Banks are well-versed in measuring the return on financial investments, but what about their return on people investments?
If banks are serious about rebuilding the industry’s reputation, then transformation programs – tackling the cultural and technological challenges the industry faces, while working to improve their financial performance – cannot just focus on products and processes. Transformation must be about people and cultural values too. Banks must ask: “Who are the best bankers, and what makes them the best?”
Those questions are more important now than ever. Not only must banks adapt to the forward march of technology, which is revolutionizing the banking workforce by eliminating, changing and creating roles across the business, but also adapt to a new generation of employees who have new expectations and are seeking jobs with a clear purpose.
So how do banks ensure they have a fit-for-purpose workforce in a rapidly changing world?
First, banks must assess technology’s dramatic disruption of the banking workforce.
There is an array of opportunity for banks to eliminate more task-based roles through automation. According to EY’s “European Banking Barometer 2016,” 56% of senior banking executives surveyed believe head count will fall in head-office administration roles, and 47% in operations and IT. Much of this reduction will be due to automation. Another major target for automation is retail and business banking, where 32% of senior executives believe head count will fall. Examples of technology innovation abound. For example, one bank has introduced a robot programmed to sense customer emotions and speak 19 languages, allowing it to greet customers and assist them with different services at the bank.
Another bank recently announced the use of robot technology to help clients with basic tasks such as money transfers. An Artificial Intelligence (AI) system similar to those found in mobile telephones allows the robot to interact with customers and walk them through various processes.
The important task for banks is to understand what sorts of roles are likely to be replaced by technology. It is essential that organizations establish a working group, including human resources personnel and technologists, to map roles across the organization against the steps in each process to identify targets for automation.
With rapid developments in technology, banks will also need the talent necessary to support these developments, stay at the forefront of innovation and manage the risks that may come with it.
Figure 1. Banking industry still a long way from reflecting diversity of society
Innovative IT staff, including those who can develop AI, will be in demand at banks, as the work of bankers is increasingly automated or augmented by technology. New skills will be needed to develop and maintain the new technologies.
Moreover, with greater use of technology comes greater risks. Institutions will need to determine what controls must be instituted to manage the automated technology and monitor these technologies to help ensure they are being used correctly and safely. If new technological advancements are not used properly, regulatory scrutiny could outweigh any benefits.
Banks must also develop plans to retrain and redeploy staff to other parts of the organization.
The second consideration for banks as they move to building the workforce of the future is to understand the expectations of a new generation of technology-enabled bankers.
The “big bang” deregulation of financial markets in the 1980s saw the traditional image of the banker change from Mr. Banks in a bowler hat in “Mary Poppins” to Gordon Gekko in pinstripes and braces in “Wall Street.” And now, once again, the banking workforce is undergoing a radical transformation.
By 2025, millennials, or Generation Y, will make up 72% of the global workforce, according to EY’s “Global Generations: A global study of work-life challenges across generations.” This generation brings new interests and priorities. Not only are they typically more digitally capable, diverse and dynamic than previous generations, but they are also placing growing importance on social purpose, flexible working and entrepreneurialism.
Figure 2. New generation, new expectations
That means banks must change the way they motivate, reward and develop their staff. Institutions need to overhaul their hiring processes and internal culture to make the most of the skills of this bright future of talented bankers. But banks have struggled with this change. Recent Universum research suggests that of the top 25 global companies that IT and engineering graduates wanted to join, none were banks. And just two of the top 50 firms they wanted to join were banks.
Banks need to ask themselves some challenging questions about how to attract leading talent. A recent Harvard Business Review and EY survey showed that 89% of respondents believed that “purpose- driven” organizations have higher levels of employee satisfaction. Banks need to ensure they are able to articulate their purpose.
Banks also need to review performance management and rewards processes to make them less painful and fairer. Many employees will breathe a sigh of relief if this means that the end of tick-box performance cycles is nigh. Meaningful, ongoing conversations about personal development are en vogue. Banks should also explore ways to offer millennials the mobility and diversity they want in a job.
Making this happen will require support from the top. Bank leaders must recognize the importance of talent transformation and empower human resources functions to change the way employees are developed, measured and rewarded.
Another area that banks should focus on, one that is often overlooked, is employee well-being. This means more than “nice to have” employee benefits, such as putting out a bowl of fruit for staff, or ensuring they have an annual health checkup. EY programs measuring well-being have shown that moving an employee from a low to a moderate well-being score delivers an average increase in productivity of 13%.
Not only are [millennials] typically more digitally capable, diverse and dynamic than previous generations, but they are also placing growing importance on social purpose, flexible working and entrepreneurialism.
Across the HR life cycle there are specific steps that banks can take to help ensure they are better able to recruit and retain leading millennial and post- millennial talent.
The third area banks should focus on to build the workforce of the future is changing the culture to encourage diversity of thought. Creating an environment that will attract, retain and advance a collaborative, entrepreneurial and diverse group of individuals will be crucial to banks that want to employ genuinely high-performing teams with the aptitude and skills to adjust to a transformed workplace.
By most standards, banking remains a homogenous industry. It is still a long way from reflecting the makeup of society in terms of gender, ethnicity or background. Even banks’ standard entry requirements – often at least an above-average academic record – dramatically limit the talent pool that banks recruit from, exacerbating the homogeneity. And past academic attainment is not necessarily a good predictor of aptitude and potential, especially for students from more challenging backgrounds.
Banks must overcome homogeneity, draw from a broader talent pool and build a culture that supports and retains people from very different backgrounds. The benefits of diversity are clear: In EY’s “Women. Fast forward: The time for gender parity is now,” research shows there is a positive correlation between greater gender balance on boards, higher share price and better financial performance. From 2005 to 2014, boards with a higher-than-average percentage of women outperformed those with lower-than-average percentages by 36%. And the highest performing companies, across a number of industries, invest more in the advancement of women than their peers.
Many firms are taking steps to encourage greater diversity, but approaches to change are often too tactical. Improving diversity of thought, as well as of personnel, calls for breaking the patterns and biases that have led to the problems of the past. It is not just about targets or retraining staff – a more fundamental rethink is required if the cultural change that supports diversity and high performance is to be effective and permanent.
Accelerating gender diversity – so that our industry can reap its proven business benefits – will require decisive action at an organizational level and at a personal one. This will require strong commitment and ongoing sponsorship and support by executive leadership if banks are to overcome four key disconnects that EY research suggests are holding back gender parity:
- The reality disconnect: Business leaders may assume the problem is nearly solved, despite little progress within their own companies. Firms need to be transparent with customers and stakeholders about the diversity of their leadership team and plans to improve it. They must also support an inclusive corporate culture by clearly defining expectations and requirements for both men and women.
- The data disconnect: Companies do not effectively measure their progress to gender parity. Firms should set a target for gender diversity and identify what must be done to achieve it. They should also measure progress regularly, using formal, targeted metrics and detailed reporting that reveals pitfalls along their talent pipeline.
- The pipeline disconnect: Organizations are not creating pipelines for future female leaders. They should introduce formal and structured female leadership training programs as a priority and develop and encourage mentoring and sponsorship opportunities for both genders. Moreover, firms should build diversity considerations into succession planning and develop retention strategies for talented female leaders.
- The perception and perspective disconnect: Men and women may not view the problem in the same Institutions should create working groups and action plans to open dialogue between genders and include different viewpoints. They must enable an inclusive corporate culture that allows women to feel included and confident enough to speak up and share.
The fourth and final step for banks in harnessing diverse and leading talent to build the workforce of the future is nurturing and empowering a collaborative workforce.
How banks manage the differences between various types of employees will be crucial to harnessing their combined abilities. Banks may face a challenge in integrating the diverse ideologies and attitudes of millennials, Generation X or baby boomers, but working out how to do this is critical.
Across financial services, older, more experienced staff are typically better advisors to clients. However, they are frequently less skilled at adapting to the new technologies and tools used in the sales process. While millennials may be more tech-savvy, they may lack the knowledge, experience and gravitas required in the sales process.
The challenge for banks is how to harness the abilities of multiple generations and get them to collaborate to maximize everyone’s potential.
EY’s “Generations” research shows that 75% of managers across a range of industries see managing multigenerational teams as an issue, with 77% citing different work expectations as a key challenge. But more than two-thirds (69%) of respondents also said their organization had made at least some effort toward alleviating the difficulties in managing a generational mix by taking a range of actions.
Although these actions are important, they will only be truly effective if banks make further efforts to understand and properly react to what motivates the different generations constituting their workforce. Those that do so, and do all they can to retain key talent, will be best placed to exploit the talents, experiences and skills of a diverse workforce.
Quick wins aside, transforming talent long term won’t be easy. But the impact of these changes will ultimately result in a more sustainable, profitable bank that is better connected to the markets in which it operates and the communities it serves.
Delivering this change will take visionary and resilient leaders who recognize that although success may not be achieved overnight, re-engineering the workforce is at least as important as the next quarter’s earnings. It will be an important aspect of their legacy. Banking senior executives should ask themselves: “Am I ready to take the lead?”
Karl Meekings is EY Lead Analyst for Global Banking & Capital Markets. With more than a decade of industry experience, he is responsible for the development and communication of strategic thought leadership initiatives for the Banking & Capital Markets Sector. Previously at Accenture, he worked as a consultant on banking projects and was later responsible for leading key research programs in UK financial services.
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