A New Year with new starts for all. What should banks be doing? In no particular order:
1. Remember Shakespeare. He famously wrote, “First, let’s kill all the lawyers.” While not necessarily a bad idea, times have changed. Now, we need to focus on compliance officers. They must be stifled before they eliminate all revenues.
2. Recommit to small business. Banks are not only losing an economic opportunity, but by failing to serve this segment many are ignoring one of their basic reasons for existence. A big mistake.
3. Be scared about losing the customer relationship. Banks continue to think that no matter the growth of non-bank lenders and payment players like PayPal they still continue to control the customer relationship. Unfortunately for banks, more customers do not agree.
4. Realize your customers are dying. If you focus on baby boomers and depend on them for your earnings, you are in trouble. Maybe not this year but within the next five or so.
5. Rethink the lending boxes in which you are operating. Yes, it’s great to refocus on less risky lending after you have already made too many bad loans. But the problem is that oftentimes banks are going after the same limited customer set. Many good customers are being ignored. This hurts the bank and, more important, hurts the larger economy.
6. Fire mediocre employees. Enough said.
7. Increase incentive income as a percentage of total compensation. Dramatically.
8. Eliminate levels of management. Banks have too many bureaucrats and not enough personnel trying to anticipate and meet customer needs.
9. Cut costs. As an outsider, it is amazing that no matter how many costs banks cut there are still more costs available for cutting.
10. Reduce your time in meetings. Most regularly scheduled meetings merit rethinking. Do they need to meet as frequently as they do? For as long? If at the beginning of the year your schedule is filling up with regularly scheduled meetings, someone should be raising their hand in protest.
11. Set timelines for decision making. Banks take too long to make decisions. This problem has worsened with increased regulatory and compliance requirements. In some cases those requirements have become an excuse for inaction.
12. Compare yourself to nonbanks and operate like them. The nonbank financial services companies I know have little bureaucracy, make decisions relatively quickly, and operate with a bias toward action. Yes, they benefit from not being as heavily regulated as banks but they benefit even more by their mindset.
13. Take a chance. To paraphrase Tom Peters, no one wants their gravestone to say, “He was mediocre.” Too often I hear bankers talk about their jobs as if they were the British or Turk ground troops digging in for the long, horrible battles of World War I. Survival rather than enjoyment or personal fulfillment is their goal. Life is too short to live that way, no?
And, Happy New Year.