Departments witnessing slow erosion of stereotyped image

The answer has not proven entirely edifying. For most investment banks and fund managers, HR is mainly a cost function, the principal role of which is supporting the more valuable revenue generators. As such, it has been pruned to keep its costs in check. Banks such as UBS Warburg have outsourced benefits administration appraisals are now conducted online HR staffs have been cut.

Deprived of its administrative padding HR has, however, emerged leaner and meaner and ready to play an altogether larger role. Gurus such as David Ulrich, a professor of business administration at the University of Michigan, have encouraged the transformation with such rallying cries as: 'It's time to destroy the stereotype and unleash HR's full potential.'

Unfortunately, the financial services sector has not always been receptive and investment banks are widely considered behind the times when it comes to unleashing HR experts. Relatively few have attained the Ulrich ideal: an HR function that is a strategic partner and agent for change, as well as being an expert in the organisation and execution of work and the champion of employees.

According to Ian Tomlinson-Rowe, a director in KPMG's financial service practice, all HR functions can be divided into three specific areas: employee resourcing (recruitment and retention), employee development (training) and employee relations (dealing with recalcitrant unions).

Employee relations are under-worked in investment banks, where placard waving and working to rule are rare. Instead of the HR department, in most banks it is line managers that have traditionally recruited and retained staff. Recruitment and training is generally where the HR function has its raison dêtre. But traditionally this has not counted for much.

George Wilson, head of HR at Rothschilds and a former head of HR at CSFB and JP Morgan, says: 'An HR generalist in an investment bank used to be involved in recruitment only to the extent that someone would call up and ask them to send an offer letter to a candidate that they knew nothing about. HR was not involved in the decision-making process.'

Technology means that this kind of administrative burden can be lessened. But according to Tomlinson-Rowe at KPMG, the expense of new technology and competition for available funds means that this has not always happened.

Yet there are instances in which HR has broken out of the administrative mould. Goldman Sachs and Morgan Stanley are widely held to keep a place for HR 'at the table', although this place is limited to an increasingly small number of specialists in particular areas. Goldman Sachs informs graduates contemplating a career in HR that they will 'work on strategies to attract and retain exceptional people'. Equally, the former JP Morgan and UBS Warburg have been praised by industry insiders for their commitment to so-called strategic HR.

However, some suggest that 'strategic' is a misnomer. Stephen Sidebottom, head of HR for global equities at Dresdner, says: 'HR is not a strategic function, it is a practical applied function. HR is about implementing business decisions and being there to give advice to the decision makers as necessary.'

'Consultative' may be a more appropriate adjective. Sandy Campbell, co-head of HR at UBS Warburg, says: 'Good HR is done by managers and supported by HR functions in a consultative role.'

Line managers must respect HR people if the consultative model is to work.

This requires HR to understand the line. Campbell says: 'HR functions often try to impose things that are trendy in the HR world and don't seem to have that much value to the business. It is important to demonstrate that there is a link to revenue generation. HR should not be seen as a standalone separate function imposing bureaucracy on the line.'

Relations between HR and the line can be improved if there is some movement of people between the two. Malcolm Beane, the former managing director in HR at JP Morgan was previously an accountant. Rich Ricci, global head of HR at Barclays Capital, came from a technology and finance background.

Others move the other way. Julia Meazzo, former head of HR in the fixed income division at JP Morgan, is now in fixed income trading and sales. However a shift from corporate finance or M&A into HR is a rare thing. Rothschild's Wilson says: 'Line experience is very important in HR, but most often the people that move are those who are not any good on the line and HR becomes a kind of rest home.'

Equally, making the move into the front office can be a difficult feat for HR people much above the age of 25. Those looking to stay in HR, but who want to work at the cutting edge, must turn their attention away from financial services.

Wilson says: 'With the exception of Rothschilds and a handful of other banks, some of the most interesting HR jobs are outside the City of London. In the City you will make a lot of money but you will not always get much strategic input. If you want to do added-value things, you need to be working for companies like Mars or Coca-Cola.'