Leadership: In My Own Words

With all of the scholarship on leadership, what could I add to the conversation? I have my ideas. And if we reflect on the decline of our industry, an honest in-the-mirror assessment of bank leadership merits discussion.

In 2004 I wrote an article for a banking industry association entitled Lead Like Lincoln. The article identified three traits that were critical to Lincoln's success: Vision, Communication, and Commitment. Ten years later, I stand by those traits.

At this stage of the post, I could cite studies, books, and management luminaries on what makes great leaders. Instead, I will give you my slightly varnished view, straight from the gut. Slightly varnished because I grew up in Scranton, where directness has greater value than tact. Not always an admirable trait for a consultant, or a leader.

A great leader has a vision for the future. This is particularly important and challenging in rapidly changing industries like technology and media. It was not particularly important in slow moving industries like banking. 

But that has changed. The greatest banking leaders can see their bank several years into the future, and organize resources around making that vision a reality.

A great leader is humble. As with any general statement on leadership traits, there are exceptions. Say what you will about Steve Jobs. Humble he was not. But hard charging, egotistical leaders can only move an organization so far, and to a certain size, before the ego starts to become a liability. Recall that Jobs got fired from the company he founded. Not an easy task to accomplish. 

The humble leader, on the other hand, takes counsel from his/her people and understands that no human being is all knowing, or even close to it. A great leader does not judge his/her importance by an org chart or the size of paycheck, but by the happiness of their people (sum total of all of their people, not just keeping an individual happy) and the purpose of their work. 

A great leader does not fear failure. Failure is the lesson plan for success. Avoid failure, and the leader understands that their company is destined for the ash heap of irrelevance. In banking, failure is clearly a dirty word when relating to the overall bank. But the most innovative and sustainable business models in our industry are moving farther away from business as usual into less tried and true paths. If there was ever a need for great leaders in banking, now is the time.

A great leader has great followers. When the Navy trained me on leadership, an early lesson was that before becoming a great leader, a sailor must be a great follower. So before assuming leadership, a future leader supports their current leader, working with purpose for the betterment of the company, with no interest in highlighting shortcomings of their leader or those around them in order to move them up the organizational ladder.

Surrounding yourself with great followers implies hiring those that can step into your shoes, or that have such potential and you are dedicated to ensuring their development. Great followers are smart, motivated, humble, forward looking, and care about their colleagues and the company. 

Great followers give the leader informed information and opinions, and if the leader, after careful reflection, decides to go against the follower's recommendation, the great follower charges forward lock-step with the leader.

Poor leaders don't want great followers for fear that they can easily slip into the leader's shoes. Great leaders cheer their followers and prepare them to slip into the leader's shoes.

Great leaders are committed. If a vision is worth pursuing, should it be abandoned when obstacles rear their inevitable head? Weak leaders cut their losses. Great leaders forge forward.

Great leaders are likable. By this I don't mean liked by everyone at all times. They can make the difficult decisions, counsel employees, and be firm when necessary. But if a leader must motivate employees to challenge their boundaries and create great companies, employees must believe in the man or woman. 

Can a person with wavering honor or integrity, or is generally a jerk get the entire company to move as one in a direction that has great risk yet may lead to great reward for a sustainable period of time? 

I think not. 

What are your thoughts on leadership in financial services?

~ Jeff

Bankers: Are We Accountable?

Twenty years ago there were 14,000 FDIC-insured financial institutions. Today that number is cut in half. The reasons are many. And yes, some are beyond our control such as population mobility, technology, and the need for some scale to invest enough to remain relevant. But, as my one-time Division Officer, Lieutenant Proper, once told me: "Be careful pointing your finger, because the other three are pointing at you."

I recently made a presentation to staffers and advisers to the Pacific Coast Banking School (PCBS) regarding what I would change in the curriculum. My theme was that if we keep teaching bankers the same things, and expect different results (i.e. not cutting our industry by half), then we are insane. I don't think I'll be invited back.

Banking is an industry that is particularly susceptible to external forces such as interest rates, business and consumer confidence, and the economy (both local and national). So if things go wrong, there is plausible deniability as to what or who is responsible. Strange that when things go right, it's difficult to find plausible deniers. But I digress.

Because of the external forces that impact results, it is typical to gravitate to holding ourselves accountable to things under our direct control... i.e. our expense budget. Volumes and balances... not my fault, there's no loan demand. Margins... not my fault, the irrational competitor down the street is being too aggressive. Profits in fee based businesses... not my fault, soft insurance market.

I find this when analyzing client profitability reports. Nobody wants to absorb the costs of support centers, such as HR, IT, and Marketing, or overhead centers such as Finance or Executive. Hold them accountable for their direct profits, because that is what they can control. It reminds me of Louisiana Senator Russell Long's quip in the 1950's... "don't tax you, don't tax me, tax that fella behind the tree." I suppose if nobody finds value in support centers to the point they agree to pay for it, we should eliminate those costs.

I think the answer to move our industry forward by establishing an accountability culture is to identify a few, transparent metrics that are consistent with strategy that hold managers accountable for continuous improvement. To overcome macro-economic factors, use trends and comparatives. For example, if you hold branch managers accountable to continuously improve their deposit spreads, compare them to the average and top quartile deposit spreads of all of your branches. The result of this accountability should be continuous improvement in your bank's cost of funds compared to peers. But instead of managing at the "top of the house" (i.e. bank's total cost of funds), we burrow down to the managers responsible for generating funding.

But since there is some art and science that goes into developing management information to establish accountability at the ground level, those managers that don't shine will frequently lob darts onto the results. But bankers that are committed to identifying and executing on a strategy that differentiates them from the remaining 7,000 FIs, should identify the metrics that correlate to successful strategy execution. 

And when managers challenge the message to dilute their accountability, senior leaders must be exactly that...

Leaders.

~ Jeff

Lead Like Lincoln

Historically low interest rates and the recent poor economy highlighted the importance of leadership in community banking. History has provided us great leaders to emulate and Abraham Lincoln is perhaps without equal. In my opinion, he demonstrated three critical qualities of leadership.

Vision - Burt Nanus in his book Visionary Leadership contends that vision is inherently idealistic and represents a "mental model of a future state of the... organization." George H.W. Bush brought attention to this key leadership quality when he declared he lacked "the vision thing."

Lincoln was a great visionary. What made his vision great was its singular simplicity; preservation of the Union. Consider this statement from 1862: "If I could save the Union without freeing any slave, I would do it-- if I could save it by freeing all the slaves, I would do it-- and if I could do it by freeing some and leaving others alone, I would also do that."

Communication - A vision is only introspection without the ability to communicate it and rally stakeholders behind it. But helping others understand the vision is not enough. The purpose of communication is to motivate others to act.

Lincoln was not sowed from the cloth of privilege. He was a simple man that was able to connect with most Americans using simple anecdotes. Presidential historian David Abshire commented: "This genius of Lincoln's words and ideas -- derived from the Bible, Shakespeare, Bums, and Bunyon -- lent an historic quality to his rhetoric and persona."

Why was Lincoln such a great communicator? His messages were simple and easy to understand. How many speeches, presentations, meetings and sermons have we endured that we have little or no recollection of? The reason is simple; the message wasn't simple.

You may remember Edward Everett, a great orator of the 19th century. Chances are you don't. At the consecration of the most storied battlefield in our nation's history, Everett delivered a long-forgotten two-hour oration. After him, Lincoln approached the podium and delivered the Gettysburg Address.

Commitment - Having vision and effectively communicating it does nothing in itself. Commitment is the doing. Many leadership experts contend that people follow committed leaders, not a vision. Divorce vision and commitment, and all that you have is an idea... an idea with no disciples.

To preserve the Union, Lincoln shelved the Constitution when the nation that held it as law was in jeopardy. Said in one of Lincoln's memorable anecdotes, "By general law, life and limb must be protected; yet often a limb must be amputated to save a life; but a life is never wisely given to save a limb." Putting aside the Constitution to use any indispensable means to preserve the Union demonstrated Lincoln's commitment to his vision.

As time passed and Lincoln's commitment was clear, tenacity and courage infected every level within the Union ranks. At the outset of the war, military commanders were not clear about Lincoln's commitment to preserve the Union. General McClellan exemplified this confusion by not pursuing Lee's army after initial successes in Virginia.

Near the end of the war, Lincoln's commitment was clear as General Sherman was burning Atlanta. Followers witnessing Lincoln's degree of commitment put forth the great effort necessary to achieve success, although the risk of failure was great. Why take the risk? Because a great leader will not yield, will not relent, and will not quit.

Abraham Lincoln was by no means a perfect leader and it was not his flawless leadership that categorizes him as one of history's greatest leaders in times of crisis. Rather, it was how he adapted to the crisis situation by first formulating his vision, then articulating it, and lastly standing by it at all cost. Indeed, for all these reasons, Lincoln was one of history's greatest leaders.

~ Jeff

Note: This has been reprinted from the February 2004 Pennsylvania Association of Community Bankers newsletter.

Leader Selection: "He's not ready."

Financial institutions are currently struggling to identify the next generation leaders. Should we fall back on our old playbook, selecting highly "experienced bankers" that have been around and are likely to be the mantle bearers for the good old days, or should we think differently?

The manner at which we choose leaders is not very effective, in my opinion. So often we go with those we personally like, or the safe choices such as elevating longevity to top billing. Been here 20 years... here's the gavel. The resistance to putting young talent in positions of executive leadership is baffling to me. Our industry is changing faster than at any time during any of our lives, and yet we listen to pundits tell us that forward looking, and often young, talent is "not ready".

This mentality reminds me of NFL quarterbacks. Yes... quarterbacks. I write this on Championship Weekend, when the Niners and Giants are set to face off for the NFC Championship while the Ravens and Patriots vie for the AFC crown. Tim Tebow was vanquished last week by the Patriots. Tebow, as many of you know, started the season third on the Broncos depth chart. In my opinion and the Broncos coaching staff, he was the third best QB on the roster. When the Broncos went 1-4 to start the season, Tebow became the first signal caller known to me to win the starting job via popular opinion.

When Tebow's number was called and the starter Kyle Orton was released, Tebow was still only the second best QB on the team. Brady Quinn, in my opinion, was a more talented passer. [Disclosure: I'm a Notre Dame fan, Quinn's alma matar] So Tebow, third string clipboard carrier, goes 8-4 the rest of way. I'm pretty sure FI board members and executive recruiters would have said "he's not ready."

How about the Patriots' Tom Brady? Have you ever heard of The Brady Six? These are the six quarterbacks chosen before Brady was chosen (199th, 6th round) in the 2000 NFL draft. Chosen before him were such inauspicious names as Giovanni Carmazzi (chosen 65th), Chris Redman (75th), and Tee Martin (163rd). The most famous and first QB seclected was Chad Pennington (18th, see photo). FI board members on Brady: "he's not ready."

Lastly, what about Kurt Warner (see photo)? Probably one of the most successful QBs in NFL history, Warner went undrafted and sent to exile in the Arena Football League. In 1998, the St. Louis Rams picked him up as third string clipboard carrier behind such high profile names as Tony Banks and Steve Bono. [Disclosure: I'm a Rams fan]

The next year he was promoted to second string behind Trent Green, who proceeded to get hurt in the pre-season, handing the football to Warner in what was feared to be a lost season for the Rams. What ensued was an MVP season followed up by an MVP Super Bowl performance that sprung a Hall of Fame career. Warner would have never started if Green stayed healthy. FI board members: "he's not ready."

Here's my point: There are professionals that do nothing but evaluate football talent, develop them, opine on them, have reams of data to compare them, and they churn out winners like Jamarcus Russell. Perhaps those that select the next level of FI leadership ought to think about those that can lead people through a difficult and changing industry instead of those that have a good loan book/the safe pick. Or perhaps that person isn't ready.

~ Jeff