A collection of observations, ruminations, predictions and random thoughts from Cornerstone Advisors.

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June 22, 2015 by Ron Shevlin Ron Shevlin

Clearing Up The Strategy Fog


Do you know the strategy of the bank or credit union that you work for?

a) Yes
b) No
c) This is a trick question, right?

If you chose a), congratulations! Self-deception regarding life’s realities is a great coping strategy. You won’t go far in life, but it won’t matter because you’ll convince yourself that you did.

If you answered b), don’t feel bad. You’re not alone, and it’s really not your fault that you don’t know your firm’s strategy. I’ll explain that further in a minute or so.

If you picked c), you’re a true gonzo banker, and I share your pain.


A blurb on Harvard Business Review’s website reported the following:

Employees don’t know your strategy

Surveys suggest that 50 percent of employees don’t have a clear understanding of their company’s strategy. What’s worse, that lack of knowledge is even more pronounced for sales and service employees. Frank Cespedes’ article for ThinkSales “outlines the issues and explains why withholding information about strategy for competitive reasons often results in greater risk for the business.”

If we suspend rational belief for a moment–an easy task for those of you who chose a) above–and take the purported results of these surveys as representative of the banking industry, then it raises an important question:

Why do 50% of employees NOT have a clear understanding of their company’s strategy?


The HBR blurb implies that employees don’t have a clear understanding of their firm’s strategy because their company intentionally withholds information from employees in fear that competitors will get wind of it. I don’t doubt that there are many execs who want to keep their firm’s strategy a secret from their competition.

But I would argue that there is another, and much more prevalent, reason why half of employees don’t have a clear understanding of their company’s strategy:

The company doesn’t have a clear strategy.


When asked what their firm’s strategy is, there is no shortage of bank and credit union execs who say, “our service.” Sometimes they even throw the word “superior” in there.

Does that mean: “We fix our mistakes better and faster than the other guy!”? Or “We have friendlier people than they do!”? Can they quantify this alleged service superiority? Oh wait! I know! They mean they’re more “convenient” than other banks. Uh huh.

In reality, the default strategy for many banks and credit unions is: “We’re not them.” Where “them” are the mega-banks that the CFPB (Civil servants Fixed on Punishing Banks) would have us believe are evil.

Many people believe that Peter Drucker said it best when he said, “Strategy is as much about figuring out what you won’t do, as it is about what you will do.” Few people, however, seem to like my corollary: “If you don’t figure out what you won’t do, you’ll find yourself in a lot of doo doo.”

I bet those 50% of employees who don’t have a clear understanding of their firm’s strategy have no clue what their firm won’t do.


I remember an incident a few years back (OK, a lotta years back) when I was a junior IT strategy consultant. The project team and I came back to the home office after interviewing execs and collecting data. The partner in charge asked the team, “So…what’s their IT strategy?” And we unanimously said, “They don’t have one.”

The partner nearly exploded, “Of course they have an IT strategy! It might suck, it might be poorly formulated, it might be poorly communicated, but damn it, they have an IT strategy! It was your job to figure out what it is!”


It’s not an employee’s job to figure out the firm’s strategy. Unless, of course, that employee is the CEO. The CEO’s job is to figure out what the strategy is, figure out if it’s the right strategy, and if it isn’t, to correct it and develop a new one, then communicate it, and execute on it. Actually, that’s just one of the CEO’s jobs. What a sucky job that is, eh?

Did you catch all the pieces? Let’s go through them again:

  1. Current strategy definition (what is our current strategy?)
  2. Current strategy assessment (is our current strategy working?)
  3. New strategy formulation and planning (what should our new strategy be, how will it be different from the current one, and what will we actually do?)
  4. New strategy communication (how do we communicate the new strategy and avoid mass mutiny?)
  5. New strategy execution (or, as Shia LaBeouf would say, “JUST DO IT!!!!”)

To appease the Harvard dude, we can modify #4 to read “How do we communicate the new strategy…without letting our competitors know what we’re doing?” I think his contention, however, is that this isn’t an important addition in the scheme of things. And I agree.


There is something else that bugs me about the HBR blurb. To refresh your memory (and save you from having to scroll back up), it said:

“What’s worse, that lack of knowledge (of the firm’s strategy) is even more pronounced for sales and service employees.”

This is a serious misinterpretation of the data.

The problem isn’t that sales and service employees don’t know their firms’ strategy. The problem is that they feel the pain of a poorly defined strategy more so than bean-counters sitting in headquarters.

It’s the sales and service folks who have to tell customers “no” because their bosses tell them to, because their incentives are structured in such a way that they personally profit by not giving customers what they want, or because their company has inferior products or services for a particular client or prospect. And, in the back of their minds, while telling the customer “no,” they hear that little voice reminding them what their company’s alleged strategy is. What a sucky job they have, eh?


So here we are at a certain point in time.

But at some previous point in time–namely, that point in time when the last strategy formulation effort took place–it’s a good bet the then-current strategy wasn’t defined and adequately assessed. And after the then-new strategy was formulated, it’s a good bet that the then-new strategy wasn’t clearly communicated, nor has it been perfectly executed.

And so the sins of the past hurt efforts to determine the strategy of the future, because few firms take the time, and expend the effort, to clarify their current strategy, assess it, and figure out if it was design or execution that is causing the under-delivery of promised results.

As a result, the senior exec team may think it knows what the company’s strategy is, but in reality, it isn’t what the plan created last year–or two or three years ago– says it is. 

This leaves many companies in what can best be described as a

STRATEGY FOG: A state of being in which an organization is unable to clearly see where it is, how it got there, where it’s going, and/or where it should go.


As we look ahead a few short months to the start of the 2016 planning season, many firms–namely those who don’t read this post–will once again repeat the sins of the past, and ignore steps #1 and #2 (and, to a large extent, #4) of the five easy pieces to strategy.

With better clarity regarding the current strategy–and an understanding of why (and to what extent) it is and isn’t working–developing and communicating a new strategy (and how it will be different) becomes a helluva lot easier.

But that still leaves an important question unanswered: How well will the firm execute on the new strategy?

If your organization wasn’t particularly good at executing on the previously-defined strategy, what kind of wacky weed are you smoking that makes you think the company will be good at executing on the new strategy? If you don’t do an honest assessment of capabilities–in the context of the firm’s strategy–you cannot answer the question I just posed.

Bottom line: Strategy formulation is a contextual exercise. That is, it happens within the context of a firm’s current strategy. Without clarity of the current strategy, future strategy development is bound to be flawed. Without this clarity, you may be stuck in a Strategy Fog.


Filed under: Retail Banking, Strategy

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June 16, 2015 by Ryan Myers Ryan Myers

Establish Your Seal Team 6: Use Data to Leverage High Performers

The notoriety of Seal Team 6, also known as the Naval Special Warfare Development Group (DEVGRU), hit center stage in recent years with missions all over the world resulting in publicity, books and movies. The team comprises the Navy’s best of the very best. It is so exclusive that the highest performers have to be invited just to participate in an exhaustive tryout that lasts several months. Once on the team, they are furnished with the best equipment, much of which isn’t available to anyone else such as the stealth helicopters used in Pakistan. This effectively maximizes the production of what is arguably the most talented military unit in the world. Does anyone think that’s unfair? Of course not. The Navy is just employing a system to get the most out of the team. So then why is this type of practice not utilized within more operations?

This is part of a notable lesson that hit home for me several years ago when reading Good to Great by Jim Collins. Part of his research involved asking managers whether they would assign a talented individual to a high performing operation that hadn’t yet reached its potential or a low performing operation in an attempt to turn it around. The best managers consistently said they would assign the individual to the high performing operation because it hasn’t yet reached its potential. The Navy has employed this strategy with DEVGRU and, as a result, accomplished some of the most significant international events in history.

Application in Bank Operations

Interestingly, this lesson plays out in very impactful and quantifiable ways within other operations by exploiting the difference between high and low performers. Years ago I analyzed this theory in a collections call center for one of the mega banks. The hypothesis was a similar question:

Is it more beneficial to assign the best collectors to high risk accounts?

The intuitive answer is “yes,” and this approach has become the norm for many. As it turns out, that’s about the least effective method possible. Although the high performers had better collection rates than lower performers on all of the accounts, they had the least significant improvement on the highest risk accounts. The sweet spot was on accounts where there was more opportunity for better results. This makes sense when you consider most of the high risk customers simply aren’t going to pay no matter who talks to them. The same was true on the other end of the spectrum. There’s no sense in assigning the best collectors to the absolute lowest risk accounts because someone accidentally missed their due date. They’d make a payment even if Jerry from IT called them by accident.

In the collections analysis I found that the highest performers had better collection rates by several hundred basis points on the segments with the most opportunity – and especially better results when compared to the low performers. The analysis projected a reduction in net loss of about $6 million and approximately $400,000 in additional revenue annually. That’s huge savings for one department, even for the villainous mega banks. The real kicker is this: it was achievable with staff that was already in place. It takes some work and analysis to set up, but a lot of value is added just by properly utilizing existing resources.

I encountered another opportunity to leverage the theory behind maximizing the strongest performer for the same collections department – only this time it didn’t involve employees. In order to elicit higher response rates to mail campaigns, the bank frequently experimented with varying letters, envelopes and delivery methods to delinquent customers. The most effective method (by far) was using FedEx and, despite the high cost, it still proved to reduce losses better than any other option. The practice was used on thousands of relatively high risk accounts every month and resulted in a FedEx budget that ballooned to about $10 million per year. I was tasked with finding ways to reduce the budget by 15% within one year. The catch, of course, was that the changes couldn’t increase the losses on the portfolio.

My team spent months analyzing the data and ultimately had a breakthrough by identifying the segments of accounts that had the most opportunity. Similar to the difference between high and low performing employees, the FedEx delivery method was more effective on all types of accounts. However, also similar to the previous example, there were particular account segments where the success rate increased much more than others. Ultimately, we switched to lower cost, less effective mail campaigns on multiple segments that had lower returns and introduced FedEx to a smaller population where it would maximize the impact. Not only did we exceed our $1.5 million expense reduction goal within the same year, but we did it without increasing the loss rate on the portfolio.

Let’s take a step back from the exciting world of collections and understand this principle is applicable nearly everywhere. Jim Collins focused on big companies making big strategic moves, but the concept can be applied to maximize performance at the lowest levels of an organization. Every bank tries in a halfhearted way to cross sell when customers call into customer service. Yet how many use data to systematically route calls with high cross selling potential to representatives with the best sales skills? Remember how this small operational change can result in markedly improved sales performance.

Assemble Your DEVGRU

Think about the team aspect of the Navy Seals and the differing roles members play during a mission. Here’s a wakeup call for bankers: you are not maximizing the performance of a team just because you maximize the performance of the individuals through performance incentives. One Navy Seal completing his role does not make a successful mission. The opportunity for maximum team performance starts by identifying the high performers along with the medium and low performers in the process. Although this may seem straightforward, most bankers would be surprised how much hormonal bias they bring to the evaluation of staff. Instead, use data, data, data!

Having good data in a call center really pays dividends when employing a new process. A manager might think Marco is the cream of the crop because he hits the most home runs, but the data could show Jane is the real winner because she regularly gets on base. Simply put, if managers took a bit more time to gather and analyze data, they would achieve better results 90% of the time. This fact-based approach is not only important in identifying the right people; it also has the potential to build career progression, and good metrics keep the pay for performance in check.

Equip the Team to Kill It… Figuratively

Once a bank has taken this smart approach to assembling and developing teams, managers can then equip the high performers with the tools to maximize their value. In a call center environment, this generally means assigning them to the appropriate outbound segment and similarly routing the most valuable inbound calls to them while providing good contact management and workflow software. Ideally, a bank would use data-driven scoring models to manage these staffing queues, but even smaller operations benefit from a less complex process.

The right team with the right tools and proper motivation create an atmosphere that improves itself. Not only do the numbers look better, but performance is improved with minimal (if any) incremental investment. How often does that opportunity come around? Plus, with more ambitious usage of data and talent management strategies, GonzoBankers get the added bonus of telling stories about how they maximized performance by developing a military-like special operations team. So, GonzoBankers, you may not get the worldwide attention like DEVGRU, but you’ll be sitting pretty at the quarterly executive meetings. Use the data, build the team, equip with tools and kill it!

 How to Build a Banking DEVGRU

  1. Plug in to Cornerstone Advisors’ database of peer benchmarking comparisons.
  2. Identify areas to improve performance, increase revenue and reduce expenses.
  3. Implement best practice growth disciplines across all business lines.

Visit our website to learn more about Cornerstone’s Performance Solutions or contact us today to get started.

Cornerstone Advisors


Filed under: Best Practices, Operations, Strategy

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June 3, 2015 by Terence Roche Terence Roche

Five Things Somebody in the Bank Better Know

“There are only two kinds of people who are really fascinating: people who know absolutely everything and people who know absolutely nothing.” —Oscar Wilde

Gonzonians, one of the realities of banking in 2015 is that there’s just a lot more to know than there used to be. Pick a topic: changing consumer behavior, new technology, industry disruptors, new payments players, vendors, products—and on and on. Nowadays, if I skip even a week of reading the trade rags and following blogs/posts/announcements, I’m already falling behind in my knowledge of what people are doing or trying to do.

One of the challenges we see facing managers is that when they are done dealing with daily issues, regulatory changes and fraud/loss challenges, all of which is never-ending and important, there’s just not a lot of energy and time left to dig into the detail of industry innovation.

I have for several years looked for the person and the role in the bank that focuses on understanding and explaining new trends, channels, disruptors, behaviors and everything related to change. This role does not easily fit into traditional organizational charts and job descriptions. Is it not really clear, for example, who should be responsible for being able to talk about successful sales through web sites. Could be Sales, could be the Electronic Delivery group, could be Marketing—but it is not obvious. So, just because we’re here to help, I have come up with two new future titles for the financial institution: Chief Officer of Knowing How Things Work, and Head of Digging Up What’s Going on Out There.

I’m kidding about the job titles. Sort of.

The fact is that financial institutions need to build a stronger discipline of research (or “scouting”) that focuses on future delivery trends, well before they are mainstream. Then, there needs to be a more formal process and mechanism to decide when/how to respond. Conferences, vendors, research groups and snotty consultants are all good sources of information, but it is the bank that is accountable for translating that into a response. One trend, even if it is way on the horizon, should be looked at and discussed regularly at management meetings.

So, putting the organizational issue aside for a moment, let’s discuss five examples of questions bankers should be able to answer right now, like today.

1. What is the best online borrowing experience a customer can have, and how close are we to it? In every planning session Cornerstone conducts and at every conference we attend, there is agreement that in five years half or more of our loan applications, and therefore half of fundings, will originate through digital channels. And we can all agree that the online marketing and fulfillment experience we can provide will determine how well we compete for that half (or more) of the business.

Question: does the management team know the best practice online borrowing experience to aim at? Is it a goal of management meetings to understand this and learn from it? It should be. There are several online lenders that have shown an impressive ability to sell and fulfill digitally and at a lower overall per-loan cost than banks. Lending Club, Funding Circle and OnDeck are just three examples. They need to be understood. Not because they will put banks out of business, although Lending Club’s $300 million/month in originations is nothing to sneeze at. Rather, it is because they are building a delivery model that has many things banks should emulate and take advantage of. Somebody needs to have this assignment.

2. What channels do our high-profit customers use to bank with us? It’s interesting. Almost all banks know at the bank level what their transaction mix is by channel and what new account activity occurs outside of branches. They also have profitability systems that show which customers make them the most money (and, in fact, one thing that has not changed in many, many years is that 20% of customers produce at least 80% of the profit). So, has the bank put these two things together? Are the channel preferences of the people that make the bank’s profits known? Management should be able to see and plan based on this information. We very seldom, if ever, see that report. Bottom line: It is important to know what banking preferences millennials have, and we do all seem to obsess about it. But it is a deal-breaker not to know the same thing for the top-tier profitable customer.

3. What is coming to us through our ACH files? This is becoming a big payments question. We all know that PayPal uses ACH to bypass the Visa/MasterCard rails. We all know that MCX, if and when it is live at retailers, will attempt to do the same thing. Those incoming ACH files that used to be payroll and direct deposit (saving you processing costs—good) could in the not-too-distant future be chock-full of transactions that used to come through the debit rails (taking away debit revenue—not good).

4. How do our wealthiest customers manage their money? Are we at all relevant in that? In an American Banker poll last year, 25% of community banks said that expanded wealth management services and related fee income were very high three-year priorities. Twenty-five percent! Man, that’s a lot of wealth to go find. So, let’s take a look at the wealth management customer you are targeting. Do they use online management tools? Do they call for advice? Do they still buy face-to-face? Are they willing to pay the big stinkin’ transaction fees because they value the bank’s wisdom, or is the bank competing with TD Ameritrade for a $9 fee? Most importantly, do we know what advice they will pay for? Many bankers have the gut wisdom of front-line salespeople, but that needs to be augmented with good, hard data.

5. How does our customer debit usage compare to best practices? Are we getting the fee income we should? This is an example of a very real fee income opportunity. My colleague Bob Roth works with many of our customers on improving payments revenue, and it is astonishing how much more fee income many bankers could make by just hitting peer penetration and transaction levels. We’re often talking hundreds and thousands of dollars a year. The good news here is that Visa, MasterCard, networks and debit processors all have great reporting and information about banks’ portfolios—cool. But it is information that a lot of banks don’t ask for or read, ever—not so cool.

Bankers that can’t answer these questions need to figure out how to do so. Then they should ask and answer five more. Then repeat. We have lots of questions to share for the banks that need more. We’re here to help. Or poke.

Seriously, bankers—make this a part of your culture.

Ask 5. Answer 5. Repeat. 

Does information management play a role in all of your technology investments?

It should.

Cornerstone Advisors can show you how use information management to make informed technology investment decisions.

Visit our website or contact Cornerstone today to talk about smart Technology Planning.

Cornerstone Advisors

Filed under: Branch Sales & Service, Cards & Payments, Commercial Banking, Commercial Lending, Consumer Lending, Marketing, Mortgage Banking, Retail Banking, Strategy, Treasury Management, Wealth Management, Web & Mobile Banking

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