Earlier this year, Santa Cruz County Bank decided that its marketing department, which normally would concentrate on attracting new clients, would focus on attracting new employees.
The $1.7 billion-asset bank, nestled along the California central coast, was caught up in the so-called war for talent. It was competing not just with the state’s shifting landscape of larger banking rivals but also nearby technology behemoths.
The issue has become a headache for the banking industry facing demands for higher wages, looser requirements for office hours and a shrinking supply of workers to choose from, according to a recent survey of more than 100 banking professionals, conducted by Arizent and its fleet of publications, including American Banker.
But about one year into her tenure as CEO, Krista Snelling and other leaders at Santa Cruz County Bank realized they had a leg up. In the same way they would pitch their bank to prospective businesses or investors, they would need to sell their bank to prospective hires. With the help of the marketing department led by Mary Anne Carson, the bank recently announced a string of hires, from a new chief risk officer to a new relationship manager and deposit relationship manager, in the heart of the competitive Silicon Valley region.
“It is absolutely a war for talent,” Snelling said in an interview. “It’s tough to get people, and we’ve had a fair amount of success recently.”
The problem banks are grappling with
Seven in 10 banking leaders surveyed by Arizent said attracting key talent was a challenge, with 16% saying it was an “enormous challenge.” A similar number said it was a challenge retaining key talent and even keeping a large enough workforce to do work.
About 14% of bankers reported compensation being too low as the No. 1 reason for losing an employee, followed by 13% who predominantly cited a lack of advancement opportunities, according to the survey.
Big banks have been feeling the pinch on pay and reported record expenses in 2021 because of it. Bigger compensation and benefits packages pushed Goldman Sachs’s full-year operating expenses up 10% from 2020 to just shy of $32 billion for 2021. Citigroup’s operating expenses swelled by 9% to $48.1 billion last year.
JPMorgan Chase’s noninterest expenses increased last year by 7% to $71 billion. Bank of America reported its expenses rose 8% in 2021 to just shy of $60 billion. The attrition rate of employees at Bank of America, for instance, had fallen in half during the COVID-19 pandemic that started in 2020. But as the economy has opened up, that rate of employee turnover has climbed back to 2019 levels, CEO Brian Moynihan said in January at a panel hosted by Fortune.
The bank has resorted to offering $44,000 in salary to entry-level workers plus benefits, he said.
“The war for talent is out there,” Moynihan said.
Turnover at the largest banks has been massive. There were 111 corporate banker losses at the 21 biggest banks, and 99 hires to replace them last year, according to a recent report from Sheffield Haworth. Wells Fargo had the busiest revolving door, losing “almost 30 senior bankers in corporate banking and debt finance, three times as many as it hired, as it reorganized and right-sized its platform,” according to the report.
When it comes to struggles drawing in new talent, 21% of bankers surveyed by Arizent said the biggest obstacle was the fact salary offers were not high enough compared with the rest of the financial industry.
But beyond the failure to shell out higher pay, about 9% of bankers said the top reason their bank was having a hard time finding workers was that they were not making advancement tracks clear enough.
Snelling at Santa Cruz County Bank sought to address this concern early on.
“Once we had the attention of the employee, the biggest thing we did is we had our executive team, everybody was involved in the hiring of this higher-level position,” Snelling said. “And I think that the reason why we had the success in bringing on all these new people, was that we were very clear about articulating our vision for the bank, and our strategy going forward and defining to the individuals how it would be a mutually beneficial relationship.”
The process, in a way, resembles poaching a commercial banker at a rival bank for their client list. Snelling and her team make hires with an eye toward whether a new employee would bring along colleagues from their previous firm.
“When you’re talking about market leaders to be able to meet with the CEO and have the CEO say to them, ‘Look, this is where we’re headed, this is what we’re doing, this is the impact that you’ll have for your clients, it worked really well,’ ” Snelling said.
‘Hierarchical’ structure affects recruitment
Those in the world of talent acquisition, people like Carll Wilkinson, CEO of the executive search firm Smith & Wilkinson, say they’re confronting seismic changes in the U.S. workforce.
“As the economy is currently constructed,” Wilkinson said, “there are not enough people to go around.”
The Bureau of Labor Statistics projects the 2022 labor participation rate in the U.S. will slow for the 13th straight year to 61.6% — down from a high in the late 1990s of more than 67%. The main reason for this decline is a baby boomer population aging out of the workforce, with many retiring early during the pandemic.
Banking is one of the hardest-hit industries because of what Wilkinson calls its “hierarchical” structure, where top executives spend decades climbing the ranks while tech companies, for instance, routinely have chief executives in their 20s. Banks will be forced to look to younger talent for top roles, Wilkinson said.
“There are just simply not enough people of the typical age to fill senior management positions,” Wilkinson said. “And that I do think creates opportunities, actually, for millennials to find themselves in leadership positions faster than prior generations might have.”
Recruiting problems are not confined to the C-suite level. Wilkinson said the work-from-home culture shift brought on by the pandemic is making it harder for banks to find tellers and other customer-facing workers.
“If the value proposition of your organization, if you’re Dunkin’ Donuts, and you say, ‘Hey, listen, it’s 16 bucks an hour in person, inconvenient hours, but you get all the coffee you can drink.’ And that was once enough to capture a certain segment of the population. Now you’re competing with 22 bucks an hour, and it’s work from your pajamas out of your own house and no commute,” he said. “They’re realizing they don’t have a value proposition to play with anymore.”
According to the Arizent survey, 25% of bankers said they are falling behind in attracting front-line workers, including tellers. Despite the trend of consolidating physical branches in lieu of new suites of digital products, some banks are still relying on these front-end workers for their expansion plans in the rush for scale.
One of those is Cullen/Frost Bankers in San Antonio, which is expanding rapidly across Texas.
The first two of 28 new branches planned for the Dallas area opened this year and are already exceeding their goals for loans, deposits and number of customers, with a third branch in the Dallas area slated to open in the second quarter. Meanwhile, the $51.3 billion-asset bank continues to grow in Houston and could be eyeing opportunities in Austin next year and beyond.
“It’s a war for talent and everybody who’s in a business that employs people is in that war. Whether they know it or not, they’re fighting that war,” said Philip Green, Cullen/Frost’s CEO.
So far, the parent company of Frost Bank is winning that war. But it has come at a cost — Cullen/Frost’s first-quarter noninterest expenses alone increased 13.6% from a year earlier.
“I’ve been surprised how successful we’ve been at recruiting bankers who want to be a part of this expansion effort,” Green said. “And so I will tell you that in general, we’re not having problems finding people who want to be a part of it. And I think part of it is because people like being a part of a company that’s growing, a company that has been successful, a company that is winning, and I think that tends to be a draw. So hopefully, it will continue to be over time and will continue to be able to find talent. We’ll see.”
Green echoed the pitch that Snelling at Santa Cruz County Bank is trying to make, by focusing on being the “kind of company they’d like to spend their life working for,” he said.
Sixty-two percent of banks said that in their efforts to lure new talent they “focus on our company’s mission and appeal to prospective employees based on our values,” according to the Arizent survey.
While compensation costs could ease when inflation begins to slow and more banks accept they have to offer more flexible options on hours, the war for talent may not end anytime soon, Wilkinson said.
That means banks will have to continue to adjust for the foreseeable future to the reality of a thinner talent pool.
“This structural worker deficit has likely a decade to go,” Wilkinson said.
