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BirdsEye View

the new commercial banker

I keep on hearing that the best job in banking today is the loan officer. They are coveted, wowed, and courted by too many banks. Their compensation is at an all time high, and their retention at an all time low. Below are some thoughts on this key position. As always, I'd be grateful for any thoughts and comments on what works and what doesn't in this all-important arena. Looking forward to hearing from you,

The New Commercial Banker

Commercial banking isn't what it used to be. In the olden days, America's largest banks all had outstanding lender training programs. They taught the best and brightest college graduates credit underwriting skills, relationship management techniques and even elements of general management. Then, the rest of the industry would pick off some of these trainees, who became the star lenders in their own institutions.

Unfortunately, the 1990s saw the big banks largely move to a different commercial lending model, typically involving a hunter and a skinner. Consequently, the need for a fully trained, well rounded commercial banker ebbed, and, with it, the training programs. As big banks' lenders' deal size increased, their credit skills decreased, since underwriting was moved to other, independent departments.

As a result of this change, this decade saw SuperCommunity banks nationwide in need of credit-skilled commercial bankers. The big banks' supply not only dwindled, but available lenders did not have the skill set needed by banks that still held the traditional lender model.

Community banks started considering building their own training programs to fill this newly created need. Many have instituted such programs, mostly to discover that their newly trained commercial lending stars were picked off by other banks, including the mega-banks. Lender pay, especially sign-on bonuses, exploded as well-trained lenders became scarce and books of business even more coveted. While many banks found that lenders promised to bring over books of business that never materialized (the general consensus I found is that only 25% of the promised volume does show up on the bank's books eventually), lender salaries, bonuses and stock options continued to climb, as did banker turnover.

Commercial bankers are now among the most difficult bank positions to fill. Bank executives are therefore asking the question: are we looking for the right bankers? The need for an alternative model for the commercial lender is upon us, and, with it, the need for a new retention methodology.

In recent Business Banking and CEO Forums, new thoughts have been voiced. First, the traditional banker hiring profile is under question. Do we really need college graduates with at least a B average as the minimum requirement? Some tell me that C+ average with some work experience seems to yield better lenders. Those folks are hungrier, they accept and often even seek the need to sell and get compensated for selling, and many of them know how from previous work experience. When I asked who are the top performing commercial bankers at a recent Forum, members mentioned a café owner, a real estate manager, a family owned business manager and other entrepreneurial types. Other great sources for the new commercial banker include Lexus dealership (not your "run of the mill auto sales person), and managers of finance company offices. These aren't the traditional sources for lenders of the past, but they seem to yield the best performers in today's banking.

One successful bank suggested looking for the following characteristics in new recruits to the relationship manager position: commitment to learning; willingness to work hard; respect; desire for accountability; and integrity.

Another interesting element in the emergence of the new lender is the renaming of the position. The need for deposits has caused many banks to change the name of the position from "lender" to "relationship manager" or "banker". In an effort to break the traditional lender identification with their lending limits and loans alone, banks are moving toward a full relationship expectation from their lenders, and even pay (and expect) cross-selling.

Look for Division 1 and 2 sports players for your new commercial banker hires. They know how to play in teams, and like to win. It sounds simplistic but it is also true. Their experience is more relevant than their age, so give them credit for that experience. Other great experience tips include being in the service business somewhere in their past (waiting tables) and resident assistants in their dormitories.

This is a significant shift. In our cross-sell benchmarking study, SCBenchmarks, we were shocked to find that retail customers overall produce a higher cross-selling ratio than commercial customers across the banking universe that participates in our study. This may be counter-intuitive, but has been validated by comments from commercial bankers and CEOs alike. Banks are redefining the lender's role to expect more than just loans out of the position, and, in the process, are finding that the new non-traditional hires are much more amenable to this additional responsibility. We have often said that "it is easier to turn sales people into retail bankers than vice versa). It appears that the saying is true for commercial bankers as well. Credit skills can be taught, but sales aptitude is more difficult to ingrain in reluctant commercial bankers.

This concept is a scary one. We all know that lenders who have not grown in the traditional credit model can be dangerous and create serious credit problems. There are several suggestions to mitigate this risk:

  • Put new commercial bankers on Workout Watch; have them work out some credits to gain the scar tissue they don't yet have

  • "Buddy" them with experienced, preferably curmudgeon bankers that will teach them where the landmines are

  • Apprentice them on assisting/spreading statements for successful lenders with solid credit history

  • Have them spend some (but not too much...) time with the credit department

  • Give them a small portfolio to start with, and give them a title that clearly indicates their job expectations (such as "associate relationship manager")

The new commercial banker is a more flexible person than the one we've seen in the past. They should be able to handle workouts when things get rough, and move into origination mode when times are better. The successful new lenders appear to be at or closely post gen-xers; people in their '30s that require different kinds of feedback and rewards than their predecessors to be retained and thrive. Chief Lending Officers often tell me how tough things were when they started, having to walk in the snow uphill both ways to get the job done. They sometimes feel that the younger generation is not willing to make the necessary sacrifices to be successful. That has not been my experience. I feel gen-exers are perfectly willing to do what it takes to get the job done, but their expectations are different from past lenders.

Gen-exers, whether they are commercial bankers or elsewhere within the organization, do best when the bank provides the following:

  • Frequent communication and pulse-checking

  • Frequent positive reinforcement (something bankers are notoriously bad at doing)

  • More frequent promotions than we think is appropriate (every six months if possible)

  • Candid conversations regarding upward mobility and the specifics of what it takes to get to the next level

  • Opportunities for personal growth, such as due diligence trips on potential acquisition candidates; corporate-wide task forces; strategic-level project participation

I have found that the next generation of bankers is willing to make the necessary commitment and deliver spectacular results if management is willing to give them more than what they received, faster and, most importantly, with frequent "atta-boys" in between. These bankers need encouragement and the knowledge that their efforts are appreciated and will count against the next promotion. I believe this is a small price to pay to retain such employees.

One more surprising place to find the new commercial bankers is among your recent retirees, or those who are getting ready to retire. This is a tricky group, since only those who still have fire in their belly will still delivers for you, but those are precious resources that should not be squandered just because they want to work 3 days a week now or take a three months vacation. Flexibility with the successful bankers that have the experience and the fire but also have special needs in terms of working environment is a huge asset that most large banks do not have. Capitalize upon your size and flexibility by attracting and retaining talent that is about to leave the work force not because they are incapable but because they want to shift the balance in their life to a degree. This, again, is true for all bankers. My very best teller was a 70+ woman who worked only 12 ½ hours a week, but had more referrals (in absolute number terms) than almost all our full time tellers. This population doesn't have many options, yet they possess great skills and experience. Give them what they need to be successful for the right tradeoff of results, and both you and the bankers will be happy.

The same suggestion goes for new mothers and other people who are looking for greater flexibility in working hours and conditions. We often get too tangled in our own rules to facilitate such flexibility, which is unfortunate. We should rise to the challenge instead and figure out how to give such workers what they need and still meet the rules of equality and equity within the work force. Such flexibility enhances employee retention hugely, and increases your banks' competitive advantage in hiring the right people.

Bottom line: you should consider different venues for hiring the next commercial banker on your team, and give them what they need to be retained and prosper in your bank. Compensation is a necessary -- but not sufficient -- condition for their success. Thinking outside the box on this issue will pay dividends for the long run for both your shareholders and customers.