By Michael L. Stevens, President & CEO

This is the annual analysis of topics identified by rising third-year GSBC students for their strategic projects. Through this exercise, students are tasked with working with their bank’s leadership to identify an important issue facing the bank or industry. The key to this project is to identify actionable recommendations for the bank to respond to.

Our reason for sharing these findings is simple: Through the annual project evaluation process, we analyze 160-plus topics, gaining a sense of the critical issues and opportunities facing the industry. For community bankers, this information should be more than just interesting. It should be an indication of how the industry is forecasting its future.

People Issues

There is typically a significant number of projects focused on issues related to people. This is to be expected given the number of people banks employ. What is surprising is that 26 percent of the projects this year were centered on People.

Remaining Competitive

Banks continue to explore ways to attract and retain talent. This has been a challenge since becoming a community banker has not been front and center in the mind of a college student when exploring a career path. Banks are doing some interesting things by increasing their presence in high schools and connecting with college students earlier.

With more people expecting a flexible work environment, this can be challenging for banks that thrive on the relationship business model and a physical presence. The cultural tide seems to be shifting with more employers wanting employees to have more face time, which may provide some relief. As students’ banks continue to tackle issues like the desire for remote work, they are challenged to be bold and creative in their ideas and to look at other industries for new approaches.

Leadership Succession

Leadership succession continues to be a significant issue for many banks. Our students are recognizing that there needs to be more transparency, planning, and development to ensure an effective handoff of leadership responsibilities. There is a natural generational tension in organizations; those approaching retirement may be concerned that by providing an intended plan to retire, they will unleash something that can no longer be controlled. The upcoming leadership may be ready to put their mark on the organization and want to ensure they are ready to assume more responsibility. A good place to start for organizations is to honor the organization’s legacy and the people who have led it. An organization can then build excitement and commitment to developing and empowering future leaders.

Culture, Culture, Culture

The final topic under the People category is Culture. Businesses of all types are focusing more time and energy on organizational culture. Investopedia defines corporate culture as “the values, beliefs and behaviors that are common or understood at a company. These determine how a company’s employees and management interact, perform and handle business transactions.

Many of the culture-related projects are focused on managing culture during strong growth or after a merger. Organizations with expanded footprints or a hybrid work environment are also finding it necessary to focus on culture. This is important work with no “correct” answer. Culture is a shared understanding of how people work together and serve customers. Organizational clarity on those expectations is instrumental in all the other people issues mentioned above.

Artificial Intelligence

Artificial Intelligence (AI) is the perfect topic for a strategic project. While its application is growing dramatically, there is still much to learn. There are several projects studying the pros and cons, and one project focuses on a classical SWOT (strengths, weaknesses, opportunities, threats) analysis. Projects focused on how AI can enhance the relationship business model demonstrate community bank leaders remaining true to who they are and their value in the marketplace. On April 3, 2024, The Wall Street Journal published an article, Business Schools Are Going All in on AI (subscription required). The article highlights how quickly schools are incorporating AI into the curriculum, telling students to view AI as a second brain. Will the industry be ready for these new graduates?

Regulation

Banking is a heavily regulated industry. No surprise that 10 percent of the projects are focused on an aspect of regulation. Several projects look to enhance compliance by implementing compliance management programs. Others are looking at complying with Section 1071 Small Business Lending rule from the CFPB. The other area being studied is the increased regulatory requirements as institutions become larger, at both the $1 billion and $10 billion asset thresholds.

The industry finds itself at a pivotal moment in regulation. There is a new administration taking over on January 20th, with a mission to reduce the size of government and the burden of regulation. In the fourth quarter Community Bank Sentiment Index published by the Conference of State Bank Supervisors, the regulatory component surged 80 points, indicating increased optimism about the burden facing the industry. This is unprecedented for the index and a very clear reaction to the results of the presidential election. Last quarter, this element of the index had an 80 percent negative response rate.

And the Uniqueness Award Goes To…

NIL and Community Banks. For those not familiar with it, NIL stands for Name, Image & Likeness. This is the workaround for college athletes to receive compensation without being paid to play the sport. It is fundamentally changing college sports. According to Opendorse, an athlete marketplace and NIL technology company, the market is projected to be $1.67 billion in 2025. GSBC has one student determined to figure out how a community bank can serve this market.

What’s Next?

These are significant issues GSBC students are tackling between now and when they return for their third and final summer session. The guidance provided to students by GSBC administration was to be bold and creative in their solutions. These issues require new and fresh ways of thinking and solving problems to ensure a vibrant and resilient bank and future industry.