Let’s do the inventory dance!

Disco feet

Photo courtesy of Alison on Flickr

Your deposits. They’re on the proverbial shelf. They aren’t doing much for you. Deposits are much like inventory. You need to move some inventory. Can you feel the groove? Can you feel it?

It’s a simple concept, right? Manufacturing companies and retailers alike manage their inventory to a tee. They sweat every detail. When, how much, what time, and over what distance will we need to move these shelf killers? Does the banking industry need to add an element of this rigorous oversight to their daily-to-quarterly performance tool kit?

“Well,” you say, “we already watch the loan-to-deposit ratio like a hawk.” True. Throw in some asset-liability management and you’re all over it. It’s more of a mentality of watching versus actingMoving inventory, or converting deposits into loans, should be the eternal preoccupation of every community banker in the land. How much do we have? When is it going out the door? Who is buying? Where are the target communities that want some of our product? Campaign management is a key aspect of converting inventory into product, deposits into loans. Are you leading the charge?

As you think through this, here are some quick steps in the inventory dance:

  • Don’t overthink the process. Realize up front that there will be missteps and, at times, it may sound like the music has stopped. It hasn’t until you say so.
  • Get out on the dance floor. So much of what we do tends to be about guarding what we have, and not finding our groove in the lending marketplace. To do this, you must surveil the landscape methodically, but quickly. It can be done.
  • ALM has a role. The pertinent aspect of this is that you should know at all times what the mix should be; however, there must be some flexibility. The market will dictate what inventory you should move and what the final product, the loan, looks like.
  • Reviewing enterprise-wide risk is a necessary undertaking. Here are the seven categories, neatly arranged by the folks over at the NCUA, upon which we like to shine the light:
    • Credit
    • Interest Rate
    • Liquidity
    • Transaction
    • Compliance
    • Strategic
    • Reputation
  • You’re not selling. Well, you’re sort of selling. What you are doing is engaging others on the dance floor. “This is our song,” you say. “This is our groove. This is our way of bringing the magic of our institution to you.”

The most important thing you can do tomorrow is step outside your office and discreetly inform the staff that it’s time to boogie. It’s time to do the inventory dance. Oh, and don’t forget your dancing shoes.

Do you want to dance?

Photo courtesy of Bob_Doran

Photo courtesy of Bob_Doran

It’s a question that fourteen-year-old teens fear the most after, “Have you finished your homework?”

“Do you want to dance?”

It’s a question that not only strikes fear, but it begs you to check all the key components of your arsenal before saying yes, or even asking the question. How’s my outfit? What about my hair? Are these shoes the right shoes? What about my hair?

As a banker, it is a moral imperative (Where have I heard that before?) that you ask the question each and every quarter at least. You must ask it of yourself, your employees, your commercial partners, and of your customers. As you contemplate asking the question, and certainly before you’re hitting the dance floor, here are some key components you should consider:

  • Marketplace understanding
    • What and where is your market? This needs to get down to the census tract. Okay. Down to the parquet tile.
    • What is your share of the market? This is not always easy to measure, even in an industry such as banking. And what about loan market share? That’s always a tough one.
    • Do you have the right access points as well as the right number of points? How well are your access points doing?
    • Are you willing to exit and enter markets for the benefit of the institution and set aside your emotion in doing so?
  • Operational readiness
    • Have you put effort into making sure that process meets market? Do you have your operational dance steps figured out?
    • Digital technology is a wonderful construct. It can also be an impediment to making a human connection to your customers. Are you using digital technology optimally? In this case, optimal equals efficiency and effectiveness both in your market and for your institution.
    • Are you ETDBW*? After all, ETDBW is so sexy on the dance floor, right?
  • Financial safety, soundness and adventure
    • Have you analyzed the potential financial upside and pitfalls of hurling yourself out onto the dance floor?
    • Safety and soundness are must-have components in your repertoire; however, doing nothing out of fear of loss oftentimes leads to obsolescence, which can lead to obscurity.
    • Embrace a sense of adventure. Yes. Even in your financial analysis and direction, have a sense of adventure. Sometimes you may go to the edge of the dance floor, but that may be the better path than clinging to the wall.

I’d like to add one more thing here. The parents. The board, the regulators, and the auditors are the parents in our little story. They will shroud you and your team in reasons why you should not dance, why you shouldn’t ask the big question. They may even make you so harried that you want to give up. Don’t give up the dance, my friends. Keep the beat. Shuffle those feet.

*ETDBW – “Easy to do business with.”