When it comes to retaining top-quality employees, money is not everything.

Banks and other financial services companies certainly rely on increasing salaries and benefits and offering stock options to hang on to senior executives, middle managers, and front-line employees, according to a recent study by search firm Manchester Partners International.

But other, far more successful ways to persuade workers to stay are often neglected, said John L.E. Seidler, executive vice president at Manchester.

High on Mr. Seidler's list is mentoring employees, which engenders a sense of value.

"Not only does this method strengthen management, but it sends a message that the company values its employees and is willing to develop them," said Mr. Seidler, whose firm did the survey. "It tells them that while they can't be guaranteed lifetime employment, they are guaranteed lifetime employability."

Manchester Partners, based in Bala Cynwyd, Pa., surveyed 56 banks, as well as 322 companies from other industries, about their retention practices.

The survey found that 57% of financial services companies said employee turnover had risen during the last 12 months. The trend is costing banks and thrifts significant amounts.

Thirty-seven percent of the financial services companies contacted said it costs $5,000 to $10,000 to replace a departed employee. Twenty-seven percent said it costs as much as $5,000, and 12% said finding and training a new employee costs more than $20,000.

Though management training can be costly, it should be viewed as an investment in keeping good employees, said Mr. Seidler.

However, these programs often become the first victim of cost-cutting campaigns.

"When you are in the midst of mergers and reengineering, training is often seen as discretionary spending and is easily cut," said Paul E. Fearer, executive vice president and director of human resources at Union Bank of California in San Francisco, which is majority-owned by Bank of Tokyo-Mitsubishi Ltd.

"But the major unseen cost is how that cut is perceived by employees," he added.

Mr. Fearer said $31 billion-asset Union Bank relies on several modern incentives. Letting employees work from home has been a "powerful way to enhance employee retention," he said.

However, he noted that banks should not ignore the value of more traditional methods that are not compensation-related. Recognizing long service and putting on award luncheons are still important, he said.

Proper orientation also is extremely important in retaining senior-level executives and ensuring their success, Mr. Seidler said. In fact, across a wide band of industries, 40% of newly hired managers fail within the first year, he said. Only 13% of the financial services firms surveyed saw improved orientation as a route to retaining top-level executives.

"So often organizations will hire people based solely on qualifications and expect them to perform quickly without orientation," Mr. Seidler said. "Companies need to take the time up-front to prepare people better for their positions."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.