With bonus season fast approaching, banks will soon need to brace for the inevitable churn of talent that occurs once those bonus checks are cashed.

With the damage from the financial crisis not yet in the rearview mirror for the industry, universal banks are facing a looming and altogether new crisis: the collapse of the industry's employee value proposition. In the simplest terms, an EVP defines what employers want and expect from employees and what they will provide in return.  

Prior to the financial crisis, a universal bank's EVP was simple: Between your late 20s and late 40s, work all-consuming hours on complex financial transactions and become wealthy beyond the dreams of Croesus.  The regulatory changes postcrisis – aimed at curbing risk-taking, limiting complex financial transactions and dampening compensation – have changed the landscape dramatically both in terms of how banks compete and the economic proposition they can offer employees.  Based on data from our firm's surveys, the total income that could be earned precrisis over an investment banker's 20-year career may take as long as 30 years or more to replicate today. 

Are the pay regulations here to stay? Are lower pay levels permanent? The answer is unclear. Yet in a market where the company with the best talent wins, banks are ill-advised to "wait and see" if things return to the way they were pre-crisis.  Banks must now redefine their EVP to continue to attract the best and brightest to the industry since the historical draw is now in jeopardy.

Prospective employees have already begun to reframe their expectations about what draws them to the financial sector.  A recent study by our firm shows the number two reason employees would quit their current employer or be attracted to another organization is not the chance at a large bonus, but rather a lack of career advancement opportunities. The traditional path in banking is one of increasing specialization, and many banks today are not equipped to provide a broad view of careers.  Interestingly, when it comes to compensation, base salary is the number one driver of both attraction and retention. Bonuses rank sixth for retention and are not even in the top ten for attraction.

In our view, the emerging winners in this new era of banking will be those companies who successfully formulate a new message to existing and prospective employees about their EVP. They will do so by focusing on five key areas:

Employer Brand. Beyond confirming that they are ethical and have strong risk management policies and cultures, successful banks will frame a "noble purpose" for its employees. To do so requires a closer look at how labor market competitors have defined such a purpose.  For instance, banks may consider corporate America ("Come run a business"), consulting ("Come help companies run better") and high-technology ("Come change the world"). We have seen some banks take a first step by emphasizing areas such as corporate social responsibility and economic development as part of their employment message.

Careers. Career development in financial services has long been one of increasing technical specialization in a given area or "vertical." The new approach will also need to offer a "horizontal" view of careers, be it cross-functional or across multiple business areas. There will need to be a bias toward promoting and developing from within versus hiring top guns from the outside (the former reinforces a strong culture and risk management).

Rewards. All aspects of rewards will need to be emphasized, as the historical, one-dimensional approach of having a bonus plan as the sum total of rewards is not sustainable. Successful companies will take a total reward perspective, one that includes elements such a base salary progression, special or "culture defining" programs that address work-life and work environment issues, as well as customized benefit programs that are attractive to different employee segments.

Training and Development. Banks will need to offer innovative training programs to promote both "vertical" and "horizontal" career paths. These programs will need to focus not only on adding technical depth, but teaching new skills and management techniques.

Talent and Performance Management. Development and performance conversations have historically been cursory (some conducted in cab rides or airport lounges), lacking the depth and attention required to help shape and influence one's career. Banks need to develop strong linkages between their evolving career paths, reward structures, training/development programs and talent/performance management.  To achieve this end will no doubt require manager training in order to ensure structure, rigorous, consistent performance processes and messages are being delivered.

To be sure, the new banking EVP will continue to include significant bonuses, but it will also acknowledge that other elements, often emphasized in nonfinancial services industries, are more important in order to attract and retain the best.

Christopher Fabro and Peter Gundy are managing directors at Towers Watson. Fabro leads the company's Global Financial Services industry group within its Talent & Rewards segment. Gundy is responsible for the company's Rewards, Talent Management and Communication and Change Management practices in the Americas.