For Umpqua Bank CEO Ray Davis, an out-of-the-box retail banker, culture and empowerment are what have made the Oregon-based bank consistently successful, not its offbeat branch designs.
By Lauren Bielski,
Now $8.3 billion, offbeat Umpqua Bank is “no gimmick,” says CEO Ray Davis.
In an interview he credits culture and empowerment for the bank’s success
Long before the value of a cup of joe and an overtly retail- looking environment was conventional banking wisdom, Portland, Ore.-based Umpqua Bank offered its customers coffee and a chat. The bank’s sharp-looking branches began popping up in Oregon at the forefront of the experience-design movement after CEO Ray Davis and his team bought into an idea that said, don’t be visually boring and support your brand in your branch outlets; the investment will pay off.
The idea of all of it? To make financial products tangible and customers feel like banking could be more than an errand. With 148 stores that sit between Napa Valley and Bellevue, Wash., and a growing reputation as a bank that’s reinvented the rules of retail banking, Umpqua is succeeding on the terms of differentiation it set out for itself.
Certainly there have been pressures. In 2007, the bank experienced just 5% organic growth, well down from previous years, and reported earnings of $65.3 million, or $1.08 per share, down from $1.63 per share.
Yet, there has also been progress. That same year, the bank acquired $727.8 million-assets North Bay Bancorp based in California’s Napa Valley. Last November, the bank launched its Innovation Lab in Portland (shown above), a one-of-a-kind branch run with technology partners to help the bank figure out new approaches to retail service, even as it addresses the needs of tech lovers. Not a bad year in an environment characterized by drastically downsized performance by many.
Also in 2007, Davis wrote a book, Leading for Growth: How Umpqua Created a Culture of Greatness, and the bank ranked 34th in Fortune Magazine’s Top 100 Companies to Work For in 2007. Early in September, ABA Banking Journal talked with Davis about retail delivery, strategy creation, and execution. With a reasonable demeanor, Davis is certain without being arrogant—sure of his bank, without preening over it.
How would you describe your bank’s retail delivery strategy and why it has been successful?
Our strategy has been to engage the customer by dramatically changing what happens at a branch. Back in 1994, when we were looking at the competitive landscape at an asset size of $140 million we asked the question, why should anyone do business with us? It was clear that we couldn’t out-resource, out-gun, out-man, the big banks. So we set out to differentiate ourselves in customer sales and service. And our results have validated our efforts. We’ve become the largest regional community bank in the Pacific Northwest, with assets of $8.3 billion. It’s not that our delivery is necessarily better, but we certainly don’t provide the usual bank experience, with tellers behind glass and teller lines and the same old behaviors. We don’t have “branches.” We have “stores.” And our stores provide an environment that encourages browsing for financial products, not just completing a transaction.
In our look, feel, and actions we’re communicating that our customers, that people generally, have options when it comes to banking. Basically, we’ve succeeded because we created a very different experience. We’ve created a bit of a mystique.
How would you address critics who dismiss what you’ve done as a gimmick?
I’d say, well, we have done well. If it were merely a gimmick you wouldn’t have that long-term result. I’d also say, look at our growth. There have been acquisitions that were a good fit and made sense for us, but a lot of growth was organic. Our loan and deposit growth are north of 35% annually. And I’m convinced that without that organic growth, those acquisition opportunities would not have happened.
When I take colleagues from other banks on tours, many of them get it: it’s not just the great-looking stores or fun ads or our non-traditional marketing efforts. It’s what takes place within the stores.
We hire people who want to engage with customers. We give them world-class training, including training at Ritz Carlton. I empower my staff to do what they need to do to address customer needs. And our culture is terrific. It isn’t insular or threatening.
You emphasize the contribution of your people. Has it gotten more difficult with growth?
Being large doesn’t make it especially difficult. I think that even a small bank finds it challenging, because culture at a company has to do, in part, with how decisions are made and how ideas are encouraged and followed through.
The whole subject is interesting and I think about it often. I think many CEOs avoid looking at it too closely because culture is something that’s hard to measure. Yet, today, banks that compete with only interest rates, well… that’s the kiss of death.
Good point. But would you agree there have to be some processes involved?
If bank leadership provides an environment of training, and management motivates employees properly with incentives and consistent communication, you can control culture a bit, but it will always be a delicate entity.
Communication and being accessible helps. It’s somewhat like raising a teenager, you’ve got to check in frequently, but with a light touch. I have told Wall Street, our culture is the single greatest asset we have, and I have also said that it’s the element of the greatest risk—even greater than our credit risk.
Certainly many companies have big HR-related technology budgets to attract better employees.
We don’t invest that much money in HR-related technologies. Nor do we rely upon psychological testing in our evaluation process. We do have very specific vetting procedures, but I believe in relying on the human touch and what your gut tells you during the interview.
Would you say Umpqua tends to keep people? Is career management and shepherding careers a big priority?
Our employees do tend to stay with us. Recently, during a leadership retreat, I was addressing a group of about 20 managers and asked who was new or who had left. In this group, as I recall, one person had retired and another had moved on. But otherwise, everyone present had been with us for some time.
So yes, we do well with employee retention.
Tell me more about empowerment, in terms of day-to-day behaviors.
Sure. If a customer walks into a store and is upset about a bad check charge, the associate facing the customer can make a decision immediately to override the charge if they feel there’s good reason. I believe empowerment is probably the most important differentiator for a community bank. It’s what the smaller bank has over its larger counterparts—the idea of not being burdened by bureaucracy.
Next, I’ll say, as an operating philosophy you have to trust your people. First of all, customers have expectations that decisions will be made in real-time, most of the time. So you need all your people making various types of decisions and engage in problem solving. We have an unwritten rule at the bank, nobody is criticized for trying to help someone. We might recommend that an associate try something else in the future, but we don’t come down hard on them.
Changing topics, how important are CRM and related technologies that help a bank know its customers?
In the current business environment, these systems are necessary. (We’ve recently adopted a CRM system called 360 View for handling customer records.) Still, systems should play a supporting role, as an enhancer of providing personal service, I don’t believe in using technology with purely a transactional mindset.
How do you handle marketing?
We run incentive programs and share everything internally before we go live with a program. But I have to say, we don’t change programs or messaging very often, because I think that bank advertising is dead, with the exception of the periodic image ad to put yourself before the public. Let me try it on you. Let’s say you’re watching one of your favorite TV programs and you see a great bank spot, grandfather hugging his grandkid—it’s very touching. And the message is, “Come open your account with us.” Would you view that as a call to action? Now, you might make a change if your existing bank beat you over the head with a 2x4, but otherwise, I don’t think you would respond to that ad.
But you do market.
We spend little money on advertising. We spend a great deal of money on what we call “handshake marketing,” which is the type of marketing designed to generate buzz. I really think our Creative Strategies Group has started to reinvent bank advertising, in some sense, by doing things that emphasize our role in community and that don’t relate directly to finance. Moreover, we push our advertising and marketing dollars down to the smallest unit in the organization. I let managers at individual stores make those decisions.
Does handshake marketing extend to social media and the internet?
Yes. It’s a multichannel program.
Some experts say that the banking industry hasn’t taken enough of a leadership role in helping consumers with money management. What’s your view on this?
I don’t agree. I think there are more serious disconnects in our industry right now. One is that the industry has too many traditional branches out in the field. At Umpqua, we have stores, and we continue to experiment with their look. But I’m not sure that as an industry, we’ve all thought enough about what we will do with all that real estate over time as electronic channels become even more dominant then they are already.
Switching topics again, I know you’ve written a book on leadership. What makes you an excellent leader?
Well, I’m not sure I am an excellent leader. It’s a tough standard. I will say that I think it’s an important topic. And I think it’s something our country needs right now.
A good leader has many traits. He or she is accessible and approachable. Leadership also has to do with sweating the details. Make sure that the small things are getting done and done consistently. Mayor Giuliani wrote a book on leadership and he pointed out that a key trait is optimism. I agree. Nobody wants to follow somebody who says, “We’re never going to get it done but follow me anyway.”
But I think you have to add another element, which is passion. I refer to it as “positive passion.” Through that you can do your job to inspire and motivate people, which is a big part of any leader’s job: persuading others to take action. BJ