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

Breaking Branch Mediocrity

Another day, another convoluted organizational structure that includes “small business bankers” that are dispersed into the branch network to shore up branch capabilities. If not small business bankers, it’s “cash management officers”, or “business development officers”. Why add a protective wrap of additional employees around your branches?

Because branch staff are too busy with operational duties to go out into the community and pro-actively hunt for business. I’ve been to a lot of branches as I travel the land looking for opportunities for banks to improve profits. I rarely see a “busy” branch. One time I saw a line for a teller and was so amazed at the site that I snapped a photo. The bank security officer set me straight. Don’t case the joint.

If bankers were truthful to themselves, they would recognize that these branch wraps, i.e. additional employees with fancy titles, are nothing more than covering up for the perceived shortfall in branch staff skills to be the face of the bank in our communities and pro-active business developers. If you are nodding your head in agreement, read on. 

If you are irritated at the theory and are scrunching your eyebrows like you bit into a lemon, then continue to add the layers to your organizational structure and move on to an article about the “branch of the future”.

Instead of adding staff and layering the cost onto an already burdened branch network (who pays for the compliance analyst you just hired?), why don’t you get the most from the investment you already make in your branches? I have four suggestions for you to improve the abilities of these critical profit centers.

1. Hire to execute your strategy. This assumes you have a strategy that is more focused than “we’re a bank”. If your strategy is to be the number one business bank in the markets that you serve, then hire branch employees that can speak intelligently to business owners about how your bank can better serve them. If those employees are inept at balancing a teller drawer, then so be it. If your staff is highly capable at ATM replenishment but cringe at the thought of speaking to a small business owner about a sweep account, read on…

2. Develop your branch staff. In my experience, the percent of banks that have specific training curricula for branch staff that goes beyond operations and compliance is somewhere south of Pi, if Pi were a percent, and I actually knew what Pi is. But you get the picture. When I was in the military, we had a training calendar for every functional position that included on-the-job (OJT), computer based, self-taught/correspondence, and classroom training. Each sailor was responsible for matriculating through the training program when they were not forward deployed. When they completed certain stages, they received certificates and were deemed “South-East Asia qualified”, or whatever designation the training was intended to accomplish. Do we have a “Small Business Qualified” designation in your training curriculum? If you are not satisfied with branch staff abilities to execute your strategy, and have invested the time and energy into developing them without results, then perhaps you have the wrong staff.  But don’t complain about staff capabilities if you have done nothing to improve them.

3.  Provide meaningful incentives. If you have heard me speak, I bang the drum loudly about branch incentives. You want branch staff to be the tip of the spear for small business relationship acquisition but give those that succeed a 4% raise and a $500 holiday bonus while those that are not successful a 3% raise and a $400 bonus? Why are we surprised that we have to build a “wrap” of different employees around branch staff? Instead of providing incentives based on deposit balances, how about branch profitability? Imagine the behavior differences if branch managers were charged with improving their deposit spreads, fee income generation, and managing their expenses? Would you get the desperate phone call for a rate exception for a $200,000 CD for a single-service customer to “keep the money at the bank”? Doubt it, because that $200,000 would be generating far less spread than the $40,000 operating account from Joe’s Tire and Battery. Even though Joe leaves grease at your teller counter every time he comes in. Why not pay branch managers for the important position that they hold in executing your strategy? Would it be beneficial to make variable compensation a greater and more meaningful component to the overall compensation package?

4. Communicate your strategy. That is, communicate it if you actually have a strategy. Being everything banking to everyone in the markets where you have branches is not a strategy, dear reader. If your strategy is the beef stew of all strategies (i.e. throw everything into the pot), then expect to be average. Wouldn’t that make a great epithet? Here lies Jeff, he was average. But assuming you have a strategy that clearly identifies the bank you strive to become, then communicate it to your employees! Who else do you expect to execute on the strategy day to day? If your strategy is to be the number one business bank, as ranked by the regional business journal, then identify objectives to achieve it and have your employees march a straight line to get there. Maybe then your branch manager will know that you want more customers like Joe’s Tire and Battery, regardless of having to use Mr. Clean on your teller counter after he leaves.

There you have it! Four concrete steps you can take to make branches more effective at achieving your strategic objectives. Did I miss anything?

~ Jeff

Note: This post first appeared as a guest post on Deluxe Corp's Forward Banker Blog in July 2014.

Bank Shorts: Sales Culture Gone Wild

When I was a branch manager, I fondly recall competing with a friend and fellow branch manager for the quarterly sales title. My bank, First National Bank of Maryland, had a very transparent incentive compensation system. I could calculate my own and my team's quarterly bonuses to the penny. It was called RAISE... Recognizing Achievement In Sales Excellence.

The challenge was that it was a sales incentive system. So we sold. This may have motivated us to focus on the product de jour rather than customer needs. I think my friend and I were conscientious enough leaders to mitigate this risk. But it did cause us to focus on the types of customers likely to "buy" promoted products and not focus on the bank's strategy.

Enjoy the Bank Short below. If your incentive system revolves around sales versus profitability, then don't be surprised if this is going on in your branches.

Bank Shorts: Sales culture gone wild.
by: jeffmarsico