Our Annual Member Meeting is not another conference. The air is electric with the energy brought by prior attendees and first timers’ nervous apprehension. They’ve been told to bring their A-game by their institutions. There’s no back seat to settle into or dark corner to hide away in. When you’re here, you really are here.
I love asking these first timers about their experience. “This was REAL,” is the most common response.
What makes it real? The content is developed in real time by participants rather than delivered from the stage by sponsors or keynotes. The focus is on actual challenges and threats of disruption rather than what we want to be true. As one participant relayed on her way out: "These were real conversations about the real challenges we face."
Here are three real truths:
1. Errors and Eras
Bankers tend to think in business cycles. In down cycles, cutting costs and the flight to loan quality are the typical bank strategy to outrun the storm.
We use the past to predict the future, which can be useful right up until it's not. Our resident economist, Tim Mahedy, pointed out peculiarities in the current economic indicators that make this cycle look different. His forecast showed two divergent outcomes with nearly the same probabilities. Regardless of which scenario plays out, one thing was clear: We're entering an era of volatility.
You can try to wait out cycles. It is much tougher to wait out an era. It is nearly impossible to win when you've bet on a return to normalcy and instead, get a new normal.
2. Culture Wars
Culture, culture, culture. Banking panels in recent years seem to have adopted the startup world’s fascination with culture. Ironically, the importance of culture is often described in generic terms. Some still think it a box to be checked off.
Culture is hard to define, and it is harder to build.
Jack Welch used a two-by-two matrix to assess emerging leaders, with cultural fit on one axis and performance on the other. Given the choice between a B player that’s a great fit and a superstar that doesn’t fit, which should the bank choose? Does it matter if a remote player isn’t a cultural fit? Can enough A players be recruited to fill the ranks?
Regardless of where participants fell on these decisions, two proofs emerged. First, culture must be intentional. It isn’t about people liking each other or getting along. It can’t be prescribed in PowerPoint and it isn’t one-size fits all. Each bank must decide what its culture should be and build towards it. Step by step. The second is a succession issue. We often talk about succession in the C-suite. The evolving landscape is pushing the importance of succession deeper into the organization. New roles. New leadership styles. New demands. Leadership roles can no longer be determined by longevity.
3. Rethinking and Rewiring
Economic indicators aren’t the only source of volatility in banking. Shifting expectations from customers and regulators are putting pressure on banks from both sides.
Community banks are quick rely on their relationships with customers as a source of competitive advantage. One of my favorite quotes of the week came from Eric Schurr, chief strategy officer at Sunrise Banks. “Relationships are the most important thing… until real money is involved.” (Quote used with permission since the Chatham House Rule prevails at member meetings.)
Another axiom that started as commentary on the relationship with regulators but is more universally true: “What was sufficient in the last exam, may not be sufficient in the next.”
Whether compliance materials or digital interfaces, new expectations are forcing a rethinking of the why, what, and how we operate. The banking industry evolves slowly, but it does evolve. Institutions that will thrive embrace the opportunity change, to rethink how to deliver value, and build new kinds of relationships.
The Next Era
The future is uncertain. The only real certainty we have is that change is occurring, and quickly. Like strong cultures, strong strategies must be intentional. They require real conversations that embrace new, uncertain realities. This exploration is both exhausting and exhilarating.
The members that joined us in Nashville last week are putting in the work to be at the forefront of banking’s future. They’re getting real, so they can really get sh!t done.