The hunger for leadership-intellectual capital-in financial services is giving way to new thinking on where to look for talent and how to keep it to boost an institution's earnings performance and revenue.
True, the chairman's job is moving the beast. That will never change. Every large organization is a mass of competing elements that needs to be pushed forward, and the personal and professional qualities needed to do that grow from that premise. That goes double for the chairman's senior managers, those individuals charged with dovetailing the requirements of technology, scale and skill into a profitable strategy. In a phrase, the ability to execute with speed.
And despite the current tidal wave of change sweeping banks into an undefined future, banks in some ways will always be banks.
They will always be dealing with money. They will always underwrite loans. Physical security will always be an issue. But banks are nonetheless changing, in form and in function; and the leadership qualities necessary to steer banks in the quiet past are as different from those needed to lead banks into the next generation, as those skills needed to sail a ship in the Long Island Sound are different from those necessary in 40 degrees south latitude-the so-called Roaring '40s off Antarctica, where waves can be 100 feet high.
This will be especially important as banks find human resource management and execution taking center stage, creating the need for leadership to get staff "on board." This is something that Tom Brown, vp and senior banking analyst at Donaldson, Lufkin & Jenrette, refers to as "engaging" employees. "How did companies like Capital One and First USA steal all that credit card business from the likes of Bank of America and Citicorp? They were focused on speed and skill, not scale," he says.
This boils down to senior management's ability to motivate employees to do their jobs right-getting them customer-focused rather than product- focused-and not just an institution's dependence on deployment of technology. "If you're a bank, you need to spend more time and effort on hiring; once you've got the (right people), you've got to give them the tools to do the job; once you give them the tools, you've got to give them work that they consider worthwhile; and you've got to celebrate success, because while many people think monetary compensation is everything, for many people, it's not the money that really drives their effort," Brown says.
Which leads to the overwhelming question: What sort of minds do banks need to sail the ship into the future-on the quarter-deck as well as the forecastle?
When banks took deposits and made loans, most senior executives were former loan officers who knew banking's nuts and bolts forward and backward. The result: Banks filled with highly competent people who'd taken that road as the main chance.
Great at the time. But today, when some people think banking's ideal model is Toys "R" Us, and retailing is the password, what banks need are people who can not only think "outside the box," but also execute on strategy. In a word, revolutionaries. This is not a quality commonly found among people focused on succeeding in the present, however competent they may be. "The idea that being a commercial loan officer puts you on the road to the chairman's office is an anachronism," says James McDermott, president of Keefe, Bruyette & Woods. "The chairman's role is much more diversified today and requires operational knowledge, familiarity with technology, and strategic thinking, because today more than ever, banks have to utilize technology intelligently, both in product offerings and data mining their customer base. These things are a lot different than they used to be, which suggests a lot more collegiality than there used to be, including more Offices of the Chairman, and more people involved in the Office of the Chairman. It won't be that autocratic, dictatorial, top-down stuff of the past."
Theoretically, the ideal mind for tomorrow's banking leadership is shifting from a left-brained, mathematically adept person with a background in finance or the military, a probable MBA and a talent for administration, to a right-brained, conceptually adept person with a liberal arts background and a penchant for creative thinking and creating order, say experts.
These are people that the Johnson O'Connor Research Foundation, which specializes in vocational testing and counseling based on a two-day battery of psychological tests, would call high in structural visualization- specifically, the ability to think in three dimensions, but, more generally, the ability to solve problems and the need to implement solutions.
These qualities, however, are rarely what banks really look for when they tell themselves they want someone who thinks outside the box, and, indeed, not what Johnson O'Connor considers a prime candidate for banking, for which they think the ability to internalize received values is key. Based on interviews with a number of industry analysts and senior bankers, what banks really want to do isn't so much to adopt new ways of thinking, but to adapt new thinking to banking-and the same goes for the people banks hire. Aside from places like marketing and human resources, bankers say, they're still looking for bankers who, metaphorically speaking, at best own a few colorful ties. Case in point: "Whatever times it is, whether it's the next century or the one after that, (a banking leader) will have to be steeped in the fundamentals of banking and more broadly, the financial services business," says the chairman of a major super regional bank. "The fundamentals of sound and progressive and profitable banking really don't change," he says. "The services change, the service delivery systems change; but those principles are ageless. I don't know that you need a different person for the next century than what you needed 20 years ago, though they need to understand computers and new types of delivery."
Some banks are heeding the call for new hiring tactics to grease their leadership fast tracks. Citicorp chairman John Reed, one of the more progressive talent scouts, has been hand-picking new hires from outside banking for the past two years, particularly on the retail side where technology has had a swift and sweeping impact on the direction of the bank. His talent search turned up former Viacom executive Ed Horowitz, Citi's evp of Advanced Development; former FedEx executive Mary Alice Taylor, evp of global operations and technology; Josh Grotstein, former svp of content for Prodigy Services Co. and now division executive of global Internet/intranet programs for Citi; and Stephen Liguori, former CEO of Mother's Cakes & Cookie Co. and now manager of Citi's New York consumer bank business.
Too often, though, leadership is sacrificed for lip service. Says one bank chairman who requested anonymity, "We hire from outside banking all the time; it all depends on the job we need to fill. If we need a marketing person, we'll look for a good candidate, and we figure we can teach him what he needs to know about banking." But on the other hand, he also says, "Most of our people come up through the ranks."
The chairman of another regional bank who has been very busy transforming it and who also requested anonymity says that even when they start off looking for someone from outside the industry-retailing, for example-they often wind up hiring bankers anyway. A search for a new HR executive, in an attempt per the chairman to hire new blood, resulted in the hire of an HR person from another bank, which happened to have been trying to produce the same sort of internal change.
The irony hasn't escaped recruiters. "Banks are scoping in very myopically. This will take them where they've been before; a ship that will continue to swim, if it's lucky. They have opportunities to break out of the box, but they rarely take them," says Eric Segal, president of Kenzer Corp., a Manhattan-based search firm. "What banks need to understand is that there's a difference between being out of the box and off the wall. Off the wall is dangerous; out of the box can be creative. The difference is a guy who operates and then thinks about it, versus the guy who thinks about it and then operates as a result of balancing all the options, a guy who's not afraid to take a risk, who doesn't act on his gut but who utilizes his gut."
The problem here is that such people don't always fit in at banks, often leading to hiring failures because in the same way that, instead of trying to change themselves at the core, banks seem often to be trying to change only at the margins, they try to fit people into the existing organization, instead of tolerating some slight nonconformity as the price of successful change.
A better recipe for disastrous hires couldn't be imagined. G. Ware Travelstead, a high-flying real estate figure in the 1980s who eventually had a spectacular crash, once said, "A big corporation goes out and hires an individualist because they think he has something to offer them, but once he's inside, they start trying to fit him into the organization; they keep knocking off corners, and one day the guy wakes up and wonders what he's doing there."
Challenges like this underline a major conflict between wanting change and accepting change. The sort of people who can change banking at its core tend to be different from the industry norm. "Despite everything you hear about business focus, some of the most exciting people we come across (in banking searches) have a very broad liberal arts background, many with an MBA. They're characterized by being readers of books-books that go far beyond business self-help books, who understand plots and protagonists and strategy and human nature, and folks who have interesting hobbies," says Susan Jurnigan, a partner of Sockwell & Associates, a Charlotte, NC-based headhunting firm. "Someone who is functioning at a very senior level and providing leadership and strategic vision is someone who is able to make connections, and see connections, before others see them. That calls for a very broad-gauged understanding of everything as it is today, but also for a creative side, and an artistic side almost, that allows them to put things together in new and different ways."
Which brings another practical, yet big issue into play: Banks have to thrive in the present to reach the future, which means legitimate demand for leadership that knows how to run the bank today, while also reinventing themselves. This means people who can think about what the bank should be without the constraints of the present. "These are two different ways of thinking, and banks need both," says Ken Blanchard, author of The One Minute Manager and Gung Ho! "Sometimes I think what they need is a president of the present, who deals with things as they are, and a president of the future, whose job it is to create the next generation of the business."
Most bankers would say that job belongs to the CEO, and in stable times, it does; but these are not stable times, says DLJ's Brown. "You really need a first curve team and a second curve team, and they have to have similar power," he says. One bank that's done this, he says, is The Provident, based in Cincinnati. Officials there confirm that while they don't have formal first and second curve teams, they do have empowered teams whose job it is to create the next bank. One result of innovative leadership: The Provident's MeritValu card, offering small discounts to consumers (which, in turn, builds customer loyalty) and access to the bank's data warehouse and analysis capabilities for participating merchants.
Provident's direction may be promising, at least in terms of creating new direction by injecting new thinking into the bank, unfettered by old ideas. But if banks in general are trying to build new institutions with old-fashioned banking minds, the outcome is bound to be disappointing and somewhat predictable.
So at bottom, no bank will thrive in the future unless its leaders can apply the best of the past to the promise and innovation of the future; command business focus; and appreciate the role of technology in financial services. "We're going to see CIOs moving into other areas of the business as time goes on. The intensity of technology is going to grow," says Chase Manhattan Corp.'s Denis O'Leary, evp and deputy in charge of delivery of consumer products and services. "Looking forward, it's an essential element in management. In the quiver of arrows that you bring to any business issue, understanding technology is a key one."
More than familiarity with technology, though, financial leadership must exude focus on business-and where it's headed. "The ones who will rise to the vice chairman's level will have that quality, or will develop that quality; the ones that continue to be screen jockeys will (remain) screen jockeys," says Cecil Sewell, CEO of North Carolina's Centura Banks Inc.
So how does an institution assemble the right team of new thinkers? "It's the person," says Kenzer's Segal, "not the industry. Good people are everywhere, if an employer will only look with an open mind."
-reinbach tfn.com
