By Jeff Marsico
It took eighteen years for the ATM to reach 50 million users. It will take far less time for the ATM to become obsolete. Why? Cash is less important now than it was 18 year ago. In fact, it may be less important now than any point since the days when barter was the primary mode of exchange.
These days, I do my banking using a mobile app and exchange money using Venmo. And new payments systems are coming out with startling regularity. How long has it taken these advances to go mainstream? Perhaps some readers thought each was a passing fad.
Who will lead the charge into the new era of financial services? Banks need to decide that now—before it’s decided for them.
Banking has historically been a slow moving industry. Yes, we were earlier adopters of technology—digitizing our customer base, housing large computer rooms with IBM mainframes that spun large reel tapes. But cutting edge? Hardly.
Regulations are a drag on financial resources and innovation. How can the banking industry move quicker? We have risk assessments, core processor limitations, and vendor management policies that slow us down. There is little consensus among bank management on the customers or technologies to pursue in order to build a long term future. And thinking about the long term, we worry, this won’t break our 2018 budget, right?
Regulator concerns, consensus thinking, and focus on short-term financial goals without long-term plans are among the reasons why we had over 15,000 banks in 1990, and 5,700 today.
What we need as an industry is leadership.
Taking ownership of the issue.
In strategy sessions when there is robust debate without consensus on direction, be a leader.
When profitability reports show a negative trend and the department manager debates cost allocation theory, be a leader.
When the bank’s vision is watered down to the point of ineffectiveness, be a leader.
Example: A bank was in the midst of its strategic plan and a process review. It had invested significant dollars in a CRM and sales management tool. The commercial lenders were not using it, however, which degraded its utility enough to question the cost. The benefits to the bank from successful implementation would have led to greater coordination between lines of business, deeper customer relationships, and more responsive customer service. Should a few individuals be allowed to torpedo those benefits just because they enjoyed large loan books and lending was the most profitable line of business? The CEO led—and the bank implemented tactics to get maximum use from the CRM tool.
Before you can lead, you must have followers—but it doesn’t end there. Before you can be a good leader, you must have willing followers. Bank CEOs and senior managers have organizational authority to compel those in their charge to march down a specific path, so long as it is legal and ethical. But do followers want to follow? The quality of execution depends on it.
Some believe leadership is a soft skill. Some think you either have it or you don’t. Others ask what “it” is anyway—suggesting it’s just in the eye of the beholder.
Don’t leave it up to chance.
Leadership is believed to be such a critical skill in the military that they commit to leadership development in every service, and at every rank. During my service, the Navy sent me for one full week of intensive leadership training.
The Navy Leadership Development Framework, issued in January 2017, stated that leadership through the quickening pace of change and complexity would give our Navy a competitive advantage over adversaries. In other words, the Navy thinks great leadership wins battles. Does the same apply to banking?
Can great leadership build market share, improve profits, and sustain your bank for a long-term future?
I think so. Here’s how.
A leader pushes the team to be its best.
This is particularly noticeable in times of change, when the leader must take their team into unfamiliar territory. As the Chief of Naval Operations put it:
“World-class leadership is our Navy’s decisive advantage. First and foremost, Navy leaders must have a burning drive to develop their teams to consistently and sustainably deliver maximum performance.”
– Admiral J.M. Richardson
A team’s best is not defined by one person. If you think the best ideas to move your team forward come from you—and you alone—you are limiting your team to the biases, ideas, and capabilities of just one individual. And you’re missing a critical opportunity. Expose each of your team members to development tools to improve their contributions to the team.
And be sure to allow mistakes.
Great leaders highlight the successes of their teams, and take responsibility for team mistakes. This promotes better team performance—and builds trust—by showing that the leader puts the common good above individual ego. Great leaders look to learn from successes and mistakes, and seek out knowledge from peers, outsiders, and their team. How else would you pursue “best ever” performance?
A leader has character.
I recently attended a community event where the new chief of police was introduced and spoke to us. He described his leadership philosophy as doing the right thing, the right way, at the right time, for the right reasons. This speaks to character. To be a Navy leader, competence is one of two development lanes. The other is character.
Can character be taught? The real question is: Can character be learned? Most behaviors are learned. Ideas turn to thoughts that turn to words, then actions, then habits. Most of us have bad habits that we constantly try to unlearn. Do we nourish the good ideas, thoughts, words, actions—and turn them into good habits? Because character radiates from leaders to team members.
What words, actions, and habits do you communicate to your team?
A leader with character gains the commitment of others to pursue a strategy that may be less proven. That’s because team members trust such leaders, and are more willing to follow them into uncharted waters. In an industry going through unprecedented change—like banking–character is a critical leadership trait.
Example: A New England bank facing performance issues was owned by a few very large investors/pension funds that were looking for an exit strategy. The bank was not large enough to garner a significant M&A premium, nor was it particularly profitable with solid market share. The new CEO proposed a new strategy. He closed all but one branch, developed mobile and online capabilities, and formed fintech partnerships. The result is a recapitalized bank that has grown to twice the size of its former self in less than 10 years. The CEO took his team into unfamiliar territory, and they are scoring wins. Does your bank have the leadership to execute such a strategy shift?
A leader communicates.
That doesn’t mean that he or she must be a “type A” personality, be gregarious, or even likable. My top three lessons from reading the Steve Jobs biography were:
- Be bold.
- Be uncompromising.
- Don’t be a jerk.
As an interested observer of Apple’s culture, I think Jobs nailed 1 and 2 and missed on 3. But he was clear about the direction he wanted to take Apple. And those willing to follow with his level of zeal experienced growth like no other. To get your team to follow you into a dark room, communicate clearly your vision, and why they should embrace the challenge.
A leader has commitment.
I recently read a Harvard Business Review article about strategy execution, in which the writer told readers to “modify often.” For tactical execution, I would agree. But if we modified our vision and strategy at the sight of resistance, would it be worth pursuing? Particularly in a changing industry. When Lincoln suffered early defeats in the Civil War, did he modify his vision of preserving the Union? No. Although he knew the path was full of hazard, he did not relent. And today we have our Union.
Banking is in transition, more so than at any point in our careers.
It is a false premise to wait until things normalize, or regulations change, or challengers to our industry such as fintech firms fail. In 27 years we pruned our industry by two-thirds. But leadership today can result in an enduring future. Leaders that push their teams to be the best, show humility and character, communicate their vision, and commit to it are in a far better position to mobilize teams for success.
Jeff Marsico is Executive Vice President of The Kafafian Group, Inc., a strategy, process improvement, profitability reporting and outsourcing, and financial advisory firm based in Bethlehem, Pennsylvania. He can be reached at 973.299.0300 x120, [email protected], or www.kafafiangroup.com.
