Identify Key Lessons from Troubled Times
Signs of an economic recovery are starting to come into view. Are you prepared to seize the momentum? Or is your organization still in a holding pattern as you ride out the storm?Â Those companies that act carefully, but swiftly, will have an unfair advantage in re-building as the economy upswings. But the first step is to pause and reflect on what just happened. You won’t have a better opportunity to identify key lessons that have led not only to your survival, but might be key characteristics that build sustainability into your future business strategy.
This is exactly what Joseph Petrucelli has done as CEO of East Bridgewater Savings Bank, a small community bank near Boston that has been criticized by the FDIC for not loaning enough money. The irony is the private bank, with assets of $135 million, has weathered the financial industry meltdown because of its long-held practice of being stingy in the loans it makes. East Bridgewater has had no foreclosures or even delinquent loans.
When competitors were freely approving loans at a rate of $9 for every $10 in deposits, East Bridgewater loaned less than $3 out of $10 in deposits. Petrucelli is a self-described “paranoid” when it comes to the credit worthiness of borrowers. The strategy has paid off and East Bridgewater has never stopped loaning money while others struggle.
Petrucelli’s determination comes from a key lesson he learned during the 1980s downturn when he was asked to rescue Boston’s Eliot Savings. Eliot Bank had been transformed from a 100-year-old sleepy community bank into a high-growth commercial lending institution with piles of bad loans. Unfortunately, there was not much left to do but close the bank by the time Petrucelli arrived on the scene.
Understanding the changing business fundamentals separates the survivors from victims. Those fundamentals are found when digging deep into your operations rather than relying solely on general market trends:
- Understand what drives customer retention, and focus on customer expansion. Most businesses are trying to keep customers happy today. Few, however, are discussing how to help customers and sales people build new business.
- Get close to your sales force. Learn what customers “want” as much as what they “need.” Talk to the sales force directly to understand the stresses and strains that could provide opportunities for solutions that will help you and your customers to prosper. Just be cautious to make sure you don’t collude with negativity. Focus your team on the opportunities without ignoring the challenges.
- Better yet, get close to your customers. And not just your peers at these companies. Visit the people who actually use your products or services. They are the ultimate influencers who can help define a competitive differentiator for you. Assign an executive sponsor for all your key clients and establish a management routine to talk to them not only about your products and services, but about their own business, their competitors, the trends they are seeing, their challenges, etc.
- Honestly assess your markets. Listen for ideas that may work for green industries, healthcare, legal services, education, utilities, security services or other growth categories. Or evaluate growing geographical regions like Canada, Brazil and Australia. Consider how you can apply what is going on in these growing sectors to your own business. Who is succeeding and what are they doing that you can learn from even if their products and services are dramatically different than your own.
- Understand what drives productivity at every level of your operations. While the claims processor might handle administrative tasks effectively, what could make his task simpler so he can take on more volume? Or maybe Jane could handle more web inquiries if her antiquated computer didn’t crash every hour.
- Talking to the troops should not be positioned as a critique of the immediate supervisor. Rather, position your review as a desire to understand the pulse of the organization so new initiatives can be quickly adopted in the future.
- Be curious. Ask questions across your organization that demonstrates you are genuinely interested. Try “What is the one thing you want changed? What can I do to help you be more successful in your role?” If you demonstrate caring, employees are more likely to truly engage in their work making better decisions and increasing productivity.
- Understand your prime costs and sales drivers. East Bridgewater Savings Bank knew its threshold for lending to keep it out of trouble. What are the key two or three measures that, if achieved consistently, will virtually guarantee success? A rolling 12-month sales average? Operating profit percentage? Accounts receivable aging? Average margin per sales rep? Focusing on these prime figures eliminates the “can’t see the forest for the trees” dilemma when you start scenario planning. And don’t limit your thinking to these drivers to just financial ones. Consider customer relationships, brand perception, company culture, etc.
In the final article of this series, I’ll discuss the next two steps to take after you complete your “lessons learned” analysis: How to define a plan of action, and creating a culture that thrives on adjusting to unanticipated scenarios that will impact your plan. Stay tuned!