A secluded perfectionist? A stressed striver? How financial services companies can use segmentation strategies to help Gen Z talent thrive

Customer experience — ask any banking executive about what they’re doing in this area, and you’ll hear a long list of initiatives designed to create easy-to-use and tailored experiences for their customers. You’ll probably hear the terms?“personalized services” and “customer segmentation” being thrown about.?

Ask the same executive about?employee?experience and you’ll get a much less detailed response. In most financial services firms, creating working conditions that are tailored to the individual is an aspiration, if that.

It shouldn’t be. The industry’s newest workers, Gen Z, are skeptical of the banking industry and many do not see it as a natural career choice. And, that’s a problem because Gen Z — those born roughly between 1997 and 2012 — will account for?27% of the workforce?by 2025. To have a chance of attracting and retaining the best talent from this generation, financial services firms need to tune in to the demands of Gen Z and give these workers the tools and environment they need to flourish.

It's an old saying in human resources:?treat your employees like your customers. We know that Gen Z are demanding a more personalized customer experience and their attitudes toward work are no different. So, what can be done to bring the customer experience and the employee experience in line??

To explore, I teamed up with?Akshata Udiavar, Principal, Consumer Banking and Wealth Strategy, Ernst & Young LLP, and Marcie Merriman, Managing Director and EY Generational Dynamics Lab Leader, Ernst & Young, LLP.

Five Gen Z archetypes and what they mean for financial services firms

This generation might have one buzzword for its name, but they are all not ubiquitous. In fact, it is a cohort of five distinct types of individuals.

The 2023?EY Gen Z Segmentation Study?identifies key psychographic segments:

• Stressed Strivers:?high achievers who are driven by a fear of not being enough (28% of Gen Z).
• Big Dreamers:?expect to do well and make money, but don’t put in the effort?(24% of Gen Z).
• Authentic Activists:?driven by an obligation to help save the world (21% of Gen Z).
• Secluded Perfectionists:?focused on being the best they can be, for the love of it (15% of Gen Z).
• Carefree Constituents:?“go with the flow” and follow the lead of others (12% of Gen Z).

Given the wide range of segments that exist in the workforce, leaders need to tailor their management styles in line with the characteristics of each archetype in order to get the most out of their Gen Z workforce.

Stressed Strivers need recognition and stability

Stressed Strivers are the most likely of all segments to place high value on?job and financial security. This means that leaders need to use a reassuring management style that emphasizes when these workers are meeting expectations and, where relevant, exceeding them. They have a strong desire to improve and may over-exert themselves in order to get there. This means it is important for managers to proactively guide these employees by providing constructive ways to progress without burning themselves out.

Stressed Strivers may be particularly unnerved by negative news about their employer, such as news articles about poor financial performance and internal notifications about cost-cutting and layoffs. For this kind of worker, it’s important to deliver this type of news in a way that balances against Gen Z’s need for stability, personal security and trust. How layoffs are communicated is crucial: financial services firms need to be honest and transparent about who is affected and why, what the results will be, and how it will help the business to be more resilient in the long term.

Stressed Strivers are especially prone to mental health risk brought on by work, including burnout. Managers must keep a close eye on these risks and be constantly helping these employees set personal boundaries, respect work-life balance, and take advantage of firm wellness and flexibility programs. What Stressed Strivers do is raise their hand to take on more work and, as managers, it is easy to overload them given their desire to please. This is a dangerous pattern. Instead, managers must fairly allocate tasks across the team, and state realistic performance expectations to Stressed Strivers — making it clear that additional effort is not necessary once goals have been achieved. To take one step further, some managers may even consider holding these kinds of employees to account for not managing work-life balance – for example, by penalizing them for not taking assigned vacation time.

Stressed Strivers are often prone to fearing the worst-case scenario. This can lead to an aversion to taking risks in fear of failure. As discussed in our recent article, agility is a desirable trait in banking transformation, so managers are wise to recognize and encourage fast failure across the workforce, within the boundaries of the bank’s risk limits.?

Another vital step is creating a progressive culture and a working experience that doesn’t strain staff in the first place. Remote or flexible working models are a good start, but leaders can do more to set the standards by openly respecting their own wellness needs (i.e., take vacations, not working at all hours). Leaders who set an example by prioritizing downtime or personal time to reset and recharge can do wonders for the Stressed Striver.???????????

Secluded Perfectionists need enablement

Management needs a different approach for Secluded Perfectionists, who are deeply passionate about their work and strive to be the best they can be for the sheer love of the work.

For workers in this category, managers need to provide them with the runway and the space to thrive. This could mean providing employees with targeted and outcomes-oriented performance coaching, giving these employees the autonomy to achieve performance outcomes in their own way, and articulating interim or milestone performance indicators to help these employees track their own progression.

Employees in this category could exist in many job families across a bank – including front-office or enabling functions. However, they may be most fulfilled in an environment where real time data and analytics are available to help them track their own progress. Examples could include revenue-generating positions that produce measurable outcomes for a bank, that can be quantified, and monitored, over time.

Secluded Perfectionists are energized by the focal aspects of their roles, and are frustrated by tasks they perceive as ancillary, or trivial. Employees in this category are likely to be fast adopters of automation or operating model changes that reduce the administrative burdens of their role. In other words: they can be excellent change agents. It could also mean that these employees are at risk of not meeting their day-to-day compliance obligations where they are seen as a distraction. In all firms, this is a risk that managers are wise to closely monitor in a highly regulated financial services environment. This is even more so the case in firms that are actively working to strengthen their company’s risk culture.

Authentic Activists need purpose

It is possible that some Authentic Activists have avoided the banking sector as an industry for employment. Instead, choosing industries such as medicine, education, or not-for-profit in order to leave a positive stamp on the world.

This is a risk for banks since the percentage of Authentic Activists within Gen Z is significant at 21% of the U.S. population. However, the news is not all bleak: there are a range of jobs that exist in banks that could be attractive to talent in this segment.

Examples includes roles focused on diversity, equity and inclusion, employee wellbeing, sustainable finance, climate risk, financial inclusion, cyber-security and more.

To seize this opportunity, and as discussed in prior blogs, the narrative around banking careers to candidates and inbound talent should portray a strong message around the social impact of banking careers and the role of banks in society – including the ways in which banks support the financial wellness of underserved communities and contribute to the green economy through sustainable investing.

Trust is the gateway to transparency

While there are certainly nuances within the generation, one thing they share is their skepticism, especially of big companies and government. They trust large businesses to do the right thing only about a third of the time. And across all sectors, financial services is one of the least trusted sectors in the eyes of Gen Z, only behind social media companies.

How can financial services firms build trust with Gen Z?

As discussed in some of our previous?blogs, transparency is crucial. Public claims about environmental or social issues that don’t match reality will undermine trust, so financial services firms need to be realistic about where progress is being made and where there’s still work to do.

Unlike their predecessors, Gen Z rely less on traditional sources of information like annual reports and financial statements to form opinions. Instead, they will scour the online presence and social media footprint of a company to form opinions and take stock of a company’s impact.

Since Gen Z is not afraid to call it out when they perceive inauthenticity, it is best for a company to control its own narrative through transparent communication practices. This might, for example, involve publishing thematic information on the gender pay gap. Many companies (financial services and others) have work to do to achieve gender-based pay equity and Gen Z knows it. Instead of tightly guarding this information, firms may be better to reveal the headlines of their analysis, even where the message is bleak. This kind of vulnerability is typically well received and prevents the narrative from taking on a life of its own (which can sometimes paint a picture that is worse than true realities). ??

As creatures of community, we humans forge trust through face-to-face interaction, and often in informal settings such as after-work social events. As discussed in our recent blog on the?Gen Z challenges in FinTech, a lack of in-person connectivity can lead to a range of negative outcomes like insufficient bonding between managers and teams and challenges in building a tangible culture. However, many financial services firms are mandating on-site work – at least in some form – which could pose a comparative advantage in earning workforce trust. ???

Technology as a way of life

Gen Z is the most digitally native generation to date. As consumers, they have little patience for brands with clunky, outdated digital experiences. That extends to the employee experience, so financial services firms need to provide Gen Z with the latest digital tools that enable them to work and collaborate effectively.

Earlier, we talked about the importance of transparency. This is a topic we’ve also explored in our article,?How Gen Z will make or break the future of banking, under the banner of radical transparency. There, we discuss the growing expectation for real time data and analytics as part of the employment experience. In the same way that Gen Z have grown up being able to order a car service at the tip of their fingers and receive running updates on car type, fare, driver name and location, they may expect this kind of transparency at work as well. Apps and tools that provide employees with real time information around relative compensation, promotion opportunities and individual performance may become more than an aspiration, but, an expectation of Gen Z. And, in today’s world – this would be an expectation very difficult to satisfy in many financial services firms.

Financial stability is key

Another common feature across Gen Z archetypes? Financial insecurity.

Some members of Gen Z have entered the workforce in a constrained economic environment. Particularly those that entered in 2020 – the most uncertain times of COVID-19 pandemic – or, in 2023, where reductions-in-force and cost cutting have increased in line with recessionary threats.?

Many Gen Z recall the financial crisis of 2007/08, and may have seen their parents lose jobs, re-mortgage their homes, deplete savings and more. This, among other reasons including constant headlines of economic insecurity, has led to a generation that is keenly aware of financial stability – and, fearful of not having it.

What this means for leaders is that investments in financial wellness benefits will be well received by Gen Z. This could include student debt forgiveness programs, financial literacy programs, optional stock purchase programs or benefits that support family planning. It also means that Gen Z will expect to understand how their compensation and benefits programs work, the full value of their total rewards, and possibly, their near-and long-term earnings potential in the firm.? ?

A tailored approach

Tailoring management styles to match unique learning and attitudinal styles is only possible if employees have first been psychographically identified. Managers could explore the use of unique tools, such as EY’s Gen Z Segmentation Typing Tool to achieve this goal. Understanding Gen Z recruits and their unique perspectives and motivators is just a starting point. This information can provide the basis for having effective conversations with employees about goals, stressors and the working environment. This will require new approaches to leadership and management training that can benefit everyone – both managers and employees alike – in the end.

This is the fifth in a series of five blogs that explore how the financial services sector can attract and retain Gen Z talent. These follow our first report,?How banking on Gen Z talent will make or break the future of banking.

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