ESSAY ONE
Teamwork in Financial InstitutionsâDoes It Really Matter?
Michael J. Castellana
CEO, SEFCU
Not only do effective team-based behaviors âmatterâ in financial institutions but a case can be made that they have, and will continue to, predict success and failure. It is well documented that the functioning of a team has a direct and significant correlation to achieving its stated goals. For any particular team, the case for a positive correlation is short and indisputable. But what happens when an organization is an ecosystem of independent and often competing teams? Such is the case for most financial institutionsâboth those that remain today as well as those that have become casualties of industry evolution and business cycle disruption. In such an environment, teamwork may be the difference between thriving and ceasing to exist.
Most financial institutions are balance-sheet driven, with organizational structures dictated by line of business that further align with financial statement category. For example, there will likely be a lending division with component reporting units for commercial, retail, and residential products. The aggregation of the individual obligations of these products will appear on the company's balance sheet as commercial loans outstanding, auto loans, credit card loans, and so on. Often the balance sheet and income statement become the de facto report cards of the institution.
Supporting these âbalance sheetâorientedâ divisions will be teams from areas like human resources, facilities, information technology, customer service, debt recovery, and more. A financial services organization could easily have twenty-five or more balance sheet divisions below the corporate level and a like number of support divisions. As you visualize the organizational chart, each of these divisions will be made up of multiple teams with more granular objectives in support of their respective business units.
Unfortunately, the organizational chart will resemble the classic row of silos with a corporate ring at the top. Most business units, regardless of size, are managed through measurable and clearly defined metrics. These metrics within one silo should cascade down from the divisional lead and help define success for each individual team. While seemingly simple within the divisional silo, the metrics of one silo often come at the expense of another silo or of those support teams referenced above. For example, the real estate lending team has a metric on loans originated, and clearly more is better. However, the loss mitigation team has a metric related to delinquent loans where one bad mortgage boosts the metric in the wrong direction by hundreds of thousands of dollars. The typical conflicts in success metrics for silo component teams in financial institutions could fill this book. Wall Street and Main Street are littered with the names of once proud financial brands that could not coordinate the tension among individual, team, and divisional success metrics in such a way that it created a win vertically (divisional), a win horizontally (across multiple divisions), and a win corporately (mission-based attainment).
It may be illustrative to look at my own institution and our methods in dealing with silo conflict. SEFCU is a $2.4 billion credit union serving many of the population centers in upstate New York. We were chartered and have operated in an uninterrupted manner since 1934. We have more than forty branches, 750 employees, and two wholly owned subsidiaries (a mortgage bank and an insurance agency). While we have many of the structural characteristics detailed above, we attack silo conflict through a shared sense of purpose and a focus on corporate culture. The combination of these elements and a âjust do the right thingâ approach to empowerment provide the decision-making guidance necessary to overcome silo conflict.
We have adopted a âbanking with a purposeâ (BWP) business model. This overarching approach has four pillars, starting with our employees, followed by our members (customers), then our community, and finally our business partners. We elevate our employees to the top of the priority listâif they are not ready, engaged, and working together, the rest of the model fails. We then address the needs of both our current and future customers. We also contribute a minimum of 20 percent of our net income to our community in a variety of forms of philanthropy. This approach gives the prior two pillars (employees and customers) something to take pride in and an opportunity to be part of something much bigger than themselves or their divisions. Finally, we have a programmatic approach to working with our business partners to ensure they benefit from their association with the SEFCU ecosystem. For each of these four pillars, we have success metrics that define both organizational and team success.
We have fostered a six-point corporate culture, including member service, teamwork, continuous improvement, change management, fun, and wellness. While non-numeric, this âway of doing businessâ is reiterated in both word and action at all levels. These elements define how we will operate on the inside of SEFCU's four walls.
BWP + Corporate Culture, SEFCU-Style, become the lens through which we can identify, measure, and react to team success metrics horizontally, vertically, and at the corporate level. Our not-for-profit approach mutes an overemphasis on balance sheet success metrics, and our relatively small size provides for a more narrow structural height and depthâagain giving us a better chance to overcome silo-based team metric conflict.
In sum, we recognize that if we do not properly promote teamwork throughout our ecosystem, we lose. At our financial institution, we use our mission, business model, metrics, training, incentives, structure, culture, decision making, and even physical space arrangements to promote collaboration and a sense of shared purpose. When it comes to financial institutions, teamwork matters.
ESSAY TWO
Do Teamsâ Leaders Really Matter?
COL Casey Haskins
U.S. Military Academy, West Point
Sooner or later, every discussion about teams leads to the topic of leaders. People believe that leaders matter a great deal and that leadership is the main factor in determining a team's performance, for good or bad. Part of this belief appears to be inborn; across cultures, people defer more and give more weight to authority figures than to others. But much of our belief in leadership is acquired as well, soaked up from our culture, especially the stories we tell. In our stories, leaders often play a dominant role. They are the heroes, and the notion that they are the most important members of the team is drummed into us as children. Very often, the people telling the stories are leaders, too, whether parents or teachers or preachers. Leaders tell stories of other leaders, and we absorb the lesson that leaders matter. It's no surprise that the âgreat manâ theory of history still dominates in most people's thinking. While it has been criticized for millennia, its central idea has never been dismissed.
We typically assign the credit (or blame) for important events to leaders, even when we know intellectually that those events were largely beyond their power, and in spite of knowing the critical roles others playedâeven when it's clear that the contributions of the rest of the team were probably at least as important as the leader's. In our minds, for example, it's still Abraham Lincoln who won the Civil War. Never mind the contributionsâup to and including deathâof literally millions of others on the Union side. Never mind that Lincoln himself wrote, âI claim not to have controlled events, but confess plainly that events controlled me.â Logically, we realize he was correct, but still it was his sheer persistence and determination that won the war. This just feels right. It's how the world worksâhow we think it does, anyway.
Recently, though, a number of researchers have started to question this received wisdom. They've asked how much leaders really do contribute and whether teams would be better off with more shared leadershipâor even with no leaders at all. The debate they've sparked now comes up regularly during discussions about teams and discussions about leadership. And the truth is the revisionists have compiled a lot of evidence to support their view that leaders matter less than we think. Most leadersâthe evidence is quite clear on thisâare pretty average. Replace one and an organization will soon resume its previous course. While the team's satisfaction may go up or down, its overall performance will change very little. In fact, some studies show that the difference between highly rated CEOs and poorly rated ones is, at most, a few percentage points in the company's performance. Why all the fuss then?
Here are two reasons leaders really do matterâjust not always in the ways we think.
The first reason is that looking at averages is not the right approach. We do it almost automatically, assuming that leaders will be normally distributed: that is, that leader talentâand therefore leaders' resultsâwill look like a bell curve. Identifying the curve's center and how far it's spread (its variance) will therefore tell us a lot. However, this is a mistake. Talent is indeed (at least approximately) bell-shaped, but results are not. Rather, they are distributed according to a âpower law.â While we are correct to expect a bell curve of leader talent, that's really irrelevant when judging the impact they have. We should look for an exponential curve insteadâa very different propositionâand we should pay much more attention to the extremes than to the middle.
This dichotomy between a population (normally distributed) and the results of that population's interactions (distributed exponentially) is typical of complex systems. Results of complex interactions always follow a power law, even when the things that produce them don't. In a now-familiar example, although measures of general talent in the population approximate a bell curve, income and wealth are exponentialâa fact that provoked Occupiers' protests against the privileged â1 percent.â
In a power-law distribution like this, we should expect that most leaders won't make all that much difference, a few will make some difference, a handful will make a really big difference, andâonly occasionallyâone or two will have an impact profound enough to shatter the status quo.
And, at least in the Army, that does indeed describe what we see.
The Army is an interesting place to study leadership. In many ways it's the closest thing to a controlled experiment we can find: lots of identical organizations doing nearly identical things in very similar circumstances. Usually, the biggest difference between those organizations is the leaders who are put in charge. But despite all their similarities, some teams achieve markedly different results. Part of that difference can no doubt be ascribed to circumstances and luckâbut not all of it. Too much is consistent and predictable to be random chance.
When we look deeper, we find, as expected, that most leaders do matter a little, yet their time in command doesn't have much of an impact one way or another on the team's performance; it's more a question of style than dramatically different results. Yet there are a few leaders who consistently make a big difference in every unit they're assigned to. Some of them improve team performance significantly. Sometimes a bad leader slips through the cracks and has an equally dramatic effect, but for the worse. Taken altogether, the size of effects leaders have on their teams is not bell-shaped but exponentialâand it's usually the ones near the end of the curve who make it into the history books.
Arguing, as the revisionists do, that leaders don't matter because the average leader doesn't make much difference to the team's performance, is like arguing that the stock market doesn't matter because most days it doesn't move much, or earthquakes don't matter because they're typically too small to be felt. Both arguments are true, but both miss the point.
This brings us to a second reason why leaders matter more than other members of the team. Success and failure are not symmetric. To a leader, they are not just two sides of the same coin. That's because leaders cannot succeed by themselves. Success requires the whole team. A leader can work hard and do all the right things: build a good plan, develop the members of the team, inspire them, put in place the right incentives, and find a good balance between empowerment and control. Still, at the end of the day, success comes down to execution on the part of lots of individual team membersâand to luck.
Dwight Eisenhower prepared two press sta...
