HR in Banking
The mission to build a future-proof banking organization begins with building a future-proof workforce. This article explores the top talent management practices that will be relevant for the banking sector in 2023.
HR Is at the Forefront of Transformation
“The greater the obstacle, the more glory in overcoming it,” said Molière. This applies perfectly to HR leaders in the banking industry, particularly when it comes to talent management in banking.
HR professionals in banking have to contend with a number of internal (workforce planning and management, cost management, organizational models, globalization of the workforce, etc.) and external pressures (government regulation, customer expectations, industry expansion and consolidation, financial markets, etc.).
The banking industry is significantly affected by new technologies and market disruptors like FinTech and Telco, which aim to provide financial services quickly and nimbly. To add to the challenge, the COVID-19 pandemic accelerated changes that were already underway in the sector. The continuation of traditional banking models depends on how well banks can adapt to the realities of digital evolution and meet shifting customer demands.
Learn More: 23 HR Trends in Banking for 2023
Top Talent Management Challenges in Banking
The pace of change and uncertainty is taking a toll on workers in the banking industry. Financial services workers reported the second-highest level of job stress and sleep. Employee motivation in the sector also dropped 32 percent, according to Smith’s study of 7,000 of his clients. Certainly, there is a need for banks to put HR at the forefront in order to effectively manage the situation. HR in banking plays a crucial role when it comes to setting priorities, promoting the bank as a source of talent, and creating strategies to "future-proof" the company.
Why Must Banks Invest in Talent Management?
A significant component of future-proofing the organization is future-proofing talent. A survey by Brad Smith, chief science officer at meQuilibrium, of global CEOs and board chairmen concluded that human capital is the top challenge that they face. This raises the question of whether sufficient efforts are being taken to tackle the issue.
A study by Deloitte uncovered that not enough investment is being made to cater to talent management in the banking sector. They examined the expenditure on talent management and human resources in their Human Resources Benchmark for Banks. The report identified investment shortfalls in talent management. According to the report, the banking sector should be able to increase employee productivity, groom future leaders, and profit from the expansion of emerging markets by investing in people management. However, this needs to be done carefully and strategically for optimal results.
Let’s take a look at the top talent management techniques that banking firms can include in their HR operations.
15 Talent Management Practices in Banking for 2023
Here's a list of 15 top talent management practices banking organizations can imbibe in their short-term and long-term policies to build a truly future-proof workforce:
Planning Future-forward Banking Recruitment
Futureproofing becomes increasingly important in today's demanding and cutthroat talent market. The traditional recruitment model may not cut it anymore, which is why banks must look for fresh approaches to attracting and retaining talent. Banking organizations should embrace the dynamic changes taking place around the world, particularly in Information Technology and Human Resource Management.
For instance, Canara Bank has been able to develop hiring processes that are proactive, upfront, and quick. They have achieved this by formulating a long-term recruitment strategy as a result of a workforce study they conduct in the organization as a regular practice. This strategy considers branch expansion plans, business growth plans, retirement plans, exits, demographic analysis, etc.
2. Building a Talent Pipeline
The knowledge and abilities needed for new-age and digital banking are very different from those needed for traditional banking. This applies to all management levels, but it is even more important at the top. Considering this, having a multifaceted talent acquisition and development strategy for banks is a must.
For instance, YES Bank started an innovative talent acquisition program, known as Y-PEP (YES Professional Entrepreneurship Program), targeting tier-1 business schools. With the addition of a certain number of professional entrepreneurs every year, they have been able to create a talent pool. As a result, a talent pipeline is created, and the hand-selected young leaders are prepared for diverse business roles. Similarly, for newly created leadership positions, especially in branch and retail banking, the internal talent pool is their first choice. There is a strong and clear process in place for identifying internal potential.
3. Planning for Future Talent Requirements
43% of working hours in the banking industry will be automated in the future. As a result, the skills that employers will need to look for in employees will change from basic cognitive skills to socio-emotional and technological skills. This would create a talent gap if banks continue with their traditional recruitment efforts. Therefore, banks need to reassess their long-term talent management plans and create a strategy to upgrade them.
4. Identifying Critical Roles
80% of corporate value in banking organizations is driven by 50 roles or so. When organizations concentrate on the top of the organizational hierarchy, 90% of important talent is missed. Instead of using the traditional hierarchy, banks can choose the methodology for identifying these critical roles based on data. The best performers identified can then be assigned to these positions, and banks can oversee their training and development.
5. Streamlining Succession Planning
An integrated talent management program can be applied to an organization's mid-level and senior management cadre. The efforts in succession planning in banking can then be integrated with this process. In this system, talent management is a four-step process in which the first stage is to identify essential roles based on their impact on the business. Following this, high-potential employees are found through a talent review process and mapped to critical roles. Depending on the organization's ability to retain the current role holder and the availability of a successor, a succession plan should be developed for each crucial role.
Learn More: HR Challenges in Banking for 2023
6. Focusing on Inclusion and Diversity
Diversity has various advantages, including improved financial performance and decision-making, greater job satisfaction, and enhanced corporate image. Banks need to consider setting quantifiable diversity objectives and to review all procedures to identify unconscious biases. Rich rewards accrue from a strong emphasis on a diverse and inclusive workforce. It leads to a more flexible work environment and a wide recruitment pool, promoting better decision-making, greater creativity, and lower business risk.
7. Ensuring Efficient Performance Management
Employee performance plays a vital role in improving the operational efficiency and effectiveness of banking processes. Performance management and rewards and recognition programs in banks need to focus on maximizing employee engagement and development, which in turn would lead to improving the performance of individuals and the organization. Work to build a performance management approach that emphasizes conversations, meaningful differences between high and low performers, and workforce development.
8. Building Robust Training and Development Programs
The implementation of an effective training and development program in the banking sector is necessary to support both conventional and atypical learning. This generally includes:
- Internal development programs
- Coaching and mentoring
- Succession planning
- Cross-functional project assignments
- High-potential development schemes
- Graduate development programs
- Courses at outside institutions
- Internal secondments
- Assessment centers
- 360-degree feedback
- Job rotation and shadowing
- Development centers, etc.
These initiatives can help employees develop their skills more actively, become more dedicated to their jobs, share knowledge more readily, and become better prepared to take on more responsibility.
9. Crafting Agile Org Structures
Traditional banking models need to be infused with dynamism to empower banks to cope with changing times. Banks will need to transition from hierarchical to agile organizational structures, in which leadership empowers networks of teams to accomplish goals. In an agile model, teams have the flexibility to move around as opportunities arise. There are several advantages to this adaptable structure, such as results like lower costs, increased customer satisfaction, and increased employee engagement.
10. Using Data for Talent Management
One of the key advantages of operating in the digital age is the amount of data that banks have access to. Forward-thinking banks have the option to use this data to recruit, retain, motivate, and promote rather than relying on subjective procedures and established norms. For instance, a heatmap showing the roles with the highest attrition rates can be created using corporate data. These roles can then be tended to with a special focus on engagement, training and development, and motivation.
11. Improving Employee Retention Strategy
Employee retention is a major challenge in the Indian banking industry. The top reasons for turnover in the sector include:
- Negative perceptions of pay
- Lack of career growth
- Poor communication during times of change
Having a robust employee retention strategy in banks can help curb turnover rate, save money, and boost employee morale and productivity. An employee retention strategy should typically include:
- Ways and methods to keep employees engaged
- Practices to drive inclusive communication
- Techniques to effectively implement rewards and recognition programs
12. Fostering a Culture of Employee Engagement
Research shows only 35% of respondents surveyed reported high employee engagement. A culture of employee engagement in the banking sector will enhance employee satisfaction, which in turn will positively contribute to business outcomes. It shapes employees’ attitudes, enabling them to perform better, and achieve strategic outcomes more effectively. Employees’ expectations impact their performance, which further affects the organization’s performance. This is why engagement should be ingrained in the culture and regularly assessed to fulfill employee expectations.
13. Creating a Competency Framework
An organization needs to continually make investments in the skill development of its workforce. A competency framework contains a number of competencies that are applicable to various occupational roles in an organization. Each competency determines the standard against which employees are evaluated. For instance, a competency framework can be developed with the knowledge, abilities, and traits required when one progresses from "managing self" to "managing others" to "managing managers". Such a framework can serve as the foundation for training and career management programs.
14. Upskilling and Reskilling Planning
Employees at various levels need to be reoriented in terms of knowledge, skills, and attitude in line with changes in the industry to effectively contribute to their roles. This strategy should concentrate on demand-led skilling – shifting the emphasis from traditional skill-building programs to Design Thinking, Innovation, and Creativity-led Entrepreneurship (D.I.C.E.) and soft skills. An agile upskilling and reskilling plan can empower the workforce to stay relevant in the face of disruptive changes. Having such a strategy in place will go a long way in developing large-scale, long-lasting solutions to save costs and increase process efficiency.
15. Fostering a Progressive Work Culture
In the current environment, baseline compensation is not enough to retain talent. Employees also want challenging work with agile teams aligned to a sense of purpose. Creating an organizational culture that values lifelong learning can go a long way in attracting and retaining the right talent. Further, making efforts to improve mental health, ensure safety, and motivation can go a long way in facilitating a progressive culture. Another important aspect of such a culture is Environmental, social and governance (ESG) associated policies. Employees are becoming more and more conscious of whether their banking organizations have strategies and policies to address environmental and social responsibility.
Learn More: Top 10 Talent Management Trends for 2023
The Way Forward
Talent management in banking is a tactical weapon for gaining a competitive edge, in these times. It's reasonable to say that the workforce will set the pace for the advancements the banking industry will experience in the future. This makes effective talent management indispensable in banking organizations. In this scenario, the role of HR will be far more exciting and strategic than in the past.
An end-to-end, module-based, highly configurable HRMS platform can be a great ally for the HR function in the banking industry.
Interested in exploring further? Find out how Darwinbox can simplify talent management in banking, book a demo today!
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