Jeff Judy

Jeff's Thoughts - November 7 , 2012

Make "Can We Work Together?" Your First Question, Not An Afterthought

Many smart banks develop alliances or affiliations that help them provide more complete service. They may have legal, accounting, financial planning, and other services available from trusted resources, whether that's via a formal relationship or a more informal practice of regular referrals.

Meanwhile, the economy being what it is, and our industry being what it is, mergers and acquisitions continue, with banks joining forces one way or another in the hopes of producing better returns for the time and money invested. A colleague of mine who is dealing with a few banks in this situation recently commented on how overwhelmingly numbers-driven some of these merger decisions can be.

Both of us have seen banks join forces and, frankly, flop. It is not unusual for two banks with good numbers to decide that greater "economy of scale" would turn them into profit powerhouses. But when they sign on the dotted line, they enter a long period of stagnation.
What goes wrong? "Number blindness", kind of like "snow blindness", has set in, meaning that focusing only on their spreadsheets has blinded them to other key elements in creating an effective combined organization.

And chief among these elements is culture. When two organizations have quite different ideas of "how we do things around here," slamming those cultures together sets off a seemingly endless series of struggles. Those struggles are felt in every area of the organization, whether we're talking about administrative (and cost-saving) efficiency or smooth dealings with customers.

On a smaller scale, you run into the same things with alliances with other services. You may assume that you should be joining forces with the most successful, say, accounting or legal firm in your market.

But if they have a very different approach to working with customers than you do, you might be better off finding a smaller player who's more in line with your values and practices. If their ideas about what an alliance or partnership means differ widely from you own, especially in terms of keeping in touch with one another and evaluating mutually beneficial strategies and practices on a regular basis, any gains you make from sharing customers with them will be eaten away in wasteful, and stressful, efforts to overcome your cultural differences.

I am sure just about every banker (or former banker, who has moved up the org chart) can remember a customer who was technically profitable, but a bad investment of time and energy. Those customers look all right on a spreadsheet, but eventually you realize you spend so much time wrestling with them, or responding to unreasonable requests, or just struggling to get simple things done that you could easily make the same return off a couple of customers you could manage in half the time.

The same things happen with partners and affiliates. And it doesn't much matter what your agreement says on paper, because whether or not you work well together is something that happens later, when real people try to do things the way they've always done them, and difficult choices have to be made. The smaller the differences between cultures in the first place, the less frequent and less challenging those choices will be.
Whether you are looking at an informal business alliance or a full blown merger, I know you'll run the numbers.
Just make sure you run a "cultural audit" of both parties before you make a decision that may lead to very disappointing outcomes for some time to come.

More About Culture

I have spent many years consulting with banks on culture issues, and I strongly believe that a "tight" culture underlies the results achieved by the most successful banks. For more of my thinking on this topic:

  1. Visit my "Culture Issues" page for an overview of the issues and of my experience in helping banks get a handle on their cultures.
  2. For more insight into how culture makes a difference, use the link on that page to download my "Culture Matters" article spelling out "Six Common Misconceptions about Corporate Culture that May Be Holding Back your Business".
  3. If that convinces you to pursue culture in more depth, drop me an e-mail at, or call me at 952-903-0113, and ask for my 20-page white paper on "How Tightening Your Culture Can Make You More Nimble, More Resilient, and More Successful." (You can learn more about this paper and download a preview from my Culture White Paper page.)
  4. If you'd like to explore a formal culture assessment for your bank, visit the Assess Your Culture page . You can download a copy of my Culture Assessment Planner, or contact me to discuss options.

Far from being a "soft" issue, few things contribute more to sustaining success over the long term than your institution's culture. Make sure you understand, and actively manage, your culture for the best possible outcomes.