Many reports, documented and anecdotal, have shown the issue of skills gap across many industries (Lasonde, 2016; Dewan, 2015). Hence, employers scramble to recruit the best available talents to meet shortages and execute their strategic growth objectives. However, a new workforce, millennials, presents varying dynamics to companies. Globally, the financial services industry has witnessed a serious talent shortage (Frasier-Nelson, 2016). Frasier-Nelson (2016) shows that available data indicate that between 2007 and 2013, the financial services industry lost about 20% in MBA graduates.
Further, it has been observed that the talent shortage now stands at 70% relative to 59% observed in 2014 (Dewan, 2015), reflecting a growing shortage and a potential crisis of the industry. Today, many executives tend to acknowledge possible challenges associated with finding the best talents. Moreover, not many are convinced that they have the right talents to execute their strategic objectives. This implies that talent constraints could adversely affect the industry. As many financial firms strive for global presence to reach new markets and improve their practices to remain competitive, unlikely impacts of talent shortages remain unknown. This research paper seeks to explore how high rates of attrition associated with most millennials have affected strategic initiatives and growths in the financial services industry.
In the last seven years, the financial services industry has continued to record fewer MBA graduates and noted high rates of turnover among millennials, leading to talent shortages. Consequently, many executives find it hard to execute strategic initiatives and growth strategies.
The Asian Institute of Finance (AIF) Talent Barometer is appropriate for measuring talent shortages in the industry. A low score of less than 2.5 shows the ease of finding talents while an extreme score of more than 7.5 reflects greater challenges for employers to recruit right talents (Asian Institute of Finance, 2015, p. 10).
Strategic initiatives and growth strategies are defined by major activities planned to be achieved within a fiscal year, and they varied from one firm to another. They include technology deployment, regulatory and compliance, revenue growths, profitability, attaining economies of scale, developing robust training programs, merger and acquisition, and expansion among others.
For the past seven years, there have been fewer MBA graduates and high rates of turnover among millennials, leading to talent shortages that negatively affect the execution of strategic initiatives and growth rates in the financial services industry.
The problem of talent shortages in the financial services industry has not escaped the attention of practitioners and academics. In the recent past, Dewan (2015) observed that the lack of major skill sets was the main barrier inhibiting companies in the financial sector from further growth. This finding was linked to a poll involving 410 financial firms’ executives in 62 countries. It was established that most CEOs were specifically concerned about talent shortages in the industry (Dewan, 2015). Further, results indicated that the financial services industry faces stringent regulations and escalated competition for new talents. Such factors not only contributed to fierce competition for experienced financial services professionals but also led to increased demands for more diverse and multitalented types of employees. In this case, financial firms’ CEOs expressed their frustration on how to attract, train, and retain employees. Specifically, employees who possessed ‘hybrid capabilities’ (technology and financial services skills) were seen as rare in the industry.
It is observed that the banking sector has continued to experience intense competition for talents from the growing FinTech sector (Frasier-Nelson, 2016). Most practitioners have questioned the traditional bank employment model characterized by long hours, heavy regulations both within and from regulators, and working lunches at desks. Technologies have challenged this model and regulations by introducing new forms of financial services to meet payments, savings, and investments among other services. Therefore, the talent shortage is occasioned by an abrupt need for more employees in specific areas related to risk and compliance and the growing FinTech sector. This situation has led to an inevitable shortage of employees.
Additionally, the banking industry has experienced some negative publicity due to the past financial crisis, making it hard to attract highly skilled employees. Moreover, executives now focus on a broad range of skills in new employees relative to past hiring practices. Nevertheless, Lasonde (2016) pointed out that financial and insurance services still experience about 73% of talent shortages, and millennials have significantly contributed to this situation.
Schawbel (2013) referred to a report by PwC that showed that millennials only considered the financial services industry as a career-launching pad. This implies that relatively a small percentage (10%) intended to stay for the long-term in their current jobs, 42% were focused on any offers and 28% actively wanted a way out of the industry. As mentioned above, the traditional model of banking has subjected millennials to a rigid work environment than anticipated, and if they cannot deliver set targets, they move to a completely different industry. In 2014, the consulting firm, The Intelligence Group, conducted a study and revealed that millennials believed in the work-life balance (88%) and flexible work schedules (74%). These attributes, however, are lacking in the financial services industry, but they are common in technology firms. Moreover, they argue that other industries offer greater learning opportunities and less bureaucracy relative to banks, which are still stuck with old practices.
Additionally, Spencer and Muchnick (2015) observed that this new generation of employees introduced new problems to organizations. They argued that one major factor responsible for the high rate attrition among millennials is the flattening of organizations, which created few opportunities for career advancement and promotion for new employees, leaving millennials with limited career advancement options (Spencer & Muchnick, 2015).
As such, there is a need for corporations to transform internal management practices to adapt to the needs of millennial workers by redesigning management practices to reduce job dissatisfaction, absenteeism, and attrition. On this note, Özçelik, (2015) shows that organizations that want to enhance internal branding and reduce turnover must understand unique needs of millennials, such as flexible work hours, project diversity, fun workplaces, and improved learning (Özçelik, 2015). They prefer a work-life balance and privacy for family and personal lives. Organizations that offer these opportunities create loyal employees who are most likely to stay for longer periods and reduce high rates of attrition associated with millennials.
A survey conducted by PwC demonstrated how inadequate skills in the financial services industry was a serious threat to the growth of the industry (PwC, 2012). Many executives linked their failures to execute strategic initiatives to talent shortages in their firms. In most instances, they had to either cancel or postpone major strategic initiatives because the required talents were not available to implement them (PwC, 2012). Specifically, one in four executives claimed to be unable to execute a market opportunity or having to terminate or suspend a major strategic initiative due to skills shortage (PwC, 2012). In India, 41% of CEOs terminated or suspended strategic initiatives, 31% in China, and another 24% around the rest of the world (PwC, 2012).
Further, a study sponsored by the Project Management Institute (2013) showed that many firms did not either have the skills or failed to assign the right talents to execute a strategic initiative, resulting in project failures. Surprisingly, only 41% of the respondents deployed the right talents to execute high priority strategic initiatives (Project Management Institute, 2013), implying that the rest did not use the right talents, canceled, or delayed their initiatives. Additionally, the Asian Institute of Finance (2015) found that the talent shortage issue was now critical in the financial services industry. Hence, it was noted that shortages of skills affected organizational growth and capabilities to sustain a competitive edge (Asian Institute of Finance, 2015).
As observed, millennials are the latest group of talents to enter the labor force. However, the financial services industry, to some extent, has failed to align its business practices and millennials’ expectations, leading to high rates of attrition. As many studies have shown, millennials require different management styles based on their unique characteristics to ensure that they are recruited, retained, managed, and nurtured within the sector. Financial firms that would be able to attract and retain this new generation of the talented workforce would also find it easier to execute their long-term growth and strategic initiatives. Hence, many financial executives should focus on factors that lead to enhanced millennials’ attraction and retention.
While limited research has documented the effects of millennials’ high rates of attrition on key strategic initiatives and growth of the financial services industry, available evidence suggests that executives now terminate, delay, or poorly implement such strategies because of a lack of the required skills. The competition for talents within and across industries has left the financial services industry with a talent deficit. In this regard, firms must review their human resource management practices and industry practices that lead to high rates of attrition and correct them to retain the necessary skills for the execution of major strategic initiatives and long-term growth.
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Spencer, J., & Muchnick, M. (2015). Should we undo the flat organization: Accommodating needy millennial generation workers. European Journal of Contemporary Economics and Management, 2(2), 14-28.