A strategic blueprint for making the most of banking talent

The banking environment is more competitive than ever. The challenges—and opportunities—posed by digitization place talent center stage. It is vital that business leaders understand this. It is time to manage talent like you manage capital. Create a talent strategy which delivers value through transformation of culture, process, and structure.

We believe some 43 percent of all working hours in banking activities will be automated in the future.1 A massive shift from basic cognitive skills, to socio-economic and technological ones. For those considering their talent strategy in this environment, there is one number that will focus your mind. We have found that the ROI for businesses that get talent right is 2.5 times greater in the first year after a transformation.

Something this significant requires leadership from the top. CEOs must convene a top talent management team, coming together with the heads of finance and HR, to form a kind of “G3.” The HR role needs to be elevated to the same level as finance. Very much one of “business partner.”

Once a laser-focus on talent from the top team has been achieved, leaders must link business value to the most critical roles. Not just looking at current needs, but also focusing on the delivery of future value. Do you know where the real value-creating roles are in your organization? McKinsey has found that on average businesses can identify just 40 or 50 roles which disproportionately affect their business outcomes. We found that at least half of those critical roles are several layers below the C-suite level, often are not on the CEO’s radar, and include roles which may not be occupied, or are filled by underperformers.

Actively managing talent in these critical roles requires changes in processes. Let’s look at some real examples.

One private equity firm found that nearly half of its key roles were filled by employees who were considered mediocre performers. In this kind of situation, hiring is crucial. We worked with a Canadian bank with limited experience in recruitment for digital talent. They had a slow, bureaucratic, process, taking six months to fill some positions, whereas competition for this talent hired within weeks. We created a clean-sheet approach for recruitment, setting up an agile three-person talent squad that revamped the interviewing process and created new intake channels. It worked. Recruitment time went from months to weeks.

Given the fast changes in talent skills needed, hiring on its own will not close the gap fast enough. Reskilling is recognized by 75 percent of executives we polled as being critical to adapting to the digital age. For banks baulking at the scale of transformation, the following statistic often makes change more palatable: our research suggests only about 10 percent of roles are likely to be obviated, with the remaining majority likely to be modified to varying degrees by automation and digitization, allowing for upskilling and redeployment. We worked with one bank with over 70,000 employees. They were undergoing a cost program and needed to adjust to digitization. We identified the roles that would be displaced by automation, but more importantly envisioned how the majority of roles would evolve, and what roles would be created elsewhere. We designed the upskilling and reskilling required, and mapped re-deployment potential, with the understanding that the retention of highly skilled and agile employees was a vital complement to recruitment. In this client’s case it was also a non-negotiable element of the legal environment they worked in.

When done properly, reskilling also has a transformative effect on employee buy-in. In one case we saw employee satisfaction rise from 70 to 80 percent during the process. This is a vital point, as 40 percent of transformations fail because employees do not buy in to the new approach.2

One of the biggest talent process changes necessary is in performance management systems. When we asked CEOs what they thought of existing performance management systems 94 percent expressed concerns. “A time-consuming process” that “wasted time on middling performers” rather than “coaching the stars” or “removing the problems.” We work with clients to build a performance management approach which emphasizes conversations, meaningful differences between high and low performers, and development. Get your managers coaching. One bank taking this approach saw a 44 peent increase in positive ratings for performance measurement. They also saw an 11 percent improvement in productivity in their contact centers.

In all of these process changes, technology itself has a role. For example, McKinsey’s people analytics tools identify high performers and optimize motivation, particularly in client-facing roles. They also identify top talent at retention risk. Using such tools, one bank halved its staff attrition rate from 30 to 15 percent and achieved over $15 million of savings in training and recruiting costs.

As part of any successful talent strategy, changes should also be envisaged in culture, focusing on positive employee experience. “Millennials” have different expectations. Developing a strong enterprise focus on inclusion and diversity is part of this. CEOs should not be afraid of top-down targets. A strong focus on a diverse, and inclusive, work force brings rich rewards. Recruiting from a broader talent pool, and ensuring a more flexible working environment, fosters improved decision-making, higher creativity, and reduced business risk. We must have a clear understanding that diversity correlates with financial outperformance.

Finally, business leaders need to address structures. The new digital environment we are working in requires more dynamism than traditional structures can deliver. To meet this challenge, more and more businesses are switching to “agile” management structures. People working in small, fluid, teams that are allocated talent and tasks for rapid delivery. We will look at agile structures in more detail in future posts.

Upcoming posts in this space will also look at the talent challenge for banks from a number of angles, from a sector-specific look at how wholesale banks are adapting to the ever-rising importance of digital skills, to how a focus on talent leads directly and tangibly to increased productivity. We’ll also share an innovative view on how talent recruitment and development will look in the bank of the future, and hear from one or two leading CEOs discussing their individual approaches.

The competition for top talent has never been hotter, and we expect it to intensify. Winning will require clear talent strategies and quick execution. Banks who can do this will harness the power of talent and reap the rewards of a higher-performing, more productive, and motivated workforce. These banks will be far more likely to see their strategic aspirations become a reality.

1. US Bureau of Labor Statistics; McKinsey Global Institute analysis

2. McKinsey research