You cannot change the truth, but the truth can change you.
Why is it that life in the banking industry often feels like banging your head repeatedly against a big, honking concrete wall?
It feels this way because our organizations have wonderful, colorful and (most certainly) wordy visions about the future, but all this wonder painfully disappears when we try to execute the vision. Execution is hard…it’s exhausting…and sometimes it simply sucks:
As I look around the industry and watch my banking brothers and sisters struggle with execution, I’ve come to the striking conclusion that the major cause of this frustration can be described with one simple word:
Webster’s defines transparency as “free from pretense or deceit.”
To me, transparency means that the organization runs itself based upon facts and not what a banker once described as “anecdotes and supposition”. Bankers burn out when their company starts to feel surreal, where discussions, decisions and recognition seem to be completely divorced from the truth. Sadly, this “Bizzaro World” environment can emerge in almost any organization when there is a lack of transparency.
At Cornerstone, we are fond of the Jack Welsh quote, “Face reality as it is, not as it was or as you wish it to be.” Crazy Jack has become a business cult hero because he symbolizes true execution – when goals are clearly defined, priorities are set, resources are properly allocated and accountability is firmly established.
So here’s an urgent message to bank CEOs everywhere: you have it in your power to change the very nature of your organization overnight!
And here’s better news: it won’t take a merger, new systems, headhunters or a costly branding campaign. All that you big cheeses/top dogs/el jefes have to do is make three things highly transparent in your organizations:
• Performance Metrics
By opening the windows and letting the light shine on these building blocks of execution, CEOs can create operating cultures that are more focused, faster moving, better integrated and perceived as “fair” by every manager and employee. \
Want to be a Gonzo banking execution machine? Of course you do Beavis. Here’s a quick hit list of what it takes to be a transparent banking organization.
Ever been in a management meeting when some dweeb is going on and on about how great his business line is doing? You hear a lot of big words like “momentum” and “platform for growth” and “market leading,” but then some curmudgeon sitting next to you whispers, “Ask him about his numbers – they stink.”
Most banks do a good job of tracking the company’s high-level performance numbers: ROA, ROE, EPS…BFD. However, they typically do a lousy job in sharing and elevating the performance numbers of individual business units and support groups. Here’s why this deficiency hurts the bank. Managers ultimately vie against each other for resources, budget dollars, promotions and bonuses. We can spout all the Kumbaya we want, but life is competitive. Without clear metrics that expose which managers are kicking tail and which are blowing smoke, the bank’s allocation of resources becomes a manipulated political process.
There are three key tiers of performance reporting that are important for Gonzo banks to implement:
Balanced scorecards – These high level numbers track metrics that are closely aligned with the Strategic Plan. Attainment of these measures are essentially proxies for successfully executing the strategic vision. Typically, the higher level strategic scorecards are broken into areas like Growth, Profitability, Customer Satisfaction, Employee Engagement, Productivity and Risk Management.
Performance benchmarks – Down below the high level strategic scorecard, banks need to “cascade” benchmark measurements to every nook and cranny of the organization. Whether an employee “hob nobs” with the wealthiest clients in the bank or tracks collaterals for the ailing mobile home portfolio, every function needs to be driven by simple clear benchmarks. Check out the upcoming 2005 Cornerstone Scorecard sample to see what we mean by depth. With “key performance indicators” at every level of the organization, it gets very hard to run from the truth.
Service level agreements – A final group of performance metrics that are critical for the Gonzo Bank are service level agreements or SLAs. (No relation to the machine guns and Patty Hearst.) For the various support areas like I.T., Human Resources and Finance which take a daily beating for a “lack of responsiveness” to the front line, SLAs can be very powerful negotiation tools. We’ve seen several Gonzo banks take simple measures like “average help desk ticket resolution time” and “average days until monthly financials are available” to make their whole culture more service oriented.
A couple of caveats to transparent performance metrics:
Projects, Priorities and Resources
At Cornerstone, we like to say that the road between your bank today and your bank tomorrow is paved with projects. Sadly, there are few organizations that have nailed the world of projects. Only 10% – 15% of the banks we see have an aggregated report of all projects in the organization (both I.T. and non-I.T.). Very few have established the same project approval and management methodology across the organization. While banks take stabs at prioritizing their initiatives, they often end up with a whacky bell curve where 91% of the projects are classified as “high priorities.”
In order to make the project process more transparent, banks need to:
1. Establish a formal project methodology for the entire company and train like crazy.
2. Drive execution with a senior project steering committee that can at any time see a current report that lists:
This type of information reveals an important truth to the executive suites – most banks are over-committing like mad and paying very little attention to whether projects are on track and meeting objectives.
Conflicts and Decisions
Finally, banks will move forward much more quickly if they can make their decision-making more transparent in the organization. On a daily basis, banks have a bunch of wild issues floating around that need to be addressed by executives. Often these issues involve conflict between two different managers. One wants to centralize – they other doesn’t. One thinks there’s a systems problem – the other believes it’s a stupid user issue. Sadly, most banks let these issues fester until they exhaust everyone. There doesn’t seem to be any ground rules for how issues should be debated and resolved.
When this environment exists, the tide of decisions flows to whoever has talked to the CEO last to convince him that their position is the most valid. It can create a lot of useless loitering around the executive suite doors. It can cause a lot of folks to show up to meetings just so they can monitor what gets said – CYA.
In the future, Gonzo banks will be run by managers who more actively disclose material changes they are proposing in the organization. As opposed to hiding from debate, senior managers will embrace debate. Finally, the team at Cornerstone believes that banks will adopt some type of formal process to bring resolution to the natural disagreements that arise between two or more departments.
Let’s imagine that a bank is having the classic debate about whether two major divisions need to use the same CRM system. As opposed to behind-closed-door bickering, imagine if a CEO forced both managers to deliver a brief business case stating their positions on the disagreement. Instead of whining, both managers would be forced to deal with facts and rational arguments. Imagine also if major cross-departmental issues that were escalated to the executive suites were actually tracked by the bank’s strategic planning function. Now, executives could not waffle on decisions and never come down on one side of the debate. They would be forced to work their pipeline of unresolved issues just like a loan officer has to work his or her prospect pipeline. Finally, imagine if a communication came from your CEO that said the following:
To Management Committee:
We have undergone a healthy debate in our company as to whether our Retail Banking and Wealth Management divisions should utilize a common CRM system. As you may know, the Retail Division is currently implementing Whiz Bang and has invited business lines to be part of this selection process. The Wealth Management group has been very satisified with the customized CRM program they have developed in their department, arguing that it has better functionality for upscale customers and currently integrates into the Trust System. I have weighed both of these positions and decided that all business units will need to be part of the Whiz Bang initiative. Our Strategic Plan emphasizes the need for stronger team sales across our product lines. We simply cannot effectively implement this strategy without a common approach and system to support our sales and service efforts. We certainly will be making trade-offs and will need to shore up some of the functionality for our profitable Wealth Management business, but I am asking all of you to get behind making our sales and service strategy a success – let’s use Whiz Bang to its fullest potential.
Most organizations are hungering for better clarity in decision-making. When management is hesitant to be open about debates and decisions, the rumor mill starts working overtime.
At the end of the day, transparency builds trust among managers throughout the organization. Making this culture change will require strong leadership from CEOs and their executives. They need to have the stomach and interpersonal skills necessary to force disclosure, embrace debate and clearly communicate decisions. Is it worth the effort to make this change?
Bank CEOs and executives need to ask themselves this question: will my best talent expend their energies and dedicate their souls to a banking organization that they perceive as secretive, manipulative or highly political? Not unless bribed with above-market pay and really, really good free booze.