Revive and thrive: how financial organisations can conquer their current challenges

By Mark Jenkins, Chief Finance Officer, MHR

The UK financial sector is still reeling from the effects of the past few years, and while there has been some gradual recovery in parts, the economy faces new headwinds of increased inflation and political uncertainty. Likely influenced by these recent events, the continuing skills shortage, the switch to hybrid working and a new post-pandemic emphasis on employee experience are areas that organisations need to be mindful of. Quite as much as they must become more data-driven, bringing together workforce and financial planning, businesses from regionally based insurers to City investment banks need to address these topics. With this in mind, here are four related trends that are shaping the financial sector this year.

Skills shortages are prompting more recruitment from within

Firstly, we can see how skills shortages in the financial sector have become a significant factor. Seasonally-adjusted Office for National Statistics figures show there were 45,000 vacancies in finance and insurance at the end of last year – a 127% year-on-year increase.

These shortages are sufficient to limit investment in more than a fifth of financial services firms (22%) according to a report by the Confederation of British Industry and PwC. This found that three-quarters of companies in the sector were recruiting to overcome their skills deficit, with slightly more (78%) also putting emphasis on upskilling.

In light of these challenges, we’re now seeing more organisations with skills shortages seeking to realise the full value of those already employed at the business. There’s a key focus on developing the skills of current employees through enhanced training and mapping talent more effectively across the organisation to improve internal recruitment.

In more forward-looking organisations, HR is taking the lead, using technology to understand the full range of skills, experience and qualifications among current employees and devising learning management programmes and better-defined career pathways. Matching potential internal candidates for probable vacancies or new roles is becoming a necessity unless organisations wish to enter a downward spiral of salary competition that only delivers short-term fixes. As well as being quicker, recruiting from within is also much cheaper than using specialist recruiters.

Organisations are reappraising how they manage hybrid working

The second point relates to hybrid working. Opinions are divided, often strongly, about the value of working from home, but at one point last summer 80% of financial firms planned to put hybrid into practice. However, the continuation of hybrid working also poses managerial problems.

HR professionals should ensure that leaders have sufficient training in how to manage dispersed workforces. Managers must engage meaningfully with employees and foster a team culture using technology to share ideas that improve performance or productivity. Two-way communication should be genuine, ensuring employees and those leading them understand one another and employees know where their work fits into a business’s longer-term goals.

In the financial sector, where regulatory compliance is critical, supervision needs to be transparent and firm, but without the demoralising use of surveillance-type technology. Firms using hybrid working may also need to revise their plans so as to meet FCA expectations.

A new emphasis on employee experience and internal culture

The third trend relates to employee experience (EX). While trying to win the skills shortage battle, financial organisations are being put under pressure to prioritise employee experience not just to attract and retain talent, but to ensure operational continuity and maintain business identity. Post-pandemic workforces are more focused on work-life balance and wellbeing, and employers have to ensure they meet changed EX expectations as well as competing on salary.

Many employees, for example, want access to training and development, aware that skills requirements constantly evolve. As well as meeting such requirements, established institutions also have to create less overtly hierarchical cultures and offer flexible working opportunities to compete for data and IT talent with fintechs and challenger banks. Employees need to feel they can influence internal culture for the better. In large or dispersed workforces, this is where HR technology platforms become necessary so all employees have a voice.

Businesses also have to gain greater visibility into their people data. This, however, requires rapid adoption of data modelling and engagement tools to identify key patterns in employee behaviour and feedback. Organisations that fail to act on employee insights typically see productivity levels plummet and their organisational culture come under threat. However, those that embrace technology and intelligent workforce solutions can make better, more informed business decisions, improving the employee experience.

HR leaders and the CFO get their heads together to plan strategically

Finally, as the financial sector continues to recover, HR is going to need to place a bigger focus on talent management and creating a greater commercial awareness. The traditional compartmentalised approach is being dissolved by technology, bringing HR and finance leaders into much closer collaboration. This is an improvement not just from an internal networking perspective, but also from via the injection of greater empathy about other departments’ challenges. Employees quickly learn how they can mould inter-departmental inputs and outputs to improve efficiency and shape joint goals.

Together, HR and finance are increasingly needing to act as change-agents. HR leaders have to understand finance better and be capable of using analytics to feed vital predictive information into organisational plans. Finance chiefs are incorporating the outputs from workforce planning analytics into their own broader strategic plans. The use of workforce planning analytics are also an indication of strong and weak areas, highlighting where teams need support or can expand and develop on current successes.

In the era of digitisation, CFOs are supplementing their reliance on spreadsheets with the adoption of financial planning analytics using automated data collection, enabling them to quickly build scenarios based on near real-time information. The fallout of the pandemic is continuing to influence how CFOs work, by highlighting how the implementation of analytics will enable faster and better decision-making and ultimately, greater organisational agility and profitability.

As 2022 continues to unfold, the financial services world is having to address a variety of different questions – it was always unlikely to be an entirely tranquil year given recent events and the aftermath of Covid. However, by tackling the four themes identified above, organisations are finding themselves in a much stronger position to move forward with confidence.