Bank COOs: In the Trenches of Constant Change

In another industry, rising to chief operating officer – just one step from CEO – might bring a sense of fulfilling one's aspirations. But in a sector continually transformed by consolidation and technology, the bank COO is defined as much by upheaval as fulfillment.

Take Chad Hargrove, who at younger than 40 serves as COO and chief financial officer at National Bank of Georgia in Athens. In April, the $406 million-asset bank announced a merger with State Bank Financial in Atlanta – a deal that means Hargrove will shed the COO title for a position in commercial lending. (He will retain the title of senior vice president.)

It was not Hargrove's first anxiety-producing merger.

"I've been through this three times," he said. "My wife said, 'This is not what I signed up for.' " But unlike the mergers at his previous banks, where he served as CFO or controller, this time Hargrove will get to stay on at the merged company. "They gave me an opportunity to help round out my career and become a lender. My ambition is to continue to progress and continue towards a CEO role."

The industry's rapid change is redefining roles and altering job security throughout the corporate suite. But the evolution is arguably having a bigger impact on COOs. In a merger, both CEOs usually stay on in some role. But the same is not always true for the respective banks' COOs. There is often only room for one. On the flip side, COOs who stay on or are added to the executive team following a merger may prove more indispensable managing integrations or implementing a new strategic vision of the merged bank.

COOs are central to the industry's transformation for other reasons. While they still fill traditional roles of first lieutenant to the CEO, implementing the board's vision on the ground floor or being a CEO-in-waiting, operations chiefs also find their roles ever in flux as banks' operational structures are overhauled with an eye toward technology, strategic vision and growth.

"I usually end up being involved in things that are going through a lot of change," said Rajinder Singh, chief operating officer at BankUnited in Florida. Singh, whose background includes M&A, was part of the team that acquired BankUnited in a failed-bank deal in 2009, since which time the company's asset size has more than doubled to $24.7 billion. "In a rapidly changing organization like ours, you have to wear different hats at different times."

For other COOs, running a bank's day-to-day operations has changed dramatically simply because of the industry's technological shifts. "We're traveling at the speed of light," said Christy Bair LaZear, senior vice president and COO at the $417 million-asset Bank of the West in Grapevine, Texas. "Everything is digital, everything is electronic."

In a recent survey of COOs and other operations executives conducted by SourceMedia Research — an affiliate of American Banker — when respondents were asked to choose the description that best reflects their role, the most frequent selection was "Driver of change." (The label was chosen by 25% of the participants, beating out "Problem Solver," which garnered 23% of the responses.)

Yet the COO's traditional role as a generalist is still true today. More than any other c-suite position besides maybe the CEO, a COO does not have a particular specialty as much as involvement in virtually every aspect of the bank.

"We have a very broad knowledge and very broad background in all areas of an institution," said Linda Hamilton, executive vice president and COO of the $584 million-asset Iroquois Federal Savings and Loan in Watseka, Ill. "We're not that specialized."

However, a COO can bring use his or her specialty from previous positions to shape parameters of the job.

Edward Willingham, the COO of First Citizens BancShares in Raleigh, N.C., with $32 billion in assets, said he sees himself as "generalist." But, he added, his background in running customer-facing business lines "does give me perspective about how to support our headquarters teams."

"That background has allowed me to bring a little more of the voice of the customer to strategic business decisions and activities that we're involved in," he said.

Despite the jack-of-all-trades nature of the role, a COO often does not oversee every department. At some banks, the COO will divide oversight responsibilities over certain areas of the bank with the CEO or other executives, with the authority to make decisions autonomously. In others, the COO is seen as the voice of the CEO and board, implementing strategic decisions at the staff level.

At United Community Banks Inc., a $9.7 billion-asset company in Georgia, COO H. Lynn Harton oversees the operations, the bank's technology initiatives and human resources. Jimmy Tallent, the bank's chairman and chief executive, oversees enterprise risk and finance. "We each have our primary things that we lead. Our teams are confident that we're the ones in charge of each of those areas," Harton said.

He added that CEOs and COOs must trust each other and communicate well under that kind of leadership structure. "It's a little bit like your parents," Harton said. "If they're aligned, then the kids feel confident. If you ever feel like they're going in different directions, it's not a good thing."

While Harton says he believes his "last seat" in his career will be at UCBI, his career changes illustrate the industry's consolidation. Formerly the chief credit officer at Regions Financial, he left the company after its merger with AmSouth Bancorp in 2006. He later was the chief executive officer at South Financial Group in Greenville, S.C.; he orchestrated its sale to TD Bank, where he stayed on for about a year until moving to UCBI.

Harton said a fluidity of roles for top executives comes with the territory. "That's been true for the industry. When I started [in banking], there were somewhere in the neighborhood of 24,000 banks. There's probably in the neighborhood of 6,000 banks today. That's a lot of consolidation."

But for COOs in an age of consolidation and specialization, with increased emphasis on subject-matter c-suite positions such as chief risk officers and chief data officers, the job of a generalist can seem unsteady at times. As a highly elastic – and also highly paid – position, the COO can be one of the first executives to go at the time of a merger.

"It could be the acquiring bank needs somebody who's 100% X and your strength is Y," said Shelley Seifert, the COO at the $6.1 billion-asset First Bank in Creve Coeur, Mo. "It's a role you can have, or not."

Yet the COO can be just as indispensable when a merger requires the hand of an operations head to manage integrations, or when a bank is considering a strategic move that calls upon the COO's background.

Stephen Young, COO and executive vice president at the $5 billion-asset CenterState Bank of Florida in Winter Haven, moved up to the role from CFO in 2010, when the bank was beginning an acquisition spree. It has since completed 12 acquisitions.

In an acquisition-hungry bank, "There's a lot of integration and things that you have to do on the front end and the back end," Young said. "I'm just connecting the right people or resources to solve problems."

Sometimes the role can be customized to address the idiosyncratic needs of the bank.

"If [the COO] is more focused on driving revenue and growth [for] the bank, then that position has more opportunities for longevity," said Mike Comer, executive vice president and chief operating officer at the $939 million-asset Citizens National Bank in Sevierville, Tenn.

Jennifer Simmons became the COO last fall at the $6.9 billion-asset Opus Bank in Irvine, Calif., to fill a role tailored to managing the bank's growth initiatives. But her assignment was less about leading the bank's growth than making sure the bank's operations could manage the growth. "There was a need to get the [bank's] bowels caught up," she said. That meant "fixing things to make sure we wouldn't have to spend too much money … setting up sloppy projects and sloppy processes."

How the bank is growing and navigating that growth is also a key facet of Singh's job at BankUnited. He said he is constantly on the lookout for the best-performing and worst-performing business lines within the institution to decide where he should devote his attention.

"The most important decision that I make [is] where is it that we want to grow and where is it that we don't want to grow," Singh said.

Meanwhile, technological innovation and competition from nonbank firms is forcing COOs, who came up in banking before the emergence of fintech, to become more tech-savvy as they oversee upgrades to banks' infrastructure.

Nathan Bennett, a business professor at Georgia State University, said the importance of technology and data in a company's future gives those managing operations more relevance.

"With the control of that resource comes a great deal of power," said Bennett, the author of "Riding Shotgun: The Role of the COO." But it is not always clear in every case whether it's the COO driving that train at an institution or someone else, he added. "It could be a COO, it could be a [chief information officer], it could be a chief data officer."

Part of managing technological enhancements, some COOs say, is trying not to innovate too quickly or to lose sight of the bank's core identity.

"It's really about being flexible enough to interact with customers in the way that they want without exposing the bank or customer [to] additional risk," said David Cline, the COO of the $3.5 billion-asset State Bank & Trust in Atlanta. "The balancing of those needs is paramount."

The technological transformation also applies to the back end as banks try to get leaner. Humans are "the most expensive side of banks," Simmons of Opus Bank said. That's why, she said, "I've made my primary focus the automation of our bank." A common COO objective, she said, is to "look for things that don't make sense" and to "cut the fat out of the bank."

At First Citizens, the chief information officer is one of Willingham's direct reports. Rather than have the technical know-how of a CIO, he said, the COO primarily must have the management judgment to make sure the right IT specialist is on the job. "I've had a steep learning curve as I've moved from the customer-facing world to some of these headquarters functions," he said. "I have to be enough of a student and ask enough questions to feel like I've got comprehension of the topic. I didn't bring that technical fundamental to the table."