THE TEN MANAGEMENT PRINCIPLES OF SUPERCOMMUNITY BANKINGManaging SuperCommunity Banks is no different from managing other companies, with the exception of the strong need for decentralized decision making while maintaining controls and building the entrepreneurial spirit of the enterprise. Several tried and true management principles work especially well for the leadership of SuperCommunity banks.
Some may not be able to cope with change; some may be able to, but unwilling to try. Both will pay with their independence. Strategy needs to evolve, not become a straight-jacket etched in stone. Strategies should emanate both from the local markets and lines of business as well as from the holding company, to assure that the whole is greater than the sum of the parts. Senior management need not tell each business unit how to lay out the roadmap for success. They should do so by specifying their goals and making sure the people who work for them pursue those goals. Some of these goals will not optimize to each business unit or geography but rather to the entire enterprise, which is beyond the line of sight of each business unit. Managing is about defining and acting, not about waiting for the next plan, thinking and rethinking, but getting on with it, doing it. Don't assume that things will get better because time will heal what's wrong. Look reality in the eye about your competitive position, people, structure and products, then act decisively and quickly on that reality. It is not size that is crucial; it is creating a vision and making sure that everyone working with you shares that vision and knows how it will guide decisions down the road. As you plan, consider also the value of being one of the top three banks in your market. This has a lot of value to your shareholders and can contribute to your success. Because of this leadership position, you could apply more aggressive (that is, less costly to the bank) pricing. Because of your SyuperCommunity Banking size and strategy, you have the resources to bring new products and marketing into your competitive arena. At the same time, acting locally and customizing delivery to each market can protect and enhance your position. This is particularly handy when you operate in markets with different cost of funds structures, capitalizing upon that by generating more deposits from the low-cost-funds markets and lending more in the higher cost-of-funds markets. One specific bank I know yielded 12 basis points of additional spread through local market loan pricing, and another bank reached 50 basis points. Reap the benefits of your strategic position by building share in local markets (which could be as small as 1 ½ mile radius around your branch) and employing that power to your advantage. Fix, close or sell. Get rid of weakness. Ask yourself three questions: Take a good hard look at your business and don't be afraid to make some major changes to get your costs down, even within the SuperCommunity bank paradigm. Decide which of your employees and businesses you truly need and which you do not need. Don't dither. The quicker you make those decisions, the better off you, your people and your business will be. No one appreciates working with people who retired on the job. One of the most important values is candor, a rare value in many businesses. Create an atmosphere in which employees feel free, even encouraged, to speak out; where speaking out is rewarded and is considered a path to success. People should be able to speak up to somebody who can do something about their problem. They should be expected to engage in open dialog with their superiors, or possibly one level above that. Banks are known for command rigidity. When you speak to someone above your boss, you've violated corporate ethics. This chain needs to be broken. Expect your people to do more than simply work. They are capable of more. Harness their energy and talent. When managers and workers talk to one another, they are then able to explore ways of improving the day-to-day workings of the business. Managers do not have a direct line to God. The people who really know what's going on are the people in the trenches who touch the customer or bank operations every day, who execute local market management and corporate strategy. It is the brainpower of those people that needs to be unleashed. It should be a part of each manager's job to listen to employees' views and, when consistent input is provided, act on them. Listening to the people who actually do the work is the first step to learning and tapping into the creativity of the workforce. They might not have your line-of-sight, but their input is invaluable for you to make the right decisions. Four goals can be accomplished by breaking down the hierarchical barriers and open a company of mutual listening between management and staff. The term manager has often come to mean, in the banking industry, someone who controls rather than facilitates, complicates rather than simplifies, acts more like a governor than an accelerator. Some bank managers of the past were Dr. No, finding reasons why we can't do things. Leaders of successful banks inspire people with clear visions of how can be done better. My definition of a good manager is someone who helps their people be more successful, become better employees, more valuable in the marketplace, more productive for the shareholders, happier and better skilled. If a manager doesn't create value to their team, what is the purpose of their presence? Some managers muddle things up with pointless complexity and detail. They equate managing with sounding smarter than others. They inspire no one. Many of the traits traditionally associated with managing are not effective in truly empowered companies that are determined to create a competitive advantage inherent in their operations. Activities such as breathing down your people's neck, micro-managing, wasting time with trivial or non-actionable reports, hoarding information, are all destructive yet present in today's business world. Instead, what a leader should do is to provide an environment where people have the resources to grow and the educational tools to develop, so that they can make decisions that approximate the way senior management makes decisions. An organization with the right decision making discipline will be indifferent as to who makes the decisions. The end result should be the same. Successful banks are often managed by shareholders for shareholders. The people who run the business should have a keen sense of ownership so they will run it as entrepreneurs, not caretakers. The mindset should be for openness: raising issues, debating them, resolving them, rather than accepting compromise and non-performance. Strong managers rally people around their vision of what the business CAN become. They replace a bureaucratic style with an inspirational one, surrounding themselves with people who seek responsibility and the accountability that comes with it. Not everyone will be successful in such an environment. Some will wilt, which is okay. Others will shine and take the entire organization with them. Strong decentralized management doesn't imply chaos. It means less supervising, more delegating and letting each branch and unit develop plans that make sense for their marketplace, including decisions how, when and where to spend some marketing, hiring and advertising dollars. Large companies have advantages too. Size gives staying power through market cycles and geographic diversification beyond a single economy. Size allows for R&D and investments in products that sometimes take years before they pay back. It allows for a broad product line and for attracting specialists. SuperCommunity banks need to combine the best aspects of large and small banks, true to their core competitive advantage: out-local the nationals and out-national the locals. Capitalizing on their size and running lines of business in a focused way that can compete with large banks while thinking and acting like a small company in each market is a winning strategy. As you pursue the goal of improving efficiency, you will likely meet opposition. Arguments will be made by those who want to stave off cost cutting that seem logical, compelling and persuasive. When thinking about cost cutting or any business step that is unpleasant or painful and seems to go against the grain of your culture, keep your eye on the company's future. The past is no guide it's what got you into the situation in the first place. Be tenacious in your pursuit everyone will benefit from that experience. Calculate how many less dollars you'll need to make to achieve 10%+ EPS growth in 2007 if your efficiency ratio was 1% or 2% lower; it will give you heart and inspiration to find a way to make it happen. Before it's too late, act to speed up the way you make decisions, the way your bank functions. Ignite the company with passion, hunger, appetite for change and innovation, customer focus and, above all, the speed to see reality more clearly and act on it faster. Companies follow predictable life cycles. At their start, new businesses are invigorated by an urgency to rush to the marketplace and carve out their niche. In an environment like that, bureaucracy can't get a foothold in the same way that moss doesn't grow on a rolling stone. But as institutions grow and prosper, getting more comfortable, priorities begin to shift gradually from speed to control, from leading to managing, from winning to conserving what has been won, from serving the customer to serving the company. We begin to erect layers of management to smooth decision making and controls, and all that growth does slow us down. In the era of financial services innovation and intense competition, when start-up banks and investor capital are at a long-term high, if you're not fast you can't win. Others will be hungrier than you, more responsive to market changes and evolving customer needs. You must reduce the barriers created by years of turn and fiefdom building. If you have silos, you have a bunch of management layers that do not talk to each other. It's like going out in the cold with six sweaters on your body doesn't know what the temperature is. Speed is the best vaccine against lethargy. It is the simple ingredient that drives small companies, and its absence gets big companies in trouble. They grow so big that customers become a vague abstraction to too many of the company's employees, or, worse still, an annoyance. Remembering the customer and the shareholder at all times is what will assure your on-going success, and speed facilitates that top-of-mind attitude. As you read this, you will say: speed can get us in trouble; it can lower quality, disrupt our crucial command and control systems; interfere with regulatory compliance; cause serious organizational errors and mishaps. Of course we must not put on speed at the price of lowering quality, disregarding compliance etc. We must preserve all standards and at the same time figure out how to get faster. It is absolutely doable. We too often assume that the way we do things is inherent in the business, only to find out that others who didn't make that assumptions have sped up their operation. Just look back at mortgage underwriting, teller training and other internal processes that changed dramatically over recent years. In a bank, the drag comes from silos, the walls that grow between commercial and retail banking, between finance and marketing etc. These walls ultimately creep outside the company, creating barriers between the bank and its customers, or its vendor partners. Each piece of turf within the walls is defended by watchdogs within the fiefdom. Each of these walls is a speed bump that slows down the company. Knocking down the walls between functions, levels, locations and lines of business is so important to leveraging the entire company for every customer. Everyone must join in a common purpose, satisfying customers. Some banks have initiated cross-disciplinary team calling and customer sharing. This is an excellent example of an organizational commitment to break down the walls and optimize the entire company rather than each line of business or geography. |