Fi n a n c i a l S e r v i c e s

july 2008

A talent shortage for

European banks
A shortage of strong internal candidates for critical positions will force European
banks to overhaul their talent-management efforts in order to stay competitive and
ensure strong growth.

Lars F. Putzer, Christos Sermpetis, and George D. Tsopelas

Article As European banks grow and expand their geographic reach in an increasingly competitive
at a landscape, they’re finding it ever more difficult to fill critical positions with qualified people.
glance Indeed, recent interviews with top HR executives of European banks reveal that they face
shortages in the sheer number of top-notch executives they need, as well as in the specific
skills executives must have for banks to execute their business plans.

The 13 banks represented in our study can be grouped into three distinct categories based on
the relative effectiveness of their talent-management practices. Even the intermediate and
advanced banks have much room for improvement. The common theme is that the CEOs
and top executives of banks must personally endorse and live talent management, so that an
understanding of its importance percolates throughout the organization.
European banks face a looming talent shortage. In the next five years, some large
institutions will face difficulties filling positions crucial to the execution of their
evolving strategies. While the best talent managers can tap strong internal
contenders for such roles, many others will be forced to fill pivotal jobs with
second-tier internal talent or with external candidates—a relatively expensive and
risky approach for banks. To date, our research finds that European financial
institutions have made little progress in managing talent effectively. Those that fail to
act soon may have to forgo important growth opportunities.

We interviewed top HR executives at 13 large European universal banks,1 10 of

which are among the top 30 in the region by market capitalization, in eight countries.
Most bank executives told us that currently they don’t have enough qualified people
inside the organization to fill critical positions. Within three years, we estimate, the
talent gap will expand, leaving most banks unable to use top internal talent to fill 25
to 40 percent of their senior-executive positions and other roles with economic or
strategic significance.

Moreover, we found that in the next three to five years, banks may be desperate for
capable people to work in specific areas that are vital to the banks’ evolving business
plans. In retail banking, for example, we estimate that almost half of most banks’
critical functions will be deprived of talent (Exhibit 1). Bank functions such as
cross-border integration, turnaround management, push marketing,
third-party-channel development (for mortgages and consumer lending, for
example), and underwriting and monitoring retail credit all will require skills that are
in relatively short supply. Several trends are behind the growing need for more
sophisticated skills in these areas. One is the banks' rapid growth in emerging
markets, which frequently involves M&A. Others include the increasing
sophistication and declining loyalty of customers, heightened competition for
deposits, and the effects of the subprime-lending crisis.

1
EX HI B IT 1
Talent shortage ahead

All executives in our sample recognize that developing, retaining, and, if necessary,
recruiting top talent is fundamental to ensuring a bank’s future profitable growth.
Very few banks have benefited substantially from their talent-management efforts,
however (Exhibit 2). Only one-third of the respondents, for example, say that their
organizations manage to fill critical vacancies quickly and effectively with internal
talent. Indeed, the extent to which these banks have implemented
talent-management strategies varies widely. We found that the 13 banks represented
in our study can be grouped into three distinct categories based on the relative
effectiveness of their talent-management practices (Exhibit 3).

2
EX HI B IT 2
Falling short

EX HI B IT 3
Implementing effective strategies

Banks in the beginner group do not treat talent management as a priority. As a

result, they tend to rely on external recruiting for their evolving talent needs. To
retain top talent, the beginners also tend to emphasize compensation and brand
names rather than career prospects and inspirational leadership. Banks in the
intermediate group recognize the importance of talent management and have put in
place basic practices centered on identifying and reviewing talented midlevel and
senior executives. Yet these banks have not applied themselves consistently in other
areas, such as talent development, where progress is less visible. Banks in the
advanced group are clearly the most effective in the war for banking talent: the top

3
team makes a high priority of talent management, developing and applying key
processes and creating a specific, centralized unit to handle it.

Even the intermediate and advanced banks that have attempted to transform the
way they manage talent have much room for improvement. Our experience suggests
that, to succeed, they’ll need to be more rigorous in their talent-management
processes—for instance, by using objective indicators (such as the average time to fill
critical positions) to measure and improve the effectiveness of these efforts.
Furthermore, members of the top and senior-management teams must work harder
to incorporate talent-management activities into their own weekly routines—for
example, by personally advocating, endorsing, and communicating key messages to
middle management and to frontline employees. Such commitment drives active
participation in talent management, rather than mere compliance with it,
throughout the organization and shows employees that it is a top priority.

About the Authors

Lars Putzer is an associate principal in McKinsey’s Frankfurt office; Christos Sermpetis is a consultant and George
Tsopelas is a director in the Athens office.

Notes

1
Universal banks have multiple lines of business, including retail, wholesale, investment, and private services.

Related Articles on mckinseyquarterly.com

“Making talent a strategic priority”

“The people problem in talent management”

“What’s in store for global banking”

“Coping with the credit crunch: Opportunities for corporate banking in Europe”

We welcome your comments on this article: quarterly_comments@mckinsey.com

Copyright © 2008 McKinsey & Company. All rights reserved.