… as seen in Ohio Record, official publication of The Ohio Bankers League

High Performance Banking: Defining and Achieving High Performance

By Hal Oswalt, President & CEO, Brintech

Statistically speaking, a high performance financial institution regularly surpasses its peers on financial performance measures, rating in the top 25 to 30% in ROA, ROE, Efficiency Ratio, and other key performance indicators. High performing banks didn’t achieve those rankings overnight. Building financial performance requires developing internal strategy on multiple levels, and cohesive, logical strategy takes time, leadership, and dedication to build.

My experience in banking indicates that consistently creating and executing strategy in five key areas will incrementally move banks into higher levels of performance:

Focusing on Profitability

In the past three years, banking industry profits have risen, but profitability has declined. Banks primarily struggle with maintaining profitability because they do not reliably measure how well their customers, branches, and products perform. An enterprise-wide focus on profitability will essentially mirror the bank’s strategic plan. High performance institutions will fully utilize the planning process as the central mechanism for guiding the institution toward meaningful internal and external analysis and intelligent business reporting that creates an accurate picture of which customers, products, and branches make the most impact on the bottom line.

Growing and Maintaining Core Deposits

Core deposit accounts represent stable, low cost funds – and they are the basis of every household’s banking relationship. These basic deposit accounts represent reliable sources of fee income, cross sell opportunities, and referrals to new customers. Before launching any major core deposit generation initiative, Brintech recommends that a bank assess each of the factors in the areas of product assessment, technology and operations, sales training and support, and marketing. Once a bank determines where it stands on each of these key components, creating an effective deposit generation and retention strategy becomes a much simpler task.

Creating Incentives for Attracting and Retaining Key Employees

The 2006 Community Bank Competitiveness Survey sponsored by the ABA Banking Journal indicated that finding qualified human resources is one of their most difficult tasks.

To attract and keep those employees, many banks are offering higher than average salaries, offering educational opportunities, improving the quality of the work environment, and increasing incentive pay opportunities.

While incentive pay or “pay for performance” is not a new idea, the high performing banks who have implemented incentive systems know that they work. The plan that truly incents employees to drive the organization’s strategic plan will comprise 30 to 40% of every employee’s total compensation, will provide ongoing feedback to the employee, and will either help every employee improve their performance or find more suitable positions – inside or outside the bank.

Maximizing Technology Utilization

Brintech recommends five key strategies for maximizing technology ROI:

Proactively Managing Risk

Many community banks devote fewer resources to risk management than their larger counterparts, believing that smaller, less complex institutions don’t have the same need to manage risk that larger banks have. The reality is that banks of all sizes face the same risks with varying degrees of exposure, and therefore have the same need to manage those risks. The goal should be to achieve an optimal alignment of people, process, technology, and risk that promotes steady earnings and increases shareholder value, while avoiding critical losses.

The Bottom Line

Some banks really do need to take the time to completely overhaul their planning, technology, and business reporting process to improve in all of these aspects. Others are high performing in one area, such as a strong incentive compensation program. But I have yet to encounter a bank that could not improve on at least one of these five aspects – any improvement in one area should lead to greater levels of performance across the board.

Hal Oswalt is the President and CEO of Brintech. Hal has a broad background in both banking and financial consulting, with particular expertise in strategic planning, cost management, process value analysis and organizational change management. He spent 16 years as a commercial banker in the Southwest and for eight of those years was President and Chief Executive Officer of community banks in Oklahoma City and Tulsa. He has also held the position of Managing Director and Vice President for a worldwide provider of financial services, software, and outsourcing services.

Prior to joining Brintech, he served as Managing Director of a major national consulting firm. He has managed consulting projects throughout the United States, as well as in Australia, Greece, Russia, England, Ireland, Thailand, Mexico, and Germany.

Hal holds both a Bachelor of Science degree in Business and a Master of Business Administration degree from Oklahoma State University and is a graduate of the University of Wisconsin’s Graduate School of Banking.

Brintech…bringing strategy and technology together to improve performance.