Cultural transitions can be daunting, particularly in the banking industry.
New CEOs are often tempted to make changes and put their stamp on the bank. The challenge is knowing what aspects to change, and what parts of the model should remain intact.
Brent Beardall, who has been CEO of Washington Federal in Seattle since April 2017, and Ira Robbins, who took over the top post at New York's Valley National Bancorp in early 2018, shared their experiences during a Wednesday
Both banks, which have grown substantially in the past decade, have undergone makeovers in recent years. Each CEO walked attendees through their thinking as they moved ahead with a variety of changes.
“Where we got a little bit lost was not understanding what our value proposition was as a relationship bank,” Robbins said. “We were a great $4 billion bank, a challenged $15 billion bank and really had no sustainable value proposition as a $20 billion bank."
Valley's customer-centric shift
The $41 billion-asset Valley needed to provide “a differentiated experience for our customers" that allowed the company to be "the sole provider of all their financial needs," Robbins said.
Robbins contrasted his approach with that of his predecessor, Gerald Lipkin, who worked at the Office of the Comptroller of the Currency before joining Valley. That regulatory experience had its pros and cons, Robbins said.
“Gerry really had the values and ethics you would want at any company,” Robbins said. “I remember sitting in an investor meeting back in 2007 being pushed to go into the subprime lending market. Gerry was pounding on the table saying. 'This is not good for us, this is not good for our communities.' ”
While such discipline kept Valley profitable during the 2008 financial crisis, Robbins said there were other aspects of the business model he decided to change after taking the helm.
“Gerry Lipkin was great at values, ethics and many things, but Gerry was a former regulator,” Robbins said. “He established protocols, processes and procedures that were very regulator-driven, that weren’t customer-centric. It required a massive shift in the organization to rethink risk culture.”
For Robbins, that meant shaking up Valley’s executive ranks by changing out almost everyone on the company’s management team. The first few years after Robbins become CEO, several hundred employees turned over annually.
Valley, however, also invested in training programs for the new executives and employees.
“We spent an insane amount of money and focus on leadership development,” Robbins said, though he did not provide a number.
“Our organization needed to shift from mediocre managers to amazing leaders,” Robbins added. “There’s a distinction between what a manager does and what a leader does. Our focus was really primarily making sure we had leaders that inspired.”
An overhaul at Washington Federal
For decades, the $19.1 billion-asset Washington Federal operated as an efficient traditional thrift, providing customers with home loans and a safe place to stash savings. It had an efficiency ratio of just 17% when Beardall joined in 2001. But there were tradeoffs to having such a lean model.
“We were the most efficient bank or thrift in the [nation], and it showed in our products,” Beardall said. “We didn’t offer checking accounts. We had no ATMs.”
An earlier predecessor’s decision to limit ATMs was based on a fear that having more machines in the community would tempt clients to withdraw their funds.
Roy Whitehead, Beardall’s immediate predecessor, started the process of making Washington Federal look more like a commercial bank. Beardall’s mandate was to finish the job.
Such a transition “is a very precarious proposition,” Beardall said. “We’ve done so very intentionally, in a very disciplined manner. I’d say we’re in the seventh or eighth inning in terms of transitioning.”
Like Valley, Beardall wanted to improve the customer experience at his bank.
That process began soon after he took over as CEO. Beardall took the better part of two weeks writing a letter, that he personally signed, to each of the company’s 2,000 employees. In it, he asked them to love what they do.
“There are days that every one of us doesn’t love our jobs, but overall, you need to love what you do,” Beardall said.
“It makes a difference in your life, in the lives of your families, in the lives of your coworkers and your customers,” he added. “After you love what you do, you’re empowered to make a difference. … I wanted people to be part of the solution. We’re better collectively than we are individually.”
Beardall said he considers composing the letter time well spent. Voluntary turnover fell from 33% to 17% at Washington Federal, he said, and “level of engagement really [went up] across the board, as well as our customer satisfaction.”
Then came the heavy lifting and more investment.
Washington Federal hired five software engineers whose sole job is to optimize its website. The site, which once took 8 seconds to open after the address was entered, now responds in 0.4 seconds.
“The website is the front door to everything,” Beardall said. “It’s our new headquarters.”
Washington Federal also rebranded its bank in September 2019 as
“We did focus groups and put the name Washington Federal on the wall and asked, ‘What do you think this company does?’ The No. 1 answer was part of the federal government,” Beardall said. “No. 2 was a credit union. You want to talk about getting my ire up.”
Rising to the occasion
The coronavirus pandemic proved a critical test for each company’s efforts.
Both were able to respond quickly when the Paycheck Protection Program was rolled out.
Valley made more than 13,000 loans totaling $3.2 billion, while Washington Federal originated 6,500 loans for more than $780 million.
“When PPP came around, we had two different options,” Robbins said.
“We could work with a vendor to have them deliver what a customer experience looked like, or we could deliver our own customer experience that fit with the experiences we strived for,” Robbins added. “Within a two-week period, we built a front-to-end module that backed into our core processor.”
Creating a customized portal, then processing a surge of applications was stressful, but Valley’s
“The ability to execute far beyond what our numbers and statistics should have been is a function of the culture that we created,” Robbins said. “People weren’t working until 2 am or 3 am because Ira told them to do it. … They wanted to [do it] because they understood the impact we had on those that were around us and the connection with our individual communities.”
The pandemic presented a unique opportunity for Washington Federal to put its corporate values into action, Beardall said.
“It was some of the most fulfilling moments I’ve had in my career,” Beardall said.
“We had a mission … to make as many PPP loans as we could to help people,” he added. “It was awesome. One of the best things we’ve ever done to build our culture.”
