In the dozens of bank planning meetings I have recently facilitated across the country, the greatest strategic challenge that management teams identify is finding the right people. Attracting and developing qualified carbon-based life forms has become the biggest pain in the rear for bank executives. One of the ways bankers are trying to address this issue is through improved management training programs.
Remember the great bank management training programs of yesteryear? Whether it was Continental Illinois, Citibank, Wells Fargo or Chase, these programs simply rocked! They churned out bankers by the hundreds, young bucks full of vigor and ready to take on the financial world. Where the heck did those programs go? They disappeared almost completely in the ’90s and now have just started to make a tepid comeback.
Without a good “farm system” to create future professionals, the banking industry is facing a serious talent void. Here are a few issues to consider.
#1: Demographics are working against us
We’ve said it before in GonzoBanker columns (see “Talkin’ Bout My Generations), there are 76 million Baby Boomers that will begin to retire soon and only 58 million in Generation X to fill their shoes. This impact can already be seen in banks today. It seems that a 35-year-old trained banker with 10 years of experience is more endangered than a duckbill platypus. The labor pool will simply be shallower in the years ahead.
#2: Narrow bankers are becoming the norm
As banks have merged and centralized, we’ve also seen a tremendous rise in functional specialization. For instance, many sales professionals in larger banks have no clue about credit, compliance or operations. It’s basically the Fuller Brush guy with a banker’s business card. The back office doesn’t look much better. We’re starting to create folks who have been the ACH Balancing Administrator for 15 years, never daring to step over into that dark land next door called the ATM Department.
#3: Training is viewed as a luxury banks cannot afford
Isn’t it ironic? Three months after the strategic planning session where executives talk about people being the “greatest asset,” these same executives make training one of the first victims in the annual budget showdown. Somehow, bank executives have not seen ample evidence to make the connection between management training investments and revenue/earnings growth.
No matter what newfangled idea may come along (multi-channel integration, Six Sigma, on-boarding), a bank’s success still comes down to the quality of senior and middle managers. In our technology and process improvement work at Cornerstone Advisors Cornerstone Advisors, we often find that poor performance has little to do with computers and procedures, but merely a manager who is not managing. Think about the opportunity cost that is created and the energy that is taxed when mediocre managers hang out in your organization.
All of the trends communicate an important reality to executives: the free market today will not create a sufficient amount of experienced bankers unless banks start focusing more on developing their own professionals.
It’s time to stop believing that management training is unaffordable and get more creative about how to hack these important programs together.
So fair readers, I offer you the 10 key mandates for a GonzoBanker Management Training Program.
#1: Employ a two-tier structure to the program
Gonzo banks should have both a “Management Trainee” program for immersing new recruits into the world of banking and a “Leadership Development” program that takes experienced stars in the organization and grooms them for future executive positions. At any point in time, a team of new recruits and a strong crew of middle managers should be running through a formal management and leadership development programs.
#2: Focus on more than just credit
Let’s get this straight: a management training program is not synonymous with a credit training program. Credit is certainly a big chunk of the required curriculum, but let’s not forget mongo important areas like operations, sales, I.T., compliance and wealth management.
#3: Expand the focus beyond snotty-nosed kids
When bankers think about management training, they immediately create images of the energetic college graduate with one business suit from Macy’s and the new leather briefcase given as a gift from grandma. Unfortunately, this narrow focus on new college graduates misses great opportunities and creates an unhealthy divide between management trainees and the rest of the organization. In fielding candidates for the management training program, don’t forget the 34-year-old single mother who supervises the Note Department or the Accounts Payables supervisor who just came from the insurance industry. There are untapped management stars in most organization whose careers could easily be launched with the inclusion in a management training program.
#4: Deal with geography issues up front
Many banks have struggled with employees’ growing hesitation to relocate for a different position. They train a dozen young bucks at the corporate headquarters, only to find that none of them wants to move out of the HQ town when it’s time for permanent assignments. If they are told to move, they take their costly new skills and leave for a competitor in town. Former Community First executive Dan Fisher once offered me a better idea: hire people with a specific initial geographic assignment and then enroll them into the trainee program when they accept their position. Dan’s got it right. Our structure has it backwards today.
#5: Keep it hands-on
Gonzo management programs should not wallow around in theory and academia. Instead, they will force trainees to be exposed first-hand to the grit of our industry. No working on simulation spreadsheets in the boardroom. Instead, let’s take little Chad the trainee and force him to work the night shift in item processing. Let’s have Lisa the trainee man the I.T. help desk for a week, and let’s makes sure every trainee sits in a branch and opens new accounts for customers. If future executives are going to wax poetically about how simple it is to sell bank products, they damn well better have done sales themselves. There are too many sales “experts” in our industry today who have never set foot in a branch.
6: Leverage the abundance of training content
Many bankers worry about how they will develop the materials for a management training program, but that’s the easiest part. Any bank can cobble together an affordable curriculum from the alphabet soup of organizations like ABA, BAI, RMA, ACB, and FMS. The abundance of self-directed, online and customized courses available from these folks provides a major league shortcut in developing a bank’s management training program.
#7: Force strategic thinking
One of the common criticisms about middle managers is that they do not “think strategically.” While some may think a visit to Harvard is needed to learn strategy, I’ve seen banks employ creative, cost effective ways to foster this type of development. One bank made each “Executive Academy” candidate read a recent management book and write an essay on how the author’s thoughts could be applied to the bank’s strategy. Another bank asked middle managers to make regular presentations to the senior team about critical topics in the industry. Instead of expensive computerized bank simulations, bank executives can simply give their trainees a hypothetical strategic issue for their particular bank and ask them to develop a plan of action. One client had their trainees tackle the issue, “What if our branch expansion plan is not meeting its expectations?” Strategic thinking can only be learned by doing, and it not hard for management to create these types of activities internally on a shoestring budget.
#8: Build incentives for trainees to stick around
One of the greatest risks banks face when investing in management training is that newly minted trainees will leave the bank before any of their development has been amortized with real work. Structures that withhold a portion of bonuses and salary increases until the trainee serves more than two to three years can be effective in addressing this issue. In addition, good personality profiling of candidates up front can weed out the rats who are likely to jump ship.
#9: Make management rotation real
The most valuable aspect of the classic management training program was that experienced managers were rotated to different parts of the bank, creating a number of well rounded individuals to take the highest posts in the organization. General Electric has made an art form out of management development through rotation. These days, our industry seems to find these rotations impractical, and the frequency of these moves seems to be falling continually. However, there are some banks who still take rotation seriously. I recently met with a bank CEO who hesitated to name a bright young manager the new CIO because he worried about him being typecast too much as an I.T guy. The CEO’s highest priority was to give this manager broader experience so he could “one day run the entire bank.” Bravo!
#10: Keep the commitment constant
I have witnessed many banks turn their management training programs on and off like a beer keg, all depending on budget conditions and other corporate initiatives like mergers or regulatory compliance. But let’s face it. There will never be a quiet time to start building for the long term. Management training must be viewed as a necessary investment in doing business, especially with the industry’s growing labor challenges. So banks may want to come up with some guidelines to keep the commitment ongoing. My suggestion? A bank should have a management trainee for every 50 – 100 employees in the organization. A $1 billion bank with 250 employees should have three to five trainees on hand to avoid eating their seed corn and ensure a crop of leaders for the future.
Time to Grow Our Own
The most important reason for banks to reignite their management and leadership programs is to create “real” bankers again. We need bankers with broad knowledge and experience because of the sheer diversity and complexity that our industry presents. Lately, bankers seem to believe that we can piece together success through intense staff specialization, centralized operations and loads of outsourcing. While these are all valuable tactics in certain situations, real value is created when the pieces of the organization are designed, orchestrated and motivated to come together – and this only happens when there are great mangers around.
“That’s our philosophy: if we develop our own talent, we’re more likely to win…you can’t impart that pride and tradition when you just go sign a free agent or trade for someone who’s come up through someone else’s system.”
–Charlie Blaney, LA Dodgers VP of Minor League Operations
Fast Company, April/May 1997