By Joe Sullivan, CEO of Market Insights, Inc.
According to the FDIC’s most recent quarterly assessment of the banking industry, banks posted their tenth consecutive year-over-year gain in quarterly net income. Two out of every three banks reported improved net income numbers, and only 18.9% were unprofitable for the fourth quarter of 2011. Yet a constant source of anxiety for many bank and credit union professionals is the question of how and where they will generate profits in the months ahead. Every financial institution today is learning how to thrive in an environment where the consumer expects more for less, while stricter regulations chip away at revenue streams and compliance demands strain resources.
The financial industry overall has done a fairly good job at keeping pace with new regulations and technology. Things have, however, become more complex, more difficult to forecast future sources of profit. Unfortunately, many CEOs and senior managers attempt to improve the profit pitcure through conventional and increasingly ineffective tactics. They rely excessively on cross-selling, cut costs too deeply and manage margins reactively. What many bankers often overlook is the degree to which the rules of the game have changed. They have developed what can be called “profit tunnel-vision” — a condition that causes them to lose sight of a new profit engine in our post-recession economy: purpose and passion.
Admittedly, those two words barely register in the vocabularies of most financial executives. Yet (as Tony Hsieh, CEO of Zappos.com reminds business leaders) too many companies are focused only on the bottom line. When a company forgets about passion and purpose, it actually ends up hurting long-term profitability. In other words, profit is not your purpose, it is by-product — a result, not a goal.
Don’t take this the wrong way. Profit and profitability are fundamental components in any institution’s success. But short term attempts to recover profits will only damage a brand. The marketplace is riddled with examples of strategic missteps made when an organization’s motivating principle is profit above all else. Consider BofA’s debacle when it attempted to implement a $5 per month debit card usage fee. Consumers rejected the effort and abandoned the brand in noticeable numbers. As Fast Company blogger Shawn Parr wrote, “To be clear, making money is absolutely imperative, but it is just one of the outcomes of a successful company.” If you are driven solely by profits you will not look or feel any different than most of your competitors. This article will explain how attention to purpose and passion, as expressed both through your brand and your internal culture, will shape your bottom line.
So what does it mean when I talk about purpose? Let’s first look at it from a first-hand, individual standpoint. What motivates you to get out of bed each day? What’s your purpose? To yourself? To your family? To your friends? To your employer? To your co-workers? When I ask that question in workshops or seminars people often think of “purpose” as some grand principle like the one that animates the lives of celebrities like Oprah Winfrey or Steve Jobs. Purpose does not need to be big and bold. It simply needs to be yours. So choose a purpose, something that will animate you to get up and going every day. This is the motivating driver around which you can organize your day, your department, your bank or credit union, or even your life.
Any number of medical studies point to the fact that people with a purpose live longer. Think about someone in your own family — perhaps an uncle or grandmother, a dad or grandfather — who worked their entire life. When retirement day arrived, did they seem deflated, uncertain what to do with their time? Perhaps they had lost their sense of purpose, and there was nothing in line to take its place? In many such cases, a person’s physical health will actually begin to deteriorate. An individual’s personal sense of purpose can keep them vital, engaged and alive. The same can be said for organizations.
Organizations with purpose also live longer. They survive shifts in the market, and their brand remains relevant to consumers. The challenge in financial services is that many banks and credit unions have little sense of purpose — their actions seldom factor changes in consumer needs and behaviors. Your brand will barely be noticed by the consumer if your purpose is all about profit. Your purpose should inspire, drive innovation and unify your internal culture.
Why do Apple, Google and IBM consistently rank among the strongest brands in the world? These brands weild such tremendous power because their organizations have purpose. Apple’s external message and internal structure is organized around “think different,” an invitation for people to create their world through self expression. Google focuses on the ideal of liberating people through the universal availability of information. IBM has embraced the purpose of helping create a “smarter planet.” These companies connect a clear sense of purpose with their audience, while setting them apart from competitors. Moreover, they tangibly express their brand purpose through their internal culture, something evidenced in the behavior of every employee.
The Harvard Business Review recently explored the concept of “Collective Ambition” within organizations. Simply put, it’s why an organization exists — its reason d’etre — what it hopes to accomplish, how internal team members collaborate, and how the organization’s brand promise aligns with core values. This alignment is real, and the results tangible. In fact, according to one study, fully engaged organizations with a clear internal culture outperform others by 33% in customer retention, and outpace competitors in sales growth by 51% annually.
Purpose-Drive Brands in Banking
There are examples of purpose-driven brands in banking. Take the global banking giant Standard Chartered Bank. During the height of the recession, the bank’s CEO Peter Sands sent senior management on a six month road trip specifically to have conversations with key stakeholder groups — customers, suppliers, regulators, and yes, even regulators — about what makes the bank unique. The common theme which emerged from this process was that the bank was viewed as an ethical partner that was going to be around for the long-term. An ambitious statement for a global bank during the height of a recession, don’t you think? That sentiment, however, inspired the bank’s brand promise: “Here for Good.” As they illustrate in both deed and word, “Here for good is the essence of who we are. It’s about sticking by our clients and customers through good times and bad, and always trying to do the right thing.”
Once your organization’s purpose becomes clear, let it animate everything you do, and don’t lose sight of it. Starbucks is a perfect example. Their purpose has always been to become a “third place,” somewhere between home and the workplace where people could create caffeinated connections with one another. This focused dedication led to their amazing success — with essentially no advertising! Their purpose drove decisions — big and small — as well as the behaviors of employees. But then they lost sight of their purpose.
In the years leading up to its problems, Starbucks had been on an aggressive growth phase, building as many as seven stores each day. This resulted in a dilution of focus. Starbucks was using growth to mask other deeper challenges at the company. When Howard Shultz returned to Starbucks as CEO in early 2008, he acknowledged the company had lost its innovative edge and had much to say about the coffee company’s rejuvenation.
CEO Howard Schultz was quoted saying, “We’re not going to allow growth to cover up mistakes at Starbucks ever again. We’re not going to have unbridled growth that turns into a strategy as opposed to a purpose.” He is spot on.
Howard Schultz understands that a company’s sense of purpose, its adaptability and its skill at executing strategy are what assure profit… and longevity.
So what is your purpose, your organization’s reason for being?
Ask this of your board, your senior management, your staff… even (especially!) yourself. The collective answers you uncover will help you differentiate. The process invariably leads to a realignment with customer needs, saving you from fate.
Passion can take many forms: zeal, enthusiasm, excitement, fervor, etc. Whatever you want to call it, passion is the key ingredient. It’s contagious. It’s what gets people united around a common cause, building momentum for your purpose.
I often ask bankers what they are passionate about. Of course they say something they think I want to hear, like, “I’m passionate about checking accounts.” Yeah, right… I mean what are you personally passionate about? Do you like to ski, run marathons, golf, cook, spend time with family? What?
Embrace your passion, even if you think it has nothing to do with your job, because it actually does. As you express your passion, you discover newfound vigor that transfers energy to other parts of your life — both personal and professional.
The power of passion can be demonstrated through the story behind Clif Bars, a healthy sports nutrition bar created by an avid backpacker named Gary Erickson. In 1992, he was living in a garage with his dog and a pair of skis as his only possessions. On his quest to create a sports bar without all the bad oils and fats, he experimented with various concoctions in his mother’s kitchen until he found the magic recipe. The rest, as they say, is history.
The opportunity to sell the company presented itself. He and his partner agreed that they would sell the company for approximately $120 million to a large food conglomerate. But the morning of the closing of the transaction, Gary realized he didn’t want to sell the company, and couldn’t go through with the deal. His partner still wanted to go through with it however, and expected $60 million. So Gary put himself $60 mil in debt.
He candidly approached his employees, sharing his vision of an independent company. But in order for that strategy to succeed, it would take everyone’s support, ideas, long hours and passion. With the commitment of employees — hikers, runners, health nuts and sports enthusiasts who were themselves passionate about Clif Bars — the company was able to prevail. Employees were drawn to work at Clif Bar because aligned with their own passions. Gary knew that a passionate employee is an engaged employee. In financial services, engagement can turn personal bankers into champions and tellers into superstars.
At a retreat with 150 bankers, I asked people what they were passionate about. What did they find? There were many similarities among their passions, which in turn helped connect the group together. In the same way, a clear organizational purpose can unite your internal culture. A shared sense of collective passion can engage customers in ways that reshape perceptions about your institution. Imagine the cultural shift in your team if you began to encourage and nurture their passions. Studies suggest as much as two-thirds of a company’s profits hinge on enthusiastic employees effectively engaging consumers.
Profit is not your purpose. Find your purpose and let it guide everything you do.
Your purpose is what keeps you (and your business) active, engaged and vital.
Your purpose is unique to you. That’s what makes it difficult to duplicate, and what will set you apart from your competitors.
Your purpose is at the center of your brand position.
Your bank or credit union in particular must address whether its purpose aligns with what consumers need and expect.
Passion animates your purpose and brings it to life.
Awaken your passions in some area of your life and then transfer that energy to the workplace.