Taking stock: HR at LSEG
The London Stock Exchange has diversified greatly in recent years, but how has M&A activity affected HR practice?
The first question I want to ask Tim Jones, group head of HR at the London Stock Exchange Group (LSEG), is the first question he asked when he was approached about the role in 2010: What does a stock exchange do? The London Stock Exchange brand is globally known, thanks to its 200-plus year heritage – but what does it actually do?
Luckily, his four years leading HR at the group means Jones is now in the perfect position to explain: “A stock exchange helps with capital formation. We assist companies with initial public offerings (IPOs) and encourage them to join the stock market.” But that’s not all. During the financial crisis the number of IPOs taking place fell dramatically, so LSEG’s CEO Xavier Rolet decided the group needed to diversify and become more internationally competitive in order to keep growing.
Now, says Jones, the Exchange has a number of other offerings, from intellectual property to providing business indices (the group owns FTSE and last year acquired the US asset management firm Frank Russell Co., which includes an indices business). It also plays in the balance sheet risk management space. And underpinning all that is the technological infrastructure needed to keep the group’s exchanges (which include the Italian exchange Borsa Italiana and pan-European Turquoise) running smoothly. In 2010, LSEG acquired Sri Lankan firm Millennium Technology, which has some of the fastest trading technology in the world.
This diversification has involved an impressive amount of M&A activity, an area in which Jones has plenty of experience. He began his HR career at Marks and Spencer, and in his five years there led HR on two major projects: a manufacturing joint venture and the acquisition of the Per Una brand in 2004. From M&S, he moved to advertising firm Aegis Media, where he looked after EMEA and was involved in a lot of M&A activity. So, when he got the call to join LSEG, despite never having worked in financial services before, he believes his major selling point was his knowledge of “how to gently integrate businesses and unify companies”.
At LSEG, HR has been “intensely involved” in M&A. “Our approach with acquisitions is to diversify,” Jones explains. “It’s not about acquiring something and making it exactly like everything else in the first 100 days. These are additions that complement our existing offering and they need a level of independence. Often we’re acquiring not infrastructure, but talent. One of the key considerations when we’re acquiring a business is whether there is alignment from a brand and values perspective.” That means HR has a critical role to play, from planning for integration to working out how to retain the talent LSEG is looking to acquire.
Jones believes the group’s metrics speak for themselves as to the value HR has been able to add. Market capitalisation was £2 billion when he joined; now it’s £8 billion. LSEG was FTSE 125 in 2010, now it’s around FTSE 50, and has grown to nearly 5,000 staff from 1,450 in 2010. “When we think about how we have been successful, we think about the acquisitions,” he adds. “Were they the right kind of acquisitions to make and have we retained the people that we needed to? Have we fulfilled shareholder expectations? My team and I have been integral to the delivery of those.”
The internationalisation and diversification of the group hasn’t been without change for the HR team. Jones has moved his function from being set up in a silo by each entity to providing a more centralised and global HR solution, at a lower cost and with fewer people. “When I first joined, I didn’t think we were as commercially focused as we could be,” he says. “The challenge for HR is how do you add commercial value? It was my view that general capability wasn’t as good as we needed it and we had localised solutions. Now we are much more global. People have either relished that opportunity to step up and develop, or we’ve had to bring in people who are more international in outlook.” Jones’ remit covers 20 countries, including the US, Italy, Sri Lanka and Hong Kong.
Although his team has shrunk, Jones says a big lesson has been in making sure the HR function is resourced appropriately. “Sometimes corporate functions can be a bit shy in asking for appropriate resource,” he reflects. “My big learning has been that if you have a business appetite and your direction is aligned with the business direction, don’t be shy in asking for resource, rather than asking people to do things on top of their day jobs.”
Beyond HR, LSEG has gone through more change in the past five years than any other time in its 200-year history, estimates Jones. “In the late ‘90s, we had a monopoly,” he says. “Technology and globalisation have created much more competition. The more traditional parts of the business have had to go through a big change journey, adapting to a more commercial and competitive environment. It’s an environment that has always been influenced by regulation, but [is now under] greater scrutiny.”
However, he adds change has been largely positive, with roles adapting to competitive and regulatory changes, rather than wholesale redundancies. Recently LSEG ran its first global engagement survey: 80% of employees participated and it achieved an engagement index of 77%, which Jones is proud of “considering the amount of change”. “The advocacy and pride scores are off the scale compared to the benchmarks,” he adds. The survey identified employees were keen for more development opportunities, so LSEG is investing more in talent, and creating opportunities for people to move internationally around the group.
During the recession financial services, and big banks in particular, became less attractive destinations for socially conscious graduates. Do young people still aspire to work in the industry? Jones says LSEG benefited in terms of recruitment at the height of the crash. Why? “I think because although we are associated with financial services, our heritage and values, like integrity, were attractive. Graduates wanted to join us on the back of that. It was a role associated with financial services, but not a cause in the way the banks were.”
The ripple effect has gone beyond graduates, with LSEG able to attract more senior people “who may have become disillusioned” with banking. “Some of our key hires recently have been people who have worked within financial services before,” reveals Jones. “Five years ago, it would have been harder to attract them, but because of our growth and the level of disillusionment with parts of financial services, we’ve benefited.”
People are also likely to be attracted by LSEG’s role in the wider economy, such as its focus on the importance of job creation and helping small companies grow via IPOs. Its Elite programme helps small companies prepare for capital investment. “It’s hard for some companies involved in financial services to talk about their social purpose, but I think we are in the perfect position. We are providing a purpose by providing infrastructure that supports the markets we serve,” believes Jones.
The Exchange is also able to play a role as a pivotal point for other financial services companies to congregate around, on apprenticeships for example. LSEG appointed four apprentices last year, but Jones said the group wanted to “gain momentum” and help a larger number of young people by partnering with others. It is now working with a number of other organisations to create a development programme for apprentices, in partnership with charity City Gateway.
When it comes to what makes HR influential more generally, Jones – who appears on the HR Most Influential Practitioner ranking – believes it’s about commerciality and adding “meaningful value”. But there is another element that is becoming more important given his governance responsibility, and the context of the sector in which he works. “HR needs to have the right judgement and be brave and bold in challenging the business, like a conscience,” he says.
“There is a level of professional independence to the role,” he continues. “I want to bring that constructive challenging. The more you go about that the right way, the more the organisation trusts your judgement. Too many people in the profession have been compliant in wrong decisions and not challenged where they should have.”
Nowhere is this truer in financial services than in remuneration. “The weight of opinion around executive pay means we have a responsibility in HR to make sure we are focusing on the right areas and ensuring our business leaders are making the right decisions around people, talent and remuneration,” Jones explains. “It’s about applying the right judgement to help the organisation make the right decision, and so you can look someone in the eyes and explain why you’ve made that decision.” He adds he feels he’s got it right, as over 95% of LSEG’s shareholders voted in favour of the latest Remco decisions.
“The more constructively challenging you can be, the more people will treat you as a true partner,” he concludes. “There are fantastic HR people out there, but there are more in the profession who could become more commercial, more influential and use the voice they have.”