Compensation Survey Results: An “Untenable” Talent Climate

Intensifying competition for talent is forcing banks to pay up for both new hires and existing employees.

There were two jobs for every job seeker as recently as March, according to the Bureau of Labor Statistics, and employers of all stripes may be feeling like the balance of power has shifted. The results of Bank Director’s 2022 Compensation Survey, sponsored by Newcleus Compensation Advisors, show the banking industry is no exception to these dynamics.

Seventy-eight percent of responding directors, human resources officers, CEOs and other senior executives say that it was harder in 2021 to attract and keep the talent their bank needs than in past years. They’re responding to that challenge, in large part, by raising pay. Ninety-eight percent say their organization raised non-executive pay in 2021, and 85% increased executive compensation. Overall, compensation increased by a median 5%, according to participants.

That’s led bankers to shift their priorities. Managing compensation and benefits costs (46%), paying competitively (40%) and recruiting commercial lenders (34%) have emerged as respondents’ top compensation-related challenges this year. The proportion of respondents most concerned with tying compensation to performance — the top challenge identified in past surveys, going back to 2019 — fell sharply to 21% from 43% last year.

Even in the face of rising compensation costs, they’re also focusing on retaining and keeping staffing levels stable. Fully half of respondents say their bank added staff over the past year and 34% maintained staffing levels. Just 16% decreased their total number of employees. More than half (54%) of those whose bank decreased head count cite competition from other financial institutions and companies in their markets as the primary reason for the decline.

When asked about the specific challenges their organization faces in attracting and retaining talent, bankers and directors point to an insufficient number of qualified candidates (76%), rising wages in their markets (68%) and rising pay for key positions (43%). In anonymous comments, respondents describe other difficulties, such as competition from other industries, challenges with remote or hybrid work and younger workers’ disinclination for certain types of long-term compensation.

“[W]age pressure is incredible,” writes one community bank executive . “Our most significant competitor just implemented [four] weeks of vacation for ALL new hires and pays up to 25% higher for retail banking positions. That cost structure is untenable unless we earn more. We are under extreme pressure for talent at the same time we are building out revenue business lines.”

Key Findings

Banks Pay Up
Banks almost universally report increased pay for employees and executives. Of these, almost half believe that increased compensation expense has had an overall positive effect on their company’s profitability and performance. Forty-three percent say the impact has been neutral.

Lenders In Demand
Seventy-one percent expect to add commercial bankers in 2022, which is almost certainly driven by a desire to grow commercial portfolios and offset expense growth. Over half of respondents say their bank did not adjust its incentive plan for commercial lenders in 2022, but 34% have adjusted it in anticipation of more demand.

Additional Talent Needs
Banks also plan to add technology talent (39%), risk and compliance personnel (29%) and branch staff (25%) in 2022. Respondents also indicate that commercial lenders, branch and entry-level staff, and technology professionals were the most difficult positions to fill in 2020-21.

Image Enhancement
Forty percent of respondents say their organization monitors its reputation on job-posting platforms such as Indeed or Glassdoor. Further, 59% say they promote their company and brand across social media in an effort to build a reputation as an employer of choice, while just 20% use Glassdoor, Indeed or similar platforms in this manner.

CEO Turnover
Sixty-one percent of respondents indicate that they’re not worried about their CEO leaving for a competing financial institution, while a third report low to moderate levels of concern. More than half say their CEO is under the age of 60. Respondents report a median total compensation spend for the CEO at just over $600,000.

Remote Work Persists
Three quarters of respondents say they continue to offer remote work options for at least some of their staff, and the same percentage also believe that remote work options help to retain employees. Thirty-eight percent of respondents believe that remote work hasn’t changed their company’s culture, while 31% each say it has had either a positive or negative impact.

To view the high-level findings, click here.

Bank Services members can access a deeper exploration of the survey results. Members can click here to view the complete results, broken out by asset category and other relevant attributes. If you want to find out how your bank can gain access to this exclusive report, contact bankservices@bankdirector.com.

2022 Compensation Survey: Complete Results

Bank Director’s 2022 Compensation Survey, sponsored by Newcleus Compensation Advisors, surveyed 307 independent directors, chairs, CEOs, human resources officers and other senior executives of U.S. banks below $100 billion in assets, with the majority of respondents representing regional and community banks. Members of the Bank Services program have exclusive access to the full results of the survey, including breakouts by asset category, ownership structure and region.

The annual survey benchmarks CEO pay and compensation for independent directors and non-executive chairs, and supplements respondent input with data collected from 96 public banks. This year, it also examines a competitive talent landscape, and CEO succession and performance. The survey was conducted in March and April 2022.

Click here to view the complete results.

Key Findings

Talent Challenges
Managing compensation and benefits costs (46%), paying competitively (40%) and recruiting commercial lenders (34%) have emerged as respondents’ top compensation-related challenges this year. While half say their bank added staff over the past year, 78% say that it was harder in 2021 to attract and keep the talent their bank needs.

Banks Pay Up
Banks almost universally report increased pay for employees and executives. Of these, almost half believe that increased compensation expense has had an overall positive effect on their company’s profitability and performance. Forty-three percent say the impact has been neutral.

Lenders In Demand
Seventy-one percent expect to add commercial bankers in 2022, which is almost certainly driven by a desire to grow commercial portfolios and offset expense growth. Over half of respondents say their bank did not adjust its incentive plan for commercial lenders in 2022, but 34% have adjusted it in anticipation of more demand.

Additional Talent Needs
Banks also plan to add technology talent (39%), risk and compliance personnel (29%) and branch staff (25%) in 2022. Respondents also indicate that commercial lenders, branch and entry-level staff, and technology professionals were the most difficult positions to fill in 2020-21.

Image Enhancement
Forty percent of respondents say their organization monitors its reputation on job-posting platforms such as Indeed or Glassdoor. Further, 59% say they promote their company and brand across social media in an effort to build a reputation as an employer of choice, while just 20% use Glassdoor, Indeed or similar platforms in this manner.

CEO Turnover
Sixty-one percent of respondents indicate that they’re not worried about their CEO leaving for a competing financial institution, while a third report low to moderate levels of concern. More than half say their CEO is under the age of 60. Respondents report a median total compensation spend for the CEO at just over $600,000.

Remote Work Persists
Three quarters of respondents say they continue to offer remote work options for at least some of their staff, and the same percentage also believe that remote work options help to retain employees. Thirty-eight percent of respondents believe that remote work hasn’t changed their company’s culture, while 31% each say it has had either a positive or negative impact.

2021 Compensation Survey Results: Fighting for Talent

Did Covid-19 create an even more competitive landscape for financial talent?

Most banks increased pay and expanded benefits during the pandemic, according to Bank Director’s 2021 Compensation Survey, sponsored by Newcleus Compensation Advisors. The results provide a detailed exploration of employee benefits, in addition to talent and culture trends, CEO performance and pay, and director compensation. 

Eighty-two percent of respondents say their bank expanded or introduced remote work options in response to Covid-19. Flexible scheduling was also broadly expanded or introduced, and more than half say their bank offers caregiver leave. In addition, most offered bonuses to front-line workers, and 62% say their bank awarded bonuses tied to Paycheck Protection Program loans, primarily to lenders and loan production staff.     

And in a year that witnessed massive unemployment, most banks kept employees on the payroll.

Just a quarter of the CEOs, human resources officers, board members and other executives who completed the survey say their bank decreased staff on net last year, primarily branch employees. More than 40% increased the number employed overall in their organization, with respondents identifying commercial and mortgage lending as key growth areas, followed by technology.

The 2021 Compensation Survey was conducted in March and April of 2021. Looking at the same months compared to 2020, the total number of employees remained relatively steady year over year for financial institutions, according to the U.S. Bureau of Labor and Statistics.

Talent forms the foundation of any organization’s success. Banks are no exception, and they proved to be stable employers during trying, unprecedented times.

But given the industry’s low unemployment rate, will financial institutions — particularly smaller banks that don’t offer robust benefit packages like their larger peers — be able to attract and retain the employees they need? The majority — 79% — believe their institution can effectively compete for talent against technology companies and other financial services companies. However, the smallest banks express less confidence, indicating a growing chasm between those that can attract the talent they need to grow, and those forced to make do with dwindling resources. 

Key Findings

Perennial Challenges
Tying compensation to performance (43%) and managing compensation and benefit costs (37%) remain the top two compensation challenges reported by respondents. Just 27% say that adjusting to a post-pandemic work environment is a top concern.

Cultural Shifts
Thirty-nine percent believe that remote work hasn’t changed their institution’s culture, and 38% believe the practice has had a positive effect. However, one-quarter believe remote work has negatively affected their bank’s culture.

M&A Plans
As the industry witnesses a resurgence of bank M&A, more than half have a change-in-control agreement in place for their CEO; 10% put one in place in the last year.

Commercial Loan Demand
More than one-quarter of respondents say their bank has adjusted incentive plan goals for commercial lenders, anticipating more demand. Ten percent expect reduced demand; 60% haven’t adjusted their goals for 2021.

CEO Performance
Following a chaotic and uncertain 2020, a quarter say their board exercised more discretion and/or relied more heavily on qualitative factors in examining CEO performance. More than three-quarters tie performance metrics to CEO pay, including income growth (56%), return on assets (53%) and asset quality (46%). Qualitative factors are less favored, and include strategic goals (56%) and community involvement (29%).

CEO Pay
Median CEO compensation exceeded $600,000 for fiscal year 2020. CEOs of banks over $10 billion in assets earned a median $3.5 million, including salary, incentives, equity compensation, and benefits and perks. 

Director Compensation
More than half of directors believe they’re fairly compensated for their contributions to the bank. Three-quarters indicate that independent directors earn a board meeting fee, at a median of $1,000 per meeting. Sixty-two percent say their board awards an annual cash retainer, at a median of $21,600. 

To view the full results of the survey, click here.

A Former Astronaut Offers Work-From-Home Advice to Bankers

Michael Massimino is uniquely qualified to offer tips and encouragement to people working remotely because of the coronavirus pandemic.

He was an astronaut.

He’s been to space twice and holds a team record for the number of hours spacewalking in a single space shuttle mission. He was also the first person to tweet from space.

Massimino sees many parallels between the challenges he faced as an astronaut and the situation confronting office workers today.

Now a mechanical engineering professor at Columbia University, he has written books and articles and given talks about the qualities that underpinned his work: building trust, perseverance and working with teammates and customers.

The following interview has been edited for length, clarity and flow.

Isolation and Working from Home
My space flights were not long — two weeks at a time — but I was trained to go to space for longer periods of time. One thing we were concerned with was using free time well: There was a lot of photography, communicating with family and friends, and outreach about what it is that you’re doing in space.

It’s important to do your best to embrace the situation, even if it’s tough to accept. Try to make yourself understand, “This is the way it is. No matter how much I complain about it, it ain’t going away.” We have to learn how to embrace situations and see what opportunities are there for us.

Having a regular schedule helps. Getting exercise is really important. When we were training, we would exercise every day that our schedule allowed it and got outside to enjoy the beauty of the planet. In space, we could look out the window or during our space walks and enjoy the beauty that surrounds you. You can do that here on Earth too; don’t forget, we live on a beautiful planet. And it seems to be better to go outside than to stay in, as the virus goes.

The last thing about isolation is: Eventually we’re going to break out of this, so you want to try to make the most of it. We are away from the hustle and bustle of our daily lives right now; that’s the way it is in space as well. You can do some really thoughtful quiet thinking about what life is about while you’re in those situations.

Effective Team Communication
I speak to a lot of bankers. They’re used to collaborating and dealing with clients, and they approach that relationship in a way that they can’t do anymore.

When you train for spaceflight, you work with your instructors, flight controllers and flight director. You also work with your fellow crewmates, but they’re generally with you — unless you’re outside and they’re inside the spaceship.

We practiced communicating and working with people at a distance. The crew would be in a simulator, the instructors would be in one spot and the flight control team would be in the Mission Control center. We would practice communicating and relying on each other and hearing each other’s voices.

I did the “Capcom” communication job a lot as an astronaut. I always made sure that the crew in space knew that I was there for them, that I would keep them informed and let them know that we didn’t forget about them.

If I had trouble during my spacewalks, I felt really alone. “I can’t get to the hardware store to fix this. Who’s going to help me?” I had one particular problem on my last spacewalk that was a real issue — I stripped a screw or bolt trying to repair the telescope — and the crew came up with a solution.

Today, we can still do Zoom calls and even see each other. There’s a level of comfort and normalcy to the whole thing, and teams are still in place. All of the support team is still there, your clients are still there — and you’re supporting them. You can support someone else on your team but also reach out for support when needed.

Coming Back from Tragedy
I was on the flight right before the Columbia accident. We landed successfully; they took the ship the next time and didn’t come back.

That was pretty devastating. It was similar to the situation we have now: Life changes in an instant. We lost our friends and we had to console their families and deal with the loss of people. But it was also like: “What the heck has happened to the space program?” We had no intention of stopping the space shuttle program, but it was grounded to a halt, even though we had a lot of important work still to do.

We used the idea that we weren’t going to let our friends’ deaths happen in vain. We were going to continue the program and figure out ways to move forward with the space shuttle program. We didn’t fly all that much the first couple of years, when we were dealing with how to recover from everything, but we started flying again and were able to finish the space station build up and also service the space telescope once more. We continued the program until 2011.

But we had do everything with a different set of rules. The accident taught us a lot of things that we needed to change: We needed to inspect the vehicle, we need to be able to repair it if it had damage, we needed to have a rescue capability — all these things had to be developed over a period of years before we were ready to continue that program.

Accepting, Adjusting to Change
When something changes that drastic overnight, you react as quickly as you can, but you might not be able to get back into the flow of things. It was a different world that we lived with, and we did that for a finite time. That was one solution to the question of, “How do we get back to finishing what we started?”

The other thing was, what do we do beyond that? The longer-term issue was that we could not fly the shuttles forever. We were going to do it in a different process, in a different phase of the program, but we knew that it would end after a few more flights. We got another 20 flights or so, maybe a little less, and that was it.

The bigger solution was to come up with a new way to get to space. That was pretty drastic as well, dealing with that change. We didn’t want to be dependent on the Russian Soyuz forever, and a whole new idea developed: doing it commercial through private companies. Everyone was like, “You’ve got to be kidding me. NASA needs to do this. Only governments can do this. This will never work.”

A lot of people resisted the thought that we’d go back to space with private companies. But you had to get on board because change was coming. You might not like it, but you need to accept it. People were [upset] and many stepped aside because they weren’t onboard. But some remained to work on it and now look where we are: A much better situation than where we were. But that takes time.

There’s a lot of analogies here that applies to what we’re dealing with, particularly in the financial markets. The Paycheck Protection Program was really important, and banks played a huge role in helping their customers apply for that. But now banks are going through a lot of restructuring and a lot of uncertainty. It’s volatile — things go up and down — but you’ve got to persevere.

Even if you don’t love it, you need to accept it. Maybe after a while, you’ll think, “This was a good idea.” But it’s not easy. People don’t like change, especially when you we’re doing something you really liked and were successful at, and now you’re not doing that anymore. We were all forced into this pandemic. There’s certainly some bad — but most of the bad comes early. Most of the good comes later.