Wednesday, March 27, 2019

The Untapped Power of Brand in Banking

“Our money is the same as the bank’s down the street.” And so were the Uber cars in my recent trips to Los Angeles and Nashville.

But something was different. Something that immediately made me feel better about being in Nashville than LA. And my wife nailed it: “the Uber drivers were so much friendlier.” 

Could that early impression pave the way for positive reinforcing interactions with other locals? Leading to our perception that Nashville is friendlier than LA. And why my wife was interested in tagging along to a recent banking conference there.

So, if you are asking, “what does brand get you?”, there ya have it. The Marsico’s doubled up on their visit.

Ask the Experts

My firm is not a marketing or branding firm. We leave that to the able hands of folks like Tim Pannell of Financial Marketing Solutions, a recent This Month in Banking podcast guest. Tim had great insights for banks on brand. And in our discussion, he mentioned how great brands tend to drive more value than firms operating in the same industry. 

To the point, Forbes estimates the brand with the greatest year over year growth in brand value was Netflix at 35%. These values are based on revenue over an 8% ROE; Forbes’ estimate of what a brandless firm could achieve. For Netflix, Forbes estimates the brand value at $11.5 billion. The best brand, Apple, was valued at $182.8 billion. Is brand worth it?

There are other measures that Tim mentioned in our podcast, and I encourage you to listen to it. So you can adopt your own version of tracking the evolution of your brand.

What do you want your brand to say? How do you want your customers to feel about your bank? And how will you track progress?

Bad Habits

Old habits may work against the brand you are trying to create.
For example, at that Nashville conference, one presenter went into detail about increasing deposits through odd-lot rate
promotions (see a pic I snapped of a slide). We know the trick. Run a 7-month CD special, in the hopes that a very high percentage that take it will roll into the standard 6- month rate. 

In other words, take advantage of customers that don’t keep tabs on you. I’m not saying there is no place for such promotions. But the unintended consequence is customers having to watch their back. Not a great place for your brand to be, right?

I moderate bank strategic planning sessions. And no banker or director ever said that they wanted to take advantage of their customers. Because it is contrary to the mantras I often hear: relationship building, community, and trust.

No, the odd-lot rate promotion is one old-school tactic that keeps our customers on edge. There are other ways to lower cost of funds. Such as increasing the relative size of transaction accounts to total deposits. But that takes long term planning, diligence, and brand building. So those customers that get angry at their current bank for trying to screw them can look to your bright, shining brand as an alternative to business as usual. 

Brand building is hard work. It's not just a name change and an ad campaign. Bankers should write down the type of bank they want to project. Create the guardrails for everyday interactions and decision making. Produce videos of positive, brand-consistent customer interactions. Get all employees on the same page.

Because as Tim said in our podcast, a great brand will mobilize a community bank's greatest asset, its people. Untap it.

~ Jeff

This post is related to my firm's Strategic Management service. To learn more, click here.

Saturday, March 02, 2019

Employee Retention: Keep the Keepers

You have a highly valued employee, and they quit. Why? The boss? The culture? The pay?

I'm sure if I searched for credible sources, I would get some version of one or a combination of the three. It is highly individualized. But what is universal is that each financial institution has employees that are highly valued and they want to keep. Yet rarely tell them so. For fear that the employee will recognize their worth and ask for more money or shop themselves around. Better to repress that employee, right? Shhhh. Don't say a thing.

The most recent Bureau of Labor Statistics analysis shows the number of quits, i.e. employee-driven departures, at 3.5 million in December 2018, the highest since pre-recession 2007. 

Best Strategy

The best single strategy for employee retention is management attention, according to Bill Conerly, a business economist and former banker. Employees may tell you they are leaving for more money, and if your compensation is not in the ballpark for the value they can get on the open market, then perhaps that is true. But if comp is in the ballpark, then it is likely the employee wouldn't be looking around if the company's culture was great and their boss paid attention to them.

Management and leadership are soft skills that are not on a financial institution's priority list. Seven years ago I wrote about this on these pages, and I haven't seen much improvement since. In that post, I wrote of a former military commander that worked for a large corporation that incorporated leadership into their development program. They hired psychologists to develop the curriculum, and actors to role play. 

So, in addition to the ideas below, it is important for financial institutions to develop good managers with leadership abilities. Because they are the ones that will be executing the following ideas to retain your high performers.

Three Ideas to Improve Retention

1.  Build a culture that salutes achievement. Accountability shouldn't be based on fear, recrimination, and public flogging. It should be built on open recognition of a job well done. Be it exceeding goals, achieving top quartile profitability, most improved, or proposing and implementing an innovative idea. Give that employee a trophy. Coach under-achievers that have an attitude of self improvement. Because, as one of my Navy Senior Chiefs once told me, if you have an employee that puts forth the effort and has a good attitude, and they don't succeed, that's on the supervisor.

2. Set career paths. And develop employees to achieve. So many financial institution development programs are ad hoc. No direction. But if you hire a junior credit analyst out of college, once they get the job, ask them what they aspire to be. Aside from compliance and functional training, develop them to hit their next level. Even if it is outside of Credit. Perhaps they want to be a commercial lender and some day, be CEO of your bank. That's great! If they achieve within their functional position, then we should be prepared to develop them for the next level. Instead of pushing them down in their current position because they are really good at it. Which is a sure fire way to have them shopping their resume, in my opinion.

3. Conduct stay interviews. Now, I will admit that I'm cynical about buzzwords. But I received a newsletter from a financial institution executive recruiter that caught my eye on improving employee engagement. Stay interviews will help your financial institution make tweaks to its culture and employee relations, and improve employee engagement, which I hear is a key reason why high performing employees stay. Because they matter to you. 

During our most recent podcast, we answered listener questions and one question was "what is the most effective way to recruit and find talent in a community bank?" My answer, build from within. 

Because there aren't many employees out on the street. And to woo them, you might have to pay up. And if you pay up, you may run into "equal pay" movements happening in many states, pricing up your existing talent. An unintended consequence.

What would you rather do to build an employee base capable of executing your strategy? Buy or build?

~ Jeff

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