Reining in Wall Street's Rainmakers

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Managing talent successfully, particularly those who possess scarce skills and are in high demand, is a tough chore—and a universal challenge. As our own research and experience has shown, attracting and retaining the right talent ranks as one of the top concerns for business leaders, and in the developing economies, we have found it usually to be the top issue. But financial reward isn't the only driver of engagement and retention, and indeed, perhaps more care needs to be taken in recruiting those people who seem to be motivated solely by it. Career-growth opportunities, positive team experiences, learning opportunities, objective performance management, and links to rewards are all values that the younger generation in particular embraces. They also reflect good practice.

Of course, there are examples of companies that have done it right, and you have only to look at some of the survivors of the current crisis. One of the large global firms we work with remains a market leader—not by chance, not because of a handful of star rainmakers, but because the company has invested in recruiting, developing, and tracking talent across its global workforce. It understands what skills and expertise exist within its various geographical areas and business units, and it incentivizes the appropriate behaviors by rewarding those who take a long-term view of success. This firm is conservative in assessing risk, but it also calculates bonuses based on multiyear—not single-year—results, and incentives are team-based. On every decision—from a PowerPoint presentation to a multibillion-dollar investment—this firm's cultural norm is, "Check your thinking with someone else."

What Comes Next?

As the financial services industry recalibrates the basics of financial capital and sound finance practices, this is the time to envision a strong "human capital" balance sheet as well. What talent and skills will be needed, and where will they come from? What sort of leadership behaviors and culture are needed, and what sort of operating model and governance structures are needed to avoid these problems in the future? The challenges for leaders at all levels have now increased dramatically, not least with the mergers and consolidation of the industry into fewer, very-large-scale universal banks, or "superbanks."

Structural reforms will be needed in the way high performers are compensated and incentivized, with more of an eye toward long-term sustainable business performance and effective risk management practices. There will also need to be better linkage of reward systems to improved performance management practices, talent-development practices, and leadership development. At the same time, creating a culture with the underlying governance structures of greater accountability and collective risk management will need to be balanced with maintaining the entrepreneurial spirit that has driven success and growth in the past.

None of this will be easy. The workforce in the financial markets is now gripped with fatigue and fear, and no one can say for sure when this crisis will end and when we will see more sustained stability. A collective response is required, including intervention by regulators who want to take action to curb the excesses. Confidence will need to be rebuilt, and the damage to the image of the industry will likely last some time, which will affect the recruitment of new talent as well.

The Emergency Economic Stabilization Act of 2008, passed into law on Oct. 3, includes limits on executive compensation. Lawmakers may not agree on much—but none of them wants to use taxpayer money to prop up a financial institution or its leaders unless there is some return and much greater accountability. Let's hope, at the same time that we desire more regulation, we don't also strangle the geese that have been laying many golden eggs.

As in any crisis, opportunities will also emerge. The ability to execute new talent strategies and create more collaborative and responsible corporate cultures will distinguish the survivors in the new financial services world and mark the leaders. And now more than ever, gaining additional market advantage will require swiftness in execution and the ability to understand and manage change rapidly.

Peter Cheese is global managing director of Accenture's Talent & Organization Performance practice and co-author of The Talent Powered Organization. Katherine LaVelle is managing director of Accenture's Talent & Organization Performance practice for the financial service industries.