In the past 18 months, we have seen a noticeable shift within the senior management ranks of most of our client banks. A search for consensus is giving way to direction-setting; a comfort with decision by committee is losing out to individual decision-making. These are very positive changes for the industry. The banks leading this shift should dramatically outperform and out-serve those that continue with a more traditional (that is slower and more labored) decision process.
Fundamental Changes in Management’s Approach
In many cases, the decision-making process within the best banks has changed dramatically from just a few years ago. Aspects of this change include:
Direction over discretion. As consultants, we have seen many instances in which senior management makes a decision and, then, allows line managers wide discretion in how (and even whether) they implement the decision.
The positive aspect of this “freedom” is that it allows local managers to maintain responsibility and promotes customization rather than rote acceptance. The major negative aspect is that it waters down the effectiveness of the decisions made by senior management and permits significant inconsistency of approach within the same bank. Increasingly, top management is willing to limit this freedom, believing, appropriately, that if the decision makes sense, exceptions should be very rare.
Fewer, not more, decision-makers. Two examples illustrate the burden under which banks have historically operated. First, I remember one client engagement in which the bank established a Steering Committee to react to, refine, and approve our project recommendations. Initially, the Steering Committee totaled 12 people (too large to be effective). By the time of our final meeting, the Steering Committee had grown to almost 20 people (way too large), some of whom had virtually no idea why they were in the room. This bank saw a large committee as a way to ensure that it was taking all opinions and knowledge into account as well as covering all political bases.
Second, I remember two meetings on the same day in which we reviewed proposals with two companies (one bank and one non-bank). The bank meeting included 15 attendees; the non-bank meeting had one (by the way, we won both proposals).
Today, we see fewer, not more, managers making key decisions. In reality, many of the people involved in prior years served the role of window-dressing rather than value-adders. Banks now realize that being too internally inclusive is both expensive and unjustifiable.
More experimentation and less analysis. This may be against a consultant’s best interest, but at least in some cases, banks spend too much time analyzing and not enough time trying/piloting various approaches. Inputs such as customer research are valuable, but they are also static and banks should regard them as a snapshot picture rather than a definitive answer. Whenever we hear a consultant authoritatively talk about The Customer (as if it is a homogeneous unit), we know they are over-generalizing.
The best banks commission and review analyses and then act, knowing that they may need to adjust as they go forward. We remember one client that took over 12 months to develop a business-oriented card product. Elements extending the time frame included reaching across multiple organizations within the bank and building the product with CYA rather than speed-to-market and rapid testing in mind.
More pushback from below. Traditionally, banks have been genteel and polite places where not rocking the boat was as much a part of success as individual ability. No longer. The best managers (and there are an increasing number of them) want pushback; they may not like it, but they want it and respect it.
Pushback is not inconsistent with the increased management direction we mentioned above. Direction-setting is dynamic in nature; it does not mean that a bank puts on blinders. Some flexibility is required; you just cannot have multiple employees deciding when and where to apply that flexibility.
Concluding Thought
Many bank managers simply do not “get it” and continue to follow a highly bureaucratic and labored approach to decision-making. These bankers are often too self-satisfied with their current performance or lack the self-confidence to head down what is, for them, a different and more challenging path. Unfortunately for them, management decision-making is a key area in which the excellent-performing banks operate with a distinctly different approach from the also-rans.