Asset-management firms make investments on behalf of other people and institutions. Since the success of these firms depends to a critical extent on the quality of the talent that they employ to make investment decisions, they must excel at recruiting, developing, rewarding, and retaining talent, right? Wrong, according to their own people.

The message on talent from asset-management employees to their bosses is an overwhelming "could do better," as a McKinsey survey shows.¹ The bosses might be forgiven for being surprised. After all, in the United States the average earnings for investment managers are almost double those for lawyers. How could employees feel that they are badly treated? And what if they do?

These feelings do matter, for the survey shows that companies perceived by their employees to be good at managing talent are also the ones doing well in the market (Exhibit 1): the three firms with the best results in each area were almost always the same. Whether or not these firms really are the best talent managers hardly matters. After all, labor in this industry is highly mobile, but if good employees believe that they are working for the best, they will stay put.

Asset-management employees want these three changes:

More time and attention from top managers. Only 38 percent of the industry’s staffers feel that their chief executive officers are heavily involved in assessing and motivating senior professionals and managers; in other industries, 73 percent of respondents reckon that talent management is firmly on the CEO’s agenda. Only 43 percent of asset-management employees believe that their senior managers see managing talent as an important part of the job, compared with 67 percent in other industries. This belief, like all of the others, is held consistently across geographies and functions—but not tenures: junior employees feel the bosses’ indifference much more strongly.

Improved recruitment. Only half of those surveyed think that the quality of their colleagues has improved in the past three years. Although most believe that recruiting processes are quite sophisticated—recruiters know what skills and types they need—the results of the processes are perceived to be poor. Only 38 percent of respondents feel that their companies recruit better staff than do competitors, compared with 55 percent in other industries, and many believe that good candidates turn down the respondents’ own firms.

Sharper distinctions between high and low performers. Most of the respondents think that their managers have effective processes for evaluating their performance but don’t use that information to develop and reward potential high performers or to move out low performers. Only 36 percent feel that their firms really work hard at keeping good people, and only 35 percent have noticed their firms taking steps to move out poor performers. But a resounding 83 percent think their firms should get rid of poor performers.

To reward success, the respondents are looking for more than just extra money. A large proportion believe that their pay is high and that their prospects of creating wealth are good—though a statistically impossible 60 percent of them reckon that competitors pay better than their employers do. But the respondents feel strongly that pay differentials are not used sufficiently to manage the performance and job moves of the staff (Exhibit 2).

Nor, it would seem, are nonmonetary approaches. Exhibit 3 arrays all of the levers that are used to manage talent. Employees think that the levers below the diagonal line are important but not wielded effectively in their firms. Compensation lies well below the line, but so do motivators that are much cheaper and easier to deliver, such as feedback, mentoring, promotion, and training. Asset managers could manage their talent more effectively for less than they spend now on managing it poorly—in the eyes of their employees, at least.