- Members of a board have a duty of loyalty and also of care; at strong boards, these core responsibilities provide a foundation for five additional behaviors.
WASHINGTON, DC — This past week, I had the distinct pleasure of visiting San Antonio, Texas. As I flew home on Thursday, I found myself reflecting on how purpose-driven companies (like the one I visited) focus on what their customers truly care about. By extension, I spent time reflecting on how a board might best support and encourage this mindset.
As I wrote for a piece that posted on BankDirector.com yesterday morning, one of my favorite proverbs when talking about the value of high-performing teams is to go fast, go alone; to go far, go together. Now, as my team prepares to head out to Chicago to welcome some 200 people to the Four Seasons Chicago for our annual Bank Board Training Forum, this mindset once again came front and center.
Given the financial industry’s rapid pace of change, one would be forgiven to think the best course of action would be to go fast at certain challenges. However, at the board level, navigating an industry marked by both consolidation and emerging threats demands coordinated, strategic planning.
Since I re-joined our company in September of 2010, I’ve noticed five key elements characterize many boards at high-performing banks. Some are specific to the individual director; others, to the team as a whole.
#1: The Board Sees Tomorrow’s Challenges as Today’s Opportunities
Despite offering similar products and services, a small number of banks consistently outperform others in the industry. One reason: their boards realize we’re in a period of significant change, where the basic premise of “what is a bank” is under considerable scrutiny. Rather than cower, they’ve set a clear vision for what they want to be and hold their team accountable to concepts such as efficiency, discipline and the smart allocation of capital.
#2: Each Board Member Embraces a Learner’s Mindset
Great leaders aren’t afraid to get up from their desks and explore the unknown. Brian Moynihan, the chairman and CEO of Bank of America, recently told our Executive Editor that “reading is a bit of a shorthand for a broader type of curiosity. The reason I attend conferences is to listen to other people, to pick up what they’re talking and thinking about… it’s about being willing to listen to people, think about what they say. It’s about being curious and trying to learn… The minute you quit being educated formally your brain power starts to shrink unless you educate yourself informally.”
(*Spoiler alert: you can read more from Bank Director’s exclusive conversation with Moynihan in the upcoming 4th quarter issue of Bank Director magazine.)
#3: The Board Prizes Efficiency
In simplest terms, an efficiently run bank earns more money. This allows it to write better loans, to suffer less during downturns in a credit cycle, to position it to buy less-prudent peers at a discount all while gaining economies of scale.
#4: Each Board Member Stays Disciplined
While discipline applies to many issues, those with a laser focus on building franchise value truly understand what their bank is worth now — and might be in the future. Each independent director prizes a culture of prudence, one that applies to everything from underwriting loans to third-party relationships.
#5: The Board Adheres to a People-Products-Performance Approach
Smart boards don’t pay lip service to this mindset. Collectively, they understand their institution needs to (a) have the right people, (b) strategically set expectations around core concepts of how the bank makes money, approaches credit, structures loans, attracts deposits and prices its products in order to (c) perform on an appropriate and repeatable level.
Looking ahead, I feel a sixth pillar could emerge for leading institutions; namely, diversity of talent. Now, I’m not talking diversity for the sake of diversity. I’m looking at getting the best people with different backgrounds, experiences and talents into the bank’s leadership ranks. Unfortunately, while many talk the talk on diversity, far fewer walk the walk. For instance, a recent New York Times piece that revealed female executives generally still lack the same opportunities to move up the ranks and there are still simply fewer women in the upper management pipeline at most companies.
At Bank Director, we believe ambitious bank boards see the call for greater diversity as a true opportunity to create a competitive advantage. This aligns with Bank Director’s 2018 Compensation Survey, where 87 percent of bank CEOs, executives and directors surveyed believe a diverse board has a positive impact on the performance of the bank. Yet, just 5 percent of CEOs above $1 billion in assets are female, 77 percent don’t have a single diverse member on their board and only 20 percent have a woman on the board.
So as we prepare to explore the strong board, strong bank concept in Chicago, I’m reminded of another adage, this one from Henry Ford. If all you ever do is all you’ve ever done, then all you’ll ever get is all you’ve ever got…
If you’re curious about what we’re talking about in Chicago, I encourage you to follow the conversation on social media, where we’re using #BDTrain18 to tag shared ideas on LinkedIn and Twitter.