Can innovation solve the Fintech talent crisis?
Ask any Fintech leader their top three challenges right now, and talent is likely to feature among them.
Record low unemployment, closed international borders, the great resignation, remote workers, soaring salaries and a global skills shortage have created the most complex talent crisis in the modern era.
Business leaders are pleading with Government and the education sector to solve the problem. But with technology and business changing so fast, any help they provide could take years to produce any tangible benefits.
Many business leaders I speak to feel helpless right now. But what if you could solve the talent crisis in your business today?
The good news is there is a simple solution. The not-so-good news? Like innovation, the answer may be simple, but success comes from execution.
How can there be a talent shortage?
Planet Earth is home to 7.9bn people. We are arguably the most advanced civilisation in the history of humanity. Every company potentially has access to a highly-skilled and educated workforce, available anywhere, anytime (83.72% of adults have a smartphone and internet.)
Indeed it’s these conditions from which Fintech evolved. A startup with little capital can leverage cloud technology and smartphones to onboard and serve customers anywhere, 24:7.
So, I asked myself what would happen if I took the same innovative thinking and applied it to talent?
Could we solve the talent crisis in Fintech by applying First Principles and Design Thinking?
First-principles thinking solves problems by reducing them to their essential elements and building from the ground up.
But before solving the problem, I had to understand the problem. So I spent two years researching, including hundreds of founder interviews and data on 100 Fintech startups.
The research uncovered many problems, and I spotted recurring patterns, which helped me understand the real issue behind the talent crisis.
Some of the problems identified were:
- Less than 1% of Fintech founders have professional expertise in Talent and HR
- Less than 10% of Fintech startups (<50 people) employ an HR professional
- Startups that hired an HR professional as part of the founding team (first ten employees) had, on average, half the staff turnover
What became very apparent to me is that the ‘talent shortage’ problem in Fintech was, in most instances, an internal issue vs an external issue.
Necessity Drives Innovation.
Even with an HR/Talent professional in place, hiring for Fintech is complex. Fintech requires a unique set of skills and behaviours, making finding the right people difficult, especially if you embrace traditional recruitment methods.
How we work, communicate, shop, bank, listen to music and watch TV has changed massively over the last 15 years. But, the way we recruit people has not.
Here is a list of the most recent innovations in hiring.
1482 - Leonardo Da Vinci invented the resume.
1921 - Thomas Eddison developed the recruitment methodology still used today.
1923 - Alfred Sloan developed today's organisational management structure at GM motors
1962 - Myers Briggs personality profiling
1980 - Competency-based interviews
There’s an irony here that, like banking, the only innovation we have seen is digitising ancient systems and processes.
Sorry to break it to you, but there will always be a talent shortage in Fintech.
If we follow First Principles Thinking when asking the question ‘How do we solve the talent shortage’, one may conclude we are asking the wrong question.
In the corporate world, ‘Talent’ has become a ubiquitous term used to describe every employee. But when it comes to addressing a talent shortage, we must distinguish between skilled workers and talent.
A skills shortage and a talent shortage are two different problems.
Commonwealth Bank in Australia employs over 4000 software engineers. Yet, they are still lamenting a talent shortage. To put that number into context, that’s more software engineers than all BaaS companies combined.
So what leads to innovation? Skills or Talent?
Whether you are a Fintech or a tier-one bank, every company needs to innovate to survive. Therefore, if talent leads to innovation, then the most talented people will always be in demand. In theory, there will always be a talent shortage.
Take professional sports, for example.
Talent in Elite sports has a different definition than in the corporate world. A sports club consists of leadership, support staff and talent (players). Players are hired not just for their skills but for their ability to deliver performances under intense pressure.
And talent is paid accordingly. So a player's earnings and career success mainly depend on their outcomes and performances.
In Fintech, the expectations placed on employees are closer to talent in elite sports than talent in a bank.
- The fast-moving, high-stakes, high-pressure environment is not for everyone. There are high levels of scrutiny where people must own mistakes, adapt quickly, and perform. If they don’t, the business may fail. But if they succeed, the rewards can be significant.
If no one has made ‘the thing’ you are making, people must learn on the job or ‘fly the plane as you’re building it.’
Therefore, a person's propensity to learn a new programming language under pressure is more critical to innovation than proficiency in Golang.
Contrast the environment of a Fintech to a bank.
Based on our data, 90% of people who move from a large bank/financial institution to a Fintech startup leave within the first six months. So why is there such high turnover?
People are given a clearly defined task in a bank with support, training, tools, and resources. Compensated for completing tasks promptly, if an employee doesn’t deliver, the bank won’t fail. If an employee makes a mistake, they can hide it or blame someone else. This culture is pervasive in large institutions and has led to three CEO resignations from the Big Four banks.
This type of behaviour can also prove very destructive to Fintech startups. So if hiring from banks and financial institutions is too risky, where do you find talent?
It seems like a reasonable question to ask. But first of all, you need to ask, ‘how do I identify talent?’
Therefore, I have created a simple algorithm for assessing talent in Fintech:
Core skills + learning ability + performance under pressure + outcomes = talent
At Tier One People, we assess every candidate on these four criteria. Using this assessment, only 2% of candidates make it onto a Tier One People shortlist. Out of 150 leadership hires, 42% are females following these principles.
To date, the algorithm results in a 97% success rate compared to a 90% failure rate when hiring people based on their experience in a bank.
Apply Design Thinking to hiring.
Fintech 1.0 was all about picking the low hanging fruit. Banks were doing such a lousy job of digital and had such contempt for their customers that any Fintech with a decent CX could gain customers relatively quickly.
And this is precisely how I would describe the talent market. Fortunately, companies are doing such a terrible job of digital and treating candidates with such contempt that anyone who can offer better cx (candidate experience) will hire top talent.
Let’s face it, the candidate experience sucks. Job platforms, chatbots, online application processes and video resumes reduce the time for the recruiter at the candidate's expense.
An effective talent acquisition strategy mirrors an effective customer acquisition strategy.
Recruitment is all about sales and marketing. If you rely on job platforms as your primary distribution platform, you will always experience a talent shortage.
If you want to engage the best talent, an omnichannel strategy is essential, not buzzword bingo.
We stopped advertising on job boards three years ago at Tier One People and used the budget to create a podcast. As a result, the podcast has tripled the number of inbound enquiries we receive from top Fintech talent.
Combined with our partnerships (UK DIT, FinTech Australia, Blockchain Australia,) sponsorships, media appearances and content, a small business has created a globally recognised brand which attracts quality talent and clients.
Often, the best innovations come from reframing the problem and looking at it through the eyes of the customer. So when you start thinking of talent as people and as your customers - you are well on the way to solving the talent crisis.