For years, financial advisors have talked about the wisdom of periodically reallocating assets to reflect an investor’s changing demographics and risk tolerance. That admonition gained fresh credence in 2008 as consumers, businesses and nonprofits - all holding a variety of investment instruments - starting seeing the first signs of a protracted recession.
While your own institution most likely reallocated some assets to avoid the changing currents of market turbulence, less attention may have been paid to your portfolio of community goodwill.
Community goodwill can be defined as the mix of external activities beyond bread-and-butter customer relations that adds to the belief that your financial institution brings significant value to the markets it serves. All the public beneficence in the world will not undo poor client relations, of course. But a solidly demonstrated commitment to the community - strategically realigned in these troubled times - may help reassure nervous customers and other key stakeholders that your institution is not only safe and sound, but also understands the real-life issues being confronted by your neighbors.
A number of variables may come into play when a financial institution seeks to reallocate its portfolio of community assets. For example, a bank that has accepted TARP funds - a potentially polarizing decision - may want to hold the line on additional grants or contributions as it demonstrates that it continues to engage in lending. Conversely, an institution down the street that has “fired” public sector clients - such as the Ohio bank that publicly abandoned a couple of school district accounts in July 2008 due to balance sheet concerns - had better have a public relations plan ready that reaffirms a robust, yet cost-effective commitment to the community.
Despite such variables, and with an ongoing commitment to safety, soundness, and superior customer relations as the foundation of all goodwill, a strategic reallocation of community assets helps keep any institution credible. For example:
* How long has your bank sponsored a stock market game in local classrooms? Given the very basic lessons that Americans are learning in today’s economy, is it time to reallocate those resources to a new program emphasizing saving, budgeting and the evils of predatory lending instead? Is it time to widen the reach of such programs if they’re targeted solely at lower-income families?
* How much is your institution paying for naming rights at the local stadium? You may not be accepting TARP funds, but you don’t have to be Citigroup to feel the heat from members of the public who believe that in this environment, other priorities should prevail. Are your customers especially team-loyal? Are you headquartered in a big college town? Can you truly justify your expenditure from a risk-versus-reward marketing perspective?
* Is the newly-passed federal stimulus package going to fund projects in your community? Is there a funding gap in the total cost of any project that your public financing unit or foundation can fill to make it a reality? While your decision should always be dictated by sound business decisions, you should also review the public relations value of assisting the public sector in tough times - an act that certainly assists in future business development.
* With municipal budgets in crisis, is there a local facility that needs emergency funding? What can your institution do creatively to address such a situation? In 2003, Western Reserve Bank of Medina, Ohio recruited key community leaders to launch the “Sink or Swim” campaign to keep a popular municipal pool operating during a budget shortfall. The bank sought reasonable donations from area residents and businesses, and the idea placed Western Reserve Bank front and center as a community leader in a broad based, family-friendly initiative that raised $45,000. The pool remained open all summer.
* How many nonprofits do you currently help underwrite? What is the average dollar amount? Should you eliminate wide disparities in giving in these challenging times so all your nonprofit stakeholders survive? Or should you strike a better balance between underwriting and the use of employee mentors to continue support while conserving bank funds? Answers will vary from market to market, but a reevaluation might be in order.
* Are your relations with community partners truly strategic, or just a one-way street? Have you considered more actively engaging community development advocates, builders, REALTORS© and others to join you in shaping and communicating positions on local, state and federal policy of mutual interest? Whether or not your institution has a political action committee, developing a stand-alone coalition of like-minded partners to share common beliefs in good times and bad may prove invaluable.
Transparency goes beyond stockholders
Whatever you decide regarding your mix of community allocations, it’s also a good idea to wrap them around a core financial message. The most pronounced recession in decades is inflicting a body blow on numerous balance sheets, and your community stakeholders - not just shareholders, customers and employees - want to know how well you’re doing. By placing community stakeholders on the same plane as your primary audiences, albeit with more succinct and telescoped financial messages, you’ll help dispel rumors, quell anxiety, and instill greater public confidence in your organization.
Once you have developed your strategic reallocation plan and set it within a financial framework, you may also wish to address the current set of public relations tactics (as opposed to strategies) that you employ to leverage your commitment. Some thoughts:
* If you make a habit of presenting single checks to grantees in one-off events, should you consider larger events with a bigger aggregate dollar amount and numerous participants to garner more substantial media coverage?
* Do you make it easy for community partners to access your materials (releases, key facts, event images, etc.) so they can utilize them for their own purposes while shining an additional spotlight on your good works?
* When projects are being funded as part of a public/private partnership, does it make sense to invite public officials to your funding announcement to boost stakeholder and media turnout while deepening important relationships?
* When publishing your annual Foundation Report, do you leverage goodwill by issuing a news release?
Like any smart investor who engages in portfolio reallocation, having your financial institution conduct a strategic reallocation of community programs is a wise practice. In today’s extraordinary market environment, where financial players are perceived as strong or weak and “good” or “bad” almost overnight, there should be a managerial imperative to ensure that your external commitments and communications are as relevant and as reassuring as they can be.
