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The financial services industry is facing an unprecedented paradigm shift. Digital disruption, stiffer regulations, and customer-driven service options are influencing the way business is conducted.
Firms that are slow to adapt to these influences, and the changing demands of the workforce that will deliver the new services, could suffer loss of market share and potential widespread employee disengagement.
Changing workforce demographics
More than 60% of the workforce in the United States is age 40 or older. Millennials account for a large proportion of the remainder of the workforce. Not surprisingly, it’s expected that over the next five years those numbers will reverse as Millennials become the dominant workforce demographic. As workforce demographics change, opportunity lies in embracing new business models and in re-evaluating the way employees contribute.
Financial Services would benefit from assessing the roles each segment of the workforce plays in this dynamic environment. Additionally, each generation should be helped to understand and accommodate the generational preferences and strengths of the others. This will be especially vital in terms of creating a successful knowledge transfer system as employees retire. Firms must also take into account that if there isn’t a strong system in place to recruit and retain Millennials as this turnover transpires, they will be at risk for a major skills gap.
Present statistics on the Millennial generation indicate it is the fastest growing population to date; approximately 76 million people in the United States alone are from this age group. In addition, by 2020, Millennials are forecasted to comprise nearly half the global workforce. Attracting and retaining the younger generation will be crucial for future success. This is especially critical due to the fact that less than 10% of Millennial college graduates are interested in making the banking sector a career path and less than 2% see the insurance sector as a viable option. These statistics are already low and risk declining even further unless Financial Services does something to stem the tide.
Meeting Millennials on their terms
Like other generations, Millennials have specific characteristics that firms will need to take into account when it comes to attracting and retaining this generation through applying new human resources models. In short, talent management will require a brand new focus and approach. Options ranging from benefits packages that cater more to personal needs to creating bite-size work-flows have been suggested as standard requirements when it comes to recruiting Millennials as agile members of the Financial Services Workforces. Work-life integration and flexibility as well as a career network versus a career ladder is often a Millennial expectation. From a Millennial perspective, hierarchy and seniority roles in the workplace should be replaced by equal recognition and a level playing field for everyone based on the skills and talent they bring to the table, not the number of years they’ve been in the workforce.
Just as important will be management’s ability to embrace an outsourced, external or even robotic workforce. This, too, is a critical paradigm shift. It will be vital for organisations to put into place an organisational governance system that is strategically able to determine:
- Which skill sets should be procured from internal workers and which tasks, and projects should be delegated to an extended workforce
- How the role of human resources will change to adapt to these diverse groups
- If evolving career path development for both segments will be feasible
Changing regulations and changing technology
Most roles are expected to make a major shift to keep pace with the changing workforce. This is in part due to increased regulations that are standardising how financial services professionals carry out their work.
Another consideration that will impact FS is the fact that as technology advances, more workers will have to interact with more machines. Employees will need to develop new skills and abilities in order for this human-artificial intelligence (AI) interface to be successful. In fact, a recent Accenture survey revealed that in the past two years alone, approximately 70% of corporate executives have significantly increased their investment in AI. This confirms that intelligent enterprises are the coming wave and that human capital leaders must act to meet this demand.
No one can deny the massive upheaval taking place in the financial services industry. A plethora of new technologies will only continue to challenge banks and other financial institutions. How management and workers will effectively tackle and overcome these shifts in a way that will make new business models profitable is yet to be seen. Are Millennials the answer? In my next post, I’ll explore how this digitally-oriented generation is shaping the future.
Read more in Workforce of the Future: Dealing with Business Change and the Millennial Challenge.