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Why Do Some FIs Thrive Regardless of Economic Conditions?

July 13, 2012

By Philippe Asselin, Vice President of Business Development at FMSI

When things go in an undesirable direction at a financial institution, typically the top leaders are held accountable for the organization’s performance.  These senior level managers at a bank establish the organization’s overall strategy, which should influence each system and process put in place.  These proven systems and superior processes should put them in a position to win, even in tough times.  But why is there such a varying degree of success when different institutions implement the same system or replicate the same process?  What is the cause for this disconnect at a company?

As we ponder these things, it begs the following question:  Are great business results a reflection of the system itself, the environment, the employees, or the commitment from senior management to be a driver of critical systems?

I believe the leaders carry the most importance.  Specifically the idea of senior level management being the drivers who make sure a system or a process is not only implemented but also that it is being utilized properly—a point clearly explained in the third part of the below quote:
“I define leadership as having three parts: first is seeing what needs to be done to make things better or seeing a problem that needs fixing; second is having the vision, the skill, and the wherewithal to change the system; and third is the most important task of mobilizing the energy of others to organize and act in ways to achieve that vision.” (Herman)

As aforementioned, the success of companies trying to implement a proven system varies greatly. I propose that it is the leader’s ability to identify innovation as it relates to their company’s unique situation and stay involved to make sure it is carried out—which leads to success.  The following quote helps elaborate this distinction, and it is from a college drop-out who eventually turned his company into one of the most influential and profitable companies in the world:

“Innovation distinguishes between a leader and a follower.” –Steve Jobs

Innovation can come at a high cost though, and unless you have unlimited resources it can cause the competition to outflank you on price.  As Henry Ford once said “Competition is the keen cutting edge of business, always shaving away at costs.” Innovation is a great mantra so long as the costs do not run you out of business.  With this in mind, it is very easy to understand why executives decide to steer clear from risky innovative approaches.

So what does it all mean?  How does it help an instiitution if a leader takes a more active role in making sure a system is successful?  An allegory I will now share helps to keep it simple for me, as the complexities of leadership can get us all lost in a sea of theories that seem to work only in the vacuum they were created in.  A man named “Joe” had the opportunity to go for paddle board exercise on the ocean with an elite Special Forces member.  The two were out for a casual paddle at first, until the Special Forces member asked Joe if he would like to race.  Joe knew he would probably lose, as he was not in as a good a shape as him, but thought it might be fun to try.

To no surprise from the moment the race started, the Special Forces member pulled way ahead of Joe.  Was it his stroke, the board, or the engine- being him, that caused him to effortlessly pass?  Joe marveled at his ability to cut smoothly through the choppy water and finish way ahead of him.  He wondered what it might be like to be that disciplined and be that effective with his stroke through improved technique.  Surely he would become a much faster paddle boarder.

The Special Forces member looked at Joe and complimented him on a great race.  Joe said, “Your board is much better than mine.  I seemed to waiver off course because my board wasn’t designed to track well.”  He replied, “Let’s trade boards then and see how it goes.”  Joe, a bit winded, reluctantly agreed.

At the start, Joe was ahead- he was tracking better, and the board was lighter.  Towards the end however, the Special Forces member pulled away from behind and beat Joe.  The Special Forces member shared that his board did in fact track better than Joes, but that Joe needed to learn how to read the other influencing factors to make the most use out of the better board or it will be only as good as the engine paddling it.  An epiphany came about for Joe when thinking about his company— he thought he could also improve his business with the same enhanced approach.

In other words, it was the driver that really made the difference in the race, not just the board’s ability.  Results were attained not merely with a flip of the switch on the new board or system, but with a disciplined driver who knows how to act upon the actionable business intelligence provided.  Don’t let excuses allow your competitors to win or your leaders to lose, and don’t rely on outdated or unreliable business intelligence that does not give you the complete picture, or give you just the results within your four walls.

References:
Herman, Susan J. (1942-2009), Keynote speech, “Leadership, the Holocaust, Genocide, and Education,” Hildebrandt Award Presentation, Cohen Center for Holocaust Studies at Keene State College (NH), 20 April 2009
Henry Ford Quotes. Brainy Quotes.  Retrieved June 28, 2012 from http://www.brainyquote.com/quotes/authors/h/henry_ford.html
Steve Jobs. (2012, June 26). In Wikipedia, The Free Encyclopedia. Retrieved 18:22, June 28, 2012, from http://en.wikipedia.org/w/index.php?title=Steve_Jobs&oldid=499491772

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