A growing number of bank leaders are expressing increased concerns about compensation, succession planning and talent acquisition and retention, according to a June 20 report from Bank Director’s 2023 Compensation Survey.
As compared with last year, the stress around incentive pay — or tying compensation to performance — has more than doubled, with 44% of survey respondents naming it as a top challenge.
“Last year’s survey found bank executives and board members most concerned with the rising cost of compensation and the ability to offer competitive pay as they sought to compete for talent,” Emily McCormick, vice president of editorial and research at Bank Director, said in a statement.
“Those remain important concerns, but incentive compensation has been thrust back into the limelight on the heels of recent bank failures, as regulators focus on aligning compensation and risk,” she said.
In a survey of 289 CEOs, senior executives and HR leaders of U.S. banks, nearly all respondents said pay continues to climb. About 97% said their bank increased employee pay in 2022, and 89% said executive compensation went up, adding up to a median increase of 5% in overall compensation expenses last year.
Hiring concerns continue to remain top of mind but may be easing slightly. About 56% said hiring was more difficult in 2022 than in 2021, as compared with 78% from the year before. At the same time, a large majority of respondents said a key obstacle to hiring new talent is an insufficient number of qualified applicants, followed by rising wages in their market and rising wages for key positions.
Succession planning is a growing concern, the survey found, with more than a quarter of respondents citing it as a top compensation-related challenge. In particular, bank leaders have less confidence in long-term succession plans than short-term plans related to a sudden departure or leave of absence.
Perhaps related to this, about a third of the survey respondents said their bank has offered retention bonuses to key staff to keep them on board and delay retirement. That’s up from 21% who said the same last year. In addition, 71% of respondents said their bank coaches mid-level talent to ready them for roles in the C-suite, and 55% turn to external career development programs.
Remote work appears to remain prominent as well. About 80% said their bank offers remote or hybrid options to some employees, and 52% offer these flexible options to executives.
As the banking industry faces ongoing turbulence, executives and HR leaders are looking for the best ways to retain talent — but also better manage work schedules. JPMorgan Chase, for instance, announced requirements for managing directors to be in the office every weekday to reinforce culture, advise employees and be available for impromptu meetings. Hybrid workers are also required to be in the office three days per week, and managers can include attendance in performance reviews.
The financial services sector will need to focus on high adaptability this year as well, according to a recent report. Some firms are redesigning jobs for the future, while others are employing automation tools to reduce front-office tasks. Many companies are also prioritizing retention, with Bank of America offering a training program to help workers boost their skills.
Among HR pros, hiring has taken a backseat to other priorities this year, sources told HR Dive. Retention, upskilling, compensation and benefits investments and employee experience have become more critical.