I. Growing Your C&I Portfolio / Driving Organic Growth
The future of banking is unclear. “Business as usual” doesn’t cut it anymore. Forward-thinking institutions recognize the ability to evolve and adapt creates a competitive advantage.
Generating organic growth has become more difficult. Stiff competition and fewer quality deals has created tremendous pressure in the market. Competitive pricing and aggressive underwriting continues to squeeze margins causing banks to stretch for yield. Banks in general have been so reliant on real estate in general and CRE specifically for loan totals that the industry has become highly commoditized. And terms like “relationship banking” and “trusted advisor” are overused and yet seldom exhibited behaviors in banking.
Bank sales and marketing strategies have been stuck in a rut these past three decades. Many retail and community banks still think in terms of “product campaigns” and “marketing programs” and business and regional banks still rely heavily on referrals from real estate brokers, CPAs and attorneys for new business. Approaching the market with the same marketing and sales strategies as your competitors is a sure way to blend in and get lost in the crowd.
Does your bank experience any of these?
- Success is too dependent on a few rainmakers.
- You have lenders on payroll who are not very strong at selling.
- A substantial percentage of your lenders aren’t hitting their annual sales goals.
- Your lenders focus more on getting a “package” than establishing a relationship.
- Your lenders push for steep rate discounts in order to “get the deal off the street”.
- Your lenders negotiate harder with their credit administrators than they do with their customers.
- Your lenders rely heavily on third party referrals from commercial real estate brokers, CPAs and attorneys for much of their new business.
- Your lenders are more transaction-focused than relationship-focused.
You can grow organically even in a weaker market! The secret is to develop lenders who are focused, disciplined and strategic in their business development and sales activities. In short, it takes lenders who are willing to think and act differently and it requires sales managers to manage differently.
President Sunwest Bank
II. No Executive and Mid-Management Succession Process
The formalized supervisory, management and leadership training programs once utilized by the “big banks” to develop the leadership talent of their junior and middle managers are a thing of the past. In many states, those training programs have not existed for over two decades.
The banking industry is filled with managers who have been promoted into leadership positions due to tenure and technical experience. However, few have had any formal leadership and management training and development. Most of their training has been “on the job.” Seen equally consistently in banking are top sales producers who have been promoted into the role of sales manager also with very little, if any, sales management training. It takes an entirely different set of skills to be a top sales producer as opposed to a top performing sales manager.
For banking executives who are fifty years of age and older, you probably remember those formal, year-long training programs. But for today’s banking executives who are younger than fifty, those types of training programs have been relegated to urban legend. This is a reality today that banks must face.
Growing the leadership and management capabilities of your executives and managers is crucial to growing the franchise value of your bank. Your employees represent one of the few things that truly does differentiate your bank from the competition. Developing them is part of the function of leadership, especially if you intend to have a strong succession plan and leadership bench strength in your bank. Having managers and executives who understand the importance of leadership and possess the skill sets and emotional intelligence is critical to preserving your brand and enhancing the value of your franchise.
President, Baker Boyer Bank
III. Your Bank Has Multiple Culture Disorder
“MCD” or Multiple Culture Disorder is very common in banks. Few banks have a well-defined culture. Within a bank’s footprint, regions have different cultures as do different offices, branches, departments and teams. This is due to a variety of reasons: mergers, acquisitions and employees who have worked for other institutions.
A bank’s culture is at the top of the list as one of the most important and crucial components to market differentiation. Culture plays a factor in every aspect of your business from being able to recruit the best employees, to how lenders approach your markets, to how your branch staff interacts with your customers, to how employees work in teams. Culture is more important than strategy and affects everything including your bottom line!
The challenge is that most banks do not have a well-defined, documented and agreed-upon understanding of their culture. Nor has any thought or discussion been directed at how their culture needs to evolve to meet the challenges of tomorrow.
Every bank faces this challenge, especially those who have acquired numerous institutions or experienced multiple mergers.
Senior executives often pay lip service to the issue of culture but have little true understanding of how to build a strong, unified culture that improves bank performance.
IV. Just because you Merged Institutions Doesn’t Necessarily Mean You Merged Cultures
Tremendous time, energy and financial resources are expended through the process of merging or acquiring banks. Teams of attorneys and subject matter experts review a multitude of business areas including corporate records, financial information, loan and investment portfolios, deposits and funding sources, interest rate risk management, fixed assets, data processing, operations, technology, shareholder agreements and human resources-related matters such as compensation and benefits, life insurance, and employment contracts.
Significant energy is focused on financial, operational, risk and administrative aspects of the business, however little is focused on assessing the culture compatibility of the merging institutions. In fact, one of the most dangerous risks in a merger (yet often overlooked) is neglecting to assess the cultural risk of merging institutions.
There can be numerous cultures within a bank. If cultural compatibility is overlooked prior to completing a merger it can severely disrupt and prolong integration process resulting in customers leaving to go to another bank. Even the sales cultures of merging business banks can vary significantly even though both banks have similar customer and market profiles.
Every integration process has its challenges, from systems and technology to HR and acclimating customers to new processes. An employee’s ability (or inability) to adjust quickly plays a crucial role in integration success. Typically, there is no plan for merging cultures when merging institutions. This results in a process that takes longer, encounters more difficulties, and greatly hinders the ability of employees to adapt and integrate the new vision.