Don't misread restructurings and layoffs as a sign of weakness
When a large bank announced a small workforce reduction as part of a restructuring recently, my inbox soon filled with banker friends asking for my take on things.
Some were sure that there must be underlying problems at the institution.
I offered a few thoughts to the handful of folks who seemed to be looking for a chink in the armor of a tough competitor.
Now, I wouldn’t deny anyone their right to speculate or wishcast that a competitor was struggling. I suggested, however, that there was a certain level of cognitive dissonance going on with many folks in our industry.
If you were to ask any informed leader in the banking industry if the current structure of their company is exactly what they believe it needs to be to meet their full potential five or 10 years into the future, few would answer affirmatively.
I’m not just throwing out hypothetical thought exercises here. Almost everyone knowledgeable about the banking industry realizes that it is not insulated from the evolutionary changes observed in most industries.
And yet, we still seem to react with either shock or cynicism whenever a bank tweaks branch networks, or adjusts staffing levels or announces an increased focus on digital banking.
I suggested to my friends that there was something a little odd about everyone agreeing that the business models of the past cannot hold in the future. Yet, they still had shocked faces whenever banks begin making necessary changes.
I suppose old habits (and beliefs) die hard. There was a time in the not-so-distant past when the closing of one branch, let alone multiple branches, was likely a very negative sign.
The banking world primarily revolved around the handling of cash and checks. Branches were akin to “financial services factories” processing mountains of paper to serve their customers. As the customer base a branch supported grew, the paper it processed multiplied.
More customers led to heavier traffic, more paper and necessitated more staff.
If you saw a branch closing or staff levels within a branch reduced, it was likely a sign that business either had declined or had never met projections.
A side observation: The very small percentage of bank branches that have been shuttered over the past few decades is a testament to how historically strong an industry banking has been.
Legacy banking models and strategies have served many well. And it isn’t surprising that the evolving of those models causes a bit of anxiety.
That said, no one can deny that there has been a significant reduction in the number of basic teller transactions branches are now asked to process. Yes, customers still visit branches. And access to a physical branch remains high atop their list of reasons they choose an institution.
Their visits tend to be fewer in total, but more impactful on their overall customer satisfaction and loyalty. Still, the majority of their total interactions with banks will be via digital channels.
Yet, when bank leaders make a statement like “becoming a digital-first bank,” many folks in our industry seem to believe that means becoming a digital-only bank. To be clear, digital first does not mean digital only.
In fact, there is evidence that “digital only” customers tend to have lower satisfaction levels with their banks than multichannel users. It’s not that they are necessarily dissatisfied. However, they’re not as happy with their bank as customers who still have at least some connection to, and interactions with, a physical branch and live bankers.
Contrary to the predictions of some futurists, most bank leaders today do not believe branches are destined for the dustbin of history. However, they fully grasp that the way and the reasons customers choose to use branches are changing ... and they must adapt in order to survive.
In fact, in a time in which customer preferences and habits are evolving, not adjusting to that evolution may be the most dangerous path for bank leaders to take. The business landscape is littered with once-dominant companies that didn’t adapt to evolution, or attempted to adapt too late.
Decisions are especially hard when they involve modifying employee’s roles or eliminating positions. That is why well-meaning leaders sometimes put necessary decisions off too long.
Leaders cannot overcommunicate with their teams during these times of change. Making needed changes to our companies is not an indictment of the past. It is not a negative reflection on past or current leaders, or the folks up and down the org charts.
There needs to be a recognition that proactive moves to build competitive banks for the future are far better and less disruptive than the reactive moves that would be required later.