Tradition vs. Reality Equals Change
The banking industry, steep in tradition, professionally dressed in impressive trappings and secured by tried, tested and trusted conservative banking principles was comfortable. That is until it was sideswiped by a bubbled economy that burst in 2008.
Attracted to the white hot real-estate lending opportunities that were driving the economy, banks established growth targets that set the stage for excesses that typified much of the industry and helped to place many banks in a stressed condition. The likes of which had not existed since the great depression. Unforeseen reality struck!
The consequences of aggressive lending practices with insufficient credit analysis in an unprecedented economy produced declining collateral values and non performing assets that consumed bank capital like the Cookie Monster.
Today, many banks are assessing the decisions of yesterday and the abilities of current bank management.
Making incremental changes to turn the industry around will not fill the bill for banking regulators who are given the responsibility of ensuring that banks are managed in a prudent and sound manner. Customers are also concerned about the safety of their money in under performing banks. Shareholders are looking at ROI and reluctant to reinvest needed capital. The situation demands futuristic thinking and prudent management.
Business rises and falls upon leadership and strategic management decisions. Leading people in the right direction is not an organizational challenge. It is an alignment challenge. The right people in the right positions for the bank to conduct, lead and implement strategic changes are critical in restoring public, regulatory and shareholder confidence.
The Right Place at the Right Time
One of the many changes within the banking industry is that everyone, officers in particular, need specially trained skills and the ability to exercise good judgment. Are the loan officers friendly, bottom line oriented, customer focused, accurate and thorough when it comes to paper work? Thinking ahead in terms of succession planning, do these same individuals have a desire for continuous learning? Do they have good leadership abilities? Do they possess futuristic thinking and good decision-making skills? This is the right time to have such individuals on the team and the right place is the bank – for now and for the future. Do such individuals exist? Indeed they do. However, it takes scientific hiring tools to help ferret out such individuals from the masses available in today’s flooded talent market.
Analyzing every position for the best match is a good idea. Clearly if the bank has a CFO who is overly assertive and aggressive, who doesn’t care about accuracy, who is not bottom line oriented and who has low personal accountability, one may need to rethink this individual’s place in the bank.
Leadership is not being “buds” with one’s staff. Leadership is not being afraid of enforcing rules, regulations, policies and procedures. Leaders do not lack a vision for the future. A good leader does not ignore the bottom line. This is indeed the right time to have the people with the right talent in the right place.
Putting Your Money Where Your Staff Is
The other side of this change coin for sustainability is supporting the bank’s talent. New studies illustrate that motivation from the organization is a key factor in high performing service teams. One study argues, “The potential value of human capital can be fully realized only with the cooperation of the person” (Jackson & Schuler, 1995, p. 241). How can human capital be motivated by or committed to an organization that does not invest in them? Investing in human capital is investing in productivity along with future profits. A study by Lepak and Hong (2009) suggests that when an organization invests in its human capital in the form of training, development, rewards, promotions and salary increases, the employees are then motivated to reciprocate by providing productivity, commitment and better customer service. A basic rule of business is maintaining long-term customers. These highly valued customers take less time to service, do not jump ship at the first sign of fee increases and they spread the word to friends and family thereby generating new business at no cost to the bank.
In many cases, traditions are to be valued and maintained. Conservative banking principles, proved over time, can be invaluable when practiced by quality management. Keeping pace with regulatory demands, focusing on the bank’s strategic plan, hiring the right talent and keeping them trained will bring customer loyalty, employee commitment, increased profits and return the bank to normalcy.
References: Jackson, S.E. & Schuler, R.S. (1995). Understanding human resource management in the context of organizations and their environments.
Kepak, D.P. & Hong, Y. (2009) Do they see eye to eye? Management and employee perspectives of high-performance work systems and influence processes on service quality
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