Archive for March, 2011

Win Without Trying

March 23, 2011

Years ago a prominent management consultant introduced me to one of the worst philosophies for success in commerce that I have ever heard: “The business of business is to put other business out of business.” No philosophy for commercial success could be further from my personal philosophy, which emerged from my direct experience rather than from any academic school of business, whereas the consultant in question had adopted his philosophy from some Brotherhood of Darkness and was relying on the dark side of the Force to gain success for himself and his clients. 

About mid-way through my twenty-year banking career, I heard the term “win-win” at a business conference. The basic win-win idea is that no one needs to lose in order for anyone to win. But I had already learned that truth from my first mentor, an old Jedi master-banker named Jack Corliss who had put it this way: “The needs of the bank and its community are parallel. Neither can do well at the other’s expense.” Jack’s words are as true today as they were forty years ago; new challenges are born every day, but wisdom never changes. Most people saw Jack as a banker whose hobby was art; the truth is, Jack was a full-time artist: the bank was his palette, his senior executive position was his brush, cash was his paint, the community was his roll of canvas, and he did beautiful work for forty-two years. 

As part of his move into retirement, Jack helped me gain a position at another community bank where I would have the opportunity to transplant his teachings in an environment lacking a consumer loan department. That bank, Poughkeepsie Savings Bank (PSB)—one of the largest savings banks in the world in the 1970s-80’s—had a similar philosophy; the emphasis was on community development and enrichment. Over a seventeen-year period, I pioneered: consumer lending, regulatory compliance, data security, and loan (quality) review functions.  Along the way, I also resurrected the bank’s “house organ” newsletter. All of those roles produced successful results noncompetitively. The “wins” occurred without trying to win any competition with other banks. In fact, the only time my winning was diminished was when I made a conscious misguided effort to defeat competitors

Here are thumbnails of those winning experiences: 

When I spearheaded consumer lending, I did not know that the Federal Reserve Bank of NY annually published statistics on the performance of loan departments at commercial banks in the district. Key ratios were provided related to portfolio composition and earnings, loan delinquencies, staffing, and so on. When the bank hired a new investment officer, one of the first things he did was measure the bank’s various portfolios against industry statistics. Because consumer lending was in its infancy at savings banks, it was fair to assume that ours was underperforming the averages at commercial banks. The truth was that PSB had outperformed the averages across the board. Our portfolio was four times as productive bottom-line and with half the staff. A separate profitability study, conducted with the guidance of a Price Waterhouse accountant, confirmed that incredible truth which surprised me as much as anyone. 

When I spearheaded regulatory compliance, I had the blessing of the bank’s meticulous President, who held an Ivy League law school degree. I was the first savings bank compliance officer elected in New York State and maybe elsewhere. With no competitor compliance functions to clone, I drew upon and blended published models for: internal legal departments, operational auditing departments, paralegal departments, and intersected those with the concepts of internal consulting and consultative selling. Over the ensuing twelve years, as the bank proceeded to more than double its assets, adding new divisions, subsidiaries, and services along the way, I guided the building of compliance quality into those initiatives throughout that process of expansion. The bank was subject to periodic examinations by state and federal government agencies, and not once in all those years was the bank cited for any systemic or substantive violation. Regarding compliance, PSB outperformed all peers, but not because that was the goal—the focus was on internal controls and quality assurance.

When I spearheaded the data security function, I gave no thought to what other data security officers were doing at other banks or how they were performing. My focus was on doing a state-of-the-art job of establishing a secure wire-transfer system and establishing effective access controls and policies for all systems, from mainframes to PCs. Exactly how PSB stacked-up against all the other banks is still unknown to me, and it was irrelevant then. I only know that there were frequent news reports of major data security breakdowns at other large financial institutions, and PSB was never among them. Our goal was fully met, achieved at low cost, and able to be administered efficiently and effectively by non-technical affordable staff. PSB had no losses and suffered no adverse publicity due to breakdowns in data security controls. 

When I spearheaded loan review it was unfortunate that the bank had not allowed me to take this on before the commercial real estate portfolio began experiencing rapid deterioration. The emergency mission was to evaluate overall quality of the massive portfolio, estimate imminent and projected losses, make recommendations, and track performance from that point. The initial evaluation results were needed “yesterday.” The Coopers & Lybrand accounting firm recommended hiring a nine person team to get an accurate fix within three months. I had no time to model the project after what any other bank was doing, or be concerned about how my approach measured-up to that of other loan review officers at other banks. By devising an acid-test fill-in-the-blanks approach involving one piece of paper per loan reviewed, I was able to examine a scientifically-derived random-sampling and make a meaningful estimate on schedule. My unorthodox approach was open to criticism by skeptics, but my results proved accurate as later confirmed by auditors from Coopers. I had not tried to out-do them with cleverness or insult their CPA credentials; I just needed to get the job done with limited resources. A software-based expert system was available to banks, but it was not in the budget, so I invented my own system on a sheet of paper. 

When I resurrected PSB’s newsletter it had been long dormant. The President gave me the task of doing something “appropriate and slick” with it. He disliked everything about the old newsletter, so I started from scratch with the help of an outside printing firm and local photographer. The goal was to make it a vehicle primarily for staff recognition and team-spirit-building as opposed to its former service as “company bugle.” At the end of the first year, I circulated a questionnaire to gain feedback for adjustments to design, content, etcetera, and received confirmation of my surmising that it had been universally well-received. During the second year I tweaked the quality further and added the photographic work to my list of tasks in order to make the finished product match the full vision I had for it: one that I knew would satisfy my audience. There was never a thought about competing with anyone to achieve this; however, to my great surprise, at the end of that year the Marketing Department had entered the newsletter in an industry-wide contest. I discovered this when called into the Board Room one afternoon and presented with a brass and walnut plaque—my noncompeting newsletter had won second-place. The magic of not trying had struck like lightning again. 

In all of those cases above, the winning came without trying, in the sense that my focus was on setting and reaching company-centered goals toward the service of customers and then following through by taking logical steps with little-to-no thought about how the bank’s competitors were performing. Using that approach, I virtually eliminated the competition. I say “my,” and “I,” and use the term “spearheaded” because the creative work and completion of hands-on tasks were mine, and because many others in the organization operated under different personal philosophies (some were fiercely competitive). 

In every one of those roles, I reported to one or more supportive VPs, SVPs, EVPs, or the President who permitted me to work with a high degree of independence. Most of those functions I spearheaded also proved successful thanks to the willing cooperation of professional-minded individuals throughout the organization. I am grateful to all of them and will remember their faces and names always.