FINANCIAL INSTITUTIONS CONSULTING, INC.
http://www.ficinc.com/
June 2, 2004
TODAY'S FOCUS - PETER DRUCKER: THE RULES OF EXECUTIVE CLASS
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By Charles B. Wendel, President
Financial Institutions Consulting
Peter Drucker: The Rules of Executive Class
When Peter Drucker writes a column, EVERY manager should reflect on his words. Tuesday's Wall Street Journal excerpts an article from June's Harvard Business Review in which Drucker outlines eight practices that make an effective leader. When you read his comments consider the degree to which you, or those you work for, emulate these practices.
1. Ask "What needs to be done?" In this context, Drucker mentions Jack Welch's decision to get rid of all GE businesses that did not have a number one or two position in their industry. The issue for bank managers centers on what they need to do, whether in the retail or commercial space, to make their group top performers. In some cases, this requires organizational change, in others the focus needs to be on segmented market approaches. The opportunity for bankers is to articulate what is required and then ensure top execution.
2. Ask "What is right for the enterprise?" Drucker's view is that the"enterprise" has to take precedence over shareholders, executives, or other employees. Simply stated, without the enterprise being emphasized, it may not be there for those constituencies.
3. Develop action plans. Drucker comments, "Without an action plan, the executive becomes a prisoner of events." Yet we have frequently worked with senior bank managers who make decisions and expect them to be implemented without specifying the action steps required and setting out signposts for success. Leaving too much open to interpretation often leads to failure or ineffectiveness.
4. Take responsibility for decisions. In particular, Drucker focuses his comments on taking responsibility for hiring decisions and making the changes required. Historically, banks have been very slow to fire or to move a banker to a position more suitable for his/her skill set. Today, the best performing banks take a frank look at the capabilities of their bankers and make the necessary changes. For example, the traditional corporate banking RM role is being reexamined at multiple banks. As that job definition changes, managers are finding the need to deal directly with capabilities shortfalls that previously had been ignored or hidden.
5. Take responsibility for communicating. Two-way communication is critical for effective decision-making and action implementation. In Drucker's words, "Effective executives make sure that both their action plans and their information needs are understood." Communication also has to be consistent and clear. We find that repetition of the same message is critical to getting bank managers to accept that a proposed change is serious and inevitable rather than a "flavor of the month." One of the worst mistakes is assuming that one-time communication (or even two- or three-time) has been effective.
6. Focus on opportunities, not problems. Drucker: "Unless there is a true catastrophe, problems are not discussed in management meetings until opportunities have been analyzed and properly dealt with." In part because of their risk management orientation, bankers are exceptionally good at detailing why a new initiative will not work. This includes both employee and customer issues. Drucker's point is that focusing on the upside of change should be given greater priority.
Within banking today, dramatic changes are occurring in retail, small business, and commercial banking. Some of these changes provide "shocks to the system", but they are necessary because of the changing nature of the customer and competition. Bank managers need to ensure that important strategic initiatives are not marginalized by focus on near-term problems and tactical roadblocks.
7. Make meetings productive.
Drucker mentions that most executives are in some sort of meeting more than
half of their business day. I think that underestimates the time that bankers
spend in meetings. But some players, like GE, operate meetings with a clear
discipline and focus. They start on time, accomplish what they can, create
a "parking lot: for further consideration", and end the meeting
on time. Conversely, many of our clients operate with a sloppy meeting discipline.
Meetings start late and end without clear accomplishment.
8. Think and say "We." Drucker explains, "This means
[successful executives] think of the needs and the opportunities of the organization
before they think of their own needs and opportunities. This may sound simple.
It isn't, but needs to be strictly observed."
Our experience supports Drucker's view that the best managers operate from a company-wide perspective rather than thinking of their own world. I met yesterday with a senior banker who commented that she greatly admired her boss because he was ethical, put the customer first, and insisted that the institution operate as one. More top bank managers are doing what is right for their entire institution rather than for themselves.
Unfortunately, while the situation is changing, not enough of these excellent managers exist. A silo mentality continues to cripple many financial institutions. Frankly, we see silos breaking down or gone in most retail areas. The corporate areas of banks, whether large or small, are often highly siloed in orientation. Many of these bankers view themselves as a breed apart from the rest of their bank; we view them more as the last people standing at the Alamo.
Final Comment.
Take a moment to assess yourself
and your organization in each of these areas. Of course, no one organization
is likely to follow each of the practices. Consider where the gaps occur and
also consider the costs, both for your company and, more important for yourself,
of doing nothing to close that gap.
BAI's Small Business Seminars
Sharpening your organization's focus on the small business customer can result in increased profitability.
Plan to attend (or send your small business manager to) BAI's new Small Business Seminars:
Leveraging Branches and Alternative
Channels to Improve Small Business Banking (June 28-29, 2004, Chicago,
presented by Charles Wendel, President, Financial Institutions Consulting)
&
Effective Small Business Prospecting and Sales Management (June 29
- 30, Chicago).
View or download the brochure:
www.bai.org/pdf/smallbizseminars2004_broch.pdf
To register for the event: www.bai.org/events
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ABOUT FINANCIAL INSTITUTIONS CONSULTING
FIC is a strategy consulting firm addressing issues related to growth and profitability for financial services clients. We emphasize practical, bottom-line results based on quantitative and qualitative research and an in-depth understanding of industry dynamics. For more information about our consulting services or if you have questions or comments, please e-mail info@ficinc.com.
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