Building Confidence in Banks: The Payoff in Jobs
by Gael O'Brien
For investors, banks may now be the most attractive they’ve been in 30 years. However, public confidence in banking is at its lowest levels, according to a recent Gallup Confidence in Institutions survey.
Only 10 percent surveyed had a great deal of confidence in banks, followed by 13 percent who had quite a lot of confidence. In the 2011 Gallup survey of 16 institutions from the military to Congress, banks ranked 12th, ahead only of organized labor, big business, HMOs and Congress in engendering a great deal/quite a lot of confidence.
In a recent interview with Gallup Chairman and CEO Jim Clifton (see the first part here) he talked about the importance of banks’ increasing public confidence and the key role they play in helping entrepreneurs grow their business, which connects to the global competitiveness of the United States.
In 2012, U.S. job growth will require 1 million entrepreneurs to start their own business and we are only going to have 400,000 to 600,000, Clifton says; “so there is no way we can have enough jobs in 2012.”
Clifton argues, in his new book The Coming Job Wars, that successful entrepreneurship and job creation are the most pressing issues facing the world. In the U.S., Clifton says, local leaders must provide environments that encourage people to create small businesses because they generate most of the jobs. He describes the need for a partnership between cities, universities, and local tribal leaders (successful business people, retired officials, philanthropists) involved in the community who aren’t pushing their own agendas that can foster that kind of environment.
Sense of Community
Clifton shared with me the results of an experiment being conducted in Omaha, Nebraska that he believed had potential for other cities. The University of Nebraska, Omaha Chamber of Commerce and the Gallup organization joined with a wealthy rancher, and the Governor, to screen and identify 500 small businesses that were committed to growing, then screened and identified 50 good mentors to support those businesses. Clifton points out that the businesses like being part of three organizations that have huge brands; they also enjoy the involvement of a popular Governor, who comes to meetings. “We created an ecosystem of enthusiasm about free enterprise.”
The net result? Clifton says this creates a huge sense of community, an increase in volunteerism; “all good things happen when you have all those entities working together for the biggest problem, and the biggest problem is job creation.” Referring to the Gallup Path global model, Clifton points out that “the highest state of well being is when you give back. In that model in Omaha, there is an enormous amount of giving back.”
How do banks and increased confidence fit into this? If you have ever started a business, Clifton says, a banker is more important in your life than your spouse or anyone else. From talking to and watching small businesses, bankers know which businesses are going to shoot up, what entrepreneurs need to do, and the advice to give them; bankers have relationships and insights and can be extremely helpful in job growth in addition to loaning money, he says.
If a genie appeared and let you choose only one institution in which you had the power to restore trust – again referring to the Gallup Confidence in Institutions survey – more important than Congress or the media to job creation would be banking.
Degrees of Separation
Much has been said, and written, about how the actions of Wall Street banks in particular, and mortgage companies like Countrywide Financial contributed to the conditions that led to the 2008 economic meltdown. The result was eroded trust, confidence, and reputations —the result of what was interpreted as financial institutions’ greed and utter lack of concern for customers.
One way for banks to repair confidence, says Clifton, is to refocus their mission and purpose on helping the United States grow its 6 million small businesses and support entrepreneurs’ starting new businesses every year. Most of the job creation in the U.S. comes from small and mid-size businesses.
“The best thing banks can do,” says Clifton,” is take a deep interest in their banking clients to help them get more customers.” A good banker, Clifton says, helps you think, talks to you about your business, and helps you build strategies.
“Most of these small businesses, when we poll them,” says Clifton, “don’t need funding....only 20 percent of them say they are having a difficult time getting funding.”
The role of the banker, says Clifton, is not so much in funding, but serving as an advisor actively engaged in helping and supporting you grow your business.
Clifton estimates that 1 in 10 people employed in the U.S. work for a bank or an institution similar to a bank. If those 10 million employees connected to financial institutions had as their purpose really helping the 6 million small businesses, the impact on communities would be enormous, he says. “Banks are one degree away from us, not six degrees,” Clifton continues.
Banks greater focus on positively impacting communities through growing jobs would have another benefit to both them and communities explains Clifton; it can help them attract the stars that are coming out of graduate schools.
Commenting on a trend that others have observed about the so-called Millennial Generation, he says these young people feel a need for a greater sense of purpose than just making money or increasing shareholder value. “Young people... want to know how their job is making the world a better place, or how it is having an impact on your community....So if you are an employer, you’ve got to be crazy not to address that or you will never get the stars.”
Clifton’s approach is one way banks can increase public confidence. At the other extreme is the announcement this week that Bank of America is quadrupling CEO Brian Moynihan’s compensation package in a year when their stock fell 58 percent and they’ve announced plans to lay off 30,000 employees.
Gael O’Brien is a Business Ethics Magazine columnist. Gael is a consultant, executive coach, and presenter focused on building leadership, trust, and reputation. She publishes the The Week in Ethics