Mangrove Community Bank Enterprise Ltd
LEADERSHIP THROUGH RURAL SOCIAL ENTERPRISE
The case study: Mangrove Community Bank Enterprise Ltd.
Mangrove Community Bank Enterprise Ltd. operates the Saltmarsh and Gardenville[1] Community Bank branches of Bendigo Bank and the Intertidal Inlet, Swampy Marsh and Chambers[2] franchise branches of Bendigo Bank (Bendigo Bank 2017b) which serve quite diverse communities stretching across the Swampy Marsh swamp at the top of Westernport Bay and further inland to the south-eastern suburbs of Melbourne.
The branches operated by Mangrove Community Bank Enterprise Ltd. are now the only providers of face-to-face financial services in each of the five towns in which they are located ([Mangrove Community Bank Enterprise Limited] 2016).
It was in the tiny town of Saltmarsh that the story of Mangrove Community Bank Enterprise Ltd. began. Located 85 kilometres south-east of Melbourne, Saltmarsh became an agricultural centre under European settlement (Gunson 1968). However, the town’s significance waxed and waned from the end of the nineteenth century (Gunson 1968). By the time the end of the twentieth century was approaching, the Great Southern Railway which had been servicing the town for over one hundred years had ceased to operate. In addition to this, Telstra, the local council and state Rivers and Waters all closed their depots in the town (Ries 2002). As with other small towns in regional areas at the time, the banks started to leave too. The Commonwealth Bank closed its branch altogether in 1997 while the ANZ Bank downgraded its services to part-time (Bendigo Bank 2017b; House of Representatives Standing Committee on Economics Finance and Public Administration 1998; Ries 2002). In total, ninety jobs were lost and, in a town of only nine hundred people (Ries 2002), this had a significant impact (Bendigo Bank 2017b). One local business person was quoted as saying that Saltmarsh was ‘a town suffering from deep depression’ at the time (Ries 2002). ‘There were empty shops all down the main street, businesses were closing, the town looked dirty and people's self-esteem was non-existent’ (Ries 2002).
Community leadership in action: Doing good through rural social enterprise
In response to the downturn in the town’s fortunes, a group of residents joined forces to implement a Street Life program in 1997 ([Saltmarsh] Township Committee 2017). Following the success of the program, they were encouraged by their local council to form a Township Committee ([Saltmarsh] Township Committee 2017). This Committee, made up of representatives of clubs, groups, societies, associations as well as residents, worked to turn the town around ([Saltmarsh] Township Committee 2017). The primary initiative they pursued was a partnership with Bendigo Bank to open a Community Bank branch in Saltmarsh (Ries 2002). By 1998, the community had formed a proprietary limited company to operate the Saltmarsh Bendigo Bank Community Bank branch having raised the necessary start-up capital of $300,000 in just a single night (Bendigo Bank 2017b; Ries 2002). The Saltmarsh Community Bank branch of Bendigo Bank opened on 28 October 1998 (Bendigo Bank 2017b) and was only the third Community Bank branch opened as part of the Bendigo Bank Community Bank initiative (Mayne 2008), placing it in the role of pioneer. In 2000, Mangrove Community Bank Enterprise Ltd. opened a second Bendigo Bank Community Bank branch in Gardenville, the first Community Bank enterprise to do so. The following year, Mangrove Community Bank Enterprise Ltd. expanded into Swampy Marsh with the opening of an agency, another first. Again pioneering, Mangrove Community Bank Enterprise Ltd. established a franchise branch in Chambers in 2004. In the same year, the Community Bank enterprise became the first to list on the Bendigo Stock Exchange (Strategy Workshop Notes 2011). Mangrove Community Bank Enterprise Ltd.’s fifth and (at this stage) final branch was opened in the small town of Intertidal Inlet in 2008.
Social and community benefit
Mangrove Community Bank Enterprise Ltd. was not only a pioneer in growing a Community Bank enterprise but also in the generation of social and economic benefit within its local area. One early initiative undertaken by the Community Bank enterprise was to establish a local business centre. According to Ries (2002), Mangrove Community Bank Enterprise Ltd. ‘chose to develop a suite of low-cost serviced offices next to the bank and to offer them as a lure to professionals and service providers’. So, where the town was ‘bereft of professional service providers in 1997, [by 2002, it] boast[ed] an accountant, a town planner, a surveyor and a branch office of the local council’ (Ries 2002). In 2015, one local resident proudly proclaimed that, ‘today the town looks good and is good. Residents here walk tall and proud, so happy to live here’ in a speech to the local Rotary Club (Speech Notes 2015). In recognition of the variety of ways in which they had strengthened their district, Mangrove Community Bank Enterprise Ltd. became only the second Community Bank enterprise to be inducted into the Bendigo Bank Community Bank Hall of Fame in 2008 (Bendigo Bank 2017a).
Having returned face-to-face financial services to Saltmarsh as well as brought them to four additional communities, Mangrove Community Bank Enterprise Ltd. holds banking business totaling $527 million (Mangrove Community Bank Enterprise Ltd. Management Reports Combined June 2017). This enabled it to return over $700,000 to community organisations in the 2016-17 financial year (Mangrove Community Bank Enterprise Ltd. Management Reports Combined June 2017). The Community Bank enterprise has also started to take on bigger initiatives intended to provide a benefit to the communities it feeds into. Its ‘signature community project’ is the Saltmarsh Community Recreation Facility ([Mangrove Community Bank Enterprise Limited] 2016). This saw Mangrove Community Bank Enterprise Ltd. purchase 87 acres of land in Saltmarsh in 2014 before gifting it to the local council for development as a location for both community and sporting activities ([Mangrove Community Bank Enterprise Limited] 2014). This initiative is representative of Mangrove Community Bank Enterprise Ltd.’s mission ‘to positively influence the development of the social and economic capital of communities through investing in initiatives that will improve the available services, resources and infrastructure in those communities’ (Strategy Workshop Notes 2011).
Mangrove Community Bank Enterprise Ltd. has acknowledged the challenges associated with the global banking environment in recent years ([Mangrove Community Bank Enterprise Limited] 2015). However, in 2017 Mangrove Community Bank Enterprise Ltd. was positively affected by a change to the revenue sharing arrangement with Bendigo Bank. In fact, due to the mix of products held by its Intertidal Inlet branch together with other cost-saving measures, the branch generated a profit for the first time in 2017, eight years after it opened (Strategy Workshop Notes 2011).
The structure of this Community Bank enterprise is an executive officer reporting to a board of directors. The executive officer in this Community Bank enterprise, however, has no direct reports. The managers of the Community Bank enterprise’s five branches report into a Bendigo Bank regional manager and rarely to the board. The board consists of ten non-executive directors. Similar to in the Community Bank enterprise’s early days, these directors are primarily people deeply entrenched in the community local to the town where its first bank branch was opened and who wear a number of hats representing various clubs, groups, societies and associations. In terms of expertise, many are business owners. The current executive officer and her predecessor both have backgrounds in banking. Two of the ten non-executive directors are female and four of the ten are over seventy. Most have been recruited through existing non-executive directors’ networks, with a number of recent appointments serving a period of ‘apprenticeship’ by observing board meetings for a year or more before being officially invited to join.
Leadership Challenge 1: Should we address lagging profits or not?
In 2008, Mangrove Community Bank Enterprise Ltd. opened a bank branch in a small town called Intertidal Inlet approximately halfway between the towns where the Community Bank enterprise’s first and second branches were located. According to the non-executive directors present at the time, they knew the branch would struggle to make profit but decided to respond to that community’s desire for a bank branch rather than be faced with Bendigo Bank working with the community to establish another Community Bank enterprise operating a branch in the heart of their footprint.
As predicted, the Intertidal Inlet branch struggled to make a profit in its first decade. This was amplified by the onset of the Global Financial Crisis. One non-executive director estimated the loss being made by the Intertidal Inlet branch to be $50,000 per annum at its worst.
The first port of call was to consider closing the branch altogether. One nonexecutive director said:
“from a company point of view and from a shareholder's point of view, we would be remiss not to say well let's close the place…Well that's not helping the community at all…we went there to help the community” (Mangrove Participant 10).
Another non-executive director reported that the focus then became:
“…how are we going to get [the Intertidal Inlet branch] to break even? Don't worry about getting it - it doesn’t need to make a million dollars. How are we going to get it to break even and potentially just claw back some of what it cost us?” (Mangrove Participant 4).
The chair of the Finance and Budget Committee explained that:
“Generally, we don’t control what profit we make on what we do. We can control our expenses to a certain degree which helps our profit” (Observation Notes August 2017 directors’ meeting).
Interviewees reported that at a regular directors’ meeting, the executive officer of the Community Bank enterprise at the time presented the idea of closing the branch on Saturday mornings to reduce expenses, explaining that this was happening elsewhere in the Community Bank network. Discussion regarding the effects of such a strategic response on the Community Bank enterprise’s stakeholders then ensued. This is exemplified by the following discussion that took place in June 2017 with regards to Saturday morning trading at another of Mangrove Community Bank Enterprise Ltd.’s bank branches following a brief review of in-branch activity.
During the exchange, non-executive directors made the point that if a branch was in profit, customer needs should have priority, saying:
“Saturday morning is one of those things that was a point of difference with other banks … Do you want to go down the road of…profitability over customer service and those sorts of things?” (Observation Notes June 2017 directors’ meeting).
“You don’t want to lose money. Okay? If it’s losing money, obviously, there’s no option...But if it’s breaking even or making a small profit, right, for customer relationship I think we should run with it” (Observation Notes June 2017 directors’ meeting).
“When we opened…the Community Bank rule was the extended service to customers and communities…If you’re not losing money then, you never know, somebody might walk in with several million dollars one Saturday morning” (Observation Notes June 2017 directors’ meeting).
Some non-executive directors felt that it was not too much of an adjustment for customers to make in conducting their banking on another day. One said:
“I think most of the traders and the townspeople…can just organise stuff Friday and Monday, it’s not life threatening” (Observation Notes June 2017 directors’ meeting).
The Bendigo Bank Regional Manager present agreed, saying:
“Most of those transactions can be done on Friday or a Monday…it’s not as though they wouldn’t be done at all. It’s more a question of the relevance of Saturday as far as the convenience for customers goes” (Observation Notes June 2017 directors’ meeting).
The individual who had initially suggested closing the bank branch on Saturday mornings, then presented the staff perspective:
“The staff…feel very demoralised about the worth of their activities on a Saturday morning because all they are doing is deposits and withdrawals and nothing else and they could be done at other times” (Observation Notes June 2017 directors’ meeting).
Ultimately, in this leadership challenge, Mangrove Community Bank Enterprise Ltd. chose to close the Intertidal Inlet branch on Saturday mornings in order to ensure continued profit to direct to local community contributions.
Alternative banking arrangements were negotiated with affected customers while staff who wanted to work on Saturday mornings were given the opportunity to do so at other bank branches operated by Mangrove Community Bank Enterprise Ltd. The chair of Mangrove Community Bank Enterprise Ltd.’s Finance and Budget Committee reported that the strategic response had resulted in a saving to the Community Bank enterprise of approximately $15,000 per annum. This saving, combined with the positive impact of a change to the revenue sharing arrangement with Bendigo Bank, enabled the branch to make a profit for the first time in 2017. The Intertidal Inlet resident on the Board reported that “it really didn't have any side-effects on the town. It's just you have to be a bit more organised” (Mangrove
Participant 5).
Leadership Challenge 2: Should we pursue an initiative that may not have a direct benefit for the local community or not?
By way of a one-page email on 18 April 2017, Bendigo Bank offered Victorian Community Bank enterprises the opportunity to contribute to Cotton On Group’s Unite Project, a state-wide initiative to tackle homelessness which had associated branding opportunities (Board Papers May 2017; Board Papers 1 May 2017). Community Bank enterprises could opt in to support the project by selling bottled water for $2 per bottle through their branches. The water, its delivery and the co-branded fridges to house it were all offered at no cost to the Community Bank enterprise (Board Papers May 2017; Board Papers 1 May 2017). In the email, Bendigo Bank requested that Community Bank enterprises notify of their decision by 28 April 2017 (Board Papers May 2017; Board Papers 1 May 2017). The initiative was included under ‘Correspondence In’ on the agenda of a regular directors’ meetings held at Mangrove Community Bank Enterprise Ltd. in May 2017 with associated information included in board papers distributed prior.
At the Mangrove Community Bank Enterprise Ltd. directors’ meeting, the executive officer took the floor when the agenda item relating to the Unite Project by Cotton On Group came up, presenting a brief overview of the opportunity before concluding by saying, “whether it’s something that benefits our area or not, it doesn’t matter. It’s about the bigger picture” (Observation Notes May 2017 directors’ meeting). Non-executive directors then raised issues regarding the intricacies of rolling out the initiative including whether there was sufficient space in the branches to house a fridge near a power source to ensure there weren’t “leads trailing across the floor” and how to make sure people were “honest” in paying for their water (Observation Notes May 2017 directors’ meeting). One individual extended upon the concept of selling bottled water through Community Bank branches by suggesting selling slabs of bottled water to community groups as well. The issue was quickly settled with the chair saying, “So we agree? Let’s move forward” (Observation Notes May 2017 directors’ meeting).
The minutes of the directors’ meeting note:
‘The Unite Project is an initiative that was pitched to the [Community Bank] Network at the 2017 VIC Metro Conference in Torquay. It involves the installation of a small fridge with bottled water and an honest (sic) box. All raised funds go towards supporting Youth Homelessness. There is no cost to the [Community Bank enterprises] and they are restocked by the Unite Project. We have not received any further information around how they are going to proceed with installation. Further information to come once provided’ (Minutes May 2017 directors’ meeting).
According to Bendigo Bank, 59 branches of the 200-plus in Victoria came together to support the Unite Project by Cotton On Group by hosting a fridge in their branch (Board Papers September 2017).
Leadership Challenge 3: Should we pursue banking business or brand visibility in return for community contributions or not?
After its first decade of operation, the non-executive directors of Mangrove Community Bank Enterprise Ltd. concluded that brand visibility in return for the local community contributions made by the Community Bank enterprise was important. At a strategy workshop held in 2008, the non-executive directors, facilitated by an external consultant, considered how they might maximise brand visibility from their local community contributions. According to this interviewee, the inaugural chair of the Community Bank enterprise – who was heavily embedded in the Community Bank enterprise, Community bank network and local community – conceived and presented the idea of a ‘signature community project’ and the idea gained traction:
“[The chair] had this idea and went, ‘What do you guys think?’ and around the table it was nods of heads and ‘Okay, how do we go about…this?” (Mangrove Participant 2).
This interviewee went on to describe the inaugural chair’s general approach: “[He] will chuck an idea on the table and just sit back” (Mangrove Participant 2).
At the next strategy workshop in 2011, an executive officer who had been employed in the interim (from among the ranks of existing non-executive directors) was tasked with doing the preliminary work to make the project a reality (Strategy Workshop Notes 2011). Interviewees indicate that throughout this process, the inaugural chair (by that stage retired from the position of chair yet remaining a non-executive director) was crucial. He was described by one of his contemporaries as “the prime driver” (Mangrove Participant 3) of the ‘signature community project’. Records indicate that he was a member of the Community Bank enterprise’s Community Recreation Project Committee and the local council’s Community Sporting Precinct Masterplan Steering Group (Minutes Steering Group meeting). By 2014, a strategic response had begun to be executed; the Community Bank enterprise had committed funds to a community recreation facility housing community groups and sporting clubs and leveraged their commitment to bring local council, Rotary and federal and state government on board (Community Snapshot PowerPoint 2014). Mangrove Community Bank Enterprise Ltd.’s current chair spoke at interview about his belief that the initiative was an investment in brand presence:
“We recently invested a million dollars, well it ended up being about three million dollars into a sporting precinct in [Saltmarsh]... Now that opens up a whole new area for us of one, investing in our brand, investing in our community” (Mangrove Participant 1).
The execution of the strategic response was not straightforward, however. Some non-executive directors were unconvinced about the intended location of the community recreation facility. This non-executive director reported:
“some people [local residents] are a bit narky about it and I suppose some of our board members were concerned” (Mangrove Participant
11).
Despite these rumblings of discontent, the facility was completed in late 2018.
