By Christy Guzzetta
Finding the right executive for an important position in banking, and particularly in the specialized field of wealth management, can make or break an organization’s performance. Unfilled positions and failed new-hires can cost an organization money and momentum and undermine their status in the marketplace.
Meanwhile, the task of identifying top talent gets harder all the time. A declining number of mid-career workers, fewer younger workers entering the workforce and a rapid growth in workers above the age of 55 are all contributing to a talent gap. Furthermore, with the walls separating the various financial services firms tumbling down, banks, brokerage firms, insurance companies, money managers and others are all searching for the same talent.
Despite the high stakes, the ways in which most banks and wealth management providers seek top talent are often inadequate for this important challenge. Their in-house recruiters are often over-extended and over-matched. Their traditional executive search firms use methods that, almost by definition, exclude top performers. The result is that top positions often are filled with mediocre, ill-suited or under-achieving talent, if the position is even filled at all.
As banks and other wealth management providers seek to land top performers in an increasingly competitive talent market, they would do well to reconsider their traditional approaches to recruiting, question conventional executive search wisdom and look to new search tactics to locate their next leaders. They can start by asking themselves seven important questions that will help them find the best search firm for their needs.
First, however, it helps to know a little about what’s at stake.
Although banks are not alone in struggling with a talent gap, they do face special challenges. According to a new Deloitte & Touche study, banks in particular are struggling to attract new talent. Their talent pool is aging and their talent pipeline is diminishing, according to Deloitte.
The pressure is even more acute when one considers how important having top performers is to the bank president. Countless studies indicate that CEOs believe the people they hire are their most important asset and best source of competitive advantage. Fifteen years ago, when the chairman and CEO of a major wealth management provider’s new trust company asked me to recruit his top people, I asked who would be interviewing the candidates, expecting him to delegate the task. Instead, his response demonstrated just how critical he considered the task. “I’ll do the interviews,” he said. “That’s the most important part of my job.”
To ratchet up the pressure even more, consider what happens if you make a bad choice. When an organization recruits a candidate for a job for which he or she is ill-suited, the organization pays a hefty financial price. In cases of new executives transitioning into an organization, failure rates of 40 percent are common and the costs of these failures have been estimated as high as 20 times the salary and benefits when all associated costs are considered, according to Professor Michael Watkins, a leading authority on managerial and executive transitions and professor at INSEAD: The Business School for the World – a graduate business school with campuses all over the world.
In the face of this pressure, many banks and wealth management providers turn to their human resources departments to land the best candidate. However, as noted earlier, most HR departments are already over-burdened with the job of filling a seemingly infinite number of openings at lower levels of the organization. Additionally, among all the many disciplines that HR professionals must master – organizational development, employee health and safety, labor relations, workplace diversity, benefits and compensation and more – the science of recruiting is typically not one of them. Furthermore, HR professionals often lack the level of knowledge familiarity needed to “headhunt” a wealth management star. Strapped with too many responsibilities and usually staffed with too few people, the HR department understandably works to simply “fill the seat.” Selectivity, therefore, gives way to “filling the hole.”
On the other hand, some banks turn to recruiting firms in the hopes that their specialized services will uncover candidates unavailable to their in-house HR recruiters. But even here, certain behaviors and practices can undercut the identification and selection process, leaving the hiring organization with a sub-par candidate. That’s because traditional search firms use approaches that, by their nature, overlook highly qualified, successful candidates.
So, what should a bank do? Just as you expect a search firm to screen candidates well, you should screen search firms thoroughly. Make sure that you are confident their approach will yield a top performer to fill your critical, vacant position. Asking yourself five important questions about your search firm will help you determine if they’re up to the task.
1. Do they emphasize their databases when describing how they will find the best candidate? Search firms love to boast about their “robust” databases. The unstated truths: databases are full of resumes from people who simply want a new job, not necessarily those who are best-qualified for a new job. Moreover, these databases tend to be comprised of the same resumes from the same candidates that all executive search firms collect. They’re not unique. Lastly, databases quickly fall out-of-date due to the dynamic nature of the job market. As a result, companies that rely on databases often present you with people who didn’t make the cut in their last executive search. Someone else’s reject becomes your top candidate.
2. Are their searches research-driven? The best search firms don’t depend on existing resume files, rolodexes and databases. Nor do they conduct their searches by asking candidates who turn them down “Who else do you know?” – a question that rarely, if ever, delivers candidates of value. (After all, who is going to give up their most successful portfolio manager, their top earner or their best leader to a potential competitor?) Instead, the best “headhunters” start each search anew, exhaustively researching an entire geographic market in order to build a list of candidates who are already successfully leading organizations and demonstrating expertise in the area of need for the hiring organization. This process uncovers candidates missed by other search firms because it identifies top performers who may not be looking, are happy and successful in their current positions and who ordinarily escape scrutiny. The best search firms do not stop working when they present four or five candidates. They stop only when they have examined every candidate in a target market.
3. Do they look beyond a candidate’s pedigree? A degree from an elite university and a history of being hired by leading providers does not always guarantee success. A track record of high achievement on the job is a far better indicator of future performance than a school’s name on a diploma. Search firms must be savvy enough to look beyond appearances to determine true ability and accomplishment.
4. Do the candidates they uncover create success where they are now? In sports, there’s the curse of “potential” – the athlete who never lives up to his or her billing. In business, there’s a similar phenomenon to which many search firms are blind. In short, do they look for people who can potentially learn on the job or do they deliver people who are already demonstrating that they can do the job well?
5. Do they find the person who’s qualified or the person who’s available? Too often, search firms will present candidates who are available or simply eager to take on new challenges, rather than candidates who have demonstrated an ability to excel when faced with new challenges.
Recruiting and retaining top employees is an important objective of any company. For a bank or wealth management provider, with its requirements for specialized skill in the face of a limited talent pool, recruitment is an even bigger and more important challenge. At a time when the competition for top performers is intensifying, banks need to consider different search approaches than they have employed in the past.
Christy Guzzetta is president of New York City-based GES Services Inc. (www.gesservices.com), an executive search firm specializing in senior positions in personal trust, investment management, private banking and other wealth management disciplines nationwide.
Copyright 2007 The Warren Group