Sunday, March 06, 2011

Experienced Bankers Wanted for Mediocre Bank

"He's not ready" is the response I often hear when I ask why a sharp banker is not part of the FIs senior leadership team. I hear it from senior leaders, industry executive recruiters, and industry consultants. But when I hear this, let me share with you what my internal voice is saying: "I want to make myself feel better by diminishing your perception of the value this clear up-and-comer can bring to our team."

If the talented individual we are speaking of is not yet good enough to serve in a similar role to me, then, ipso facto, I must be more talented than him. That is one reason I was so impressed with a southeast bank president that said to me "look around, you don't see many executives over the age of 45 because they don't get it [the new way of doing business]." This CEO must not have bought the "he/she's not ready" line.

This attitude is not exclusive to executive ranks. I recently recommended an acquaintance of mine to a regional business banking executive who agreed to take a look at his resume. The result: doesn't have business banking experience. This was true, but knowing the "type A" nature of this individual, I had little doubt he would be successful learning "credit", knocking on doors, and building relationships. Instead, this bank wanted an experienced banker. To which my internal voice said: "experienced at doing commercial real estate transactions and scoffing at directives asking him to build a full relationship."

Another version of the above is when I hear "he doesn't understand credit." I have heard this from FIs currently experiencing credit problems. Apparently it is worse to hire someone that must learn credit than to hire one that has already proven challenged in the endeavor.

Dave Martin, an industry consultant with NCBS, recently wrote in an American Banker opinion piece (see link below, may require subscription) "when we put the wrong person in a job or allow the wrong person to stay in a job, we undermine our businesses." But personnel issues are frequently cited by FI executives as to why they are not succeeding in this strategic initiative or that. And they are not willing to make the necessary changes to move their business forward. Instead, they are in search of "experienced bankers."

Arkadi Kuhlmann, founder and CEO of ING Direct USA, was quoted in a recent Harvard Business Review piece on hiring practices by Fast Company cofounder William Taylor (see link below), "if you want to renew and re-energize an industry, don't hire people from that industry. You've got to untrain them and then retrain them. I'd rather hire a jazz musician, a dancer, or a captain in the Israeli army (see link below to my post on hiring a vet). They can learn about banking. It's much harder for bankers to unlearn their bad habits." If you believe the concept of hire for attitude and train for skill is true, how do you remake your employee base?

First, the FI should clarify the strategy. Understanding where you are going is a critical yet under appreciated step in identifying the people needed to get you there. It requires vision and a roadmap to achieve the vision. Do you know where your FI is going?

Second, you must identify key positions that are important cogs in the wheel to executing strategy. I already made reference to banks that want full relationships with their business customers yet their lending team is chock full of commercial real estate transaction folks with little interest beyond their current pipeline. But if relationship building is the strategy, are your branch personnel up to it?

I have witnessed FIs build confusing and inefficient workarounds to the shortcomings in branches. One reason is that experienced branch managers tend to come from the old school, where taking care of customers once they come in the door is job 1, followed closely by ensuring the branch balances and branch cash is not off. Well, last I checked, not nearly as many customers are coming into branches anymore.

FIs pursing the "relationship" strategy fail to recognize that a relationship occurs between two people. If you hire for attitude in the branches, and get a good go-getter with a positive outlook as branch manager, but proceed to pay her minimally with little upside, she will seek promotions out of the branch. This recently happened at the branch where I bank.

Branch manager is often a destination position for those that were promoted through the teller ranks and have no need to be the bread winner. For those type A people we may want in the branches, branch manager is frequently a waypoint position until something better comes up. Not a particularly effective way to execute on a relationship strategy. But branch managers are critical to our strategy.

The manner at which we hire and fire in FIs reminds me of the different styles of George Steinbrenner and the Pittsburgh Steelers' Rooney family. Steinbrenner would make key hires relatively quickly, and would fire them if they didn't work out. The Rooneys, on the other hand, invest significant time into hiring the right people and stick by their decisions (see link below). In banking, I have witnessed us hiring like Steinbrenner, and firing like Rooney. I suspect we should choose one method or the other, and use execution of our strategy as the measurement of whether a person will work out for us.

For community FIs to remain relevant to customers and prospective customers, we must choose a strategy that delivers either a competitive advantage through differentiation or cost leadership. Fortunately, there are still opportunities to deliver cost leadership for some of us, although I would deem it to be a difficult slog to have lower costs than the very large FIs. If we want to differentiate, then how? Most strategy sessions I attend require that the community FIs people be superior in the manner at which we execute strategy. So I ask you, who is executing your strategy?

Do you believe in the "hire for attitude" philosophy or the "hire experienced bankers" one?

~ Jeff

Dave Martin's American Banker piece, "If he hollars 'bad fit', let him go."

William C. Taylor's Harvard Business Review piece, "Hire for Attitude, Train for Skill"

My blog post "Be all that you can be"

New York Times piece "Rooney Method: Build Methodically and Await Rings"


  1. I think we often confuse nostalgia for strategy... if we can only go back to how it used to be. Thanks for the comment Tom!