It is clear that compensation is a driving issue for talent throughout firms, not only at the top of the organization, as many discussions suggest. Our work with clients indicates that even traditional back-office, non-revenue-generating positions, such as those in HR, IT, legal and corporate communications, for example, have historically been compensated at significantly higher levels than their peers in other industries — even two to three times higher when factoring in bonuses. Such pay was deemed essential to attract the high quality caliber of talent and to offset the extreme, often grueling, demands that came with a job in financial services. The allure of working in this industry was typically about making money. Period.
Now a new reality exists — many financial institutions cannot afford to compensate employees at the high levels of the past and compensation in the industry is expected to be tied more closely to revenue generation. This means compensation for back-office positions will likely be adjusted downward, more in line with other industries. As a result, the value proposition for financial services employees has to change—if the job is no longer all about the money, what can the industry do to attract the talent it needs? How can financial institutions overcome recent turmoil and negative publicity and remake themselves as employers of choice? How do the jobs themselves change?
We are working with our clients to help them address these issues holistically and with the long-term perspective of building the next generation of financial services. Part of the effort is to understand what other factors, besides compensation, can realistically be used to continue to attract the best and brightest talent. Will factors such as leadership development opportunities, work-life balance, global and career mobility and a stimulating work environment with the chance to work with and learn from really smart people be enough? Other industries have been working to attract and retain talent using these levers for years, so financial institutions have some catching up to do and a significant hurdle to overcome to make the cultural and mind-set shift necessary to fundamentally change the way they operate.
This is an issue of operating model redesign and talent management, including the need for business-driven HR—the topics that are top of mind for HR practitioners in various industries. Stay tuned as we share more about our work in the financial services industry, the results of our ongoing research and the industry’s progress in meeting its challenges in upcoming HR Times posts.