Upcoming Forums:

BirdsEye View

My last article, "You Eat What You Kill", must have hit a nerve. I got over 100 reactions to it, all of them extremely positive. Below are some of the reactions and insights you shared with me, quoted with permission from their authors.

Mark Sanchioni of Webster Bank wrote: "As a former retailer with May Co., I am amazed at the lack of sales management expertise among senior executives in banking. One could argue that although we have worked hard at transforming our organizations, we do not tolerate sales people, the red-headed step-children that they are, in the board rooms. We love the numbers they put up for us, but they don't belong in leadership roles..as if they are full of fluff or sizzle with no true substance or financial acumen. This lack of representation at the executive level, agenda setting and strategic planning causes organizations to get distracted. No one is representing the sales force priorities". I agree this is an important comment, as I 've seen too many management teams sitting around the executive table with many more staff people relative to revenue generating executives. Such composition skews the thinking and decision making at the executive levels away from the heart of the organization's profitability.

Carol Franklin of National Penn said: " I think that we are too often worried about being politically correct and are afraid to rock the boat, or be considered "not nice". Does it always have to be smiles and happy days? This is a business, here to serve shareholders and customers, and sometimes we have to say and do things that aren't warm and cozy... We need to be able to ask hard questions and make hard decisions about our staff. We have a program ... called "Push The Coasters". The Coasters are the folks who show up but only do the minimum they need to do to get through each day. We can't afford to have coasters here...After technology and process efficiencies, all you are left with is your people. And if they are dogs, or coasters, you have a choice: keep them and deal with their inability to give 110% each day, or find a 110% contributor." Amen!

Mike Shryne of M&T wrote: "Any bank that has a clear, well defined sales culture and definitive sales processes tied to direct pay for performance... does, in fact, perform better than those without. My experience is that banks aren't well developed in this area. My experience is ... that 10% of the super performers you can't improve; stay out of their way, reward them and insure you keep them (your lions). 80% of the mid-performers is where you need to focus. These are the ones that, given a sales culture and strong sales process and tools to help them (automation) can lift their sales performance. This is the group that you want to focus your ... investment because a small percentage lift equates to huge revenue gain (your horses) or manage out quickly (your dogs). It is not harsh; it's reality - we earn or perish".

Ben Smith, Chairman of Macatawa Bank, said: " I am slowly changing my opinion on why bankers do so poorly, and I don't realy like my thought. I think bank management is still living in the old world and simply is not up to the task. I think they like their prestige in the communities, their pay, which is usually based upon asset size and has little to do with performance...I also think the way we are trying to encourage sales culture is divisive and is not effective. Yes, a few good performers get all the bonus and the rest wonder what's going on. It is not the individual that makes the team great; it's the heart. And today few work to develop that culture and level of commitment within the employees... We do hold our expectations far too low for some reason, and, of course, struggle to meet even those low goals. but institutions need to understand the dynamics of their organizations and be sure they are focused and committed... All parties in community banking - the communities, employees, customers and shareholders,have a common interest. They collectively can be an awesome force . but when you separate them and focus on each separately I think something is lost.

Smith continued, "I think management is an art; while you can force performance for a while with bonus, the only lasting solution is better management who is truly focused on all constituents and knows how to motivate the team, reward best performers (not necessarily with cash) and improve everyone's performance while holding the bar high". Well said!

Danny Buck of Sterling Bank quoted one of his favorite directors, John Buck: "The longer you nurture and care for a sick horse, the harder it is to shoot her when you finally have to". Buck continued, "Unless we face the realitiies that this is a tough business, then we will be bulldozed right under by the brokerage houses, insurance companies, credit unions, Wal-Mart and everyone else in our business".

Carol McMullen of Eastern Bank said: "In the trust and investment business one needs to build a sales culture from a very strong service culture... It is a delicate balance among building the business and building profit, and taking care of clients, but I believe that the best sales and service people can do that. it is very important that a sales culture support self starters and be a meritocracy, with upside potential available to those who produce. It is clear that underperformers hurt all businesses and should be weeded out, but sometimes it is about finding the right job for that person. "Fit" is important in clothes, culture and work environment. Not everyone is cut out for sales, but everyone can learn that we are all selling all the time. Some people have to ask for the sale, and others support the organization with quality work, upbeat attitude and great service, which permits the sales culture to work".

Dana Lorenson of MidFirst Bank expressed similar thoughts regarding fitting the right person into the right job and thereby giving everyone the best opportunity to succeed.

Scott Laycock of Mid State Bank offered, "At year end 2005 I rewarded my top performers with a "Rhino Award". The Rhinoceros is a symbol of success, a creature of immense strength, force and courage. Rhinos are know to charge through obstacles; make their own trails; by unstoppable; meet challenges head-on; be thick-skinned - arrows, spears and discouraging words cannot penetrate their tough hides; be leaders, not followers, and never back away from the competition". I heard that rhinos sometimes kill lions; I now understand why and how...

Bob Bailey of Bank of Williamsburg added, "unlike our financial services competitors, bankers get paid more if they move into management. Most lions have no desire for paperwork or human resource management, but if you want to increase your salary you must move into management. great strategy: take your top producers and move them to a desk." Well said! he offers an out-of-the-box idea: "I used to dream about a plan of letting a banker open a branch and get paid on the net income of the branch. How many takers would you have? Certainly all lions. So what if they make $200K a year!"

Another banker summarized the situation aptly: "Most banks really haven't achieved a true sales process and culture. Lots of lip service to it, but few have done it. It's hard to do. How many banks have sophisticated sales reporting and aggressive sales incentives? How many cap incentives (Anat: key question in my opinion; uncap and unleash the sales power of your stars). If you want a true sales culture, why on earth put caps on your incentives?" Good question!

And Nat Padget from Flag Bank concluded: "Until we as an industry accept responsibility for performance parameters and set and measure those, we are doomed to feed dogs".

My motto has been: "Kick butt (i.e. be uncatchably first, not just first), no foo foo (i.e. do so ethically and with the highest moral standards) and have fun". Our people deserve the opportunity to soar and achieve beyond their self expectations, and it is our job as managers to give them opportunities where the sky is truly the limit.

Anat

Leadership According To Sun Tsu

Sun Tsu lived over 2000 years ago. He wrote a book about the art of war, which proved eternal. While many of his comments have only military implications, his thoughts about leadership are still relevant today and are applicable to many industries, including banking.

Sun Tsu advocates seven tenets of leadership:

1. Morality. The general with the greater moral fortitude will prevail, says Sun Tsu. My translation is, the company with the stronger culture and the leaders that foster and preach that culture will survive, prosper and grow, as they engage their entire workforce by providing their employees with the context for decision making, Examples include Park National Bank, Synovus, Frost , Hancock Bank and others. Their culture might be quite different, but the strength of their moral fiber and the commitment to the culture are similar.

2. Leadership ability. Executives vary greatly in terms of their ability to lead. Many smart executives are brilliant, yet do not relate effectively to their teams and fail to inspire their people to follow them not only from their mind, but also from their hearts. Dick Evans of Frost Bank has said that successful companies engage their employees' both hearts and minds. Sun Tsu, history and I agree.

3. Core competencies. Sun Tsu talks about the advantages of heaven and earth that lie with the successful general. In corporate America, this tenet implies a specific strength that characterizes the company and its leadership. It could be a patent, superior technology, or outstanding service. When I say Volvo, bankers everywhere respond "safety", just as when I say Porsche, they say "performance and speed". Strong companies and leaders have that clear identity, that competitive advantage they can rely upon. In our industry, Citibank boasts ubiquity; it is everywhere. Northern Trust, Private Bank of Chicago and Boston Private all connote strength in wealth management. Citizens Business Bank of California is only about business, and that's their focus. Sun Tsu is right again: focus and building from a point of strength spell victory.

4. Discipline. This characteristic is often lacking in companies, including banks, which explains why so many plans fall short due to poor execution. The ultimate victory depends on the ability to turn carefully crafted plans into reality. It requires execution prowess which, in turn, depends on discipline. Consider banks that have enjoyed decades of strong efficiency ratios which did not impair growth, controls, asset quality and overall performance. These are banks like Valley National of NJ or First Banks of CO. Their success is due to a strong and unwavering discipline, which starts from the top down. When Jerry Lipkin, Valley's CEO, says, "I work half days, 7 to 7", this sets a tone that permeates the entire company. Discipline is both about setting the expectation for clear parameters of behavior and the actions that follow. It is typically integrated into the company's very fiber, and is difficult to explain to outsiders. A solid credit culture is a good example of such discipline which, in certain companies, is never (well, almost never) compromised. The result is consistency of performance which is enviable and is difficult to duplicate.

5. Trained workforce. We all want our bankers to leap tall building with a single bound, and they can do it – with the proper training. Unfortunately, training has become a crutch in many banks, an excuse for lack of performance. Nonetheless, Sun Tsu is right: you must equip your army for the war, and world-class training is the foundation for building world class culture and workforce.

6. Strength. Sun Tsu refers to pure strength as a sign of leadership and success. Strong leaders are easier to follow than weak ones. Strength does not imply close mindedness or rigidity; it stands for reliability, consistency and caring. Many of the legendary bank CEOs we know, from Jimmy Blanchard at Synovus and Dick Kovacevitch at Wells Fargo to less well known bankers such as Mike Stanford of First State Bank of NM and CO or Marty Adamas at Sky Financial exemplify that strength of personality and character without the negative "side effects" that often accompany it.

7. Consistency in both reward and punishment. This is one of the biggest Achiles' heels in our business. We zig-zag on people, strategy and discipline, thereby demoralizing the troops and reducing their effectiveness. Consistency is essential to success. To clarify, consistency doesn't mean sticking with a losing strategy, but it does mean rewarding and penalizing using the same parameters.

In addition to these seven traits, Sun Tsu offers other tips for leadership success:

• Managing by distribution of power. Sun Tsu says, "the control of a large force is the same in principle as the control of a few men. It is merely the question of dividing them into small numbers". This is one of the principles behind the concept of SuperCommunity Banking, which advocates managing the enterprise through the management of several smaller, more local banks. Companies that have done that have more then compensated for the inefficiencies inherent in the structure by enjoying greater revenue growth and reliability, such as Capitol Bancorp of MI, an extreme example.

• Speed is essential. "Rapidity is the essence of war". Nimble decision-making and the ability to tweak quickly and affect mid-course corrections are strengths enjoyed mostly by community banks that are unencumbered by bureaucracy and too many processes. Speed to market and quick product and process introduction have been important weapons for two thousand years, yet we continue to build processes that choke our system and slow us down. Especially in today's world, with its overwhelming pace of change, speed is key.

• Focus on your people. "Carefully study the well-being of your men", says Sun Tsu. After all, they are the backbone of your company. A leader without followers isn't a leader, and Sun Tsu reminds us that, even in conscripted armies, caring for your people is the first step to success.

• Shoot for invincibility. "The good fighters of old first put themselves beyond the possibility of defeat and then waited for the opportunity to defeat their enemy". This is big, hairy, audacious goal if I ever heard one, but it is the right goal. In my past, I defined success as being "uncatchably first". Winning isn't enough; winning by a huge margin is true victory that assures sustainable results. While I agree that invincibility is a tall order, becoming THE bank in your market isn't. Many banks name this as their stated goal, but too few actually plan and execute a strategy to achieve this noble state.

In sum, the fundamentals of warfare (and commerce) haven't changed much in centuries. The tactics have, as has the environment and terrain, but the secret to leadership and success remain true today as they have millennia ago: set your sights high, lead by strength, discipline and fairness, and don't forget that, without your team behind you, no matter how great you are, you will not win.

Note: Sun Tsu, "The Art of War", is available in book stores everywhere and on the web as well.