By David ShoemakerCompetition for top talent remains fierce. In Bank Director’s 2019 compensation survey, respondents were asked to select their top three compensation challenges for 2019. Of the respondents, 36% struggle with recruiting commercial lenders, 34% with succession planning, 31% with retaining key people, and 29% with recruiting younger talent. In addition, 37% responded that managing compensation and benefit costs is a top challenge while 26% have difficulty offering competitive pay.
It is fairly obvious why banks are so focused on attracting and retaining high caliber employers. Just as in sports, when you have a talented team and a good game plan, you get great results. In the world of banking, this means achieving a higher return on assets (ROA) and a higher return on equity (ROE), better efficiency and ultimately higher compensation and job satisfaction.
So, how do you get there?
First, it is important that the board and CEO agree on the bank’s long-term strategic plan. In addition to clarifying which markets and products to pursue, the plan should include an agreement on the risk level the bank is willing to take to achieve the desired shareholder returns as well as the skills needed to execute the plan.
The bank must then look internally to see if it has employees who possess or can develop these skills. When necessary, the bank should be willing to look outside for select individuals to complete the team.
Second, continuous talent development is critical. Training via seminars and schools is helpful but must be supplemented with mentoring and having a culture where regular, honest feedback of both strengths and weaknesses is valued by all employees. In addition, cross-training as well as laying out a possible career path for each employee can help them visualize a long-term future with the bank.
Next, the work environment makes a huge difference to employees. If the workplace provides a team atmosphere with high energy, flexibility to take care of situations that pop up, and a place where fun is mixed with hard work, people will be less likely to actively pursue other opportunities.
Finally, compensation and benefits must be competitive. Most banks provide a competitive salary and bonus plan, along with group benefits such as medical, life, disability, and a 401(k) or other retirement plan. Some banks offer stock options to some or all employees. In addition, 64% of banks provide some sort of supplemental executive retirement plan or other nonqualified deferred compensation plan to executive management. These plans have been around for years and have traditionally been used to attract, retain, and reward senior management.
More recently, nonqualified plans have become a popular way to provide incentives to employees who have not yet reached the senior management level but have been identified as future leaders or strong revenue generators. These plans are typically structured differently than SERPs in that they often provide payments while the employee is providing service to the bank rather than retirement distributions. For example, the plan can be customized so that payments coincide with a child’s college years or they might be used to pay off a some or all of the employee’s student loan debt. The shorter timeframe is more appealing to younger workers as they typically cannot imagine working to age 67, much less working at one place until that age. To further enhance retention, the plan usually specifies forfeiture of the entire account balance if the participant competes with the bank. The employee appreciates the extra income but also appreciates the recognition from senior management.
David Shoemaker is a managing consultant at NFP Executive Benefits, which ABA endorses for executive and director benefit consulting.