Leading for Growth

How Umpqua Bank Got Cool and Created a Culture of Greatness

Raymond P. Davis, Alan R. Shrader

• Publisher: Jossey-Bass
• Year: 2011
• Print ISBN: 9780787986070
• eBook ISBN: 9781118047231
• Edition: 1
• Topic: Business
• Subtopic: Leadership
• Index: Business

How any business leader can create an atmosphere of competitiveness for exceptional growth

When Ray Davis took over the local 40-person South Umpqua Bank in 1994, many people in the industry poked fun at his insistence that employees answer the phone with a cheery "World's Greatest Bank." Eleven years, $7 billion in assets, and 128 branches (or " bank stores" in Umpqua lingo) later, the moniker seems quite apt. Other banks scratched their heads when Davis sent his tellers to Ritz-Carlton to learn customer service and were intrigued when he hired a cutting-edge design firm to completely re-think retail layout. Now, with a top design award under their belt, a name change (there never was a North Umpqua bank), and a completely new definition of the banking business, Umpqua has become the darling of the entrepreneurial press and a growth powerhouse. The New York Times calls Umpqua " Starbucks with tellers."

Ray Davis (Portland, OR), named by U.S. Banker as one of the 25 most influential people in the financial industry in 2005, is President and CEO of Umpqua Holdings Corporation. Alan Shrader (Moraga, CA) is an experienced writer and editor of business books.

Part One

Prerequisites for Relentless Growth

Many ingredients are needed to take a company on a path of sustained and relentless growth. It takes talented people, strong marketing, precise execution, the right metrics, and much, much more. I’ll give you my take on these growth ingredients later on in this book. My view is that all these factors don’t matter a whole lot without strong, effective leadership. So that’s what I am going to focus on first.

Leading for Growth Starts with You

If you are leading a company large or small, or a profit center in a larger company, you need to realize that it all starts with you. It doesn’t all depend on you. (Only an egomaniac would think the company’s success all depends on him or her.) But make no mistake, as a leader, it all starts with you. That’s why I call this section of the book prerequisites for relentless growth.

If you don’t have what it takes, if you don’t focus on the right things in the right way, then I don’t care what great business plan you have or how big your line of credit is, you are probably going to stumble somewhere along the way.

What are the leadership prerequisites that you need to master? I think they boil down to five key essentials:

• You have to cut through conventional wisdom and figure out what business you are really in.

• You must develop the self-discipline to stay true to your plan in the face of conventional wisdom and other obstacles.

• You need to generate the positive passion that comes from a clear vision of your future.

• You must make it clear to your people that you are personally involved in leading them through the changes ahead.

• You have to develop the ability to find out what’s going on behind your back to ensure your strategies’ being implemented effectively on the ground.

These five key responsibilities belong to you as a leader. They cannot be delegated. That is why I say it all starts with you.

Chapter 1

What Business Are You Really In?

Industry publications write about Umpqua a lot. And they usually say nice things, remarking on our strong growth, our return to shareholders, our reputation for being cool and quirky, and our unique organizational culture. But these articles almost always insert a comment that irks me. No matter how positive the article is, it almost always says something like, “Umpqua Bank calls its branches ‘stores,’” as if the word store is a gimmick. They humor us by putting store in quotation marks, as if real grown-up bankers wouldn’t be so silly as to call their branches that. But it’s not a gimmick. It’s part of who we are and how we see our business. They don’t understand that it’s a huge, even dinosaur-sized, part of the reason they are writing about us in the first place! It’s part of our unique culture that they extol.

Why do we call our facilities stores rather than branches? Because we understand what business we are really in. We’re in the retail service business, which to us means we sell banking products and services to the public in our stores. In this chapter, I explain exactly what I mean by that and why it is so important for you to understand what business you are really in.

Business Not as Usual

It is too easy to look at your company and say, “we’re in the banking business.” (Or in the tire business or the computer business.) You will never break free of the hold of conventional wisdom with that kind of thinking. And if you can’t break free of conventional wisdom, you’ll never break out of the pack—you’ll never create a competitive edge that separates you from your competitors.

To illustrate how a lack of understanding of what business you are really in can do to you, just consider Steve Jobs and Apple Computer.

Back in the early 1980s Jobs thought that his company was in the computer business, specifically the computer hardware business, and that it could prosper by selling better computers than its competitors. And for a while, that worked. Then IBM entered the picture, along with its then-partner Microsoft. In 1984, Apple tried to jump ahead by introducing the first point-and-click operating system with its revolutionary new line of Macintosh computers—a great leap forward that was much easier to use than Microsoft’s cumbersome DOS system. But unfortunately, Jobs never realized that the business was changing and that he was now competing in the software business. He and his successor John Sculley kept the Mac operating system proprietary and used it only as a way to sell Apple’s hardware.

Apple thought it was competing against IBM, Compaq, and the other PC clones when it was really competing against Microsoft. When Microsoft copied the look and feel of the Macintosh system with Windows—and sold it to every comer—Apple’s goose was cooked. Of course, Apple faced many hurdles—who knows what might have happened if Jobs hadn’t been forced from the company? But it’s my firm opinion that if Jobs had understood early on that he was really in the software business, we probably wouldn’t know Bill Gates as the world’s richest man.

So understanding what business you are really in is absolutely critical to success.

“Okay,” you might say, “that’s an extreme example from the early days of a revolutionary new industry that was growing exponentially and whose landscape was changing daily. I’m in a mature industry that’s growing slowly, even in good years. How does that apply to me?”

Well, it applies to you in spades! And Umpqua is living proof. After all, banking is a mature business if there ever was one—banks have been around for hundreds of years! Walk around any city, any small town, and you’ll see a dozen banks in a few blocks. And don’t talk to me about growth! When we started to reinvent Umpqua Bank in 1994, our market was in the midst of profound economic slump. The economy in our region was rooted in the timber industry—and just happened to be the home of the Spotted Owl and a strong environmental movement. Talk about total lack of synergy. The economy was at a standstill, our market wasn’t growing, and yet we found a way to make Umpqua grow, moving from third in market share to first in just three years in our home market. How did we do it? For starters, we had to kill conventional wisdom in the company. We had to stop our people from thinking like bankers and get them to think like people in the business we were really in: retail service.

Most businesses are run on conventional wisdom, and they struggle to get by. Every quarter it’s the same story. Are we meeting our numbers? Are sales up? You cannot grow your business by feeding it conventional wisdom. And you cannot grow your business if all you are doing is worrying about your numbers—because then you are not honing a strategy to seize the future. As the new leader at Umpqua, my first job priority in reinventing the company was to kill the conventional wisdom that had guided the company for forty years. The bank’s board had hired me to take this small company and make it grow. Together we decided to seize the future.

But let me go back to the beginning.

You cannot grow your business if all you are doing is worrying about your numbers.

Seizing the Future

When I was contacted about running Umpqua in 1994, it was a small community bank in rural Oregon with $140 million in assets and six small branches. It was called South Umpqua State Bank, even though there wasn’t a North Umpqua State Bank. The previous CEO had retired, and the board was looking for a change. The bank was at a crossroads. It was a solid bank and well respected in the small communities it served. But it wasn’t really going anywhere, and by continuing to practice the purest definition of insanity (doing the same thing over and over again while expecting different results) the company was doomed to go nowhere and in fact its future would have been doubtful. The big banks smelled blood and were sniffing around, looking for prey—in our world, acquisitions.

When the board interviewed me for the CEO position, I told them that if they wanted things to stay the same, I wasn’t their man. But if they wanted to employ a strategy that might have a good chance of creating shareholder value, then I might be a candidate. Fortunately for me the board realized that if they were serious about creating value for the shareholders and improving the overall intrinsic value of the company, they would have to support dramatic changes in how it operated, marketed, hired people, and the like. In fact we had to reinvent the entire institution, and build it around the principles and practices of the business we were really in. The board bit the bullet and took a chance with me—an unproven character from Atlanta, Georgia.

Before coming to Umpqua I had run a bank management consulting firm and dealt with CEOs from all sizes of banks across the United States. I learned a lot in dealing with all these different bankers. In fact, it was like attending graduate school. I learned what not to do, from helping people fix some of the stupidest mistakes they could have made. I also picked up some pretty good ideas. But overall, I was amazed by the lack of creativity at the top levels and felt that I could take my ten years of consulting experience and put it to work in a small bank with a well-defined market and hopefully create something interesting.

Here’s why.

What had struck me during my years of consulting and traveling around the country, going to all these different banks, was how similar they all were—and how bland. You know from your own experience that the typical bank is quiet, cold, and boring. It has ropes to keep people in line, empty desks, and stale coffee. You can see how bored the people in line are. Often the tellers aren’t much more animated. Sure, you’ll get a shy smile and a weak “thank you,” but two minutes after you walk out, you’ll have forgotten the whole experience. I could put you down in almost any bank in the country, and you’d know right away you were in a bank, but ninety-nine times out of a hundred you’d have no idea what bank. They are all the same. I started to think that if you created a bank environment that was distinctive, attractive, and inviting, with great customer service, you might be able to give your bank an identity that people would respond to.

Think of your own business and industry. What do you and your competitors do that is boring, stale, or bland? Is there something that is numbingly similar across every company, including yours? If so, you have a great opportunity.

Think of your own business and industry. What do you and your competitors do that is boring, stale, or bland?

I also realized that we would not be successful in differentiating Umpqua with resources, people, computers, locations, saturation-marketing campaigns, you name it. We were a tiny outfit; the big guys had bigger guns—they had already won that battle. And I knew full well that bank products are for the most part commodities. Sure, different banks will have slightly different loan terms, savings rates, and check colors, but they are all similar. So I felt there was little to no opportunity to have Umpqua stand out with products. Even if we were capable of creating a new and exciting product, I knew it would be copied by a competitor down the street within a few days.

I got together with my management team and we started asking ourselves questions: Why would somebody want to bank with us? Here we were in a depressed market, competing against all the big national players as well as credit unions and other community banks. How were we going to stand out? How were we going to get people to drive by two or three of our competitors’ branches to bank with Umpqua? We realized that we had no answers to these questions as things currently stood. If we wanted to grow, we had to create answers to these questions.

If you sell tires, it’s the same question, why would somebody want to buy tires from you? Why wouldn’t they just go to the nearest tire store? Why would someone be inconvenienced and drive past two stores to get to your store? These questions were critical to our survival.

Think about your business. How do you stand out? Why should someone do business with you over another competitor with virtually the same products and services? How are you differentiating your department, division, or company so you stand out from the pack? How you answer these questions is critical to your survival.

I frequently tell people that the radical changes that we were going through began with a motion picture that played only in my head. It was always very specific in that it had a beginning and ultimately a happy ending that showed where we wanted to go—but the middle, which showed how we were going to get there, was always changing as the movie played out in my imagination. It depicted (to me at least) what it would be like to walk into a bank that people did want to hang out in, that was exciting, that was, just maybe, even a little bit cool. The movie that was playing in my mind was fuzzy around the edges at first, but one thing I saw clearly was the potential to significantly differentiate our company from our competitors and allow our customers and clients who entered an Umpqua store to know right away what bank they were in—Umpqua! Through this crazy little movie I had already started to think of Umpqua as not just another bank, but as something else entirely.

I kept playing that movie in my mind, over and over, people walking into a bank that was exciting and made them want to linger a while. Where do people hang out? Starbucks, of course. Lots of people also like to go to the mall and hang out at Nordstrom or the Gap. But those were very different businesses. Or were they? And that’s when I started to focus on the larger picture of understanding ...

Table of contents

• Title Page
• Copyright Page
• Dedication
• Introduction
• Part One - Prerequisites for Relentless Growth
• Part Two - Roles of a Leader
• Part Three - Master the Basics
• Part Four - Marketing, Marketing, Marketing
• Part Five - Leading Your Culture
• Conclusion
• Acknowledgments
• The Authors
• Index