Saturday, May 29, 2010

Be all that you can be.

Banking’s largest investment is in its people. I have recently written about how critical our people are to the bank’s success. Executives often lament to me about the lack of quality, experienced bankers in the marketplace. They recall fondly the days when large banks would put recent college graduates through management trainee programs, credit schools, and the like. This created a healthy pool of qualified candidates that wanted to move from large banks to community financial institutions.

Those programs are gone now, and their alumnae are aging. This leaves a gap between the seasoned banking professional, and the entry level banker. Making matters worse, the media coverage of our industry portrays us as a bunch of unethical miscreants, making it difficult to attract quality people. While this portrayal hurts our efforts to attract the best and the brightest, our self-imposed obsession with “experienced” bankers plays a much more significant role, in my opinion.

Imagine if Southwest Airlines, in its infancy, searched for an airline executive to run the company. Would we have the innovative, point-to-point, low-fare strategy we have today? Herb Kelleher, one of the founders and former CEO, was an attorney. What if IBM, in a tailspin, hired an experienced tech executive in 1992? Instead they hired the former CEO of RJR Nabisco, Lou Gerstner, who led them back to relevancy. Nabisco!

Why we are so obsessed with “experienced” bankers is beyond me. Given the challenges my clients are having with their current employee base, one would think to take a fresh set of eyes to our hiring practices. On this Memorial Day weekend, let me make a suggestion.

I spent seven years in the US Navy. I was a cryptologist. This has no relation to banking. I did not learn how to calculate a debt service coverage ratio. I did not learn how to be proficient at the Jack Henry Silverlake system.

Here is what I learned: How to manage, and quite often manage more people than most bank executives today; how to lead, and lead people from varied backgrounds; how to follow; how to learn; how to teach; how to speak; how to write; how to counsel; how to give and accept criticism; how to work under pressure; how to be flexible; how to hold myself and others to high standards; how to work hard; how to persevere; how to win.

Every military veteran can speak of similar experiences and skills. We are not “experienced” bankers. But could we be?

In community financial institutions’ quest to remain relevant to our customers and communities, perhaps we have to look elsewhere for the type of employees that will carry us into the future. Limiting ourselves to a shrinking pool of aging candidates only artificially increases their salary demands, lowers the quality of our employees, and strengthens the status quo.

Be different. Be relevant. Think to the future. Hire a vet!

- Jeff

Saturday, May 22, 2010

An open letter to bank marketers...

Change is difficult. Consider the difficulty in changing our own behaviors. A friend of mine that runs fitness clubs on Florida’s Gold Coast told me that it can be more effective to increase weight training in my workout regiment if I want to shed some pounds because muscle burns calories. This required me to rethink and change my workout routine. The end result: I decreased my cardio workout and increased weight training five measly minutes.

I did not doubt my friend’s advice. I had difficulty changing my routine, a routine that is totally under my control. Imagine changing the culture of a whole organization. To my bank (thrift and credit union) marketing friends, I throw this challenge to you.

The talent of the individuals facing me these past two days at the ABA School of Bank Marketing Management in Dallas was impressive. Collectively, they have intelligence, education, intuition, and the ability to think strategically. Marketers, in my experience, have demonstrated a greater acceptance of the need for cultural change in banking.

But there is a challenge to them. In many instances, they have been marginalized in their institution; relegated to running the ad budget or organizing the next customer mixer. Many, if not most bank employees, think about the next loan deal, or the next CD promotion. Marketers are the proverbial right brain thinkers in a left brain world.

But banking is changing rapidly. The need to develop a vision and a strategy to support achieving that vision is greater today than at any time since post WWII. If our bank is simply an efficient processor of debits and credits, are we needed? There are plenty of other financial institutions to fill that role. Each bank must assess where it stands in its communities and among its customers. Once completed, they need to identify the type of bank they want to be and set about getting there.

Marketing is in a unique position to play a critical role in evolving our industry and be the lynchpin for cultural change (see link to Susan Heathfield’s blog on organizational cultural change below). The personality of Marketing leaders are typically well-suited for strategic thinking. They have their fingers on the data about the bank’s customer base, markets, and prospects that is critical to creating strategy. They have the skills to design service standards that are truly superior, to implement training that goes beyond compliance, and to demonstrate to employees how to execute on those standards.

But how should a bank marketer implement cultural change in an industry that has not yet embraced it? How should one convince a CEO that the long-term relevance of the bank is dependent on cultural change and not simply minor tweaks to business as usual?

I don’t think this will be easy. But I find the marketing function to be in a unique position to start the process of cultural change. Marketers intuitively recognize the need for change, have the ability to pull back the camera and think strategically, and have the ideas to show a path to successful change and lead their banks back to relevance. Take the initiative.


Monday, May 17, 2010

Oysters and Pearls. Banking's biggest challenge: Our people.

There is a lot more focus on bank strategy today than at any time over my career. Some of it is regulatory driven, as banks that do not have a strategic plan are being criticized in their exams. So, there I sit, facilitating strategic planning sessions where board members and senior managers dream up the bank they want to be, yet intuitively know they don’t have the right employee mix to successfully execute on their plan.

I recently had a strategic discussion with the head of human resources for a client. She gave the opinion that banking was perceived by employees as a safe industry, and therefore are staffed with those that seek safe jobs. Not a ringing endorsement of the quality of people in banking.

I think she may have a point. Banking has evolved quickly over the past 20 years. Maybe the evolution was not as quick as, say, the tech industry, but quick with regard to banking. The people that occupy critical seats within the bank were bred in a far different banking environment. Strong operational personnel were key, where business development and relationship management may not have been as important to a bank’s success.

Now things are different, yet the people have not changed. I’m not sure we have developed the right mix of finders, minders, and grinders. It seems the key finders are commercial lenders. Minders tend to be branch personnel, who take care of customers once they become customers, and portfolio managers in lending, who also take care of existing commercial loan customers. The grinders are the back office personnel that make the engine run. Do we have the right mix of people to execute our strategy?

I often hear that we lack the finders, and I agree with the point. But if you believe that most new business comes from existing customers, than your minders are also critical to your success. Take my business, for example. Greater than 80% of my company’s new consulting engagements come from existing customers or ones that we did business with in the recent past. Did we get those engagements because of our finders, or because of how well we served them through our minders? There is probably a little bit of truth in both.

I am no expert at this, but in my experience the personality traits of the hunter (i.e. the finder) tends to be different than the caretaker (i.e. the minder), and the button masher (i.e. the grinder). Trying to turn a grinder into a finder is pushing the proverbial rock up a steep hill, and vice versa. You may be able to migrate between finder and minder with the right person, or between minder and grinder. But it seems a stretch to turn an “oyster” into a “pearl” (Jimmy Buffett song reference, see the accompanying video).

The key for bankers is to identify the type of role each position in your organization plays. Is a branch manager a finder, minder, or grinder? If so, does the person in that role have the personality to succeed at it? You can make your decisions from there.

This reminds me of when I coached a girls fastpitch softball team. Softball is different than baseball in that the batting order is developed to move players one base at a time. In baseball, you put your biggest sluggers in the 3, 4, and 5 position. Not necessarily so in softball. We built the order using the “get-em on, get-em over, get-em in” philosophy.

For example, the person hitting second should be strong in “get-em over”, because we put a strong “get-em on” person in the leadoff slot. We then gauged what the hitter’s second strength was, and planned accordingly. The order was designed to give the hitters the best chance at succeeding at what the team needed when they stepped up to the plate.

Bankers should consider a similar philosophy in building their lineup. Much like a sports team, they should also consider continually upgrading by always searching for good outside talent, regardless if a position is available or not. You can replace those lower performers with better prospects, upgrade your lineup, and put your best team on the field. As in sports, the value of your bank is driven by the quality of people within it.

- Jeff

Thursday, May 06, 2010

Is the pie getting smaller?

I have what I consider a very astute friend. He’s a relatively young guy (in his 40’s), and seems to be very smart with his money. I perceive him as being a very good bank customer. When he told me he does a family balance sheet every year, he piqued my interest. I asked if he would be willing to share it with me in common-sized format, changing the numbers to percents of his total assets.

He only counts his financial assets and liabilities, and only counts fixed assets such as his home if he borrowed against it. Having a mortgage and an auto loan, he therefore counted his estimated market value of the car and home in his assets and included the loans in the liabilities. The results of his efforts are in the accompanying table.

My suspicions were confirmed. Less than 14% of his family’s assets were in a bank. Brokerage companies and mutual funds were the benefactors of the majority of his financial assets. His mortgage, the only significant liability, was with a credit union. The credit card balance was de minimus, and as you would suspect is with a large bank.

Is my friend’s balance sheet typical? I would not base strategic decisions on such a small sample. But perhaps we should reflect on our own family’s balance sheet and use a little common sense. In my opinion, my friend’s situation is probably typical for a family in their 40’s. It is perhaps not typical for those in their 70’s, as they may have more in the bank. It is these customers that give the banking industry the false sense of security and results in only minor tweaks to business as usual.

Banks can also look at the nationwide growth in deposits for comfort. In the past ten years, deposits in FDIC-insured institutions grew approximately 7.4% annually*. But wait, in the past two years, deposit growth slowed to 4.7% annually.

I suppose the good news is there are fewer banks almost every day. Through mergers or failures, the flock is being reduced. That may also give us the false sense of security that all will work out for those that survive. But I suspect it’s not. Preferences are changing, particularly from one generation to the next. Younger families are putting their serious money outside of the banking system.

If you believe this trend to be true, what is your strategy to deal with it? Should you accept it at face value and set your sites squarely on competitors to fuel your growth, going toe to toe for their customers’ 14%? Do you buck the trend, trying to win back a greater percentage of the next generations’ balance sheet, increasing wallet share to, say, 25% or greater? Or do you expand into lines of business that are already taking business from you, i.e. brokerage or mutual funds? Perhaps you should send up the white flag on retail and focus on businesses that tend to have a higher percentage of financial assets with banks?

I think the answer lies somewhere within the preceding paragraph, and perhaps a combination of the above. What seems clear is that sitting back and doing nothing assures your future. You will have none. Put up the for sale sign. Investment bankers could use the business.

- Jeff

*Source: FDIC

Sunday, May 02, 2010

Book Review: The True Leader by Jamie Marsico

A+ I enjoy reading books, both fiction and non-fiction. When I read a book related to banking and I perceive it as a “B” grade or better, I’ll tell you about it here in my blog. This is an exception. The True Leader has no relation to banking. To those blog readers expecting my humble opinions on banking, I apologize. But to those blog readers who are parents and/or grand-parents of children 8-12 years old, bear with me, if you will do me the honor.

Less than a year ago, my 11 year old daughter, Jamie, wrote a book, The True Leader. I encouraged her, thinking the journey on its own would be worth the effort. A few months ago, she completed it and said she was ready to seek publication. Publication! I could not discourage her. We went through the cycle, seeking publishers, proof-reading, then finally editing. It was a lot of work, but when Jamie said “nothing is going to stop me from getting my book published”, I was immediately onboard with her.

And Thursday, April 29th was the day… the day her book went for sale on and other retail outlets. I cannot describe in words the pride I feel the day I saw the first proof from the publisher, the day I saw it online, and as I write this. Imagine, an 11 year old writing and publishing a book. Could your 8-12 year old be inspired by such a story? It reminds me of the story of S.E. Hinton, the teenage author who penned “The Outsiders”, the story of the “socs” and the “greasers”… friction among teenagers from different backgrounds.

The True Leader, however, is a fictional tale that centers on an Alaskan wolfpack fighting to preserve their land from wolverines. Toko, the protagonist of the tale, is followed from birth through many battles with their competitors, until maturity when he grows to be pack leader. It speaks of loyalty, survival, and leadership. I found the story fascinating, even though I’m outside of its demographic. Of course, I have a bias, but would your child or grand-child enjoy such a tale that was written by a peer?

Here is what I like about the book:

1.  It has a lot of action. There are many battles between wolf and wolverine, all described in details as seen by the book’s 11 year old author;

2.  It is a metaphor on life, the maturing of a wolf-pup to a true leader;

3.  It is written by an 11 year old. How else could you best encourage an 8-12 year old than, “look, this book was written by a 5th grader”.

 What I didn’t like about this book:

1.  Nothing. I am admittedly biased. The author is very special to me.

If such a book would interest you, I have placed it on my bookshelf on the right margin of this blog. You can also visit and join our Facebook Fan Page (see link below), tell your friends, and/or go directly to Amazon (also, see link below). Me and my family appreciate your consideration and your valuable time.

- Jeff