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BirdsEye View

Monique Dattilo of First Banks emailed in response to my last article about branches an interesting and insightful comment: "More great insight to our future of banking! I agree that customers may shop for banks on-line, but continue to begin the relationship at a physical location. The beginning of many relationships are with the checking account and retention is correlated to direct deposit, bill pay, debit card usage, etc. With this in mind, we may need to expand our footprint but maybe the shoe does not need to be so large or staffed for transaction processing! When I asked a group of my daughter's friends, in their young twenties, why they chose the bank they did, their answer was based on convenience of the location. They rarely visit the bank but want to have it nearby just in case they need it. I think your suggestion of the "outlet" model is a precise observation! "

And Dave Maraman of M&I said, "I think this is just another normal cycle. Remember when many of today's branches were gas stations? In the future, I think people will be saying I remember when that insurance office, or veterinary clinic, etc, was a bank. In fact, I would be willing to be that a few banks shore up earnings and capital in the future with real estate sales. "

Drew McLellan, a.k.a Top Dog , said: "I totally agree with your take on the branch situation. We have worked with many bank client over the years and suggested that they have a full compliment of bankers and loan officers on site over the weekend. From the outside, looking in, it makes perfect sense.

And Dave Mooney, CEO of Alliant Credit Union, commented: "Your observations re. proliferation of branches are on the mark. While the trend away from transacting in branches is gradual, it is persistent, and will be perpetuated by continued advances in remote access and generational preferences. But they absolutely panic at the suggestion. Its my non-banker opinion that to have to work on the weekends implies a lower status  so let the tellers do it. The bankers have worked their way up....to not having to put in time on the weekends  thats a retail gig, not a navy suited bankers lot in life."

I do, however, believe the transition will be tough for those whose relevance is, today, largely based on branch access. While the institutions may desire to transform their branches into sales outlets, branch users for the most part still look to them for routine cashiering and service transactions. As Steve Case, the founder of AOL said, consumers will do what they want to do, not what we want them to do. Even as the incidence of branch transactions declines, a small fraction of visits is to open new accounts. (This is one area where banks differ from other retailers: the frequency of purchase is quite low, while the frequency of transacting is high.) The difficulty for traditional branch banks is that, if they deny or limit the services that their current depositors seek from them, they will become irrelevant to those customers. At the same time, the online institutions parlay their lower cost structure into a competitive price advantage to attract balances and more remote access-oriented consumers.

Also, simply replacing tellers with sales people does not address the issue of an excess of branch locations. As in all arms races, the expansion of branch networks has increased the operating costs of all combatants, while no one gains an advantage. The available market simply gets divided among a larger number of (expensive) branches. At some point, disarmament must occur, though no one will want to be first. Your airline analogy is quite fitting, though I would suggest that it was Southwest and other low cost airlines, more than 9/11, that forced the legacy carriers to dramatically reform their cost structures and operating practices. And those changes were very painful for the industry and their shareholders. "

On the personal side, Arik did poorly at the State Championships, but he is determined to persevere, train and show his stuff next year. I'll keep you posted.

Last, Passover is coming upon us. As usual, we do ours on a Saturday, so that all the kids and their friends can make it. Our menu is posted on www.anatbird.com under New In The Nest. Let me know if you want any recipes.

Have a great week,

Anat

HIRING AND RETAINING GEN X, Y AND M EMPLOYEES

I recently wrote an article about marketing to those younger customers that we all covet. In fact, we do have some mixed feelings about them, since they are not deposit rich, we all know they are essential to our banks' future growth . Gen X, Y and Millenials are also indispensable in our work forces. They are our tellers, retail bankers, note clerks. We still use the same recruitment and retention tools we use for older employees, but we also know they are not as effective (try talking to a Millenial about your retirement benefits and see their eyes glaze over). Given the crucial role these employees play in your workforce today and tomorrow, and their inevitable link to your younger target customers, below are some thoughts on how to recruit and retain the "younger generations".

One caveat before we start: don't project from your own experience expectations for these new employees. They will work hard for you, but they are NOT you. Each generation is different, and they are certainly no exception. Don't begrudge them the reluctance to walk in the snow uphill both ways to work; their frequent job changes and apparent lack of loyalty; their expectations for a better work/life balance; their expectations for promotion despite short tenure in the job. They are indeed different, but, with some flexibility, will create much value for your shareholders for years to come.

Consider their background:

• Helicopter parents. They have parents that have been hovering for years, taking often an intrusive role in their lives well beyond childhood, putting the kids in the center of their universe and organizing everything from play dates and chauffeuring duties to intervening with teachers and professors. No wonder they think they are indispensable to the world at large!
• Strong self confidence. The support and affirmation they received, especially Millenials, from both home and schools, have given this generation self assurance bordering on arrogance. Their upbringing causes them to expect to be successful and immediately respected.
• Better life balance expectations. These employees have seen their parents toil long hours to the point of frustration and often divorce. They want a better balance in their life, and will be loyal to an organization that facilitates that, hence expectations for flexible work schedule and location.
• Schedule and structure rule. These kids were raised on four activities a day and tight schedules. They like the structure and expect it in the work environment as well. In many, this expresses itself in a need for more frequent and positive affirmation.
• Pressure to succeed. Along with the support they receive, these younger people have been expected to succeed along all fronts from near-infancy. Consequently, they often bite more than they can chew.

Implications for the workplace are many:

• Don't just love them; adore them. Gen X, Y and M (Millenials) grew on limitless, over-doting parental love. They therefore expect adoration and frequent positive feedback well beyond what older managers are accustomed to. Their role model was dramatically different ("No news is good news"). That approach just won't cut it with the younger generations. They need, and thrive on, frequent feedback. It is essential to their personal happiness and retention. It is also extremely challenging (and alien) for their managers.
• Promote early and often. In conjunction with the adoration aspect, positive feedback includes promotions. These employees expect to be promoted often, within months or their last promotion, not years. The implications are profound. For one, broad-band salary grades don't work for those who need frequent promotions. Instead, grade splintering is a better approach to attract and retain younger generations.
• Incentives need to be modernized. Incentives are another feedback mechanism they thrive on. Our incentive systems are minimal for low level employees, yet these younger people often start as the lowest on the totem pole. Modernizing their incentives to put much more of their pay at risk (north of 25% of base, which means sometimes lower base) is a welcome step by many X,Y, M members.
• Culture shock. Given the child rearing experience of these young people, many find it startling to be doubted, questioned, rebuffed. Managers need to learn how to communicate with these employees effectively. They can be motivated and become loyal employees, or switch jobs quickly if they don't like their manager. The stigma associated with job hopping doesn't exist among them.
• The "greening" of our employees. Gen X, Y, M members like to do good as they do well. Adding that dimension to their work brings content and satisfaction to their job. They want to make a positive difference in the world, and banking can be a great profession to achieve these aspirations, if properly managed and packaged.

The greatest challenge you face is teaching your managers to accept and nurture these young prima donnas. Many of our managers lack effective management skills in the first place, and younger employees present an even greater challenge than the typical employee. Using your own X, Y, M employees as a focus group might help forge a path to success in many ways. They know what they want, and they like to be listened to. Ultimately, though, it's up to each of your managers to learn how to manage this new and challenging work force. The payback is HUGE!