In part one of this special episode, Sean and Gina welcome Terrie Spiro, co-founder, founding director and chair, and Jennifer Docherty, co-founder, founding director and chief executive officer of Bank on Women. Dedicated to women’s leadership in community banking, Bank on Women strives to increase the number of qualified women serving on the C-Suite and in the boardroom – which will make banking better for all and foster opportunities for women now and in the future. Armed with powerful data, Terrie and Jenn share how banks with diverse representation in leadership benefit from increased performance and bottom line improvement. They discuss the “leaky pipeline” of women entering leadership positions and tools to support and sustain institutional and industrywide change.
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.
Gina Bleedorn: And I’m Gina Bleedorn, Chief Experience Officer at Adrenaline.
Sean Keathley: Well, Gina, I’m especially excited for this podcast. We have two very esteemed guests. I’d like to introduce them now. Terrie Spiro is the co-founder, founding director and chairman of Bank on Women. She’s also chairman and chief executive officer of TNP, a financial enterprise consulting LLC. And then Jennifer Docherty is co-founder and founding director, chief executive officer of Bank on Women, as well as the associate general counsel and managing director of Piper Sandler. So good morning and welcome to our podcast Believe in Banking.
Jennifer Docherty: Good morning, Sean. Thank you for having us.
Terrie Spiro: Good morning Sean.
Gina Bleedorn: Jen and Terrie, I had the pleasure of seeing crowds around what I found out later was the two of you at a banking industry event called Acquire or Be Acquired and that led us to realize the incredible energy and momentum in the industry around who you are and what you are doing. So aside from the titles, can you tell us a little bit about your backgrounds in banking, what got you here and led to what is now Bank on Women?
Terrie Spiro: Gina, I’ll answer that. First, thank you for that very nice compliment you just paid us. So I’m a corporate lender by background and I’ve had the great experience of being able to climb the corporate ladder, if you will, from corporate lender to chief lending officer, and then working my way into the C-suite of different types of institutions, all of which were for the most part in the Mid-Atlantic area. So I’ve been an executive in top 50 banks and multi-regional banks and even community banks. So it’s been a great cross-section of banking industry that I’ve been exposed to. I’ve also had a wonderful experience in founding a community bank in my career and I’ve been a white knight and a turnaround specialist and so I’d say to date I’ve had a great ride in the banking industry as a banking executive.
Gina Bleedorn: Jen, how about you?
Jennifer Docherty: Like Terrie, I’ve spent my entire career in the community bank space. Started out as a lawyer working with depository institutions on both the regulatory and the corporate side and then I’ve spent the last 20 years at Piper Sandler helping banks to raise capital. Terrie and I had the opportunity to meet about four years ago at a women’s leadership conference and got to talking about community banking because we both have really enjoyed our time in community banking. But at the time there was an article that had appeared that listed the number of banks that had women as CEOs and if I recall correctly, about 30. As you probably well know there are over 5,000 banks in the country and so it got us into a conversation about why we’ve seen so many talented women around us, but they haven’t ended up in the C-suite and how we’ve seen so many of those women leave community banking.
Jennifer Docherty: And again, this is an industry we’ve spent our entire careers in. It’s an industry we really love and believe in, but there had to be something going on and something that we could do to try to address the talent that was leaving the industry. And what started out as a conversation grew into what we now are thrilled to be able to go around the country talking about is our nonprofit organization, Bank on Women and it started with a really simple premise, which is to help banks better themselves by taking advantage of the benefits of all these talented women who’d spent their careers in the industry. Terrie, anything you’d like to add about our genesis?
Terrie Spiro: Yeah, thanks Jen. You know I would tell you that when I saw that article and it was sent to me by law firm that did some work for my bank and then I was running a public bank holding company at the time so I was on that list. I literally was just so shocked and disappointed when I saw how short that list was. I flipped it, I stuck it in my pocket and took it to this leadership conference that Jen was referring to and I thought this will be a good sort of conversation starter. And then of course that’s where Jen and I met and we had really excellent conversations with the whole range of professional women who were at this conference. But to me it really was something that focused my thinking and also my, quite frankly my anger and my passion about the fact that women really needed to be more prevalent in the C-suite and in the boardrooms of banks.
Terrie Spiro: And so we got about forming this not-for-profit a little bit later and doing the research and rolling up our shirt sleeves and figuring out, okay, how can we make a business proposition to the industry that they’ll listen to? It couldn’t be something where we simply stand up in front of audiences and say, hey, this is the right thing to do, or this is the moral thing to do, or you should be doing this. Lecturing to the audience would not be effective and so we decided to appeal to bankers in ways that we know would get their attention and so we decided to appeal to them based on the bottom line. How could their banks be more profitable? How could they be more competitive and what would be the unique competitive advantage by having gender diversity in their C-suite and in their boardrooms and then we backed up that talk, if you will, with all sorts of rich data and research that we found and we use in our presentations today.
Gina Bleedorn: Terrie, first of all, Terrie and Jen, wow. With your backgrounds which you spoke about so humbly, but are very esteemed and accomplished and completely 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 sort of 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.
Terrie Spiro: If you’ve got female representation in top management you’ll get a 5% bump on return of equity. If you can get increased numbers of women in your board, even if diversity already exist, you will see a bump of your return on assets. And also, 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: So I think Gina, there are actually a couple of questions embedded in the question you just posed. I think the first one is sort of 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. So this was a study looking at banks specifically, and some of the data that Terrie referred to is cross industries. 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 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%.
Jennifer Docherty: And this part is really important. Risk-adjusted profitability is measured by the sharp ratio, increased approximately 20% once you hit the critical mass and we’ll come back to this I think a number of times today. I think it’s really important to get away from the concept of tokenism and there’s some other downsides to that as well. 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. I’ll point out the final point in the study which I think is probably becoming more and more relevant, even 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 sort of do well by doing good. The impact on bench performance obviously is very highly correlated to their gender diversity. On the second point, we can break this down a little bit more, 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: So Terrie, maybe you can respond to this. One of the things we talk about Believe in Banking is what’s different between community banking and even super regionals or banks that are larger in nature, but are moving into new communities. Their big advantage is being a part of the community. That is what keeps Fintech’s away from stealing all their business. That is really the value proposition as you talk about this advice-based transition we’re in now. The idea of just being a part of the community and we know that what you say is true about women and financial decisions, women in the community and then just statistics that really alarm you. This idea McKinsey has a report out. Roughly 50% of entry-level staff are women. So how in the world is it balanced at entry-level position, but then when you move to this CEO position, it’s such a minuscule percentage, 30 out of 5,800. There’s a huge breakdown and it’s not in entering the bank and work… Entering the bank is not the problem. So can you maybe speak to that and shed a light on where the link is breaking?
Terrie Spiro: Sure. 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 when it comes to senior management, when it comes to C-suite, when it comes to the board room and there are many reasons for this. There are additional stressors and barriers to advancement for women. We refer to it sort of in an all-encompassing way as the broken pipeline and let me sort of explain what happens generally. You’re right, if you look at just about any institution, whether it be a top 50 or a small community bank in a small marketplace in the Midwest, you’ll note that the majority of employees are women, but you will find them at the teller line, you’ll find them in the branches, you’ll find them in the back office. You will not find them in the C-suite.
Terrie Spiro: You’ll typically not find them calling on customers or managing P&L. What ends up happening is that women are promoted to manager level at fewer and lower rates than men. So for instance for every 100 men that are promoted only about 86 women are promoted and then women and men want promotions and ask for promotions and ask for raises nearly identical rates. They both aspire for the same yet more men are likely to receive them. So, why is this? Well, let me go back to P&L for a second. Typically, what happens in a woman’s career early on is that they’re not encouraged like men to consider a P&L role. They’re steered into different directions. It could be retail, marketing, administrative roles to HR. It would be into areas that do not require or nor do they stress the management of P&L where revenue generation is key.
Terrie Spiro: Whereas men are two times as likely as women to not only get those opportunities, but to be directed and promoted in that direction. That is a significant factor for what happens. Also, because of this broken pipeline you find that women are what we refer to so many times are onlys. They’re the only one of their race or their gender in that line of work and so they stand out and they’re more actively scrutinized in that role. All of these things end up affecting their upward mobility and then of course there’s something called the motherhood penalty. Sad to say, having children has a negative impact on women versus men. You’ve got an extra workload at home and you’re expected not to have it have any impact on your workload in the office and then you have a perception, even if you don’t have children, well, you might have children one day and so maybe you don’t want to take on that big assignment.
Terrie Spiro: You don’t want to have that big promotion. There are all of these sort of 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 ending up in the C-suite or women being recruited to the boardroom. 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 bank holding companies, the public bank holding companies in the country, there are only 30 female CEOs out of over 5,000 banks. Jen, what have I missed in response to Sean’s question? What else can you add about the leaky pipeline?
Jennifer Docherty: I guess I would add just a couple things and I think that’s a great summary of some of the issues that go into this C-suite pipeline concern. But there’s an interesting study done. Found out less than 2% of women who leave their jobs are leaving their career behind. So I think it’s really important to understand what goes into employee retention and how that might be different for your male and female employees, but to put sort of a fine point on the numbers, women earn approximately 60% of all advanced degrees. That’s from associate up through PhD.
Jennifer Docherty: So all the highly educated talent pool now is comprised predominantly of women. And we hear sometimes about diversity fatigue. In other words, this discussion has been going on for a while and some people start to tune it out. And the reason that it’s been going on for a while is because it’s hard to solve some of these problems, but the numbers are pretty staggering. So Terrie’s a great example of one of the 30, but there are approximately 20% of all bank board seats in the country right now are held by women and there’s still almost 20% of banks who have no women on the board. So statistically it’s a significant problem to be addressed.
Sean Keathley: It sounds like there is a hill to crest. And what I mean by that, as long as women are underrepresented or maybe singularly represented, it’s hard for them to be their best selves and be effective. I imagine there is too many people hiring people like them. And that is to me what has to be broken. You can’t continue to have white men give white men the role and often they’re being groomed to do so. And so I think some of the hard work needs to happen to feed the, to use a baseball term, the farm system. You think about even football, the offensive coordinator is the most likely person to be the head coach. So with the NFL’s focus on diversity, they’re not as much focused on just hiring diverse head coaches. They’re focused on getting diverse people to the offensive coordinator position. So you talked a little bit about some of the biases around HR. Marketing retail is one of the answers getting women into the P&L world sooner. They’re certainly educated, they’re capable. Is that one of the ways? And then we’ll think about that answer as we talk about shifting to people that are truly in a growth mindset, because I know you’re not trying to convince every bank at once, but certainly, the growth-oriented banks might be most attentive to your statistics around how to be more successful.
Jennifer Docherty: It’s a great point, Sean, and I love your analogy for anyone who’s a hockey fan. In USA hockey has been very, very focused on expanding the scope of people who are interested in playing the sport. In the USA on an international level is not competitive in hockey and the reason for that is because it’s a sport that until recently has had a very narrow appeal. And so at the youth level now USA hockey has poured a lot of resources into expanding to the minority community, to women. And so the growth of USA hockey ultimately will be successful at the top level because of the investment that’s made at the early stages and throughout the career. So I think it’s a very apt analogy. To put a little bit of a fine point on that, men are three times as likely to be encouraged to consider a P&L role, which historically has led to the C-suite as we’ve mentioned.
Jennifer Docherty: Men are two times as likely to be promoted or selected for leadership training and 50% of men report getting detailed advice at work about how to chart a path to the P&L job versus 15% of women. So we hear the word intentional a lot, and I think this is what intentional means. It’s just human nature to gravitate to people who are like ourselves, but in order to run an effective organization, you have to be aware of that bias so that you can intentionally bring other people into the fold to give them an opportunity to be successful to make your organization more successful. You mentioned growth, Sean, and I think this is a really important thing to talk about particularly right now. There’s been a resurgence of M&A over the last year or so as we sort of come out of COVID.
Jennifer Docherty: And the banking industry is one that is constantly shaped by M&A. There are lots of factors driving that right now. Some of it is the increased cost burden of regulatory compliance. Some of it is the accelerated need to innovate. That was a driving force for banks going into COVID. The importance of innovation has only grown. And so I think you’re exactly right. I think you made this point when we were preparing for this podcast, that banks that want to last, and Terrie says this all the time, our mission is really to help banks be successful in the long term, to adapt and evolve so that they’re around. And so I think as you think about where your goals are as it relates to your own growth, diversity is a, to me, a low hanging fruit, a huge advantage to make anybody more competitive going forward.
Jennifer Docherty: There’s a very interesting study that was done about M&A and this wasn’t just limited to banking. This was in fact a 20 year study that looked at every single publicly announced merger. And what the study concluded is that companies that had a gender-balanced board with at least a third women, again, we talk about this critical mass, performed better on an operating performance standard and on shareholder value metrics. In the first year they performed almost 2% better in terms of total shareholder returns. 40 days post announcement, almost 1% higher. Three years after acquisition, approximately 4% improvement in ROA, about a 2% higher sales growth. So you can see that in order to be successful in the long term it’s really important that you have the benefits of cognitive diversity on your board.
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.