Every year, Cornerstone Advisors conducts a survey of community-based financial institution CEOs that asks what their top concerns are. The 2022 survey produced the biggest one-year change we have ever seen. A full 63% of executives identified the ability to attract qualified talent as a key concern, up from just 19% the year before.
No doubt this focus on talent is at least partially the result of the sheer number of new topics requiring industry expertise. Think digital currencies. Embedded finance. BaaS. Buy now pay later. Gen 3 core systems. Artificial intelligence and machine learning. How many of those topics would have been on any FI’s training curriculum two years ago? Yet boards now ask about every one of those topics in terms of the financial institution’s strategy.
However, attracting qualified talent won’t be enough. Every financial institution has knowledge and expertise that can only be developed internally, simply because the knowledge build is so unique to the industry, including:
- Processes unique to a line of business: There is no school or degree for bank processes, front or back office. And they vary by financial institution.
- Regulations: The practical application of regulations to specific situations at the institution requires deep “inside” knowledge.
- Vendors and systems: The vendor stack and roadmaps, and the institution’s databases, make its knowledge requirements unique.
In short, there is no university diploma that can be obtained for many areas of the bank – and, in my opinion, the further you get into the back office, the truer this is.
At Cornerstone Advisors, we’re observing that banks need to focus on “build or buy” of key skills and knowledge for the next generation of leaders and managers. Some thoughts about what we see working:
1. Have a clear list of jobs, skills, and knowledge that will need to be developed versus hired. Everybody will have a different list, of course, but four areas where we consistently see the biggest “build” need are:
- Payments: While there are certainly people that can come to a bank or credit union with a great deal of understanding about payments, there is the entire back-office component – disputes, fraud, reconciliation, vendor configuration options, et al. – that can be learned only on the job.
- Commercial credit: An institution’s required credit expertise will depend on its business and niches. For example, knowledge of national environmental lending will be unique from that of import/export letter of credit. Unfortunately, peers and competitors don’t have a deep bench to abscond with.
- Digital marketing: This is simply too new an area for there to be loads of potential applicants with loads of expertise and experience. Even if execs can find candidates with broad digital marketing experience (they’re out there), they will need to understand the nuances of banking and what will constitute meaningful marketing opportunities in particular client segments.
- Data analytics: There are a growing number of available people with very strong data skills, but even if hired they will need to come to grips with the complexity of the institution’s data structure.
2. Don’t ignore the importance of the apprenticeship model when building talent. Most leaders at FIs can point to on-the-job training they received early in their careers that has been the basis of their success. The apprenticeship model has worked for centuries and still works well at the modern bank.
3. Balance the in-person need for apprenticeship training with the new realities of remote work demands. In a recent Accenture study, over 60% of employees surveyed felt their productivity had increased due to working at home, and only 13% felt it hadn’t. Whether it is a new hire or re-skilling of an existing employee, the message of “five days in the office” won’t sell. Getting the right amount of face time for development while giving the new generation of stars an appealing work-life balance will be a key challenge for HR groups.
A clear, disciplined, focused plan for development of the next generation of talent is more crucial than ever. There are times when buying talent from elsewhere just won’t be an option due to cost, availability, or the risk of retaining those same people. The good news? Some of the best opportunities might be right in front of you in your existing workforce.