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    Top 15 HR Practices in Banking Sector [2024]

    December 28, 2022

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    15 Best HR Practices for HR Professionals in the Banking Industry
    Shreya Srivastava
    Written By
    Shreya Srivastava

    HR professionals in banks need to stay up to date with the best HR practices in the industry to successfully manage the workforce and help banks achieve their business objectives. This article explores 15 best HR practices for banking professionals to consider.

    Did you know that companies lose $550 billion every year because of employees who are disengaged from their jobs? HR plays a crucial role in any organization, and this is especially true for banks. HR helps to ensure that a bank is staffed with qualified and motivated employees who can support the bank’s operations and goals.

    In addition to recruiting and hiring, HR professionals in banks also play a key role in managing employee performance, providing support and guidance to employees, and handling employee relations issues. By effectively managing the people resources of the organization, HR professionals can help banks achieve their business goals and create a positive work environment for employees.

    Learn More: HR Trends in the Banking Industry: 23 Trends for 2024

    5 Benefits of Implementing HR Best Practices in Banks

    1.    Attracting and retaining top talent

    HR professionals in banks can attract and retain top talent by developing and implementing effective recruitment and retention strategies. This includes identifying the skills and qualifications needed for various positions, sourcing and screening candidates, and developing competitive employee-benefit packages.

    2.    Ensuring compliance

    HR in banks can help ensure that the bank follows relevant laws and regulations, such as those related to equal employment, labor relations, benefits, etc.

    3.    Inducing higher productivity

    Effective HR practices in banks can help manage employee performance through activities such as setting performance goals, providing feedback and coaching, and conducting performance evaluations. This can help to improve productivity and drive business success.

    4.    Promoting employee satisfaction

    With robust HR practices in place, HR professionals in banks can efficiently handle employee relations issues that may arise, such as conflicts between employees or concerns about pertinent regulations, etc. By addressing these issues in a timely and effective manner, HR professionals can help to maintain a positive work environment and promote employee satisfaction.

    5.    Creating a positive organizational culture

    HR professionals in banks can provide support and guidance to employees on a wide range of topics, including career development, training and development opportunities, and benefits. This can help to foster a positive work culture and improve employee retention.

    Learn More: Top HR Challenges in the Banking Industry in 2024 [With Solutions]

    Top 15 HR Best Practices for the Banking Sector in 2023

    After looking at the benefits that can accrue from implementing the HR best practices in banks, let us look at some of the best HR practices that banks can adopt in 2023 to improve their performance and achieve their business goals. These practices include:

    1.    Agile organization structures

    The banking industry is evolving at a rapid pace and has an aggressive growth mandate to meet. Continuing with traditional hierarchical structures can be detrimental to banks. Agile organizational structures are designed to be more responsive and provide the adaptability to respond to changes in the market or the broader industry.

    They often involve decentralized decision-making and cross-functional teams, which can help to foster innovation and collaboration. In the banking industry, where customer expectations are constantly changing, and new technologies are emerging, an agile structure can allow banks to respond more quickly to customer needs and take advantage of new opportunities, such as the adoption of digital banking services.


    2.    AI and ML-based recruitment

    The banking industry has been facing high attrition, a huge number of absconding employees, and challenges in recruiting at scale and speed. In such a scenario, banks can opt for automated, AI and ML-enabled recruitment and separation to facilitate faster onboarding and exit processes.

    AI can also be used to identify patterns and trends in job performance and retention, which can help banks make more informed hiring decisions. For example, AI algorithms can analyze data from past hires to identify factors that are predictive of success in a particular role.

    3.    Selective recruitment

    Another great method of recruiting for key roles in banks is selective hiring. It means coming up with hiring strategies that are more proactive and attract highly qualified candidates with specific skill sets. In selective hiring, HR teams do a thorough job analysis of the open positions, look at publicly available data on the labor force to target recruits, and ask current employees for referrals. With this method, less time and money are wasted looking for and interviewing people who aren't right for the job.

    4.    360-degree feedback system

    360-degree feedback is a system in which employees get feedback on their skills from their direct reports, manager, peers, and even customers. This feedback is anonymous and is kept private. To implement this practice, an online, anonymous feedback form is sent to 7 to 12 people. The questions on the form cover a wide range of job-related skills. 

    This system lets HR get honest feedback, better understand development needs (training, behavior, leadership, etc.), and get a complete picture of a possible candidate for leadership. By using this approach, banks can ensure that their employees are performing to the best of their ability and are well-positioned to meet the challenges of the future.

    5.    Streamlined succession planning

    In the banking industry, succession planning is critical for ensuring that the organization has a pipeline of qualified leaders who are ready to step into key roles as they become available. The following steps can be followed to implement succession planning in banks:

    •    80% of corporate value in banking organizations is driven by 50 roles or so, which is why it is important to identify the key roles and responsibilities that are critical to the success of the organization. This includes identifying the skills, experience, and competencies that are necessary for success in these roles.

    •    Next, it is important to assess the current pool of internal candidates to determine who has the potential to fill these key roles. This may involve conducting assessments, such as 360-degree feedback or leadership development programs, to identify strengths and areas of improvement.

    •    Once potential candidates have been identified, it is important to develop a plan to prepare them for leadership roles. This may include providing training and development opportunities, as well as assigning them to key projects or assignments that will allow them to gain the skills and experience they need to succeed in leadership roles.

    Learn More: 15 Top Talent Management Practices for Banking in 2024

    6.    Rewards and recognition programs 

    In the banking industry, meeting high standards of customer service is critical to success. Rewards and recognition programs can help foster a culture of excellence within banking organizations, as they encourage employees to go above and beyond in their work. These programs also help in improving employee morale and job satisfaction, as they acknowledge and appreciate the contributions of individual employees. 

    This can lead to increased productivity and a more positive work environment. Finally, these programs can help retain top talent, as they demonstrate to employees that their contributions are valued and appreciated. This is particularly important in the banking industry where competition for top talent is fierce.

    Learn More: Simplifying Total Rewards Strategy for 2023

    7.    Effective evaluation systems

    Creating an evaluation system that clearly connects each person's performance to business goals can be good practice for banks. Every employee should have a clear idea of whom they report to. Employees should be able to rate themselves as part of the evaluation process because it gives them more agency in the process. 

    Evaluations are considered fair and neutral if they are based on what the employee has done over the course of a year. For more objectivity, each worker should also be evaluated and judged by the next level up, i.e., the person at a level above the immediate superior. If possible, getting cross-functional feedback from another manager will make the system even fairer.

    8.    A culture of knowledge-sharing

    Knowledge sharing is an internal knowledge management process that lets employees share information or skills with their peers. Sharing knowledge makes employees feel like they belong in the company, improves teamwork, boosts engagement, and cuts down on support training costs and tickets. To create a culture where people share what they know, HR teams in banking organizations can:

    •    Hire a knowledge manager
    •    Invest in a tool for building a knowledge base
    •    Create an internal process for how employees should share their knowledge

    9.    Transparency

    In the banking industry, where employees handle a wide range of duties, the need for clear expectations and knowledge of corporate objectives becomes vital. There are two aspects to building transparency:

    i)    Making a connection between the efforts of the individual and of teams towards the organization's goals: Employees want to feel that the work they do has a meaningful impact on their organization, but not all of them have a comprehensive understanding of how each department contributes to a business's performance.

    ii)    Communicating the ‘why’ behind decisions: Your employees may not like or agree with a decision you make but communicating why it is being implemented may change how they feel about it. This can help in building trust, safety, and loyalty.

    Employees in a bank should have access to business information to help them feel like they are a part of the team. Banks can consider using communication channels like weekly team updates, newsletters, and all-hands meetings to facilitate transparency.

    10.    Compliance adherence 

    In light of continuously changing government regulations and norms and the rise of hybrid work in the banking sector, HR professionals in the industry need to ensure their practices and policies remain compliant. It’s important for banks to have risk and compliance specialists on board, either as employees or as service providers. You can run all of your HR policies, procedures, and contracts by this team or agency for approval before putting them into action. 

    HR must also ensure that management and employees know their rights and the limits of the law. Compliance training is also required to teach employees about the rules and laws that apply to an organization or a specific job role. These training programs can help reduce risks, make sure employees are safe at work, and improve the overall work environment.

    11.    Flexible working arrangements

    Long hours and high levels of stress are common in the banking industry. This is why flexible work arrangements, such as flexible schedules and remote work, are becoming increasingly common in the sector. These arrangements allow employees to have more control over their work schedules and help to improve work-life balance, improve employee productivity, and engagement. 

    Flexible work arrangements can also help to attract and retain top talent, as they demonstrate to employees that the organization values their well-being. This can help banks gain an edge in competitive hiring. Finally, flexible work arrangements can help to reduce absenteeism and turnover in the banking industry, as they can lead to increased job satisfaction and a sense of loyalty to the organization.

    12.    A culture of high-performing teams

    One of HR's most important jobs in banks is to build and support high-performing, effective teams. A good team comes up with creative ways to solve problems. Teamwork can be made easier in a number of ways, such as by measuring team performance, giving rewards to teams that do a good job, and using communication software, feedback tools, project management tools, and so on.

    13.    Employee development plans

    In a survey, 54% of banking professionals responded that retaining younger talent is “somewhat challenging,” while 12% responded that it is “very challenging,”. Your current workforce, which probably includes a lot of millennials and a growing number of Gen Z probably has skills and experience that have nothing to do with their current job but could help the company reach its vision and long-term goals. 

    If you don't know about your employees' hidden skills, you might miss out or hire someone to do a job that an existing employee could do with a little training. When it comes to morale and engagement, internal promotions are so much better than new hires from the outside. To get the most out of your employees and find out about any hidden talents they might have, you need to work with each of them on a development plan. Keeping track of each employee's growth, personal career goals, skills they need to learn, and checkpoints for their future progress is the best way to do this. 

    14.    Diversity and inclusion

    A diverse and inclusive workplace can improve the overall performance and productivity of the organization. Diverse teams tend to be more innovative and effective at problem-solving, as they bring a variety of perspectives and approaches to decision-making. Banks serve a diverse range of customers, and a diverse workforce can help to ensure that the organization is able to understand and meet the needs of all its customers. Banks can promote diversity and inclusion by implementing affirmative action policies, offering diversity training, and creating employee resource groups. 

    15.    Cloud-based HR software

    HR software can make it easier to manage, improve, and automate HR processes. Implementing HR software is an important HR best practice because it helps HR professionals spend less time on low-impact administrative tasks. It gives them more time to focus on the most productive and strategic goals. Some other important benefits are:

    •    Reduced instances of human error
    •    Improved data organization
    •    The power of analytics
    •    Continuous feedback
    •    Compliance with rules and regulations

    The Next Steps

    HR plays a crucial role in banks. By implementing effective recruitment and retention strategies, ensuring compliance with relevant laws and regulations, managing employee performance, and handling employee relations issues, HR professionals can help banks attract and retain top talent, create a positive work environment, and drive business success. By following these HR practices, banks can create a strong and motivated workforce that is well-positioned to support the bank's operations and goals.

    Find out how Darwinbox can help you manage all your banking HR needs, book a demo today!  

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