Is Your Bank Organized For The Future?

A New Bank Organization

A traditional bank is organized along a hierarchical structure. The CEO presides over executive vice presidents that head up various divisions supported by senior vice presidents, then vice presidents and so on. Commercial loans, retail, branches, mortgages, etc. all report up to their chain of command. Most banks are essentially organized along product lines with a rough geographical overlay so that every region has a representative for each product. This worked well for the first 175 years in banking, but now the organizational structure is starting to fail us.


Geography Becomes Meaningless


What is the geography of an online deposit application or a smartphone? If the trend in banking is to move more and more products online then banks are organized to serve last century’s customer. Having regional presidents or management will start to make less and less sense. Of course, the question arises - what about local knowledge?


Velocity Of Information


Local knowledge is quickly being supplemented by increased information. We now get credit scores, fraud alerts, permits, sales comparables, aerial imagery, rent levels and thousands of other streams of information in near-real time. Better and faster information not only reduce the need to geographical management, they often turn it to a disadvantage. Banks now conduct construction inspections via drone that digitizes progress and automatically calculates completeness. A Skype interview with the construction manager and we now have a validated progress report within hours where it used to take two weeks. Leveraging firms like ERSI, REIS, Core Logic and others we can access rich tapestries of geospatial coded data to provide equal or better marketing and credit compared to being in the area. Below, is an example of a heat map of spatial correlations that can be used to detect and quantify household habits and demographics the best fit a bank’s high-value customer profile. The same map can be produced for credit. Our point is that by leveraging this data we can know more about an area than probably 90% of the bankers that are actually in the area. 


Bank Customer Intelligence



Speed Of Decisions


The more customers use online and mobile banking and the faster the data gets update and analyzed, the faster the decisions in banking need to be made. Our SmartBiz SBA product (available to almost all banks) makes a lending decision in five minutes and closes the loan in seven days. Exceptions stem from a wide geographical range and need to be reviewed for a decision in less than 24 hours. Having a traditional hierarchical structure is cumbersome as decisions often involved deposits, credit, ALCO and pricing. Trying to get a timely decision from credit is often difficult enough let alone decisions on two or three products.


As banking becomes more technologically advanced, opportunities will accrue to those banks that can react and execute the fastest. That means banks need to be more efficient and more adaptable – often the antithesis of many banks' current structure.


Dispersed Workers


Compounding the problem is the need for more skilled bankers that may not reside in your geographical area. To excel, banks, particularly rural banks, will need to be able to manage teams across a wide geographical area including maybe international workers. A flexible, geographical workforce also does not lend itself to a traditional organizational structure. 


Organization Around The Customer


The biggest argument against the current organization structure is it is formed around geography and products and not the customer. The value for most banks lies in the ability to deliver superior service to the customer. If the customer is in the center of value, then should the organization reflect that and be architected to service the customer?


A Better Way To Organize


The solution is to form more “Action Teams.” Action Teams are often made up of workers from different disciplines brought together for a particular purpose. This might be a Client Action Team (CATs) designed to support a particular type of customer such as small business or a Project Action Teams (PATs) to support a particular goal such as to improve the loan administration process. Whatever the grouping, the goal is to have decentralized team where the leader’s main job is to put the structure in place and then facilitate decisions and information within the group. The result is a highly flexible and highly adaptable working unit.


Bank Organization 

Each team has a primary function and is comprised of individuals from diverse areas that can add their expertise to the main mission of the team. On a secondary basis, each member is part of a “training group” that exists solely for the promotion of skills within a discipline. These training groups would be from areas such as credit, deposits, risk, leadership, compliance and so forth.  Like merit badges, each banker can learn various skills from lending to deposit structuring in order to benefit the team and the individual. This prevents silos from forming and keeps the team focused on its primary mission which usually revolves around delivery a high level of service to the customer.


Teams can be expanded and contracted as needed with members shifted around. This allows for a more efficient use of resources and since there is no hierarchy, the structure is infinitely more scalable. Titles become meaningless and every individual’s value lies in their ability to stay current and execute on their various skills. Communication occurs within the team and amongst the training group thereby allowing the faster dissemination of information.


Since a bank most likely will have multiple decentralized Client Action Teams it has a higher probability of figuring out the most productive way to accomplish a task. Those in a leadership role help evaluate other teams and bring best practices to those teams that can best use them. This contrasts with a hierarchical structure that has one way of doing things that may or may not be the best for the time and place. Action Teams allows for faster experimentation and iteration.




Banking is ripe for reorganization. Shifting from a traditional command and control structure to one of autonomous Action Teams allows banks to better innovate and respond to a changing environment. The action team structure can be found at Ritz Carlton’s, Nordstrom’s and SEAL teams. Information and change will continue to speed up and banks that reorganize themselves now will be more adaptable in the future.