June 10, 2020
Common Sense

Over the past 10 years, Lakeland Financial Corp. has been 30% more profitable and 25% more efficient than the average bank. It also happens to approach technology investments in a unique way.

"How do we measure the profitability of customer relationships?" asked David Findlay when he joined the Warsaw, Indiana-based bank 20 years ago as its chief financial officer — today, he’s CEO.

"We use software that shows us product profitability, which leads to client profitability, which leads to organizational profitability," he was told.

"This is really cool," Findlay thought. "It’s like store-level profitability in the restaurant business" — he had just spent five years as the CFO of a large restaurant franchisee.

"Where are those reports?" Findlay asked.

"We don't have any," he was told.

"What do you mean?" he asked. "Didn’t we just buy the program?"

"No, we've had it for three years," he was told.

"So we invested in software three years ago for product, client, organizational and branch profitability, but we don't generate any reports from any of the four categories?" he asked.

"No, but we're getting close on product profitability," he was told.

That’s the moment Lakeland started thinking differently about how it assessed technology investments.

"Everybody loves to talk ROI and IRR on capital investments and technology investments," Findlay says. "To this day, we don't calculate an IRR or an ROI on individual capital investments. We say, 'What is it? Do we need it? Will it help us run the business better? And if we buy it today, can we implement it tomorrow?’"

"The first rule," Findlay continues, "is that we're never going to buy anything again that we don't implement immediately upon acquisition."

It’s a simple, streamlined, efficient approach to making technology investments that leverages common sense, not consultants.

Given the $5 billion bank’s performance over time, it’s hard to argue with Findlay’s logic.

John J. Maxfield / executive editor of Bank Director
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