Business has been good for healthy banks and other financial institutions over the past 10 years. Yes, you read that correctly. Healthy financial institutions benefited from high regulations brought upon them by the Dodd-Frank. Even though most execs led meetings with the woes of a high regulatory environment, business was quite good for these healthy institutions. These institutions were gifted the luxury of a vibrant consolidation market within the community banking sector that is a once-in-a-generation (or multi-generation) opportunity.
Community bank talent development teams often found themselves wearing not only their training and development hat, but often their organization development hat as well. Talent development initiatives in a market consolidation environment are much different than in markets experiencing an increase in competition. From 2008 to 2017, FDIC applications for new bank charters were essentially nonexistent. Since 2017, the FDIC has received roughly 20 applications for new bank charters, also known as “de novo banks.” How should talent development professionals rethink their learning and OD strategies in this market?
Talent Development When Times Are GoodMost change happening in a consolidation market involves alignment of HR policies and procedures. With consolidation comes a higher return of assets for healthy banks, allowing more resources to be spent on designing centralized learning programs. As Roger L. Martin points out in his recent HBR article, “ The High Price of Efficiency," many industries experience consolidation and focus on efficiency; waste management and almonds are two industry examples. “Such efficiency,” Martin describes, “comes at a price.
“The almond industry designed away its redundancies, or slack, and in the process it lost the insurance that redundancy provides. One extreme local weather event or one pernicious virus could wipe out most of the world’s population [of almonds],” Martin writes. Though not to this extreme, community banks have experienced a similar consolidation journey over the past 10 years. With the science of high efficiency and consolidation brings the luxury of resources. Bank learning teams began designing tailored programs for all job families. Leadership development and high-potential programs became an expectation, no longer a luxury.
However, often these leadership development programs did not focus on leadership in an environment where competition was increasing; rather, macro topics included how to lead the organization in a growth market with little or no competition.
Talent Development in a De Novo Environment
In a recent ABA Banking Journal article entitled “ A New Dawn for De Novo Banks,” Monica Meinert points out the economy is ripe for a de novo resurgence.
Since 2017, just shy of 20 de novo applications have been received by the FDIC. You may be thinking, “Twenty? That’s not very many . . . we’re fine!” That is exactly the way several organizations thought prior to their collapse. Many iconic retail establishments like Sears have fallen due to the perfect storm of technology and customer behavior merging to create Amazon. Blockbuster Video, the 1990s and early 2000s icon of every Friday night date, fell to the perfect storm of Netflix and other streaming entertainment services. BlackBerry thought they were safe since they controlled nearly all the market share of the mobile workforce; then Apple came along with their iPhone and . . . there is no need to belabor the point.
The banking business is good today. But the de novo banks are coming.
As your institution prepares, what are some areas in which you can prepare?
Robots are removing most traditional roles within the walls of banks. De novo banks will open with financial services consultants, not tellers, loan officers, or even universal bankers.
Financial consultants will be able to walk any customer through any product or service the institution offers—a true “one-stop shop.” When was the last time your HR team mapped your current talent and mapped them to roles in this coming competitive marketplace? Topics such as innovation, decision making, and problem solving are just some skills that should be focused on this this new shared economy. For all these macro reasons and more, talent development teams will need act as business partners and produce the knowledge, skills, and abilities their institutions need to meet the challenge of the de novo competition.
The de novo resurgence is a welcomed force of change. Just be ready for the perfect storm for your institution.