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New Perspectives in Banking Urgently Needed

One of the biggest threats to the banking industry today is complacency, or an unchallenged reliance on what has worked in the past. Leaders who are blindly followed, or departments with undue influence, can have a negative impact on the future of an entire financial institution.

Subscribe TodayYears ago, I worked at Sun Microsystems, a company largely credited with driving the explosion of the Internet in the mid-1990s. At the time, , Sun Microsystem’s CEO, was seen as essentially flawless — so much so that the perception in the field was that few people in the company could openly question him.

In many ways, this in-step following of a single leader had its benefits. McNeely was a truly intelligent leader, and was among the first tech CEOs who garnered a lot of publicity for promoting company culture (with Beer Bash Fridays being one of the notable examples).

However, there were signs that giving too much credence to a single person also had a downside. As the market started to shift, McNeely was consistently tied to ideas that, while being effective in the past, no longer brought the same results. Because of this reliance on a single perspective, Sun Microsystems fell behind in the market and was eventually acquired by Oracle.

The Fiefdom Mentality

What I saw at Sun Microsystems was an example of a “fiefdom mentality” — an entity that is controlled tightly by one person or a small group of people. It’s not always a bad thing, but it can hold companies back from innovation, progress and sometimes survival. This mentality is often found in the banking industry.

While on a call with a consultant who works with community banks. I asked him for his perspective on the fiefdom mentality. He stated that throughout his 25 years of working with several hundred banks, he saw it constantly.

Often, a strong, long-tenured individual in a leadership position at a smaller institution resists change longer than what makes sense, just because their perception is fixated on what had worked in the past. While bigger banks are starting to embrace tech-driven change and move away from legacy perspectives, executives at many regional financial institutions are similar to their smaller peers, challenged by a fiefdom mentality and are falling behind market leaders.

There are many places fiefdoms can take root in an organization. Sometimes is can be the CEO of a family-owned financial institution, who proclaims how well they “know their customers.” They claim to hear their customers don’t want dramatic technological changes or improvements to the digital experience. This mentality is the reason why close to 1,000 financial institutions still don’t offer mobile banking..

In other organizations, fiefdoms can be departmental-based. Sometimes it is the finance, compliance, or risk areas of a bank or credit union. Similar to when a single high ranking individual has undo control over the organization’s thought process, a department can have a myopic view of the marketplace or of their role.The result can be an organization stuck in neutral – or reverse.

The result can impact financial results, customer satisfaction, market competitiveness or even the long-term survival of the organization. For instance, there are leaders of major banks who have said that brick and mortar is the key to success and that digital is overrated. Similarly, there are institutions that believe customer satisfaction is driven by teller interactions, or that mass media is the only way to reach their target audience.

Time for New Perspectives

Avoiding a fiefdom mentality is perhaps more important than ever in an era where technology is rapidly changing. In such an era, leaders must take the attitude that they’ll likely overlook something, and that what worked yesterday might not work tomorrow. After all, can you imagine where any of the giant banks would be if they had decided to double down on tellers and branches in the past decade instead of investing heavily in digital experiences?

Even for the most astute and aware executives, it’s easy to overlook emerging trends. As Andy Grove used to say, “Only the paranoid survive.” When executives adopt this mantra, they realize that they must look outside themselves for guidance even if they still ultimately trust their intuition when needed.

Tenured executives can still be strong, passionate leaders. But they must move forward with the assumption that they may misjudge the market and must listen to a broad range of voices before committing to a course of action. This has never been more true than today, where consumer expectations and digital technology advances have combined to create opportunities (and threats) not even considered 18 months ago.

Whether the fiefdom is at the top of the institution or a department within a bank or credit union, there is a need to identify the “lord(s) of the fiefdom” as quickly as possible, so their needs can be addressed without having a negative impact on the future of the overall organization. Better to fight for change and progress now, before it’s too late.

The best way to keep a fiefdom from becoming a hindrance is to encourage a democratic culture — one that relies on qualitative and quantitative data. As you track more and more data about the customer, member, marketplace and the industry as a whole, you’ll have a better understanding of what you need to do to get everyone in the organization moving in the same positive direction. And with this understanding, you’ll be better able to get ahead of the competition and stay ahead, no matter what the future brings.

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