Accentuate the Positive in Strategy

A consulting colleague of mine focuses on executive coaching. She works closely with senior executives in leading them to consider their strengths and weaknesses and establish a plan to address negatives while building off strengths. She does not try to transform people or turn them into someone they cannot be. As part of her diagnostic work she often begins by conducting “360 degree” interviews, whereby she meets with a client’s direct reports and the client’s boss in order to develop a fact base about the person. She discusses with interviewees her client’s various attributes in order to create a vivid and in-depth picture of the individual’s character.

FIC and other consultants often conduct similar examinations for bank clients when we do what is commonly called a SWOT (strengths, weakness, opportunities, and threats) analysis. We then review the results with senior management, frankly, often emphasizing the negatives rather than the positives of an organization. However, banks are more likely to build off their positives and improve what they’re doing now as opposed to letting the negative feedback encourage them to go in entirely different directions. Going forward, banks need to better assess and understand those strengths and exploit them, while selectively adding on new capabilities.

Focusing on Strengths

As my colleague, Liz Bentley writes, “Research and social psychologists have discovered that focusing on strengths is a more effective strategy for self-improvement because it leads to higher performance, greater productivity and increased satisfaction. Plus, leveraging your strengths can actually improve your weaknesses. That’s because your strengths and weakness are more closely linked than you may realize.” For example, arrogance is the negative extreme of confidence, inflexibility may be the negative side of being systematic and unreliability is the flip side of spontaneity.

Banks need to assess their own positives and work with them to distinguish themselves from other players. Particularly today, banks and their line bankers appear to be in the doldrums, bummed out by a slow economy, proliferating regulation and often antagonistic internal support staff (who firmly believe that they are both smarter than line staff and that they protect the bank from line activities). Yet, banks also have tremendous strengths and offer great value to their customers that banks need to understand, celebrate and exploit.

The commercial banking industry as a whole has done a dreadful job of communicating these positive qualities to the general public, who lump them in with ravenous investment bankers and hedge fund operators. It is not too late for the industry and individual banks to stress the positive. Consider that:

Most bankers care about their customers. Despite the bad recent publicity and the negative PR of “too-big-to-fail” (TBTF) banks, most bankers are thoughtful, caring, and helpful. I see this from the inside as a consultant as well as from a customer perspective. The company I bank with is one of the worst among the TBTF players and yet the bankers I deal with are terrific despite their mediocre leadership.

Bankers possess high integrity. OK, maybe not investment bankers, but the commercial bankers I have worked for and with operate with the highest ethics. Unfortunately, the crimes (and I mean crimes) of some in combination with disastrous media coverage (usually accurate) have eroded some of the public’s confidence in banks and made the industry a piñata for regulators. Commercial bankers have allowed this to happen by their insufficient response to the recent financial crisis.

Banks have fueled the growth of America. It is no coincidence that banks and baby boomer wealth have grown together; they are co-dependent. While many non-bank competitors are now picking away at bits of bank market share, banks are still incredibly important and will continue to be so. The industry and individual banks need to do a better job at communicating this. They also need to adjust to the diminishing importance of baby boomers and the increasing prominence of Gen X and Y.

Banks excel at risk management. Even with their recent problems, banks, large and small, have developed excellent risk management procedures. While many continue to overemphasize the use of technology in making decisions, the state of risk management has never been better. Investors should more fully appreciate the improvements that banks have made.

Banks learn from their mistakes. Really, they do. But sometimes they let the sales/credit pendulum swing too far over to credit conservatism once mistakes have been made. That’s where we are now at with many banks, although the need for revenues is starting to force change. Some banks have redefined their “credit box” too narrowly to meet the needs of many consumers and small businesses, which frustrates customers and opens the door for credit unions and other nonbank competitors.

Banks offer significant expertise. Even banks without specific industry lending groups possess expertise in certain areas, whether manufacturing, construction, lending to high-net-worth clients or other specialties. These strengths can be further exploited to differentiate the bank from others and to allow, in some cases, for a pricing premium. However, bank management often seems unaware of in-house knowledge and incapable of exploiting it.

Some of these positive characteristics are “soft” and cultural while others can be more directly translated to a stronger bottom line. Management needs to acknowledge its individual strengths and determine the path required to take them forward. This demands a continual focus on execution, a skill that few banks possess.

Focusing on the negative, whether related to banks or people often results in people shutting down and not learning from criticism, no matter how valid. As Ms. Bentley writes, “Focusing on strengths will lead to greater success and a strong signature presence. For continued self-growth, examine your characteristics, acknowledge your strengths, identify where your equator is so you don’t go south (meaning fall into the negative side of a characteristic), and work to constantly uncover blind spots. To put your best self forward stretch out of your comfort zone to reach new heights.”

Focusing on strengths also needs to be balanced by reality. For example, banks that have been excellent at customer service but mediocre at sales need to understand that and determine how to maintain a core capability while building the weaker area. This is an era in which stretching out of the comfort zone has become critical to success as demographics shift, customers become more independent and traditional loyalty may be undergoing some fundamental challenges.

Banks need to revisit and rethink what many term their “value proposition.” As a matter of course, bankers used to stretch to help their customers and distinguish themselves from others. Now, many operate within increased constraints, disappointing customers and providing an opening for nonbank players. Management needs to reflect on the characteristics that encourage customers to value them and work to reemphasize the operating philosophy, energy, and action steps behind those characteristics.

Mr. Wendel is president of New York City-based Financial Institutions Consulting, Inc. He can be reached at [email protected].