Leadership in Financial Institutions

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					Leadership in Financial Institutions

Executive Summary

This report is the result of a study conducted by enb consulting and is based on
interviews with over 25 corporate leaders and senior managers in 16 global
organisations. It provides a snapshot of leadership and management
development in the City today and explores the background to some of the
unique challenges being faced and how they are being addressed.

Financial institutions, struggling to develop and sustain competitive advantage in
an increasingly challenging business environment, are now beginning to invest
more time and money in leadership and management development than at any
time in the past. Increasingly, organisations are placing importance on senior
managers developing a broader skills set beyond the technical competences that
were, often singly, the key to success in the past. As an industry, however, the
Financial Sector in general and investment and wholesale banks in particular, still
have some ground to make up on other sectors.

Those interviewed suggest that the impetus for this change in attitudes is based
on a combination of the following factors:

      The focus for training in investment and wholesale banks in the past has
       inevitably been on technical skills, with leadership and management
       development interventions too often disparate and isolated. Nearly all
       interviewees commented that in financial institutions there has been too
       much focus on developing functional leaders and technical specialists at
       the expense of strategic leaders. This has meant that too often they are
       not equipped or prepared for broader executive responsibilities and
       management roles.

      The financial sector itself is changing as the market matures and
       competition for market share increases. More organisations are placing
       greater importance on „talent management‟ as a key differentiator and a
       means of gaining and sustaining competitive advantage. This is matched
       by the demands of those already in the industry, or intent on joining, who
       now require career and personal development alongside financial

      The pace of change and the demands on the leaders of the future in an
       increasingly complex environment will require people with a broader set of
       competences in the 21st Century. In addition to the changing competitive
       environment, some of the issues seen by interviewees as dictating the
       changes on leadership in financial institutions are:
          o increased regulation
          o corporate governance
          o the exponential pace of change in technology
          o corporate social responsibility
          o globalisation and dealing with diversity.

In the past, responses to management and leadership development in financial
institutions have rarely been part of a co-ordinated programme that matches
individual and organisational objectives. There has been a preference for „stand-
alone‟ events, such as attendance at business school programmes, sometimes
linked with executive coaching. Quite often this type of development has not
started until the individual has reached a senior position.

There is now an increasing emphasis on progressive development, identifying
individual needs at an early stage and building on competences as a
manager/leader‟s career progresses. More organisations are linking development
with corporate values and some financial institutions have established their own
leadership competences alongside the normal competency frameworks.

Business schools still feature strongly in executive development, particularly in
high potential programmes. Increasingly, they are being used as „partners‟ and
included as part of a wider solution that embraces; coaching, personal
awareness and action learning as key components in a „best-in-class‟ leadership

Executive Team development remains the least sophisticated aspect of
leadership training in financial institutions. Little time and effort is spent on „team
development‟ beyond the addition of such activities as an after-thought in off-site
events or strategy „away-days‟. Executive teams that focus on their own values,
purpose, deliverables and team dynamics remain in the minority and there is still
a high degree of scepticism among others that such activities amount to „tree-

Executive coaching has been used widely in financial institutions as one answer
to personal development that can also be fitted alongside the „day job‟. Whilst it
has many benefits for individuals when it is approached in the correct way, there
is little evidence that those benefits are being translated further into the
organisation. Executive coaching as a stand-alone intervention was seen by a
number of interviewees as being status-driven and elitist. There was also
criticism that it allowed senior managers to abdicate their responsibility for
managing performance.
Mentoring was viewed by interviewees as one of the most cost-effective ways of
nurturing talent and embedding the culture of an organisation. Widely used in
graduate development, there has been little success in implementing mentoring
schemes at other levels in financial organisations. The report highlights some of
the best-practices used in organisations that have successfully implemented
such schemes.

The issues surrounding diversity and cross-cultural training were high on the
agendas of interviewees, although the responses across financial institutions
were mixed. There was a general acceptance of the moral need for increased
awareness in both managing and recruiting people, and this is now being
reinforced by new regulations. Most organisations are providing diversity and
cross-cultural awareness training although some have found it difficult to source
this type of training externally. In addition to internal training initiatives, there has
also been evidence of financial institutions re-assessing their policies to prepare
for the new regulations.

In terms of „talent management‟, there was a general consensus that the need to
recruit, retain and develop the best people will be a key source of competitive
advantage in financial institutions of the future. It was considered that market
conditions alone will dictate the need for a larger and more diverse, pool of talent
and that individuals will take a longer term view of their career development.
However, this view was not universal and there remains a body of opinion within
the industry that considers talent management is less important in the unique
circumstances of investment banking.

The report also provides access to articles on the enb website providing
guidance and best practice relating to many of the above topics.
                      Leadership in Financial Institutions

1. Introduction

In the last two years Leadership and management development has moved
strongly towards the top of agendas in the City. Financial institutions, struggling
to develop and sustain competitive advantage in an increasingly challenging
business environment, are now beginning to invest more time and money in
these areas than at any time in the past.

There is growing recognition that previous lack of investment in management and
leadership development during the boom years of the 80s and 90s is now
impacting on the ability to compete. This awakening has seen attitudes changing
and, along with them, the way in which leadership and management
development is regarded. Increasingly, organisations are placing importance on
senior managers developing a broader skills set beyond the technical
competences that were, often singly, the key to success in the past.

As an industry, however, the Financial Sector in general and investment and
wholesale banks in particular, still have some ground to make up on other
sectors. Yet it becomes understandable why that gap has appeared when
considering the combination of unique circumstances affecting the industry.

This report is the result of a study conducted by enb consulting in the Autumn of
2003 and is based on interviews with over 25 corporate leaders and senior
managers in 16 global organisations. It provides a snapshot of leadership and
management development in the City today and explores the background to the
renewed focus. It also considers some of the unique challenges facing financial
institutions and the ways in which they are being addressed. By identifying best-
practice guidelines where appropriate, the report also provides a benchmark
leading-edge leadership and management development activities.
2. The Generation Gap
The City is starting to catch up rapidly, but over the past 15 years, most other
business sectors have consistently, and significantly, exceeded its investment in
people development. The focus for training in investment and wholesale banks
has inevitably been on technical skills with leadership and management
development interventions too often disparate and isolated.

The last two years has seen a change in attitudes as a series of factors have
combined to sway opinions.

      People at the top and the next generation have focused on knowledge and
       technical skills development, often at the expense of broader leadership
       and management development. It is being increasingly recognised in
       financial institutions that the best functional leaders and specialists are
       often not equipped or prepared for strategic leadership responsibilities or
       broader management roles.

      The financial sector itself is changing as the market matures and
       competition for market share increases. The short-termism of the past
       may not be suited to a future generation of employees that will be seeking
       career development in addition to financial reward. More organisations are
       placing greater importance on „talent management‟ as a key differentiator
       and a means of gaining and sustaining competitive advantage.

      The pace of change and the demands on the leaders of the future in an
       increasingly complex environment will require people with a broader set of
       competences in the 21st Century. The last two years has seen this impact
       on financial institutions more than in most other business sectors and has
       started organisations to examine what they require from their leaders in
       the future.

They are explored in greater depth in the following sections and reflect the
discussions during the research interviews.

2.1. Functional to Strategic Leadership.
All interviewees recognised that the industry has a generation of senior
managers who are equipped admirably with the technical skills that brought them
promotion to senior levels. However, once taken outside of their specialist
functions, either into another specialist role to broaden their experience or one
that has executive responsibilities, it has become increasingly apparent that they
often feel exposed.
This has been compounded by a lack of incentive for individuals to move outside
of their specialist roles. There is little encouragement for people to broaden their
experiences whilst success in their own specialism reaps far greater rewards.
„Promotion‟ can quite often result in less financial reward combined with longer
hours and more responsibility. There is evidence that line managers of the
specialists often „protect‟ them from other roles as they might also see their own
rewards affected.

Some comments to reinforce these views include:

       “Best technicians become leaders – but are the skills compatible?”

       “We have a product-centric approach – people just stay in their

       “I am interested in a leadership role – but the returns are less and I
        will work longer hours”

       “We recruit entrepreneurs and individualists – they don‟t always
        make the best leaders without focused development.”

       “In this environment, we now need to be managers and not just

       “there can be a „player-coach divide‟ in this industry, just as in
        sport, where the best players do not always make the best

2.2 Changing Industry – generation issues
Even in such a cyclical industry, there has been a general upwards-trend over
the past 20 years that has now seen the industry reach a state of maturity. This
demands a different approach to people development and talent management.

There is a generation of senior managers at MD level (ages 35-40) who have
been in the industry for 12-15 years and who are experiencing this plateau effect
for the first time. Having experienced an ever-upwards trend, the business
environment is now placing new demands on their skills as they deal with
managing redundancies, motivating teams in an increasingly competitive market
and managing P&L rather than just generating revenue.

The financial market place over the next five years will also see a greater number
of mergers and acquisitions as companies stave off threats to market share. A
new survey by PwC and the Economist Intelligence Unit indicates that nearly half
of the financial sector executives interviewed predicted that M&A would be the
primary focus of their activities over the next five years. Once again, this places
further demands for new skills on leaders of the future.

There is also a generation of managers who joined in the 1980s that is now
focused on their second career or semi-retirement. In financial institutions, this is
at a much earlier age than most other sectors. The short-term nature of that
particular career profile, aligned with the significant rewards that support an early
retirement, have had a further impact on attitudes to any development that goes
beyond improving technical expertise.

However, there is now a growing voice among MDs that supports the call to
recruit people for full careers and not simply a fast-track to wealth and early
retirement. The rationale is that financial institutions need to treat talent
management as a source of competitive advantage. By promising BOTH
financial rewards and career and personal development, then the best people will
be recruited and retained.

The attraction of longer term careers is further substantiated beyond the ENB
research by figures released by the Centre for Economics and Business
Research. The City has seen 300,000 jobs lost within the last 2.5 years and the
prediction is that there will be a slow recovery to 320,000 by 2007 which is the
same as the peak of 2001. The message for financial institutions is that job
security will become an increasingly important issue. Whilst the „hire and fire‟
culture may still pervade, those seeking jobs will also be more selective about the
personal and career development they will be gaining when joining an
organisation as well as the financial rewards.

Comments from interviewees that reinforce the need for more effective talent and
career management include:

       “Talent Management will be a key differentiator, where increasingly,
        the margins between salary levels and other benefits are
        becoming smaller”

       “We need to get people interested in the business for its own sake –
        not just for financial rewards”

       “Meaningful careers in the City are understated – they are too often
        hidden by the publicity around the money.”

       “We should be harvesting what we have – not letting them go and
        then recruiting them back later”
       “As we‟ve been losing people, development has been less of an issue –
       now the „ice age‟ of the past 3 years is melting we need to think longer

However, whilst these reflected the great majority of views, the ENB research
found that they were not always universal. There remains a body of opinion in
financial institutions that adheres to the short-term view. This is particularly
apparent when a number of factors combine in an organisation that can support
the short-term argument. These include:

      many people simply want to become a deep specialist to gain rewards and
       retire early
      new, flatter structures reduce opportunities for promotion and people shun
       advancement, to gain rewards in specialist roles
      reward systems are often focused entirely on business results
      the organisation boasts excellent retention rates
      the organisation is able to attract high calibre recruits

2.3. New Demands of the Leadership Role – challenges of the future

Over the last two decades, nearly all business sectors have had to deal with the
increasing challenges of globalisation, technology, regulation and increasing
competition. When these challenges are combined with higher client
expectations and new considerations for corporate governance and corporate
social responsibility, the demands on leaders and managers of the future
become increasingly complex.

In financial institutions, the challenges and pace of change appear to have
accelerated in the last 3 years. Nearly all interviewees commented on how the
rate of change they are currently experiencing is greater than ever before. Some
of the issues specifically highlighted that have an impact on the competences
required for leaders of the future included:

2.3.1 Regulation
Public opinion, fuelled by pensions and investment concerns in recent years, has
increased the pressure on an already active financial regulatory system. This
has meant that leaders in financial institutions need to consider an increasingly
vocal group of stakeholders which has felt let down by the industry. Not only
does this influence the regulator but places even more emphasis on corporate
governance and social responsibility.

2.3.2 Corporate Governance
Public opinion, regulatory pressure and the backlash of Enron and WorldCom
has placed corporate governance high on the agendas of financial institutions, It
was seen as an increasingly important challenge in the industry by those

Changes to corporate governance going into the 21st century, have therefore
placed new challenges on business leaders. Where reckless behaviour and risk
taking was eulogised in the recent past, there is an increasing trend towards the
opposite with business leaders wanting to play it safe.

Whilst some observers believed that the high-water mark of concern was 2002, it
is likely that such scepticism is misplaced with the Securities Exchange
Commission and Institutional investors in the USA intensifying further their focus
on organisations in 2003. A key competence for successful leaders in the next
decade will be the resolve and courage to take educated risks but the intellect to
make them as „calculated‟ as possible and to mitigate any adverse fall-out. The
supreme challenge for leaders of financial institutions will be in steering the
middle course to balance the requirements of corporate governance whilst
building the business.

2.3.3 Corporate Social Responsibility
The 1980s and 1990s saw leaders focused on short-term performance where
shareholders were the key. A large number of interviewees commented on the
changing stakeholder map in the years ahead. They considered that society will
be looking at their organisations to expand their range of focus to a wider
stakeholder group that is interested in the organisation‟s contribution to the
„greater good‟.

In financial institutions, there is already evidence that this is becoming higher
profile, not simply through „ethical investing‟ but also the way in which many are
contributing to the community through financial sponsorship or organising
support projects as „team-building‟ events. Among those organisations
interviewed, all were contributing in some way to the wider community and saw it
as an increasing feature of business life in the future.

Those interviewed considered that, because of this change, the leaders of the
future will be expected to develop more sophisticated relationship and influencing
skills to accommodate the demands of an increasingly diverse stakeholder group
beyond the financial world and their own business sector. Additionally, they saw
this being compounded by the expectations of employees who will be influenced
by the organisation‟s ability to present itself as socially responsible with a clear
set of values and ethics. The last year has seen a number of investment banks
and other financial institutions establishing new values or re-assessing existing
ones. Their purpose has been to use them as the clear „statements of intent‟ on
the way they do business internally as well as externally. It was evident during
interviews that financial institutions are using them increasingly as fundamental
building blocks in leadership and management development programmes and
also in performance management systems. The „mouse-mat‟ values of the past
are seen as no longer relevant in an industry that needs to change.

2.3.4 Globalisation and Cross-cultural issues
As expected, the effects of globalisation and cross-cultural issues featured in
most interviews, with all of the participating organizations having a global reach
to some extent. There was a consistent view of the need for cross-cultural focus
in organizations but the comments below also illustrate the differing levels of

       “We have 100,000 people in 50 countries. we must think globally”

       “We are currently transferring back office functions to India – we
        aren‟t the first and won‟t be the last and we need to deal with

       “Our organization has a „national‟ culture that needs to think and
        be international if it is going to become a major influence”

       “Since the merger we still haven‟t developed a single organizational
        culture that truly transcends national boundaries”

       “On this floor (of 100 people) we only have one woman MD and no
        Afro-American/Caribbean employees. Ignoring diversity and cross-
        cultural issues is simply no longer an option”

       “when dealing with cross-cultural issues, we should ensure that we
        do not take them from the US perspective as a starting point”

When considering the impact that this will have on leadership and management
development, a snapshot of the future is provided in recent research involving
four international financial and development institutions. The International
Monetary Fund (IMF), the World Bank, the Inter-American Development Bank,
and the Inter-American Investment Corporation all contributed to a study that
identified the following future competences for leaders in global financial
      coping with the speed of inter-related international events and crises,
       including the speed of technology;
      managing and leading in the growing complexity of a global society;
      the role of the corporation and its responsibilities in a „caring‟ society
      becoming more adaptable and flexible in creating, accepting, and adapting
       to change;
      maintaining a vision that incorporates people from different cultures
      recognising the decline of nation states/boundaries and the convergence
       of cultures as education and technology break down barriers.

2.3.5 Technology
The digital revolution has meant that it is no longer possible to innovate and
deliver at the old incremental rates and expect to keep pace. Digital has already
been a major driving force in accelerating the pace of change to an entirely new
level. Among the many other challenges in financial institutions, e-commerce and
new dealing platforms have placed even greater demands on the way in which
leaders need to operate. Retaining the best staff, dealing with diversity and
managing increased stakeholders in the complex environment that increased
connectivity brings, places emphasis on a different set of leadership

When asked about the principal challenges faced, nearly all interviewees placed
technology close to the top of the list. At a personal level this meant dealing with
e-mail and mobile communications but at a business level it also reflected the
expectancy of response from clients and colleagues. As the clients and
customers become more technologically advanced, the pressure is on financial
institutions to be one step ahead.

One interviewee commented:

“Only 10 years ago you had some breathing space between sending a fax
 or letter and receiving a reply – now the response is instantaneous and
 24 hours a day”

Leaders in the era of new technology will need to be „intellectually agile‟ to
embrace new developments and manage their impact from a leadership

As indicated in the previous section, technology has also accelerated the need to
focus on leadership issues involving globalisation and cross-cultural issues. In
recent years JP Morgan, ABN AMRO, Goldman Sachs,
Deutsch Bank, HSBC, Barclays, Morgan Stanley, Fidelity CitiBank, Standard
Chartered Bank are among the many who have transferred back-office and other
transaction functions. Within 2 years they will have over 16000 technology-based
jobs transferred from the UK to the Indian sub-continent.

3.5 Competencies for future leaders
Throughout the interviews and in earlier discussions, there has been debate
about the competences that will need to be developed by leaders of the future to
respond to the challenges highlighted above. The enb website
www.enbconsulting.com (also draft at Appendix A) provides more information on
the historical perspective to leadership development in the 20 th Century and
proposes the core competences for leaders of the future. Whilst it should be
stressed that if applied, they would need to be tailored to specific organisational
strategies and values, they do provide a starting point for competence

4. Leadership and management development in Financial
   Institutions today
This report has already highlighted the step change in attitudes towards
leadership and management development in financial institutions. This is partly in
response to the drivers for change identified above and partly, as an industry, it
lagged far behind other business sectors. The last two years has seen some
catching up but there is still some way to go in a number of areas. The following
section considers some of the key areas based on the research interviews and
also on enb’s experience of working in the industry over the last 10 years.

4.1 Executive Development – the recent past
In comparison to other business sectors and until a few years ago, executive
development in financial institutions had not been well addressed. As described
earlier, the focus on technical skills and specialist development precluded
investment of time and resources in other development areas as individuals grew
in the business.

Quite often executive development has started at the point at which the individual
becomes a senior manager. In many financial institutions, the most popular
response to an executive development requirement has been to attend a 3 week
programme at INSEAD, Wharton or one of the „name‟ business schools. These
have been well received by those who attended and there is no doubt that much
can be gained by attendees who experience a multi-national, multi-industry
programme focused on a relevant business topic.
There can be little criticism of the business schools as their learning objectives
are transparent, but too often the drawback of such an intervention has been that
it is too little and too late for the individual executive. As a ‟stand-alone‟ event, not
linked to a broader development programme, it can also stand the risk of the
learning not being fully embedded in the parent organisation to benefit both the
individual and the organisation.

Some interviewees considered that such programmes can often be seen as a
„rite of passage‟ towards advancement and that it supports the „tick-box‟ attitude
to development that has been fostered by senior managers who had been
through the same process. In the past, the more sceptical observers have
described such programmes as “looking good on the CV” and “a status thing -
like getting the key to the executive loo”.

The programmes themselves provide an excellent learning opportunity but, in
financial institutions, they have been rarely linked to a co-ordinated personal
development programme.

4.2 Executive Development – The future and ‘Best in Class’
Attitudes are changing and, in the last two years, the focus for many of the
organisations interviewed has been on development programmes for senior
managers, executives and high potentials that target individual development
needs. There is now much more emphasis on progressive development,
identifying development needs at an early stage and building on competences as
an individual‟s career progresses. There is also a greater realisation that
employing a variety of interventions and more innovative techniques to build
skills and knowledge pays greater dividends for both the individual and the

Leadership competences and competency frameworks are being used as a
benchmark for development alongside organisational values. One of the
organisations interviewed has designed a specific set of leadership competences
alongside broader competence frameworks that has taken into consideration
many of the challenges for leaders of future described earlier.

The Council for Excellence in Management and Leadership published its „Best
practice for organisations‟ guide in 2001 and reflected that in the 21 st century:

      attendance on „once in a career‟ programmes will decrease and will be
       replaced by a series of targeted learning events across a person‟s career
      executive education will take into account that a key cost is a manager‟s
       time and increasingly will use real work-time as the learning tool supported
       by blended learning
          action learning projects and simulations will be used to engage real
           organisational issues
          customised development programmes will be designed to achieve specific
           corporate objectives
          programmes will increasingly incorporate „vertical‟ rather than „horizontal‟
           slices of the organisation based on the principle of learning for
           organisation challenges not „status‟ events.

The business school programmes will still have an important place in the
development process but they will increasingly become part of a broader
package. In „best-in-class‟ organisations, attendance at business schools is seen
as one of the key components in a quadrant of activities that support executive
and high potential development. This is supported by
recent research by PricewaterhouseCoopers involving a selection of the Top 20
Global Most Admired Fortune 500 organisations.

They identified the following as key components of a high potential or executive
development programme:

           Business Knowledge – the trend is for more partnering arrangements
            with business schools as a preferred supplier and partner. Learning is
            tailored towards the organisation‟s competitive environment and there is
            an increasing demand by individuals to work towards recognised
            accreditation, such as an MA (Leadership), MBA or DMS, as part of a
           Mentoring and coaching – These are seen as separate, yet cost-
            effective, activities. As key components of a co-ordinated development
            process, they have the potential to make the most impact but they can
            often be the least successful in implementation as described later.
           Action Learning – projects dealing with real organisational issues are
            particularly beneficial for fast-track and high-potential programmes that
            require cross-functional working. At a more senior level, „shadow boards‟
            are becoming a meaningful way of developing the next generation of
            leaders and an effective succession planning tool.
           Personal awareness and development – almost exclusively now being
            seen as the starting point in today‟s development programmes that focus
            on individual needs. The focus on personal awareness accelerated in the
            1990s as „emotional intelligence‟ and became a core competence of
            leaders. This was given further impetus in the 21st century as „authentic
            leadership‟ became the aspiration of modern leaders. Psychometrics,
            diagnostics and development centres are now accepted parts of this
            process in best-in-class organisations
4.3 Executive Teams
If the focus on individual development at executive level is increasing in financial
institutions, the same cannot be said about the development of executive or
leadership teams. In this business sector more than most, top teams are brought
together based on functional responsibilities, technical excellence and
organisational structure. It is arguably the most important, yet least
sophisticated, aspect of executive and leadership development in the financial
sector. However, there is a broad, and continuing, body of opinion among senior
managers that the development of a top team is unnecessary because their
experience as individuals can carry them through.

At enb, our experience is that Executive Team development is hugely complex.
Whilst there will always be common foundations with the normal tenets of „team
building‟, the demands placed on executive teams set them apart in terms of their
development. Each executive team has its own unique set of circumstances yet,
in the financial sector, there is often reluctance by top teams to embark on the
process of development. Attempts at developing high performing teams are often
met with accusations of „tree-hugging‟ and that they are an imposition on time. In
almost all cases, there is a fear of self-disclosure and exposing vulnerability at an
individual level. This can be compounded by the use of diagnostics or 360
feedback tools in an environment in which the succession stakes are high and
where peers can also be competitors.

However, more executive teams in financial institutions are adding a „team
development‟ element to planned strategy away-days and off-site meetings. This
is a step forward but there are few executive teams spending time looking closely
at their own purpose, deliverables and interpersonal relationships that can
combine to take them to the next level and closer to becoming a truly high
performing team.

The lack of focus on team performance means that few executive teams in the
financial sector can be described as maturing beyond the „norming stage of team
development. The great majority remain forever in a cycle between „forming‟ and
„storming‟. Those teams who do break through into the „performing‟ stage
recognise the specific issues surrounding an executive team and have done
something to address them.

In our experience at enb, the unique challenges faced by top teams can be
summarised under the main headings of team dynamics, goals and
accountability. The factors that can impact on top team performance include:

   Team Dynamics
    Frequent changes of personnel – ill-defined boundaries for newcomers
     means that it is difficult to reach „norming‟
    The team is designed to suit personal egos or is predicted by the
     organisation chart and not for performance. This means that the team is
     not always the best mix of people to do the job
    Flatter structures often mean increased Top Team membership and the
     team becomes too bloated for decision-making
    Similarity in preferences and ambition mean that dynamics and inter-
     relationships are more challenging and confrontational
    Some members are more equal than others – “inner circles” can appear
     where there is a central core of decision-makers
    Power, politics and succession planning – higher stakes increase the
     „storming‟ phase
    The Team Leader role in executive teams is, by definition, more powerful
     than other leaders roles. The Team Leader relationship with the team
     needs to be clearly addressed
    Different, and more sophisticated, influencing styles are required in a
     group of peers.

   Performance Goals and Accountability
    Top Team goals are too often linked to organisation goals rather than
      team performance and this abdicates responsibility for TEAM performance
    Senior Managers become „caught‟ between functional and corporate
      responsibilities. Loyalty is tested as focus is placed where individuals are
    Lack of a common sense of purpose and shared values as a team. “Why
      we are here?” is rarely discussed and values are an important benchmark
      of behaviour amongst team and as role models for the organisation.
    Collective accountability can be threatening to individuals who have been
      used to single accountability.
    Divided loyalties – split Head Office/Division responsibilities are often a
      feature of Executive Teams that create fissures.

A more complete discussion of Executive Teams and their development can be
found at the ENB Website www.enbconsulting.com (also draft at Appendix B)

4.3 Executive Coaching
In the past 10 years it has become increasingly popular to hire coaches for
promising executives or newly promoted senior managers. Research indicates
that there are at least 10,000 coaches operating in US business today, a figure
that has increased 5-fold since 1996 and which is expected to exceed 50,000 by
Whilst the numbers may be smaller in the UK, similar trajectories of growth have
been experienced. The economic downturn has had some impact on this growth
in recent years, but there remains an active interest in executive coaching which
is increasingly being seen as a serious business tool. This is particularly true in
the UK financial sector where executive coaching has been seen as an answer to
individual development for senior managers that can be managed around a busy
„day job‟.

In our experience, and during interviews, it is also evident that, as an industry,
the financial sector is not always gaining value for money in this area. Some of
the observations made during the research support this:

    In many cases the coaching is not linked to a co-ordinated and managed
     individual development programme.
    Development objectives are not clearly established at the outset of the
     coaching process and, if they are agreed, they are not necessarily linked
     with organisation objectives
    Arrangements to evaluate success are not put into place at the outset of
     the coaching relationship
    Too often, senior line managers are using executive coaching
     interventions to abdicate their own responsibility for managing
    Executive coaches are being „passed on‟ from one individual to another
     under the premise that „if it worked for me then it can work for you‟.
    HR professionals, who could perform a „technical buyer‟ role to assess
     credibility and competence of coaches, are often kept out of the
     purchasing loop
    In the same way as 3 week business school programmes, executive
     coaching is often linked to status and that the organisation is prepared to
     invest in the individual.

Executive coaching can be an impressive development tool when managed
properly and when it is linked to personal and organisational objectives. It has a
greater popularity in financial institutions than in most business sectors but it is
costly and it is becoming increasingly important to demonstrate value for money.
enb has provided a guide to selecting an executive coach that will allow clients to
avoid some of the above pitfalls. This can be found at the enb web site
www.enbconsulting.com (and draft at Appendix C)

4.4 Mentoring
There was a broad recognition amongst interviewees that mentoring can be one
of the most cost-effective ways of nurturing talent and embedding culture in an
organisation. Whilst this has been most effective in the areas of graduate
development, nearly all organisations admitted that its application could be
improved elsewhere in the organisation. Those organisations that are optimising
the benefits of mentoring incorporate some or all of the following:

    Mentoring schemes are being championed by HR/T&D functions and
     „owned‟ by the business at a senior level with high profile sponsors
    Role modelling is seen as important by senior managers – ie taking on the
     mentor role themselves and living the values
    There is clarity about the role of the mentor in the organisation – not
     leaving it open to individual interpretation but linking it to organisation
     objectives and a business purpose
    Training programmes are provided for mentors (and mentees)
    Ongoing support is available to sustain a mentoring programme – eg
     sharing knowledge, lessons learned, evaluating initiatives and ongoing
     mentor training and development.
    There is recognition or (non-financial) reward for those adopting a mentor
     role. Ie reflected in appraisals or performance management discussions

4.5 Cross-cultural Training and Diversity
As indicated earlier, this featured strongly in interview discussions as an
important area of development for financial institutions. However, the
organisational responses to developing cross-cultural awareness and embracing
diversity are mixed. Whilst there is a wide-spread recognition of the need, most
organisations felt that they should be doing more. However, at least one
organisation has found it difficult to source an external provider of open
programmes in the United Kingdom and many were focused on specialist
consultancies to meet their needs or were driving initiatives internally.

The diversity issue is closely linked with the changes in the market place. As a
greater number of people want to see investment banking as a longer-term
career rather than the „make money and run‟ attitudes of the 90s, it is likely that
the current male-dominated mix will change. It is also expected that the maturing
market will allow only the best to survive and this will mean attracting the talent
from as large a pool as possible.

At a graduate level this is already happening and some recruitment specialists
see the financial sector as “ahead of the curve” in attracting people from a
diverse background. A current example of this is the initiative by a number of
investment banks, including CSFB, Citigroup, JP Morgan, Deutsche Bank and
Goldman Sachs to sponsor a recruitment forum for gay undergraduates.
In addition to the market-driven need for an increased focus on diversity, it is also
linked to the moral issues surrounding corporate social responsibility.
Additionally, with more anti-discrimination measures covering gender, ethnicity
and disability due in 2004 and legislation against age discrimination introduced in
2006, financial institutions will be under increasing pressure to prepare for the
changes. HBOS and Lloyds are two organisations that have been proactively re-
assessing their policies and training in diversity in preparation for the new

4.6 Talent management
In most interviews, there was a general consensus that the need to recruit, retain
and develop the best people will be a key source of competitive advantage in
financial institutions of the future. It was considered that market conditions alone
will dictate that:

    There will be an increased need for organisations to widen their search for
     good people in a larger, more diverse, pool of talent as described above
    Individuals will be less-focused on short-term rewards and will be taking a
     longer term view of their career development and hence more selective
     about their choice of organisation.
    Rewards will become more closely aligned across different financial
     institutions and talent management, in the form of career development,
     can provide an important differentiator
    Investing in talent will encourage people to stay within the organisation
     and this will allow a more co-ordinated approach to developing leaders of
     the future through high potential programmes.

However, this view was not universal and there remains a body of opinion within
the industry that considers talent management is less important in the unique
circumstances of investment banking. The rationale behind this thinking is that
there is a generation of individuals that still see the nature of their type of
investment banking business as essentially short term. Many individuals still look
little further than specialising heavily in one area, succeeding in it and then
retiring early or choosing a different second career. This can be compounded by
a flatter structure in which there are fewer avenues for promotion and also by a
reward system that focuses almost entirely on business results. It can often raise
questions among individuals about “Why do I need to develop myself?” or “Why
do I need to move elsewhere” when they are gaining sufficient rewards where
they are. They therefore see little benefit of moving to somewhere where they
may be less effective in an attempt to get on the next rung of the ladder.

Whilst all interviewees saw the importance of talent management in the larger
global organisations, in smaller financial institutions where the above attitudes
can prevail and recruitment and retention rates are good, it is understandable
that talent management takes a lower position on the corporate agenda.

enb subscribes to the view that Talent Management will be the life-blood of
organisations in the financial sector, not just in gaining competitive advantage but
also in surviving. It highlights four imperatives that provide the building blocks for
developing a culture of talent management:

4.6.1 Building a Winning Environment
The first need is to create a business and environment that talented people want
to join. There are a number of “pull” factors, which appeal to an individual‟s wants
and needs that attract them to an organization.
.The three core factors involve are:

    Develop an outstanding company, built upon a strong achievement ethic,
     sound values and a compelling vision
    Create exciting jobs that will stimulate, challenge and stretch capable
    Ensure talent is effectively coached, mentored, given feedback and
     appropriately rewarded

4.6.2 Make Talent Management a Priority in the Business
There are three key steps in this process.

    Foster a talent management mindset. Essentially, get managers to realise
     that identifying and developing talent is part of their job and a key
     business objective.

    Develop talent management skills. Essentially these are communication
     and relationship building skills, centred around questioning and listening
     skills and giving objective feedback.

    Make managers accountable for managing talent. This involves teaching
     managers how to agree objectives, identify competencies, define the
     performance gap, coach and mentor people and to use talent in effective

4.6.3 Create a Means of Selecting Outstanding Talent
There are four steps in this process:

    Know what you want. A business needs to define the behaviours or
     competences that it needs in its future leaders and managers. It then
     needs to develop a robust selection process to objectively assess
     applicants to ensure it makes offers to the right people.
    Take more risks with inexperience. Not surprisingly, the key message here
     is to take a calculated risk in allowing talented people to take
     responsibilities and decisions to which they might not normally be
    Create Development Roles. It is difficult for talented individuals to develop
     their talent and use it to business advantage if there is a continuous need
     to perform in an operational role. Whilst not exactly super-numary,
     managers and the business should create development roles, for a limited
     duration, to enable the talent to grow and blossom.
    Provide a path – Talented individuals cannot rise up the organisation if
     their path is blocked by a layer of managers whose priority is more to do
     with their pensions than transforming the business.

4.6.4 Develop Talent and Use It
There are six things an organisation should do, to use and develop the talent it

    Recruit talent according to its business strategy and needs
    Move and promote talented people frequently, especially early in their
     careers, to give them an holistic view of the business and as much
     experience as possible
    Confront issues of turnover and take action to promote career progression
    Give regular feedback, supported by both coaching and mentoring
    Break the rules, if necessary, to ensure talent is properly recognised and
    Ensure planned development actually happens

An expanded version of this process can be found at the enb website
www.enbconsulting.com (and draft at Appendix D)

4.7 Evaluation
Financial institutions are little different to most other business sectors when
considering evaluation of development programmes. In most „training‟
programmes there is a general recognition of the need for immediate feedback of
the „happy sheet‟ variety but further evaluation is rarely undertaken. In more
costly programmes there have, however, been attempts to delve more deeply
with follow-up questionnaires that provide some qualitative assessment of how
the skills or knowledge have been applied after a specific time period.

It is rare for any financial institutions to go beyond the „application‟ (or Kirkpatrick
Level 3). In common with most organisations, there is little attempt to link training
and development interventions to business results (Level 4) or Return on
Investment (Level 5). The latter is often difficult when attempting to isolate the
training aspect with other factors (eg is an increase in sales due to better trained
people, an advertising campaign or increased customer need?)

There are a number of appendices relevant to the content of this report. They
reflect guidelines and best-practice in the following areas:

   A.     Leadership in the 21st century – the new competences
   B.     Executive Teams – why they are different!
   C.     Executive coaching – making the right choice
   D.     Talent Management – a best-practice guide for organisations

For further details or comment on this report please contact:

Mike Gale or Rob James at enb consulting 01483 890077

mgale@enbconsulting.com and rjames@enbconsulting.com