The future for HR in financial services will be digital and data driven. At least, that’s the Wall Street consensus. But, while the pandemic enhanced the strategic importance of the Chief Human Resources Officer in many firms, it also exposed HR’s lack of readiness for a data-driven future.

According to research from Sage, “65% of HR leaders say their teams have had a vital role to play in the pandemic, driving change, enabling remote working and supporting wellbeing.” In the same research, 87% of C-suite executives credited HR for “leading accelerated change and driving new ways of operating”.

However, the pandemic highlighted the lack of basic foundations within many firms when it came to their people data.

The stresses of remote working and concerns over the Great Resignation have highlighted the need for financial services firms to listen to, understand, and respond to the sentiment of their employees. At the same time, many companies are changing the way they look at talent development and skills building.

“In the long run, I believe almost every company will become more like a professional services company and less like a ‘hierarchy of jobs’ over time, says industry analyst Josh Bersin.

“Within each business function (IT, Finance, HR, Marketing) most companies already have lots of mobility, project work, and agility in people’s jobs,” he adds. “But once you start opening this up across functions, across business units, and across geographies – your company starts to feel more like a ‘global services firm’ and less like the product, services, tech, or other industry you’re in. And that’s actually a good thing.”

It’s true that some pioneering firms are taking the lead on deploying or developing new HR technologies, cleaning up their data, and rethinking the way they manage skills within the business. But there are many who point out that the industry will struggle to follow suit, for three main reasons:

1. Lack of basic data and data skills
As one senior HR insider at a major investment bank said: “That’s all very well those guys in the data team talking about how amazing all of this new technology is but where the rubber hits the road, as HR business partners we can’t get anything basic, let alone all this fancy stuff they’re talking about.”

In many organizations, the basic data is not available to support enacting any meaningful changes. It’s a huge task to go through the available data, sift through all the roles in a business, work out which skills sit within those roles, and tag those skills to each employee individually. This is a challenge for any large global bank with hundreds of thousands of employees in multiple locations, even if they are using an AI or machine learning tool to infer skills data at scale

As another senior HR insider revealed: “When Covid hit, it was a significant and time-consuming piece of work just to redesign the headcount report. It feels like we are a long way from predictive analytics.”

Having access to data is just the first step. Right now, the feeling in the industry is that most HR professionals don’t yet have the skills to create a data-driven culture. HR functions may therefore need to look at upskilling their business partners in how to interrogate, interpret and present data to derive meaningful conclusions, and devise convincing narratives that will influence decisions at the C-suite level.

2. Resistance to change
One senior HR leader at a large global bank told me about his experience implementing a specific tool to infer skills data. It took seven months to implement, whereas at the tech firms where he’d previously worked, the same project would have taken three weeks. While this is partly due to the bank’s archaic systems and the extra challenges that come with operating in a regulated environment, “another key issue was a cultural resistance to change within the bank”.

Resistance to new processes is common, but it can be even stronger when porting a data-driven culture from an industry like tech into a more traditional financial services environment.

Similarly, the switch from a role-centric view of talent to a skills-centric one is radical for financial services firms. One insider at a major Wall Street bank related how, when they piloted an initiative to proactively suggest internal moves based on ‘hot skills’, employees didn’t understand the benefits and reacted negatively. “Instead of seeing it as a means of identifying new career pathways and opportunities, people thought they were being fired and they complained,” he said.

3. Privacy concerns
Several industry insiders warned that financial services employees are not used to being surveyed, much less subject to having email and Slack messages analyzed using natural language processing, as is already common in many tech firms.

“This only works if they have a culture where employees are comfortable with being monitored in this way,” said one.

Where tech firms such as Microsoft have been using these techniques for years, their employees have already seen the value it can bring. They have seen the business using that listening data to fix problems and improve the organizational culture. Financial services employees have not had that experience. As a result, many will feel that this is an invasion of their privacy.

As another contact said: “Employees need to understand this information is confidential, and they need to feel confident that their privacy is protected. That comes down to clear, honest, and transparent communication from senior leaders around why they need this data and what they will do with it.”

The data revolution is inevitable, but it won’t be painless
While it’s clear that many HR functions within financial services firms are struggling to become data driven, the consensus is that this is inevitable. All functions are increasingly becoming data driven, and with the pandemic having highlighted the importance of a well-oiled HR function, forward-thinking organizations are not going to rest on their laurels.

As most financial services firms’ cultures evolve to become more digital, HR will have to follow. The only question is how painful that evolution will be. The obstacles are significant, and they will vary slightly from firm to firm. What is clear is that firms need to hire more data scientists and analytics experts into HR functions, and senior HR leaders are going to have to become more knowledgeable about data and technology in general.

The last message from the market is to start now rather than wait until conditions are perfect. As with most revolutions, you can’t control it, but HR professionals in financial services can control how they react to and attempt to harness it.