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A Look Ahead to U.S. Retail Banking in 2016

Top retail banking executives, at institutions both large and small, are expressing a mix of optimism and uncertainty as they look ahead to 2016.

Self-Service Revolution

Customers are migrating to electronic channels, making payroll reduction a necessity, but they still desire the same, or an improved, level of service.

Where is the Leadership from ‘The Leadership’?
With the industry beginning to heal from its recent travails, banks need to focus more on developing and nurturing top-notch management talent. by JACK CRAVEN
Apr 30, 2012  |  0 Comments

Proof seems to be everywhere that the economy is beginning to pick up and bankers appear to be more optimistic about the future. After what the industry has struggled with over the past four years, hope abounds that we indeed may be finally ushering in a new era. But what will it take for our industry to get back on track from the perspectives of profitability, efficiency and innovation?

I strongly believe that leading the charge will be the managers and employees who have persevered in spite of all of the recent difficulties. Trudging forward, day after day with smiles on their faces (or not) despite little to no pay raises (let alone performance bonuses), they have done the heavy lifting and hard work. But of all the banking related articles I have read over the last six to 12 months, not one has been dedicated to the importance of developing, retaining and nurturing banking talent, let alone appreciating it.

So, here’s my contribution. For any bank, large or small, there are four key areas that must be cohesively aligned in order to successfully support the achievement of the bank’s strategic objectives: Products/Delivery Channels, People, Process and Technology. The “People” side of the equation, which I’ll focus on here, is influenced by the following three key factors:

Organizational Strategy. This clearly defines how the organization needs to change over time to achieve the bank’s strategic objectives and provides an actionable plan for making the transformation happen. An effective organizational strategy coupled with a proven talent management system will create lasting value for a bank by enabling it to more effectively deal with the ever-changing external environment, provide the capability to efficiently process and act on information, retain key employees and create knowledge, which is arguably the lifeblood of any successful organization.

Talent Management. The leading banks have created entrepreneurial cultures that understand and emphasize the importance of continual learning and sharing of knowledge. They are also adept at recognizing, rewarding and developing strong leaders, promoting collaboration and demanding individual accountability from both management and staff.

Compensation and Incentives. Top performing banks continue to dedicate the resources necessary to develop competent, skilled and engaged employees at all levels of the organization and consistently link employee compensation directly to achievement of corporate goals and objectives.

Given the importance of these factors and their contribution to a bank’s success, I am alarmed by the findings from a talent management survey of 3,500 bank chief executive officers regarding top performers recently conducted by the American Bankers Association and the Corporate Executive Board. For example, only half of the surveyed CEOs could identify the high performers in their banks. Of those executives, only 20% had written development plans. And one-in-four high performers – who exert 21% more effort than average employees, according to the survey – expected to leave the bank within one year.

The survey also pointed out that banks look to fill 60% of their open positions internally. If this is the case, and with a quarter of high performers heading out the door, how will organizations not struggle to fill key leadership positions? How will they be able to grow?

What about the importance of an effective talent management program in contributing to the overall success of the bank? According to Bersin and Associates, it is quite profound; the firm’s research shows that banks with good programs generate 26% more revenue per employee; experience 41% less turnover in high performing staff; suffer 17% less voluntary turnover; and are 28% less likely to have had a major (10% or higher) layoff.

These statistics are very telling, but what really struck me was the newly released BAI Solutions Demand Pulse Report – 2011. In three out of seven functional areas or “domains” measured, one of the top factors impacting effectiveness – in other words, getting things accomplished – was the “lack of coordination across departments.” These were not trifle domains, either. Specifically, we are talking about Operations, Risk and Regulation Compliance and Technology. “Organizational culture impediments” was also a factor in Risk, Retail Marketing and Product Management.

The unfortunate reality of the situation is that banks talk a good game when it comes to understanding what truly motivates, energizes and challenges their best people. Platitudes such as “people are our most important asset” and “we value our people” can be found in 99% of the banking industry’s strategic plans. Yet, the truth today is that very few banks actively identify, develop and nurture the talent inside their own walls. Nor are they entirely successful at making sure their organizational structures promote communication, collaboration and teamwork, according to the BAI survey.

The evidence is clear that performance is enhanced when a bank is effective at managing and developing its talent. But banks don’t appear to even do a decent job of getting their people to work collaboratively across functional groups and their organizational cultures are impeding progress. How can banks be expected to develop their people if they can’t even get them to effectively work together? And why are some bank CEOs not even aware of the fact that their own organizational structures are impeding progress? How much longer can they afford for this to go on?

If it is difficult now for banks to retain their top performers, how will disruptions to the industry such as the full frontal assault under way by firms such as Apple, PayPal and Google and other non-bank entities change the calculus? From my standpoint, disruptions such as these will only intensify the war for talent and the key battles will be fought over the best people because they are the true creators of value.

Are you prepared for battle?

Mr. Craven is a managing director at Cornerstone Advisors, Inc., a Scottsdale, Ariz., based consulting firm specializing in bank management, strategy and technology advisory services. He can be reached at jcraven@crnrstone.com.


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