In its new survey of what use banks are making of the World Wide Web, Grant Thornton, the nationwide management consulting firm, reports 59% of the banks that established Web sites wanted to be perceived as leaders.
This is a solid motive, of course. But I sometimes wonder what real value there is in leading the pack, and what the price is.
One rationale for being a leader is that it makes the managers and employees taking the step feel they are modern and progressive. This is a valuable morale builder. But do the bank's customers really care?
It reminds me of a study done a number of years ago and published in Harper's magazine that showed a major reason companies get involved in public service is to make their employees feel good about themselves. The public remains unconvinced, however, that this public service is free of self-serving motivation, no matter how pure the motives may be.
Moreover, there can be many costs of being No. 1, or close to it, in offering a new service.
First, the leader cannot benefit from having someone else bear the burden of the exploratory costs and early mistakes. It's a lot cheaper to come on board after the kinks have been ironed out.
Equally important, once you've started to offer a new service, you must support it for a while - whether it proves valuable or not - simply because you've devoted employee time to the initiative, not to mention political capital.
As an example, we have the banks that set up international departments. In order to justify the overseas office, its staff ends up making loans that should never have been made.
Similarly, we have the sad case of thrifts that decided to go public and then got into deep trouble because they had to do something with their new capital, whether good lending opportunities existed or not. This led to eased lending standards.
And then there are the banks that set up discount brokerage operations. Despite high potential liability and low profits, they keep them running because a speedy closure would be embarrassing.
Luckily for community banks, they are not pressed to be in front of the pack unless there is some real value to being there.
This is not often the case with larger organizations.
I remember an executive vice president of Philadelphia National Bank telling me that Bank of America had sent a representative to learn about the holding company Philadelphia National had set up. Bank of America had set up its own holding company before the visit.
The PNB man was amazed: "You have a one-bank holding company? Why did you set it up without having any idea of what to do with it?"
The answer: "Since we are the largest bank in America (as they were then), we feel if anyone has one we must also. Now what do they do?"
And some larger banks decide to lead the pack into new areas so that they have a vehicle for growth. This lets them promote good people who might leave if there were less opportunity for advancement.
Community banks do not have those problems.
Then when should a hometown bank be in the forefront of change?
*When it sees a real immediate marketing or cost benefit from the new service that might be lost by waiting.
*When it feels it can win market share by being first.
*When it fears that customers would leave, otherwise.
But community bankers should remember that customer inertia is strong in banking.
They are just as unlikely to win customers from another bank through a new service or rate as they are to lose accounts by not being first. The typical bank customer is "sullen but not mutinous," at worst. And many bankers report that you have to insult and insult the customer for ages before he realizes it and decides to switch banks.
In the end, a community bank can look at changes in the industry - fast- moving as they are - and take the advice offered on the mayonnaise jar: "Keep cool but don't freeze."
Mr. Nadler is a contributing editor of the American Banker and professor of finance at Rutgers University Graduate School of Management.
