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Financial services: Industry at a crossroads


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For the first time ever, financial services is not represented in the top 20 Best Companies for Leadership – and the industry is split on the best way back.

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Financial services: Industry at a crossroads

  1. 1. Financial services: industry at a crossroadsFor the first time ever, financial services is not represented in the top 20 BestCompanies for Leadership – and the industry is split on the best way back.Goldman Sachs. HSBC. American Express. Citigroup. This climate, along with ’deleveraging’ efforts and restrictionsJP Morgan Chase. on proprietary trading activities, has lowered business volume throughout the industry. Loans that were once routine are nowOver the years, these and other blue-chip financial services subject to lengthy reviews, dramatically slowing the velocity ofcompanies have earned a place among the top 20 Best business opportunities. Profitability has suffered, and so too haveCompanies for Leadership. the rich bonuses that the industry once relied on for recruiting and retaining young, talented executives.In fact, there has been at least one financial services companyamong the top 20 every year Hay Group has conducted the Moreover, since the financial crisis was worsened – and, somestudy – until this year. believe, caused – by the industry’s own practices, there has been a rupture in trust between financial services providers andThat may not be entirely surprising. Firms are still struggling most of their principal stakeholders: clients, business partners,to engineer their recovery from the most severe financial crisis shareholders and a generation. As part of the aftermath, government controland regulation have been substantially strengthened around In the face of these difficulties, sector leaders and observers arethe world, particularly in Europe and North America. At the divided as to the best way to navigate through the turbulence,same time, virtually all firms have tightened their internal risk and position financial organizations to take advantage ofmanagement processes. opportunities when the climate improves.©2012 Hay Group. All rights reserved
  2. 2. Financial services: industry at a crossroads Which way forward? On the one hand, some believe the current global managing director for the financial situation is an extreme instance of a normal services sector at Hay Group. “But they also dip in the long-term business cycle. These must take action to rebuild trust and develop leaders advocate adapting business-as-usual dramatically different – and better – client- practices for weathering a downturn: reducing centric approaches to the marketplace.” costs by improving operational efficiencies and If that weren’t enough of a challenge, Laouchez trimming staff, while preparing for the upswing notes, the industry must also cope with the by developing new products and relationships sweeping changes affecting all businesses – based on past successes. Trust will be restored significant realignments driven by powerful, by traditional, solid business success. long-term megatrends in demographics, Other industry leaders, including the financial attitudes and technology. services team at Hay Group, believe that both In particular, new technologies have made the rules of the game and the game itself have financial products more transparent to changed fundamentally and irrevocably. In this consumers, who now find it easier to compare view, the way forward requires fundamental the costs and returns of similar products offered changes in the way companies do business. by different organizations. This has the effect “To emerge from this current cycle in a strong of shifting more buying power to clients – and position, financial services firms must take places a greater premium on both client service care of the basics, cutting costs and updating and differentiation through effective product traditional products,” says Jean-Marc Laouchez, and organizational innovation. The case for innovation The Best Companies for Leadership from other empowerment; and emphasizing collaboration sectors have responded to similar challenges by to drive cross-fertilization and innovation. committing to disciplined, long-term initiatives Results of the 2011 Best Companies for aimed at creating a culture of innovation. They Leadership study suggest that the financial have implemented strategies and practices that services firms are now lagging behind the invite and support new ideas: focusing on client top companies in all these dimensions: needs; embracing multiple, diverse perspectives; promoting organizational agility and  Top 20 Best Companies for Leadership Financial Services Firms Client needs: Employees spend much time discussing customers’ future needs. Broadening perspectives: In my company, employees are encouraged to learn outside their area of expertise. My company has a balanced mix of local and international talent in senior leadership positions. An appreciation of global issues is a key job requirement in this organization. Agility and empowerment: My company evaluates the performance of its leaders based on their agility. Self-organizing project teams are the main way work is accomplished in this company. Collaboration: My company takes clear action when a leader is not collaborating (even if he/she has strong business results). Supporting innovation: My company’s leaders regularly celebrate innovation. My company runs unprofitable projects to try new things. 0 20 40 60 80 100©2012 Hay Group. All rights reserved
  3. 3. Given that money, in one form or another, is the Hay Group believes the greater risk lies in notprinciple product of these firms, the choice of trying new things. Experience shows that, inshort-term profitability over client-service and practice, harnessing the power of talent andinnovation may be predictable. But with the innovation quickly and positively impacts near-magnitude of the challenges facing the sector, term profitability.Trust and the leadershipchallengeTrust is more fundamental to success in financial committed effort across the industry,services than in any other industry. Clients particularly from its leading organizations.and employees remain associated with banks, These efforts must begin within eachinsurance companies, assets managers and organization, by re-engaging and re-energizingother financial services organization when they employees, and re-aligning their interests withbelieve they can rely on them. Yet as a result those of shareholders and clients. However,of the financial crisis and the revelations that it when it comes to rebuilding trust, the resultstriggered, trust in the sector is unfortunately in of the Best Companies for Leadership studyshort supply. Regaining it will require a suggest that the industry has work to do.  Top 20 Best Companies for Leadership Financial Services Firms Leaders in my company have the ability to generate personal and organizational loyalty. My company evaluates and rewards our leaders based on their ability to build excellent relationships with their peers. 0 20 40 60 80 100Historically, organizations in financial services have no matter how gifted; it requires extraordinaryrewarded managers who have delivered superior leadership skills. Hay Group believes that financialreturns through finely honed commercial, services organizations should display innovative,technical, analytical or other specialist skills, collaborative and other leadership skills in theirrather than those who have exhibited strong managerial ranks today. But measured againstleadership capabilities. the best companies, those in financial services once again fall short regarding practices thatThe job of refocusing a large, global or matrix develop and nurture leadership talent.organization, however, is not a job for a technician,  Top 20 Best Companies for Leadership Financial Services Firms This organization actively manages a pool of successors for mission critical roles. In this company, everyone at every level has the opportunity to develop and practice the capabilities needed to lead others. Leaders in my organization create a work climate that motivates employees to do their best. Leaders in this organization demonstrate self-awareness. 0 20 40 60 80 100
  4. 4. Financial services: industry at a crossroads Forward looking companies will be able to chart a new direction There is some good news, however: in their  keeping people engaged in a new leadership development practices, financial environment of ‘responsible reward,’ while services organizations do rank higher than the striking the right balance between growth and survey average. For example, financial services risk in both systems and peoples’ mindsets companies rank significantly higher than all  developing the ‘third generation’ of leaders companies in the survey in actively managing to address these challenges and drive the a pool of successors for mission-critical transition to a better performing model. roles, and in giving people at every level the opportunity to develop leadership capabilities. “For all the challenges they face, I am confident These practices create a foundation that that forward-looking firms will be able to chart resourceful leaders can build on. a new direction for themselves,” Laouchez concludes, “combining world-class efficiency They will need that foundation, because to with product and organizational innovations survive and succeed in the changing business that will strengthen their client relationships landscape, financial services firms must and ultimately rebuild trust and lift profitability.” overcome significant hurdles, including: These are the firms that will be best positioned  reducing costs without cutting human to prosper when economic climates return and relationship potential to more positive and uniform growth – and  rethinking operating models to provide undoubtedly the organizations that will lead meaningful client experiences, improve the industry back into the ranks of the Best transparency, and renew trust Companies for Leadership. About Hay Group’s Best Companies for Leadership study Hay Group has researched the Best Companies for Leadership since 2005. This year’s survey includes responses from nearly 7,000 individuals at more than 2,300 organizations worldwide. The survey was based on the organization’s response to an online questionnaire and peer nominations. Respondents that completed the survey were from 103 countries, with 11 percent from North America, 35 percent from Europe, two percent from the Middle East, 21 percent from Asia/Pacific/Africa and 31 percent from Latin America. About Hay Group Hay Group is a global management consulting firm that works with leaders to transform strategy into reality. We develop talent, organize people to be more effective and motivate them to perform at their best. Our focus is on making change happen and helping people and organizations realize their potential. We have over 2600 employees working in 85 offices in 48 countries. For more information please contact your local office through©2012 Hay Group. All rights reserved