Charles Schwab is America’s largest discount brokerage firm, which offers its customers with financial advice and financial planning. It has employee base of over 13,000, most of who reside in the United States. Like many other companies in the financial services industry, Schwab has had to endure a dynamic and volatile market environment since the late 1990’s. This has created many challenges for the firm including a core workforce that has been through enormous growth followed by an equally powerful reduction in size. In the last 15 years, this cycle has repeated itself thus creating a significant morale challenge for leadership and Human Resource partners to address. To return the company to its full earnings and growth potential, a system to restore and replenish high morale is applied. Content workers are productive workers and keep the company competitive in the industry. In this highly competitive brokerage space, productivity, efficiency, and all employees working for a set of common goals are critical to Schwab’s success. The company gives its priority to customer satisfaction by “empowering and working from the customer in rather than existing processes out. This is done by identifying what customer wants and only then determine if you can supply the requirement at a profit” (Kador, 2002).
HR and Centralization
In 2001, all bets were off for the Charles Schwab Corporation. It had built a business by providing access to the stock market at an incredibly discounted rate from the full service brokerages. As the 90’s wore on, the stock market heated up and these were the “boom” times for Schwab. Average daily trades exploded. Schwab’s business went from a niche market to one of America’s most recognizable companies. Its employee base grew from a few thousand, at the start of the decade to 26,000 by the end of the decade. Staffing departments could not keep up with Schwab’s growth, and training facilities would often be filled to increase the capacity. The financial resources of the company were at an all time high and employees felt it. Thousands gave out stock options, and as the company stock rose aggressively, so did forced retirements. This was the only way that an employee could gain access to the company stock earnings. Because of the pace of growth, coupled by the many retirements every week, advancement was relatively easy. People were often moved into higher-level positions as a result of need rather than selection. In addition, there were parties, flexible work shifts and benefits of all sorts, which emerged. Morale rivaled any modern day tech company. People were also not prepared for what came next. “The company seeks forward-thinking, optimistic and employee who are compassionate about companioning client’s goals. Its culture also extends to the community through volunteerism and philanthropy supported by the foundation” (Daily finance, 25 April 2013)
The “Adjustment”
In March of 2001, the stock market tech “bubble” burst. For the past five to six years, technology stocks had enjoyed an enormous rise in value due to a belief that the internet and the associated hardware using it would grow to almost limitless levels. As Fed Chairman Alan Greenspan once said, it was “Irrational Exuberance”. Companies carried out stock valuation for their earnings several times in a year. People had made lot of money in pat and no one could believe it could end. Participation in the markets grew and stock level rose. As a result, thousands of people were entering the markets for the first time each day. All thanks to companies like Charles Schwab, which made it easy to deposit money and start trading right away. Each click generated $29.95 for the company, and nearly all of that was profit. All of that momentum stopped nearly overnight that March. The market had seen its share of “down” days in that six-year “bull” market but nothing compared to this. “The Nasdaq Composite lost 78% of its value as it fell from 5046.86 to 1114.11.” in two consecutive years, It panicked and numbness followed (Schwab & Schwab, 2004). These two states of public reaction had adverse effect since it reduced Schwab’s revenue. This was because the public’s paralysis meant that there was no trading, and without trading, there was no revenue. With no revenue, there was no need to have 26,000 employees. From 2001 to 2005, Schwab eliminated half of its workforce. As those years unfolded, optimism that Schwab’s glory years would return began to fade despite several short periods of increased trading. As that optimism faded, not surprisingly, so did morale.
Centralization
As the Charles Schwab corporation sought to survive, it had to undergo a severe cost cutting initiative known as the “Cost Leadership Initiative” In addition to the job eliminations already discussed, Schwab centralized many of its functions. This allowed fewer people to meet the needs of many across the organization with a smaller staff, thus a reducing expense to the company. Human Resources were one of these centralized areas. Formally divided into many separate areas, one large Human Resources group was formed. It contained the core Human Resources generalist team, which helped to support the performance management needs of the separate business units. Recruiting, Training, Benefits, and Compensation were all brought under “one roof” (Kador, 2002). This provided a very lean cost structure for the firm. To provide one example of how this saved the company money, we can look at the consolidated training department. Prior to the consolidation, each separate business unit had its own training department. This amounted to hundreds of employees across the company. With the consolidation, many of those jobs were eliminated and the hundred became less than one hundred employees.
References
Business Wirevia. Dated 15th April 2013. Charles Schwab Named a
"Top Workplace" in Indianapolis and Denver; Company Also Receives National Ga. Daily Finance. Retrieved at http://www.dailyfinance.com/2013/04/15/charles-schwab-named-a-top-workplace-in-indianapol/
Schwab, C., & Schwab, C. (2004). Charles Schwab's new guide to financial
independence: Practical solutions for busy people. New York: Three Rivers Press.
Kador, J. (2002). Charles Schwab: How one company beat Wall Street and reinvented the
brokerage industry. Hoboken, NJ: J. Wiley.
