The Next Generation of Mutual Bank Leadership

In anticipation of the Mutual Board Summit in Boston, I’ve been reflecting a lot about what differentiates the most effective mutual bank leaders from their peers at other financial institutions. By circumstance (we happen to be in a part of the country with the highest concentration of mutuals) and by momentum, we’ve been privileged to have a front row seat in the ongoing evolution of mutual bank leadership. After managing the leadership transitions of public banks, mutuals and credit unions, we’ve noticed that the most successful mutual bank CEOs often share a distinctive leadership profile. While we’ve observed the next generation of mutual bank leaders thinking like public company executives in many of their decisions —particularly around the pace of innovation and the importance of discipline in efficiency metrics — mutual-specific traits clearly exist. For us, they are:

1. Stewardship Without Complacency. The old mutual bank leader preserved. The new mutual bank leader preserves while still driving change.

Don’t get me wrong, successful mutuals — and certainly those with the greatest likelihood of survival — perform well financially. Compared to stock banks, however, the metrics of success differ. For generations of mutuals, the preservation of capital ruled. Mutual bank CEOs (and their boards) view their role as that of a link in a very long chain, and less so as a terminal decision-maker. The ability to weather cycles and to make loans that other banks won’t is part of what defines mutuals. While their peers at public banks tend to focus on earnings and efficiency, mutual bank leaders focus on earnings and capital. For next generation leaders, this requires proactively seeking opportunities for their teams to observe them demonstrating a bank-above-self approach to decisions that layer profitability and efficiency into what had historically been a capital-centric worldview.

2. Community Leadership Beyond Visibility: Mutual leaders can no longer just attend events and serve on boards. The strongest leaders are asking: How do we remain indispensable to our communities? How do we attract talent to our markets? How do we support small business formation?

We all serve someone, and within banking, who bankers serve matters. There are plenty of public banks doing good and making real positive contributions to the communities in which they operate, but by nature of ownership there is no mistaking that at public banks the shareholder rules. On the other end, credit unions have as their North Star their members. While mutuals are operated for the benefit of their depositors, “community” tends to take a much broader meaning, the concept being inclusive of customers, employees and the communities in which they all work and live. By being the bedrock of a community, the banks succeed when the community thrives. The most successful mutual bank leaders and their teams have community in their DNA. For next generation leaders, this means seeking leadership roles in organizations addressing issues such as housing, workforce development and skills training.

3. Consensus Building as a Competitive Advantage: Successful leaders must align: board members, senior management, employes and communities.

Herein lies the evolution of the mutual bank leader. Stewardship, preservation of capital and community support have been the hallmarks of mutual bank leadership for generations. The tension between preserving a mutual’s legacy and pushing harder on growth, talent, technology and profitability is the challenge of today’s mutual bank leadership. As the world around mutuals changes drastically, the next generation of leaders is under assault from shifting demographics and consumer behaviors, extreme talent shortage and skyrocketing people costs, and a snowball effect of technology demands. We’ve seen the urgency accelerate from we should to we have to (grow, be more profitable, explore partnerships, adopt new technologies, etc.). The most effective mutual leaders are operating closer to the redline than their predecessors. This requires an expert-level grasp of consensus-based leadership. Gone are the days, hopefully, of control and command, top-down leadership. Next generation mutual bank leadership should focus on consensus from the board room to the front line on the balance between legacy and innovation.

Perhaps the most important question facing mutual boards today is not whether these leadership traits matter, but whether they are intentionally developing them in the next generation. As many long-tenured mutual CEOs approach retirement, boards increasingly need leaders who can simultaneously honor a mutual’s heritage, navigate unprecedented change and build consensus across diverse stakeholders. Finding the balance may be the defining leadership challenge of the next decade.