In this special year-end episode, Sean and Gina return to some illuminating discussions with banking leaders featured on the Believe in Banking podcast in 2022. From an institution evolving for its customers and communities to women moving up the ranks into banking’s C-suite, these conversations reveal how banking is at the forefront of change. The podcast features David Trautman, chairman and CEO of Park National Bank, who talks about his regional bank uniting twelve autonomous affiliates under one refreshed brand and how that change furthered their heart for service. We also return to an essential conversation with Terrie Spiro and Jennifer Docherty, co-founders of Bank on Women, who provide information and insights on having more women in higher positions of power and how that results in better banking.
Text Transcript
Intro: This is Believe in Banking, a podcast series for decision-makers, influencers and leaders, featuring experts taking on the financial industry’s most pressing issues with insight and empathy. The podcast features information and conversations designed to enlighten and empower. Here are your Believe in Banking hosts, Sean Keathley and Gina Bleedorn.
Sean Keathley: Welcome to our Believe in Banking Podcast. I am Sean Keathley, President and CEO of Adrenaline. For our podcast this month, and the final one for the year, we’re putting our guests back in the spotlight with the best of Believe in Banking guest edition. Here we return to some of our conversations with banking leaders about challenges and change they see in the industry and how banks are leading financial services forward.
Sean Keathley: In our discussion with David Trautman, Chairman and CEO of Park National Bank, we discuss how this regional bank unified under one brand banner after years of affiliate autonomy. The decisions they made in the process created some significant leverage points for the institution as they grew and expanded, and ultimately set them up for success for not only now, but in the future.
We also return to an important conversation with Terrie Spiro and Jennifer Docherty, co-founders of Bank on Women, an organization dedicated to increasing women’s leadership in the community banking space. In our conversation, they provide powerful data that shows how diverse representation and leadership actually results in improved institutional performance and better bottom line for banks.
We hope these powerful conversations with some of banking’s best and brightest, spark inspiration for you as your bank focuses on new thinking and new opportunities in the new year.
Sean Keathley: Well, Gina mentioned how long ago it’s been, and one of the things we were thinking about is, what else happened around the time you decided to go with this and it was this pandemic we’re living through? So, just talk about how that became a headwind that didn’t stop you guys. It certainly created more challenges, but Park is not an organization that cowers to opportunities to overcome. And I think what you guys have done has been heroic in the conditions we’ve been living in. But just talk about that as an experience, because many people maybe chose not to make big brand decisions in COVID, and you decided to move ahead and use the evidence to guide you despite the challenging environment around you.
David Trautman: Mm-hmm. You may have noticed, Gina and Sean, and your colleagues over time, that we value the wisdom of history and if we found someone who can capture a sentiment for us, we’re not shy about using it. So, with respect to your question, Sean, really two quotes guided us. The first is from Martin Luther King, “The time is always right to do what’s right.” And we knew it was the right time to do it and we had to do it. There was a whole bunch of stuff going around us, but so be it. We had to do what was right.
And then the second one is from CS Lewis, “The only people who achieve much are those who want knowledge so badly that they seek it while the conditions are still unfavorable. Favorable conditions never come.” Now, he was writing this in the aftermath or the final stages of World War II, but if you think back, World War II wasn’t that long ago, and whatever chaos we had with respect to COVID or challenging economic times, at least in my judgment, pales in comparison to that.
So, we wanted the knowledge, we got the knowledge, and then once we had the knowledge, it seemed inconceivable to us to not act on the knowledge. So, hence the Martin Luther King, “The time is always right to do what’s right.” Interestingly for us, we had a head start because we were already trying to unify and simplify and clarify our brand and our names as part of reacting to the evidence that you all helped us obtain.
David Trautman: Historically, we have almost always not only been steadfast when times are , but we kind of thrive when the world finds itself in chaos. My own sense of that is because we’re sort of like a trawler in a storm. We might be traveling three or five or eight knots, but our bow is always pointed in the waves and we ride them out. When the waves calm down, others may travel faster, but in a hurricane they don’t survive. So, how can we hang around for 110-plus years? It’s that.
And the final thing I think is, we try to resist labels of any type. So, you hear about triumphs, tragedies, good or bad or troubled times. Our sense is that every season holds lessons and it’s our duty to learn them and apply them as best we can. And one lesson that we learn from prior seasons is that customers like predictability when the rest of the world is signaling unpredictability. So, for all those reasons, Sean, that’s why we remain unwavering.
Juliet: David, this is Juliet. I was interested to hear from your standpoint, you’ve talked about how the brand was that sure, steady line, the decision that you made was the right line to do even amidst chaos. I wonder if you could talk a little bit about anything that surprised you, both with the unraveling that you already mentioned, but also how people reacted. What was most surprising to you about the entire experience?
David Trautman: It was the wonder of things that we didn’t anticipate. So, for example, we had planned for a bunch of discontent, a bunch of emotional dislocation, and the pool of people I alluded to before, who were relieved, became somewhat vocal and said, “Thank goodness we’ve done this, now let’s get on with it.” So, that was neat.
And then a side benefit, once COVID happened, there were things that presented themselves, like the Payment Protection Plan and other things the government was doing. There is no way we could have done what we did with, for example, the PPP loan program, in the fragmented world that we had operated in for so long, we just couldn’t have done it. So, it wasn’t the things that surprised us as much as the things that amazed us and how our folks stepped up, because we were unwavering and said, “This is the way we’re going to go. We want to serve more. We want to execute with excellence, and we want to treat customers, colleagues, and communities like they’ve never been served before.”
David Trautman: And all sorts of possibilities start popping out about that, many of which I don’t even know about, because people just got after it and did it. It was sort of the liberation, sometimes it’s paradoxical, but the more you put in, “This is the way we’re going to do it. We’re going to have this brand, this name, this menu.” It liberates people, it liberates a section of their mind to permit them to creatively say, “All right, within these guardrails, how can we ennoble this job? How can we increase our service?” That brain power that used to be dedicated to untangling the hairball that was our 12 name, 12 fragmented brand world, was now redeployed towards a more creative, imaginative ability to pivot mindset.
Gina Bleedorn: Well, it’s clear why Forbes named you one of Ohio’s best banks. Talk a little more about the operating model, you started to hint at it, with the autonomous presidents in your local communities and how that worked. Tell us a little bit about that structure and what the bank went to in coming to the decision to change the brand architecture of the multiple names and autonomies with local banks.
David Trautman: You all know the story well, but for those who may listen to this, who don’t know it so well, we engaged Adrenaline really to help us research why customers bank with us and why prospects didn’t. And we began with the assumption that we’re going to start with a clean sheet, a blank slate. We’re going to let the evidence guide our decision-making, which is something we’ve tried to do over the years. We want the then current evidence to inform our current decision-making. So, we started clean.
We had always thought that our different names were of some value to our customers and prospects, and the research proved that assumption completely wrong. What we learned was that it was more important that customers and prospects know their banker. We also found that they wanted to deal with a regional or national bank. And although we were certainly a regional player, because we had multiple names that did not convey the breadth and depth of our capabilities nor the magnitude of what we were as a unified institution.
David Trautman: It was a perfect example of Mark Twain’s observation that, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” And we knew our name surely must mean something to our customers. And what we discovered is that it meant, at best, an incomplete picture of who and what we were. And at worst, a confusing array of unnecessary complications and difficulties for our customers and colleagues.
It was an epiphany for sure, and you all helped us get there. And to your credit, you never presented a conclusion and then went out and found evidence for it. We abhor that. We don’t want to prejudge. We let the evidence dictate and you helped us assemble it, put it into a digestible form. For that, we are grateful.
Gina Bleedorn: Terrie and Jen, wow, with your backgrounds, which you spoke about so humbly, but are very esteemed and accomplished and immersed and dedicated to the banking industry, you are standing on a place of such credibility. So, kudos to what you’ve done in your careers even before Bank on Women, and of course, now what you are doing to truly make even more of an impact on the industry.
You mentioned appealing to the bottom line and your approach. Tell us about some of those stats, about that data. How does this kind of diverse representation actually improve the industry and how do diverse boards perform versus non-diverse ones?
Terrie Spiro: Let me start with that and then Jen can add some additional data. First and foremost, it can’t be done by one woman in the C-suite and/or one woman in the boardroom. What the research points to is the fact that you need a critical mass and generally what that means is that you need a third of your boardroom, if you will, that is women, and that you need a good representation in your C-suite of women, in order for you to start to see the benefits of increased performance and bottom line improvement.
The diversity impact in terms of driving returns is really quite staggering. What we’ve seen and what the data reflects is that if you increase women in corporate leadership, let’s say, from zero to 30%, that critical mass number, you’ll see that you’ve got a 15% increase in profitability. If you’ve got female representation in top management, you’ll get a 5% bump on return of equity.
If you can get increase numbers of women in your board, you’ll see a bump of your return on assets. There’s sort of a, what I would refer to as a blanket effect, and meaning that when employees believe their organization is committed to inclusion, what you’ll see is an 83% improvement across the board, across your organization, with employees believing that their ability to innovate has improved. Jen, you want to add to some of the data?
Jennifer Docherty: I think, Gina, there are actually a couple of questions embedded in the question you just posed. I think the first one is the direct data on diversity driving performance and the correlations there. And then, I think the second part of that question is the, why is that? Or, how does that work?
On the first part, I’ll just add to some of the great data that Terrie just shared. There’s a study that was done by the Federal Reserve just after the financial crisis, looking at banks specifically. Some of the data that Terrie referred to is cross-industry, so I think it’s important to note that this is not just an impact on banks, but when you look at banks in particular, there was a pronounced effect for banks who achieved a critical mass of gender diversity.
For banks who moved from 13 to 17% share of women on their boards correlated with a improvement in efficiency of roughly 17%. Profitability improved approximately 13%. And this part is really important. Risk adjusted profitability is measured by the Sharpe ratio, increased approximately 20% once you hit the critical mass. I think it’s really important to get away from the concept of tokenism. If you have one of anybody in a room, that person often is discredited or is deemed to represent an entire group. So, the benefits of diversity really come in when you start to see a more balanced group.
Jennifer Docherty: The final point in the study, which I think is probably becoming more and more relevant given what’s happening in the economy right now, but the positive impact of gender diversity was especially large during the financial crisis, suggesting that diversity leads to better strategic advice.
So, I think it’s really important for banks to understand that this really is an opportunity to do well by doing good. The impact on banks’ performance obviously is very highly correlated to their gender diversity. But on the second point, how does this work? I think it’s important to understand, women represent the majority of banks’ customers, employees, community, so having representation of your community in your boardroom and in your C-suite is obviously critical to being able to service those constituents.
Sean Keathley: We know that what you say is true about women and financial decisions. This idea, McKinsey has a report out, roughly 50% of entry-level staff are women. So, can you maybe speak to that and shed a light on where the link is breaking?
Terrie Spiro: That’s a very good question, Sean. You’re right. I mean, even though the representation of women has improved, notwithstanding important gains, women are still underrepresented. There are all of these hidden stressors and barriers that contribute to this leaky pipeline.
So, you can see the whole notion of burnout and hidden stressors lead to women leaving right around middle management and not making it up the higher ranks. And that is why I go back to the article that really motivated me and infuriated me at the same time, where of all of the public bank holding companies in the country, there are only 30 female CEOs out of over 5,000 banks.
Outro: You’ve been listening to Believe in Banking, a podcast series created to empower decision-makers, influencers, and industry leaders in financial services. Be sure to also join us on our flagship site believeinbanking.com.