Culture, Service and the Bottom Line: How 2020 Proved the Pinnacle Model

By Terry Turner, President and CEO, Pinnacle Financial Partners

How do you quantify the impact made by culture?

That’s been a challenge for our firm since Day One in 2000. It’s easy to show the cost-benefit analysis of a new branch office, a piece of technology or a new team of bankers. It’s tougher to justify spending so much time and resources on building and sustaining a great internal culture.

Yet we’ve known since we first sat down to build this bank that culture had to be a top priority. We knew the dividends it could pay if we got it right, even if we couldn’t always point to a direct result on a ledger.

2020 gave us an opportunity to make our case, and recent research from Greenwich Associates helps prove how right we were.

It hardly needs recounting at this point. In 2020, our country and economy faced multiple crises simultaneously, perhaps at an unprecedented scale. It was a time when Americans needed help—desperately. And many were not able to get it from traditional sources like federal, state and local governments who were struggling to keep up with changing crises and the ever-steepening toll they were taking.

Millions of small businesses faced temporary shutdowns that threatened to lead to permanent closures, revenues that bottomed out and employees who were depending on them to meet payroll.

It was a snowball headed down a steep hill with one crisis growing another, one person’s tough times affecting several others in a terrible cycle.

America’s banking system, uniquely positioned in the economy to help deploy capital quickly and keep the credit market stable, had to move quickly to help. At the macro level, there are a lot of levers we can pull to keep the wheel turning and serve shareholders.

But it’s the micro level that keeps a local small business going and gives a struggling new homeowner what they need to put food on the table. That’s what will help sustain local economies, keep people employed and get more help in hands the fastest. What can we do for clients immediately? How are we delivering it? How easy is it to get help?

In short, distinctive service, trust and ease of doing business are most important in a time of crisis. And that kind of reputation is earned by being trustworthy when others aren’t and by being easy to do business with when it’s overwhelming, not by catchy slogans and slick advertising.

Those are the real difference makers, and that’s what Pinnacle delivered in 2020, a very unusual year in terms of fear and uncertainty. We were only able to deliver because of our relentless focus on culture from our very beginning, that nebulous concept that’s impossible to find on a balance sheet or P&L statement.

Our culture has been built on some key tenets:

• Hire the best financial professionals in our markets, each with a heart to serve
• Create the best workplace they’ve ever had
• Foster strong relationships and genuine love among our associates
• Incentivize them with firmwide targets and a shared bonus plan to work together for the common good, not individual targets which breakdown teamwork and jeopardize outcomes for clients
• Motivate them to do the right thing for the firm with real, tangible ownership
• Empower them to do the right thing for clients by focusing on meeting needs and giving advice over high-pressure sales
• Give them the tools and freedom to deliver on their promises and give the client what they need
• Free them of middle management bureaucracy and allow them to move quickly with local decision-making power

No matter what challenges 2020 threw at us, our associates rose to meet and overcome them. All because we built--and they help nurture--an internal culture that leads directly to service that is measurably distinctive and ranked among the best in the entire nation.

Let’s look at how our culture rose to the challenges of 2020.

• Our experienced associates with a heart to serve stopped at nothing to help clients in crisis.
• Because they love coming to work every day, they worked harder than any team I have ever seen in my long career, sometimes literally around the clock, without complaint.
• Because they care for each other and are incented to work together toward common goals, they volunteered to pitch in however they could to get the job done. Our firmwide incentive structure is also essential to the collaborative relationships between lenders and credit, which is how we were able to review 100 percent of “risk graded” loans on our books to assess credit risk and help stabilize clients’ finances.
• Because they are all literal owners in the firm through generous annual stock grants, they did whatever it took to help our firm pivot to defense and then worked to get us quickly back on offense.
• Because they are empowered to do right by their clients, they listened closely to what clients actually needed most, without pressure to accept terms or services that weren’t in their best interest.
• Because they have a full suite of financial tools and the freedom to design custom solutions for those needs, they could deliver on their promises.
• And because they have the power to make decisions, they could act more quickly and nimbly to respond to immediate needs.

As an example of all of those elements at work, you need look no further than the results our associates achieved during the Paycheck Protection Program. We’ve talked many times about the success we helped our clients achieve with PPP, but consider this: In the first round, PPP had a $349 billion allocation. Based on our asset size, we should have claimed about $490 million of that for our clients. Instead, we loaned $2.4 billion to 14,000 businesses. It was a herculean effort, the best I have ever seen, and it was only possible because of the points I just outlined.

The other payoffs for our clients and our firm are just as concrete.

• We continued taking market share despite the soft economy:
  • 1 by deposits in Nashville (FDIC) and No. 1 among companies with sales of $1-500 million (Greenwich Associates)
  • 4 by deposits in Chattanooga with 50.9 percent YOY growth (FDIC); No. 2 among companies with sales of $1-500 million (Greenwich Associates)
  • 4 in Knoxville at $2 billion (FDIC); No. 2 among companies with sales of $1-500 million (Greenwich Associates)
  • 7 by deposits in Charlotte with 46.2 percent YOY growth (FDIC)
  • 6 by deposits in Memphis with 41.3 percent YOY growth (FDIC)
  • 3 by deposits in Roanoke with 28.3 percent YOY growth (FDIC)
  • 12 by deposits in Greenville, SC (FDIC)
  • 13 by deposits in Raleigh (FDIC)
  • 32 percent deposit growth firmwide (FDIC)
• We continued growing across several important financial metrics while many banks remained in defensive austerity and missed projections. We actually reported diluted earnings per share growth of 12 percent—and more than 24 percent on an adjusted basis—over the fourth quarter of 2019 in spite of all the hardships.
• We earned four Greenwich Best Brand Awards for Trust and Ease of Doing Business for both small business and middle market banking, one of just five banks nationwide to have a measurably distinct brand in every category.
• We earned 23 Greenwich Excellence Awards at the regional and national level, one of just 30 banks nationwide to have measurably distinctive service.

Looking more closely at the Greenwich Associates research, we can see the straight line from our culture to financial results.

According to Greenwich Associates:

About half of all U.S. commercial banking clients say the COVID-19 crisis changed the way they view their banks. About 30% of companies are pleased with their banks’ performance during the pandemic and have a higher opinion of their banks than they did at the start of 2020. However, about 1 in 5 companies say the crisis lowered their opinion of their banks. Of these, 85% are either actively seeking a new provider or are open to such a discussion.

…

Small businesses were least satisfied with the support they received from the largest national banks. In Q2 2020, more than a quarter of small businesses rated national banks as “below average” or “poor” in terms of their helpfulness during the crisis. In contrast, two-thirds of small businesses using regional banks rated their providers as “excellent” in terms of their helpfulness during the crisis, with 81% giving the excellent label to community banks. [Source: Greenwich Associates]

…

Regional and community banks scored points with U.S. middle-market companies last year by leveraging their high-touch service models to provide support during the COVID-19 crisis. [Source: Greenwich Associates]

Greenwich Associates are the world leaders in market research for financial services, and they believe crisis response is one of the greatest factors driving client satisfaction right now. Furthermore, they say:

Expected turnover will likely bring new business to banks that stepped up to provide small businesses with the support they needed last year—especially the regional and community banks that took home Greenwich Excellence Awards in Small Business Banking for 2020. [Source: Greenwich Associates]

Culture, meet bottom line.

This latest research validates many of our long-held beliefs. That doing the right thing for clients and associates is good for business. That client satisfaction and ease of doing business is always a winning strategy. That strong relationships built on trust are paramount. That people matter and are worth the investment of time and money. That “culture eats strategy for lunch.”

It’s how we’ve always done business, indeed what we were founded and designed to do. We never needed concrete proof because we believe it in our hearts and see it with our own eyes. But it’s nice to be in a position to prove it to the rest of the world.