Sometimes other areas of banking involve as much expense and risk as making loans.
When bankers guarantee a signature, for example, they can be held liable for a huge loss if it is invalid.
Also, poor proofreading on a credit card application has been known to bring class actions based on a bank's charging rates higher than indicated by an obvious typographical error.
What brings this to mind was the visit that Leslie Goodman, president and CEO of First Fidelity Bank of New Jersey, recently made to one of my graduate classes.
$100,000 a Head
When Goodman started out, in 1965, most of his training was of the "on the job" variety. This involved sitting with an old-line banker who taught him some of the basics - but who resented that Goodman, a college graduate, need not work his way up from teller before being trained to lend.
Now Goodman's bank has a 21-month training program. "By the time we have finished training an individual," he said, "it has cost the bank up to $100,000 - so we'd better not make too many mistakes."
A hundred grand! That is a lot more than most credit officers' lending limits!
Goodman was asked, "How do you avoid the problem of hiring people, training them at this high cost, and then having them leave you for some other bank?"
"Right now that's not a problem," he replied. "There are structural changes in banking today that have left us with a great many unemployed bankers - 70% of whom will never work in the industry again. So the people we train are not likely to have that many other options.
"In fact," Goodman added, "we can hire an experienced lending officer with 15 years of bank work under his or her belt for just about double what we have to pay these trainees, and so can anyone else. So their mobility is limited."
The next question was obvious: "Why have a training program if you can hire experienced people. You don't have to spend while they are learning."
Goodman gave four answers.
* The trainees earn some of their keep by working as the credit analysts who back up the lending officers.
* The bank wants a pipeline of credit officers for the future, so it isn't dependent on the one-shot pool of people trained elsewhere and now looking to move because of the downsizing trend.
* A solid training program supports the hoped-for growth of the organization.
* "Maintaining our own training program is an important part of ensuring that our staff is imbued with First Fidelity Bank's credit culture. Our credit culture may be somewhat different from that of other financial institutions. Therefore, some experienced lenders may find it more difficult to make the transition than would a trainee who starts without any preconceived notions as to how credit should be granted."
Even so, at up to $100,000 a head, mistakes are expensive.
Local Talent More Loyal
As he concluded his discussion of training programs, Goodman added one other factor that I have found to be valuable in the past.
"The best pool of good trainees consists of people who know and love our marketplace, so they won't leave after they are trained to go to a location they like better.
"Being born in New Jersey and raised here, coming to this bank 27 years ago was a lot more attractive to me than going to the Midwest, where habits and ways of life were different."
A Recruiting Lesson
Twenty years ago, the First National Bank of Louisville used to hold a career fair at Christmastime when all the college students were home.
The bank found this far preferable to visiting campuses around the nation, because many of those attracted to Louisville for the job quickly decided to retum to their home states.
The bank got stuck with the training costs and had no new blood for its efforts.
My students, good MBA and Phd candidates, did not stop at questions on training. Like most business school students they prefer to call a training program "pre-presidential orientation," so questions arose as to who gets to the top in banking today.
Shifting to Retail
Goodman's answer: "With banks having fewer opportunities to make business loans, as companies turn to the commercial paper market, and with streamlining of inventory also cutting loan demand, banks will rely more and more on their consumer business.
"So it's my feeling that CEOs are far more likely to come from the consumer side of the bank and consumer marketing than from the traditional commercial credit side, the way I did."
As for other major changes in banking that he has seen, one in particular struck home: the budgeting process.
"When I joined the bank, we used to prepare budgets. Then when the day came to report on actual result; and how they varied from forecasts in the budget, we would sit at the meeting, explain when we missed the mark, and then forget the past and make a new budget forecast for the next period," he said.
"Now when we miss the budget, we sit and work on what we can do inside the bank and get back on budget and make the bank match the forecasts we presented."
'How Do I Apply?'
After class, one student, who had worked for years as an engineer and was now studying to become an investment banker, came up to Goodman and said:
"I wanted to be an investment banker until I heard you talk and felt how much fun you get out of your work. Now I want to be a, commercial banker.
"How do I Apply?"
It's the type of enthusiasm that Goodman transmitted to my class that makes me so optimistic for the industry's future, despite its present pain.