GEORGE K. DARLING
Better appreciation
Part Two of a Three-Part Series
(Editors note: This series examines the various sources to which banks may turn for ideas and feedback.)
Outside consultant firms are used to help gauge economic trends and offer banks, investment companies and credit unions statistical information needed to maneuver through a competitive marketplace by providing assessments of branch sites, developing administrative policies and conducting peer performance analysis. According to industry experts, consultants are essential in strategic planning for banks.
Simply stated, consultants are hired because banks need a resource – an expert in a specific area – or see the need to eliminate internal political issues that are controversial by using an impartial source.
“Larger banks tend to use larger consulting firms if they are looking for strategic planning. For smaller banks, more branch site work and broader projects apply,” said Robert W. Powers, principal of Compass Consulting Group in Providence, R.I. “With all the mergers and buyouts, there have been a lot of efforts by community banks to broaden their footprints and open in different markets. In some cases, banks are looking for assistance with outside perspectives to bring new ideas.”
At Sovereign Bank, which has over $38 billion in assets, a wide range of consultants are used for relatively limited strategic engagements, and not tactical issues, said Richard Ehst, director of corporate communications for the bank.
According to Ehst, Sovereign Bank seeks “the best of the best, and we typically use consultants with a regional reputation and sometimes a national reputation because they have a well-crystallized strategic view of the business, as well as a high degree of sensitivity … and a lot of experience.”
Community financial institutions hire consultants to focus on strategic planning assistance, market research analysis, organizational development and market expansion. According to Powers, consultants also are hired because banks lack internal resources.
“One of the keys to success is developing long-term relationships,” said Powers. “Clients also tend to use us as sounding boards to bounce an idea off of.”
Banks executives make administrative decisions based on the information provided by outside consulting firms and generally use consultants’ analysis throughout the year on various projects.
“Consultants review data quarterly and provide insight to what is going on in the financial world,” said Oliver Nunes Jr., president and chief executive officer of Hudson Savings Bank, which has approximately $375 million in assets. “Banks our size can’t have experts in every particular area, and consultants provide us with that broad picture.”
‘New Vision’
Risk management and budget analysis are often complex and complicated issues for banks without internal resources to simplify and understand.
George K. Darling, chief executive officer and founder of the Darling Consulting Group in Newburyport, said having an outside consultant explain banks’ current risk profile provides the banks with a better appreciation for the kind of liquidity available and their risk position in a competitive market.
“We help banks manage their balance sheet, assess their risk potential, and provide them with opportunities to increase their income without materially changing their risk profile,” said Darling.
To a large extent, consultants are used to help banks retract, retain and motivate employees and executives through short- and long-term projects, according to Susan O’Donnell, senior vice president at Clarke/Bardes Consulting, which assists approximately 200 financial institutions in New England.
O’Donnell said this time of the year provides the biggest push for consultants as banks gear up for next year’s budgeting and fiscal planning.
“Particularly in Massachusetts, we work with the Massachusetts Bankers Association to conduct a compensation survey and provide information to banks on how their pay and benefits compare to specific labor market,” said O’Donnell.
In the area of compensation, Nunes said consultants are used to provide a broader perspective of the industry and evaluate employee salaries so smaller banks can remain competitive in a large market.
Generally speaking, O’Donnell said, the larger banks are looking for “much more integrated, total and strategic use of all the parts moving together – and a lot of times, the assignments are much broader and strategic. The smaller banks usually need us to support a human resources aspect … by providing data and setting up compensation programs.”
O’Donnell said projects range from small annual projects to yearlong analysis and progression developments, depending on the specific needs of the bank.
In the race to be the best in the industry, consultants provide a different perspective to banks, and Ehst said, “The secret to being the best is believing that there are always better solutions out there in the marketplace.”
Ehst said a great deal of time is spent “in a constant search for the truth … about what is true in the marketplace – and outside sourcing can offer better solutions.”
But the keys to success in financial consulting, according to O’Donnell, are the bank players.
“The players are changing, which in effect changes the client base for banks … and the new vision of the banking industry is wanting to offer investment services and lending, brokerage and full financial services,” said O’Donnell. “It’s an exciting time for our clients in the banking industry and there is a lot of activity at the board level. That is a good thing – it expands their business and the need for expertise.”
