What Makes a Banking Leader

5-23-14-kaplan.pngThe banking industry today is operating in an environment that few could have anticipated, yet requires an increasingly complex mix of banking skills, leadership capabilities and interpersonal qualities in its leaders. Having spent time recently speaking with hundreds of bank CEOs, board members and senior executives, the requirements for success as a bank leader today have crystalized. Each letter below represents a vital element that bank CEOs and potential CEOs must understand or possess:

B is for balance sheet: Today’s bank leaders must understand the risks inherent in the current interest rate environment, whether due to potential funding mismatches or the risks from declining securities values in a rising rate environment.

A stands for asset quality: Bank leaders must remain vigilant regarding credit quality. There’s still no quicker way for a bank to falter than to suffer from a spate of bad loans. Regulators continue to focus on credit culture, policies and procedures as well.

N is for non-interest income: Everyone wants more, but how do we actually grow revenues? Increasing fees on customers always carries some potential fallout. And building lines of business such as wealth management, insurance or other products involves a significant up-front investment and a long-term return. There are few easy answers here.

K represents capital: As everyone knows, this is the most critical ingredient that banks need today to survive and drive growth, whether organic or transactional. A lack of ample capital not only constrains strategic plans, but too often invites a call from your regulator.

The L stands for leadership: While great leadership remains an obvious prerequisite for success, the demands on bank leaders today are more strenuous and complex than at any time since the Great Depression. Many bank boards struggle with the challenges of succession and developing that vital next generation. In addition, the mantle of leadership should extend much further into the organization than just the CEO’s office or C-Suite executives for an organization to truly succeed. While the CEO sets the tone, everyone should lead by example in their daily interactions with customers and colleagues.

E stands for emotional intelligence: This is the critical aspect of leadership in which you see your bank’s leaders communicating effectively, leading from the front rather than the rear, and following a “servant leader” mindset. The emotionally intelligent leader knows that the bank’s success is not about them, but rather the people on their team. When the team is successful, the leader succeeds as well.

A represents authenticity: One of our favorite leadership attributes, authenticity occurs in the leader who means what she says, and does what she says she will do. It’s the ability to create “follower-ship” through actions and a genuine approach to dealing with a bank’s varying constituents.

D is for digital savvy: Today’s community banks need an approach to the digital world that is timely, relevant and real. Whether you like it or not, the technologies that are revolutionizing banking today are not just impacting the industry’s back office, but have become a vital channel for growth. Banks must play offense here, not defense.

E represents the employee: Bank CEOs and directors regularly praise their employees for good work and great service. While these qualities are the foundation upon which our institutions are built, they are simply not enough anymore. If your bank is going to win against the competition, it must have the absolute strongest cadre of bankers possible—from the executive team to front line lenders and managers, to the employees behind the scenes. Next to capital, employees who can execute your plan are the only remaining differentiator in banking today.

R, of course, stands for regulatory: In the current climate, the ability of bank leaders to forge a constructive working relationship with their regulators is vital. Banks that take a combative tone with their examiners usually end up on the wrong side of their exam. While the regulatory climate may have overreached, it is what it is. High-performing bank leaders figure out how to operate successfully under this dynamic, and forge positive regulatory partnerships.

As Billy Beale, CEO of Richmond, Virginia-based Union First Market Bank stated recently at the Bank Director Acquire or be Acquired conference: “Banking is not complicated, but it has gotten awfully complex.” Today’s bank leader needs a plethora of banking skills, leadership competencies and personal attributes to be successful. Anything less than a full suite of these talents may not only impact your bank’s ability to win, but could ultimately put the institution itself at risk.

Talent Evolution: Banks Are Looking Outside the Industry for Diverse Skills

7-22-13_Emily.pngBanks are going through enormous changes in terms of the skills and talent they need at the executive level. Arguably, banks nowadays need more expertise in regulatory compliance, risk management, information technology (IT) security and social media than in the past. Peter Crist, chairman of Chicago-based executive recruitment firm Crist/Kolder Associates, and chairman of $17-billion asset Wintrust Financial Corp., foresees a need for someone at the executive level “distinctly different [from] the chief marketing officer’s historical role” who understands social media and digital products. Rising concerns surrounding cyber security risk will also see the role of the IT executive gain prominence, a role that promises to be “tougher, more complicated, more sophisticated” over the next decade, says Crist.

Banks are already familiar with shifting needs in human capital, lately driven by regulatory concerns on compliance and risk. As the financial crisis hit, many banks did not have in-house talent qualified for the chief risk officer position, and Crist noted a spike in searches to fill the role. As more of the Dodd-Frank Act is finalized, banks “have to respond to that with talent,” he says.

Where can banks find these specialized executives? Crist says that many of the biggest banks are recruiting from outside the banking world.

Citigroup’s head of human resources, Paul McKinnon, came to the financial services giant in 2008 from Dell. State Street Corporation’s Chief Risk Officer Andrew Kuritzkes came to the banking world from management consulting firm Oliver Wyman, where he was a partner. Teresa Tanner worked in human resources at fast food chain McDonald’s for a decade before joining Fifth Third Bancorp as chief human resources officer in 2003. Anil Cheriyan joined Atlanta-based SunTrust Banks as chief information officer in 2012 from IBM Global Business Services, where he was a senior partner serving clients in the financial industry. Crist says that diverse experiences aid any company, but can be of particular benefit within the banking industry, which, he says, suffers from a lack of new thinking and innovation. “The best organizations show a proclivity to attract and retain people with diverse experiences who can think differently,” he says. Institutions “that don’t think about introducing new [and] different DNA into their culture will go the way of all extinct species.”

In addition to looking from without, banks can still benefit from finding talent the old- fashioned way: Grooming from within, and taking advantage of the talent pool generated through industry consolidation. Crist wonders how industry consolidation will impact hiring for the surviving banks. “Will [bank] consolidation mean that there will be a surplus of talent floating around?” he asks. He also adds that some skills might prove unnecessary as banks provide more and more services online. “I don’t think that I would want to be a 55-year-old mid-market lending officer ten years from now,” he says. “I have a feeling that world is going to be changed dramatically.”

Bank boards need to look ahead. “How will the banking landscape look ten years from now?” says Crist, and in turn, where will future bank leaders come from? He stresses that bank boards and management should have a “top-down attitude” when it comes to human capital strategy, adding that the best companies spend considerable time on talent needs. He cites JPMorgan Chase & Co. (JPM) as a good example. “Look [at] how many JPM alums are running companies,” he says. “Jamie [Dimon, CEO of JPM] does a marvelous job [of] focusing on people.”