Bancorp Hawaii Racing Toward a New Horizon in Banking
Today, outrigger canoe racing is still driven by Hawaiian tradition. On September 29, Bancorp Hawaii Inc. will once again host the 18th annual Bankoh Na Wahine O Ke Kai (Women of the Sea). Female paddlers from Australia, Canada, New Zealand and the United States, including Hawaii, will ride the swells. Smack the trade winds. Hold their form and pull their weight. All this, during a 41-mile, six-woman outrigger canoe race across the Kaiwi Channel from Molokai to Oahu. In October, the men will compete in Molokai Hoe (paddle)—also sponsored by Bancorp Hawaii Inc.
The boat crews offer a study in plotting courses and modern-day corporate teamwork. Says Duane D. Feekin, corporate vice president of human resources: "Everyone has to pull in the same direction to get to the same spot. If we pull at different speeds or directions, we'll go around in circles." Lest he forget, Feekin keeps a painting of an outrigger hanging on his office wall.
Indeed, the bow paddler sets the pace. The person in second or third position calls side-to-side paddling changes every eight to 14 strokes. The two middle paddlers supply the brawn. But it's the rear paddler who uses the instrument to read the waters and set the direction. Much like HR keeps Bancorp Hawaii Inc.'s (Bancorp) workforce of 5,000 on its steady course.
"The reason we back the race is that it's a way to perpetuate Hawaiian culture and demonstrate that team spirit," says Lawrence M. Johnson, chairman and CEO. "One of our special assets is the ability of our staff to deal with the unique cultures of Asia and the Pacific Islands [because of the employees' ethnic backgrounds]. This area is growing faster than any other place in the world."
Therefore, as the largest financial organization in the Pacific region, Bancorp and its principal subsidiary, Bank of Hawaii, have launched their strategic plan, Bancorp 2000. Johnson says it's the company's vision of where it wants to be in the future. "We're going to have to spend more time, effort and money in five areas—technology, information, asset mix (more consumer services), delivery channels and cultural change." For HR, it means establishing a performance-driven culture by stepping up training and development; improving employee benefits; and accelerating virtual customer service for a uniquely diverse population. Clearly, today's banking industry has changed from single transactions to multiple services. Customers do more than just deposit checks or withdraw cash. They expect sophisticated knowledge—in simple language—on mortgages, loans, college tuition, IRAs, insurance, trusts and mutual funds. And they want it 24 hours a day, be it by phone or at the nearest Longs Drugs. "We can no longer sit back and be order takers," says Jean Hamakawa, assistant director of HR. "[Our employees] have to be much more aggressive."
Follow the industry current.
To mainlanders, the Pacific Islands always seem so far away. Heck, one can barely name some of them—Tuvalu, Kiribati and Niue. But to those working in the middle of an ocean, such as Bancorp's employees, they're close enough to feel the ripple of the banking industry's consolidation. In fact, by decade's end, a final wave will create 10 or fewer dominant institutions in the 50 largest U.S. metropolitan markets, according to a study by First Manhattan Consulting Group in New York. For companies such as Bancorp, the scenario signals two things: Paddle quickly; and build upon your strengths in an era of mergers, acquisitions and increased demand for full financial services.
One of these assets is location. Bancorp Hawaii Inc. is a regional bank holding company with more than 130 locations spanning nearly 12,000 miles from Singapore to New York. Bancorp and its subsidiaries provide financial services to businesses, governments and individuals in Hawaii, the Asia-Pacific region and in selected markets on the U.S. mainland. Founded in August 1971, the holding company recorded net earnings of $121.8 million for 1995, up 3.5% from $117.7 million reported in 1994, according to its recent annual report.
"The industry has changed remarkably within the last 20 years. The inefficient aren't going to survive," says Feekin, a native of Iowa with 20 years of experience in human resources. "It's creating an awful lot of insecurity."
But as corporate vice president of HR, Feekin bets his oars on opportunities. Like the day a former colleague stepped into his office at Omaha National Bank, where Feekin served as assistant director of HR. The colleague said: "Duane, I've got a problem. The person who was to host a guest canceled out. Are you free?" Feekin says he could have given three answers: "I can't"; "I really can't"; or "Sure, I'm open." To keep a short story short, Feekin spent his lunch hour with one of Bancorp's global business consultants—a Norwegian who later passed Feekin's name on to Bancorp. That was 12 years ago. Aloha, Omaha.
When Feekin first arrived at Bancorp, he accepted the position of personnel manager of recruitment and staff development. At the time, it was a step down. Within a year, he was promoted to assistant director and then director of personnel. Around that time, Bancorp also began to view the personnel profession in terms of human resources, rather than administration. At the outset, Feekin was invited to make a presentation to the board of directors about how important human resources was to Bancorp. Instead of the planned 15 minutes, the board listened for 40. Ever since that day, HR has frequently been invited to sit in on board meetings—particularly when board member Fred E. Trotter makes a presentation on compensation benefits. Feekin also attends to ensure that Bancorp's acquisition activities transpire as smoothly as possible.
First and foremost, that requires a competent staff to integrate the new workforce and customer base with the established ones. "I've been here 12 years, and we've acquired seven companies. HR is trying to blend entirely different cultures into our organization. Our job is to go in and really exercise due diligence," says Feekin. Armed with an HR checklist he created for tracking acquisition activities, his staff works proactively to lay the foundation for the next merger. Key to that, however, was shifting from a support culture to an achievement culture in terms of employee performance. The more developed and trained the current staff, the easier it has become for HR to integrate the newly acquired population.
Train and certify one's crew.
As assistant director of HR, Ruthann Yamanaka frequently assesses Bancorp employees' development. In addition to overseeing equal employment opportunity functions, payroll and quality assurance, she manages staff training. "We've invested a lot in development because we believe learning is lifelong," she says. Like outrigger canoe racing, each individual must be placed in the right position. "The kind of people the bank needs today has changed over the years," she says. As banks move away from the brick-and-mortar model, Bancorp employees will have to provide fast, accurate, convenient and flexible service. They must also become more technical and knowledgeable—without losing the Aloha spirit, for which Hawaiians are well-known. Customers, she says, expect nothing short of a Bancorp representative from whom they can receive full service.
Consequently, HR comprises staff-development professionals who provide myriad courses and certification programs for the various business units. Unit supervisors help determine who needs what kind of training—based on one's job responsibilities, career goals and objectives. Once the audience and goals are established, HR staff develop and lead the classes themselves or find an external consultant to teach the necessary curriculum.
In line with Bancorp 2000's emphasis on technology, the company has begun to deploy 2,500 new PCs to employees in the state of Hawaii. The computers, she says, are being installed division by division as part of Desktop 2000. Eventually, they'll reach the outer branches. As the banking industry increasingly depends on relational databases and file sharing, employees will have to become skilled at several programs and systems. Among the technical curriculum: computer operations, word processing, spreadsheets, database creation, graphics, data manipulation, project design and reporting systems.
Current recipients must sign up for several computer courses within the year. Most courses are easy to get in, but tough to drop. For example, a no-show, late cancellation or incomplete in a class with a direct cost may result in the estimated participant cost being charged to that employee's cost center.
With all this technology, one might wonder if customer intimacy and banking service have become oxymoronic. Yes and no, says Johnson. Of course, nothing can replace face-to-face human interaction: A smile, a mahalo (thank you), a friendly interaction ("Howsit, Mr. Aoki?" "All right, brah.") But when an individual or business customer steps up to an ATM, there's only one thing that matters—did the transaction work? Did the window go up? Did an accurate statement come out? "We try to handle the human interaction personally or electronically," says Johnson. "That becomes our moment of truth."
Another moment of truth is when an employee completes the training courses. Bancorp offers its managers and employees special diplomas and certificate programs through the Bancorp Development Center. Staff are recognized for their milestones upon fulfilling all the required courses and electives. But the participants must have completed all courses within a five-year period and received a passing grade. Bancorp offers diplomas in three areas: Leadership 2000, General Management and Quality. It also offers certificates in four areas: Leadership Development, Management Foundations, Direct Sales, and Quality Customer Service and Sales. The latter certificate is designed to enhance staff members' quality customer service and sales skills to external and internal customers. There are a minimum of nine courses and three electives required for this document.
If an employee also wants to explore other career paths, there's one place to go: the Career Resource Center, which is located on the 11th floor of Bancorp Tower in Honolulu. Well-stocked, the center is a joint venture of HR's Staff Development division and the bank's Information and Reference Center. What if employees want to improve some of their leadership skills? They can check out "Winnie-the-Pooh on Management." Using the characters and stories of A.A. Milne to illustrate such principles as the benefit of setting clear objectives, the need for accurate information and communication—time-honored advice is offered in a whimsical, relaxed style.
At Bancorp, training and development clearly is a top priority—and it's fun. But HR also recognizes employees perform better when their jobs are compensated by a flexible benefits package. Bancorp provides that, but with the outlook of tying compensation and benefits to results.
Keep pace with benefit trends.
Very often before a race, paddlers prepare their outrigger canoes by gently wet-sanding the hull of their boats. The thousands of little scratches hold molecules of water that diminish the canoe's friction as it travels through the ocean. Instead, it becomes like water sliding past water. Even if by the slightest amount, the canoe will move more quickly. Such is the advantage accrued from one single act. Similarly, by deciding to shift from defined benefits to defined contribution plans, Bancorp employees have become a more empowered crew. They're gliding more flexibly toward their retirement goals—and coming out ahead. Some earlier than expected.
Hamakawa, who is in charge of compensation and benefits, explains. Bancorp's shift toward a performance-oriented culture is part of positioning for the 21st century. "We began to look at how to appropriately reward people in a variable environment," she says. "As we expect staff to be more sales oriented, we need to reward that [behavior]." The move is integral to the Bancorp 2000 vision as a global leader in the Pacific Islands and the Pacific Rim. HR already provides a variety of pay throughout the company: overtime, incentive and commission, to name a few.
Moreover, division managers look to HR to establish competitive salaries and benefits that are appropriate for each geographical area. "We have to see what's unique in each place," she says. "That includes laws, customs, past practices, union activities, social activities—whatever is different."
As the business environment varies, so do expectations of Bancorp's employees. Hence, the company revised its retirement and profit-sharing plans as of January of this year. Not surprising, considering the changing employer-employee relationship overall in Corporate America. More and more, companies have moved away from traditional pension plans toward more flexible contribution plans. According to statistics from Access Research Inc.—a Windsor, Connecticut-based research and consulting firm specializing in retirement plan issues—the number of private-sector workers enrolled in defined contribution plans has surged from just 11 million in 1975 to 42.4 million in 1995. Clearly, employers such as Bancorp aren't only responding to cost control and simpler administration, but also employees' desire for flexibility, portability and accessibility.
Bancorp's previous retirement plan only took into account base pay. In fact, HR describes it as a dinosaur—first designed in 1947. Back then, employees were more likely to remain with the same company for most, if not all, of their careers. "That's the way it was in those days, you know. You'd come out of school, go to work and get your gold watch when you retired. Today, people need to move [to advance or remain employed]," says Hamakawa. For years, the majority of retirement plans were based on defined benefits, which were based on complicated formulas, such as length of employment, average pay over a specified number of months prior to retirement, and so forth. Auntie Leah could count on the money, but she didn't know how much it would be until she retired. And once she did, the amount was fixed.
Under the new program, retirement is based on total pay (base pay plus overtime, commission and other incentives). All of the benefits employees accrued up to December 31, 1995 were thereby frozen until retirement. However, employees were immediately vested in the current plan. Today, years of service are counted toward the five-year vesting requirement under the new program. Moreover, Bancorp contributes a minimum of 4% of an employee's total pay annually into a personal retirement account. When the employee retires, he or she can receive monthly retirement benefits or the entire value of his or her personal account in one payment.
HR went a step further. It also enhanced the retirement plan by offering a voluntary early retirement opportunity, explains Hamakawa. Bancorp's board of directors authorized a voluntary early retirement option for staff members who are 50 years of age or over and who have at least nine years of creditable service (years of service minus one). The voluntary early retirement benefits are calculated by adding five additional years to service and five years to age. "We pretended they were here five years longer and that they were five years older," she says. A bridge benefit of $250 a month also is included until age 65.
Duane D. Feekin,
Vice President of HR,
Bancorp Hawaii Inc.
In addition to the frozen benefits and the new retirement plan benefits, Bancorp revised the profit-sharing plan. Briefly, Bancorp's contributions formula has been enhanced, and the allocations are now based on total pay. Part of the profit-sharing program includes a 401(k) member savings plan. The bank provides a super match of $1.25 for each $1 an employee saves up to 2% of total pay. And employees can continue to contribute up to 7% of their total pay to the member savings plan.
According to Hamakawa, the retirement program has been received favorably. Of the 440 eligible employees (about 10% of the employee population), 75% opted to retire early. Excluding higher-paid executives, the average retiree is sailing away with lump sums between $60,000 to $140,000. Was the enhancement simply a way of getting rid of older employees? Not really. Given Hawaiians' reverence for family, or 'ohana, Bancorp wanted to treat its older employees with respect. "We wanted to provide an attractive way for our older employees to exit the company," she says. Bancorp hasn't filled most of their positions, Hamakawa adds. HR, therefore, plans to place each employee in better and different spots in the corporate canoe. "We have an opportunity to reposition ourselves and distribute employee talent differently," she says. That being secure, Bancorp also has provided its clients with state-of-the-art banking technology.
Hold steady on quality service.
Throughout their history, Polynesians viewed the ocean as their home—not as an adversary. Their canoes, their water and their history were considered as one. Likewise, Bancorp would like its customers to view its local bank as a friendly—even homey place to be. A familiar place established over a lifetime with excellent equipment, a safe environment and a tradition of accessible service.
In today's world, banking must be convenient. And it must be located anywhere. At a local Bancorp branch, an ATM, a supermarket—even in the comfort of one's home. It's what Hamakawa describes as their customers' preference for low-touch, high-tech or high-touch, low-tech service. Bancorp provides both.
For example, at Bank of Hawaii, the subsidiary introduced an innovative service for its merchant customers. The first of its kind in the nation, The Bankoh Business Service Center (BBSC) performs dual functions 24 hours a day: It's a depository that accepts merchant deposits and a change machine that dispenses strapped bills and rolled coins to merchants. "We felt we had been doing a good job for our consumers. Yet, merchants didn't have the same round-the-clock access to their funds," according to Bob Makahilahila, vice president and manager of Bank of Hawaii's ATM department.
A typical business center includes these features: a security monitor, security camera, depository, card lock, change dispensers, ATM, ATM safe and entrance. The first BBSC opened at an unobtrusive location at Aloha Tower Marketplace in October 1995. Negotiations are currently under way to expand the service to other shopping centers as well.
On the other end are nonmerchant customers like Auntie Leah, who still prefer the human touch. That's why Bancorp complements technology with the Aloha spirit and island tradition. It can be as generous as offering a pikake lei to a guest or as tasty as sharing a cream puff from Maui's Komoda Bakery.
In terms of honoring native culture, Bancorp has begun accepting checks for deposits or payments in the Hawaiian language. Employees are instructed to treat these transactions as they would any check written in English. Tellers at the Bank of Hawaii and First Federal branches (one of Bancorp's subsidiaries) are receiving translation guides to aid in reading the words and translating written amounts from Hawaiian to English. (For example, Kanakolukumawalu a me 29/100 kala simply means $38.29.) Therefore, staff members who are fluent in the Hawaiian language are being identified to help facilitate the process. The new policy recognizes the rich heritage of Bancorp's customers. "Because of the resurgence of Hawaiian culture, we've taken it to heart and done a lot to further the education," says Hamakawa. Adds Feekin: "Hawaii is indeed the role model when it comes to cultural awareness. This is just what's so absolutely refreshing about this environment." Language, he says, is just one more way the company hopes to bridge the past and present.
As Bancorp expands it reaches across the Pacific Islands and in the Pacific Rim, it also will rely less and less on expatriates, says Feekin. Part of HR's responsibility is to hire from the local market. And if need be, bring the new recruits to Honolulu for training. The sooner they're trained, the sooner they can return to their native islands.
In modern-day Hawaii, Bancorp is leading in swift canoes.
Personnel Journal, September 1996, Vol. 75, No. 9, pp. 28-36.