The demographic challenge all US companies face is compounded at the country’s banks. The basic challenge is one of simple numbers: baby boomers (born between 1946 and 1964) are a large generation; generation X (1965 to early 80s) is a small one; and millennials (early 80s to 2000) are once again a large generation.
As baby boomers leave the workforce, there simply aren’t enough tenured executives following along behind to take the reins, which means millennials will need to develop into executive leaders more quickly than most banks’ management teams are accustomed to. Not to mention the fact, that the last millennial is now in college, and companies will need to prepare to onboard and develop an entirely new generation in the next two years.
Again, this is even harder in banking. Surveys of commercial bankers show that fully half of commercial banking relationship managers have been in the industry for 20 years or more, and only 9% have joined the industry in the last five years, according to CEB data.
What any company wants is a pyramid of its employee talent that is wider on the bottom, and narrows towards the top so that there are many candidates vying for the next step up. But US banks have the opposite right now: a top-heavy industry dominated by tenured talent.
And that talent is mobile. The vast majority of commercial bankers are actively looking for new roles at another bank, according to CEB data. Fully a quarter of commercial bankers age 60 and up are actively seeking new roles at other banks, and nearly half of commercial bankers age 21-30 are looking to switch banks.
That creates an incredibly competitive market for talent, with incentive compensation for commercial bankers going up more than 150% between 2006 and 2014.
What Community Banks Should Do
Every bank executive is already spending a lot of time thinking about talent. But there are three things community bank executives in particular should consider.
Don’t assume that anyone is a lifer: With more than a quarter of bankers at every level of experience actively seeking new opportunities and national banks engaged in a war for banker talent, taking the commitment of any of your people for granted is a mistake.
Maximize your return on “transient” talent: Don’t necessarily pass on someone great because you think they might want to move on in a few years, if their hunger for professional growth can help you grow as an organization.
Ask if you’re giving generation X and millenial team members worthy work: At a recent dinner with a diverse group of bank executives, the guest speaker was an astronaut, and showed this video of a SpaceX team retrieving the first stage of a rocket for the first time.
Afterwards, several bankers commented on how young the team in the control room were, and one said “At my bank, we’d be asking them to wait another five years before we gave them something big to manage. We need to get them something worth doing.”