Spencer State Bank in Oklahoma knew in late 1998 that it needed to cut employee turnover, improve worker productivity, and boost returns.
It just didn't know how.
So the $28 million-asset bank turned to an Oklahoma community banking company, First Bethany Bancorp, and its unique consulting subsidiary, Strategic Advantage Inc.
The nation's only consulting company owned and operated by a community bank, Strategic Advantage focuses on maximizing employees' potential and otherwise improving the performance of small banks. Today, turnover among entry-level tellers and bookkeepers at Spencer is still higher than its president would like, but the bank's return on assets jumped to 2% in 1999, from about 1.5% a year earlier.
"I can't give them all the credit for that improvement, but they deserve a lot of it," said Randy Smith, Spencer's president.
Strategic Advantage, with just two employees, trains managers in areas its president says are often ignored at small banks that cannot afford full-time human resources employees.
Wholly owned by $96 million-asset First Bethany, Strategic Advantage helps Oklahoma banks develop performance reviews that spell out specific goals for workers to earn raises and promotions. Strategic Advantage also helps companies develop incentive-bonus programs that more closely tie employees' pay to bank profitability, giving workers a vested interest in their bank's success.
"Community bank supervisors and managers are loaded down with so many tasks that there's no time to focus on how their employees can improve," said Danita R. Worrell, Strategic Advantage's president. "People wander around all year and don't know if they're doing a great job or a mediocre job. Most employees get the same percentage raise each year no matter what."
Bankers said Ms. Worrell's program also gives employees more feedback. It not only might lead them to work harder, one banker said, but also helps reduce stress.
"We had gone through a year of high turnover with employees complaining of too much stress," said Laura Miller, executive vice president of the $44 million-asset Farmers State Bank of Quinton, Okla. "But a lot of the stress had to do with a lack of communication, employees not knowing what they were supposed to be doing. This gave them a better idea of what was expected of them."
Strategic Advantage grew out of an effort that started at First Bethany in 1993, after the bank's longtime head, Peter J. Pierce Jr., died. Mr. Pierce's death left First Bethany in the hands of his two sons, Chris and Pete Pierce, who wanted to shift away from the typical, top-down management structure toward a looser culture that could spur employee creativity and dedication.
"Under Dad, we had a poppy-field culture," said Pete Pierce, First Bethany's president. "Any poppy that got its head up too high got it cut off. Dad didn't like any dissent or difference of opinion. Chris and I are consensus builders. We like to work from the bottom up instead of the top down." Mr. Pierce said he soon realized that other community banks could benefit from adopting similar programs and that his bank could earn fees from such a business. So First Bethany started Strategic Advantage in September 1997 and took on its first client early the following year.
Though Strategic Advantage now works with 10 banks, it accounted for just 2% of First Bethany's income last year. However, Mr. Pierce said Strategic Advantage already has recouped the $75,000 the parent company spent to launch it.