Jeff Judy

Jeff's Thoughts - April 10 , 2013

When CEOs Go To School

As a trainer and as a consultant, I work with all levels of banking staff. With bank leadership -- Directors and C-suite management -- I'm more likely to be in a consulting role. With commercial bankers and underwriters/analysts and support staff, I'm often in the classroom teaching them sound credit fundamentals.

But I have noticed something a little surprising of late. When I step in front of a classroom to deliver those sound fundamentals to front line banking staff, I can often look out among the participants and discover several CEO or other executive staff in my audience.

Curious about this trend, I've chatted with these unusual participants during breaks and after sessions, to explore why they are there. On the one hand, I tend to assume they already have good credit fundamentals, that they would not be in leadership positions if they had not already proven themselves. On the other, if they really do not have extensive knowledge in the credit arena, well, let's just say that many CEOs are not terribly comfortable showing what they do not know in front of lower level employees.

Some of these executives in my credit classes, perhaps a third of them, admit that in fact they are not intimately familiar with some key aspects of credit. Generally, that's because they did not come to, say, the CEO position through the credit function. They may have been highly successful in other roles, and when they assumed their leadership position, they recognized that they needed more knowledge to provide guidance and supervision to their credit staff. They didn't want to learn all the answers. They wanted to learn enough to ask the right questions, and to be able to evaluate the quality of the answers they receive.

A larger portion of these executive participants, however, actually have good experience in credit operations. So what are they looking for?

Generally, they tell me that they are feeling uncomfortable about the discipline, the consistency, the rigor with which their credit decisions are being made. Things are getting just a little loose, even a little sloppy. These CEOs want to reset standards, if you will, and many of them are aware that some things have changed in the years since they sat at a loan desk. They need to have confidence that they understand the very credit principles and practices they will expect their staff to apply.

So that explains the intellectual reasons they are in my class, the knowledge they are looking for. But more important, for CEO and other high-level participants in my basic credit classes, are the leadership reasons for being there.

How many times have you encountered experienced credit staff, longtime loan officers or senior lenders, who are complacent in their knowledge of credit practices? How hard is it to get the "old hands" to change their ways, to shift their standards?

That resistance does not hold up very long when your CEO is willing to admit to needing a refresher on the fundamentals. How much more committed will the front line staff be to what they learn in the classroom if their bank's boss is sitting in the back of the room?

Knowledge of how to do credit right is certainly of value to bank leadership. But when CEOs admit what they don't know, when they publicly show their support for learning common, sound practices, when they give their most valuable resource -- time -- to credit training, that example benefits the entire institution.

That's leadership.