Combatting Employee Malaise During the Pandemic

The coronavirus pandemic has upended how people work, and how they feel about that work — changes that may persist over the long term.

While many companies have adjusted to working remotely, the uncertain duration of the pandemic has left some employees feeling a sense of malaise and listlessness. Bank Director reached out to Brendan Smith, who holds both a clinical therapy degree and an MBA, to learn more about how office workers, managers and business leaders can address these feelings and prepare for the future.

As “The Workplace Therapist,” Smith helps companies eliminate workplace dysfunction through workshops, executive coaching, consulting and content on his blog, podcast and books. This conversation has been lightly edited for length and clarity.

BD: What is your read of where the U.S. workforce is, five months into the coronavirus pandemic, based on what you’re hearing?
BS:
2020 has been an interesting year from the workplace standpoint. The biggest word I’m hearing from people who come to me is “motivation.” They’re not motivated anymore. Part of the reason why is they’re stuck. Every day is the same thing: coming down into their office, getting on the same Zoom calls at the same time. There’s no variety.

The other interesting thing that happened is that when people first started working virtually, they said, “I have all this free time because I’m not commuting.” Everyone realized that and started using what would have been commute time to schedule meetings. A lot of people I talk to have meetings starting at 7:30 or 8 in the morning, and have meetings that go all the way to 6:30 in the evening.

BD: A lack of motivation is also a problem for workplaces even in normal environments. What’s different about this broader lack of motivation?
BS:
The lack of motivation before was really tied to lack of growth: I’m not growing at the pace I want, I don’t have the right opportunities in front of me, I’m wanting something else. This is different. This lack of motivation is tied to feeling stuck or trapped: I don’t have options, I’m stuck doing the same thing over and over again, I can’t go out and explore. People feel like they’re out of options.

BD: Why is a lack of motivation detrimental to the workplace and why do employers and managers need to address it?
BS:
The lack of motivation results in people doing the bare minimum. That’s detrimental right now because everybody has things they need to be working on: pivoting, changing, adapting to survive. Survival requires more than the bare minimum. If everyone at your company is doing the bare minimum, you’re a sinking ship.

BD: What are you telling people dealing with this unique lack of motivation? How can people adapt or transition to this new environment and new reality?
BS:
What’s happening is that we thought things would come back to normal by this point but now, it feels more a rollercoaster: we’re going down another hill, and we’re not sure when the coaster will end. That uncertainty breeds anxiety, and it contributes even more [to the] feeling of [being] trapped.

Let’s talk about how you get out of this. There was a famous theologian at Emory University’s theology school named Jim Fowler who used to say “You want to give people hope and handles.” Hope and handles is the best antidote for the time we’re in now.

With hope — people need to anchor to something in the future that motivates and excites them. We know that there will be some kind of normal, at some point in the future. We just don’t know when.

What handles represents is “What can I do now?” In times of uncertainty, one antidote is clarity. While we can’t be clear on how things are going to look a month from now, we can be clear on this week. What’s something people can do this week that either leads them towards something they’re excited about in the future, or gives them what they need?

BD: Do you recommend fewer Zoom calls as well? Or is there anything that managers can do to bring hope and handles for their employees?
BS: Hope and handles is for everybody. But one thing that managers need to do in times of chaos is create more structure and consistency, while also mixing in some variety. Maybe it’s not always a Zoom call — I’ve been recommending people switch video calls into phone calls.

From a motivation standpoint, I think it’s healthy for managers to have some hope and handles conversations right now with members of their team, to help people reframe and feel a little more in control. Something like, “I know we’re stuck in this hamster wheel now, but when things get back to normal, what is one thing you want to either do more of, change or improve for your role specifically?” Or for something a little more structured, there’s a simple technique of asking three questions: Stop, start, continue. “What’s one thing that you think we should stop? What’s one thing we should start doing differently? And what’s one thing we should continue?”

The other thing I would say to managers is to really work on honoring and protecting boundaries. Boundaries are really important for us in life. The way technology has evolved has broken down all natural boundaries between work and home. For me, protecting boundaries is not doing work calls outside of certain hours. Managers need to recognize that everyone’s experiencing the blending of work and life now, and be respectful of people’s boundaries and the needs of their particular situation.

BD: I understand that a lot of the advice for helping people cope is to remind them of a more-normal future. But do you have any advice to help people become more comfortable with the ambiguity in the present?
BS: Let’s talk about this from a business or banking standpoint. There’s a school of thought that strategic planning is silly, because no one can see into the future and there are too many variables.

What you should consider doing instead is an exercise called “scenario planning.” You map out different scenarios and factor in the variables that may change; for example, rising or lowering Covid-19 infection rates. If it lowers and then everything gets to a healthy point, then what [does] the economy look like? If it goes up, what happens? If it stays flat, what happens? While you can’t predict the future, you’ve got enough different scenarios of what might happen so that when the future does start to unfold, you just map it to one of your scenarios.

It probably would not be unhealthy for managers to do a bit of planning with their teams on how they want to handle the remainder of the year. We’ve got enough months under our belt doing this virtual thing that it would probably would be a healthy exercise for teams to create a plan of how you want to operate, assuming that this is going to be the way that that we roll.

Realities Beyond the Balance Sheet Facing Bank Buyers

Financial leaders face new and unique challenges as the navigate the remainder of this year and well into 2021.

The early reads on credit quality, credit access, operational and execution risk, regulatory oversight impacts and dimming growth prospects paint a bleak picture. Underlying this environment is an ongoing consideration for consolidation forcing institutions to assess their long-term viability. A closer examination of tangible book values clearly demonstrates who could be the buyers and potential sellers.

So, what is so different for M&A now? I have always believed that no two deals are the same —and that remains true. In the past, we may have looked solely at regulatory good standing, loan concentration, deposit pricing and distribution like geography and branches. While these remain fundamentally most important at the core, we now fully expect to see a heightened focus in due diligence around key layers of bank leadership, corporate culture and values, ability to deliver digital offerings to key customer segments, financial literacy programs and community investment.

A recent study by Deloitte noted that more than ever, bank M&A strategies need the right tools, teams and processes — from diligence through integrations — to pull off successful mergers. Additionally, buyers need to consider the compatibility and integration of any digital tools and how they will meet customer expectations. Can your bank deliver what these customers expect?

Most institutions looking to acquire or be acquired need to address several non-financial topics when considering how to proceed. Five in particular are consistently under-communicated by acquirers and will be even more impactful moving forward. These items speak to the fit of the merger partners — the intangible elements that cause the difference between a high customer retention rate with a platform for organic growth or a tepid retention rate with little sign of future organic growth.

1. Strategic Leadership
How an institution’s leaders navigated the recent Covid-19 pandemic says a lot about what investors, employees, customers and communities can expect if it merges with another bank. For example, the Small Business Administration’s Paycheck Protection Program may have given some banks lessons and plans that may make them potential partners worth exploring. No one knows what lies ahead, but strategic leaders must be able to think, clarify and execute during these new M&A conditions.

2. Bank Culture and Values
Most banks have a mission, vision and values statements. Until the current environment, how leaders must lead to make employees feel included and valued had not been challenged. But in almost every M&A engagement, there are significant segments of impacted employees and customers that experience uncertainty and fear. Demonstrated values can go a long way to secure trust and help the execution of these transactions succeed.

3. Digitization Expectations for Employees and Customers
Many institutions were not prepared for what occurred earlier this spring. Disaster recovery and business resumption plans were a solid start, but many were insufficient for this type of event, requiring operations and services to move off-site in a matter of days.

But aside from the initial challenges of the PPP, most banks appear to have done an outstanding job of helping employees work from home without too much customer disruption. This operating model will be the new way forward in banking. When banks merge, it is important to understand how each institution’s plan worked, and how much or little displacement that model could be for employees and customers going forward.

4. Financial Literacy and Inclusion
The reality of how our country has operated over decades has come into focus during the pandemic. One issue that many banks have identified is access to capital and providing banking services in a service-blind manner going forward. Financial literacy and inclusion must be a tenet in creating a more-effective banking system. Aligning how these programs can work, collaboration and inclusiveness can create a platform for capital distribution that works with any institutional strategy and grows exponentially after a merger.

5. Community Investment
Many institutions have invested significantly in community programs over the years. In a merger, these groups need to understand what the plan for that support will be going forward. The pandemic has made it even more important to discuss and support these investments in communities, given the struggle of many organizations these days. While these five items are not exhaustive, we know that they are among the top issues of executives, employees and customers at prospective selling institutions.

Leading Through Crisis

In the early 2000s, The LEGO Group was on the verge of collapse.

It sounds hard to believe today, since the company is one of the largest and most successful toy sellers in the world. But in 2003, the Denmark-based company was on the brink of insolvency, with massive debt and a negative cash flow of DKK $1 billion.

LEGO needed new leadership. It promoted Jørgen Vig Knudstorp, a former consultant, to CEO. Along with Chief Financial Officer Jesper Ovesen — a former banker — Knudstorp gradually righted the ship by instilling organizational discipline and forming a strong financial foundation for the company.

The new executives were brutally honest with LEGO’s board and employees about the challenges the company faced. To survive, everyone needed to focus on turning things around, correcting the company’s problems so they could plan its future.

That required clear thinking and a dose of reality.

“Before LEGO could even begin to reignite a sense of what was possible for LEGO, they first had to persuade people that decades of unfettered growth offered no assurance that the company would ever get its groove back,” writes David Robertson in “Brick by Brick: How LEGO Rewrote the Rules of Innovation and Conquered the Global Toy Industry.”

Crises come in all shapes and sizes. They can be small and isolated in a single company, like LEGO’s need to refocus itself after years of mismanagement. Or they can be caused by broader, external factors that affect industries and economies.  

No matter the source, crises call for strong leadership. The coronavirus pandemic is just the latest example.

Carla Harris, vice chairman of wealth management and a senior client advisor at Morgan Stanley, shares what leaders today must do to weather the current crisis in a discussion that kicks off Microsoft’s Envision Virtual Forum for Financial Services.

First, great leaders are visible, says Harris. “There’s something powerful in being able to see the person that you’re following.”

They’re also transparent and empathetic. Employees and other stakeholders “want to see empathy, but they also want to see confidence and positivity,” she says. It’s an uncertain environment, and we’re all feeling a wide range of emotions due to the health and economic consequences of this crisis.

“One of the biggest learning moments for me as a leader was watching financial services leadership during the financial crisis. There were some leaders who didn’t really say anything to their people, and there were some leaders who were out front every day,” she says. Harris has spent over three decades on Wall Street, joining Morgan Stanley in 1987. “There was a regular cadence that people came to rely on, and that was frankly empowering.”

While the unfolding crisis is unique even among crises, with an especially broad range of potential outcomes, leaders have arguably never been better equipped from a technology standpoint to take action. Companies may be locked down for the most part, with employees largely working remotely, but leaders can still communicate directly with staff. For example, Boston-based State Street Corp. uses video conferencing technology to host virtual forums where employees can interact with senior executives to get answers to their questions.

Harris also recommends that leaders be flexible in today’s environment and open themselves up to input from diverse viewpoints. Strategic goals may shift in response to the Covid-19 environment, or leaders may need to consider new ways to achieve their objectives. “Don’t have rigid views of what you think things are going to look like on the other side” of this crisis, she says. “This is the time now to be an inclusive leader, and the hallmark of being an inclusive leader is to solicit other peoples’ voices.”

I’d suggest one addition to the actions Harris outlines, based on my conversations with business leaders like Horst Schulze, the co-founder and former president of the Ritz-Carlton Hotel Co.

Lead with purpose.

There is no one-size-fits-all personality for leaders, and leadership skills are developed over time. But all great leaders share one trait: They have a vision and inspire employees to achieve it.

“We need leadership,” says Schulze. “Leadership implies, ‘I have a destination in mind.’ It means, ‘I show my people the destination, and I show them how it’s beautiful for them, how it’s great for them, how it’s exciting for them, how they should join me in reaching that destination.’”

Great leaders are rare. But in times like these, they can be the difference between surviving a crisis or thriving despite it.

Six Timeless Tenets of Extraordinary Banks

flywheel-image-v4.pngIf you want to understand innovation and success, a good person to ask is Jeff Bezos, the chairman and CEO of Amazon.com.

“I very frequently get the question: ‘What’s going to change in the next 10 years?’ And that is a very interesting question,” Bezos said in 2012. “I almost never get the question: ‘What’s not going to change in the next 10 years?’ And I submit to you that that second question is actually the more important of the two, because you can build a business strategy around the things that are stable in time.”

In few industries is this truer than banking.

Much of the conversation in banking in recent years has focused on the ever-evolving technological, regulatory and operational landscapes. The vast majority of deposit transactions at large banks nowadays are made over digital channels, we’re told, as are a growing share of loan originations. As a result, banks that don’t change could soon go the way of the dinosaurs.

This argument has merit. But it also needs to be kept in perspective. Technology is not an end in itself for banks, it’s a means to an end — the end being to help people better manage their financial lives. Doing this in a sustainable way calls for a marriage of technology with the timeless tenets of banking.

It’s with this in mind that Bank Director and nCino, a provider of cloud-based services to banks, collaborated on a new report, The Flywheel of Banking: Six Timeless Tenets of Extraordinary Banks.

The report is based on interviews of more than a dozen CEOs from top-performing financial institutions, including Brian Moynihan at Bank of America Corp., Rene Jones at M&T Bank Corp. and Greg Carmichael at Fifth Third Bancorp. It offers unique and invaluable insights on leadership, growth, risk management, culture, stakeholder prioritization and capital allocation.

The future of banking is hard to predict. There is no roadmap to reveal the way. But a mastery of these tenets will help banks charge ahead with confidence and, in Bezos’ words, build business strategies around things that are stable in time.

 

The Six Tenets of Extraordinary Banks

Jonathan Rowe of nCino describes the traits that set exceptional banks — and their leaders — apart from the industry.

To download the free report, simply click here now.

How the Covid-19 Crisis Turned One CEO Into Counselor in Chief

Since taking over as CEO of Amalgamated Bank in 2014, Keith Mestrich has demonstrated his management chops by reengineering the $5.3 billion institution’s balance sheet and improving its profitability.

But that experience pales in comparison to the challenge of running a company headquartered in New York City, which is ground zero for the Covid-19 pandemic. Most of Amalgamated’s 400 employees have been working from home since mid-March, including Mestrich. “I never thought that I’d be in the sixth week of running a bank from the basement of my house, by myself,” he says.

The pandemic has had a devastating impact on the U.S. economy; the likelihood of a severe recession requires management teams to carefully monitor their banks’ vital signs, including loan losses, liquidity and regulatory capital levels. But most bankers are experienced at this, most recently during the Great Recession in 2008. They know how to manage balance sheets through an economic downturn.

Managing employees through a crisis of this magnitude is another matter entirely.

One obvious way in which the current situation is starkly different from the last recession is the incredible personal stress the pandemic has placed on employees. Social distancing and sheltering orders have forced most employees to work remotely, either isolating them or requiring them to juggle work and parenting if young children are in the home.

These stresses are layered on top of the fear of infection. In New York City, where most of Amalgamated’s employees work, there were more than 138,000 confirmed cases of Covid-19, with nearly 10,000 confirmed deaths and more than 5,000 probable deaths through April 22, according to the New York City Department of Health and Mental Hygiene. And of course, the news has been full of stories about the city’s overcrowded hospital emergency rooms and the desperate, daily search for ventilators and protective gear.

People are frightened, including many Amalgamated employees. One of Mestrich’s jobs now is to be counselor in chief.

“I spend a huge amount of my time just checking in with people at all levels of the bank,” Mestrich says. “People who have to come in and work have different levels of fear and … and that is calibrated by their own family situation. I talked to one woman who works in one of our branches, who has three kids, and she’s a single mom, and knows that if anything were to happen to her, [it] could be really devastating, so her fear level is very different than somebody who’s a single person and relatively young and healthy.”

He has also heard positive stories from his employees. “I got a great message from one guy – the only member of our staff who I know was actually hospitalized – [that] he was going back to work,” Mestrich says. “He’s recovered and doing well.”

The fear that some Amalgamated employees experience could magnify when they’re asked to return to their old work environment. “I think coming back is going to be really challenging, especially for organizations that are in hot spots,” he says.

Will companies be required to test their employees and verify the results, and will social distancing requirements remain in place in the office? Amalgamated will rely on guidance from the government in repatriating employees, although Mestrich notes that “guidance right now, as of today … is very all over the place.”

No matter how this normalization process is executed, Mestrich says it will have to be done with great sensitivity. “I think we’re going to have to be unbelievably empathetic to people who have any number of situations, whether they’re a little bit older worker or they have underlying medical conditions or they still have kids at home and don’t have any other childcare arrangements or they’re just fearful,” he says.

Amalgamated has its roots in the U.S. labor movement. The bank was founded in 1923 by the Amalgamated Clothing Workers of America to provide banking services to its members and is still 40% owned by the union’s modern day successor, Workers United. Mestrich says many of the private sector unions that bank with Amalgamated have “seen significant layoffs and a lot of stress, both in terms of trying to figure out how to service their members, but also concerned about revenue dropping from dues income.”

And of course, many union members lave been laid off as well. In early April, Amalgamated launched the Frontline Workers Fund to provide financial support to workers impacted by the pandemic, including health care, grocery, cleaning service, food service, domestic and retail workers. It contributed $50,000 to stand up the fund and will donate 10 cents whenever a customer opens a new account or spends over $10 using the bank’s debit card. Amalgamated will donate proceeds from the fund to other union organizations for distribution.

The Amalgamated Foundation has also joined several other large foundations to establish the Families and Workers Fund. This fund will also focus on workers, families and communities that have been impacted by the pandemic. It has an initial commitment of $7.1 million, with a goal of raising $20 million. Amalgamated will also manage the fund’s operations.

In one sense, these two initiatives are just larger examples of the empathy that Mestrich has for his own employees. After all, what is philanthropy but empathy in action.

Who Will Lead the Bank Industry Into the Future?


leadership-2-1-19.pngLeadership is a central aspect of banking. Not only do bank executives lead their institutions, but directors who sit on bank boards tend to be leading members of their communities.

Indeed, it’s no coincidence that the biggest and tallest buildings in many cities and towns across the country are named after banks.

That’s why leadership was one underlying theme of this year’s Bank Director’s Acquire or Be Acquired Conference held at the JW Marriott in Phoenix, Arizona.

It was the 25th anniversary of the conference, one of the marquee events in the banking industry each year.

The conference opened with a video tracing the major events in banking since 1994—a period of deregulation, consolidation and innovation.

In that time, the population of banks has been cut in half, Great Depression-era regulations have rolled back and the internet and iPhone have made it possible for three-quarters of deposit transactions at some banks to be completed from the comforts of bank customers’ own homes.

It was only fitting then to bookend the conference with some of the greatest leaders in the banking industry throughout this tumultuous time.

The first day concluded with the annual L. William Seidman CEO Panel, featuring Michael “Mick” Blodnick, the chief executive officer of Glacier Bancorp from 1998-2016, and Joe Turner, the CEO of Great Southern Bancorp since 2000.

The banks run by Blodnick and Turner have created more value than nearly all other publicly traded banks in the United States. Glacier ranks first in all-time total shareholder return—dividends plus share price appreciation—while Great Southern ranks fifth on the list.

As Blodnick and Turner explained on stage, there is no one right way to grow. Blodnick did so at Glacier through a series of 30 mergers and acquisitions, building one of the leading branch networks throughout the Rocky Mountain region.

Turner took a different approach at Great Southern. He and his father, who had run the bank from 1974 to 2000, focused instead on organic growth. They built a leading footprint in the Southwest corner of Missouri, and then, in the financial crisis, completed five FDIC-assisted transactions to spread their footprint into cities up the Missouri and Mississippi rivers.

One consequence of this approach was it enabled Great Southern to consistently decrease its outstanding share count by upwards of 40 percent since originally going public, as it never had to issue shares to buy other banks.

Asked what one thing he wanted to share with the audience, Turner talked about the importance of ignoring shortsighted stock analysts. Despite Great Southern’s extraordinary returns through the years, it has rarely if ever been “buy” rated by the analyst community.

Why not? When the economy is great and other banks are growing at a rapid clip, Great Southern tempers its growth to avoid making imprudent loans. Then when times are tough, and a pall is cast over all stocks, Great Southern surges ahead.
Blodnick’s advice focused on M&A. For sellers, the goal should never be to get the last nickel, he explained. Rather, the goal should be to establish a partnership that will maximize value over time.

The conference also had a parallel track of sessions, FinXTech, focused on technology.

These sessions were often standing-room only. It was an obvious indication about what the future leaders of banking are focused on now.

Don MacDonald, the chief marketing officer of MX Technologies, took a particularly broad approach to the subject. Although his session ostensibly focused on harnessing data to increase growth and returns, he put the topic into historical perspective.

The question MacDonald was trying to answer was: How do we know if the banking industry has reached a genuine inflection point, after which the rules of the game, so to speak, have changed?

The answer to this question, MacDonald said, can be found in developing a framework for assessing change. That framework should include multiple forces in an industry, such as regulations, customer expectations and technology.

It’s only when multiple major forces experience change at or around the same time that a true strategic inflection point has been reached, explained MacDonald.

Has banking reached such a point?

MacDonald didn’t answer that question, but given the environment banks operate in right now with the growth of digital distribution channels and the ever-evolving regulatory regime, one would be excused for coming to that conclusion.

Given these two tracks—the general sessions focusing on banking and the FinXTech sessions focusing on technology—it was fitting that the final day of the conference was opened by John B. McCoy, the former CEO of Bank One, from 1984-99.
McCoy hails from the notoriously innovative McCoy banking dynasty, preceded by his father and grandfather. Bank One was one of the earliest adopters of credit cards, drive-through windows and ATMs, among other things.

Furthermore, it was McCoy’s approach to acquisitions at Bank One, where he completed more than 100 deals, that helped to inform Blodnick’s approach at Glacier. Known as the “uncommon partnership,” the approach focused on buying banks, but allowing them to retain their autonomy.

The decentralized aspect of the uncommon partnership left decision-making at the local level—within the acquired banks. It allowed Bank One and Glacier to have their cake and eat it too—growing through M&A, but leaving the leadership of the individual institutions where it belongs: In their local communities. This resulted in lower customer attrition, the scourge of most deals.

One overarching lesson from Acquire or Be Acquired is that banking is about facilitating the growth of communities, and the best people to spearhead this are the ones with the most on the line—the leaders of those communities.

Four Interesting Insights From High-Performing Bank CEOs


insight-1-11-19.pngThere comes a point in the process of mastering a subject (in this case, banking) when reading books or articles, or studying data, begins to offer diminishing returns.

After reaching that point, the best way to maintain a steep learning curve is to speak directly with authorities on the topic.

There are lots of authorities on banking—academics, consultants and lawyers, to name a few—but the ones who know the most are seasoned executives sitting atop high-performing banks.

I had many conversations with top-performing bankers in 2018. Here are four of the most valuable insights I picked up along the way.

1. The benefit of skin in the game
People in business talk all the time about the importance of a long-term mindset. Thinking long-term is especially critical in banking, given the leverage used by banks and the severe cycles that afflict the industry.

Unfortunately, in a world geared toward quarterly performance, maintaining a long-term mindset is easier said than done. When times are good and there are no signs of economic trouble, it’s only natural to relax lending standards to maintain market share.

Steering clear of this requires discipline. And one way to impose discipline is through skin in the game. If executives own large stakes in the institutions they run, they’re less likely to take imprudent risks.

This was one of the takeaways from my conversation with Joe Turner, CEO of Great Southern Bancorp, one of the industry’s top-performing banks over the past four decades.

“There are always going to be cycles in banking, and we think the down cycles give us an opportunity to propel ourselves forward,” he said. “Having a big investment in the company plays into this. It gives you credibility with institutional investors. When we tell them we’re thinking long-term, they believe us. We never meet with an investor that our family doesn’t own at least twice as much stock in the bank as they do.”

2. The pace of innovation in banking
It’s tempting to think the pace of innovation in the banking industry has accelerated over the past few years.

Even most millennials can probably remember when they had to visit a branch to make a deposit or check their account balance. Today, by contrast, three-quarters of deposits at Bank of America Corp., the nation’s second biggest bank by assets, are completed through its digital channels.

But this doesn’t mean bankers are strangers to change, because they aren’t. The industry has been in an acute state of evolution since the 1970s, when laws against branch and interstate banking started to come down.

Furthermore, while change is indeed happening, perhaps even accelerating, one benefit associated with operating in a heavily regulated industry is it won’t change overnight.

This was one of the takeaways from my conversation with John B. McCoy, CEO from 1984-99 of the notoriously innovative Bank One, which is now a part of JPMorgan Chase & Co.

“The digital thing is happening—it’s changing things—but it’s not going at warp speed or anything,” said McCoy “Maybe one of the reasons is that banks are still highly regulated, so it’s hard for an outsider to come in and disrupt the whole system. … But absolutely it’s going to make a difference, and in 10 years things will look totally different than they look today. But I don’t see any one thing that will change things overnight.”

3. Continuous self-improvement
In 2015, Phil Tetlock, a Wharton Business School professor, published his book, Superforecasting: The Art and Science of Prediction.

Don’t let the corny title fool you. Tetlock is a leading authority on the accuracy of predictions. The book walks readers through an experiment he conducted to determine whether some people can forecast more accurately than others.

Not only did Tetlock find some people were in fact better at forecasting than others—the so-called superforecasters—he also found those people shared certain traits.

Foremost among those traits is perpetual beta, “the degree to which one is committed to belief updating and self-improvement.” According to Tetlock, perpetual beta was nearly three times as powerful a predictor as its closest rival, intelligence.

It should be no surprise then that many top executives at top-performing banks share a similar trait, dedicating large amounts of time to learning and self-improvement.

Here’s how Brian Moynihan, chairman and CEO of Bank of America, answered my question about what he reads:

“It’s an eclectic mix, but basically newspapers, periodicals and I get a lot of books sent to me. It’s mainly just a lot of articles. The world has changed. It used to be when I delivered papers in college that I’d read The Boston Globe, The New York Times and The Providence Journal because I delivered them every morning. I still read them, but where I pick up most stuff now is from the article flow on a given day coming through all the feeds.”

He went on:

“Reading is a bit of a short hand for a broader type of curiosity. The reason I attend conferences is to listen to other people, to pick up what they’re thinking and talking about. So it’s broader than reading. It’s about being willing to listen to people and think about what they say. It’s about being curious and trying to learn. That’s what we try to instill in our people. The minute you quit being educated formally your brain power starts to shrink unless you educate yourself informally.”

4. Continuity of leadership
Some sort of panic, crash or credit crisis has struck the banking industry an average of once every decade going back to the Civil War. Yet, every time a crisis strikes, it catches bankers by surprise and leads to legions of bank failures.

The problem is that each new generation of banker has to re-learn the lessons of history. And these lessons are often learned the hard way.

This is why it’s important for banks to maintain institutional consciousness, passing lessons learned from the older generation of bankers down to the younger generation.

One bank that’s done this particularly well is First Financial Bankshares, the dominant locally owned bank in West Texas and one of the top-performing regional banks in the country over the past two decades.

There are a number of explanations for First Financial’s success during this time, which encompasses the financial crisis, but one is that its current chairman and CEO Scott Dueser lived through an acute banking crisis in Texas in the 1980s and is determined to avoid doing so again.

“The 1980s was this super education,” said Dueser. “I learned what not to do. And I learned how to get out of problem loans. I’m so glad I went through it because I remember it today and am not ever going to go through it again. And that’s why in the 90’s [and through the financial crisis] we did so well. That’s the value of having somebody like me in a bank that remembers. All these young guys, they don’t remember that. So how do you teach them? Well, you just tell them this is what happens when you do that.”

Future Banking Leadership Formula: Talent, Technology and Training


talent-11-1-18.pngIt’s an old phrase but still rings true today: An organization thrives when you get the right people in the right jobs.

That’s easy to say, but not always easy to do. Future leadership in banking is of great concern to boards today. And while there are myriad methods of finding good people, three key considerations in finding the right people include talent, or a transitioning generation in leadership; technology, or a heightened need for new and better ways to get the job done; and training, or existing employees looking for that golden career opportunity.

Talent: Transitioning Generations
Understanding generational differences is critical if a bank is seeking to attract young talent. Failure to understand these differences will only result in frustration. For example, boomers and millennials may not see eye to eye on a number of things. Older workers talk about “going to work” each day. Younger workers view work as “something you do,” anywhere, any time. If you’re looking for younger talent, whether on your board or within your bank leadership group, take the time to understand these generational classes. The more you know about their needs, expectations, and abilities, the easier it will be to attract them to your organization, resulting in growth that thrives on their new talent.

For younger talent, the hiring process needs to be short and to the point, with quick decision making. Otherwise, they’re quickly scooped up by competitors. Another key area is a greater focus on company culture. Millennials, for example, are sensitive to the delicate balance between work and life. Some may easily turn down a decent paying job for one that provides more control over his or her schedule and life.

Take the time to read, learn, understand, and seek out that younger talent you believe will move your organization to the next level.

Technology: An Opportunity to Rethink What People Do
In the time it takes to write, publish and read this article, the technology target for banks has moved exponentially. Keeping up requires a great deal of focus, investment and thinking outside the box. And because of the pace of change in technology, a chief technology officer (CTO) is a critical part of today’s banking leadership team.

The qualities needed in an effective CTO include the ability to challenge conventional wisdom, move decisively toward objectives and flexibility. Since long-term growth and expense management quite often are dependent upon the right technology, the CTO plays a major role in management’s long-term strategic planning for the bank. Even now, technology is performing the work entire departments used to do just a few years ago.

An effective CTO will help ensure the bank is ready to move into new growth phases of the business, including internet banking, enhanced mobile banking, cybersecurity, biometrics, and even artificial intelligence.

Training: The Value of Existing Employees
While utilizing online recruiting systems can help you find good people, there could be gems right down the hall. Growing talent from within is too often overlooked. Traditionally, boards have felt this is a job for the CEO or human resources. But some have argued that a lack of leadership development poses the same kind of threat that accounting blunders or missed earnings do. This lack of leadership development has two unfortunate results: 1) individual employees seeking to make a greater contribution never get the opportunity to shine and 2) the bank loses a potential shining star to the competitor down the street.

Lack of an effective development program is shortsighted and diminishes the value of great employees. Today’s boards must take specific steps in becoming more involved in leadership development. First, encourage your executive team to be more active in developing the leadership skills of direct reports. Second, expand the board’s view of leadership development. Take an active role in identifying rising stars and let them make some of the board presentations. In this way, the board can assess for itself the efficacy of the company’s leadership pipeline. And meanwhile, the rising stars gain direct access to the board, gleaning new perspectives and wisdom as a result.

As boards consider their duties and responsibilities, identifying future leadership should be at or near the top of the list. Organizational growth depends on it and the bank will be better able to embrace an ever-changing generational, technological and business environment.

Successful Change: Managing Human Capital Risk During Implementation


risk-3-26-18.pngMany financial services companies are in the process of implementing significant change initiatives or poised on the brink of doing so. As discussed in our previous article, many such efforts fail to meet expectations because leadership has underestimated the human capital risks that threaten strategy execution. But effective implementations can mitigate critical people-related risks while building employee understanding, commitment and resiliency.

The Typical Transition From the Past to the Future
Regardless of the type of change—for example, a consolidation, acquisition or new business model—employees must go through a process of transition. A transition that is smooth reduces the depth and duration of lost productivity, as well as unwanted turnover, and expands the organization’s capacity for future changes.

Employees often initially focus on change as an ending to what they know as familiar, which can foster uncertainty and negative attitudes, such as assuming the change won’t work. Leadership must help employees move first to a mindset that is more neutral and accepting, so employees are willing to give the change a try. From there, management can help employees begin to see the change as a new beginning and understand that the new organization can do better or more.

With most change initiatives, almost every employee is affected to some degree. Employees might need to adapt to a new technology system or move to a different facility. They could find themselves in a much larger department or with a different level of authority. Some of the changes in employees’ individual experiences will play a greater role in the potential for project success than others and therefore warrant greater change management attention. For example, leadership could expend more energy dealing with how managers react to having their authority altered than on employees who merely need to learn new procedures for approvals.

Note that it is not only reductions in authority that require leadership attention. Managers in a smaller bank where the president made all of the salary and promotion decisions might find it difficult to adjust after being acquired by a larger institution where they are expected to be more actively involved in such matters.

Transition Monitoring and Management
Financial services companies should create a change effectiveness scorecard to evaluate the impact, readiness, adoption and benefits realization of each change initiative. Metrics might include the percentage of business results achieved, individual or department change readiness (at project launch and quarterly intervals going forward), training completion rate, key employee retention, client satisfaction, quality of production and employee engagement.

Employee engagement can be measured through responses to pulse surveys conducted on a regular basis to track and improve employee understanding of and buy-in on the change project. These short surveys ask respondents to rank from 1 to 5 the accuracy of statements such as:

  • I understand how this transformation can benefit our employees, customers and community.
  • I believe the communications I receive from the transformation team.
  • I feel that I have enough opportunities to learn about the transformation.
  • I know where to go when I have questions about the transformation process.

When it comes to change projects, individual leaders or employees typically fall into one of four categories based on their level of engagement, performance and impact on project success. Each category calls for different management strategies during project implementation:

  • Advocate (high impact, high engagement): Leadership should recognize and reward high-impact employees who are actively and vocally on board and performing well, and consider increasing their project responsibilities.
  • Supporter (low impact, high engagement): These employees demonstrate their high level of commitment to the project by effectively providing assistance or resources, even though they are not critical to satisfying high-impact project objectives. Leadership should consider increasing their project-related roles and responsibilities.
  • Laggard (high impact, low engagement): These individuals have a low level of commitment to the project—even if they are performing well—but are essential to meeting the project objectives. Leadership should address their low engagement in hopes of moving them to advocate status. For example, the management team could consider demonstrating what’s in it for the employee if the project succeeds. If that effort fails, leadership should consider reassigning these employees from high-impact areas where they could negatively influence others and project success.
  • Bystander (low impact, low engagement): These individuals demonstrate a low commitment level, and their impact is not vital to meeting project objectives. Leadership might consider their potential for greater project impact and address reasons for low engagement.

The human capital risks associated with change initiatives could prove the difference between ultimate success or failure. Particularly when change affects customers, the employee experience has a direct effect on customer experience. By properly managing employees throughout the transition, bank leadership can help employees see change not as a negative ending, but as a positive beginning.

Human Capital: An Underestimated Element of Successful Change


capital-2-26-18.pngFinancial services companies of all sizes are modifying their business models to stay competitive. But managing organizational change is a major business challenge, as evidenced by the fact that 70 percent of critical change initiatives fail to meet management expectations. One reason for the high failure rate is that leadership often underestimates the effort necessary to properly handle the human capital element—that is, the employee awareness, understanding and commitment required to achieve success.

When a change initiative is a bank consolidation, acquisition, turnaround or the implementation of a new competitive business model, there is little margin for error. Directors typically focus on the financial or operational risks associated with the resulting organization, but they would be wise to expand their oversight to the potential effects on people and culture, which in turn affect how well the organization can serve customers, its perception in the community and its sustainability.

The Role of Human Capital in Change Initiatives
It’s understandable that bank directors and management tend to concentrate on the risks that can be expressed in spreadsheets and financial statements, but ultimately, it is the people of the organization that create—or impede—success.

An organization’s staff should be well prepared to use the new business processes and systems going forward, for example. Employees also should be prepared for changes to job roles and responsibilities that frequently occur due to business process improvements and new technology integration. Importantly, staff must understand not just the “how” but also the “why” behind the change if they are going to buy in.

The extent of the risk associated with a change initiative is generally driven by the extent of the impact on employees, and their readiness and ability to change. This risk increases when changes:

  • Affect more employees;
  • Affect more aspects of work;
  • Affect more locations;
  • Represent a large departure from the status quo;
  • Or represent a disruptive change, as opposed to an incremental change.

Common changes may include changes in employee roles, culture, staffing, relationships, competencies, authority, information, training, expectations and facilities. The changes that have a greater potential impact will require more active change management, while those that are less likely to cause significant waves simply can be monitored.

Once a bank’s leaders understand the change risk associated with an initiative, they can devise a plan for managing the change and communicating with employees about it.

Four Critical Transitions
An effective plan for managing business change accounts for several essential staff and culture transitions, each of which comes with its own change risks. Fortunately, each transition can be managed if leaders analyze and address the relevant issues in advance.

  1. Organizational transition: Leadership must determine the strategies, structures, processes, employee reward systems and people tactics (for example, hiring, development and retention) that will be affected or that must change.
  2. Employee transition: What changes will be required of individual employees and departments, and are they ready and able to do so? Changes may involve job roles, responsibilities, workflows and expectations. In times of change, employees naturally wonder, “what’s in it for me, and what’s needed from me?” Leadership must be able to clearly answer these questions.
  3. Cultural transition: Bank leaders need to determine how the current culture (in the case of consolidations, turnarounds or realignments) or the new culture (in a merger or acquisition) will accelerate or delay achievement of the organization’s goals. They also should analyze whether current behaviors in the organization are the optimal behaviors and how the culture will need to change (for example, leadership style, decision making or authority).
  4. Infrastructure transition: Leadership must understand if desired business changes will require changes to the processes and systems that support employees, such as performance reporting or payroll and benefits systems and, if so, the cost, timing and resource implications.

Bank leaders must act as influencers and role models during the execution of change, but their effect on results, and employees’ levels of commitment and performance, will vary depending on a few factors. Do the bank’s leaders possess the necessary skills, knowledge and abilities to perform the requisite responsibilities? Do bank leaders have the required level of commitment to perform the necessary roles and responsibilities? And finally, is their management style a cultural fit for their organization?

The ability to accomplish successful change depends on a range of factors, including some that might not traditionally be considered. Bank leaders must identify and manage their people and culture risks to maximize the odds of obtaining the desired results.