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The ABCs of a Power Bank: Insiders talk about transforming a run-of-the-mill financial institution into a power bank

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When NJBIZ decided to tackle the topic of power banks — institutions that stand out, regardless of their size, and have a positive reputation as forward-thinking and tech-savvy brands — one of our first questions was: “what makes a financial institution a power bank?” So we went straight to the top and asked John McWeeney Jr., CEO of the Cranford-based New Jersey Bankers Association.

He initially hesitated, explaining that “power bank” is not a label typically used in the industry, but McWeeney quickly rallied and said that a power bank would likely be characterized by strong leadership, with a powerful brand distinguished by its growth, innovation and willingness to take on a reasonable amount of risk while maintaining financial strength.

“It’s not just a matter of size,” he adds. “Instead, it’s an institution with a strong cap base that also delivers a good return for its shareholders.”

That sounds reasonable, but it’s also something that just about any financial institution should strive for. So why — especially in a state with a vibrant economy like New Jersey — have some banks become household names, while others sort of struggle in obscurity?

It starts at the top

“Leadership,” says McWeeney, without missing a beat. “It’s a combination of the CEO and the board of directors, because they set the tone for the bank’s direction. A C-suite that is strong and diverse, with a healthy relationship with a board that is diverse and involved so the bank will tend to innovate and grow. Without that mix, it’s just business as usual. The institution will tend to resist change, shy away from taking any risks and will often suffer from a lack of diversity.”

He outlines some of the nuts and bolts behind a good C-suite and board relationship.

“Make sure the board is kept up to date on the marketplace and the institution itself,” McWeeney says. “That way there’s a better chance the board members will understand your change and innovation strategies.”

It’s also helpful to recruit diverse, talented individuals for the board, “so you don’t get a bunch of people who all think the same way. CEOs from power banks usually have a cooperative relationship with their board and chairman.” But “cooperative” doesn’t preclude spirited discussion, he adds. Instead, there’s a balancing act.

“You don’t want a bunch of people who always say ‘no,’ but you don’t want a board that always says ‘yes,’ either,” says McWeeney “Independent thinkers add value to an institution.”

A Power Bank grows in Clifton

A Clifton-based community bank could be New Jersey’s next power bank, thanks to a lawyer-turned bank CEO who’s bringing the nearly century-old institution into the 21st century.”

“We’re a startup that’s more than 80 years old,” says Paul Aguggia, who took over the reins of Clifton Savings Bank in 2014.
 
“My vision was to bridge the historical Clifton—which was an excellent community bank that focused on residential lending and customer service—with a more active approach that was required in today’s highly competitive market.”

Fortunately Aguggia had close connections with Clifton Savings, which has been around since 1928. As chairman and leader of the financial institutions practice group of the international law firm Kilpatrick Townsend & Stockton LLP, he served as outside counsel for the institution for about 10 years before being joining Clifton Savings as CEO.

He quickly brought the bank into new lending areas, like commercial real estate, and attracted more depositors by adding new kinds of consumer accounts. But a big change focused on people, overturning a “conservative, somewhat complacent culture,” Aguggia explains.

One key part involved adopting a “universal banking concept,” which meant cross-training employees so “any customer who walks through the door can be serviced by the next available employee, regardless of his or her title,” says chief revenue officer Tricia Hrotko, who worked closely with Aguggia on Clifton Savings’ transformation.

“It doesn’t sound earth shattering, but it actually is a significant advance,” she said. “And it’s something that many banks still haven’t done.”

It took a lot of training, she adds, but ultimately, “We shifted the outlook of our employees from an order-taking mentality to one that’s rooted in consultative sales: understand customers, and what their current and future needs are, then engage with them to solve their challenges.”

“We wanted to keep the best parts of the bank’s historic corporate culture,” adds Aguggia. “We took the core strengths the bank has had since 1928 and built on them. The idea was to make it a competitive, more-diversified community institution that could make the most of the opportunities this vibrant market offers.”

It’s not an easy task, but experts say a transformation like that is part of the change needed to become a power bank.

Stay close to the community

A power bank also needs to stay involved in the communities it operates in, he observes. “A power bank will work with individuals, businesses, and nonprofit and other philanthropic organizations. And volunteerism is also part of it, since people are the fabric of a community.”

But it all starts at the top, McWeeney says. “Everything begins with the CEO and the board of directors. Today especially, facing rapid technological change — in addition to generational change with the rise of the Millennials — you have to adapt to be successful.”

Banking consultant Peter J. Ostrowski agrees that visionary management is one of the key differences between power banks and also-rans.

“All banking is basically the same business, but the leadership and vision makes some banks stand out,” says Ostrowski, a former analyst at the Federal Reserve Bank of Boston who’s now a managing director at the Cranford-based bank consulting firm Ostrowski & Co. Inc. “The difference is that visionary executives and board members go beyond understanding the business side of banking, and also understand the impact that all of the bank’s employees have on the community.”

Get buy-in from everyone

So it’s not just the C-suite and board members who have to buy into the concept, “but everyone who interfaces with customers,” Ostrowski says, “including the entire lending team—not just the chief lending officer—all the way to the tellers.”

As an example, Ostrowski says “an ‘average’ lending team knows regulations, “but a ‘power bank’s’ lending team will also thoroughly understand the businesses they serve, so the team has the confidence to extend the necessary funding. In effect, the lending team becomes a kind of consultant, helping the customer’s business become even more successful. In turn, your customer will remember that you were there to help them.”

Buy-in has to go both ways, he adds, “Up to the board level, and down the line to the employees. As a bank grows larger, it can be a challenge to scale up without losing that focus. But that’s part of what differentiates power banks from others. People like Kevin Cummings [CEO] from Investors Bank, and Gerry Lipkin [CEO] from Valley National Bank have been able to do this.”

The fact that banking is more complicated today makes it tougher to become a power bank, Ostrowski reports. “The combination of more regulation and rapid technological change means that it’s not as easy to stand out,” he says. “Today, for example, with mobile banking, you’re not just competing with the bank down the street, you’re competing with banks — and other institutions — nationally. Becoming a power bank usually means changing the perception of the bank’s culture from the inside out, and then maintaining a culture of adaptation of change.”

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