Today, between 60 and 65 percent of employees across the workforce are older than 40, with millennials accounting for a majority of the remainder.[i] In three to five years, those percentages will flip. When considered alongside the declining popularity of investment banking among millennials, it’s clear that investment banks face a major hurdle. Accenture research shows that among MBA graduates from the University of Pennsylvania and Columbia University—two top US business schools with a strong finance focus—investment banking as a career choice fell by nearly 50 percent between 2008 and 2014. Here’s why.
A new kind of talent
Salary and benefits aside, 2015 graduates value interesting work (39 percent), flexible work hours (37 percent) and opportunities for rapid advancement (34 percent).[ii] Understanding these motivations, and using them to develop a corporate culture and employment opportunities that will appeal to this newly empowered group, will be a critical shift for the investment banking industry.
A new kind of skill set
Not only are people changing, but so is technology and the skill set it requires. As trading activity becomes increasingly automated and the popularity of self-service trading grows, the need for specialized traders will decline. According to Accenture research, over the past few years, 43 percent of brokers have shrunk their sales trading workforce, using technology to maintain the same—or similar—trading volumes. Moreover, 73 percent of buy-side participants are now using more and more trading cost analysis and algorithms to direct trades.
As the line between front office and IT office blurs, demand for a new kind of skill set is emerging—e.g. one that combines soft skills like personal interaction with hard skills in areas such as analytics and alternative messaging protocols.
A new kind of talent management
When it comes to human resources, investment banks face four main challenges:
- Recruiting the right people with the right expectations
- Developing employee skills and capabilities within the first several years
- Fostering a supportive culture that values and promotes work-life integration, social responsibility and opportunities for development
- Providing career opportunities that are interesting and challenging
As the workforce continues to evolve, so too must the investment banking industry’s approach to talent management—and business more generally. Specifically, organizations need to look closely at four key areas:
- Workforce recruitment and retention: Millennials are drawn to companies that can offer a variety of professional experiences (think bite-size projects with multiple “clients”), access to a strong career network and flexible benefit packages.
- Skills validation: Organizations need a process for outlining required skills and validating individual skill sets in a flexible, transparent and ongoing way (think open-sourced crowdsourcing). Given the pace of change in investment banking and the consequent need for continuous learning, skills evaluation has become a “living process” that extends well beyond key junctures, such as hiring and promotion.
- Extended workforce development: As investment banks become increasingly dependent on an increasingly skilled extended workforce, there is growing need for training and career advancement opportunities for these resources.
- Human capital analytics: Determining which data to capture and how to use that data to effectively manage employees in a way that delivers optimal returns are two important considerations for organizations in this data-centric age.
The changing workforce, including the rise of millennials, presents both challenges and opportunities for investment banks. By adopting a focused—but flexible—workforce strategy that creates space for individual employees to carve out their own career paths, organizations can attract and retain the workers they want and need.
For more on talent management and the workforce of the future, read:
[i] The 2015 Millennial Majority Workforce. Bureau of Labor Statistics Employment Projections