The Game Has Changed:
15 New Rules for the Future of Banking
No two ways about it—it’s been ugly. Since 2008, the banking industry has been racked by instability, volatility and unpredictability, like one long episode of Game of Thrones. And just when community bankers thought things were getting sane again, they found that the rules have changed—for good. The future of banking will belong to those banks that understand that the whole game of banking is fundamentally different now. The future will belong to those institutions that understand the new rules of that game—and are the best at executing them.
In fact, 90 percent of the problems that most banks are struggling with right now stem from the fact that they are simply playing the wrong game. Their people are busy running a Mongolian goat rodeo of activity instead of understanding that mere activity is NOT a result. In fact, activity is rarely even the MEANS to a result.
If you don’t have a rock-solid, crystal-clear definition of your bank’s intended results, busywork and activity will produce a downward spiral that only ends when you are acquired or taken out of the game altogether.
What are the new rules for winning in the months and years ahead?
New Game Rule #1: Focus on getting massive core deposits.
Gone are the days of measuring to see how many new accounts you have. When 87 percent of your customers are causing you to actually lose money, WHO CARES how many of those money losers you have? Instead, part of the new game is understanding that core deposits help you maintain safety and avoid vulnerability—regardless of interest rate changes.
Just a few short years ago, banks were screaming for deposits. How soon we forget. Now that they’re sitting on lots of them, most banks have gotten cocky. Most think they’ve figured out some secret, when in fact they’ve actually gotten weaker in their ability to secure a tremendous amount of low-cost core deposits— sustainable over time—without matching rates or order-taking.
New Game Rule #2: Clean up your loan portfolio immediately.
Yeah, you made some mistakes—and we all know how you made them. The formula for making bad
loans is simple:
No funnel filled with good quality A+ credits that you’ve identified through psychographics +
No warming campaigns to get into legitimate conversations with these prospects +
No system of sales to pull in these quality customers = Bad loans!
So, while you’ve made some mistakes in the past, you can now make a change by identifying, warming and closing. But as long as your bank is sitting on a time bomb of bad loans, the bad juju from those mistakes will sap your energy. So decide to clean up the portfolio immediately. Get it behind you, then build your system so you won’t be going through another portfolio clean-up three years from now due to lack of wisdom and failure to execute.
New Game Rule #3: Target the right prospects.
You don’t need everyone as your customer. You already know that. But while most bankers believe growth and profits are driven by the number of new accounts they bring in, success actually has nothing to do with new accounts.
Not one thing. Instead, it has to do with quality of accounts. For instance, instead of bringing 300 new loans into your location in a month, why not focus on bringing in 75 loans—where every one of them is an A+ credit and every closing brought you an extra 100 to 200 basis points?
NOW we’re talking. So stop the crazymaking activities of assigning more people to chase more (unprofitable) business, and get your people focused on doing the right things.
New Game Rule #4: Get all of them.
Once you have identified the right prospects, have a system—and I do mean a SYSTEM—to pull in every last one of them. That is the new game of banking.
Keep this game visible, keep it fun, and keep it in front of everybody every week.
Highlight those teams and individuals who land the aces, get them moving in the right direction, and establish a system of accountability to ensure the right activities are happening every day.
New Game Rule #5: Get your people out of the “80 percentile” activities.
I am always astonished when I go into a bank and hear people talk about how overwhelmed they are with allllll the work they do. Yet when I ask them to do something that ought to take five minutes, I watch them spend a week making a mountain out of that molehill.
It seems as though people are more distracted than ever before, and their ability to be efficient and git-er-done has plummeted. Maybe it’s video games or texting or some other aspect of our rapid, unfocused society…I honestly don’t know.
But somehow many employees have ended up in a place of such lack of focus that the critical few activities—those that will really grow your bank—are always pushed away by a tsunami of unnecessary activity.
Get your people to understand that Hey, these are the five key initiatives for the bank, and these are the five critical drivers for the bank, and every day we’re going to report on our progress with these initiatives, such that every activity is tied into those drivers. Suddenly, you can begin to move the right needles in the right direction.
New Game Rule #6: Make it fun!
Keeping your people motivated and happy is not just about clown noses every day or an ice cream social after a big win. As a matter of fact, it’s about none of those things. It is about creating an environment that celebrates success.
Nothing creates success more than a celebration of current success. The problem is that most bank CEOs think “celebration” means doing a PowerPoint once a quarter, talking about the numbers, and saying, “Woohoo!” for three minutes about past history. Unfortunately, celebrating just one time—after the wins have already been racked up—is already too late. All those theatrics measure and celebrate are results as opposed to inputs.
Having a process where everyone in the bank knows the critical drivers, where people are put together into contests around those critical drivers, where management makes it fun, and where celebrating and “high-fives” are a normal occurrence when one of those drivers gets improved—THAT is how you get every one of those needles to JUMP.
New Game Rule #7: The critical drivers for every position should be tied to the key initiatives and the key results for the bank.
Your people are all good people. Rarely do I walk into a bank where they tell me, “Gosh, our people aren’t any good.” In fact, regardless of the performance of the bank, I almost always hear, “We’ve got really good people.” So we know that their hearts are in the right place, but clearly their activities are focused in the wrong direction.
By giving people a clear understanding of critical drivers that really matter, you can start to move things forward in ways that make some sense. For instance, instead of a personal banker caring about the number of new accounts they have, they should really care about how many Top 100 prospects they’re bringing in. How many cross-sales is New Accounts selling? What’s the cross sales ratio on new accounts—and more specifically, to their A+ portfolio?
By homing in on the correct critical drivers, establishing a system for increasing and winning around them, and having a fun system that instills an I-can-do-that attitude instead of one burdened with quotas and other overwhelming work—you can easily move your people to a level of confidence knowing that they can do anything.
New Game Rule #8: Invite people off the “happy bus” when necessary.
Simply by working at your bank, some of your people may be on the wrong team. In fact, it might be time to invite them to join another team—somewhere else—because your team will be expecting people to bend over backwards to WOW customers… to consistently meet customer service standards without exception…to routinely hit their critical drivers…and to be authentic in their communication without crazy-making, whining and gossiping behavior.
Some people just can’t live by those standards. That’s okay. There is always another place for them outside of your “happy bus.” Dealing with those employees who need to be dealt with is imperative. In fact, the number one reason CEOs lose their job, according to Fortune magazine, is failing to deal with low performers and unhealthy dissidents.
New Game Rule #9: Celebrate and make visible all of your team and individual results on critical drivers.
Don’t just drop numbers into a report somewhere. Instead, make hitting the high benchmarks visible and celebrated. Celebration is about making the numbers known to everyone… “high-fiving” those who achieve them, focusing energy on them, increasing them, talking about why they’re important, and tying them to the team. Those are the things that matter most.
New Game Rule #10: Have a mindset of unstoppability.
Who will come out the other side of this crazy economy? The smart money is on the banks where the CEO can bring a fist down on the table and exclaim, “Listen, if there’s only one bank standing in this country at the end of whatever is going on here, it’s going to be us. I don’t care what’s going on in the environment. I don’t care what’s going on in the economy. I don’t care what the competition is doing. As long as we keep our focus on making our clients successful, absolutely nothing can stop us from being successful.”
That is the leadership mindset that most banks are lacking right now. In fact, I would say 97 to 98 percent of all bank CEOs have completely messed up their mindsets—and as a result, have negatively impacted the mindsets of their teammates. It’s not hard to do when you have the pressure of regulators, the economy, and a lot of reasonable people giving you all kinds of excuses of why “it can’t be done.” That doesn’t excuse you, however, from moving forward or from making the shift to say, “OK guys, I admit it. I bought into the story. But you know what, that is not our story. We are writing our new chapter, and it starts today. Let’s go!”
New Game Rule #11: Stop ALL whining, gossip and excuses COLD.
You can do a tremendous amount of good. You can build systems, you can create great marketing, you can get all the right people on your bus, you can incentivize them well, pay them well and have all kinds of wonderful things going—but as long as you’re allowing whining, gossip and excuses to continue in your organization, nothing, nothing, nothing will ever work. When you have a group of people pulling the cart up the hill and even two or three have their feet dragging behind, that cart just ain’t gonna reach the top.
Not dealing with crazymaking behavior is the downfall of executives who believe, That’s just how it is. It hurts the bank and the people in the bank. End it.
New Game Rule #12: Build systems.
Every bank should work to create a franchise-style model—whether you have one location, 15 locations or 100. This essentially means that every branch uses the same profit, growth and income-generation systems. When you move into a new market, how do you hire? How will you find the best prospects? How will you warm them up for a lender to call on them? What are the critical drivers that will be required from your personal bankers at that new location? How will you know if they met those? What are the behaviors of the branch manager at that new location? How will you know if he practiced those behaviors?
These are just a few of the systems that must be built. Plus, by building just a few systems focused on creating profitability—and thus having more assurance of profitability—you can make new locations profitable within just nine months, as opposed to waiting two to three years for them to simply sustain themselves. A franchise-style model of systems gives you the potential for growth and profitability without limits.
New Game Rule #13: Beware of the archetypal patterns.
I’m not sure if anybody else has seen this, but after working with hundreds of banks over 20+ years, I’ve discovered there is some shift that happens at the $200 million mark and another that happens at the $1 billion mark—almost without exception, unless there is intervention.
At the $200 million mark, a bank discovers they are no longer in the Wild, Wild West. They can no longer watch everybody and tell them what to do. Suddenly, they find everyone running in scattered directions with no understanding of successful patterns or how to repeat those successful patterns—mainly because no best practices have been built in.
Consequently, many banks grow from $200 to $500 million spending valuable time building systems (and more often kicking and screaming) when they could have just done the hard work at $200 million to create systems that allow for success.
At the billion-dollar mark, on the other hand, everybody suddenly gets Big Company Disease.
They start spending valuable time worrying about the wrong things, like: “Gosh, which plant service can we hire to water the plants?” Their people start thinking, “Gosh, that’s not my responsibility—it must be someone else’s.” Suddenly, the exec team forgets that every employee should have two to three “jobs”—constantly watching for what else needs to be done and stepping up to make that happen. Because the bank is larger, people don’t feel heard—so a pattern of whining, gossip and excuses becomes the cultural norm. These patterns make it almost impossible to succeed, as evidenced by the large numbers of banks that reach the billion dollar mark, then implode.
Not taking growth systems seriously RIGHT NOW—and not building a can-do culture from day one—is a problem. But if you are nearing the billion-dollar mark, getting laser-focused on them right now is astronomically important.
New Game Rule #14: Show that you love it.
Take a look in the mirror and notice what your face looks like. Is that the face your mama grew to love—or is it the one that grew on the front of your head once you decided that life was hard? No matter what is happening, your face is showing to your people.
If you have a jovial look…if you’re high-fiving your team and having a good time, chances are they’ll have a good time and make the tough stuff easier, too. But if you’re in misery every day, you might as well just knock a million or two a year off your bottom line—because that is the impact of a leader who shows up as someone who’s just biding their time until retirement.
There are way too many leaders who need to make a choice. Either get on the “happy bus” or get the heck off—because you have no right to hurt the potential of your people by marking time and counting your days until retirement. When you haven’t committed to being in the game and intensely playing it, you shouldn’t be on the bus at all.
New Game Rule #15: Be the giver.
As a leader, it’s up to you to bring your people to an understanding that you’re in a giving game. You’re here to make the community better. Help every small business you touch become financially successful. Ensure that every parent who wants to send their kids to college is creating a college or retirement fund to make that happen. Make sure that every customer retires with financial independence. Banking is about the “why”—the giving back, the value you bring to others, the philanthropy you pursue, the community service you create, the financial literacy you teach, and so much more. It’s about taking the “why” seriously and being a giver, not a taker concerned only with profits.
Understanding these 15 rules of “the new game of banking”—and having systems in each one of these areas—is not only the key to profitable growth. It’s also a mindset that will become absolutely imperative as pressure mounts to create a high-performing bank.
The good news is that you have a choice to make growing your bank difficult or easy. But one choice you must make: Start today creating important shifts in every single one of these 15 areas.