What banks need to know about hiring in a highly competitive environment

The talent that banks are seeking—people who can help the institution build the digital, automation, and analytical capabilities they need to succeed today—is in high demand. Banks are competing not only against other banks, but against all firms seeking a sustainable talent advantage.

Of course, hiring talent is only one side of the talent coin: Banks will not succeed unless they also develop their current employees through reskilling and upskilling programs. But improving the hiring process is clearly a necessity for banks. A recent post on the McKinsey Leadership & Organization blog addressed ways that organizations across industries are widening the net in their search for talent.

Increasingly, according to the post, companies are turning to unexpected sources, many never considered before for hard-to-fill jobs. Some are removing minimum experience requirements to ease what were once considered automatic disqualifiers.

When drawing from sources that haven’t previously been used, assessing candidates well becomes more important than ever. And evaluating them based on prior experience isn’t enough. One financial services firm found that for candidates in one of their two primary sales roles, prior sales experience had no impact on performance. For these jobs, which focused on renewals as opposed to new sales, certain personality traits were far more indicative of success. For some roles, who someone innately is can matter more than what’s on a resume.

Furthermore, traditional means of judging a candidate’s readiness for a role should be re-examined in the search for new talent. One branch of a financial services firm—which happened to be located in a city with several colleges and abundant graduates—had made it a practice to focus their search on candidates with college degrees or advanced degrees. But they eventually found that candidates with associates degrees were more motivated and outperformed—and outlasted—those with full degrees.

In that light, it’s worthwhile to revisit the importance of intrinsic traits. Our research suggests these characteristics, coming from within the person, such as personality or motivations—can account for 5 to 20 percent of variance in performance. For roles with historically high attrition rates, being aware of this fact can make a big difference.

How can companies assess intrinsic traits? We start by pinpointing what characteristics matter most for high performers by role within the organization. (The answers can be counterintuitive: at a fast food chain, we found that extroverted sales associates actually decreased customer satisfaction scores—customers tend to favor speedy and accurate service over extroversion.)

A fast-growing bank in Asia needed to recruit a large number of front-line agents. Initial efforts failed to draw enough resumes, and many of the candidates the bank did hire (often in a hurry, under pressure) turned out to be poor fits, with many quitting after a short time. To address the challenge, the bank developed advanced analytics models to understand the relationships between agents’ performance and their backgrounds and traits; they then redesigned the recruiting process to target and screen candidates with the right backgrounds and traits. The new process boosted candidate supply by 30 to 50 percent, cut time-to-fill by half, and reduced new hire attrition by 30 percent.

Armed with insights on the traits that lead to success in a role, a company can then build tools to assess whether candidates possess these traits, and then focus on making sure they have adequate training to fill in any gaps in experience. This strategy can help applicants who may have been previously overlooked due to a lack of job experience or gap in their job history.

Startups are a source of innovation in candidate assessment, in some cases gamifying the process. One new firm created assessments to grasp how people think instead of what they know. The company is building a simulation-based recruitment assessment tool using artificial intelligence that measures a candidate’s cognitive skills and abilities using an evidence-centered and theoretically data-driven approach. This focus on process rather than pure knowledge can reduce the bias against underserved populations that is common in more traditional cognitive assessments.

So what’s the first step for a bank considering assessments to tap into unexpected talent sources? Look inward at its mission and values to ensure that new hiring processes align with both. The company should pinpoint what a good employee looks like to better assess applicants for ideal traits, use pilot assessments, track impact and refine over time to continuously improve the candidate evaluation process.

It’s also crucial to foster an inclusive environment that celebrates diversity and varied experiences is key to success. Without such an environment and a recognition of the contributions of applicants with diverse backgrounds, new employees may not feel accepted within the organization. This is even more crucial when focusing on hiring applicants with a history that is often stigmatized in the workforce.

A version of this blog post first appeared on McKinsey’s Leadership & Organization Blog