Leadership/#Disrupted Part 2: Changing how to analyze and develop talent
DEICulture RiskLeadershipFinancial ServicesBoard and CEO AdvisoryDiversity, Equity, and Inclusion Advisory
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May 20, 2021
8 min read
DEICulture RiskLeadershipFinancial ServicesBoard and CEO AdvisoryDiversity, Equity, and Inclusion Advisory
Banking leaders tend to be execution specialists with a great level to detail, but sometimes do so at the expense of innovation and inclusivity.
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This paper is the second of a four-part series that explores the growing importance of innovative and inclusive leadership in banking. It is based on a study of over 6,000 senior executives carried out over the past three years. By exploring the underlying competencies and behaviors, we look at how banks can best adapt their approach to developing senior executives. 

Part 1. Key findings 
Part 2. Changing how to analyze and develop talent 
Part 3. A new lens for identifying talent 
Part 4. Mobility and cross-fertilization 

Dataset composition 
Total: 6,111 executives 
Gender: 4,417 male and 1,496 female executives 
Leaders: 626 CEOs, 1,744 CxOs 
Regions: 2,526 EMEA, 2,437 Americas, 940 Asia Pacific 
Sector: 1,386 Financial Services, including 689 Banking   

Building leaders’ innovation muscles 

As we explored in part one, the benchmark data suggests that many banks lack innovation-oriented competencies and may struggle with new idea generation versus other sectors.   

According to the data, banking leaders tend to be more cautious, less learning oriented and inquisitive, and lack boldness in leadership compared to leaders in other sectors. This is reflective of the fact that the post-financial crisis environment saw increased regulatory, risk compliance and cost pressures that necessitated leaders with these competencies. 

Social and environmental pressures and digital disruption are quickly changing this dynamic. The need to operate in a socially and environmentally responsible way still benefits from reliable and risk-conscious leaders, and banks have an innate advantage here. The need to digitally transform operations and deliver customer-centric innovations also requires leaders who are more challenging of the status quo, and these can be a rarer commodity in banking. 

As banks adapt to these new challenges, they are likely to see a range of positive impacts across their verticals, including fostering more creative and innovative insights in investment and wholesale banking, and speeding up digital and customer-oriented structural changes in consumer banking. 

Recommended solutions

1. Change how you assess and identify talent 
Applying a different lens to hiring and promotion criteria can help organizations identify and fast-track individuals with an appetite for change and a focus on learning, creating a better balance to leadership teams. Robust benchmarks against best-in-class leadership data can allow for more accurate definition and measurement of these competencies. 

2. Provide development support for existing leaders 
Focus on skill building, development programs, mentorship and coaching across both innovative and inclusive leadership competencies to develop their disruptive and entrepreneurial muscles. This can be further improved through a “portfolio” approach for work, dedicating a small percentage of leaders’ time to innovative transformation projects with longer time frames. 

3. Source perspectives from outside the organization 
Escaping a narrow orientation can be a challenge, as there will be a tendency to recycle the existing playbook. To overcome this, firms need a thoughtful approach to bringing in more diverse perspectives. Building connectivity outside of both the organization and the sector expands horizons by introducing new ideas and new leaders. Where banks are not sufficiently inclusive, there may be a risk of tissue rejection for leaders coming in from other industries – and we explore how to avoid this in more detail later in the series.  

Applying inherent strengths

We see stronger execution orientation in banks than in other sectors. The high degree of pragmatism and low impulsiveness are indicative of a culture of consistency and reliability.

Leadership Disrupted Part 2_applying inherent strengths.jpg

The metrics demonstrate that banking executives are execution specialists with an exceptional level of attention to detail. We see this in their talent sourcing priorities, which focus on bringing in experienced hands from other banks or management consulting firms - competent and dependable experts who are unlikely to make mistakes, even under extreme pressure. 

Given this orientation, banks are likely to be more effective than other sectors at implementing new ideas and organizational transformation once they have overcome the inertia from internal barriers to change. 

One pitfall they need to avoid is over-indexing on the hiring and promoting of execution specialists at the expense of innovative and inclusive leaders.

Recommended solutions

1. Align leaders with complementary skillsets to drive commercially successful innovation 
Position commercially-minded individuals to work in close collaboration with disruptive innovators, to maintain a focus on the return on investment and ensure ideas move effectively from concept to application. 

2. Find a balance through developmental goals 
While the focus on consistency and execution brings results, attention must be paid to the strengths not becoming ‘overused’ at the expense of change, flexibility and responsiveness to emerging client needs. 

3. Adapt your hiring and succession criteria 
Emphasize different types of skills, experiences and backgrounds in criteria for new hires and leadership succession exercises. This incrementally re-shapes leadership teams into more versatile groups that can better address emerging social, environmental and digital issues.

Overcoming cultural aversion to change

As well as building the innovation capabilities of individual executives, banks will also want to foster a broader culture that is more accepting of new ideas and diverse perspectives.

Leadership Disrupted Part 2_overcoming cultural aversion to change.jpg

Bank cultures have adapted to an environment of heightened regulatory compliance and risk controls, with executives under almost constant surveillance. The benchmark data reinforces this, finding that many banking leaders are oriented towards change-averse behaviors that “harvest” more than create. On average, they tend to gather with what they have, to fortify and protect rather than adapt and evolve. 

These checks and balances help to minimize organizational and systemic risks, and encourage strategies based on models of sustainable, long-term growth. At the same time, they can result in more bureaucratic cultures that are less fertile grounds for new ideas and diverse styles to flourish. 

By learning how to find a balance between the established compliance-oriented culture and a more inclusive innovation-oriented one, banks can improve how they meet evolving customer needs and preferences while remaining true to their core mandates.

Recommended solutions

1. Take a targeted approach 
Given firmwide culture change can be a slow process, mapping and prioritizing specific areas where a more disruptive approach is required can deliver a more immediate impact. 

2. Build a tolerance for change 
To accelerate a shift in mindset, banks can recalibrate how they identify forward thinking leaders by prioritizing metrics that are aligned with change agency and investing in diverse slates of future senior executives at C-1 and C-2 levels. 

Complementary to this, think about how systems and processes can be evolved to reward and incentivize these behaviors. 

3. Enhance leadership development plans 
The most effective development programs incorporate real live leadership issues and challenges, and are offered to different levels of leaders. Done well, they can help to create visible role models across the organization who are willing to take risks and champion change. 

Appendix: Methodology

Changing how we measure potential 

The methodology was developed by our in-house psychologists in partnership with Hogan Assessments. It is based on studies of “best-in-class” senior leaders, mapped to a 95 percent confidence interval, and synthetically validated against a dataset of 5.5 million executives.

Innovation LeadershipInclusive leadership
  • Innovative
  • Disruptive
  • Bold in leadership
  • Socially adept
  • Determined

Intra-personal

  • Identifying motivations, privilege & acumen
  • Reading situations/challenges
  • Reflecting with empathy
  • Holding self accountable

Inter-personal

  • Leveraging differences to win
  • Fostering open dialogue
  • Developing with feedback
  • Holding others accountable

These are derived from weighted aggregates of twenty eight psychometrics, normalized against our global senior executive assessment dataset:

  • Adjustment
  • Aesthetics
  • Affiliation
  • Altruistic
  • Ambition
  • Bold
  • Commerce
  • Compliance
  • Diligent
  • Dutiful
  • Excitable
  • Grounded
  • Hedonism
  • Inquisitive
  • Interpersonal Sensitivity
  • Learning Approach
  • Leisurely
  • Power
  • Prudence
  • Recognition
  • Reserved
  • Restrained
  • Risk-tolerant
  • Science
  • Security
  • Skeptical
  • Sociability

Please feel free to contact us to discuss any of these topics further.