Compensation, Talent Challenges Abound in Pandemic Environment

The coronavirus pandemic has not altered the toughest hiring and talent challenges that banks face; it has accelerated them.

These range from finding and hiring the right people to compensating them meaningfully to succession planning. Day Three of Bank Director’s 2020 BankBEYOND experience explores all of these topics and more through the lens of investing in and cultivating talent.

Institutions looking to thrive, not merely survive, in an environment with low loan demand and heightened credit risk need talented, diverse people with essential competencies. But skills in information security, technology, lending and risk have been getting harder to find and retain, according to more than 70% of directors, CEOs, human resources officers and other senior executives responding to Bank Director’s 2020 Compensation Survey this spring.

On top of that, the remote environment that many are still operating under has made it harder to interview and onboard these individuals. And managing employees working outside the office may require a different approach than managing them on-site. There are a handful of other timely challenges, pandemic or not, that banks must be prepared to encounter.

Compensation Challenges
The pandemic has also compound challenging trends in hiring and compensation that banks already face. Headcount and associated compensation costs are one of a bank’s biggest variable expenses; in a tough earnings environment, it is more important than ever that they control that while still crafting pay that rewards prudent performance. Executives and boards may also need to contend with incentive compensation plans containing metrics or parameters that are no longer relevant or realistic, and how to message and reward employees for performance in this uncertain environment.

Retaining, Hiring Employees
Banks must recruit and retain younger and diverse employees who fit within the organization’s culture. Half of respondents to our survey indicated that it’s difficult to attract and retain entry-level employees; 30% cited recruiting younger talent as a top-three challenge this year, compared to 21% in 2017.

But banks and many other companies may encounter another trend: parents, especially women, leaving the workforce. Child-rearing responsibilities and distance-learning complications have forced working parents without effective support systems to prioritize between their children and their career. More than 800,000 women left the job market in September, making up the bulk of the 1.1 million people who opted out. Those departures were responsible for driving most of the declines in the unemployment rate that month.

Diversity & Inclusion
Fewer women working at banks means less gender diversity – which is an area where many banks already struggle. That could be in part due to the fact many banks haven’t prioritized measuring that and other diversity and inclusion metrics like race, ethnicity or status of disability or military service.

In Bank Director’s 2020 Governance Best Practices Survey, almost half of directors expressed skepticism that diversity on the board has a positive effect on corporate performance. Perhaps it’s not surprising that in our Compensation Survey, 42% of respondents say they don’t have a formal D&I program.

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