Banking in the Ninth

The Merits of Documentation: From the Viewpoint of the Supervisee

Ninth District Highlights - November 2012

Ron J. Feldman - Senior Vice President

Published November 30, 2012  |  November 2012 issue

I typically interact with depositories as a supervisor. Documentation and the requests for more documentation often play a central role in those interactions; supervisors typically ask depositories to review current documentation of policies and practices. Changes requested by supervisors often work their way through alterations to current documentation or creation of new documents. These requests may lead bankers at times to wonder if the benefits from documentation have been oversold.

I know the feeling. I often find myself on the other side of the proverbial desk when it comes to documentation. Federal Reserve Banks act on behalf of the Board of Governors of the Federal Reserve System (Board). The Board delegates its supervisory authorities to Reserve Banks. Naturally, the Board wants to ensure that Reserve Banks operate efficiently, effectively and with integrity. Requests from the Board to check current documentation of our policies, procedures, output, etc. and to recommend additional documentation are commonplace.

This experience leads me to conclude that, on balance, documentation of what we are doing and what depositories are doing makes sense; the benefits seem real and important. What specific benefits do I see? Three closely related items come to mind.

Getting on the same page. Employees of an organization, particularly a small one, often have the same understanding of how things work even if communication of policy and process is informal. But this is not always the case. Common, informal knowledge can sometimes prove fleeting. We have seen banks suffer when a single loan officer or a single branch did not fully understand expected practices, in part, because what was expected was not written down. Our supervisory efforts have also benefited from moving to more formal communication of what everyone should know already.

Checking to a standard. All employees and organizations deserve feedback on their performance. Such feedback makes it possible for organizations and their employees to improve. Providing effective feedback requires an understanding of the expectations of the organization beforehand. Writing it down—in the form of polices or procedures, for example—seems the fair way to set an evaluation baseline for employees. The cliché that one must measure to manage seems particularly apt for documentation that reflects concrete and quantitative standards (where appropriate).

Writing as a discipline on thinking. I have fallen prey to the following conceit too many times: I strongly believe I have a good idea about how to improve a process or create something new, only to find that writing down said improvement or new product idea proves me wrong. The very process of writing requires that we confront weaknesses in our thinking that we had heretofore blocked out. This forces me, and I think others as well, to either abandon an inadequately developed proposal or improve an idea. Creating a contingency plan may sound like an exercise in documentation alone. In fact, it can solidify an organization’s thinking on how to manage in the face of turmoil.

Of course, not all documentation is created equally. Sometimes it feels like I have to document something just so others can make sure that the document exists. This may not seem particularly beneficial at first blush, even if I understand why the reviewer cannot rely on my word alone. But with the perspective of time and distance—and as I write this down—I conclude that the low-benefit documentation effort is the exception not the rule.

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