What Dynamics Make a Successful Bank Board?

Ben Plotkin: It’s really the diversity of opinions. Banking is a regulated business, and as such, there’s a constant tug of war in the boardroom between risk control and the need to be entrepreneurial.A good community bank board respects the tension between risk control and the need for entrepreneurialism and understands that the effective resolution of this tension ultimately creates value for shareholders. In fact, a board will often have some who are much closer to the control side and others who are much closer to the entrepreneurial side. There needs to be mutual respect for each of those views, and the right balance ultimately is struck by the board as a whole and is reflected in an institution’s policies and direction.

Ron Janis:My analysis of what makes a successful dynamic for a bank board is teamwork. That’s a big generalization, but it’s a very important word that means different things at different times. For a start-up bank, it means everyone on the board is out marketing the bank and bringing in deposits and business, but as a bank develops it needs a more mature business model and that means something more complex, so a focus on teamwork is very important.A Harvard professor conducted a study for the National Intelligence Services about whether individuals or teams do a better job of analyzing intelligence for their boss.Although there were some very good individuals who could analyze the intelligence, on the whole, teams did a much better job. In effect,what bank boards do is act as a team, collecting the same kind of intelligence for their managers as the National Intelligence Agencies.What teamwork requires is collegiality, the ability to listen to each other, a specific agenda so team members know what they have to do, as well as effective and workable structures. If you have a large board, you will have to split it into various committees and get those teams operating on different agendas.

Jim Sizemore: Successful bank boards focus on all aspects of the organization, from the holding company down to the branch, including team members that are strong in accounting, legal, and compliance, and dealing with risk, technology, accounting, and understanding the process of banking itself. The directors don’t have to be bankers, but they definitely have to understand that a bank is about delivering products and services in the financial sector, and also that traditional ideas of banking, although they still exist, are dying. Banks of the future will deliver financial services that are not traditionally considered bank products and services. It will involve getting onto the Internet and communicating with the generation to come, as well as offering products and services geared toward the baby boomers and the generations of today.That’s the focal point, and by bringing together board members who can collaborate with creativity and innovation, banks can differentiate themselves from the competition.

Jay Brew: I discuss this in the first book I wrote with Dr. Ed Seifried called The Art of Strategic Planning for Community Banks, and I learned this as being a bank director myself.You have to create a dynamic atmosphere that gets everyone excited. If you get everyone excited, then they all get involved.A critical question that I always ask in my strategic planning exercises with banks is how many of the directors are making referrals? What you find on a lot of boards is a lack of referrals, either because of their directors’ ages or for other reasons. Immediately when I hear a lack of referrals, I ask,“How dynamic is this board and its activity?” It really has to be the basis, the essence, of community banking–moving your communities forward by providing the financing, the products, etc. Involvement in the business community provides that dynamic, robust type of director.Again, directors must be educated and must understand banking’s cutting-edge issues. Along with that, you still must look at a dynamic strategic plan that creates value and gets everybody involved.

Tom Ziemba: Successful bank boards move beyond their oversight role and look for ways to add value strategically to the bank’s performance.They do this by making sure the board’s roles and work include not only the basic oversight responsibilities, but also advising and consulting the management team in different aspects of bank performance; not actually doing the work themselves, but playing an advisory role. In doing so, it’s very important that the directors have complementary competencies, and not overlapping ones, so that each can contribute in different ways in terms of his or her experience and expertise.Also, the board should set a tone and climate of inquiry to encourage questioning of management issues and decisions, but it should also be supportive in giving guidance to management in terms of how to manage the bank and strategically achieve the bank’s objectives. Finally, having solid governance procedures in place, role expectations for directors and committee chairman, and charters for all board committees is very important in promoting, documenting, and codifying the expectations of the board as a whole and directors individually. I think these are very key components to making a more effective board.

Todd A. Leone: First, as with most endeavors, it starts with the people. Having a group of directors with diverse backgrounds and varied experiences that can be brought to the board room is the most important thing.You want board members who can ask questions—the tough questions. The notion that “there’s no stupid question”has never been more true. So having a group of varied individuals, all strong enough on their own so that they can be comfortable enough to ask anything, and with that, having a healthy dialogue and dynamic tension to test each question and business issue, is the most important thing.

Second, I think all board members, as well as executive management, need to be anchored in a solid strategic plan. That plan starts with the vision and the mission.What is this organization about? Beyond earnings per share and beyond ROE,what are they trying to do in six months, in 12, 24, and 36 months? It’s vitally important that there is a common plan that has generated a lot of questions and has been tested.Once that is done, everyone will be on the same page. In this way, if you ask them what they’re doing this year or three years from now, you should get a similar answer from the board and from management because they’ve tested the strategic plan, they believe in it, and they’re now trying to execute it.

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