Many graduates considering their future career have traditionally been attracted to the “work hard, retire early” image that banking appeared to represent.
Pore over spreadsheets late into the night, work 16-hour days and, if you believe in outdated and inaccurate stereotypes, drive off into the sunset to retire at 40.
The problem is that banking in 21st-century Britain is a very different animal and financial institutions are all wrestling with a growing problem: how can we attract future leaders and top executives from a dwindling pool of young talent?
The next generation of employees is quite frankly starting to question the traditional institutional culture of the banking world and applying a different set of criteria when considering decades of work ahead. Increasingly, they are able to choose from other careers that hold the same prestige and earning potential.
Top talent is being lost to America’s Silicon Valley and London’s growing financial technology industry, where people wear jeans to work, enjoy relatively normal hours and still receive an attractive salary. They say: “Well, if they can do that, why do I have to stay in the office wearing a suit until 4am?”
Stock prices may be back on the rise, banks no longer in existential-crisis mode and institutional guidelines doing more to ensure the well-being of junior staff. Yet the banking industry has lost its allure.
It is not just a UK problem. The search for talent is global and the example of Harvard Business School presents a sobering insight into the issue, with the percentage of its graduates entering investment banking, sales or trading dropping to 5% last year from 12% in 2006. Those entering technology businesses almost tripled to 18% during the same period.
At the same time, there is a bottleneck at the top of the industry that in some circumstances can delay the career prospects of ambitious younger staff.
More and more executives, faced with caps on pay, are delaying their exit and, with the eradication of the default retirement age in the UK, it means there is often a reluctance on the part of employers to tell top staff that the time is right to depart. Equally compelling, I believe, is the argument that bankers simply don’t want to leave behind a fraternity that they’ve worked so hard to join.
The majority of people in the finance industry expect to retire after the age of 50 and 41% expect to work on past 55. This emerging pattern of corporate demographics has been visible for more than a decade now. Some financial organisations have become top heavy while the number of Generation X youngsters coming in has been falling alarmingly quickly, a problem in part explained by the freeze on recruitment prevalent in the 1990s and early 2000s.
So what is the answer? It involves, I believe, a delicate balancing act as it is imperative companies recognise the intellectual capital of their senior managers and ensure knowledge and skills are successfully transferred to the younger generation to sustain continuity of performance, productivity and competitive advantage.
But any logjam within the upper echelons of the corporate hierarchy must at some stage be addressed. It is delaying, and in some cases preventing, the expected upward advancement of vice presidents to managing directors and from MDs to board members.
A consortium of promotion-worthy junior-level employees, who aren’t being moved up the ranks as a result, are creating a potential talent gap that could leave banks vulnerable. And the trickle-down effect means some graduates now perceive banking as a business lacking the dynamism of high-tech alternatives.
For a banking industry that is, to all intents and purposes, the engine room of UK Plc, it is crucial that these issues at the top and the bottom are addressed. Otherwise even more young talent will turn its face away and we will all be poorer as a result.
As Mark Twain put it: “The secret of getting ahead is getting started.” We need to ensure that more talented youngsters start by seeing banking as the career choice for them.
Martin Armstrong is chairman of Armstrong International, a financial services executive search firm. He advises corporations on cultural and talent-related issues and is a career adviser to many leading chief executives and politicians