How the financial industry is preparing its next generation of leaders
Effective leadership is key to navigating the challenges facing the financial services industry, but the demands on leaders are changing. How are companies identifying the high-potential employees that will best fit these new needs?
In the financial industry, as in many other fields, successful leaders have traditionally thrived by navigating a complicated system – one that responds to rules, expert knowledge and rational processes. Today’s workplace challenges, however, are rapidly becoming more complex, with too many interrelated variables to be resolved by rules alone.
For example, teams within financial institutions may need to deal with the complicated structuring of a particular transaction, but also to contend with the complex challenge brought about by disruptive fintechs.
“The move from complicated to complex systems means that leaders who are very good at analytical, linear, structured problem-solving need to move to adaptive leadership, which is more about recognizing patterns, joining dots, and a lot around sensing,” said Rian Raghavjee, Global Head of Asset Management at global leadership advisory and executive search firm Egon Zehnder.
A helpful way to picture this shift is “moving from the dance floor to the balcony,” he said. “When you're on the dance floor, you’re worried about where to put your foot and the next step, not crashing into something, and you’re looking at the immediate space around you. But adaptive leadership is being able to step out onto the balcony and look at the entire floor, and recognize the patterns and the flow.”
Raghavjee said that in this new reality, people need to be able to evaluate leaders “not just on their ‘what,’ but also their ‘how.’” This encompasses things like: “What’s their ability to drive collaboration and innovation? How accountable are they, versus how they hold other people in their respective organizations accountable?”
Inspiring others
Historically, leaders have been identified among people who are good at their jobs, said Rebecca Kellogg, Global Head at UBS University, the bank’s in-house learning and development institution. “But being good at their job is not always a one-to-one equation with them being good at inspiring others to do that job as well as — if not better than — they do.”
That’s why it’s crucial to create programs “to help those people transition into effective leaders,” said Kellogg. “We invest in a combination of solutions to do that: self-directed learning, case studies, simulations, peer practice, peer coaching. The goal is to get the leaders to shift their focus from ‘what I do’ to ‘what we do, and how we come together as an organization, how we show up, and how we are accountable.’”
In line with the growing need for leaders to be agents of change, another emerging shift is a greater emphasis on coaching as a leadership style, said Mark Hoban, Chair of the UK’s Financial Services Skills Commission (FSSC). “This partly reflects demographic changes: how do people now want to be managed?”
Hoban said that by adopting a coaching style of leadership, firms can encourage all their people to learn for themselves and strive to adapt to a complex world. “It’s probably better in embedding longer-term, more sustainable approaches to organizations,” he said.
Notably, in its latest Future Skills Report, the FSSC, using data from consultancy EY, observed that coaching has a very large proficiency gap, where available skills fall short of the required level. This indicates a pressing need to upskill significant numbers of people in coaching (see Figure 3).
Forging leaders
Lara Partridge, HSBC’s Head of Talent Asia Pacific, believes that leadership development stands to be the biggest beneficiary of the industry’s transition to a skills-based approach.
“Leadership can often be quite an amorphous concept,” she explained. But as technology enables much more data to be collected from a variety of sources and analyzed in a much more granular way, “we’re going to be able to break it down into much smaller, more measurable parts.“
Hoban said that as firms begin to develop comprehensive assessments of their workforces’ skills, they will be able to identify with greater ease those employees that have leadership potential.
“You should definitely include leadership skills in there, including who self-identifies as wanting to be a leader in the future,” said Hoban. “Some people might want to be subject matter experts — they might not want leadership responsibilities.”
“If you know what your pool of potential leadership candidates is, and you understand their current skill levels, then that helps you think about what more do you need to give these people by way of training for the future,” he added.
Partridge said that having comprehensive data on each facet of employees’ leadership skills will pave the way for leadership training to become much more personalized, rather than have the same standard leadership development program for a group of 20 people.
“We can be much more individualized about optimizing leaders,” said Partridge. “That’s what I’m most interested in: if we’ve got someone who’s great, how can we get another 10% or 15% out of them from a leadership or a commercial outcome perspective? We’re going to be able to do that in a much more measurable and personal kind of way.”
External perspectives
In some instances, rather than cultivating leaders from within, firms might be better off bringing new ones in from outside.
“Sometimes you want to bring in a fresh perspective and break groupthink,” said Raghavjee. “You have many people that have been there for decades, and this might be an opportunity to freshen things up.”
Kellogg at UBS agrees that a new perspective can be valuable, whether it comes from inside or outside the organization. “It’s more about whether the leaders can see things from different perspectives and different angles, and then weave the story together to be able to inspire others. And to be able to produce as an organization, be part of the whole, not part of the one.”
Raghavjee cautioned, though, that bringing in leaders from outside can sometimes go wrong — although usually not because of a lack of competency or skills. “The big one is cultural fit — crudely referred to as ‘organ rejection’ — where they don’t fit in the culture. That may be because they try to bring in a revolution you’re not ready for — you just want evolution. Then there’s character, temperament, things like that.”
Another risk of bringing in leaders from outside is that high-potential people within a firm “might look at that and say, ‘what about me?’” They could well be disheartened because “they thought they were really good, but now the firm is signaling that they’re not good enough.”
That’s why talent development and management is so important, said Raghavjee. “For the most part, I would also recommend looking at and developing your high potentials — knowing who they are and developing them in a thoughtful, careful, rigorous way.”
Discover how the financial sector is navigating the challenge of skills-based hiring and retention:
In the age of AI, it’s human skills that employers want
The financial sector is undergoing a skills revolution
What skills will finance workers and organizations need in an uncertain future?
You may also be interested in
07 Apr 2025
How to keep your network warm
07 Apr 2025
Networking online: the dos and don'ts
Explore our programs and certificates
CFA Institute offers a diverse range of programs and certificates designed to meet the needs of finance professionals across various career stages and specializations.
