Unlocking the Secrets of High Performing Financial Institutions

What does a high performing financial institution have in common with Rocky Balboa in Rocky IV? More than you’d think at first glance! 

In the film, Rocky confronts Ivan Drago, who prepares for the match using high-tech equipment, a team of experts monitoring his every movement, and regular doses of steroids. Rocky, however, focuses on old fashioned roadwork in the snow and workouts using farm equipment. In the end, with heart and resourcefulness, Rocky of course prevails. 

High performing financial institutions are defined by PRI consultant Eric Stables as institutions with operating margins landing in the top-quartile for four of the past five years and better than median for the “off” year. They win with repeatable consistency.   

“’High performing’ is not a one-time thing,” Stables said. “It’s repeatable, and it places the institution at the top of the stack year in and year out. There’s a consistency present, and we recognize there are many different paths to get there, some quite unexpected.” 

What were some of the unexpected practices that differentiated Rocky from Drago in Rocky IV? For one, Rocky made do with what he had. 

“He didn’t have to acquire the next big thing to get ready for the competition. He simply used his available resources in a different way that his competitors had not considered,” Stables said. “High performing community institutions do the same by setting their goals and then thinking of creative ways to accomplish them.” 

High performing financial institutions keep a few basic principles in mind: 

• Embrace simplicity. Simple, back-to-basics approaches can be highly effective.
• Be resourceful. Make the best use of available resources and surroundings.
• Adapt. Be flexible and adaptable to new conditions and challenges.
• Innovate within constraints. Use creativity and innovation to overcome limitations.

According to Stables, high performing community banks utilize these principles and put their shoulders to the wheel by establishing a few repeatable actions as top priorities:  

•  Work on growing revenue faster than expenses. This is the top priority of any high performing organization! High performing institutions are constantly looking for the hidden pockets of untapped profitability within the business.
• Fully commit to a well-defined strategic planning process. Sound strategic planning is an “all the time” priority that is reviewed regularly to evaluate progress and challenges. High performing institutions know this.
• Find talent in unexpected places and support its development. Meeting the current and future need for talent as Baby Boomers exit the workforce is top of mind at high performing institutions, and they are approaching the challenge with creative solutions. For example, after COVID, many high performing FIs recognized there is an untapped talent pool of knowledgeable 55+ employees who do not want to necessarily come back full-time or in leadership roles but can fill an urgent need on the ground for the right situation. There is also emphasis on developing young leaders and succession planning.
•  Develop a highly engaging culture with a shared sense of purpose. One of the ways to do this is by rewarding innovation and critical thought, combined with open and honest, multi-directional communication. “Valuing ideas and creative solutions and ensuring people receive kudos when their ideas are implemented and transparent communication when they’re not encourages continued innovation and loyalty to the FI,” Stables said.

• Delegate authority and accountability. Buy-in needs to happen at all levels of an organization. “Top down” rarely accomplishes the kind of widespread engagement necessary to supercharge a high performing institution.
• Do a lot of little things very well. This is the blocking and tackling of being a banker, Stables said. It includes managing risk and interest rates, setting policy and pricing loans and deposits – all the day-to-day practices required to run a successful organization.  
• Do one or two big things better than anyone else. Find a niche or unique business unit none of your competitors have. For example, an FI could focus on serving a professional industry such as lawyers or physicians and build specific products around that industry, marketing to them specifically. Many community institutions have had success in doing just that. The Financial Brand notes, “The key to a successful niche strategy is to have the people, products and technology that are unique to the market you’re targeting. That’s how you differentiate.” PRI helps its clients identify these opportunities and make the most of them.

 Stables said that PRI sees its highest performing clients employing these repeatable actions and sticking to the general principles to be successful. Some specific tactics that they focus on include:

•  Negotiating vendor contracts especially core + ancillary and other multi-year contracts.
• Maximizing card programs including brand agreements, PIN and Sig networks and customer PAU.
• Developing and implementing a solid strategic planning process with accountability that guides the organization.
•  Improving process efficiency on the frontline and in the back office. 

To push your financial institution to the top quartile of the stack for five years running means thinking like Rocky – keep it simple, adapt, innovate and be resourceful. You don’t have to spend exorbitant amounts of money, implement complicated technology or completely remake the landscape to succeed. High performing community banks use what they have and make the most of every opportunity. 

Resources

Community Bank Amplifies Niche Strategy Based on ROA/ROE Analysis – The Financial Brand 

Strategic Planning: Why You Should Include Future Leaders at the Table – PRI 

Strategic Planning – PRI  

Profit Resources specializes in identifying profitability improvement areas for financial institutions through revenue growth, cost control, streamlining processes, and effective use of technology. Contact us to learn more about our personalized approach to strategic planning to propel growth and improve profitability.