The Battle for Bank Talent: Trends and Strategies

December 14th, 2016

Motivated, talented employees always have been critical to the success of financial services organizations, meaning there always has been competition to attract high-performing employees. However, recent research indicates that competition has heated up considerably in the past few years, making it even more important for banks to stay abreast of current trends in compensation and human resource practices.

Trends in the Battle for Talent
The most recent indicator of the intensifying competition for talent can be found in the Crowe Horwath LLP 2016 Financial Institutions Compensation and Benefits Survey. Of the many trends in compensation, incentive and benefits strategies that are tracked in this annual survey, three areas were particularly revealing in 2016:

Employees are changing jobs at the fastest pace in at least a decade, with both officer and nonofficer turnover trending sharply upward over the past two years. Some turnover is the result of consolidations or performance issues, but most turnover represents the voluntary departure of employees–usually at a significant cost to the banks.

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Bank staffing strategies appear to have recovered from the recession. More banks today are planning for normal growth in staffing (35.6 percent), while the number of banks planning to maintain (34.1 percent) or reduce (3.6 percent) staffing levels is declining to pre-recession levels.

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The percentage of banks that plan to implement above-market compensation strategies has increased steadily over the past four years. In the 2016 survey, 28.5 percent of banks reported their strategy was to pay more than 10 percent above the market average.

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Taken together, these three trends–higher turnover, expected staffing increases, and growing use of above-market compensation strategies–suggest that the battle for talent is likely to continue and intensify.

Factors Driving the Competition
Viewing the survey results through the lens of current industry experience, one might reasonably conclude that bank compensation strategies are no longer responding to recession and credit crisis concerns. The survey responses suggest that banks are now being driven by a new set of economic and competitive factors including:

  • Employee expectations: As memories of recession-driven job insecurity fade, events such as bank consolidations, increased profitability and rising executive compensation are catching employees’ attention. The increased turnover rate suggests that high performers in search of better opportunities are more willing to take a chance and make a move now.
  • Growth strategies: Although mergers or acquisitions often are associated with net reductions in payroll, bank consolidations also can create demand for managers and executives who are more experienced in handling larger organizations. Other market strategies—such as enhanced digital banking or a relationship-banking approach—also can drive demand for employees with technical or consultative-selling skills.
  • Technology: Just as technology affects some of the skills needed to serve bank customers, it also is changing some employer-employee relationships. The “gig economy,” where short-term contract workers provide specialized services to multiple employers, has not yet affected most traditional bank jobs but certain positions—marketers, data analysts and website or mobile banking developers, for example—often can be filled by contract workers rather than full-time employees.
  • Competition: Banks with strong market positions in commercial lending or other desirable business lines sometimes find themselves on the defensive as they ward off competitors trying to lure away their most productive employees. Often banks end up offering selective pay boosts and bonuses to discourage so-called “lift out” strategies, in which a competitor lures away key managers or an entire department.

New Approaches to the Battle for Talent
Putting more emphasis on pay—particularly performance-based pay or incentives—is one way to attract and retain high performers. But higher pay scales are not the only solution.

Many banks that are consistently regarded as “employers of choice” are not the highest paying employers in their markets—or even the highest paying among comparable banks. Instead, they shift a portion of their workforce investments toward maintaining benefit programs and work cultures that promote work-life balance.

Some banks now present employees with an annual “total rewards statement” that spells out all the investments their employers are making in them. Such statements can help motivate employees by reminding them of their value to the organization. Individual personal recognition, status and career opportunities can also be powerful motivators.

Regardless of the specific mix of techniques that are used, the intensifying battle for talent means banks will need to pursue a deliberate, multifaceted approach to attract, motivate and retain the talented and high-performing employees they need to pursue their business strategies.

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Tim Reimink is a director with Crowe in the Grand Rapids office. He can be reached at 616.774.6711 or timothy.reimink@crowehorwath.com.

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Patrick Cole, SPHR, CCP, SHRM-SCP, is with Crowe Horwath LLP and can be reached at 630.586.5194 or patrick.cole@crowehorwath.com.