Over the past year, the big four banks' profits have primarily been driven by low bad debts as a result of declining interest rates, however, Westpac's (ASX: WBC) chief executive officer Gail Kelly believes that staff engagement and having "great people" on board are amongst the most important factors that will drive the bank towards further revenue growth over the next year.
Kelly believes that this is even more important at this stage than pushing out further on the risk curve or by cutting costs. According to The Australian Financial Review, Westpac currently boasts a significantly high staff retention rate, whereby staff turnover in the first year of employment is just 14% compared to the industry average of 25%, thus reflecting the corporation's focus on keeping staff happy.
Kelly said, "We are confident about growth (in the year ahead)… But the single most important thing is having great people, people who we can rely on, who are engaged, proud to be here, proud because they are adding value."
Kelly is also striving to achieve greater gender equality within the company. Westpac has a target of having women occupy 50% of positions within some businesses, and even more than 50% in others.
However, although the bank is striving for greater employee satisfaction and staff engagement, it has still repositioned a number of roles overseas or cut positions altogether – as have ANZ (ASX: ANZ) and NAB (ASX: NAB). Commonwealth Bank (ASX: CBA) remains the only big four bank to keep each of its positions within Australia and has actually increased staff numbers.
Many in the analyst community roll their eyes when the issue of staff engagement is brought up as a method to drive earnings growth, however, it really can make an enormous impact. Staff members who feel appreciated will help retain existing customers whilst also attracting new ones. What's more, they may not be so resistant to changes in the workplace, which is important as new systems come into play.
Foolish takeaway
Although the banks' earnings could certainly grow over the next year or two, their shares have become overpriced and remain unlikely to deliver market-beating returns in the long run. Investors would be wise to seek other investment opportunities.
