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Tim Watts

"Bank Goes to School for Elixir of Youth"

BRW

February 8, 1999

Like most parents of teenagers joining the workforce, Barry Fitzpatrick knows about the problems of youth unemployment. However, as the chief executive of Adelaide Bank with its 600 staff, Fitzpatrick is in a position to do something about the problem. 

In mid-1996 he committed the bank to providing 200 full-time jobs for high-school leavers over four years, and its Youth Employment Program has already taken on 170. Previously sceptical middle managers are now singing the praises of their youthful staff and frequently requesting additions to their teenage teams. The original youth employees have graduated to more senior positions and in some cases are managing their new young colleagues. Starting salaries are about $22,000.

"In this era of bank bashing, banks need a conscience and to take some social responsibility," Fitzpatrick says. "We have traditionally employed lots of young people in those first-rung-of-the-ladder jobs, but technology has done away with most of the positions. Unless we think outside the square, that will continue." There were 67 Adelaide Bank branches five years ago; now there are 30.

"Initially we thought 'What can we do? They have no experience.' But we had the personnel department look at the organisation and it found that there were actually lots of jobs available for young people, but they were part of other people's jobs - two hours a week there, five hours a week here. This is mainly in the branches, but also in marketing, collating information, in the money market department and answering basic phone inquiries."

Fitzpatrick says the biggest hurdle was the stereotyped view of youth that was circulating among existing staff. "They were thought to be undisciplined, with long hair and earrings; they don't work hard - all that sort of stuff. It needed a bit of top-down management to get past that, but once we did, support for the program grew. Perceptions changed, they were creative, hard working, enthusiastic and fun. It changes the environment in which we work. We've got an organisation now that is geared for the future."

The program has changed the attitudes of many of the young people involved. At the start of the program in 1996, 10% of new employees said they planned to do further study. Now more than 50% are completing or contemplating a university or Tafe course.

Fitzpatrick's decision to pursue a youth employment policy has not harmed the profit figures. Indeed, he believes that the injection of teenage energy is an important factor in the bank's impressive recent financial performance. Profit rose 7% to $29.5 million in 1997-98, the 10th consecutive annual increase. Lending approvals totalled $1.79 billion this year, up $560 million. Thirty percent of loans are granted to customers outside South Australia, yet only four years ago the bank was purely a state operation.

Adelaide Bank is developing a reputation for unusual growth strategies. During the 1980s it invested in retirement-village management operations, bearing in mind the ageing population. Fifteen years on, Fitzpatrick claims that the bank is the largest private-sector operator of retirement villages in Australia, with 4500 residents in more than 50 communities. He says the baby-boomer generation will revolutionise the way retirement accommodation is developed, with greater demand for high-quality facilities and premium service.

The retirement village division contributes 5% of group profit, and Fitzpatrick believes the figure could double in the medium term.

Adelaide Bank embarked on a saturation advertising campaign in the financial press before Christmas to promote its new Cash Management Trust. Offering what is currently the highest rate in the market (4.35%), the trust offers high accessibility at 4500 Australia Post outlets across the country, a cheque book and credit-card facilities

Fitzpatrick says: "You have to stay close to your customers and analyse what services they are using and what they want. There was a clear demand for this kind of product."

Fitzpatrick is optimistic about the company's prospects, and its recent sharemarket performance justifies his view. Adelaide Bank shares have risen 24% in the past six months to about $6.50.

He says it is a myth that economies of scale are only available to very largest organisations; US research shows that economies of scale begin to disappear at a lower level than most realise - around $30 billion in assets. "We are at $5 billion at the moment and our cost-to-income figure is 60%, one of the best in Australia," he says. "There is no point being a 'me too' bank. You have to find your niche and do it well."