Washington Bankers Association

Transcription

1 Washington Bankers Association Managing Human Capital: Integrating Succession Planning with Attraction and Retention of High Performance Employees April 21, 2017 Geri R. Forehand, CPCM President A Strategic Partner with The Pacific Institute 987 Kingwood Drive Clayton, Ga gforehand@forehandstrategygroup.com

2 This is the most substantial transition period in banking since the difference between thrifts and commercial banks was eliminated

3 What is High Performance?

4 High Performance Group Top 20% Based on 3 Year ROA ( ) December 31, 2016 High Performance Numbers - Median S $50-$500 (311) C $50-$500 (425) S $500-$1b (32) C $500-$1b (96) NPLs/ Loans (%) 0.72% 0.90% 0.95% 0.93% ROAE (%) 16.94% 10.16% 18.59% 11.17% ROAA (%) 1.99% 1.23% 2.07% 1.27% Efficiency Ratio (FTE) (%) 52.65% 56.95% 51.55% 56.12% Net Interest Margin (%) 4.24% 3.90% 4.24% 3.92% Yield on Loans (%) 5.48% 5.30% 5.35% 5.22% Cost of Funds (%) 0.47% 0.49% 0.43% 0.44% Net Interest Income/ Avg. Assets (%) 3.97% 3.65% 3.93% 3.66% Noninterest Income/ Avg. Assets (%) 0.57% 0.52% 0.79% 0.78% Noninterest Expense/ Avg. Assets (%) 2.51% 2.60% 2.63% 2.58% Core Revenue/FTE ($000) $229,950 $213,480 $252,690 $231,610 Pre-tax pre-provision/ FTE ($000) $104,590 $88,050 $128,170 $98,910

5 NPLs/ Loans (%) 1.18% 0.67% 0.85% High Performance Group Top 20% Based on 3 Year ROA ( ) December 31, 2016 High Performance Numbers - Median S $1b - $10b (13) C $1b - $10b (98) >$10b (22) ROAE (%) 19.24% 11.28% 11.33% ROAA (%) 1.91% 1.26% 1.30% Efficiency Ratio (FTE) (%) 50.46% 55.09% 46.98% Net Interest Margin (%) 4.00% 3.63% 3.46% Yield on Loans (%) 5.05% 4.69% 4.46% Cost of Funds (%) 0.38% 0.39% 0.34% Net Interest Income/ Avg Assets (%) 3.88% 3.38% 3.30% Noninterest Income/ Avg Assets (%) 0.86% 0.95% 0.67% Non-interest expense/ Avg Assets (%) 2.27%% 2.52% 2.00% Core Revenue /FTE (000) $241,940 $240,170 $312,190 Pre-Tax Pre-Provision/ FTE ($000) $114,340 $103,510 $182,560

6 What is the population in Washington? Broken down by demographics

7 Washington Population/ Age Breakdown (As of 2016) Total population 7,183, % Gen Z (igen, Centennials) Born 1996 and later (0-20) 1,904, % Millennials (Gen Y) Born (21-39) Gen X Born (40-51) Baby Boomers Born ) Traditionalists (silent generation) Born 1945 or before (71+) 1,862, % 1,108, % 1,675, % 632, % Source: Population data Office of Financial Management; Generations The Center for Generational Kinetics

8 Do we face a crisis? Human Capital Harder and harder to attract and retain Age stratification (Have you done this at your bank? what can we learn?) Improving our overall culture Risk focus (Regulatory emphasis) Performance focus The Universal Banker Changing the dynamics Succession Planning A regulatory focus 8

9 Succession Planning

10 Succession Planning: Ready or Not Is your organization prepared to deal with a sudden loss of key senior managers? Well prepared 14% Somewhat prepared 61% Not at all prepared 22% Don't know 3% 0% 10% 20% 30% 40% 50% 60% 70% Note: Survey of 1,098 North American senior managers i Source: American Management Association, reprinted in Wall Street Journal

11 Succession Planning: Ready or Not How would you describe the leadership pipeline at your organization? Robust 10% Adequate 47% Inadequate 39% Don't know 3% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Note: Survey of 1,098 North American senior managers i Source: American Management Association, reprinted in Wall Street Journal

12 Succession Planning: Ready or Not How important is planning for a smooth management succession as compared to previous years? More critical 71% About the same 27% Less important 1% 0% 10% 20% 30% 40% 50% 60% 70% 80% Note: Survey of 1,098 North American senior managers i Source: American Management Association,

13 Our Objectives Today People are the real competitive advantage we have. 1. Can we really define/describe our strategic direction and has it been communicated throughout the organization? 2. Do we really know/understand the primary culture of our organization? 3. Are we recruiting, hiring and retaining employees that fit into #2 above in order to drive #1?! 13

14 Top attraction drivers employer view versus employee view Employer View 1 Career advancement opportunities Base pay/salary 2 Base pay/salary Job security Employee View 3 Challenging work Career advancement opportunities 4 Organization s reputation as a good employer Learning and development opportunities 5 Organization s mission/vision/values Challenging work 6 Learning and development opportunities Organization s reputation as a good employer 7 Job security Vacation/paid time off Source: Willis Towers Watson 2014 Global Workforce Study and Global Talent Management and Rewards Study

15 Top retention drivers employer view versus employee view Employer View 1 Base pay/salary Base pay/salary Employee View 2 Career advancement opportunities Career advancement opportunities 3 Relationship with supervisor/manager 4 Manage/limit work related stress Job security 5 Learning and development opportunities Trust/confidence in senior leadership Length of commute 6 Short term incentives Relationship with supervisor/manager 7 Challenging work Manage/limit work related stress Source: Willis Towers Watson 2014 Global Workforce Study and Global Talent Management and Rewards Study

16 Culture Culture is the shared beliefs and values guiding the thinking and behavior styles of your employee base. What is normal How decisions are made when you can t be there The way we do things around here The glue that holds us together Source: The Pacific Institute

17 Two General Types of Culture Defensive Cultures - Inactive/Reactive Resist Change Assigns blame when something goes wrong Uses Chain of Command to control and direct Constructive Cultures - Proactive Communicates open and freely Takes responsibility and accountability Is innovative and takes risks Source: The Pacific Institute

18 Quantifying the Impact of Culture Kotter & Heskett: Study of 207 firms over an eleven year period as reported in their book, Corporate Culture and Performance Non-Adaptive Non-Performance Enhancing Culture Adaptive Performance Enhancing Culture Revenue 166% 682% Stock Prices 74% 901% Net Income 1% 756%

19 It s impossible to get qualified leaders in our market We don t have the resources to implement new systems This is the way we have always done it Building a Foundation for Change It s impossible for us to be profitable with all of these new regulations It s not my job to ask for referrals I am not in sales Individual Thinking (Mindset ) Behavior Strategic Plan Performance Culture

20 The Seven Pillars of Accountability Culture Unity Learning Tracking Urgency Reputation Evolving From: Accountability: The Key to Driving a High-Performance Culture by Greg Bustin

21 Core Revenue per FTE The Productivity Metric

22 Calculation of Core Revenue per FTE From FDIC data, take net interest income plus non-interest income and divide by number of FTE s. I am using 12/31/16 data.

23 Two Examples Washington Federal, N.A. The largest bank chartered in Washington with $14,885,224,000 in total assets Net interest income is $421,852,000 Non-interest income is $49,502,000 FTEs = 1,813 $421,852, ,502,000 = $471,354,000 $$471,354,000/1,813 = $259,985 core revenue per FTE

24 Two Examples South Sound Bank, one of the smaller chartered banks in Washington with $164,413,000 in total assets Net interest income is $6,152,000 Non-interest income is $671,000 FTEs = 35 $6,152,000 + $671,000 = $6,823,000 $6,823,000/35 = $194,942 core revenue per FTE

25 Our high performance metric for Core revenue per FTE for respective asset size Washington Federal = $312,190 South Sound = $213,480

26 The Shareholder Value Chain

27 Revenue Growth Stock Price Net Income Satisfaction Survey Upward Evaluation Satisfaction Survey Mystery Shop Loan Growth Deposit Growth Shareholder Career Pathing Employee Retention Customer Retention Referrals Cross Sell The Universal Banker Fee Income Value Employee Satisfaction Customer Satisfaction Customer Buying Behavior Return on Equity Return on Assets Earnings Per Share

28 Bottom Line Effective People = Business Results

29 Appendix Goals Objectives Action Plans For Succession Planning

30 Goal: Develop a management and staff succession plan for the overall bank to ensure attraction and retention of quality individuals. Objective: Define the Bank s organizational structure. Due Date Task Determine overall needs of organization Create an organization chart to properly reflect varying functions of management and staff Communicate and distribute organization chart to appropriate individuals Integrate organization chart into policies and procedures manual Employee Responsible Status Comments

31 Objective: Create job descriptions. Due Date Task Employee Responsible Develop a clear understanding of job skills and job requirements Cross-reference organization chart to define jobs Begin writing job descriptions Communicate descriptions to employees Integrate job descriptions into Human Resource policies and procedures manual Establish job descriptions in personnel files Update as needed and where appropriate Status Comments

32 Objective: Create comprehensive performance review and salary administration program. Due Date Task Employee Responsible Status Comments Develop competitive data for payment structure of similar jobs in similar organizations Determine if Bank s compensation position relative to industry Establish whether good performers receive special incentives Implement pay-for-performance measurement standards Develop evaluation program for pay-forperformance Communicate payment structure to employees based on their respective job grades Establish program to educate employees on why people are paid different amounts for different jobs Ensure personnel records support pay decisions Prepare annual budgets for wage and salary expense Determine if productivity and/or profit increases match or exceed payroll increases Determine if compensation is used to provide feedback on individual contributions to goals and on performance

33 Washington Bankers Association Managing Human Capital: Integrating Succession Planning with Attraction and Retention of High Performance Employees April 21, 2017 Geri R. Forehand, CPCM President A Strategic Partner with The Pacific Institute 987 Kingwood Drive Clayton, Ga gforehand@forehandstrategygroup.com