Prioritizing Employees

By Thomas P. Johnson Jr.

Confronting a new era of financial services competition, banks must reconsider how they manage their own workers.

Talk to executives from any bank about human resources issues and they'll assure you their employees are a priority. They're not being disingenuous about that. Most managers recognize they're only as good as the workers they supervise, and the information technology revolution of the past decade has made them even more conscious of the need to hire and retain top talent.

That said, banks in general have taken a skewed approach to human resources. Most of the institutions that dominate the industry today spent the '90s engaged in vast consolidation exercises, purchasing other banks and then paring jobs to slash overhead. Though necessary, the job cuts often disrupted service and stifled morale, hurting customer relationships in the process.

Some of this damage must be repaired in the new decade if banks are to play a leadership role in a converging financial services industry. As discussed in this issue's cover story, human capital will gain even more importance as a competitive differentiator in the Information Age, where intellectual rather than physical assets drive wealth creation. Attracting and cultivating top talent will be a major success factor in handling hybrid product sets and transforming companies to compete in e-commerce.

It's not just a matter of money, says author Bill Stoneman. Although banks must pay competitive salaries, a shift in managerial culture is what's really needed. If banks are ever to capture some of the entrepreneurial spirit found at thriving technology companies such as Cisco Systems Inc. and Sun Microsystems, they must create organizations that can harness the creativity of highly-motivated employees at all levels. Banking's traditional hierarchical management structure seems ill-suited to that challenge, but what's the alternative?

Some theorists advocate transitioning to a "network" model, where managers and workers operate within loosely structured teams, forming alliances with each other and external entities depending on the business needs of the moment. Consultant Richard Schroth, a former senior fellow at Wharton Business School, asserts in an interview that economics in the Information Age will be based on cooperation and shared solutions, as opposed to control and proprietary solutions.

Perspectives such as this help drive home the point that human resources must be elevated to a strategic priority in banking. Efficiency and workforce rationalization have their place, but cannot come at the expense of human qualities such as initiative, creativity and enthusiasm. The necessary first step is for directors to hold chief executives accountable for managing the organization's human capital in a manner that promotes innovation and excellence.

Copyright © 2003 by Banking Strategies, published by BAI.

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