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Does Your Team Have What It Takes To Thrive In A New Era?

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In January of 2010 John Kim of Heidrick & Struggles wrote in a blog piece What bank leaders do you need post-crisis?:

There may be little agreement about precisely where we stand in terms of economic recovery generally or financial services recovery specifically, but one thing is certain. When the inevitable recovery gets into full swing the financial services firms that already have in place the skills and the teams to take advantage of it will far outdistance their competitors.

Now, more than two years later, the recovery picture is a little more clear, if not exactly in full swing. The rate of bank failures has been dramatically reduced but the long-predicted consolidation wave has so far been more of a gentle tide. As the economic recovery continues at an almost imperceptible pace– particularly jobs and housing prices– financial firms are challenged to find attractive avenues for revenue growth.

New regulations further complicate the picture, on everything from trading to lending to deposits, and there are still literally thousands of new rules to be written over the next few years.

So what kind of leadership do these challenges demand? I think Kim saw that pretty clearly too:

Before the economic meltdown, the top leaders of financial institutions often fell into one of two types. There was the charismatic personality who motivated, inspired or in some cases dictated through force of his own presence. And there was the hands-on, detail-oriented operator who drove performance through results and significant attention to detail.

Today’s leader needs to be a combination of both types. The operational skills and shrewd judgment of the detail-oriented leader will be needed to achieve focus, leverage strengths, work out bad assets, closely manage risk, and interact more closely with regulators and government. The strategic vision and inspirational ability of the charismatic leader will be needed to take the institution from strength to strength and into appropriate new areas, especially when the economy heats up again. 

About a year ago I gave a talk about the state of the banking industry and how its recovery was linked to the overall economic recovery. Someone in the audience asked how, seemingly, only a handful of banks were smart enough to avoid the ills that plagued so many competitors?

I replied that that was not the question, in my mind. The question was, why did so many firms forget thousands of years of history?

The banks who set themselves apart during the crisis stuck with principals tested over millenia. After all, banking is the second oldest profession in the world. You know, quaint notions like verifying borrowers’ recurring cash flow and insisting on a margin of safety on collateral values. These firms understood that lending was, at its core, a risk management activity (see my post on Why Bankers Need to Think Like Private Equity Investors).

So, how is your team prepared for this new era?

Again, from John Kim’s piece:

These teams will need to be able to make the right decisions rapidly…

They will also break complicated issues down to simple components. No matter how complex a market, a strategy, or other issue appears, the leadership team should be able to frame it in terms of banking fundamentals: liquidity, capital, credit risk, operational risk and cost control.

One of their toughest challenges will be to lead culture change. A renewed focus on core competencies and subsequent growth into adjacent areas will require a new culture, especially at institutions that sought to play across many areas.

Is your team prepared for the new era, or are they still fighting the last war?

What’s the Talent Density of Your Team?

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Even though some of the business decisions that Netflix management has made recently have not been well received, I still think that many of the firm’s cultural attributes are worth studying.

As Netflix is back in the news again with a new DVD plan, I thought of CEO Reed Hastings’ words in a 2009 slide presentation:

“The actual company values, as opposed to the nice-sounding  values, are shown by who gets rewarded, promoted, or let go.”

“Actual company values are the behaviors and skills that are valued in fellow employees”

The presentation goes on to describe in some detail the nine behaviors that are particularly valued by Netflix (Judgment, Communication, Impact, Curiosity, Innovation, Courage, Passion, Honesty and Selflessness); and details the firm’s uniquely demanding standards for high performance and other aspects of its culture.

But the part I found most interesting was the view that turns on its head the conventional wisdom that growing firms must add significant processes and procedures to deal with increasing complexity, simply because it’s “Time to grow up”.

Instead, Hastings sees the root cause as the decline of “talent density”, as the percentage of high performance employees typically falls with total employment growth. Exacerbating the problem, the increased focus on process actually drives more talent out of the company, as they feel stifled by the bureaucracy and process orientation.

The solution, Hastings says, is to increase talent density faster than business complexity.

” Avoid Chaos as you grow with Ever More High Performance People —

not with Rules”

Not that Hastings advocates absolute freedom from rules. In fact, he lays out two types of necessary rules– those around moral, ethical and legal issues, and those that prevent irrevocable disaster (it remains to be seen whether the public relations flap over the company’s price increases are irrevocable).

Financial firms operate in highly regulated environments, and the inherent financial leverage makes the cost of some errors unacceptable. This means a higher degree of process orientation and policy compliance than many industries, but I don’t think this negates the idea that financial firms should also focus on increasing their talent density.

Especially critical, in my view, is the concept that a company’s actual values are demonstrated by “who gets rewarded, promoted, or let go”.

While firms must reward results more than efforts, leaders have a responsibility to shape the culture of their firm by also celebrating and rewarding the skills and behaviors that led to those results, and sharing those to help improve others’ performance.

I have seen managers who act like hostages to data. “I have to give Joe the big sales award. He hit his numbers, even though he fell into that one big sale at the end of the year.”

Your incentive plans have to be driven by financial results, but if they force you to reward results while being blind to the requisite underlying skills and behaviors, you need to rewrite your plans.

Top performers want to be rewarded on results, but they also want a clear vision of how their skills and behaviors are expected to be applied to get those results.

It’s the leader’s job to set that vision and apply the rewards appropriately.

If you don’t, you will eventually help another firm increase its talent density. With your former talent.

What’s the talent density of your team?

Nine Reasons Managers Struggle

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Reposted from: Leading Blog: A Leadership Blog: Nine Reasons Managers Struggle.

I will have to check my network, it sounds like we may have worked with some of the same people…

If I could add a tenth reason, I would suggest:

They are on an endless quest for the ‘holy grail’. They spend an inordinate amount of time and energy seeking the magic strategy, business model, product, technology, employee, consultant, marketing campaign (or lately, social media strategy/campaign/expert) that possesses the missing secret sauce for success. Great managers execute, first and foremost– often with less than ideal capital, experience, staffing, etc. Not that managers shouldn’t seek to improve all of those things, but those efforts must not overtake the imperative to execute.

From the original post:

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Nine Reasons Managers Struggle.
Former CEO and president of Verison (sic) Wireless Denny Strigl explores nine specific behaviors that leaders do and don’t do to make the serious performer, marginal performers, or failures. In  “Managers, can you hear me now?”  he says it’s all about behavior.
  1. Managers Fail to Build Trust and Integrity. The three major qualities of trust are integrity, openness, and respect. Trust always begins with the manager. Do you say and do things that erode trust?
  2. They Have the Wrong Focus. Focus all your energy on achieving results. Allow nothing to distract you. As the manager, you are the force that keeps your team focused on results. Continually reinforce the Four Fundamentals– growing revenue, getting new customers, keeping existing customers, eliminating costs– and what’s important, unnecessary activities will always creep in. Do you feel you are wasting time, effort, and money by focusing on things that don’t matter in getting results?
  3. They Don’t Model or Build Accountability.  The best way to get people who work for you to be accountable is to show them that you are accountable. Do you have a tendency to blame others or look for excuses? Do you talk about accountability and reward it?
  4. They Fail to Consistently Reinforce What’s Important. Managers are the first to get bored with their message. The people who work for you perform their best when what you say is consistent and frequent. Do you have a core performance message that you constantly talk about with your employees?
  5. They Over-rely on Consensus.  Consensus managers seldom survive long in their jobs. To get buy-in from everyone will likely produce a watered-down version of the original decision or action.
  6. They Focus on Being Popular. Leadership should never be a popularity contest. Managers who try to be popular often lose their focus and waste energy.
  7. They Get Caught Up in Their Self-Importance. Given all the benefits of your position, it would be easy to become absorbed with yourself. On any given day, you might think it really is “all about me.”  Do you have a high need to gain admiration, be in the spotlight and get public accolades?
  8. They Put Their Heads in the Sand. The best managers not only want to hear about problems, but encourage their employees to tell them when they encounter problems or issues they feel are not right. Good managers want open, honest, direct, and specific communication regardless of the information being presented.
  9. They Fix Problems, Not Causes.  Unless the manager fixes the cause of the problems they encounter, valuable time will be spent fixing the same problem over and over again.

Why Bankers Need to Think Like Private Fixed Income Investors

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Banks are in the business of taking and managing risks. Get that wrong and you go out of business, and there are many recent examples.

I have sometimes worked with advisors who view loans as just another product to sell. This type of advisor also tends to view anyone in the credit underwriting and approval process as being in the “business prevention department”. In these situations I try to explain how lending literally involves transferring some of the firm’s capital to a client, on which we expect a return of principal and a return on principal over time.

No matter how much profit the client makes as a result of a loan, a lender’s best case is getting a full return of principal, plus the contractual interest, and not a penny more.

$1 million loan x 2.00% spread = $20,000 of pre-tax, pre-provision revenue

The lender’s worst case is a complete loss of principal and expected interest, plus collection and litigation costs.

The firm that charges off that $1 million loan needs $50 million of new loans to get back to even.

And that excludes income taxes, labor or overhead costs needed to originate the loan, any loan loss reserves set aside, the cost of funds raised to lend out or any time-value of that money (i.e., liquidity issuance premium).

With that kind of mismatched upside/downside risk, it is necessary to view lending like the private fixed income investment that it truly is.

How advisors should think like fixed income investors:

  • They must seek an attractive risk-adjusted after-tax return on capital
  • They should expect low loss rates and low volatility of returns
  • They have to achieve these goals through disciplined management of controlled risks
  • Borrowers typically do not have public debt ratings, so individual underwriting must be performed
  • Borrowers typically do not have established market values, so risk-adjusted pricing must developed
  • Bankers must mitigate these risks through disciplined underwriting, appropriate credit structure and active portfolio monitoring and management.

Advisors that balance the needs of their clients with the long-term health of their firm win in the long run.

How Sticky Are Your Relationships?

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It’s Valentine’s Day– have you told your clients lately how much you love them?

Yes, it’s already February the 14th, and you know what that means. Gentlemen, it’s the day to leave the office early to pick up some cellophane-wrapped flowers from the grocery store and grumble about the picked-over selection of torn cards and mismatched envelopes. Ladies, it’s the day to bask in the warm glow of your superior planning and thoughtfulness. I can neither confirm nor deny that these lighthearted stereotypes may possibly emanate from my own personal experiences…

It is also a great day to reach out to your clients.

By the way, so was January 13th. And January 26th. Or January 25th. Or last November 3rd.

Any day is a great day to reach out to your clients.

Whether you are self-employed or work for a large firm, whether you receive a direct commission or a flat salary, your book of clients is your practice. Your practice is only as valuable as the recurring revenue stream from your clients, and if you aren’t retaining your clients and adding new ones, you aren’t adding value.

Contact Increases Stickiness

I have seen scores of client research reports and I cannot recall one that didn’t show a positive correlation between advisor contact and client satisfaction and retention. To cite just a few recent examples:

  • The J.D. Power and Associates 2011 U.S. Full Service Investor Satisfaction StudySM found that one of the key best practices of client service was “Proactive advisor contact regarding new products and services or accounts four times in the past 12 months”.
  • The AdvisorImpact 2009 Client Index revealed that only 63% of clients strongly agreed with the statement “My advisor is proactive in managing our relationship.”, despite 80% of them describing that attribute as ‘critical’.
  • The VIP Forum‘s 2008 study Boosting Advisor Productivity reported that 80% of new business for advisors came by referral.
  • I recall a proprietary client satisfaction survey for a large U.S. financial institution that showed even clients who were contacted more often than they preferred were statistically more loyal than those who were not contacted.

What do I say?

Worried that you don’t have a concrete reason to call your clients? Many advisors are quite proficient at coming up with great excuses to avoid making proactive contact:

“I don’t have any news”

“The market has been too volatile/flat/unpredictable”

“I don’t want to upset the apple cart. If I call, it will just give them a chance to complain”

To some degree, it doesn’t much matter. In 2010 The Oechsli Institute discovered that less than half of financial advisors performed well at what they called Engagement Competencies, with only 46% scoring well with clients at “Caring more about me than just my investments”.

I once inherited a client that I could not seem to interest in meeting so I could get to know her and see if I could add any value. I made it a personal challenge to call her quarterly. I could never reach her, so I left her brief  voicemail messages saying that I was just checking in to see if everything was going OK and to call me if I could help in any way. Within a year I got a call from her saying she needed my help. She and her husband were selling their business and they really weren’t sure what to do with the $3 million they were getting in cash.

The surveys are right. I was very satisfied to get that call.

Even Better? Ask Questions.

Ask questions to understand your clients’ pain points, their unmet needs, their unrealized goals. Find out what’s keeping them awake at night and offer a solution. The current economic and market landscape offers endless possibilities. Questions can lead to actually giving advice, where the real stickiness begins.

In 2011, another VIP Forum study, Building Business Owner Loyalty showed a lift in client loyalty anywhere from 8% to 19% by providing advice around key personal financial issues. (Number one? Personal retirement planning.)

Regardless of how it goes with your significant other today, make this a day to improve your client relationships and improve the value of your practice. Just skip the torn card and grocery store flowers wrapped in cellophane. Not that I have any direct experience in that area…

Be Remarkable

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In October 2011 I had the chance to share the stage at Safeco Field with Seattle Mariners Manager Eric Wedge at a large professional development event for my company. Eric spoke passionately about the need to challenge yourself to be the best you can be, to play your best game every day and to always focus on getting better.

With Seattle Mariners Manager Eric Wedge. October 2011

Below is the text of my speech. I try not to cross over too much from my Day Job here, but this represents some of my core beliefs as a leader.

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Our internal theme for this year is “Be Remarkable”. Tonight I’d like to talk about what that means to me.

Our CEO Richard Davis likes to talk about how most of us are “accidental bankers”– how this probably wasn’t a childhood dream for most of us, and how we probably didn’t major in “banking”. Yet, here we are…

That was certainly true for me– I was one of the first people in my family to finish high school and the only person in my family to go to college. After a few years of nights and weekends in the retail industry, I started in banking as a branch manager, and then I got a chance to become a private banker. After a few years of that, I was given a chance to manage a small team, then a large region, then eventually the entire business line. Most importantly, I was able to help my daughter begin to pursue her dreams, as she became the SECOND person in my family to attend college, just two months ago.

Why aren’t you happy?

We have industry-leading financial performance, we have industry-leading client satisfaction scores and absolutely WORLD class employee engagement scores. We are one of Fortune Magazine’s Most Admired Companies, and we have a rock star CEO. This is truly the kind of place that INSPIRES you to Be Remarkable.

Despite all of that– and I dont know everyone here tonight– but I know that some of you just might not jump out of bed in the morning thinking about how to “Be Remarkable”. You might not even JUMP out of bed at all, you might kind of roll out with a grumble. Why is that?

In fact, you may be asking yourself “If this is such a great place, why aren’t I even enjoying myself most days?”

Well let’s be honest, not too many people jump out of bed with a smile on their face and skip to work whistling zip-a-dee-do-dah EVERY morning, but if you can’t at least look forward to your day the MAJORITY of the time, you have a problem.

Maybe you’re just not a happy person. My words tonight might help you rethink that a little bit, but I am fully prepared for the fact that I just might not be able to help you…

But I’m going to assume that you’re all at least as happy as the average person. I’m also going to assume that MOST of your days OFF are at least PRETTY good days. But, like I said, if you can’t say that for the MAJORITY of your work days, you have a problem.

And if that’s the case; your customers, your boss and your coworkers also have a problem– so by extension our shareholders have a problem too. Even worse, so do your friends and your family– and that problem is you!

Because whether you are full time or part time, you spend a significant amount of your waking hours at work, and if you aren’t enjoying yourself, you’re slowly making yourself– and those around you– miserable.

And here’s the bad news: Nobody can change that for you. YOU are responsible for your happiness.

But, here’s the good news: YOU are responsible for your happiness.

You have more freedom and more power than you might know or believe. Our forefathers wrote that right into the Declaration of Independence–our unalienable rights to life, liberty and the pursuit of happiness.

The even better news? The leadership here WANTS you to love your job– and we want you to make this your career! We want you to Be Remarkable… And we’re here to help!

It all STARTS with you.

Marcus Buckingham wrote a great book called The One Thing You Need to Know, and its broken down into three sections:

  1. If you’re a senior leader– if you have people reporting to people who report to you– the one thing you need to know is how to tap into what everyone has in COMMON, and speak to that.
  2. If you are a manager of other people, the one thing you need to know is to find out what makes each person UNIQUE and manage them as the individual person that they are.
  3. But, the one thing that ALL of you need to know, whether you manage anyone else or not, is to figure out the thing that you most HATE to do and find a way to stop doing that. To stop doing the thing that you hate is even more important than doing more of the thing that you love, because doing the thing that you hate saps your energy. It destroys your soul, little by little.

You see, THAT’S the thing that’s making you miserable to be around!

Now, I’m not saying to show up to tomorrow and tell your boss that you aren’t going to balance your cash drawer any more because you hate it….

You might not be able to make the changes you need in your life overnight, and I can’t even promise that we can make it happen here– if your one true calling in life is to bring irrigation and malaria relief to third world countries, that’s awesome, but I’m not aware of any job descriptions here that involve that here…

But you can do that on your time off… and I DO promise you that we will do EVERYTHING in our power to help you put your strengths and your passions to work in accordance with the needs of our customers and our shareholders.

Strengths Based Leadership

Speaking of strengths, Marcus Buckingham also co-authored a great book called Now, Discover Your Strengths. And in it, he says that you can’t ignore your weaknesses– you have to correct them enough to prevent failure– but the only path to greatness is developing your strengths. And more often than not, our strengths are the things we love to do most.

Now, I like people a whole lot more than I like numbers, but numbers are a PART of my job, so I have to have a PRETTY good understanding how our balance sheet and income statement work; but I will never be CFO.

I LOVE the people side of our business. I love developing our business strategies, and hiring and developing the people to execute them, and I spend as much time as I can on that.

I still have to make sure the trains run on time, and I have to make sure we deliver the numbers for our shareholders; and for the most part, I rely on people who love THOSE parts of the business to spend the bulk of THEIR time doing those things.

So, if this is still just your job, and not yet your career, I really want you to think about what you love to do, what you hate to do, and what your strengths and weaknesses are.

If this IS your career, it’s even MORE important!

There’s another great book and a web site called StrengthsFinder, by Don Clifton and Tom Rath, former colleagues of Marcus Buckingham. I encourage all of you to use it to discover YOUR strengths…

The story of “Tory”

I work with someone that some of you know, but she will KILL me if I mention her name,so lets just call her “Tory”.  I sat down with Tory a few years ago and asked her what she loved doing and what she hated doing. This was very hard for Tory, because she has been a top performer forever. She said, “Oh, I’ll do anything you need me to do!” I said, “I know that, but that wasn’t my question”. It took us three meetings for Tory to finally get up the courage to say, “You know, I really want to do more analytical work, I would like to learn project management skills, and I hate to say it, but I really don’t like to manage people”. I said, “Done.” on the spot to the first two, and I said “I think I can help you with the last one, but it might take me a little while.”

Sure enough, within a few months, we were able to shift her management responsibilities to other people, and she took on more analytical and project management duties. Almost instantly, Tory exceeded even her own high standards of performance as she was able to spend most of her time doing the things that match her natural talents. I couldn’t imagine how I could survive without her on my team.

If you can’t truly bring your passion and put your innate talents to work every day, it’s going to be pretty hard to Be Remarkable. In fact, you’re doing yourself a disservice. You’re also doing your customers, your coworkers and our shareholders a disservice. We cannot deliver the world class customer experience we want to deliver without engaged, passionate people who get to put their strengths to work.

Now what?

So– once you’ve discovered your strengths, how can you go about applying them to your job?

  • In a word– ASK!  You’re here tonight, so that’s a great start. Get active with the Development Network and meet as many people as you can, from all over the bank.
  • Secondly, get a great education. Associates degree, bachelors degree, Masters, PhD–  wherever your passions take you, but in this global economy you have to bring your best to the game.
  • Check out the Career Exploration Site on the Human Resources Intranet page. There you can Explore, Learn, Plan and Network. Read the career spotlights and listen in on the conference calls where employees from all over the bank describe what their job is like and what kind of experience you need for it.
  • Participate in MentorConnect. We have what is essentially an internal “match.com” to connect people who want to be mentored with senior people who volunteer their time simply to help you be the best you can be.
  • Talk to your manager! Let them know about your dreams and aspirations. Talk about what you love to do and what you hate to do, but be patient– even if you hate it, SOMEBODY probably has to do it, and its probably YOU, for at least a little while…
  • And most importantly– perform the HECK out of your current job.  I gotta tell you– as a manager, I’m INCREDIBLY motivated to help top performers build their career, even if it means I lose them to another part of the organization. But I don’t really have a lot of patience for someone who’s not performing in their current job who tries to tell me that it’s not their fault– that they would do a great job if only we would promote them…

That may be true, but we all have to do the job we have today to have any chance to get the job we want tomorrow.

So before you head home to your loved ones, before you come into work tomorrow and start thinking about how to take great care of your customers– think just a little bit more about yourself… about your job… about your career…

Discover your strengths… follow your passions… and Be Remarkable.