Last week, in Part 1 of this column, we saw D Bank begin to wake up to a changing market based on the new CEO’s focus on values. We start this week at what may have been the key juncture for the leadership team.
- Lesson 3: Be sure of what you put in your values statements. They have power whether or not they are true.
Honesty continued to show up as a core value on everyone’s list at D Bank. It is hard to argue with honesty as important in banking. But the deeper conversation revealed changes that D Bank would have to make if they were to really name honesty as a core value. No one in the bank gave a negative performance appraisal — ever. In order to truly incorporate honesty, they would have to start telling the truth about performance. That meant a revamping of incentives and performance measurement processes. It would require training for managers and an audit for the review system. Similar conversations laid out an ambitious plan to support values such as a focus on customers, innovation and personal accountability. At one point the CFO opined that D Bank “cannot afford this much honesty.”
But Paul saw something different in the discussions. “By following the natural progression of integrating the values we identified into every facet of the business, we could get a clear picture of what we had to do, and a clearer picture of what living the value would do — or not — for the bank”
- Lesson 4: Values are not a cure-all. You do not get the benefits of change without actually making it happen.
The following months were both exciting and painful. Several members of the executive team could not make the leap. After doing his best to enroll them in a new way of thinking, Paul slaughtered two more sacred cows when he fired them despite long tenure — and replaced some them with outsiders. Under the banner of innovation, Paul instituted an intensive management development program, creating the first succession planning the bank had ever seen.
Many of the old-line employees, especially administratively focused branch managers, had trouble making the transition to a culture of accountability. However, the positive response from the majority of employees was surprising to Paul. One longtime branch manager said it best: “We have been waiting for years!”
- Lesson 5: Values are a decision guide for managers.
Paul continued over the following years to stress values as the guiding light of the organization. Each of the core values adopted required major changes to become reality. Stalwart processes like pricing, wholesale transactions and loan origination all came in for major overhauls to bring them more in line with values. D Bank reorganized to serve customers more effectively, innovated in areas such as technology and customer experience, created a culture of accountability and revitalized its brand. All this was expensive; however, the returns did not trail by much. D Bank was increasing market share within two quarters.
It is now 10 years since Paul took the helm of D Bank. About one-third of the staff has turned over, and that is not the most radical measure of change. Today, D Bank is publicly traded with an asset base of over $6 billion and a footprint in 3 states. Its customer loyalty, ROA and efficiency ratio are the envy of the industry.
Perhaps the biggest change is in Paul himself.
“I am much happier with the bank I run today and more confident about our future. For us, the key was in taking values seriously. Listing them is easy; making them real is a trial.”