Monday, June 12, 2023

Does Your Bank Matter?

My firm is debating the direction of the banking industry so we can present, discuss, and debate with our clients, particularly how they can succeed in the current and emerging environment. In the past, I have advocated for "stakeholder primacy"; if you mattered to your employees, customers, shareholders and communities you would surely have an enduring future. If an enduring future is what you aspire to.

If you mattered to your employees, your retention rate for those you want to retain will be greater than your competitors. Higher retention usually means greater employee satisfaction through employee development, engagement and empowerment, career opportunities, competitive compensation and benefits, work-life balance, and overall satisfaction with how your bank is making a difference. These higher performing employees reduce process friction and customer pain points, delivering a superior customer experience.

If you matter to customers, you would understand their individual needs and deliver banking services to them without them having to think about it or worry about it. If they have an issue, they know who to call and that person is empowered to solve it for them without being bounced around. They are comfortable that their bank and banker will balance the needs of the customer with the needs of the bank and its other constituencies. They feel good banking with you because you serve some higher purpose in your community. They won't dump you for small rate variation or loan terms. They are your greatest promoters, reducing new customer acquisition time and resources.

If you matter to your community(s), you would be missed if your bank was not there. If you are dedicated to elevating the financial wellbeing of your customers, for example, then their net worth and overall financial happiness will improve over the long term. You help elevate those in need to a sustainable level. You lift low-to-mod income households to middle class households, and so on. You are committed to the financial literacy of all that bank with you. Yes, without your bank, there would be a hole in your community. 

Better employees that stay with you to serve your higher purpose in your community are delivering a superior customer experience to customers that are comfortable paying you for the service you deliver and the value you bring to them and the community. This delivers superior financial performance to shareholders. I've discussed how to calculate earning your right to remain independent in a prior post, and banks should do this regularly to ensure they are holding themselves accountable to deliver to shareholders.

But the brass ring is to matter not just to shareholders. But to matter to all of your stakeholders.

Below is a list of the largest of the 223 bank merger deals that happened in 2013. Ten years ago. Do stakeholders miss these banks? When you build your strategy, build one where you will be missed if you were gone. It's a great legacy.

~ Jeff

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