Good truly is the enemy of great. Good community-based financialinstitutions dot the landscape. Sometimes their position is suchbecause they cannot overcome certain regulatory hurdles. Sometimesit is because they are simply not motivated to be any better thangood. Other times it is a lack of good structure, strongcompetency, and fruitful stratification and domination of amarket.

A myriad of other reasons can result in goodness and notgreatness. Competitive advantage is somehow lost in today's roughand tumble, marginalized financial services market. It can,however, be achieved through optimal determination and execution ofa sound, meaningful organizational structure.

Financial institutions have long been hindered by their stoic,compartmentalized management structures. It is time to think aboutorganizational design and structure through a new set of lenseswhile keeping in mind both internal and external operations.

The first item of business is the fundamental apparatus, orbasis, of our structure. Michael Porter, in his book CompetitiveAdvantage, proffered the Value Chain. The Value Chain, asrepresented in the chart, suggests there are two major activitieswithin the firm, primary and supporting. The primary activitiesbegin with Inbound Logistics and end with Service. The otheractivities are supporting in nature. They support the entireenterprise.

Due to its highly-regulated environment, the modern financialinstitution differs from most firms studied by Porter. Because ofthis, it is important to consider a third key activity: primary,supporting, and financial, also referred to as “safety andsoundness”. Of utmost importance is that no primary activities aremore or less important than supporting or financial activities.Competitive advantage can be created within all of those entitiesand organizational structure will drive it there.

The organizational structure recommended consists of four keyplayers:

Chief Operating Officer

The COO manages the Primary Activities in Porter's model. He orshe leads the sales and servicing components of the business.Within this set of activities fall the branches, lending,servicing, and other business units (insurance, investments, etc.).The COO, broadly speaking, is responsible for front-to-backmanagement of the member. Metrics such as member satisfaction,products-per-household, and deposits per branch are key elements ofthe COO dashboard, among others. The COO works in tandem with bothpeers, the CAO and CFO, to understand:

-What internal, support services will be required to enable theCOO team, and;

-The costs, revenue, and ultimately, net income byproduct/service.

By leading all the operations functions, the COO leads theeffort to bring together sales and service cultures as well ascredit and deposit cultures. With one individual accountable forthese various teams, the silo mentality begins to dissipate. Themember becomes the sole focus.

Chief Administrative Officer

This role is fairly new in the financial institution realm,particularly amongst smaller, community financial institutions. TheCAO is responsible for advancing the Supporting Activities andleads all those functions that support the enterprise:

-Marketing

-HR

-Training and development

-Facilities

-Technology

-Legal

This particular individual must be talented in not oneindividual area but also in leading a disparate group ofindividuals towards one goal: enabling those that enable themember! What a wonderful goal to have! This focus demands that theCAO and COO plan, execute, and work well together. Note:oftentimes, compliance can be integrated into the CAO's span ofcontrol. Several institutions have done so successfully. Havingcompliance outside of the COO's purview allows for better oversightand objectivity.

Ultimately, the CAO should be able to provide their services tothe enterprise for the best economic value as compared to thosesame functions outside of the organization. Otherwise, theinstitution should seriously consider outsourcing thesefunctions.

Chief Financial Officer

Safety and soundness–parameters a financial institution shouldnot neglect. The CFO ensures the institution stays within theparameters dictated by the respective regulatory body. This is anenterprise-wide function. However, because of the highly regulatednature of the industry, it is cast as a separate entity. Itsprimary role in assessing its two siblings is the following:

1. COO

a. Determine the net income generated from products and servicescurrently in place

b. Assess costs of facilities, overhead, and marketing forspecific products and services

2. CAO

a. Determine the tangible value added to the institutioncompared to other functions at similar firms

b. Determine if internal marketing, technology, and othersupport services are cheaper and better than going outside of thefirm

Also, the CFO will broadly interpret the institution's aggregatefinancial performance and seek ways to influence, and ultimately,improve performance.

Chief Executive Officer

Achieving marketplace effectiveness, or even dominance, in themodern economy can be a difficult road, at best. The CEO must leada group of professionals entrusted with supporting and accountingfor a sales and service effort that absolutely thrills members. Themodern, community financial institution CEO cannot be tied down bytoo many direct reports. He or she must be able to reach out to thecommunity and gain the best relationships that can be had for theinstitution. The foursome described is the beginning of moving theexecutive leadership team of the community financial institutionfrom good to great and beyond. Key projects and change managementinitiatives will also play a crucial role in making thishappen.