Sandy Begbie was in his early 20s and working in banking at the Royal Bank of Scotland when he was moved into HR. It was, he says, “the last place I wanted to be”. Yet there he stayed. Fast forward a few decades and he is the most influential HR practitioner in the UK, according to this magazine’s HR Most Influential ranking, and heading up HR at FTSE 100 Edinburgh-based investment company Standard Life.
Although he has stayed within HR the clear theme that runs through Begbie’s career path is putting himself outside of HR, to remain relevant and bring credibility back to the function. He joined RBS one week after his 17th birthday, progressing through his banking exams before joining personnel. And it is this time in banking he holds on to. “It made me realise that I brought a different perspective to people who had grown up in HR,” he recalls. “That’s a theme I’ve held onto: how do I stay relevant by doing things outside of HR?”
In practice, that’s meant things as varied as completing an MBA, running IT, taking over responsibility for Standard Life’s joint venture in China, joining the advisory board of US business school Wharton, chairing a charity, and sitting on boards as an NED (he was an NED and RemCo chair at the Scottish Government and in September last year he joined the board of Open University).
“If you are going to be successful in HR you need to find ways to operate outside of HR, it really adds to your credibility,” Begbie believes. “You need to put yourself into difficult and challenging positions. You need to understand the boundaries of what you’re capable of and inject some personal risk into your career. Sometimes you’ll be successful, other times less successful, but that’s all part of development.”
Begbie joined Standard Life in 2010 after spells at Scottish Power and Aegon as well as a 16-year stint at RBS. And his approach to leading HR echoes that of his own career: making sure the link to business performance remains front and centre. “It’s a cliché [to talk] about aligning your people strategy with your business strategy, but doing it in practice can be more challenging as all too often HR ends up getting involved in pet projects,” he says. “The purpose of HR is to drive business performance and serve customers and clients. Too often we get detached when everything we do should be aligned with improving the performance of the business in the eyes of the customers.”
That means whenever someone comes to him with a new idea he asks three simple questions: What is the problem you are trying to solve? What is the commercial value of what you are trying to achieve? And how long is it going to take you? “The reason for the final one is if there’s a commercial imperative and it’s going to take 12 months to solve it, you have to question whether you should do it in the first place,” he explains, adding that “the middle question is quite a difficult one for HR people to answer at times”.
Helping to answer that question is one of the reasons Begbie is interested in the potential power of HR data and analytics, something he feels the HR professional community is “still just scratching the surface” of. Having led three major systems implementations he believes the two “prerequisites” for success in this area are “having a single source of truth for people data” and thinking differently about skills. In his team, for example, he has two business analysts. “HR needs to realise that the people who are going to do this best probably don’t sit within the HR community,” he adds.
The “holy grail” is predictive analytics, and Standard Life is piloting a programme in its customer service area that helps leaders “to start thinking about predicting turnover, performance issues, sickness absence and so on based on current and historic data”, although Begbie stresses “we are not there yet”.
Founded in 1825, Standard Life has a long history but it needs to move with the times, particularly embracing digital. This is why one of the business’ key strategies is focused on becoming more innovative. “As an organisation collectively we need to become more innovative and faster moving,” Begbie acknowledges.
The environment in which the firm sits presents an interesting conundrum. “My starting point is that regulation and innovation simply aren’t compatible inside a traditional environment,” he says, adding that post-financial crisis “regulators don’t necessarily welcome genuine innovation and change”.
“Firstly, let’s define genuine innovation: it fundamentally disrupts a market,” he explains. “I don’t believe large organisations in a heavily regulated industry can create the environment internally to foster that degree of radical thinking. So organisations need to think outside of their traditional boundaries and establish networks with other institutions that have the culture where that can flourish.” Standard Life partners with universities and smaller organisations to generate ideas, bringing successful ones in-house.
“A large business in a regulated environment doesn’t like failure, so you almost have to lift some of the creativity out,” he adds. “We are thinking much more about external networks. It doesn’t mean we won’t have ideas here, just that innovation here tends to be more [incremental] than creating something fundamentally new.”
This blurring of the traditional organisational boundaries presents the need for an HR mindset shift. “How you think about who you employ is different now. Organisations need to stop thinking about thick boundaries; it’s much more about networks.” This means HR needs to shift from thinking purely about recruitment to thinking about “the skills, experiences and competencies we need in the future”. “You move from thinking internally to externally,” he adds. “How are you going to identify those partners and establish those relationships, which allows you to bring in those skills for the period of time you need them? Stop thinking about it as ‘our responsibility starts and stops with those on the payroll’.”
This aligns to the firm’s views on the living wage. It was one of the first organisations in Scotland to commit to paying the real living wage, and has built this into its supply chain. “We believe in the principle of providing everyone involved with Standard Life with a fair wage for what they do,” Begbie explains. “Do contractors doing cleaning or catering have an employment experience of Standard Life? Absolutely. If they are going to be on the premises and work with us they should benefit from the experience. If you are part of our network we will insist on you paying the living wage.”
On the importance of the living wage more widely, he adds: “I believe that if you can raise a whole economy up you can make a fundamental difference to people’s lives. The living wage started in Scotland with a handful of employers signed up; now it’s 80% of employers.” And from a more self-interested point of view, those younger people more likely to be on the living wage are “one of the most engaged and enabled” groups, and have some of the lowest turnover.
Inclusivity, particularly social mobility, is a personal passion of Begbie’s. He chairs the Regional Developing Young Workforce (DYW) group to tackle youth unemployment in Edinburgh and Lothian. Too many companies, he believes, have been “blinded” by graduate recruitment, using that as the only way to bring in young talent and “running the risk of losing out on talent that comes directly from school”. Standard Life has introduced blind recruiting, where hiring managers know nothing about the candidate apart from their name. “You are assessing purely on attitude, communication, team working skills…,” says Begbie. “It has resulted in us recruiting people we never would have before because of qualifications, social background or unconscious bias.” This approach has also resulted in Standard Life being only one of 11 firms in the UK recognised as a Social Mobility Champion by the government.
“I would encourage all HRDs to do [blind recruitment],” Begbie says, adding that if the line pushes back “HR needs to be much more courageous”. “We’ve not asked permission. We just said to the line: ‘you are going to recruit 20 young people and all you are going to get is their name, and this is why’.” Standard Life has increased the number of people aged under 25 in its workforce from less than 0.4% in 2010 to almost 8%, and offers living wage-paid work experience.
Another area Begbie would like to see HRDs being brave around is executive pay. “HRDs need to be much more courageous taking a firm stance on things. [The RemCo] might not always go along with what you say, but you need to be prepared to stand up to them,” he says. “During the financial crisis some of the remuneration got out of hand and clearly drove the wrong behaviours, and HR needs to recognise its role in that and should have done something about it.”
While he doesn’t think the group HRD needs to be “the reward expert in the room”, getting experience in this field is vital. “As a group HRD you should be able to connect all the dots. How are you rewarding your most talented people?
How are you making sure you’re aligned with the strategic direction of the firm? The biggest value comes from stepping back, looking at the various stakeholder maps – employees, customers, communities, shareholders… – and coming up with a path through that which makes sense and can be explained.”
With the prime minister putting executive pay and corporate governance reform for listed firms on her agenda, Begbie believes there is a “strong case for the simplification of executive pay”, in particular getting rid of long-term incentive plans. Instead he foresees a world where executives are given base pay and a share award, which fluctuates in line with share price.
“I’m a big believer in transparency and I think things like [pay ratios and gaps] should be reported on,” he adds. “The press will report it anyway so we should face up to it and be transparent. HR needs to influence the business and the board to realise that being open and honest about these things sends a positive message. Employees aren’t daft – they can pick up an annual report and work things out.”
Being courageous and values-driven is clearly important to Begbie. As Standard Life builds its global presence, mainly in the US and Asia, being true to its values is critical. “The culture will be different [globally] by its very nature, but the values – what we stand for as an organisation – need to be replicated across the world.” In China, for example, where Begbie runs Standard Life’s joint venture with state-owned organisation Heng An Standard Life, the company’s long-term view (a hand-me-down of being a mutual until not so long ago) fits with the Chinese view of business.
“There’s a whole part of China you will never understand,” Begbie reflects. “The long-term nature of business there is what stands out to me. The Chinese are prepared to take short-term losses if they believe what they are doing is right for the long term. Although we are a FTSE 100 company we also take a long-term view, and I think one of the reasons the joint venture works is because some of those values align.”
He believes British companies in general “absolutely” could learn something from the Chinese long-term approach to business. “It’s about creating things that are sustainable,” he adds. You could say the same about his own approach to business and HR.