Last week we discussed the possible future shortages in properly trained lenders faced by many community banks. This is a real possibility, so from a defensive point of view we should also consider ways of retaining and “growing” the lenders we already have or will attract into the pipeline.
Here are three rules that will help you build and retain your loan staff for the future.
Rule #1: Invest in personal growth and development, with a strong bias toward “more is better.”
A dozen years or so ago the Harvard Business Review published a study with significant implications for the issue of employee retention. The author noted that, increasingly, younger members of the workforce identified with their functional job descriptions rather than with the employer.
In other words, a young lender is more likely to identify himself as a “lender” than as an employee or officer of “XYZ Bank.”
A companion finding within the study was that opportunities to build individual skill sets was the #1 factor among several in overall job satisfaction trumping even financial compensation.
Why, I wonder, were these conclusions not evident to the banks themselves? Why do we have to be told something as important as this by outsiders, rather than sensing it among our own people?
Common sense says that better-trained employees benefit a bank’s business model by increasing customer satisfaction through more professional and quality interactions between banker and customer.
For this common sense reason alone why wouldn’t bank managements enthusiastically support increased educational opportunities?
Many do, of course, and make both internal and external growth and development opportunities available for employees. But some do not and “Exhibit A” in this sense is the way that training budgets at many companies were slashed in the wake of the Great Recession. That seems very short-sighted unless one’s perspective is no farther out on the horizon than the next quarterly earnings release.
Rule #2: Create a career path for professional credit and lending development.
Career pathing is an activity that most large employers routinely do. It’s a way of assuring “bench depth” of talent by thinking through a series of logical career experiences to expand the personal horizons of the professional staff.
One growing opportunity that integrates with the professional and management needs of the bank is the level of experience and competence in protecting the bank’s brand through the quality of the branch staff.
In many banks the delivery of commercial credit products and services remains largely through the branch system. This means that lenders should be completely familiar and comfortable with the branch environment. It’s probably the best source of face-to-face contact with borrowers and borrowing prospects. At the same time, I know from my own experience that many lenders tend to disparage the branch environment. This is unfortunate and is a disservice to the overall business model of the bank.
Traditionally, branch career opportunities were tied to operational sorts of disciplines. This is rapidly becoming an obsolete notion as many staff members trained as consumer and small business lenders are finding themselves occupying positions of greater supervisory and management positions within branch systems. The old paradigms are giving way to more diverse work experiences, to the benefit of both the individual and the bank itself.
Rule #3: Deliberately reinforce the bank’s credit culture through a series of basic experiences.
This may appear to be a variant on career pathing, yet there’s an important difference.
The lending process at every bank includes certain core elements. The first is the functional competence embodied in the Cs of Credit. All lenders should have the opportunity of experiencing the principal components of underwriting. In The Bank of New York’s Loan Officer Development Program, participants did statement spreading, credit investigations and inquiries, and formal credit analysis under the watchful eye of a permanent and experienced staff of credit professionals. We were plugged into the basic workflow of the credit function as participants and not just as observers.
The other prime component of building a strong credit culture is an understanding and appreciation of credit’s internal controls. This includes credit policy, loan review, documentation, and compliance. One’s credit education is incomplete without firsthand experience in appreciating the value of these processes. A strong credit culture requires both the functional skill sets of credit analysis and a rigorous commitment to enforcement of the bank’s controls.
Some of these experiences can be as simple as forensic analyses of failed lending deals.
How and why did the bank lose money on particular loans?
What mistakes were made?
Where did the process fall short?
Not all experience is equally good
Too often community bank managements make the mistake of thinking that all credit experiences, wherever acquired, are of equal value. This is a very short-sighted view when you consider how inconsistent credit “training” may be in different environments and how bad habits may be acquired and remain uncorrected for years.
Successful lending is more than sending a salesman out to talk to commercial credit prospects. It’s having the confidence in your processes that you can and will attain consistency and quality in the results. And it’s reinforcing the confidence of the lenders that they are capable of achieving the results that are unequivocally associated with success.
Success is not accidental.
It can only be found in a systemic approach. And that approach is likely to become more difficult to execute as a finite talent supply gets stretched in the years to come.