Philadelphia Union's Jim Curtin is Wrong About Ted Lasso

Ted Lasso is a fictious coach for a fictitious 2nd division English football (soccer) league. So why was the reigning U.S. soccer league (Major League Soccer-MLS) coach of the year dissing on him?

Jim Curtin is a candidate for the U.S. men's national soccer team (USMNT). And he was asked about Lasso in an interview. The context was that U.S. coaches are challenged to land coaching jobs in the most competitive leagues in the world. Jesse Marsch, probably the American (from Wisconsin) that has succeeded most, just got sacked by Leeds United of the topflight English Premier League (EPL). Does the fictitious Ted Lasso promote the stereotype that U.S. coaches are somehow inferior to British, German, or French coaches?

In my opinion, this is a fundamental misunderstanding of the show and fictitious coach, played by Jason Sudeikis. It is not making fun of American coaches, or Ted Lasso. Just the opposite. It is making fun of soccer elitism and the world's resistance to the U.S. elevating its game, standing, players and coaches in a world dominated by other countries. In soccer, the world does not want us to succeed. It's their sport. 

For background, Lasso was recruited by AFC Richmond (fictitious club) by an owner that was going through a divorce and the wife hired Ted to tank the team because she despised her husband so much. Ted was an ex-college football (US football) coach.

Lasso came from Kansas. And in the show, has a thick accent, 70s moustache, and is armed with an endless supply of homespun anecdotes. He knows little of soccer. In fact, the show is based on a commercial done by Sudeikis years ago to promote EPL games in the United States. In that commercial, Lasso knew very little about soccer, embraced a disparaging nickname, and played the fool. Watch the video to get the picture if you're not familiar with it.

That is the premise of the show. And if that is as far as you got, you understand Curtin's comments.

But there's more. Much more. I'm not here to tell you that Lasso's coaching style is correct compared to other coaching styles. But I am here to tell you that a primary job of a coach is to maximize the talents of those under their charge. Not only so they play well but also play well as a team.

Notice I did not say the primary job of a coach is to have extensive tactical experience at the sport they are coaching. In fact, many great coaches rely on the tactical knowledge of assistants. Was Phil Jackson (Chicago Bulls) a great tactician, or did he make superstars play well together?

Notice I did not say the primary job of a coach is to have a great resume or played the game at the highest levels. Bill Belichick (New England Patriots) played center for the unheralded Wesleyan University. He was captain of the lacrosse team.

Here are the traits that make Ted Lasso a case study in leadership.

Surround yourself with leaders that complement you. Lasso's first assistant coach appointment was his friend and fellow football coach (Beard) because he knew that Beard would tell him the truth, whether he liked it or not. Beard also kept discipline in practice. His next appointment was the equipment manager (Nate) because Lasso realized that Nate had superior tactical knowledge of the game. His final appointment was a newly retired player (Roy Kent) giving the staff the credibility they needed with the players and its fans. 

Have humility. Lasso did not present himself as a soccer expert. That was the reason he surrounded himself with Nate and Kent. In fact, in their final game in season 2, Lasso implemented Nate's formation and announced it as Nate's formation to the team and anyone who asked. That level of honesty and humility actually had Nate suspicious that if the formation foundered, it would be easy to blame Nate. But in watching the show, you understand that would not be the case. Lasso would've shouldered the blame. How many coaches shine the spotlight on their assistants? Humility also allows you to hire people you believe better than you. I have seen bank CEOs make poor hires in key positions because they would feel threatened by strong and smart people around them. If you hire weaklings to make you feel better or more secure about yourself, you are limiting your organization. Lasso did not want to limit his team to support his ego. Because his ego was virtually nonexistent.

Team members react better to positive reinforcement. If your objective is to elevate individuals to be motivated to pursue a goal then positive reinforcement is more effective than negative. In spite of old school coaching styles which is a seemingly continuous barrage of negative feedback, this is less effective. Mind you, there is a place for negative feedback that encourages players and the team to make course corrections in pursuit of a goal. And Lasso does deliver negative feedback in a positive manner. At times it seems like a maddingly positive manner. But this is part of his charm and the stereotype the show's writers are trying to promote. To make him look like a simpleton to make soccer elitists feel a little better about themselves. Lasso has no such pretense (see "Have humility"). 

Make personal connections to your team. Each team member has different backgrounds, different needs, and different motivators. Lasso takes the time to get to know each individually and treats each differently according to their needs. Although perhaps Lasso's weakness is he seems to want players to like him, he certainly puts in the time and effort to show he cares about their success and happiness on an individual level. Although we want our teams to function as a cohesive unit, we must recognize that our team is made up of a collection of individuals. Lasso gets it. And his players want to deliver for themselves, their teammates, and him.

Lasso isn't setting U.S. soccer coaches back 20 years. It is using his success in spite of promoting extreme stereotypes to mock the peculiar elitism found in soccer around the world. If AFC Richmond succeeds, as I suspect the show will play out, how will that promote the belief that U.S. coaches aren't ready for prime time? 

~ Jeff

Small Bank-Big Bank: Spending on People, Technology

I was recently slated to speak at an industry conference and I was diligently preparing when the organizer asked if I would be on a panel instead. Fine. But what about my diligent preparation?

I have a blog.

My remarks, should I have made them, were going to revolve around how much large banks spend on strategically significant resources compared to small banks. I took no bias into my search. I ran the data, and here are the results based on bank Call Report data.

The initial news was good. Smaller banks, either under $10 billion in total assets or the smaller group, under $1 billion, dedicate a greater proportion of their total operating expense to salary and benefits. The under $1 billion cohort spends nearly 9% more of their operating expense on employees. This would seem to be crucial, as I frequently hear bank strategy teams identify employees as a strategic advantage smaller banks have over larger ones.

Not so fast. I broke down salary and benefits per employee as well. And in that case, it appears as though the larger financial institutions pay more. The greater than $10 billion banks pay $103,235 per employee versus the under $1 billion banks at $76,411, a 26% difference. That explains why no hands went up at the Pacific Coast Banking School when the director asked how many students went to college to be community bankers.

To further the challenge for small financial institutions, the $1 billion to $10 billion cohort pays 12% more. So if the altruist wants to work for a community bank that is closer to its communities, they can make more with big brother. 

I understand that many, if not most under $1 billion banks are in rural areas, and therefore the salary and benefits disparity may be misleading. But we would be hard pressed to find a college senior that says they'll take a 26% pay haircut and work in Tombstone, Arizona. Although I'm sure there are exceptions.

I'm sure Tombstone is nice. I use as an example recognizable by all. Please refrain from angry comments and e-mails.

My second data search revolved around IT expenditures using the same asset size cohorts. Actually, the Call Report category is Data Processing expense. Although I've been poked for using this 70's-80's phraseology. You know who you are!

A note on the data. It does not include personnel.

The news looks good for smaller banks, spending a relatively larger proportion of their operating expenses on IT. But the larger banks are gaining ground, growing this line item at a compound annual growth rate of 10% over the past 10 years. The banks in the middle cohort spend relatively the least on IT.

What was alarming was how little this expense represented of total operating expenses. Reading industry literature one would think IT would dominate the expense ledger. Not so. 

But it will. 

Were there any surprises in the above tables?

~ Jeff

Breaking Branch Mediocrity

Another day, another convoluted organizational structure that includes “small business bankers” that are dispersed into the branch network to shore up branch capabilities. If not small business bankers, it’s “cash management officers”, or “business development officers”. Why add a protective wrap of additional employees around your branches?

Because branch staff are too busy with operational duties to go out into the community and pro-actively hunt for business. I’ve been to a lot of branches as I travel the land looking for opportunities for banks to improve profits. I rarely see a “busy” branch. One time I saw a line for a teller and was so amazed at the site that I snapped a photo. The bank security officer set me straight. Don’t case the joint.

If bankers were truthful to themselves, they would recognize that these branch wraps, i.e. additional employees with fancy titles, are nothing more than covering up for the perceived shortfall in branch staff skills to be the face of the bank in our communities and pro-active business developers. If you are nodding your head in agreement, read on. 

If you are irritated at the theory and are scrunching your eyebrows like you bit into a lemon, then continue to add the layers to your organizational structure and move on to an article about the “branch of the future”.

Instead of adding staff and layering the cost onto an already burdened branch network (who pays for the compliance analyst you just hired?), why don’t you get the most from the investment you already make in your branches? I have four suggestions for you to improve the abilities of these critical profit centers.

1. Hire to execute your strategy. This assumes you have a strategy that is more focused than “we’re a bank”. If your strategy is to be the number one business bank in the markets that you serve, then hire branch employees that can speak intelligently to business owners about how your bank can better serve them. If those employees are inept at balancing a teller drawer, then so be it. If your staff is highly capable at ATM replenishment but cringe at the thought of speaking to a small business owner about a sweep account, read on…

2. Develop your branch staff. In my experience, the percent of banks that have specific training curricula for branch staff that goes beyond operations and compliance is somewhere south of Pi, if Pi were a percent, and I actually knew what Pi is. But you get the picture. When I was in the military, we had a training calendar for every functional position that included on-the-job (OJT), computer based, self-taught/correspondence, and classroom training. Each sailor was responsible for matriculating through the training program when they were not forward deployed. When they completed certain stages, they received certificates and were deemed “South-East Asia qualified”, or whatever designation the training was intended to accomplish. Do we have a “Small Business Qualified” designation in your training curriculum? If you are not satisfied with branch staff abilities to execute your strategy, and have invested the time and energy into developing them without results, then perhaps you have the wrong staff.  But don’t complain about staff capabilities if you have done nothing to improve them.

3.  Provide meaningful incentives. If you have heard me speak, I bang the drum loudly about branch incentives. You want branch staff to be the tip of the spear for small business relationship acquisition but give those that succeed a 4% raise and a $500 holiday bonus while those that are not successful a 3% raise and a $400 bonus? Why are we surprised that we have to build a “wrap” of different employees around branch staff? Instead of providing incentives based on deposit balances, how about branch profitability? Imagine the behavior differences if branch managers were charged with improving their deposit spreads, fee income generation, and managing their expenses? Would you get the desperate phone call for a rate exception for a $200,000 CD for a single-service customer to “keep the money at the bank”? Doubt it, because that $200,000 would be generating far less spread than the $40,000 operating account from Joe’s Tire and Battery. Even though Joe leaves grease at your teller counter every time he comes in. Why not pay branch managers for the important position that they hold in executing your strategy? Would it be beneficial to make variable compensation a greater and more meaningful component to the overall compensation package?

4. Communicate your strategy. That is, communicate it if you actually have a strategy. Being everything banking to everyone in the markets where you have branches is not a strategy, dear reader. If your strategy is the beef stew of all strategies (i.e. throw everything into the pot), then expect to be average. Wouldn’t that make a great epithet? Here lies Jeff, he was average. But assuming you have a strategy that clearly identifies the bank you strive to become, then communicate it to your employees! Who else do you expect to execute on the strategy day to day? If your strategy is to be the number one business bank, as ranked by the regional business journal, then identify objectives to achieve it and have your employees march a straight line to get there. Maybe then your branch manager will know that you want more customers like Joe’s Tire and Battery, regardless of having to use Mr. Clean on your teller counter after he leaves.

There you have it! Four concrete steps you can take to make branches more effective at achieving your strategic objectives. Did I miss anything?

~ Jeff

Note: This post first appeared as a guest post on Deluxe Corp's Forward Banker Blog in July 2014.

Power to the People

I asked the head of commercial lending how best to turn the tide in business loan growth. His response: people. I asked the head of branches how to elevate the results from low performing branches. Response: people. I asked the head of an insurance subsidiary how he intends to improve margins. Again, it's the people.

My firm moderated a brainstorming session with a client on improving profitability in certain areas. We came up with several credible ideas. But a senior executive spoke up and said something to the effect that the responses that revolved around people were so far ahead of the others, that if the bank got the people issues right then performance will surely improve.

I have opined that bankers come in two general categories: balance sheet managers and customer managers. Since that post over a year and a half ago, financial institutions continue their migration toward the customer aspect. A strategy heavily focused on balance sheet management does not do much to differentiate one FI from another, and therefore does little to improve franchise value.

But strategies that focus on customers require people that are better than the people at the FI across the street. From this perspective, our assets do go up and down the elevator every day. So what are we doing to have the right people in the right positions?

We first attacked this challenge over 10 years ago when we aggressively pursued lenders. The hot pursuit led to wage inflation. The challenge was that we wanted lenders that went after the total client relationship and were surprised when what we got were loans. They were deal people, selling loan transactions usually at attractive pricing and loose covenants. We found it difficult to get the old salts to change their perspective, to build a strong relationship, to achieve trusted advisor status with their clients. They simply wanted to do deals.

Perhaps we can learn from this experience. If FIs seek to supplement their staff with more customer managers, maybe we should focus on attracting motivated, less experienced, but more malleable talent. Or perhaps such talent exists within our franchise.

To succeed at such a strategy, the FI would need a performance measurement process that identifies top performers and hot prospects, develops a training program to teach them the skills to meet performance expectations, and to ingrain your FIs Way (manner in which your FI would ideally like to do business).

If you bring onboard new, yet under-developed talent, perhaps you implement a mentor program with more senior people that have bought into your Way and are performing well. Additionally, ensure your compensation system is consistent with your Way. If you compensate for loan volume, don't be surprised if you get the aforementioned aggressively priced loan transactions and few loyal relationships.

As you populate your employee base with higher quality people your FI will perform better. If you keep in place employees that are millstones around your neck, your FI will struggle to perform better. Your objective should be to maximize the former, and minimize the latter. That's the simplest business strategy ever, don't you think?

~ Jeff

Three Banking Lessons Learned from Girls Lacrosse

Several months ago I was enlisted to coach middle school girls lacrosse. It is a relatively new sport to our area, so my learning curve was steep. We are nearing the end of our season, and yesterday we completed our first double header sweep. As I reflected on how far the girls have come, I thought of the lessons we learned along the way. These lessons apply to many areas of life, including the banking profession. I would like to share them with you.

1.  Stack the D

Easter weekend we played a game with a thin roster as many of our players had family commitments. Lacrosse is often referred to as the fastest sport on two feet, correctly implying a great amount of running. With limited substitutes, this puts pressure on the players on the field to perform while being gassed. Midfielders run coast to coast, so I had to be creative in substituting and switching player positions on the field.  In so doing, I weakened our defensive unit by moving key defensive players to midfield and middies back to D so they can rest. What I learned was that not adequately protecting our goal can lead to terrible results.

Most financial institutions are not lacking for customers. If we tallied up all customers that do business with us, a likely conclusion may be what one bank CEO stated as "there is enough 'there' there". I have been in countless meetings that the head of retail wonders why their total number of checking accounts remained stagnant while their monthly production reports show great progress in new account acquisition. The reason... customers walking out the back door while the FI tracks new customers coming in the front.  A classic tale of not stacking the D and defending your goal. Pay attention to the customers you have, and you will get more business from them.

2.  Win in Practice

How you practice drives your game performance. Lacrosse is a sport won in the trenches. If you win the draws, be first to pick up the ground balls (see photo), and disrupt opponent passes you will be successful. But having better skills than your opponent is not bestowed upon you by a higher power, as some may think. To consistently put passes on your teammates stick requires that you do so hundreds of times in practice.

The same goes for serving FI customers. If you are to tailor a solution to a business customer, it is critical you understand his or her needs, their industry, and general economic conditions. Having done your homework allows you to bring a greater amount of value to customers, an imperative in a competitive industry where one FI's money is as green as the bank down the street. If you want to solidify existing customers and win new ones, you better get serious about practice.

3.  Find the Hidden Gems

I found it difficult not to make quick judgments about my players. This girl is slow, that one is athletic, etc. To deny that we judge people with minimal information is to ignore human nature. During the course of the season, some of my early judgments proved wrong... dead wrong.  Some girls worked hard in practice, improved their skills quickly, and began making significant game contributions. This reminded me that Chase Utley and Michael Jordan were each cut from their high school teams.

Within your employee base there are unpolished gems waiting to shine. It is incumbent on us to identify them, encourage (yes, coach) them, train them, and let them show their brilliance. Most companies have varied levels of employees from stars to, well, not-so-much stars. Often, potential stars are kept under wraps by supervisors that want to keep them for themselves, co-workers that are paranoid about a star's brilliance, and general mediocrity that tends to keep people down. Do you reward mediocrity or protect so-so employees? Do stars receive a 4% raise while not-so-much stars get a 3% raise? Does longevity count more than performance?  These are some common ways that FIs keep potential hidden gems from shining.

Summary

In a rapidly changing industry, we frequently look outside of our organization to transform our FI for a sustainable future. But the lessons I learned by coaching youth lacrosse can be applied to your FI... there are opportunities to transform ourselves by looking within. First, by defending our market share and customer base we can reduce attrition and increase the amount of business we do with current customers... Stacking the D. Secondly, in a highly commoditized industry we can differentiate ourselves by being better prepared than competitors... Winning in Practice. Lastly, when product differentiation and cost leadership is difficult, as it is in our industry, then we must find and develop our best employees to elevate our game... Finding the Hidden Gems.

~ Jeff

Experienced Bankers Wanted for Mediocre Bank

"He's not ready" is the response I often hear when I ask why a sharp banker is not part of the FIs senior leadership team. I hear it from senior leaders, industry executive recruiters, and industry consultants. But when I hear this, let me share with you what my internal voice is saying: "I want to make myself feel better by diminishing your perception of the value this clear up-and-comer can bring to our team."

If the talented individual we are speaking of is not yet good enough to serve in a similar role to me, then, ipso facto, I must be more talented than him. That is one reason I was so impressed with a southeast bank president that said to me "look around, you don't see many executives over the age of 45 because they don't get it [the new way of doing business]." This CEO must not have bought the "he/she's not ready" line.

This attitude is not exclusive to executive ranks. I recently recommended an acquaintance of mine to a regional business banking executive who agreed to take a look at his resume. The result: doesn't have business banking experience. This was true, but knowing the "type A" nature of this individual, I had little doubt he would be successful learning "credit", knocking on doors, and building relationships. Instead, this bank wanted an experienced banker. To which my internal voice said: "experienced at doing commercial real estate transactions and scoffing at directives asking him to build a full relationship."

Another version of the above is when I hear "he doesn't understand credit." I have heard this from FIs currently experiencing credit problems. Apparently it is worse to hire someone that must learn credit than to hire one that has already proven challenged in the endeavor.

Dave Martin, an industry consultant with NCBS, recently wrote in an American Banker opinion piece (see link below, may require subscription) "when we put the wrong person in a job or allow the wrong person to stay in a job, we undermine our businesses." But personnel issues are frequently cited by FI executives as to why they are not succeeding in this strategic initiative or that. And they are not willing to make the necessary changes to move their business forward. Instead, they are in search of "experienced bankers."

Arkadi Kuhlmann, founder and CEO of ING Direct USA, was quoted in a recent Harvard Business Review piece on hiring practices by Fast Company cofounder William Taylor (see link below), "if you want to renew and re-energize an industry, don't hire people from that industry. You've got to untrain them and then retrain them. I'd rather hire a jazz musician, a dancer, or a captain in the Israeli army (see link below to my post on hiring a vet). They can learn about banking. It's much harder for bankers to unlearn their bad habits." If you believe the concept of hire for attitude and train for skill is true, how do you remake your employee base?

First, the FI should clarify the strategy. Understanding where you are going is a critical yet under appreciated step in identifying the people needed to get you there. It requires vision and a roadmap to achieve the vision. Do you know where your FI is going?

Second, you must identify key positions that are important cogs in the wheel to executing strategy. I already made reference to banks that want full relationships with their business customers yet their lending team is chock full of commercial real estate transaction folks with little interest beyond their current pipeline. But if relationship building is the strategy, are your branch personnel up to it?

I have witnessed FIs build confusing and inefficient workarounds to the shortcomings in branches. One reason is that experienced branch managers tend to come from the old school, where taking care of customers once they come in the door is job 1, followed closely by ensuring the branch balances and branch cash is not off. Well, last I checked, not nearly as many customers are coming into branches anymore.

FIs pursing the "relationship" strategy fail to recognize that a relationship occurs between two people. If you hire for attitude in the branches, and get a good go-getter with a positive outlook as branch manager, but proceed to pay her minimally with little upside, she will seek promotions out of the branch. This recently happened at the branch where I bank.

Branch manager is often a destination position for those that were promoted through the teller ranks and have no need to be the bread winner. For those type A people we may want in the branches, branch manager is frequently a waypoint position until something better comes up. Not a particularly effective way to execute on a relationship strategy. But branch managers are critical to our strategy.

The manner at which we hire and fire in FIs reminds me of the different styles of George Steinbrenner and the Pittsburgh Steelers' Rooney family. Steinbrenner would make key hires relatively quickly, and would fire them if they didn't work out. The Rooneys, on the other hand, invest significant time into hiring the right people and stick by their decisions (see link below). In banking, I have witnessed us hiring like Steinbrenner, and firing like Rooney. I suspect we should choose one method or the other, and use execution of our strategy as the measurement of whether a person will work out for us.

For community FIs to remain relevant to customers and prospective customers, we must choose a strategy that delivers either a competitive advantage through differentiation or cost leadership. Fortunately, there are still opportunities to deliver cost leadership for some of us, although I would deem it to be a difficult slog to have lower costs than the very large FIs. If we want to differentiate, then how? Most strategy sessions I attend require that the community FIs people be superior in the manner at which we execute strategy. So I ask you, who is executing your strategy?

Do you believe in the "hire for attitude" philosophy or the "hire experienced bankers" one?

~ Jeff


Dave Martin's American Banker piece, "If he hollars 'bad fit', let him go."
http://www.americanbanker.com/issues/176_42/if-he-hollers-let-him-go-1033869-1.html?zkPrintable=true

William C. Taylor's Harvard Business Review piece, "Hire for Attitude, Train for Skill"
http://blogs.hbr.org/taylor/2011/02/hire_for_attitude_train_for_sk.html

My blog post "Be all that you can be"
http://jeff-for-banks.blogspot.com/2010/05/be-all-that-you-can-be.html

New York Times piece "Rooney Method: Build Methodically and Await Rings"
http://www.nytimes.com/2011/02/03/sports/football/03rooney.html?_r=1&nl=todaysheadlines&adxnnl=1&emc=tha27&adxnnlx=1299413029-4gsue0vxqubNBTcVprKO+Q