Five Ideas to Build an Accountability Culture at Your Bank

I recently spoke at the ABA CFO Exchange in Nashville on building an accountability culture. Talking banker accountability to a room full of CFOs is like a politician telling senior citizens that Social Security benefits should remain untouched. It was a friendly audience.

I tried to be provocative. For example, it has been my experience that when discussing accountability, CFOs sometimes fall into the trap of talking about other departments. What about the Finance Department? How does it stack up to benchmarks, and are they realizing economies of scale, using less resources as the bank grows? They didn't flog me.

So how do you go about building a strong accountability culture at your bank? Accountability suffers a bad wrap. Most think of out-of-reach goals, difficult meetings with the boss, and recriminations for under-achievement. Does this sound like an enviable corporate culture?

Part of my coaching school curriculum for being a US Lacrosse certified coach was the Positive Coaching Alliance (PCA). This portion of the certification was not lacrosse specific. Rather, it taught how to be a coach. And by the title of the course, it was not the coach that I knew. It has adherents like Joe Ehrmann and Phil Jackson. 

The PCA discussion on "filling the emotional tank" for players has direct applicability to creating a positive culture that leads to better adjusted and happier employees, and results. If this culture interests you, I have five ideas on how you can build an accountability culture without cracking the whip and taking names.

1. Make accountabilities measurable and transparent. When I was a branch manager in the mid 90's, our sales incentive system was called RAISE (Realizing Achievement in Sales Excellence). I could calculate my quarterly bonus to the penny. I ran a spreadsheet before spreadsheets were cool. Me and another branch manager used to bet a beer each quarter on the size of our bonus. It worked. The best performers got the highest bonus.

2. Link to your strategy. Precious few banks state as their strategy to do large commercial real estate loans at very tight pricing to get deals done. Yet they continue to measure lender success by dollar production and portfolio size, incenting them to do just that. Instead, look to your strategy when building incentive systems.

3. Have a little friendly competition. As previously mentioned, my branch manager friend and me created our own internal competition that ended in a beer at the end of every quarter. It was fun, and motivated us to excel. I didn't want to show up for that meeting getting my butt kicked by my friend. Who would? Why not create ranking reports that include multiple measures, such as lender ROE, branch profitability (both ratio and dollars), or best trends in support center productivity.

4. Include support centers. Everyone thinks if only those branches would shape up, all would be well. So we prune the branch network, and branch staffing, etc. But how about all of those people in Compliance or Audit? How are they performing? It is understandably more difficult to do because we are not measuring their P&L, but we can use trends and benchmarks to highlight highly productive support centers and reward them appropriately.

5. Have an awards ceremony. When in Nashville, my wife and I bumped into a bunch of country music celebrities because it was the week of the CMA Awards. Entertainers tend to award themselves a lot. So why can't bankers? Imagine having a ceremony that celebrates your "Most Improved Branch", or "Top ROE Lender", or "Most Productive Support Unit". Imagine your own awards ceremony that creates the positive environment that promotes friendly internal competition and peer recognition for a job well done.

How do you create a positive accountability culture?

~ Jeff

Bankers: Are We Accountable?

Twenty years ago there were 14,000 FDIC-insured financial institutions. Today that number is cut in half. The reasons are many. And yes, some are beyond our control such as population mobility, technology, and the need for some scale to invest enough to remain relevant. But, as my one-time Division Officer, Lieutenant Proper, once told me: "Be careful pointing your finger, because the other three are pointing at you."

I recently made a presentation to staffers and advisers to the Pacific Coast Banking School (PCBS) regarding what I would change in the curriculum. My theme was that if we keep teaching bankers the same things, and expect different results (i.e. not cutting our industry by half), then we are insane. I don't think I'll be invited back.

Banking is an industry that is particularly susceptible to external forces such as interest rates, business and consumer confidence, and the economy (both local and national). So if things go wrong, there is plausible deniability as to what or who is responsible. Strange that when things go right, it's difficult to find plausible deniers. But I digress.

Because of the external forces that impact results, it is typical to gravitate to holding ourselves accountable to things under our direct control... i.e. our expense budget. Volumes and balances... not my fault, there's no loan demand. Margins... not my fault, the irrational competitor down the street is being too aggressive. Profits in fee based businesses... not my fault, soft insurance market.

I find this when analyzing client profitability reports. Nobody wants to absorb the costs of support centers, such as HR, IT, and Marketing, or overhead centers such as Finance or Executive. Hold them accountable for their direct profits, because that is what they can control. It reminds me of Louisiana Senator Russell Long's quip in the 1950's... "don't tax you, don't tax me, tax that fella behind the tree." I suppose if nobody finds value in support centers to the point they agree to pay for it, we should eliminate those costs.

I think the answer to move our industry forward by establishing an accountability culture is to identify a few, transparent metrics that are consistent with strategy that hold managers accountable for continuous improvement. To overcome macro-economic factors, use trends and comparatives. For example, if you hold branch managers accountable to continuously improve their deposit spreads, compare them to the average and top quartile deposit spreads of all of your branches. The result of this accountability should be continuous improvement in your bank's cost of funds compared to peers. But instead of managing at the "top of the house" (i.e. bank's total cost of funds), we burrow down to the managers responsible for generating funding.

But since there is some art and science that goes into developing management information to establish accountability at the ground level, those managers that don't shine will frequently lob darts onto the results. But bankers that are committed to identifying and executing on a strategy that differentiates them from the remaining 7,000 FIs, should identify the metrics that correlate to successful strategy execution. 

And when managers challenge the message to dilute their accountability, senior leaders must be exactly that...

Leaders.

~ Jeff