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Time for Mavericks
BY PAUL MCADAM AND KENNETH CLINE
HSBC's Kevin Newman is Maverick Banker of the Year for endeavoring to put the customer first.
SYNOPSIS | BAI's Banking Strategies' Maverick Banker of the Year is Kevin Newman, group general manager, personal financial services for HSBC Bank USA. Newman has applied his long-time advocacy of customer-centric banking to recent ventures at HSBC including a high-yield online savings account and relationship-based retirement/investment services. Others that round out our 2008 Maverick Bankers of the Year are Brad Blackwell, Wells Fargo Home Mortgage; Geri Dillingham, North Island Credit Union; Brian Edwards, Astoria Federal Savings; Peter Engel, M&I Bank; Tim Owen, Heartland Bank; Kade Peterson, Sterling Savings Bank; Frank Sottosanti, Wachovia Corp.; and Julie Dunn Story, BankAtlantic.
Now, more than ever, banking needs its mavericks.
As credit and regulatory storms blow about the industry, the impulse to hunker down is strong. There doesn't seem to be a lot of reward for suggesting and implementing new ideas when everyone around you is crouched in a defensive posture; the risk of failure is that much greater. But now is precisely the time when new ideas can lay the foundation for the next upward turn in the cycle. Those banks that can hit the ground running will gain significant distance on their competitors.
For that reason, BAI's Banking Strategies has spent the last few months searching for bankers who exemplify the best traits of the “maverick.” One inspiration for this search was the 2006 business best seller Mavericks at Work authored by William C. Taylor and Polly LaBarre. Mavericks are those who are willing to separate themselves from the crowd and stand for something truly original. Along the way, they help their institutions unleash new ideas and better connect with customers while enabling their people to achieve great results.
We have selected nine individuals who merit that distinction. You will notice that there are no CEOs among them. Our intent has been to dig deeper into the organizational ranks to identify the up-and-coming generation of banking talent. These are some of the individuals who will lead the industry into the future.
Kevin Newman, our choice for Maverick Banker of the Year, is doing just that. As group general manager, personal financial services, for HSBC Bank USA, Newman led HSBC's effort to become the first bank in the U.S. with a significant branch system to launch a high-yield online savings product. He's currently working on an effort to differentiate HSBC in the retirement services arena by building a more customer-centric organization. Earlier in his career, Newman had pursued the same goal when he helped launch and manage First Direct in the U.K., the world's first direct bank, which continues to win customer service accolades.
Below you can read Newman's comments on what it takes to be a maverick in banking, as well as profiles of our eight other Maverick Bankers of the Year: Brad Blackwell, Wells Fargo Home Mortgage; Geri Dillingham, North Island Credit Union; Brian Edwards, Astoria Federal Savings; Peter Engel, M&I Bank; Tim Owen, Heartland Bank; Kade Peterson, Sterling Savings Bank; Frank Sottosanti, Wachovia Corp.; and Julie Dunn Story, BankAtlantic.
One common thread in all these stories is that a maverick, at least in banking, cannot get the job done alone. A maverick stakes out a new path, for sure, but every one of our mavericks spoke to the need to build teams and convincing business cases that encourage the rest of the organization to make the journey with them.
Q: What does being a maverick mean to you, generally, and particularly as it applies to financial services?
Newman: To me, a maverick is somebody that doesn't just blindly follow the crowd. That isn't to say that the crowd is wrong; quite often, the market, or what most people are doing in the market, is right.
The second element is that you've got to be your own man or your own woman. You've got to be prepared to back up your judgment. You've got to be prepared to say no, and sometimes that's a very difficult decision to make. You've got to have self confidence to buck the conventional wisdom and tell senior people what they may not want to hear. You've got to be prepared to live with the consequences which, in some cases, can be quite significant.
The third thing is you can't be a maverick unless you've got quite a lot of ability. It's like the lead character in the movie Top Gun. He was a bit of an off-the-wall guy, but also an exceptional pilot. You have to have the ability to stand out and perform.
Q: Banking of course, is a very regulated industry. To what degree can you actually be a maverick in financial services?
Newman: Oh, I think you really can. Yes, there are regulations. But I really don't know any banker who says, “It's the regulators who are stopping us from out-performing the competition.” You've got to have a clear view of what you're trying to achieve and then you've got to be able to execute against that.
Q: What key experience in your personal life or career helped to shape your maverick approach to leadership?
Newman: I started my career in information technology, as a programmer, and then became a programming team leader working for an American company in the UK. My boss was a long-time friend and I remember him one day turning to a colleague and saying, “Here's my man.”
I remember thinking to myself: “I'm not your man. I may work for you, I may work with you, but I am not your man.” The incident sort of crystallized my philosophy of management along these lines: by all means, tell me what we need to do, but don't tell me how to do it. By all means, give me advice. But if you then tell me how to do it, I then become just a robot. One of the best managers I worked for told me once, “When in doubt, do the right thing.” And I believe that being your own person helps you do that.
I've taken great care throughout my career to treat people as individuals and respect them as individuals. Yes, we're all paid different amounts of money, because we have different skill levels, but that doesn't make any one of us better or worse than the other. And we sure as hell don't own other people.
Q: Is there a business result you've achieved in your career that best exemplifies your maverick spirit?
Newman: I guess First Direct is the piece that I feel best about. It was just a fundamentally different organization, based around the customer. Geographically, it was based in Leeds, which is 200 miles north of London, just far enough away from headquarters. We had the opportunity, over six to nine months, to build something special and launch it.
An auditor from the bank came to me and said he'd been listening to some of the reps advise customers to move their money from their checking account to a savings account to get a better rate of interest. “Don't they understand that the bank is losing revenue because of this?” he asked. At that point, I realized we'd made it because that's exactly how we wanted to distinguish First Direct—as a customer-centered business. For the bank and the rest of the industry at the time, that was anathema.
Q: To bring us up to your current situation at HSBC, what innovations are you most proud of here since you began managing retail banking in 2003?
Newman: It's been a challenge. HSBC had a reasonable reputation in this (metro New York) market. But we had grown the business by acquisition, rather than organically. So we needed a differentiated value proposition. Most critically, we needed to put all the competencies in place to generate organic growth—the people, systems, marketing, compensation etc. That's taken a lot of time and effort to do.
We have all the capabilities in place now. We feel good about the momentum that we're building. It is all about having a vision and being able to execute.
If you look at retail banking, there are really two parts to it. The mass business is built around systems and analy-tics, much like the credit card business. The harder task involves the relationship part of the business, whether for business or retail customers. This is particularly important with retirement/investment planning.
Our challenge there is providing the financial advice that really should be our forte. Consistently, in all the surveys we do, across every customer base, we find that none of our competitors, including the brokerage houses, really provide that service so the majority of customers use many providers.
We're trying very hard to build a business where we stand out from the competition. And at the end of the day, that can only be delivered by making sure that we have the right person sitting in front of you. And what do we have to do to provide that? I think of three things: we've got to make sure that we have the right individual, in terms of the technical skills; we have to provide training second to none; and, we have to provide motivation.
If we have people sitting in front of our clients who feel good about how we treat them, who know that we only want them to do what's right for the client, then we will win. It might take two years, it might take five years, but we will win because that is the culture that we have. That's a challenge for a lot of our competitors. When you have thousands of branches, it's very easy to adopt a mechanistic orientation.
We will win, but it really comes down to that moment of truth. How does that client feel about the person looking him or her in the eye?
Q: In terms of innovation, HSBC has also gained recognition for its high-yield online savings account. How did that come about?
Newman: To be honest with you, that wasn't easily achieved. A lot of my colleagues in the branch network were asking, “How can you offer a rate of interest significantly above the best rate of interest that we can offer in a branch?” And people from our head office in London were asking, "Kevin, isn't there a risk of cannibalizing a large part of the deposit base? Why aren't we doing this in a country where we have only a few branches?" That, of course, was the approach of some of our competitors.
I would tell my branch colleagues, look, we will offer a rate of interest today with an online account at, say, 3%, and a rate in the branches that is perhaps twenty or thirty basis points beneath that. Your challenge, my friend, is very simple. You have to show the customer you're worth thirty basis points. Do you add any value for this product? The branch network needs to provide services that customers will pay for. And if the customer won't pay for that, then we're going to go online.
That is going to happen in the market and either we react to the market, and we do what's right for the customer, or we don't, in which case, they will take their money elsewhere.
Q: What do you say to the people in London about cannibalization? You might bring in a lot of deposits online but at a high cost to the interest rate margin.
Newman: This is quite a technical issue in terms of the balance sheet but the first thing I would say is we're going to be paid a margin or a price for our service.
One of the challenges with this industry is that there are a lot of sleepy checking accounts and savings accounts out there. I think banks, as a whole, are getting a better margin than would otherwise be the case. But going forward, we need to build a business model where yes, the margins are lower, but the costs are substantially lower as well.
Without getting into the financials, the return on equity on this high-yield online business is extremely attractive and we are providing stable deposits for the overall balance sheet of the North American business.
If I was just attracting “hot” money, of the kind that's here today, gone tomorrow, we wouldn't be achieving anything. But we've worked very hard to build a brand with a long term value proposition so that our customers want to leave their money with us. That allows us to be able to say that the deposits are sticky, which has value in terms of putting assets against them. If we went out and raised wholesale money, we'd have to pay considerably more than the rate of interest that we're giving our customers.
So, I think we've been very successful with the business. We've also launched HSBC Direct in Taiwan, Korea and Canada and we'll be launching it in two or three other countries going into 2009. It's a significant part of our business globally.
A couple of metrics I can mention: to date, we have acquired approximately 650,000 customers at minimal cost to us. Seventy percent of those customers were new to the bank and we're starting to sell other products and services to them. Currently, we are at approximately $11.5 billion in deposits, 90% of those deposits being new to bank. So, only 10% was cannibalized from the rest of the bank.
So, again, I think it comes back to our philosophy of doing right for the customer. If you do what's right for the customer, you'll tend to do well. You've just got to have the commitment to do that.
Q: What advice would you give to other mavericks in this industry?
Newman: I would say three things. First, have confidence in your ability. Second, you have to build a network; you have to build a constituency for what you do. And finally, you've got to put points on the board. The days of saying, “Look, you'll see if I'm right in three years” are over. Nobody's going to wait that long.
What it means to be a maverick in banking... eight stories...
Brad Blackwell
Executive Vice President, Retail National Sales Manager
Wells Fargo Home Mortgage
San Francisco, Calif.
How does a manager in a bank the size of Wells Fargo operate as a maverick? For Blackwell, it means “affecting change when sometimes change doesn't seem to be necessary.”
“The way I approach it is to paint the picture of where we can be in three years or five years,” Blackwell says. “How do we lock up market share not just today but for five years? And to do so, what does our organization need to look like? What type of people do we need? The process helps people see where we are going.”
Case in point: Wells Fargo Home Mortgage reduced its sales force in 2006, a year earlier than most companies. “We did it early and in a way that did not leave the remaining salespeople wondering when the next shoe was going to drop. We are very committed to mortgage lending but could see that originations were going to slow and we had to downsize our infrastructure because it was too big for what was going to happen. What we communicated to our teams was: the best people in the organization are going to get more responsibility out of this. And we've followed through on that.”
Consistent with Wells Fargo's relationship-based culture, Blackwell played a key role in a recently introduced guarantee that if the bank misses a closing date on a mortgage transaction, it will reimburse the customer's first month's payment. “In addition to being a tremendous service-level guarantee for the home buyer, the program is aimed at generating value for our business partners: the realtor who referred the business or the builder who referred the business.”
For Blackwell, collaboration is the hallmark of a maverick: “To me, a maverick is not someone out there making decisions on their own - that's a renegade.”
Geri Dillingham
Executive Vice President,
Chief Operating Officer
North Island Credit Union
San Diego, Calif.
As an inaugural member of the Filene i3 Group, the national credit union innovation team under the Madison, Wis.-based Filene Research Institute, Dillingham is at the forefront of new thinking in the credit union industry. Her own institution served as the national pilot for one of the group's projects, the MatriMoneySM account, a bridal registry account for wedding gifts.
“The annual spend on wedding gifts is an $18 billion market,” Dillingham says. “We did surveys and realized that what people really wanted when they got married was cash but there wasn't an elegant way to ask for it.” The MatriMoneySM account, which is now offered by 40 credit unions, enables engaged couples to request to have cash gifts deposited to wedding registry savings accounts at participating credit unions.
Dillingham has also been instrumental in North Island's service quality initiatives. Since the early 1990's, North Island has utilized the Malcolm Baldrige model for assessing and managing service quality. In fact, in 2007, North Island was one of only 14 companies in the country to receive a site visit to qualify for the Malcolm Baldrige National Quality Award. "We were pleased to have received the site visit," Dillingham says. “But we're not doing this purely to win an award. The real benefit is it helps us simultaneously focus on our employee culture, our member culture and on continuous improvement.”
Such an approach to management is consistent with Dillingham's advice to other mavericks: “Focus on practical innovation. Mavericks must have a strong base of knowledge and ability. You have to know your business first and gain respect from your peers based on what you produce. Then you can be in a position to suggest thoughtful change. Being a maverick without the ability to get buy-in is completely ineffective.”
Brian Edwards
Senior Vice President,
Director of Marketing
Astoria Federal Savings
Lake Success, N.Y.
As a former division one college baseball pitcher, Edwards knows the value of motivating his team. He operates under the belief that “the name on the front of the uniform is more important than the name on the back.” This team orientation was further honed in marketing and sales management positions with Gatorade and the New York Islanders NHL hockey club that Edwards held prior to joining Astoria Federal. These experiences inspired him to develop a strong sales recognition program at Astoria Federal that includes surprise visits to top-performing branches.
“Every month, all of our senior management arrives unexpectedly at a branch that has exceeded goals, giving out cookies and balloons, and then we cater lunch for them the next day,” Edwards says. “Salespeople like reward and recognition. Reward, typically, means incentive payments but I've found that recognition is even more important. Good salespeople want notoriety; they want to be noticed.”
Based on an internal slogan called “PEAK,” an acronym for “Performance based on Enthusiasm, Action and Knowledge,” the recognition program also includes a quarterly newsletter to retail banking staff in which top performers get additional recognition and sales tips are provided.
Edwards credits his father's work ethic with furthering his career, recalling one snow-bound morning from his childhood when his father did everything possible to get to work. “He got into his suit and had me and my two brothers try to push the car out into the street. There was no way that car was going anywhere but it showed he had tremendous persistence. I learned from him that if you work very hard, good things come to you.”
Other advice to fellow mavericks: “Be careful when you're initiating change and be realistic in the way you approach it. But if change is necessary, over-communicate.”
Peter X. Engel
Senior Vice President
M&I Bank
Milwaukee, Wis.
“Mavericks are willing to travel paths that few individuals want to venture and they are not concerned about title or hierarchy,” Engel says. In his view, being a maverick banker also requires belonging to a maverick organization. “Being a maverick does not happen in a vacuum - it requires the support of your management to create new ways of doing business,” he says.
Earlier in this decade, Engel was part of an internal team that developed M&I's sales and referral culture, known as Critical Linkages.ª After more than a year of examining numerous vendors of sales and referral programs, “we ended up implementing our own excellence program,” Engel says. “It's excellence in sales, referrals, lending, coaching and management. It's permeated our whole company and has come to influence how we recruit, hire and train. We augmented our excellence programs with a sales and service system for our relationship managers with customer profile data, leads and pipeline management tools. As we kept developing all of these capabilities, we started to brand it under our Critical Linkagesª strategy.”
Among Engel's current responsibilities, he manages branch network expansion in M&I's new markets, which include Missouri, Kansas, Minnesota, Arizona, Indiana and Florida. Since 2003, M&I has built 52 de novo locations in these markets. Each branch incorporates business line expertise from M&I's mortgage, preferred, private, business and commercial banking services. Engel's task is to leverage Critical Linkagesª to entrench in these new markets the relationship banking culture that has served M&I in its home state of Wisconsin.
This collaborative effort underscores Engel's view that “Mavericks are leaders of teams and they have a great asset at their disposal - influence. They build teams through this influence because of their reputation for straight-forwardness, integrity and by putting the client first and foremost.”
Timothy L. Owen
Vice President,
Commercial Lending
Heartland Bank and Trust Co.
Bloomington, Ill.
Owen is a commercial lender by training and position but one of his most maverick initiatives involved technology. In 2003, he led an initiative to convert all of the lending functions at Heartland Bank to a paperless work environment. But that was just the beginning. The initiative spread through the entire bank within a year and all aspects of Heartland Bank were entirely paperless within eighteen months of starting.
One of the reasons why the bank adopted the paperless environment so quickly was because Owen positioned the project as a source of competitive differentiation in terms of customer benefit rather than purely for internal efficiency or as a “green” play.
“We decided that our program was going to be based on and structured for the most important person in the bank and that was the client,” Owen says. “We didn't just go to a paperless system because it's beneficial for our operations people or even lenders. We knew that if we could make it beneficial for the client, it would be beneficial for everyone else.”
Earlier in his career, Owen had taken the lead in getting his then-employer, a small, Illinois-based savings & loan, to become the first thrift in the nation certified as a Small Business Administration lender. “That was a fun achievement for a twenty-five-year old,” he recalls.
Owen attributes his maverick bent to mentors such as his father, who ingrained in him the virtue of honesty. “An honest answer is the best answer and it really doesn't matter how it's delivered because most people are going to understand the reasoning behind it. Sometimes, brutal honesty is even better than gentle honesty.”
Another bit of advice: “Don't test the waters - dive in. Because, otherwise, you're going to spend your entire career testing the water.”
Kade G. Peterson
Senior Vice President,
Director of Banking Support
Sterling Savings Bank
Spokane, Wash.
About fifteen years ago, a former boss told Peterson, “Boy, you're a maverick.” Peterson wasn't sure how to take that. “At first, I was offended because I thought he meant the horses that wander aimlessly in the Nevada desert.”
Now that he has more experience under his belt, Peterson understands that being a maverick means “building relationships so that you can ask the hard questions” - as opposed to being entirely independent. At Sterling Savings Bank, he applied that understanding to his effort to lead Sterling into image processing, image exchange and remote capture ahead of many of its peers. “For a bank our size ($13 billion in assets), we play with some rather big names,” he says.
Indeed, Sterling was a founding member of Endpoint Exchange LLC and Peterson helped develop the rule set for interoperability between Endpoint and NationsPayment and the merging of that rule set with ECCHO (the Electronic Check Clearing House Organization).
In addition to his leading-edge work with image exchange, Peterson and his team also focus on lean processing - the philosophy initiated by Toyota to redefine business processes to reduce waste and lower expenses. “At a process-task level, we need to ask the detailed questions about why we do something,” he says.
Petersen's views regarding technology adoption were shaped early in his career when he worked for a service bureau that ran software for community banks from a mainframe environment. “The service bureau struggled as many of its clients moved to mid-range computers and personal computers. This first-hand experience taught me how technological obsolescence can impact a firm,” says Peterson. “Having up-to-date technology guides a bank's strategy, improves a bank's margins and helps banks provide great products and services for customers.”
Frank Sottosanti
Senior Vice President,
Marketing Director of the General
Bank & Wealth Management Group
Wachovia Corp.
Charlotte, N.C.
For Sottosanti, being a maverick means being willing to take risks, particularly when a special project comes along. He reaches for a baseball analogy to explain what he means: “When that slow pitch is served over the plate, you can hit a single and get to first base 90% of the time or you can swing for the fences. I always encourage people when that perfect pitch comes along - because they don't come often - that they've got to swing for the fences.”
Some of Sottosanti's perspective on maverick banking comes from his non-banking experience. Before his career in banking, Sottosanti spent seven years with the Coca-Cola Co., where he learned how process and creativity need to work together to create effective marketing.
“I prefer to reinvent processes and business models rather than come out with some wild campaign,” he says. “I believe in process design as an enabler for better creative development. If you take the right planning actions, then the marketing tactics take care of themselves. I've instilled that discipline from my Coca-Cola days here at Wachovia in terms of getting to the right answer at the beginning before jumping off to begin an initiative.”
Putting those ideas into practice involves developing the marketing approach first in-house before turning to the outside agency to develop the creative. “You need to ask: what are the drivers of customer consideration of your product?” he says. “Why would people choose Wachovia over another bank? Then go test that, find out those top drivers and build some creative around them. Once you figure that out, your creative team's job becomes pretty easy.”
“Some marketers get hung up on the creative side,” Sottosanti adds, “but I personally get more energized by the analytical side. And in a banking environment, that works well.”
Julie Dunn Story
President, North Florida Sales
BankAtlantic
Fort Lauderdale, Fla.
An avid skydiver, Story manages her career with the same philosophy she adopts for jumping out of planes: understand that life is a calculated risk and believe in yourself. “Whenever I look at a situation, I evaluate it by asking, what's the worst that can happen? Every time I jump out of an airplane, I understand that the worst thing that can happen is I can die. I'm willing to accept that risk because I'm confident in myself, my abilities and the people I'm jumping with.”
In Story's view, mavericks dare to be different and are willing to blaze their own trail. “Mavericks do the right things for the right reasons, not because someone said to, or because it's always been done that way,” she says.
That kind of attitude is one reason Story has climbed the career ladder to her current position at BankAtlantic. Tackling start-up or clean-up challenges has been a hallmark of her career. “If something's never been done, or needs to be created, that's what I do well. And if something's broken, I enjoy the challenge of fixing it.” For example, Story had an experience with a prior employer of managing a team that opened 31 in-store branches in 30 months.
“When I was hired, I was told it would be 'turnkey,'” she recalls. “Turnkey of what? We interviewed and hired the associates, we created the training program, we built the operational components - we built 80% of it from scratch.”
Never one to shy away from any challenge, Story is now writing a book about leadership lessons she has learned in banking, in life and in skydiving. “I'm tying it to skydiving because business, skydiving, leadership and coaching have a lot in common - and it will be more exciting to read!”
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