

  • Only 17% of respondents are making significant investments in reskilling to support their AI strategy with only 12% using AI primarily to replace workers;
  • 27% of respondents have clear policies and practices to manage the ethical challenges resulting from the future of work despite 85% of respondents saying the future of work raises ethical challenges;
  • Three-quarters of leaders are expecting to source new skills and capabilities through reskilling, but only 45% are rewarding workers for the development of new skills; and
  • Only 45% of respondents are prepared or very prepared to take advantage of the alternative workforce to access key capabilities despite gig workers being likely to comprise 43% of the U.S. workforce this year according to the Bureau of Labor Statistics.

“Worker well-being is a top priority today, and similarly to the rest of the world, companies in the Middle East are focusing their efforts to redesign work around well-being by understanding workforce well-being needs,” said Rania Abu Shukur, Director, Human Capital, Consulting, Deloitte Middle East.

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One in five insurance customers saw an improvement in customer service over lockdown, research shows

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One in five insurance customers saw an improvement in customer service over lockdown, research shows 3

SAS research reveals that insurers improved their customer experience during lockdown

One in five insurance customers noted an improvement in their customer experience over lockdown, according to research conducted by SAS, the leader in analytics. This far outweighed the 11% of customers who felt it had deteriorated over the same period.

This is positive news for insurers during such challenging times, with 59% of customers also saying that they would pay more to buy or use products and services from any company that provided them with a good customer experience over lockdown.

The improvement in customer experience also coincides with a rise in the number of digital customers. Since the pandemic started, the number of insurance customers using a digital service or app has grown by 10%. Three-fifths (60%) of new users plan to continue using these digital services moving forward.

However, while the number of digital users grew over lockdown, half of the insurance customer base has not yet chosen to move to digital insurance apps or services.

Paul Ridge, Head of Insurance at SAS UK & Ireland, said:

“It’s impressive that there was a net improvement in customer experience during lockdown, despite the challenges the industry was facing with a transition to remote working and increased claims for things like cancelled holidays. While many were forced to wait on customer help lines for long periods, part of the improvement may be explained by even a small (10%) increase in the number of digital users.

“However, it’s clear that a huge number of customers are still yet to make the move online. It’s vital that insurers provide the most accurate, timely and relevant offerings to customers, and this is best achieved by having additional insight into online customer journeys so they can understand them better. Using analytics and AI, insurers can seize this opportunity to digitalise their customer experience and offer a more personalised approach.”

Meanwhile, for insurers that fail to offer a consistently satisfactory customer experience, the price could be severe. A third (33%) of customers claimed that they would ditch a company after just one poor experience. This number jumps to 90% for between one and five poor examples of customer service.

For more insight into how other industries across EMEA performed during lockdown, download the full report: Experience 2030: Has COVID-19 created a new kind of customer? 

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The power of superstar firms amid the pandemic: should regulators intervene?

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The power of superstar firms amid the pandemic: should regulators intervene? 4

By Professor Anton Korinek, Darden School of Business and Research Associate at the Oxford Future of Humanity Institute. Gosia Glinska, associate director of research impact, Batten Institute for Entrepreneurship and Innovation, Darden School of Business

Recent news that Apple hit a market cap of USD2 trillion highlights an extraordinary success story: A once struggling computer-maker on the verge of bankruptcy innovates its way to becoming the most valuable publicly traded company in the United States.

Apple’s 13-figure valuation is indicative of a larger trend that is not entirely benign — the rise of a handful of superstar firms that dominate the economy. Over the past three decades, advances in information technology, mainly the Internet, have supercharged the superstar phenomenon, allowing a small number of entrepreneurs and firms to serve a large market and reap outsize rewards. And COVID-19 has greatly accelerated the phenomenon by pushing us all into a more virtual world.

Apple — along with Amazon, Facebook, Google, Microsoft and Netflix — is a case in point. The combined market value of those six companies exceeds USD7 trillion, which accounts for more than a quarter of the entire S&P 500 index. Even amid the pandemic’s economic wreckage, these megacompanies continue to prosper. The combined share price for Apple and its five peers was up more than 43 percent this year, while the rest of the companies in the S&P 500 collectively lost about 4 percent.[1]

Superstar firms can be found in almost every sector of the economy, including tech, management, finance, sports and the music industry. They command increasing market power, which has consequences for technological, social and economic progress. It is, therefore, critical to understand how their advantages arose in the first place.

THE FORCES BEHIND THE SUPERSTAR PHENOMENON

The “economics of superstars” was first studied by the late University of Chicago economist Sherwin Rosen. Forty years ago, Rosen argued that certain new technologies would significantly enhance the productivity of talented workers, enabling superstars in any industry to greatly expand the scope of their market, while reducing market opportunities for everyone else.[2] Digital innovations, including advances in the collection, processing and transmission of information, is what Rosen envisioned would lead to the superstar phenomenon.

Digital technologies are information goods, which are different from the traditional, physical goods in the economy. What it means is that fundamentally different economic considerations apply. Unlike physical goods — a loaf of bread or a car — information goods have two key properties: They are non-rival and excludable. Non-rival means that something can be used without being used up. Excludability means that an owner of digital innovation can prevent others from using it, by protecting it with patents, for example. These two fundamental properties of information goods are what give rise to the superstar phenomenon.

In a working paper I co-authored with Professor Ding Xuan Ng at Johns Hopkins University[3], we described superstars as arising from digital innovations that require upfront fixed costs that allow firms to reduce the marginal costs of serving additional customers.[4] For example, once an online travel agency has programmed its website at a fixed cost, it can easily displace thousands of traditional travel agents without much additional effort, scaling at near-zero cost.

Because a firm can exclude others from using its digital innovation, it automatically gains market power. The innovator then uses that power to charge a mark-up and earn a monopoly rent — basically, a price superstars charge in excess of what it costs them to provide the good — which we call the ‘superstar profit share’.

THE POLICYMAKER’S DILEMMA

In a vibrant free market economy, businesses compete for customers by innovating and improving their offerings while keeping prices low; otherwise, they are displaced by more innovative rivals entering the market. Unfortunately, the increasing monopolization of the economy by technology superstars is weakening the competitive environment around the world.

Monopoly power is the main inefficiency from the emergence of superstar firms, because superstars can exclude others from using the innovation that they have developed.

So, what policy measures can be employed to mitigate the inefficiencies arising from the superstar phenomenon?

We do have antitrust policies designed to promote competition and hence economic efficiency. Authorities could take a drastic measure and break up monopolies. Or they could tax all those excess profits megacompanies make.

Another policy to consider involves giving consumers control rights over their data. Right now, only companies have that data, and they are selling it. If you free it up and don’t allow them to sell it anymore, it reduces their monopoly profits. And if you give consumers more freedom over their data, they could, for example, share it with the latest start-up and create a more competitive landscape.

However, such policy remedies can be a double-edged sword. On the one hand, they reduce monopoly rents. On the other hand, they can also reduce innovation.

Innovation requires investments in R&D, which represent a significant sunk cost that only large firms can afford. Government regulations can easily backfire, discouraging large firms from making long-term R&D investments.

What, then, is the best policy intervention? Professor Ding Xuan Ng and I believe that basic research should be public. Digital innovations should be financed by public investments and should be provided as free public goods to all. This would make the superstar phenomenon disappear, and the effects of digital innovation would simply show up as productivity increases.[5]

We live in a brave new world that is increasingly based on information. Because the information economy is different from the traditional economy, antitrust policy should be revamped to reflect that. Instead of worrying about the economy being eaten up by these gigantic monopolies, policymakers need to focus on the question ‘What specific actions can we pursue to make the economy more competitive and efficient?’

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