The dual demands for digitization and innovation in banking are among the greatest challenges facing today’s banking leaders. “Whether you’re the CEO of a global bank, the founder of a venture-backed startup or a team member on a transformation initiative,” writes Samantha Ghiotti, partner at Anthemis Group, “you should be concerned about how to lead in a digital world.” Noting that “purely analog environments no longer exist,” Ghiotti says the rules of leadership are changing – along with everything else in business.
In its research report, Does digital leadership in banking really matter?, Accenture classified banks as Digital Focused, Digital Active, and The Rest, concluding that “digital maturity is proving to be a factor that will separate future winners from losers” and that digital leadership “drive[s] superior economic performance.” Digital maturity, however, is not easily attained; Gartner found that two-thirds of commercial banking leaders lacked the confidence to “overcome legacy systems” and characterize their digital strategy as underdeveloped.
While legacy leadership, as Gartner points out, is often seen as an obstacle to digital leadership, Jim Marous of The Financial Brand believes the two can co-exist. Citing a five-year research collaboration between MIT Sloan Management Review and Deloitte, Marous notes that legacy leadership skills can form the foundation for digital leadership but must be supplemented with what the research found was “the single most important skill was to succeed in a digital workplace, the presence of a transformative vision.”
On the innovation front, researchers Ümit Hacıoğlu and Hasan Dincer studied innovation and leadership strategies in banking, concluding that these strategies “closely attached to success and sustainability in a competitive environment.” Financial-market blogger Chris Skinner, however, points to the obstacles to banking innovation – regulation, legacy systems, and a risk-averse culture, barriers that he declares to be “false constraints.” Encouraging bankers to be courageous in the face of these false constraints, Skinner says he doesn’t know “one bank that has not been transformed if the leader has the courage, capacity and competency to make the change work.”
Additional challenges to banking leadership include technology, regulation, competition, succession, changing customer expectations, talent management, and leadership development.
Digitization in banking has received a major kick in the pants by the COVID-19 pandemic and is likely to progress at a faster pace as a result. “In addition to accelerating digital adoption, the crisis has also served as a litmus test for banks’ digital infrastructure,” state Mark Schilling and Anna Celner, authors of a Deloitte report, 2021 Banking and Capital Markets Outlook. The authors note that banks have handled the crisis well and have “played a crucial part in stabilizing the economy and transmitting government stimulus and relief programs.” On the downside, McKinsey research in its 2020 Global Banking Annual Review identifies a two-part pandemic-provoked issue for banks – severe credit losses followed by a “profound challenge to ongoing operations that may persist beyond 2024.”
Top leadership roles in banking include Chief Banking Officer, Chief Financial Officer, Finance Director, Banking and Commercial Loan Manager, Bank Vice Presidents, CEO/Bank President, Hedge Fund Managers, Controller, and Senior Direct Sales Representative. Investment banking’s top echelons include the roles of Vice President, Director, and Managing Director.
Statistics on women and other under-represented groups in banking leadership are hard to come by because, as a US House of Representatives report, Diversity and Inclusion: Holding America’s Large Banks Accountable, states, “banks and other financial services firms do not fully disclose their diversity and inclusion data or policies.” The committee behind the report found that bank boards of director and rosters of senior employees are not diverse. They also determined that women comprise just 29 percent of senior-level banking roles and non-white leaders account for 19 percent. Board of directors members of large banks are 80 percent white and 70 percent male, the report states. The report makes a number of recommendations for improving banking diversity and inclusion, starting with a mandate for banks to disclose their diversity data.
Banking, as noted above, comprises numerous leadership roles with varying requirements. Joseph Mapue’s comprehensive article, 27 Finance Roles to Know in 2021, covers the preferred background for bank managers, which includes, at minimum, a bachelor’s degree in business, accounting, marketing, or finance, along with sufficient experience to provide expertise in lending, credit facilities, deposit accounts, and investment instruments and deep regulatory and legal knowledge. Mapue also profiles typical requirements for investment bankers, suggesting an MBA adds to a candidate’s marketability and value, as do industry certifications. For a deep dive into the investment-banker role, see How to Get into Investment Banking, by Brian DeChesare, whose comprehensive guides to financial roles have been cited in previous articles in this leadership series (for example, What It Takes to Be a Leader in a Private Equity Firm). Loan officers, mortgage advisors, and personal bankers are also described on Mapue’s list.
As banking leaders continue to transform into digital leaders, a significant gap in desirable characteristics is a lack of emotional intelligence. That’s the assertion of a Korn Ferry report, Success factors for digital transformation in banks. “This should raise a flag for banks,” the report warns, “because research suggests that emotional intelligence is twice as important as cognitive ability in predicting outstanding performance.”
Additional desirable leadership characteristics include the following:
Leadership Styles in the Banking Field
While most research on leadership styles in the banking sector has been conducted outside the US, Laura Van Eer argues for an agile leadership style in banking, suggesting that purpose, design, and culture should be the focal points of such leadership. “Transforming the old organizational banking structure to a new agile organization requires new leadership,” Van Eer writes on LinkedIn.
Korn Ferry’s Success factors for digital transformation in banks report notes that 40 percent of banking leaders rely on one dominant leadership style. To a greater extent than in other fields, the report notes, that style in banking and financial services is a coercive/directive leadership style. “This narrow use of leadership styles,” the report states, “constrains leaders from flexing and adapting—traits that are required to remain agile through a transformation, to engage and motivate others successfully, and to respond to the dynamic financial marketplace.”
These resources offer additional insight on leadership in banking: