THE WAR FOR TALENT IN BANKING: STRATEGIES FOR SUCCESS

New Jersey Bankers AssociationCFO Conference

November 15, 2016

Bill BorkovitzManaging DirectorKaplan Partners

The War for Talent in Banking

Today’s Agenda:

The Employment Landscape and Talent in the Banking Industry Today

Succession Planning: The Key to Your Future Star Search—Attracting Top Performers Developing High Potential Bank Leaders Show Me The Money Millennials: Workforce of the Future…and Present Future Bank Leaders

The War for Talent in Banking

MCKINSEY SHOWED THAT FIRMS WITH SUPERIOR TALENT MANAGEMENT EFFORTS GENERATE AN AVERAGE RETURN TO INVESTORS 22% HIGHER THAN THOSE WITH WEAK TALENT INITIATIVES. (The War For Talent)

Alan J. Kaplan, Founder & CEOKaplan Partners

Credit Trained Corporate Banker 29th Year in Executive Search & Talent Assessment Founded Firm May, 1994; 22 years of client success Industry Leader in Banking Talent Management Over 60 Bank President/CEO/Succession Assignments National Speaker & Author for Industry Associations Penn Liberty Bank Advisory Board of Directors Business Commentator, KYW NewsRadio SmartCEO Magazine Columnist, Talent Matters Association of Executive Search Consultants Global Board

Bill Borkovitz – Managing Director

31 Years Experience

8 Years Retained Executive Search 23 Years Corporate, Primarily Financial

Services

Private Equity Portfolio C-Level and Board ExperienceExtensive Banking CEO and CFO Search ExperienceFINRA LicensedNationally Networked

Kaplan Partners

Retained Executive Search and Talent Advisory Firm for Financial Services Firms:

Banks, Thrifts, MutualsAsset ManagementCorporate Financial Search Private Equity Portfolio Companies

Succession Planning and Management Assessment for:CEO SuccessionManagement DevelopmentBoard Search and Succession

The Country’s Only Retained Executive Search Firm Member of the ABA & ICBA, plus NJBA and 8 other State Associations

Today’s Employment Landscape

12/31/07 Unemployment Rate: 5.0% 10/31/09 Unemployment Rate: 10.0% 10/31/16 Unemployment Rate: 5.0%

New Jersey Unemployment: 5.3% New York Unemployment: 5.0% Pennsylvania Unemployment: 5.7%

Labor Force Participation Rate Still Low at 62.9%

Key Statistic: College Educated Unemployment = 2.5%

The Banking Talent Market

Market dynamics and perceptions have shifted significantly. Is there really more “talent” available?

Now 5,975 bank charters in U.S.(11/3).

Continued shortage of talented credit-trained lenders and revenue drivers.

Drive for more fee income = expensive hires (wealth, ins).

Compensation remains high to attract stars.

Lack of a well groomed “next generation”. Who is training your bank’s future leaders?

What is Succession Planning?

The process by which an organization seeks to create a continuity of leadership in order to maintain and enhance corporate performance, ensure uninterrupted operations, and increase the potential to continue as an independent institution.

A dynamic process, not a static event A multi-level exercise within the organization Includes succession at the Board level as well as the CEO

and Executive Management A subject which can no longer be ignored!

Why Talent & Succession Matter

Leadership Succession and Selection is #1 Responsibility of Bank Boards of Directors.

CEOs & CFOs Must Increase Focus on Development of a Superior Team of Bankers to Execute the Plan.

Regulatory Scrutiny of Succession Plans Rising.

Shareholders, employees, customers, competitors, communities are all watching your team!

Opportunities to win or lose credibility– along with customers and key employees– in the market.

Who is Involved in Succession Plans?

CEO Succession is a Board Driven Process Executive Management Succession (C-Suite) is a

CEO-led Process with Board involvement. Middle/Senior Management Succession is an

Executive Management Driven Process Keep pushing succession and talent development

efforts down deeper into the organization, and allow the cream to rise to the top.

Focus on the 80/20 Rule! Employees who are part of a development effort

will likely perform better and stick around longer.

How do we Begin Succession Planning?

The Strategic Plan Drives the Succession Plan; Business Plans and Talent Plans need to align.

Understand the composition of your workforce, and the demographics of key leaders. Survey your people.

Determine the critical banking/technical skills and leadership competencies needed to lead the bank and execute the plan. Evaluate existing leaders and managers to understand their

strengths, skill gaps, developmental opportunities and scalability. Remember the 80/20 Rule!

Create customized development plans for each keyindividual, including training, mentoring, coaching, rotations and feedback.

Monitor, Adjust, Report, Continue…

When do we Start Succession Planning?

Succession Planning is an ongoing process, so start now. Succession is Evolutionary not Revolutionary. CEO Succession requires: Understanding the targeted timeline until incumbent

retirement. Who is driving the timing—the board or the executive? Stay current with the strategic plan and new skills needed. Start at least 3 years from an expected CEO transition date. Think big: the company will get larger and more complex,

so the new leader profile must reflect this. Make Succession a Regularly Scheduled Board Topic!

Succession Planning: The Key to Your Future

What?

Why?

Who?How?

When?

Talent Management: Star Search

Technical/IndustrySkills

Cultural FitLeadership Competencies

High Demand Banking Skills

People who can generate business! By far #1! Commercial Lenders, Business Bankers, Mortgage

Originators, Branch Salespeople Wealth Management/Insurance Producers

Risk, Compliance, AuditCapital Strategy & Balance Sheet ManagementExperience with RegulatorsCredit Skills (never out of style)Technology and Operational folks who can reduce costs while building a growth channel.

Talent Management: Star Search

Why would a star join your bank today? Is it because… It’s a great opportunity. We’re really growing. You will be a Big Fish in a Smaller Pond. The Big Banks are still in trouble and losing ground. We are converting/going public/merging and you’ll

make lots of money on our stock. Our portfolio is in great shape–no worries. Trust us! The Regulators Love Us!

Talent Management: Star Search

Stars really want to know? Who are the Directors and key leaders running the bank? Career Upside; Where do I fit in the organization (ST & LT)? Does this culture foster growth & development of people? How strong is the company financially? Are land mines lurking? Can the bank win in the market? Is there a strategic advantage? Will the company really be here in 3-5 years? What is financial upside, short & long term? Can they make up

for what I am leaving behind? What kind of downside protection do they offer? Is it really worth making a move to join this bank at this time??

Talent Management: Star Search

Playing Hard to Get?: Top performers have many choices. Why here and now?

The better run banks are working hard to retain high potentials and top performers. This often involves promotion and/or compensation in multiple forms.

Executives are less willing—and able—to relocate:Work/Life Balance more important.Houses still under water on paper in some areas.Scarce housing at reasonable cost in some markets.Some smaller market locations not attractive.Trailing spouse issues with finding employment.

Talent Management: Star Search

At the end of the day, what is the compelling rationale for a top performer or star player to join your bank? There needs to be:

A significant enhancement to their skills. Meaningful career advancement/upside.

You need to make them whole. You need to pay them well.

People join Organizations but they leave Managers!

Developing High Potential Bankers

Key Strategies:

Talent development efforts aid the retention of high potential bankers.

Boss’s personal involvement is #1 retention tool (84%). Developmental stretch assignments are critical to

growing future leaders. The company is stronger whether you promote an

internally developed individual or not. Talent development programs do not need to be

expensive or fancy…just do it!

Developing High Potential Bankers

Key Tactics: Create a Personal Development Plan. Develop stronger and more varied technical skills

(Rotational Assignments). More training in “soft” skills; Consider Executive Coaching. Create an In-House Mentoring Program (or Seek a Mentor). Enhance Visibility with key clients and prospects. Join a Board: key industry group, non-profit, or both! Develop relationships with peer bankers, both within

and outside of your institution.

The Shifting Landscape of Compensation

Pay For Performance is the Wave Of The Present: Stakeholders prefer performance driven incentives. Easier to justify to investors and regulators. Allows for better management of fixed salary costs. Motivates High Performers.

Target a Performance Management System (incentive programs) for management and key employees that aligns everyone and differentiates better performers.

Incentive pay can be in cash, equity or both.

Incentives ideally paid over both short & long term.

Incentive compensation is necessary to attract stars!

Millennials (Gen Y)

Now the largest U.S. workforce segment, 86 million (born ~1985-2004). May be 75% of global workers by 2020.

Color blind, green, humanitarian. Smart, speak “cyber”; willing to work hard but must see

the rationale and career path. Workplace: transparency, integrity, caring, empathetic. Pair them with seasoned gurus for knowledge transfer. Embrace your future successors. Only 38% use bank facilities beyond an ATM transaction. 53% have some form of body art!

Millennial Career Goals & Aspirations

1. Meaningful Work (30%)2. High Pay (27%)3. Sense of Accomplishment (24%)4. Training & Development (22%)5. Flexible Work Hours (19%)6. Challenging Work (10%)

Source: Kleiner Perkins Caulfield & Byers and ICBA

10 Key Banking Skills for Future Leaders

Track Record Working with Regulators Experience in Balance Sheet Management & Capital Strategy Commercial Credit Skills Experience with Corporate Governance Technology Savvy, Including New Channels Updated Perspective on Risk Management Marketing and Social Media Knowledge Exposure to Fee Based Lines of Business Transaction and Integration Experience Strategic Planning Skills

10 Key Attributes for Future Bank Leaders

Authentic Leadership and Vision Broad-based Communication Skills & Executive Presence Cultural Agility The Ability to Assess and Attract Top Talent Adaptable and Flexible Strong Execution Skills Ahead of the Curve on Industry Trends A Focus on Accountability Builds a “Culture of Excellence” Knows How to Work Constructively With a Board of

Directors

A Closing Thought on Banking & Talent

The future of banking will be all about Capitaland Talent. Beyond abundant capital, successfulbanks will need the strongest possible team ofskilled bank leaders, board members andrevenue generators, to survive and thrive in thefuture.

Alan J. Kaplan, Founder & CEOKaplan Partnersalan@KaplanPartners.com610-642-5644Bill Borkovitz, Mng. Directorbill@kaplanpartners.com610-688-8989www.KaplanPartners.com