In Part One of our look at bank board leadership, we examined the merits and criticisms of the “Jeopardy Jerk,” Arthur Chu. He bucked the traditional game show system by board hopping with no apparent process logic. Chu deployed a perfectly allowable and extremely effective technique, yet it was criticized as a system hack because it was different, and (more to the point) other players were nearly defenseless against the strategy.
As we think about the banking industry, “hacking the system” is a very relevant leadership strategy.
Traditionally, bank boards have been comprised primarily of influential shareholders and community leaders. Since the recession, the banking landscape has experienced seismic shifts caused by new rules, regulations and significant changes in customer behavior regarding financial decisions.
A few years into the recovery, it’s clear that the banks that are thriving are those whose leadership teams represent their customer profiles and bring together diverse expertise into a unified, strategic perspective.
Consider these questions and best practices on board composition as you work to position your bank for sustainable growth and success.
- How well does your board know the customer base? Most US banks are witnessing major generational, ethnicity and gender shifts in their customer profiles. While Baby Boomers have been the largest and most profitable cohort for decades, Gen X and Y customers now comprise the most significant source of exponential customer lifetime value. They bring new and different financial priorities, which must be met in order to keep them as customers.
- Does the board represent your customer base? Is there variety of gender, age, experience and culture around your boardroom table? As we learned last week, boards with generational, cultural and gender diversity produce a ROE more than 50% higher than those with homogeneous board composition.
- Do you have the right financial, legal, technological, and entrepreneurial acumen? It’s one thing to reflect the makeup of your customer base. Making sure that your board members bring the right background and scope of knowledge to serve them well is another thing entirely.
A well-rounded board with fresh, unbiased perceptions about the marketplace is more likely to provide advice and oversight in ways that meet the needs of all stakeholders, including customers, employees, shareholders, and the communities you serve.
It is clear that the status quo is no longer an acceptable business model for banks. How will you respond?
If you’re already subscribed, the next installment will be delivered to you just like the rest of our content. If you aren’t, go ahead and subscribe here, so you don’t miss a thing.