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Leadership and the New ROA

By Lyle Sussman

By necessity, bankers work in a data-rich environment. At the end of the day, bank executives can click a mouse and pull up financial metrics documenting including, depending on the sophistication level of the bank’s software and hardware, everything from the bank’s compliance with federal guidelines to profitability across business units, demographic markets and time periods. In fact, the only limits to the richness of the bank’s financial reports are those imposed by the creativity and business acumen of the core system’s designers.
Yet, when it comes to documenting the financial return on human performance, the summaries and reports are anything but data-rich. To the contrary, they are almost impoverished. Yes, bank executives can typically point to turnover data, labor costs, average salaries across ranks, cost of fringe benefits, and the number of red flags or gold stickers in an employee’s personnel file. Beyond those basic metrics, however, most bankers would be hard-pressed to document the financial return on what is arguably their most important resource: their employees.  While many bankers might say they agree with the idea that employees are a bank’s most valuable asset, few actually treat their employees accordingly. What would you be doing differently in your bank if people really were your most important asset? For starters, you might look for better ways to evaluate, recognize, maximize and leverage employees’ impact on bank performance and their value to the bank. Consider these three new definitions for standard bank metrics:
•    The new ROA: Return on Attitude;
•    The new ROE: Return on Everyone;         and
•    The new ROI: Return on Intelligence.
ROA: Return on Attitude
One of the most extensively researched subjects in organizational and personnel psychology is job satisfaction. The bulk of the research in this area has demonstrated that satisfied employees are more likely to be committed, engaged and loyal to their employer than their dissatisfied coworkers. They have also been shown to provide better customer service. Regardless of the customer service training employees have received, those who feel demoralized, abused or burned out will reflect those same emotions during customer contacts.
A common misperception among bank management is that paying employees more will make them happier. While there is a relationship between pay and satisfaction, that relationship is not as simple and direct as most would think. The highest-paid people in your bank are not necessarily the most satisfied, and the lowest-paid people are not necessarily the least satisfied. In short, equitable and competitive compensation is necessary for job satisfaction, but is not sufficient by itself. You must also create working conditions in which your employees feel valued and valuable. In so doing, you will increase your return on attitude.

ROE: Return on Everyone
In light of the changing demographics of today’s workforce, bankers must broaden their definition of diversity. Diversity encompasses much more than race, gender and ethnicity. It reflects the myriad values, lifestyles and tastes of the United States’ melting pot, now estimated at more than 300 million.
In practice, many bank executives continue to equate diversity with affirmative action and meeting equal employment opportunity guidelines. But recognizing diversity means much more than meeting the letter of the law; it means appreciating the contributions that different perspectives bring to a problem. It means relishing the spirit, creativity and energy of employees whose views of the world, while potentially threatening and challenging to those uncomfortable with change, help your bank compete in our changing world.
Maintaining a strong and profitable bank depends on having employees on staff who reflect the market they serve today and will serve tomorrow, not the market of yesteryear. Adopt a perspective of diversity with regard to opportunity and growth, and you will begin realizing a return on everyone.

 ROI: Return on Intelligence
    In the bestseller, “The World is Flat,” Thomas Friedman presents a thesis capturing the essence of commerce in tomorrow’s world: As hardware, software and communication infrastructure become commoditized, the only distinctive, competitive advantage will be human capital. Moreover, that capital may reside anywhere in the world. Thus, the world is flat in the sense that human capital is leveling the competitive playing field.
The lesson for you and your bank is clear. You will survive – and thrive – not because of your branch locations, ATMs or Internet portals. All of your competitors will match you on those “commodities.” Your only distinctive advantage will be the intelligence – the savvy, creativity and entrepreneurial zeal – you and your employees bring to your market and your customers.
When was the last time one of your employees voluntarily suggested an idea for generating revenue or reducing costs? Supplied a knock-your-socks-off idea for improving customer service that attracted new customers? Came up with ways to provide service better, faster and cheaper? If you have trouble answering these questions, you are not realizing a return on intelligence.
Training and professional development are the tools for building your bank’s return on intelligence. Unfortunately, throughout my more than 25 years as a consultant to the banking industry, I have observed a consistent trend: Most bank CEOs continue to approach employee training and development as a cost – one they won’t recover if employees leave – rather than as an investment. My advice for those employers is this: Don’t worry about the employees you train who decide to leave; worry about the employees you don’t train who decide to stay.
Hire smart people and do everything you can to help them become smarter. You win, they win, your customers win and your shareholders win because you will all realize a return on intelligence. 

Most Important Asset
What would you be doing differently in your bank if people really were your most important asset? Once you have answered that question, you should see the value of putting into practice human resource strategies that increase your return on attitude, return on everyone and return on intelligence.


Dr. Lyle Sussman is acting chairman and professor of management in the College of Business and Public Administration at the University of Louisville in Kentucky.

 


Posted on Wednesday, April 04, 2007 (Archive on Wednesday, April 04, 2007)
Posted by Scott  Contributed by Scott
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