Now especially, banks need to train and encourage their best employees if they want to increase their odds of retaining talent — yet they aren't doing it.
Consultants and bankers contend the financial crisis has exposed the shallowness of many bank training programs. Since the 1990s, the banking industry has steadily cut back on training budgets to trim costs, but until now, banks generally haven't felt the effects of lower-quality programs because the industry's profits were so high.
That has all changed, said Russell Davis, managing director of Corporate Executive Board's financial services practice. In an era of lower profitability, banks need to do a lot more to prepare their employees for new challenges.
"During the good times, banks tolerated a low return on training investments because they didn't need it — they were making money in spite of themselves," Davis said. "But the good days are over, and now they've got to compete using the talents of their people instead of relying on any one of the bubbles that kept the economy afloat."
A number of bankers acknowledge that they need to beef up their training programs. According to an American Bankers Association and Corporate Executive Board survey of 343 chief executives at banks across the country, banks on average spend about $650 per employee on training, only about two-thirds of the average amount spent by businesses in general.
Though high turnover rates among many rank-and-file employees have typically discouraged many banks from investing more in training, many bankers responding to the survey acknowledged they could at least do a better job of recognizing talented employees at all levels and then more actively nurture them for promotions.
"This isn't about just finding who is going to be the next CEO, but about identifying the productive employees who have the most potential to move up to the next higher level — and how management should be getting them ready for that," said Doug Adamson, executive vice president of ABA's Professional Development Group, which released the survey last week.
Indeed, according to the bankers surveyed, only 60% of their high performers have been told they were such, only 40% had a development plan, and only 29% had a plan in writing.
Adamson said if banks fail to articulate a clear career path for high performers, many of them will leave.
Training programs at banks can range from technical skills training such as sales or customer service, to executive development (including leadership training and performance management training), to compliance training — the largest single training expense for many banks as they face ever-increasing regulations, Adamson said.
Industry consultants point out other reasons for inadequate training at many institutions.
"Between mergers and acquisitions and reorganizations, there's a lot of people constantly being moved from one function to another," said Alan Mattai, a managing director at Novantas LLC, a New York consulting firm. "A lot of those people are not getting training they need — they're just being thrown into new positions, and it's a little like sink or swim."
Those who aspire to the corporate suite at banks often face an obstacle facing many other industries: reluctance on the part of senior management to groom successors, said Charles Wendel, the president of Financial Institutions Consulting Inc. in New York.
"In many cases, senior managers pull up the ladder behind them, because they want to keep their job, and so they don't do a good job mentoring the next generation of leaders," Wendel said.
Wendel said Wells Fargo & Co. and JPMorgan Chase & Co. are two firms that buck the trend.
Donna Meador, Wells' head of talent acquisition and development, said in an interview that the top brass at the $1.3 trillion-asset San Francisco company conducts a "talent review" to identify prospective successors in upper- and midtier levels across all businesses and has training programs to groom them.
"They'll be retiring someday, and they know they're going to need to leave the company in solid hands," which means their retirement investments in Wells will remain at healthy levels, she said.
According to the bankers' survey, respondents on average spend $657 per employee on training. According to a 2007 American Society for Training and Development study, the average training spent per employee was $1,040 across a wide range of sectors, including health care, technology, utilities and financial services.
Though banks' training budgets were expected to rise 5.5% in 2009, many respondents to the survey, which was conducted at the beginning of the year, have since trimmed their budgets because of the economy.
But the survey participants also expressed doubt about the effectiveness of their training programs, regardless of investment levels. Adamson said that the sentiment wasn't so much that the bankers lacked faith in their training programs, but rather that they did not have adequate ways to gauge the effectiveness.
In the survey, one in two banks was unable to adequately measure the impact of training.