The COVID-19 pandemic has produced mixed reviews from the financial services industry over the effectiveness of remote work.
Despite strong performance across the banking and asset management sectors, some industry leaders believe that remote work has taken a toll on workforce productivity via a lack of supervision, in-person collaboration and team co-location. Others disagree.
From an employee perspective, however, remote work has generally resulted in increased flexibility, a benefit many would like to see continue.
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Given this reality, financial institutions need to adapt their performance management models to reflect a remote environment and address the pandemic’s effects on their workforce.
These adaptations consist of: concentrating on what matters now; adopting human-centered practices for performance insights and feedback; investing in people’s growth and development; and refreshing rewards strategies.
Making these adjustments will help financial institutions optimize workforce productivity and improve their chances of attracting and retaining top talent.
A renewed focus on what matters now
Like most industries, ways of working in financial services were disrupted by the pandemic — and it is only natural that what constitutes “good” performance in a new, virtual working environment has changed. As a result, several financial services companies are placing renewed emphasis on digital adoption, diversity and inclusion, and resilience measures within the performance scorecard.
Digital measures
The pandemic has highlighted the deep dependency that we have on technology and digital tools. Instead of reading or asserting body language in the room, workers meet virtually, taking cues from others via video screen if cameras are turned on. Instead of catching the supervisor for a quick connect in the hallway, questions are resolved by instant message or text — or in some cases, one more videoconference. Instead of meeting with a new private-wealth client to enable onboarding, a virtual process is followed. Instead of enacting a bank transaction in the branch or contact center, customers are shown how to execute their transaction via online banking, mobile app or chatbot.
Because of these changes, the ability to engage digitally has become a nonnegotiable skill for employees to have.
This has led to an increased interest in digital adoption metrics within the performance scorecards seen in financial services. For example, one retail banking environment pays branch employees quarterly incentives for performing online simulations for select tasks with customers. Other banks are disclosing digital adoption metrics in public materials such as annual reports to drive accountability for digital engagement.
Diversity, equity and inclusion (DEI)
Several studies have highlighted that women have left the financial services workforce in numbers over the course of the pandemic. Other groups are at risk of attrition, such as those with health or religious preclusions to the vaccination, or caretakers of children who are not yet vaccine-eligible.
To limit the pandemic-driven attrition of diverse talent, companies are bolstering their investments in DEI programs. Strategies vary from imposing diversity targets in hiring, committing to pay transparency, and building a pipeline of diverse C-suite and CEO candidates, to boosting the supply of diverse talent to the sector via educational partnerships. As a result, DEI measures are expected to grow in popularity within the financial services performance scorecard as boards seek greater accountability for an increasingly urgent environmental, social and governance (ESG) agenda.
Resilience
Risk metrics remain foundational on the scorecard and will likely continue to remain for years to come given the financial services regulatory environment. However, the pandemic has exposed a new kind of business continuity risk. Looking ahead, metrics linked to resilience may surface with more prominence as financial institutions prepare for disruptive events — be they pandemic-, climate-, political- or market-related.
Put the human at the center of feedback, coaching and career development
There is ample research that employees benefit from feedback and coaching, especially feedback that flows easily with the rhythm of the business, reinforces individual strengths and inspires growth. In a pre-pandemic environment, this was easier when teams, peers and managers shared a common space that enabled the instant exchange of tips and insights. Now, instead of sitting at neighboring desks, or walking to lunch for a post-meeting debrief, feedback is commonly reserved for structured occasions and delivered through virtual channels (e.g., a performance review, a coaching call).
This is a shame. To provide employees with the level of feedback that they want and deserve, reinforcing an “in-the-moment” feedback culture, particularly for remote workers, is required. Creating a healthy culture of feedback is still in reach as we remain physically distanced, and that can be achieved through a variety of intentional practices for teams, peers and leaders. Additionally, new digital tools can support and reinforce a positive feedback culture to build trust and strengthen connections.
With the goal of providing growth opportunities to diverse talent, particularly considering the competition for diverse talent across the sector, there has been an uptick in diversity-centric coaching programs deployed in some financial services companies — particularly for women and underrepresented minorities in the front office.
Further, institutions are investing in career paths and rotational experiences to facilitate enhanced career mobility for some at-risk job families, such as coders and developers, and risk and control specialists.
Coaching has taken on a new meaning in the pandemic as many workers have felt overworked and isolated through quarantine restrictions. Empathetic leadership has never been so urgent. While, historically, coaching has been focused on helping workers navigate their careers and optimizing individual performance, coaching for resilience is increasingly popular. To support this new definition, several financial institutions have invested in inclusive and empathetic leadership programs, as well as resilience resources, such as meditation apps, counseling services and other benefits to cultivate physical, financial and mental wellness in the workplace.
Refresh rewards strategies
Compensation will continue to be an important element of the employee value proposition in financial services.
Over the course of the pandemic, we’ve observed some firms differentiating the talent brand via commitments to hybrid work and flexibility. In reverse, some firms have chosen a different strategy, planning to bring the majority of workers back to the office at the safest moment and possibly competing on pay over flexibility in the escalating draw for talent.
Regardless of strategy, we expect that financial institutions will continue to see an uptick in compensation expense, at least in the short term, in the form of merit- and performance-based funding, and retention funding, given the strong year-to-date performance across the sector. As long as there continues to be increased consumer spending, improved credit quality, rising levels of savings and investments, and an active IPO and deals market, the pay-for-performance philosophy that is seen in some of the world’s largest financial institutions is likely to prosper.
Despite this, the distribution of total rewards budgets may look different in a hybrid working world. Given the market urgency around ESG, it is possible that pay equity and transparency programs will continue and that firms will increasingly diversify the benefits package offered to workers to account for the diverse needs of employee segments. Such diversification includes, among others, childcare and wellness benefits, and flexibility programs, like vacation purchases and sabbatical initiatives.
Where to now? Five tips for reimagining performance management with the employee experience at the center:
- Capture critical behaviors and performance expectations, such as DEI, digital adoption and business resilience, within the financial services scorecard.
- Enable a culture of real-time, multidirectional feedback for all employees, both on-site and remote — physical separation should not stand in the way.
- Identify pockets where a high degree of flight risk exists and overinvest in career development for these job families (e.g., coders and developers, risk and control specialists, contact center agents, traders and investment banking analysts).
- Acknowledge that there is a competitive pay market across the sector that will likely continue (at least in the short term). Recognize that for some financial institutions, pay competition may be offset by authentic commitments to hybrid work and flexibility.
- Factor diversity considerations into the way that performance management is innovated; as the workforce diversifies, so too do expectations from performance management, and achieving a nimble model that responds to these competing demands will help to lay a sustainable, long-term foundation.
The views expressed by the authors are not necessarily those of Ernst & Young LLP or other members of the global EY organization.
