As the baby-boomer exodus from the workplace grows in the coming years, many banks will find themselves with a groundswell of leadership positions to fill. Yet a 2015 Crowe Horwath LLP survey of banks found that only about 23 percent of respondents have established a formal leadership program. Without a well designed internal development and succession plan, banks will be forced to scramble.
Building Versus Buying Talent
With banks facing consolidation, regulatory expectations, and similar challenges, leadership planning hasn’t been a priority for many institutions. Twenty-one percent of respondents to Bank Director’s 2016 Compensation Survey say they have no long-term succession plan in place for the CEO, and another 16 percent say they have no plan for the other senior executives.
Some banks have been content to simply buy talent as needed, hiring experienced executives from outside of the organization, rather than take the time to build talent from within. It might seem like a luxury to put an individual in a management position as a development opportunity—better to keep experienced, productive people in their positions as long as possible and then look outside for equal experience when the time comes.
While understandable, this perspective is short-sighted. Promoting from within is far less costly and eliminates business continuity risk. Internal development also helps a bank maintain and reinforce its unique culture and makes it easier to retain high performers and those employees with high potential.
Of course, the board of directors also can present an obstacle to pursuing formal development and succession processes. Boards at banks frequently are populated by members of the traditionalist generation that precedes the baby boomers. They tend to believe that “the cream rises to the top” or in so-called “survival of the fittest”— in other words, those that deserve leadership positions will find their way to them without formal programs nurturing them. But regulators have begun impressing on bank boards the importance of approaching things like succession planning in a more formal way than has been done in the past.
The Role of Generational Differences
Attracting talent and planning for succession is more challenging than ever. Banks that long have depended on the wisdom and work ethic of their senior teams now must attract, develop, and retain millennials (generally, those born after 1980), while engaging their Generation X employees (born 1965-1980), and adapting to the accelerating loss of boomers.
Banks might realize that the exit of boomers will produce a rash of leadership openings, but some don’t seem to grasp that a one-size-fits-all approach to recruiting, retention and leadership development is doomed to fail due to generational differences. For example, millennials have different expectations for their employers and careers than their boomer and Generation X colleagues. They often express a desire for jobs that allow them to help society and maintain a healthy work-life balance. To attract such workers, banks might need to emphasize their community involvement efforts, which could be of less interest to older employees.
Leadership development and succession planning processes also must recognize and reflect generational differences. Millennials, for instance, can be very open to receiving mentoring from their boomer colleagues because they’ve largely had close, positive relationships with their parents. Generation Xers, on the other hand, might have had rockier parental relationships. Gen X workers also came into the job market at a time of downsizing and outsourcing. As a result of these experiences, they can be more resistant to authority figures.
While research has found some distinct generational differences, similarities certainly exist, too. Strong management and leadership appeal to all generations. The good news is that these skills can be effectively taught, mentored and modeled with the assistance of formal processes.
A wave of leadership openings is on the horizon, and banks can’t afford to take a reactive stance—they need to plan for the transition to the next generation of leaders. Forming a succession plan and building a pipeline of talent requires time, so institutions should take the first steps now.