Banking is such a constant in Lebanese existence that you can pretty much set your watch by its heartbeat. Of course this only looks effortless. In reality, there are a series of arduous and vital balancing acts in progress, primarily at the central bank and then one tier lower at the commercial banks. After all, the sector’s steady performance in the safe annual growth of assets and deposits is entwined with global realities of the most fragile political, monetary and economic sorts. This inconvenient and undeniable reality was underscored by the months-long hullabaloo over Banque du Liban (BDL) Governor Riad Salameh’s term extension, announced at the end of May.
Another bone of contention is profitability and its implications. In 2015, there were questions over the banks’ taxation, in 2016 a moral legitimacy debate over the benefits that banks gained from the central bank’s financial engineering, and in 2017, again, the dispute over the proper role of banks in the financing of the national budget by way of the taxes they pay. This is not to mention earlier incarnations of the question over the banking sector’s role in the financing or exploitation of what can hardly be described as smart frugality in the Lebanese public administration.
For 25 years banks have fluctuated between rentier-economy style gains in the case of their profits from high-interest paying treasury bills in the 1990s, and their burdens, such as the zero-coupon bonds of 2002/2003 (issued in the wake of the Paris II donor conference), and the more recent debates mentioned above. Without going into any of these issues and regurgitating the many valid questions related to our peculiar financial market, one is inclined to conclude that the concentration of risks — both upside and downside ones — in the banking segment is a perennial feature of post-Taif Lebanon.
[pullquote] Of varied societal functions, banking sector employment is the weightiest one [/pullquote]
The industry’s hidden values
Besides its two main contributions to the national economy — the financing of our public and private sector deficits — there are additional facets to Lebanese banking and its role in society. These facets are varied as banks’ enhancement of consumer lifestyles, sponsorship of events, their charitable contributions, their sponsorship of Lebanese art and their role as job creators and employers. Of these societal functions, banking sector employment is the weightiest one, constituting an important structural pillar of national employee incomes and of the labor market.
The dimensions of the employment pillar are not very obvious, and indeed the labor market in its entirety is shrouded in a fog of data insecurity, further obscured by partisan international lighthouses. Multilateral agencies and initiatives with their development agendas may illuminate the local labor market’s myriad problems and inefficiencies, but rarely offer any practical way forward. In recent years, internationally driven reports have highlighted high inequality in private sector income distribution, the statistically shrinking productivity of workers, rampant youth unemployment, the absence or inefficiency of social safety nets, and lower female participation in the national workforce.
Realistic hopes are hard to build from these reports, whether for regional job prospects or for Lebanon. For example, a 2015 report produced by the International Labour Organization’s (ILO) local office suggests (based on conclusions from somewhat questionable data on negative growth of productivity since 2000) that “types of employment available in Lebanon over the past two decades have been, on average, of relatively low productivity, usually indicative of low-quality, low-paying jobs in informal activities.”
Two reports from 2017 are worth noting. First, the United Nations’ World Economic Situation and Prospects 2017 report, published in January and updated last month, stated that the recent weakening of Arab labor markets in the Gulf countries had negative impacts on employment prospects for regional job seekers. The report highlighted that, “armed conflicts have caused large-scale unemployment in Iraq, the Syrian Arab Republic and Yemen, and some negative spillover effects have been observed in the labor markets of Jordan, Lebanon and Turkey.” In conclusion, the UN claimed that “the labor market situation in the region is not expected to improve significantly in the next two years, with structural unemployment remaining high, particularly among youth, and a widespread lack of decent work.”
[pullquote] Data research by LinkedIn from the past five years showed top regional growth in numbers of entrepreneurs and only single-digit increases in finance and banking workforces [/pullquote]
The second report, issued last month by the World Economic Forum (WEF) in collaboration with the social network LinkedIn, struck the same alarm bell on insufficient job generation, but added a new tone, referring to the “creative disruption triggered by the Fourth Industrial Revolution.” The report — published under the title, The Future of Jobs and Skills in the Middle East and North Africa — raised the notion that the impact of the Fourth Industrial Revolution “will interact with a range of additional socio-economic and demographic factors affecting the region,” creating what was labeled as challenge and opportunity for the MENA region’s workforce.
According to the WEF, data research by LinkedIn from the past five years showed top regional growth in the numbers of entrepreneurs but only single-digit increases in the finance and banking workforces. While the report offers the usual abundance of wise words and recommendations, adorned with statistics from MENA countries, it lacks useful labor statistics on Lebanon.
Against this weary background, it is quite a different microeconomic picture that emerges when one examines employment data from the Lebanese banking sector. Granted, the banks’ collective productivity is attributable to only about 26,000 banking sector employees. This is only a fraction of the economically active population of circa 2.1 million, as estimated in 2009 by the Central Administration for Statistics, with more than 1.4 million formally employed and another 0.6 million in the informal economy.
If we consider that every high-quality job in Lebanon is an asset to the national fabric, and every newly created job of this sort expands that fabric — then the contribution of banks to the sphere of labor is impressive. The direct and indirect employment bill that comprises the salaries, allowances and social contributions paid by Lebanese banks totals some LL 1.8 trillion ($1.2 billion), equivalent to 2.5 percent of the GDP (2015 figures). According to the Association of Banks in Lebanon (ABL), the salary portion of this total reached 62.5 percent and the total cost paid by banks per average employee is LL 72.87 million (over $48,300) in 2015.
Similarly, net job creation in the banking sector, which has stood at about 800 new hires per year for the last few years, can rightly be regarded as insufficient when compared with the estimated need for supplying university graduates with quality work — but it can also be taken as a blessing, especially when one considers that the banks’ gross hiring activity of fresh graduates is likely not limited to this net increase, but closer to absorbing 2,000 job seekers with bachelor’s degrees.
Gross hiring figures are not captured in the ABL annual report, but three of the largest banks tell Executive about their gross to net hiring ratios. “As banks we are doing our share of creating [employment] opportunities in the market. If I look at the past three to four years, the gross hiring at Bank Audi is more than 1,150. This is not a small amount,” says Nayiri Manoukian, head of human resources at Bank Audi Group. According to her, the group’s workforce in Lebanon comprises about 3,400 individuals; Manoukian explains that in 2016 alone, new hiring reached around 360, against perhaps 150 out migrations, leaving a net of 210 in added human capital.
At BLOM Bank Group, Head of Human Resources Pierre Abou Ezze says, “In terms of employment we have been growing at about 125 to 150 employees per year for the last five or six years at least, and we are anticipating that this trend will continue.” He adds that the bank hires about 250 new employees per year, in part to balance attrition of the workforce, and in part to satisfy demand for business development. “Our strategy is to aim for stable growth in operations, in terms of opening branches as well as in terms of developing business through existing branches,” he explains.
While the headcount at Byblos Bank was kept relatively constant in the first three years of the decade, new hiring has grown since 2014. “We hired around 100 people in 2014, then 134 persons in 2015, and 189 in 2016. In 2017 to date, we have hired 87, and expect for the full year to reach up to 200 new hires. This is new hires, not net growth of the workforce,” says Fadi Hayek, head of human resources. He puts the bank’s total employee turnover at around 6 percent per year, indicating that about 100-110 of its total national workforce of nearly 2,000 leave the bank per year. This number mainly includes job migrations, people retiring and a very small number of dismissals. “The net effect of hiring in 2015, in terms of human capital, was an increase of 25; in 2016 it was 84; in 2017 [we are] also expecting around 80 to 100,” he states.
Between them, these three large banks have about 7,500 employees in Lebanon, or very close to 30 percent of the total banking sector workforce. Although this number is not large in comparison with the national needs for employment generation, the role of banks in job creation gains even more weight when seen in the dimensions of empowering continued education of employees, developing career and social plans, as well as providing potential model functions to other corporate and institutional stakeholders in the labor market.
The human dimension
Workforce expansion strategies vary substantially from bank to bank. Hiring is correlated firstly to the addition of new branches, but also linked to adding and strengthening departments with new focuses, such as digitization or growth into SME and retail banking. Departments and specializations that saw disproportionately large additions of human capital, in the years since 2012, are compliance and control.
HR managers at the largest banks, and at some smaller ones, tell Executive of areas under their purview where automation is subduing the need for workforce expansion, such as in back office, archival and basic administrative roles. Overall, however, they confirm that banking jobs are safe, and that the increasing headcounts and creation of new positions has progressed hand-in-hand with the consistent increases in the assets, deposits and loan portfolios of Lebanese banks.
While it is mainly anecdotal information that fresh Lebanese university graduates and job seekers regard banking as a top employment choice — a survey this spring claimed to have found that 36 percent of respondents see banking as the most attractive industry for fresh graduates and that 39 percent see it as having the highest job security, but gave no information on sample size and methodology. Rabih Joumaa, head of the HR division at Banque Misr Liban (BML) says that he would not be surprised by such findings. This is because in this country, where a great hunger for stability exists, banking is “the only industry that has been stable for many years,” he says.
Job security is indeed closely related to the issue of stability. Although the hospitality industry may have demand for several thousand extra workers at the start of a promising summer season, and the construction industry may hunt after new staff when the economy is on the upswing, these industries are also notorious for seasonality and layoffs during difficult times. By contrast, the statistics at individual banks point to slower hiring during some years but not to the kind of employee volatility found in many sectors that have greater demand for labor.
Historic shifts in the profiles of work at Lebanese banks commenced in the 1990s and were spearheaded by the larger banks. Under the adverse conditions of the Lebanese Civil War, academic qualifications for work in banks became a lesser concern than street smarts in facing daily challenges, such as safely making it home from the office, remembers BLOM’s Abou Ezze. At banks like BLOM and Audi the post-conflict period was the time when senior management embarked on upgrading their staff by looking for skilled knowledgeable workers, with at least a bachelor’s
degree, or even by taking in small cohorts of MBA holders. “When I was hired as a consultant [in 1995], it was the aim to introduce academic elements to training programs at the bank. The nineties saw [the] start of [an] era of human resources in Lebanese banks. That is when banks started to take care of their human capital element,” Abou Ezze explains. Today of course, a bachelor’s degree is the minimum entry requirement that bank recruiters posit.
Meritocracy is not what is usually associated with pathways of social advancement in Lebanon, but the principles of quality hiring and merit-based pay are emphasized by the banks, as opposed to assumptions that only elusive personal connections or specific communal allegiances open doors in bank employment. In the experience of some HR experts, such latter assumptions have, in recent years, gained even more traction among young job seekers. This is a problem, because as self-perpetuating misperceptions they can easily turn into artificial inner barriers that discourage people from applying. “The process of recruitment in the top ten banks is very developed. Banks have specific means that they use to recruit the best in the market through job fairs, internships, etcetra. They are making efforts so that the recruitment process is as accurate and objective as possible,” says Bassam Nammour, training and development manager at Credit Libanais.
Rather than expecting ulterior motives in how banks recruit and promote their people, career-minded graduates, according to BML’s Joumaa, should be patient. “People should accept the idea [that they must] work hard, prove themselves and make effort in order to grow. It is not enough if fresh graduates would just do the minimum that is required in their job but expect quick promotions to become managers and immediately get what others got after 10 or 15 years of hard work,” he explains.
Enmeshed with the issue of merit based promotion is the ever-thorny question of gender biases and gender-based pay gaps. Here the tenor of human resource specialists in the banks is uniform — discrimination based purely on gender terms is not an issue.
Byblos’ Hayek states it categorically: “You will not find gender-based pay gaps in Lebanon in banks. In comparable positions such as among assistant branch managers or personal bankers, you find women earning more than men and vice-versa. Salaries depend on position and performance.” When doing an analysis of gender splits in different branches of Byblos Bank, such as rural versus urban locations or branches in regions with presumably more traditional views on the role of females, he found the reality ran opposite to common assumptions. According to him, several branch manager positions in places that are religiously conservative were in fact filled by women, and the gender mix in urban and rural branches was the same.
“We never look whether it is a male or female when we promote anyone,” confirms Audi’s Manoukian. She points out that the rise of female employees is more than a passing phenomenon and today extends, if not yet to the very top of hierarchies, certainly to high echelons in the largest Lebanese bank. “We have a good number of females as middle managers and heads of departments. When it comes to branch managers, we are looking for males, as most [branch managers] are females,” she says.
BLOM’s Abou Ezze says that the bank has, of late, seen a largely stable ratio of 51 percent female and 49 percent male employees in the strata of professional banking jobs (excluding clerical workers and manual laborers). “The ratio has not changed much in last few years. Twenty years ago the male workforce was dominating, but today female education levels and participation in workforce in Lebanon are higher. Families in Lebanon have need for both parents to work,” he concludes.
“In BML today, you can see that most branch managers are ladies, and if you want to headhunt a qualified one, you have to pay her what she deserves. I don’t see that pay based on gender is the case at all in the Lebanese banking sector today. Pay is based on knowhow, qualification and the market, which in my opinion today does not differentiate between men and women,” chimes in BML’s Joumaa. He adds that the bank also takes a positive view on future moms in the workplace. “We don’t mind at all to hire a pregnant woman. We had three cases in 2016/17 [of hiring pregnant women] where we were convinced that those ladies are very qualified and will provide extreme added value to the bank,” he says.
It would still be presumptuous to claim that there are no glass ceilings, unjust promotions, communal biases or any sort of wasta or family-driven distortions in the composition of the banking sector’s workforce. This starts at the recruitment phase. HR managers on the one hand describe ideal recruitment practices as regarding applicants as unique individuals, and anonymizing bias-prone information such as the name of the university where an applicant earned his degree, but from the conversations with Executive it appears that it is a dominant practice to discriminate in favor of applicants from “reputed universities,” which in Lebanon firstly includes American University of Beirut (AUB), Lebanese American University (LAU), Ecole Superieure des Affaires (ESA) and Université Saint-Joseph (USJ). Upon further questioning, most HR heads confirm that their preferred lists include a variety of additional universities — especially praising the technical skills of graduates from the Lebanese University — but also caution that the high number of officially licensed tertiary education institutions in Lebanon does entail a portion of universitary entities whose teaching ability and program quality they doubt.
In terms of career equality and job stresses, equality of opportunity and merit-based pay do not exclude differences in willingness to get ahead, nor do they provide female employees with the means to compensate for periods in which they may
focus on childbirth or child rearing. Simply said, gender pay gaps are a reality in Lebanon and likely will be for the foreseeable future. But as far as banking is concerned they are not based on the undervaluation of women’s contributions in the workplace.
As far as work-life balance is concerned, working in a bank is no easy job, and stresses — such as pressures to meet targets and produce sales results that will boost their bonuses — come to bear on all employees. According to BLOM’s Abou Ezze, work-life balance is a nice concept but he agrees that it is not fully compatible with ambitious career-mindedness. He says average work time per employee is 40 to 42 hours per week and admits that changes in working hours several years ago caused some employees to resign or opt for a transfer to the head office, where time flexibility is greater than in branches.
Average employees will not be pressured to put in extra work, but others have to make choices. “If you want to advance in your career and one day be part of top management, you have to put in more than the rest,” Abou Ezze confirms. This also results in proportionally greater male participation in BLOM’s program for high achievers, as younger women might find themselves unable to meet the program’s extensive time requirement if they want to prioritize their family for a period. He says: “People in that program are totally dedicated to their career. To differentiate yourself and justify being in that particular program, you first have to be a cut above [the rest] in your capabilities and second be a cut above in terms of commitment.”
Also in Credit Libanais training head Nammour’s view, “Work-life balance is not about the bank being flexible, it’s about you as a person and how you can adapt to the bank’s schedule and be flexible within it.” On the other hand, this puts the onus on the bank. Rather than expecting traditional attitudes of employee loyalty, it should focus on proactively engaging employees. “The bank needs to let the employee feel engaged by providing the right environment, economic incentives and rewards, trainings, etc. If an employee is engaged, he will be more productive,” he says.
In the totality of remuneration issues — where still modest entry-level salaries are regulated by a collective agreement that is circulated in three languages by ABL and where pay scales for branch managers potentially reach into six-figure territory — and numerous career-related issues from trainings and continued education options (see story page 30), to the provision of clear career paths and employee evaluation procedures that keep up with international developments, Lebanese banks appear as trailblazers of practices that one might otherwise encounter in teaching manuals at Lebanese universities, but see rarely in such organized and coherent form in the bulk of private-sector enterprises.
[pullquote] Work-life balance is not about the bank being flexible, it’s about you as a person and how you can adapt to the bank’s schedule [/pullquote]
Thinking beyond retirement
Moreover, the banks’ engagement extends into another socially crucial dimension — adequate pension planning. “Bank Audi feels that it is part of its civil duty to help its employees after retirement,” says Manoukian. Although the current number of retiring Audi employees is still very low, planning for retirees is on top of her department’s to-do list. She explains that since the beginning of 2017, the bank has been working on a retirement and pension plan, in a collaboration between the HR department and the bank’s finance and organization divisions, and has also worked with an actuarial company for this project. “We have committed that by the middle of this year we should produce a proper proposal that can be presented to the bank’s executive [board] committee to see if it will be adopted.”
While she concedes that at some point in the future pension provisions might even become a legal obligation, she notes that it doesn’t help an employer to have no proper pension scheme or old-age insurance model enacted by the state. But besides the political aspects, she sees the problem in Lebanon as cultural, citing the fact that very few people ask insurers about pension plans or annuity products. “It is really a culture where people don’t plan for the future, and this is scary,” she says.
In order to avoid pitfalls such as eventual future liabilities, Bank Audi is seeking to develop a plan for its employees which — while preserving the bank’s existing benefits offered at retirement and not affecting end-of-service NSSF indemnities – makes sure that employees will have, at the very least, the comfort of health coverage after their retirement. She acknowledges that this project will demand a strong financial commitment from the bank but refuses to provide any projection on its estimated magnitude.
“The bank has this culture of taking care of its employees, and it was with management acceptance that we went into the pension plan [project]. Otherwise [we] would not have done it. You cannot have such a big population and productive workforce, and their retirement is not properly secured. We especially want to have the basic need of medical care covered at age 65 and above, when one needs it,” she assures.
There are provisions in the banking sector’s Collective Labor Agreement for 2016/17 that banks have to ensure for their employees “the right of continuity of hospitalization coverage insurance” after retirement, through a program called in bureaucratese Conversion Privilege Options (CPO). Seen in combination with the other benefits that working at a bank provides in Lebanon’s unstable labor and social security environment, it is noteworthy that such initiatives are actually being implemented (Credit Libanais’ Nammour claimed that the bank recently signed such a CPO agreement for all its 1,600 staff, and was ahead in the industry in this). It should indeed send a signal to other industries that expectations of increasing productivity from employees — vital for economic success — require much more than a CEO pep talk about the “happy work family.”