Can the Banking Industry in Italy Master the Fine Art of Managing Human Resources?

Article excerpt

Over the centuries, Italian banks have been knwon for their ability to maintain high earnings while at the same time providing important support to business ventures in both domestic and world markets. The first Italian banks were financing international trade in the Middle Ages.

In today's financial arena, Italian bankers sit alongside their international colleagues in syndicated loan pools and other world banking forums and continue to play a key role in making the decisions that fuel the world's economy. Italian banks are also at the forefront in terms of technological innovation.

In a word, from the time of the Medici financiers in FlorencE, Italian bankers have consistently demonstrated a unique talent for doing business.

Yet, in an article published in the July 12, 1983 edition of American Banker, Frederico Pepe, managing director of the Banca Nazionale dell'Agricoltura, argued that "technological advances will not make Italian banks fit to compete in today's environment, unless organizationl and management changes are also made."

My own opinion is that it has been precisely the limited attention devoted to human resources planning and development in the past that is responsible for the severe problems Italian financial institutions face in today's environment. A review of the evolution of the Italian banking system, which in many ways parallels recent changes in the U.S. financial services industry, will serve to bring the picture into focus.

Until a few years ago, Italian banks prospered during a long period of steady business development against a backdrop of appropriate regulation and control provided by the central bank, Banca d'Italia. Banks showed steadily improving earning and expanded both at home and abroad. Few cases of poor financial performance disturbed the tranquility of the Italian banking industry.

All of this took place in relatively stable socio-economic system, marked by little competition from foreign institutions on the domestic market and the growing propensity of customers to save, resulting from interest rates on deposits that allowed them to compensate for the effects of inflation.

Within the structure of individual banking organizations, employees at all levels identified strongly with the banks' value systems that praised loyalty, integrity, commitment, internal mobility, and the willingness to work long and hard. Bank employees' "faithfulness" to the organization is widely acknowledged as a key factor in widely acknowledged as a key factor in Italian banks' success. Not surprisingly, the individual institution's reward systems have always put a high value on such commitment.

The banking community put forth an image of slightly arrogant solidity, centered on the power of money, an empire whose "citizens" were well protected, and who grew up in a rather bureaucratic but efficient system.

In this system authority and hierarchy generated perhaps too much respect and there was no room for individual participation and involvement. There was also little opportunity given to unions to play the role of management "gadfly." This generated pressures for other Italian businesses in practically all of the market industries.

At the same time, legislation passed on employment practices created extremely favorable conditions for all workers, so much so that, in the absence of financial conditions bordering on desperation, bankers and other businessmen were barred from dismissing employees or even trimming their work forces.

Limited Attention

In the above scenario, personnel policies understandably were regulated to a rather marginal, purely administrative role. Unrestricted, continuous increases in bank manpower -- the number of people employed by the industry practically doubled between 1970 and 1980 -- were justified by the steady growth in business and carried out without too much attention to improving internal efficiency and effectiveness. …