BOK Financial's talent refinery
Steven Bradshaw had some fresh ideas about how to maintain BOK Financial's momentum when he replaced Stanley Lybarger as chief executive in early 2014.
Lybarger, who led the Tulsa, Okla., company for nearly a quarter of a century, is a towering figure in banking, credited with transforming the small energy lender with less than $2 billion of assets into a regional powerhouse, and delivering consistent profits to shareholders largely by maintaining strong credit discipline and building a diverse base of fee-based businesses. It is a point of pride at BOK that the company never lost money or laid off employees during the financial crisis and was one of just a handful of regionals that refused to accept money from the federal government's Troubled Asset Relief Program.
Yet there is always room for improvement, even at the most respected, best-performing companies, and one area where Bradshaw believed he could change the $33 billion-asset BOK for the better was in nurturing talent. For years, BOK had been adding employees at a rapid clip, primarily by acquiring other banks, going into new business lines and expanding existing ones, but it had no formal training program designed to retain all that talent or prepare the most promising employees for senior roles.
BOK had created an office of talent and organizational development in late 2012 under Lybarger, but training took on greater urgency under Bradshaw, one of Lybarger's longtime deputies. As Bradshaw saw it, development was crucial to keeping the best employees from fleeing to competitors and grooming the next generation of leaders at a time when BOK's, and the industry's, bench strength had become dangerously thin.
"There was a period in the 1990s where there was not a lot of internal development going on, so there's this gap — and it's like this at a lot of banks — where there are a lot of us who are over 55 and a significant amount of talent among the under-40 crowd, but not a lot of talent in between," explained Bradshaw, who is 57. "We're going to see a pretty significant change in leadership ... in a lot of areas of the bank over the next decade and we need to make sure we have people who are prepared to take over those responsibilities."
A key initiative is an executive and performance coaching program geared specifically for up-and-coming managers who senior leaders see as having executive potential. There is also an advanced leadership program for midlevel managers, another management program for newly hired or recently promoted employees and a series of online classes and one-day boot camps.
The early results of BOK's investments in talent development have been promising. Turnover is down, employee engagement scores are up and, perhaps most important, existing employees are filling more of BOK's job openings. Last year, one in four vacant jobs went to an internal candidate, versus one in eight just three years ago.
That's because more employees have gained the skills and the confidence to apply for positions that may have once considered to be out of reach, Bradshaw said. "They are confident to raise their hands, and they are confident that we as an organization will consider them," he said.
How all this plays outside of BOK is hard to know, but it is likely not a fluke that the company's climb up our annual reputation rankings coincides with the talent development effort.
Stephen Hahn-Griffiths is a managing director at the Reputation Institute, the Cambridge, Mass., firm that compiles the rankings for American Banker each year. He said BOK "is setting itself apart" from others in the industry by "investing in its people and building a workplace and culture where people want to work."
While this is not the only contributor to BOK's improved reputation, it is certainly a factor, particularly in its standing with customers, Hahn-Griffiths said.
"Inspired employees make for happier customers," he said.
BOK — which placed eighth in last year's rankings — came in third overall in the 2017 rankings, with a score of 79 (out of 100). Of the 39 banking companies included in the Survey of Bank Reputations this year, only Synovus Financial in Columbus, Ga. (80.7), and USAA Bank in San Antonio (80.3) scored higher than BOK.
BOK also posted the largest year-over-year increase in its score, 9.6 points.
That was propelled by an improvement in how it is viewed by both customers and noncustomers. BOK is one of just four companies to show a double-digit increase in its score with noncustomers and its 8.8-point increase in its customer score was second only to the BNY Mellon's 11.5-point jump.
This is not to suggest that BOK was in some desperate need of a reputation reboot. Financial performance is an important driver of reputation and few companies have performed as consistently well as BOK over the last two decades. It has succeeded by sticking to what it does best — energy lending — while opportunistically moving into new markets and adding business lines, such as mortgage banking, wealth management and treasury management services. Not many banks can boast that nearly half of their revenue is generated by fees.
In the late 1980s and early 1990s, "the bank suffered from the regional downturn in the Southwest, and we did not want that same outcome" in the next downturn, said Lybarger, who remains on BOK's board. "How do you maintain a reputation? By building a company that is recession-proof."
Large banks are gaining momentum as regional banks stall in the annual American Banker/Reputation Institute Survey of Bank Reputations. Chase even barreled its way into the top 10 of the customer ranking.
Synovus Financial struggled along with its customers during the financial crisis. Now that it's healthy again, it credits the strong ties it built with those customers, and the involvement of its executives in the communities they serve, with helping restore its status as one of banking's most reputable brands.
It also helps to be a model corporate citizen, and Mark Graham, the president and CEO of the Tulsa Area United Way, said that BOK has few peers in that regard. Bradshaw himself is the current chairman of the Tulsa Area United Way and last year, along with his wife, Marla, co-chaired a fundraising campaign that brought in $25.3 million, a near record for the nonprofit.
"BOK's fingerprints are literally all over Tulsa," said Graham, noting the company's heavy investment in economic development and its employees' significant involvement in area nonprofits. "It sets the bar here, and that's saying a lot because Tulsa is a hugely philanthropic community."
BOK has had some hiccups. Last year, the company paid a $1.6 million fine to the Securities and Exchange Commission for allegedly covering up the misuse of funds related to a bond issue. BOK said the fraud was perpetrated by an executive in its corporate trust department who is no longer with the company.
Even so, BOK generally enjoys a strong reputation with its customers, investors and people who live in its communities. To understand why, it helps to know about its ownership structure and its ties to the Kaiser Family Foundation.
The billionaire oil executive George Kaiser bought the then-ailing company in 1991 and today he and his family foundation own roughly two-thirds of BOK's stock. Despite their vastly different missions — the foundation is chiefly focused on childhood poverty and early-childhood education — there is little question that the foundation's spirit of giving back has seeped into BOK's culture.
"When you think of BOK, you think of George Kaiser, and when you think of George Kaiser, you think of Kaiser Family Foundation," said Graham. "All are significant players in the development of this community, in pushing us forward."
With Kaiser and the foundation owning such a large chunk of the publicly traded company's stock, BOK can go about its business relatively free from investor pressure, said Brady Gailey, a managing director at Keefe, Bruyette & Woods.
BOK's leaders "are not managing the bank for the next quarter or even for the next year; they are focused on creating value over the next five to 10 years and beyond," Gailey said. "A lot of banks don't have that longer-term focus because they have big rosters of institutional investors that want results now, not later."
Gailey said — and BOK executives concurred — that the ownership structure is a big reason BOK was able to be so patient with customers in the energy industry when oil and gas prices started plummeting in late 2015 and early 2016.
As energy-related businesses were struggling to repay their loans, many banks responded just as investors and analysts wanted them to: by quickly writing off or unloading troubled credits, sharply curtailing energy lending and, in some cases, exiting the sector entirely.
But BOK took a different tack, opting instead to give many of its clients ample time to work through financial troubles brought on by falling prices. The company had survived down cycles before and, as its executives have said repeatedly on recent earnings calls, it was not about to abandon its customers when they needed their bank most.
"We're a committed and unapologetic energy bank, and we understand that commodity prices can be volatile," said Stacy Kymes, BOK's head of commercial banking.
Underscoring its commitment to the battered sector, BOK has continued to actively pursue new energy business — it has added $900 million of oil and gas loans over the past 12 months — and last year even bought an energy-focused investment advisory firm.
"We're a committed and unapologetic energy bank, and we understand that commodity prices can be volatile," said Stacy Kymes, BOK's head of commercial banking. "Being reactive in the short term isn't going to result in a positive outcome for the bank or the borrower," he said.
Jared Shaw, an analyst at Wells Fargo Securities, said investors and analysts have generally been comfortable with that stance because BOK has such deep expertise in energy lending. The company is prudent in its underwriting — the loan to value on its energy loans typically ranges from 50% to 60% — and most of its loans are for exploration and production and therefore collateralized by the oil and gas in the ground. As Shaw pointed out, the banks that suffered the steepest losses on energy loans were those financing businesses that provide oil field services, such as rigs and other heavy equipment.
Shaw said investors are not bothered that BOK continues to write new loans at a time when many other banks are taking a pause. "Even though energy prices have come down a lot, the loans BOK is putting on its books are actually better loans because the pricing assumptions are so much more conservative," he said.
Bradshaw believes there is a link between BOK's decision to stand by its energy clients during this most recent downturn and its improved reputation score.
BOK has operations in nine states, including Texas, Colorado and Missouri, and about 80% of its offices are in markets "that have some level of reliance on the energy industry," Bradshaw said. "When you work with your customers, that permeates within the communities, and it is a point of pride with employees. Our customers know that we are loyal and that we are not in this business casually and therefore not going to exit it casually. That builds a stronger reputation."
He sees a link, too, between its talent development efforts and the improved perception of BOK in its markets. He said the commitment to education and training has "energized" the employees, and that is helping to lower turnover and, ultimately, improve relations with customers. Among employees BOK views as being a "high performer" or having "high potential," turnover was 7% last year, down from 8% in 2015. Further minimizing turnover among these two employee groups is a top priority, and sometimes that means giving talented workers an opportunity to stretch themselves even before they are ready.
"No one is really 100% ready for their next role, but it's important that we as leaders give people the opportunity to do things that might be outside of their comfort zones," Bradshaw said.
Christine McQueen was one of the first BOK employees selected to participate in a 10-month executive education program, and the experience changed the trajectory of her career.
A former manager in the company's information technology group, McQueen was promoted in January to director of bank operations, a senior-level post in which she oversees operations for a wide range of functions, including lending, retail banking and wealth management. She admits she likely would not have even applied for the position if she had not gone through the executive training program in 2014.
A key component of the training is a research project in which the class participants are broken up into teams and asked to come up with a solution to a real-world problem or question. McQueen and her team, for example, were asked to look into the feasibility of BOK expanding its energy lending into Canada. After months of research, she ultimately concluded that such a move would be too risky, and as part of the program, had to explain the decision to a panel of senior executives. That access to Bradshaw and other senior leaders was invaluable, McQueen said, and ultimately gave her the confidence to not only apply for the bank operations job, but seek their input before she even interviewed for it.
"I got to know them and some of their thought processes, so when this became available I felt very comfortable in going to talk to them about what their expectations for this role would be," she said.
Stacy Tiger, BOK's director of talent and organizational development, said much of the training is focused on developing "soft skills," but it's those "stretch assignments," she said, that participants find to be most beneficial. Though the idea of lending in Canada was ultimately scrapped, many other ideas are accepted, and it is up to presenting teams to help put the ideas into practice. That can be heady stuff for a midlevel manager.
"They get the opportunity to work with the executive team" to implement the idea, Tiger said, "and you can imagine how great that is for employee engagement and morale."
McQueen, who is coming up on her 10th anniversary with BOK, said that Bradshaw's focus on employee engagement has indeed boosted morale across the organization. She pointed not only to the formal talent development programs, but also to the dozens of informal coffee meetings Bradshaw holds with rank-and-file employees each year.
"Regardless of what your role might be, he wants to hear what's on your mind," McQueen said. "It's been a positive, impactful thing. It makes people feel like their voices are being heard."
Bradshaw began hosting the meetings when he took over as CEO three years ago. They have no agenda and one of the only rules is that senior leaders are not allowed to attend because Bradshaw fears their presence might discourage honest discussion.
"They give me feedback on what they see as a priority but don't see us working on, and I can tell you it's been pretty enlightening," said Bradshaw. "I've probably learned more about the company from these sessions than I had in my 20-plus years here."