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."
http://www.americanbanker.com/issues/176_42/if-he-hollers-let-him-go-1033869-1.html?zkPrintable=true

William C. Taylor's Harvard Business Review piece, "Hire for Attitude, Train for Skill"
http://blogs.hbr.org/taylor/2011/02/hire_for_attitude_train_for_sk.html

My blog post "Be all that you can be"
http://jeff-for-banks.blogspot.com/2010/05/be-all-that-you-can-be.html

New York Times piece "Rooney Method: Build Methodically and Await Rings"
http://www.nytimes.com/2011/02/03/sports/football/03rooney.html?_r=1&nl=todaysheadlines&adxnnl=1&emc=tha27&adxnnlx=1299413029-4gsue0vxqubNBTcVprKO+Q

Banking School: Effective Decision Making

On occasion I have the privilege of attending a banking conference in a swanky locale. Last month, I attended a gathering of Pennsylvania bankers at The Breakers in West Palm Beach, Florida. These conferences are typically chock full of opportunities for me to learn something. I feel it my duty to pass what I learn to you in the hope that you will benefit from it, as I have.

There were many good sessions, but the one I found particularly interesting was done by David Martin of Commonwealth Advisors. David competes with me in one of my firm's lines of business and it may not be wise of me to play him up. But I respect Dave's opinions as a result of his decades of industry experience and willingness to share his knowledge. I may not always agree with him, but I have always respected him.

His topic of the day was on making difficult decisions. Banking has changed slowly from the Great Depression to the late 1970's... a little quicker from the 1980's until 2008... and in a major shift since 2008. However, as Dave put it, "bankers and their boards often apply more sophisticated analysis to routine loan and investment decisions than they do to critical strategic decisions". If our industry is undergoing a long-term strategic shift, as I believe it is, we need to chart a course that gives us long-term relevance to our customers, communities, and shareholders.

Here are the eight steps Dave proposed for effective decision making (from Harvard Business Review on Decision Making by Harvard Business School Press, June 2001):

1. 
   
   Set the Stage: This is the collaborative problem solving stage, testing and evaluating exactly what the problems are, presenting balanced arguments, establishing an openness to solutions and constructive criticism that carries into later stages.
2. 
   
   Recognize Obstacles: Cognitive Bias... our industry's bias toward the familiar has been a significant contributor to finding solutions that are small "tweaks" to business as usual; and Group Dynamics... going along with the group, assuming group harmony is more important than accurate strategic decisions... or... individuals dominating the discussion... or... silent dissent that typically results in meetings after the meeting to undermine decisions that were made in the group. Early recognition of these obstacles that subvert the effective decision making process is critical to avoiding them.
3. 
   
   Frame the Issue at Hand: Perform a root cause analysis by repeating the statement of fact and ask the question "Why?". Then identify your decision making objectives you want to reach by defining the performance that represents a successful outcome and painting a picture of what things will look like when the problem is solved.
4. 
   
   Generate Alternatives: Brainstorm solutions. Enlist a devil's advocate. Require details from participants to avoid platitudes such as "get us to the next level". Appoint a note-taker to ensure all ideas are considered and documented.
5. 
   
   Evaluate Alternatives: Use objective analytical discipline to evaluate costs, benefits, time, feasibility, resources, and risks. Also, identify areas of uncertainty and focus on those that have the greatest impact on the outcome of your decision.
6. 
   
   Make the Decision: Set up performance metrics to track progress towards your hoped-for results. Support the decision once it is made.
7. 
   
   Communicate the Decision: Notify those responsible for implementation and that will be affected by the decision. Explain the thinking behind the decision. Clarify what is expected to support the decision.
8. 
   
   Implement the Decision: Generate short-term wins. Monitor progress and fix problems before they grow. Be direct, open, and honest and allow no silent dissent that undermines the effectiveness of implementation in order to return to the status quo.

There are many challenges facing our industry that can be solved by implementing a disciplined decision making process to lead to better strategic decision making. I am confident more will emerge once the regulations resulting from Dodd-Frank start rolling off of the presses.

Rather than allowing these challenges to build up to overwhelming proportions, perhaps we should implement strategic decision making that is disciplined, focuses on the real challenges, and generates alternatives that will lead us into the future.

Alternatively, we could bury our head in the sand, complain about lawmakers and regulators, and pretend all is well with us and wrong with the other guy (see below for the "head in the sand decision making process").

- Jeff