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Teflon calling officers, or, why do people get fired (or don't)?

Part 1 of a two-part series. It seems a mystery at times why some get fired and others prosper.

It seems a mystery at times why some get fired and others prosper.

Often, the reasons are not apparent to the colleagues of the banker in question.

In considering this, I believe that there are important lessons to be learned as we enter a period of new uncertainty for the commercial banking business.

Banks terminate employees for only a handful of reasons, in my experience: job performance, cultural misfit, aberrational behavior, and economic hardship.

Interestingly, simple incompetence rarely comes up. And the reasons for that are not only interesting, but suggest potential action.

Simple math--too many lenders into too few loans

In the last five years, we've seen many situations of economic hardship creating unemployment in banking.

The number of banks has shrunk due to forced marriages of weak banks into stronger ones and a contraction in the volume of lending business that local economies can sustain.

In other words, there's been a surfeit of capacity in the industry--less business to do, with more capacity available than is necessary to accomplish it. Head count contractions are inevitable and unfortunately, more are likely in the coming years.

This leaves the remaining categories to be discussed. We'll start our discussions this week with the general category of job performance issues.

Should banks rethink what the lender's job really is?

There are plenty of examples of terminations due to "screw ups," especially as banks have sought to insert higher levels of personal responsibility and accountability back into the workplace.

But really, how many lenders are fired over problem credit portfolios? Or a sheer incapacity to evaluate and book loans?

Over time, the unforgiveable sin has been a loan loss due to documentation deficiencies where the lender either didn't know or didn't implement common sense rules of loan documentation.

Yet banks have slowly come to realize that it's not necessarily the best use of a bank lender's time to be immersed in the often minute details of loan documentation and closing.

These are often better left to back office staffs, well versed in such matters, where specialization and tight procedural control can accomplish better and more consistent results. Not only does the lender get freed up to be a better business developer and loan servicer, but the process itself is better suited to an internal control-type of organization structure.

As a result, I think we're seeing fewer terminations for reasons of this general nature.

Teflon calling officers business doesn't stick to them

What about the lender who just can't seem to develop any business?  He makes lots of calls and spends much time having lunches and coffee meetings with prospects. Yet he--or she--just can't seem to close a deal.

It's a sort of inability to simply take out the order pad and ask for the business.

These people exist to a greater or lesser extent in all banks, but rarely are they deliberately pruned out.

We can all probably recall some hapless individual who fits this general description, but how realistic is the characterization? 

Not very, because most banks don't throw the "newbie" into the marketplace to flounder by himself. Rather, the floundering often occurs in pairs or groups and is indicative of a lack of appreciation of the skills needed to successfully sell.

Sales ability is not necessarily a matter of competence. More often it's a matter of proper nurturing and support. Lack of it can lead to employee turnover but the employee is not necessarily the primary culprit. Sometimes, I think, the employer fails to understand the skills involved.

Good appearance, poor performance

I recall a 50-ish lending vice-president from my bank in Oklahoma City who was hired by us after being cut by our leading competitor during the general economic malaise in oil and real estate in the mid-1980s.

In his previous employment, the bank was under great stress and ultimately failed but in the year or so before its demise, there were several terminations among its professional staff.

Anyway, this was my own read of what happened. But I came to revise my estimate of this man's unhappy professional life.

At our bank, he was assigned a portfolio of loans that in decent economic times would have been sufficient to keep an experienced person constructively engaged. But what I concluded from my perch as the problem energy loan manager (and a member of the bank's loan committee) was that the man could not deal with a "soft" loan portfolio.

By "soft" I mean one that is labor intensive and that exhibits characteristics atypical of the highest grades of the bank's internal loan grading structure. In other words, he just couldn't ever seem to "true up" his portfolio in an overall environment of stagnant to declining market economic conditions.

He knew how to make sales calls, attract business, and get deals closed. Unfortunately for him, and for the bank, there was more to lending money that simply bringing the deals in the door.

What was really at stake were the silent but enduring aspects of a lender's job description. Perhaps we should call these the "iceberg factors." What we could see looked excellent, but somehow, on the whole, the banker didn't work out.

Yet it would never have occurred to me then, or now, to simply label this individual as incompetent.

Lenders rarely leave because they're plain no good

Rarely do we ever see evidence of simple, unvarnished incompetence. We have all made hiring mistakes in our careers. These are costly for our banks and the human toll of career damage on the impacted individuals is not insignificant. But these lapses are mercifully rare.

A perhaps larger issue and one very difficult to assess prospectively is the lender's work ethic.

Words like "lazy" and "uncurious" and "indifferent" come variously to mind in thinking about former bank colleagues who left either noisily or quietly. But rarely were these departures filed away for reasons of competence as their primary cause.

What's left, then, in understanding elements of bank lending officer turnover are the issues of a bank's culture and then the aberrational behaviors of the job incumbents themselves.

These are not competence issues, either, and are often fascinating and insightful.

We'll explore some of these next time.

Ed O’Leary

ABA Banking Journal Contributing Editor Ed O'Leary, a veteran lender and workout expert, spent more than 40 years in bank commercial credit and related functions, working with both major banks as well as community banking institutions. He earned his workout spurs in the dark days of the 1980s and early 1990s in both oil patch and commercial real estate lending. O'Leary began his banking career at The Bank of New York in 1964, and worked at banks in Florida, Texas, Oklahoma, and New Mexico. He served as a faculty member and thesis advisor at ABA's Stonier Graduate School of Banking for more than two decades, and served as long as a faculty member for ABA's undergraduate and graduate commercial lending schools. Today he works as a consultant and expert witness, and serves as instructor for ABA e-learning courses and has been a frequent speaker in ABA's Bank Director Telephone Briefing series. You can e-mail him at etoleary@att.net. O'Leary's website can be found at www.etoleary.com.

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