Magazine article American Banker

Banks Need to Get Up to Speed with Decision-Making Processes

Magazine article American Banker

Banks Need to Get Up to Speed with Decision-Making Processes

Article excerpt

Speedy decision-making is a hallmark of entrepreneurial companies. Relying on gut feelings, even if they contradict data produced by managers and others, provides an increasingly strong competitive advantage as change accelerates.

Banks, on the other hand, seem slower to make decisions than their business requires. I'm not talking about credit and other customer-impact decisions, though these have not escaped the slowdown trend, but about the overall speed of decision-making.

Data have traditionally been more important to decisions in banking than in other industries. Given banks' role in risk intermediation, this is appropriate, and suppressing gut instincts has paid off in many ways. The waning of "character loans," for example, seems to have reduced the risk embedded in most banks.

But there is a price. Many banks have saddled themselves with heavy bureaucracies that slow the flow of information from customers to executive management and vice versa.

Now consider some of the more successful banks in the past few years: Commerce Bancorp of New Jersey, Charter One and Park National of Ohio, Cullen/Frost of Texas, and Capitol Bancorp of Michigan. Each represents a unique business model, but all excel in two important dimensions: strategic focus and consistently crisp, effective execution.

Because of their clear identity and strategy, they make decisions faster than competitors do. The management team has a context for all decisions and is often small and cohesive.

These bankers fought bureaucracy and the tendency to follow the herd to safe but unremarkable results. …

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