Sunday, Nov 28

Building relevant skills for future banking

Building relevant skills for future banking

Just like any other industry, banking has continued to evolve even before early 2020 when the pandemic struck unexpectedly. Research has shown that in the previous decade, the branch footprint had shrunk by about 20 percent in the United States and by 60 percent in Nordic countries. These changes are now evident in almost all the regions across the globe today.

Obviously, these changes are driven mainly by the application of technology in banking. Moreover, consumer needs are fast evolving rapidly, as people continue to expect more and more from their online banking services. Consequently, as banks digitize their front ends in response, they also establish next-generation technologies in the middle and back offices to help save costs and provide better services. A pre-COVID-19 research on the future of work by Mckinsey suggests that almost all roles in bank branches will decline over the next decade.

The average branch size is projected to shrink from six full-time equivalents to four by 2030. Unfortunately, the global pandemic has accelerated those trends and has added urgency to the discussion. Aside the risk of potential job losses, Banks now have to learn to respond and adapt quickly to changes in the ecosystem. According to McKinsey, banks’ HR leaders, in the first several months of the crisis, successfully adapted their organizations and ways of working; banks and their workforces responded remarkably well.

The Quick response and adaptability during the pandemic, according to McKinsey, has affected banks’ organizational structures in three ways. First: the crisis has accelerated the shift from hierarchical structures to agile ones, in which individuals have autonomy, leaders delegate to empowered teams, and relationships are less formal and more flexible. Second: banks have redeployed talent from surplus to shortage areas to help save costs and bolster reputations. Finally: banks have offered training on new skills that people can use in their current jobs (upskilling) or for new jobs (reskilling).

Now, banks are sifting through the changes brought about by the COVID-19 crisis to understand which ones are temporary and which are permanent. One of such important decisions that banks are faced with is the need to have a formidable workforce that can thrive amid difficulties whilst ensuring that banks meet the needs of their customers. This, therefore, makes it more important for banks to concentrate on building future workforce, strong enough to deliver results.

BUILDING FUTURE WORKFORCE

To start with, Banks or HR leaders need to make a decision as to whether to continue to hire new employees or to hone the skills of existing ones to carry out new tasks. This decision usually requires a careful analysis; a cost-benefit analysis. McKinsey research shows that redeployment with effective reskilling is 20 percent more cost-effective than “hiring and firing”, as it reduces the number of new hires and the number of layoffs needed.

Also, it boosts an employer’s brand reputation by building a healthy employee value proposition marked by robust investment in people. However, to many HR leaders, reskilling has always seemed like a complex and lengthy process that requires a lot of preparation and shows impact only in the medium or long term. This, has therefore, slowed its adoption by large organizations.

Luckily, McKinsey, through its conversations with banks’ Chief HR Officers (CHROs) who have thrived during this crisis, outlined five lessons on how to reskill successfully

CONSIDER STRATEGY NEEDS AND INDUSTRY TRENDS

The first thing to do is to consider upskilling proactively based on strategy needs and industry trends. This means that before initiating any upskilling or reskilling effort, it’s important to know what the effort is for and what skills are in scope. Based on forecasts of shifts in the role mix, banks have focused on critical skills for specific roles (for example, remote skills for advisers) and for general needs across roles (for instance, adaptability skills).

According to McKinsey, banks that have achieved productive reskilling have designed the learning objectives in close alignment with their strategy. For instance, a US retail bank was able to reskill many of the branch employees into universal-banker roles by equipping them with basic general consulting skills, as well as enhanced technical skills.

EMPLOY SKILL ADJACENCIES

Also, Banks need to analyze skill adjacencies before launching any reskilling effort. Finding source roles with the closest skill match to destination roles can minimize reskilling needs and enable quick reskilling that focuses on missing skills. One example of quick reskilling is micro-skilling, which provides ad hoc training (a maximum of one or two days) for specific skill sets.

During the COVID-19 crisis, some banks trained tellers to become customer-service reps and trained customer-service reps to become universal bankers. This was possible mainly due to the skill adjacencies of these roles. For instance, high-performing tellers possess the customer-engagement and influencing skills that customer-service reps require. Likewise, high-performing customer-service reps have the understanding of bank products and services that is needed from effective universal bankers.

Also, Banks need to analyze skill adjacencies before launching any reskilling effort. Finding source roles with the closest skill match to destination roles can minimize reskilling needs and enable quick reskilling that focuses on missing skills. One example of quick reskilling is micro-skilling, which provides ad hoc training (a maximum of one or two days) for specific skill sets.

During the COVID-19 crisis, some banks trained tellers to become customer-service reps and trained customer-service reps to become universal bankers. This was possible mainly due to the skill adjacencies of these roles. For instance, high-performing tellers possess the customer-engagement and influencing skills that customer-service reps require. Likewise, high-performing customer-service reps have the understanding of bank products and services that is needed from effective universal bankers.

PROVIDE ADEQUATE INFRASTRUCTURE

In reskilling, many banks emphasize the need for investing in large infrastructure and systems. This would ideally contain several elements, such as the skill inventory and an internal talent market to encourage mobility and reskilling needs.

It could also contain a central library to offer online and offline training, and a learning factory to build reusable learning content. To reskill its 3,000 tellers, McKinsey indicated that the midsize European bank built a new, digital corporate academy, where learning materials were migrated and delivered through digital channels. Besides, to make the learning journey easier, it also transformed legacy learning modules. For example, shorter, two- to four-minute instructional videos replaced older, two-hour videos.

The European bank also developed a reskilling tool to help match employees to new roles for when the bank needs to hire internally. Training employees require that formal infrastructure be put in place. In 2020, many banks faced challenges when they had to move quickly to train employees but had little formal infrastructure in place to do so.

LEADERSHIP AND SUFFICIENT TALENT DEVELOPERS

Another important measure for effective reskilling is to invest in leadership and ensure sufficient talent developers. Nevertheless, these initiatives require committed leadership to succeed. The workforce of the future will need leaders who are similarly advanced. Thus, people who create a positive and nurturing growth environment rather than simply telling people what to do.

Additionally, such leaders are people who communicate with employees clearly and transparently about the company’s change programs. The success of most banks is based on strong leaderships that are able to carry their followers along in every activity of the banks, especially during crisis. For example, one executive at ING explained that leadership “is about letting people see what are the different doors and helping to open them”. Similarly, the success story at the midsize European bank was also built upon strong leadership champions.

In that regard, it is also important to have “talent developers”– people who are able to identify, assess, and train employees as needed. These could be HR business partners, functional leaders, or middle managers. Talent developers help leaders translate the direction of the business into talent requirements. They can also help identify the right people for future needs and, with support from learning and coaching experts, can help them get there.

The financial-services industry has faced dramatic disruption over the past decade, with significant implications for the talent needed in the future. To remain competitive, banks must dynamically redeploy employees to roles with increasing demand, as well as providing employees with diverse career paths and with corresponding upskilling and reskilling support.

Equipped with the right mindset and tools, talent leaders can expand on these changes and get ahead of competitors in building the workforce of the future. Doing so can provide banks with the opportunity to think about not only the next phase of banking but also how to deliver financial products to people. It can also provide an opportunity to exploit digital capabilities and to start thinking about new products, services, and ecosystems.

HOMOGENOUS LEARNING C U LT U R E

All of the Chief HR Officers interviewed by McKinsey underlined the critical role that culture plays when implementing quick and efficient reskilling. In their experience, ensuring a homogenous culture is the topmost measure to reskilling. Indeed, given the pressure imposed by the COVID-19 crisis, banks have had to reorganize their workforces quickly.

This has left little time for employees to acclimate to a new culture and to new ways of working before they need to be productive. However, creating a homogenous culture does not often come naturally and usually requires considerable up-front investment. According to McKinsey, Banks that have done this well typically use a mix of capability building and immersive experience.

Additionally, such Banks also rely on a consistent, inspiring communication plan that starts with a clear definition of joint purpose and values. Moreover, building a homogenous learning culture also requires a consistent, ongoing commitment. The more that a bank conceives of it as a journey rather than a one-time training, the better the results will be.

For instance, the US retail bank, which wanted to reinvest in its employees, created a homogenous culture of its own. The bank’s culture has the twin goals of helping employees thrive in the future workplace and helping the bank shift to a more customer-focused culture.

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