Facing the Future by Managing Talent Risk Now

By Kate Young

Not long ago, at a bank not so far away, it was a perfectly ordinary Monday morning. Human resources was all set to onboard a new hire. Orientation documents were lined up. Business cards printed. Food for a team lunch ordered. But the new hire never appeared. After phone calls and emails to the new hire failed to yield any response, the reality set in: the bank had been ghosted.

Urban myth? “No, it’s real,” said a community banker who asked to remain anonymous. Some variation on that story has “happened to us more than once.” The act of ghosting is characterized by an abrupt, complete and unexplained cutoff of all contact—and it’s an increasingly common byproduct of the hiring process. With low unemployment rates and high competition for talent, it’s a seller’s market out there. Especially for the technical and analytical skills most critical to banks.

And it comes at an inflection point when a bank’s ability to bring in top-notch talent is crucial for survival. That’s why bank risk managers are taking pains to get a handle on their institutions’ talent risk.

As any risk manager will tell you, though, inherent in every risk is a corollary opportunity. So when a group of bankers and an executive recruiter got together to discuss the issue at the recent ABA Risk Management Conference, what emerged was not a cautionary tale but a path forward. And it looks something like this.

Confronting the ghost of banking past

Perhaps even more daunting than the disappearance of a new hire is the specter of old, outmoded business models common to traditional banking. “Banking is different from what it was 10 years ago—even five years ago,” says Lindsay Alton, senior financial analyst at Mechanics Bank in Mansfield, Ohio. She points to changes in customer preferences, technology, work force and competition. But the biggest talent risk, she says, “is that we see a lot of banks with operating models, compensation models and training models that are more geared toward historic banking rather than where we are today—and where we’re headed in the future.”

Preparing for the future of bank talent means asking “why” repeatedly. When a prospective employee has the choice of working for a tech firm or your bank—why should she choose you? If your bank doesn’t allow remote work or flexible hours—why not? If employees are expected to do the same job year after year without a clear plan for development and increased responsibility—why should they stay?

“If we want to have access to the best talent,” says Dee McDougal, SVP of diversity and inclusion at Pacific Western Bank, “we’re going to have to evolve.”

Recognizing the need to differentiate, prioritize and engage

A bank’s two biggest hiring challenges, McDougal says, are positioning the bank “as an employer of choice, and also communicating that to prospective employees.”

“It’s a hot job market as we all know,” agrees Robert Iommazzo, managing partner at SEBA International. You can’t beat the competition, he says, by “talking about how great you are as a bank.” As an executive recruiter working for both U.S. and international banks, he advises his clients to convey their institutions’ vision, value structure and culture to prospective employees. “Those are the pieces that differentiate [between]a local, regional or national bank versus a tech company.”

But communicating vision, values and culture must go beyond words on a page. To understand your own culture, McDougal says, you have to find out what others are saying about you. Job candidates increasingly glean cultural insights on potential employers from sites like Glassdoor and LinkedIn. “What does the employee experience look like online?” she asks.

Culture is also reflected in the behaviors of human resources and the hiring manager. One place where many companies get stuck, Iommazzo notes, is with “the concept of this person as an ‘applicant.’ That’s passé.” A better approach, he says, is to remember that job candidates have needs, timelines and choices of their own—and hiring them is not like “making widgets in the basement.”

Everyone is busy, Iommazzo concedes, but if recruiting talent is a priority, then it needs to be treated as such. You can’t leave candidates hanging for weeks or months at a time. He recommends keeping top prospects engaged with frequent touchpoints until their start date—especially if a relocation is involved.

Getting serious about diversity and inclusion

There’s no shortage of studies showing that diverse and inclusive organizations outperform homogenous ones—and that most job candidates prefer them. (For more on this topic, see the feature on page TK.) So how a bank tells its diversity story is vital. McDougal points out that cross-functional interviewing provides a way to expose candidates to a broader picture of the organization. And offering mentorship and sponsorship programs display a bank’s commitment to diversity and inclusion by providing “exposure capital”—i.e., the opportunity to meet allies, resources and decision-makers within the bank.

A couple of caveats: “Within banking there’s a big focus on diversity when it comes to gender, race or ethnicity,” McDougal says. “But I also think it’s important for us to be respectful of other ways that we are different.” That would include age, background and even work style. Enabled by technology, for example, some employees perform better when they’re allowed to work flexible hours or from home. That said, employers should not express willingness to offer telework unless they have the technological infrastructure in place to make it a success.

Along the same lines, McDougal warns, you don’t want to pretend the organization is diverse when it isn’t. “That would just derail everything,” she says. If you try to promote diversity by inviting a minority candidate into your organization, “and your company is not prepared for the inclusion part, then that candidate might not be set up for success.”

Achieving diversity will become easier, McDougal believes, when organizations take the time to look beyond the existing referral networks for candidates—and to look for necessary skill sets rather than apples-to-apples experience.

Considering compensation

The heyday of the single-company career is over. People entering the workforce now expect to move every few years. As a result, Alton points out, prospective employees tend to prioritize short-term benefits—like a higher base salary—over longer-term ones, like retirement plans. That puts small and rural banks at a competitive disadvantage to institutions with deeper pockets. It’s even harder if there’s a metro area within an hour’s drive. Candidates are likely to think, “What’s a 20-minute drive when I can double my salary?” Alton says.

One response to this mindset, Alton suggests, to write up a total compensation package that includes not just salary and bonuses but also the dollar value of paid leave, retirement and healthcare contributions, tuition reimbursement, incentives and other employee benefits. Banks can also sweeten the pot with other perks that competitors might not offer—the ability to work from home, for example, or the opportunity to do volunteer work on the bank’s time.

Taking a longer view

If you start thinking about talent management when you have a job opening to fill, it’s already too late. Under pressure, there may not be time to understand the skills needed, take creative approaches to the search or attract the right candidate. Alton says that she’s seen a shift lately toward a more intentional approach to talent—along with a greater focus on identifying and developing internal talent. The latter also helps prevent costly attrition. “Understand the younger generation is not going to sit around and wait like the older generation did,” she says.

Joanne Campbell, EVP of risk management at Camden National Bank in Rockport, Maine, says that her bank uses individual development plans, not only for employee retention, but also to prepare them for new responsibilities as the need arises. While employee development might involve classes or certifications, it can also be experiential—attending meetings in other departments, for example, or shadowing a mentor. The next generation of employees, she notes, want to see a career path. They’re asking, “Where do I go from here? How do I get there?” she says.

When it comes to managing talent, banks should be asking the same thing.