THE FOUNDER S MENTALITY - PART 2

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1 Imagine you are the owner of your bank. How would you feel if a competing bank opened a new branch across the street from you? Would you feel happy about the new competition? Most likely not, as that competitor would be hurting your business, and taking money out of your pocket. Now imagine you are an employee at your bank. How would you feel if a competing bank opened a new branch across the street from you? Would you feel the same as you did when you were the owner? At best you may feel indifferent, as the new bank is potentially a good thing for you. With more banks in the area, there is more competition for your services. At the heart of this simple thought exercise is the basic truth that owners of a business feel and act differently than the common employee does. Owners (specifically Founders) are more likely to spend money differently, have a different level of customer engagement, and have a drive to constantly improve the business. In fact, companies that have a Founder still involved in the daily business outperform (by a factor of 3.1) companies who do not have an engaged Founder (Bain Research). It was this simple fact that hooked me into reading The Founder s Mentality by Chris Zook and James Allen. In last month s Human Capital article, we began to explore the concept of the Founder s mentality, and we provided a simple way you could reflect and assess the level of Founder s Mentality that is within your bank. This month we will dive even deeper into the various characteristics of the Founder s Mentality, and provide some tips & tricks on how you can improve it.

2 (Continued from page 16) This is the second book utilized in our Human Capital series reviewing some of the best business literature and research that I have recently found. Most of us don t have time to read many books or journals, and when we do take the time we don't always spend the time afterwards reflecting on how to apply the lessons we learned to our lives and our banks. This is why I hope this series over 2017 will be valuable. Maybe this review and its lessons will inspire you to read the book on your own (and I won't be reviewing books I would never recommend you read). Or maybe you can take these lessons and make some improvements already in your work. Either way, I hope you enjoy learning more about The Founder s Mentality. Our previously reviewed book was Grit: The Power of Passion and Perseverance by Angela Duckworth The Characteristics of the Three Core Attributes of the Founder s Mentality As explained in last month s article, there are three core attributes of the Founder s Mentality: Frontline Obsession, Owner s Mindset, and Insurgency. While these are great concepts to build around, we need to breakdown these big ideas into more manageable characteristics. As a way to make the Founder s Mentality more tactile, Zook & Allen have three sub-characteristics per core attribute.

3 (Continued from page 17) Frontline Obsession In the majority of companies, the Founder was the first sales person, customer service representative, product developer, and order fulfiller. Every part of the customer experience was overseen and obsessed about by the Founder, which makes sense because without a steady stream of customers the small business would fail. Underneath this frontline obsession are three sub traits that companies should have: Customer Advocacy The Founder was the original customer advocate in building a valuable customer experience. This laser-like focus on the needs of the customer is something that should be replicated in all our employees (and not just the customer-facing ones). When your finance department and your operations department are just as focused on the customer as your sales department, then you know you have a healthy frontline obsession. Frontline Empowerment Eventually all Founders realize that they need to delegate responsibilities and empower their frontline. The most successful companies focus that empowerment on improving a customer s experience. Think about your bank. Do you empower your frontline employees to waive fees if they believe that can improve a customer s relationship with the bank? Without empowerment to improve the customer experience, your employees will stop advocating for your customers. Relentless Experimentation As most startups know, you never get it right the first time around. Most products and services are a byproduct of innovation, experimentation, and constant refinement. The most successful companies never become complacent with their core products / services. They are always looking at ways to make them better for the company and better for the bank. Even if it means cannibalizing other parts of their business, companies with a Founder s Mentality never stop trying to have the best product / service possible. Owner s Mindset Surveys conducted by Gallup continually show that only 13% of employees have an emotional connection to or engagement with their company. This is a problem, because companies with a higher level of engagement and emotional connection with their employees significantly outperform those who don t. This is where small companies have an inherent advantage over larger companies. Employees of smaller companies tend to feel a sense of ownership over the company, and through that ownership mindset are more likely to be engaged with the company. Certain traits are as follows: Aversion to Bureaucracy Small companies hate red tape and bureaucracy, but after years of growth, most companies see bureaucracy and standardized processes as a way to handle the growing complexity. While standardization and operating systems are impossible to avoid when scaling the business, you need to make sure they don t become burdens on your business. When assessing your systems, processes, and rules within your bank, ask yourself a simple question: what is the ROI for us doing it this way? Thinking about your operating principles in terms of ROI will make sure you are focusing on the most value adding activities. Bias for Action Inside the mind of a Founder is the simple equation that time is money. Wasted time is time that could have been spent attracting customers or improving the business operations. This bias for action is something that should be instilled in all employees and leaders. Obviously, this does not mean you should make decisions haphazardly or without thought. But it does mean that wasted time is wasted opportunity inside your bank. Who hasn t had a colleague who spends 20 minutes complaining about having the complete a 15-minute task? Strong Cash Focus Founders are extremely focused on the cash of their business, cause it is quite literally their own money. In small companies, most employees also treat the company s money as if it were their own money. But after a certain amount of growth, the mindset can shift to where spending company money is not a second thought. I see this mindset everyday in my current company. Every few months, I buy a few hundred dollars worth of business books for my team, as a way to stay on top of current trends. In

4 3. Promote from Within A Founder s Mentality has to be grown over time, it cannot be part of an onboarding program. While there is nothing wrong with hiring external talent, it does come at a cost. Promoting Professional Corner GRIT: THE POWER OF PASSION AND PERSERVERANCE - PART 2 (Continued from page 18) reality my $400 dollars of books is nothing compared with our annual cost base of $40 billion, but since all my colleagues have the same mindset, those small costs add up quickly to big costs. If I were really committed to cost leadership, instead of buying copies for all my team, I might buy copies to share. Insurgency In the startup phase of a business, sometimes it feels like war. They imagine themselves as a tiny group of freedom fighters challenging the larger behemoths on behalf of their customers. They believed in what they were doing, and they were hungry grow. Certain of the traits are as follows: Bold Mission Belief in the company comes from having a purpose that people can rally behind. This purpose is not found in our P&L statements, nor is it in the paychecks of your employees. A purpose is something heartfelt and something that people are proud to be a part of. How many of your employees see your bank as a source of a paycheck, and how many see your bank as a source of great value for your customers and your community? The point of an insurgent outlook is that this heartfelt mission should be bold. Make it big and aspirational, and not something you achieve in two years. Spikiness Every company has something that differentiates itself from its competitors. Instead of trying to get better where they are weakest, the successful companies double down on their differentiation. They strengthen their strengths, and focus on building their unique value proposition. Companies that spread their focus tend to fail at everything equally. Limitless Horizons Finally, Founders are always working towards the horizon, but as they approach their goals, the horizon shifts as well. The companies that achieved a decade of profitable growth did it by growing outward from their core business. But instead of growth accompanied by complacency of bureaucracy, they were able to scale their business while maintaining their insurgent focus and energy. Fostering the Founder s Mentality in your Bank High performance comes from living the Founder s Mentality throughout all levels of the company. The Bain research found that the most consistently high performers (the ones who had over a decade of profitable growth) exhibited four to five times more characteristics of the Founder s Mentality versus the worst performers. On a daily basis, employees are making decisions as if they owned the bank, and that mindset leads to better decisions for the bank. So what can you do to develop the Founder s Mentality within your bank? Zook and Allen have provided five Tips: 1. Dream Big What is the reason for your bank to exist? What is your mission and your vision of the future? As senior leaders in your bank, most of your can answer this question. But the real test is whether or not your employees could answer it with the same clarity and conviction. In the average company, only 40% of employees say that have any idea what the company stands for. High performance companies have a bold mission and vision that everyone in the company can easily understand and relate to. A standard generic mission / vision is boring and easily forgotten. An inspiring and bold mission / vision is engaging and is something people use to make decisions. 2. Embrace Meritocracy When I heard James Allen speak, he challenged my company to identify the last time we performed a double level promotion. Too often big companies feel more limited by the people processes, and talented people are kept in junior roles for longer then they should be. Founder companies embrace meritocracy and don t let bureaucracy get in the way of performance. Within your bank, really look at your performance management and talent processes. As much as possible remove the red tape, and replace it with a dogged focus on meritocracy.

5 GRIT: THE POWER OF PASSION AND PERSERVERANCE - PART 2 (Continued from page 19) from within continues to grow and nurture an employee s engagement with the bank. The longer a tenure an employee has with your bank, the easier time it will be for them to think and act like a Founder. 4. Simple Targets and Allow for Entrepreneurship Set big and simple targets for your bank, and then enable your employees to achieve the goals. A Founder is empowered to be entrepreneurial and make decisions on how to achieve the goals. Obviously, the entrepreneurship mindset will have some limitations, but within their field of responsibility, each employee should be empowered to achieve the bold mission / vision in a way they see fit. For example, think of the story of Nordstrom s customer service department giving a refund on tires, even though they didn t sell tires. There was no policy saying this was ok, but the customer service department was empowered to achieve their vision of an unforgettable customer experience. 5. Zero Sum Mentality Too often we continue to do something because it is the way we do things, and not because it is the right thing to do. This is called the status quo cognitive bias, as we are biased towards maintaining the status quo and avoiding change. A simple trick to avoid this bias is to do zero sum planning. Instead of thinking about what you will continue (or budget) for next year, take everything back to zero, and begin your plan from there. With everything back to zero, resources tend to flow to the best ideas, not just the status quo. A Decade of Profitable Growth in Your Bank? Leading your bank to a decade of profitable growth is possible. It starts by taking ownership. Success or failure won t be the result of external factors like your competitors, the market, or the overall economy. In fact multiple surveys show that 85% of executives blame internal factors for their company s shortfalls. Your success or your failure is going to come from within the bank. And as the research shows, success is significantly connected with all employees acting like they own the company. The true Premier Performing banks have teams that are united in making their bank great. They work tirelessly to provide an outstanding customer experience, while simultaneously trying to simplify and remove costs from their operations. And in the end, they aren t satisfied. They keep their hunger, even after they achieve exceptional results. While we haven t done the analysis, we believe that many of our Premier Performing banks would also show the attributes of the Founder s Mentality. If you would like to discuss the concepts of the Founder s Mentality and how it applies to your bank, please contact us. We want to help you and your bank achieve Premier Performance, and we believe that investing in your Human Capital is the best way to sustained success. Cary Bailey Findley holds a Masters degree in Industrial and Organizational Psychology and a Masters degree in Business Administration. He has spent the past decade building the Human Capital within two Fortune 500 companies. He currently runs the Leadership and Functional Development department for Maersk and was recently awarded the ranking of #1 development organization in the world by the Association of Talent Development. Prior to that, he was the HR leader for the $1 billion European Thermo King division within Ingersoll Rand. He specializes in talent development, culture change and building HR models to drive business strategy.