A focused plan for the development of next-generation talent is more crucial than ever.
This blog is reprinted with permission from the original.
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, banking as a service, buy now pay later, gen 3 core systems, artificial intelligence and machine learning. How many of these would have been included in any financial institution’s training curriculum even two years ago? Yet every one of these is now a topic that boards are asking about in terms of strategy.
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 FI.
- Regulations. The practical application of regulations to specific situations at the institution requires deep “inside” knowledge.
- Vendors and systems. The institution’s unique vendor stack/roadmaps and databases make its knowledge requirements one of a kind.
In short, no university diploma can be obtained for many areas of the organization—and, in my opinion, the further you get into the back office, the truer this is.
At Cornerstone, we’re observing a need to focus on the “build or buy” of key skills and knowledge at financial institutions 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 really can only be learned on the job.
- Commercial credit. My colleague Joel Pruis has convincingly argued that there has been an exodus of great commercial credit talent that will need to be replaced. An institution’s required credit expertise will depend on its business/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 many potential applicants with loads of expertise/experience. Even if execs can find candidates with broad digital marketing experience (they’re out there), they will need to understand the nuances of financial services 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. They will then need to learn where the data “nuggets” are, i.e., the information that will be actionable and have real impact on operations and performance.
In all of these areas, and in other key identified “build” areas, there is one big overriding theme: These people will need to have a deep understanding of how banking works—profit and loss, delivery, money movement, etc.—combined with strong knowledge of the peculiarities of the markets, products and systems.
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 today. A key to future success will be the formalization of this approach in the career pathing and goals of both the teacher and the pupil.
3. Balance the in-person need for apprenticeship training with the new realities of remote work demands
On the one hand, leaders at FIs would be correct to note that much of the “build” effort will require in-person, face-to-face training. On the other hand, in a recent Accenture study, over 60% of employees surveyed felt their productivity had increased due to working at home, and only 13% definitely 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-in-the-office/work-at-home balance will be a key challenge for HR groups going forward.
A clear, disciplined, focused plan for the development of the next generation of talent is more crucial than ever. There are times when buying talent 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.
A co-founder of and partner in CUESolutions provider Cornerstone Advisors, Scottsdale, Arizona, Terence Roche brings 40 years of experience in bank operations and consulting. He has directly managed over 50 system selection processes and written numerous technology plans.