Profs. Anjan V. Thakor, WashU Olin Business School, and Robert E. Quinn, Michigan Ross School of Business, draw on their research into the Bank of Bird-in-Hand in the United States to highlight how even a highly regulated institution can embrace authentic purpose and integrate it into its business model.

Authentic Purpose in Banking: The ultimate strategic advantage by Anjan V. Thakor and Robert E. Quinn. Related research: Ethics, Culture, and Higher Purpose in Banking: Post-Crisis Governance Developments, International Journal of Central Banking, December 2021.

Many Fortune 500 companies have an explicitly stated mission statement, but few have an authentic statement of higher purpose – one that transcends the typical pursuit of profit and prevents the emergence of a transactional culture where self-interest drives the culture. An authentic statement of higher purpose clarifies the organization’s mission and attracts people to commit to the common good. It serves as the guiding principle for every decision, breaking down silos and fostering a culture of unified, creative effort.

The key is authenticity. As we pointed out in our 2018 Harvard Business Review article, most attempts to create purpose-driven organizations fail because many executives cannot imagine themselves, or others, moving beyond a conventional, self-interested mindset to genuinely pursue the common good. Most “know” it is impossible. As one CEO candidly told us, “I do not want to create a statement of purpose, because I know we will not live it.” Unfortunately, hypocrisy is often assumed in professional life. We live in pretense, perpetuate it, and ultimately reap its consequences.

People work for many reasons, one of which is to make money. While money may bring a person’s body to work, it seldom brings their soul. In high-performing organizations, people feel a deep sense of meaning and passion for their work. These organizations typically have a higher purpose – not a PR statement or a productivity tactic, but a collective call to contribute to something greater. This purpose is a moral statement that everyone believes in and endorses, creating accountability that comes from within, not imposed from outside.

Since higher purpose transcends conventional thinking, pursuing it can be particularly challenging in organizations where control and compliance are paramount, such as highly regulated, deposit-insured banks. Following our 2018 HBR article, we set out to explore whether purpose-driven banks exist, and if so, how they balance business prudence with authentic purpose.

A little over a year ago, we were fortunate to find just such a bank and conduct an in-depth study, including on-site visits and interviews with executives, employees, customers, directors, and investors. The bank, called Bank of Bird-in-Hand, is the first FDIC-insured de novo bank to open in the U.S. after the 2007-09 financial crisis. Our research provided valuable insights into how even a highly regulated institution can embrace authentic purpose and integrate it into its business model. Here, we share some of what we learned.

Authentic Purpose in Banking: Background

The Bank of Bird-in-Hand was founded in December 2013 with 10 employees, becoming the first bank in the U.S. to gain a charter since 2010. It was established by a group of investors in the rural village of Bird-in-Hand, located in Lancaster County, Pennsylvania – a regional home to a significant Amish community. The bank’s purpose was clear from the start: to provide much-needed banking services to the underserved area, particularly to the Amish and Mennonite communities, who had limited access to financial services.

The bank received approval from the Federal Deposit Insurance Corporation (FDIC) on November 27, 2013, and launched with $17 million in equity capital provided by the initial investors. Although the bank is stockholder-owned, it is not publicly traded.

From its inception, the bank’s major investors and Board of Directors made a decisive commitment: they would not “cash out” by selling the bank to profit from their investment. Instead, the transcendent purpose of the bank—to provide financial services to an underbanked community – remained the focus. The bank’s first CEO, Brent Peters, stepped down on July 1, 2014, and was succeeded by Lori Maley, who served as acting CEO until November 2014, when Alan Dakey was appointed. After his retirement in March 2017, Ms. Maley was promoted to CEO, a role she holds today.

Since its founding, the bank has experienced impressive growth, with total assets reaching $1.363 billion, deposits totaling $1.089 billion, and shareholders’ equity amounting to $141.253 million by the end of 2023. Investors we interviewed expressed high satisfaction with their returns.

While it may sound overly complimentary, it’s important to highlight a few remarkable facts about the bank. First, the bank has experienced virtually no loan defaults, a testament not only to its credit risk management but also to the strength of its purpose-driven culture and its deep relationships with borrowers and the local community. Second, the customers we interviewed – including those at the bank’s annual customer appreciation picnic – were genuinely enthusiastic about the bank. Third, employee engagement and satisfaction were exceptionally high. One employee, recovering from cancer treatment, was advised to take more time off before returning to work, to which she responded, “Why? The bank is where my sunshine is!” Finally, bank regulators have expressed satisfaction with the bank’s operations, indicating that it has successfully balanced regulatory compliance and control with fostering a purpose-driven culture that empowers employees without stifling them.

What do we learn?

Rather than delving into the specifics of how the Bank of Bird-in-Hand has managed to be both authentically and successfully purpose-driven, we’ll highlight the three most important lessons we learned from studying the bank.

Lesson 1. Authentic, Higher Purpose Comes from an External Motivation, but The Channel through which it is Manifest is Internal.

The key to the success of Bank of Bird-in-Hand’s higher purpose pursuit is the impact its purpose has on the internal motivation of the bank’s employees. But alignment is key to having a positive motivational effect, so how do you align all employees with that purpose? What we learned from studying the Bank of Bird-in-Hand is that for an organization to truly live its purpose, employees must believe in it as passionately as the founders and senior leaders do. This may sound straightforward, but in practice, it’s a formidable challenge.

To achieve this alignment, several elements must be in place: employees must trust that their leaders genuinely believe in the purpose, so that when profit and purpose seem to conflict, the organization chooses purpose; the pursuit of purpose must inspire pride in employees, offering deep meaning in their work; and the purpose must transparently guide routine decision-making, shaping the organization’s culture. At the Bank of Bird-in-Hand, all these elements were present. So, even though the bank was motivated by the “external motivation” of serving an underbanked community, its success was driven by the internal commitment of its employees.

Lesson 2. Leading a Purpose-Driven Organization is Challenging Internally Because Authenticity of Purpose Conflicts with the Transactional Belief System

Given the growing evidence – both anecdotal and empirical – that purpose-driven organizations achieve positive economic outcomes, the obvious question is: why isn’t everyone following this model? The answer lies in the subtle conflict between purpose-driven leadership and the more common, control-oriented, transactional leadership style that delivers solid economic results for many companies.

In a purpose-driven organization, leaders don’t treat employees as mere factors of production, as standard microeconomic theory suggests. Instead, they see them as “creative geniuses” who must be respected and aligned, not controlled. Leaders in these organizations understand that their role is not to manage people, but to help them find their “why” – the deeper purpose that drives their energy and focus.

From there, the organization is built around these values. This requires placing recruitment at the forefront and making decisions that don’t threaten the culture. For example, the Bank of Bird-in-Hand has turned down numerous opportunities for rapid growth, always asking one critical question: “Can we do this while maintaining our approach to recruitment and our culture?” Few organizations can consistently operate with such a commitment to alignment.

Lesson 3. Internal Challenges in Pursuing Purpose are Magnified by Hidden Non-Believers.

Many organizations have leaders who publicly endorse the organization’s higher purpose but secretly don’t believe in it and may even engage in undetected sabotage. We’ve observed this problem in too many organizations, where managers are promoted not because they inspire others but because they excel at complying with directives or ingratiating themselves with higher-ups.

These leaders often find themselves in charge of employees who are more purpose-driven and sharp-witted than they are. Leading such employees is a task these managers often fumble. Worse, they may feel threatened by them. This dynamic can lead to a series of decisions that gradually extinguish the organization’s purpose. Fortunately, at the Bank of Bird-in-Hand, the leadership provided by Lori Maley and her team has avoided this pitfall, preserving the organization’s purpose and maintaining its authenticity.

Lesson 4: Because Bankers Cannot Believe in Higher Purpose, Higher Purpose is the Ultimate Strategic Advantage

Leaders cannot pursue what they cannot imagine. Purpose-driven banking is outside the transactional mindset that dominates global banking. Most readers of this paper will likely dismiss the idea, “knowing” that higher purpose cannot be implemented in modern banking.

In each interview, we asked whether the culture of the bank could be replicated in an area very different from Lancaster County, Pennsylvania, say South Chicago. Almost everyone doubted it. The two exceptions were Lori Maley and Bill O’Brien, the individuals most responsible for the success of Bank of Bird-in-Hand. Both acknowledged the challenges and the costs involved. They recognized that most people wouldn’t be willing to pay that price. Yet, both firmly believed that such a culture could be created in South Chicago – or anywhere else. The key differentiator is being an authentic leader fully committed to the common good of the bank.

Further details can be found in our case study and accompanying video (see Quinn, R., and A. Thakor, “Banking in Paradise: Bank of Bird-in-Hand”, WFA center for Finance and Accounting Case Study, August 2024).

Useful links:

• Link up with Profs. Thakor and Quinn on LinkedIn
• Read a related article: The Power of Purpose
• Discover Olin Business School
• Apply to study at Olin.

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