In the run up to the Fourth of July holiday, you may have missed that June 27 was the 50th anniversary of the first ATM and June 29 was the 10th anniversary of the first iPhone. I was struck by the coincidence of these two anniversaries occurring in the same week. It also caused me to revisit in my mind a concern that has been growing for some time.
During several recent bank board retreats and strategic planning sessions, I’ve witnessed the challenging dynamics that occur when leaders begin the process of “board refreshment.” Board refreshment is the current euphemism being used by consultants (and by the proxy advisory firms) to refer to the need for a closer match between the strategic goals of banks and the skill sets of board members. This need is especially apparent in the boards of many mid-sized regional and community banks.
We are living in a time of increasing change in the demographics (gender, race and age) of the customer base of banks, coupled with rapid technological developments which impact the ways in which commercial customers conduct their businesses and interact with other businesses, including with their banks. The typical board of a mid-sized regional or community bank, however, consists of men in their mid to upper-sixties who share similar backgrounds and whose perspectives were shaped during a different era for both business and banking. The concern I have is that continued adherence by banks to such board composition will result in competitive disadvantage.
I’ve been practicing law and advising banks for over 30 years, and for most of that period I don’t think it mattered as much how strong the typical community bank board was. What mattered was the strength and competency of the CEO, and it was a bonus if the bank had an energetic and engaged board of directors. I believe there is now an increasing need for stronger boards. Take a moment and consider how well equipped your board is to help guide your bank through the period of rapid change that is on the near term horizon.
What is the level of enthusiasm and commitment of your board members compared to when they first joined the board? How many new business relationships have come to your bank in recent years as a result of board member referrals? How many of your board members do you consider to be strong performers in their board roles? How many are taking the time to keep pace with the impact of technology on business and banking? If you find these difficult questions to consider, you will understand my concern. In an industry that is increasingly competitive and impacted by external forces, why not have a board of directors that is a competitive advantage?
In this context, I thought about the anniversaries of the ATM and the iPhone. The impact of the ATM cannot be overstated. It made banks much more accessible to customers. I opened my first bank account in college during the late 1970s, and I can remember the challenge of finding an ATM in those days. Today, ATM technology has evolved to become a truly interactive experience, and ATMs can be found everywhere. It appears the impact of the iPhone and other smartphones, however, will go well beyond the impact of the ATM. It seems possible that within a brief span of time most banking transactions will be conducted electronically and there will be less reliance on cash. If so, ATMs could go the way of the pay phones that have disappeared from public places.
Do you have an ATM-oriented board in an increasingly iPhone-oriented world?