The Power of Positive Peer Pressure in Banking [Podcast]

Dallas Wells, Chief Success Officer at PrecisionLender, sits down with Jim Young to discuss the positive powers of peer pressure - beginning first with its role in the Montgomery Bus Boycotts, where it helped a social cause spread. They'll also explain what it looks like in a bank when peer pressure is helping positive habits form - and how your bank can use peer pressure to achieve positive outcomes.

"On a playground, peer pressure is dangerous. In adult life, it's how business gets done and communities self-organize."

 

Helpful Links

• The Power of Habit - Overview (3 minute video)
• Rosa Parks: Networks and the Power of Weak Ties - Blog (2 minute read)

Podcast Transcript

Dallas Wells: Hi, and welcome to The Purposeful Banker, the podcast brought to you by PrecisionLender, where we discuss the big topics on the minds of today's best bankers. I'm your host Dallas Wells, Chief Success Officer at PrecisionLender. With me in the studio today is Jim Young, Director of Communications. Thank you for joining us.

Recently one of our Client Success Managers, Megan Vick, decided to start a book club at PrecisionLender. Jim and I were both put into a group assigned to read "The Power of Habit," by Charles Duhigg. I won't get too deep into it. I'll just say that it was a fascinating read. Several times we came across passages that we thought could really be applied to banks. The one we're going to talk about today is the Montgomery Bus Boycott: how habits helped turn the protest of one woman, Rosa Parks, into a social movement.

First, some quick background: Rosa Parks refuses to ride in the back of the bus, gets arrested, becomes the moment that ignites the first big protest of the Civil Rights Movement. So much has been made of Parks' role, but we were struck to find out that she was far from the first person to be arrested for refusing to give up her seat, but this time it stuck. Obviously Martin Luther King had a lot to do with that, but so did some peer pressure. Jim, can you outline Duhigg's explanation for why peer pressure was such a critical part of Montgomery Boycott, and why he feels it's key to other such movements?

Jim Young: Yeah, it was interesting because he goes through and first he outlines that Rosa Parks had all these connections to all these different parts and different groups within Montgomery. That was a key part of it. Obviously Martin Luther King, Jr. is a huge part of it as well. Then he said, "That's not enough." History is filled with situations in which there's been a small, one-time protest, and that's about it. How did they start this thing, get the ball rolling, and keep the momentum? What he says is it's actually this concept of what he calls weak ties; not the strong ties, like you know Rosa Parks and so you're going to support her, but rather you are maybe a member of Rosa Parks' church or you're a member of a social organization that Rosa Parks is part of, and the members of that organization, some of them are participating in the protest, and you feel, in order to maintain your status in whatever group that is, that you should participate in that.

That's how those weaker ties ... You don't really know that person, but through peer pressure, you're then compelled to participate, change your behavior--and, in this case, obviously, we're talking about habits--change your behavior, change your habits in order to again maintain status within that group. One of the examples Duhigg uses outside of that is why you would ... All of us have a situation in which someone we know only loosely asked us for a little bit of help about a job. Do you know someone at this company? Can you let them know I sent in my application? You don't really know them, but you choose to help them, and you do that because it's sort of part of this ... You're in this loose network of friends, and you don't want to get that reputation as the person who doesn't do that sort of thing. Even though that particular person ... You may not care whether they like you or not, you care about your status within that group.

Now, what does all that have to do with banking? We're not advocating ... This is not a podcast to set you guys up for social protesting. Really, there's a pivot here, though, that makes sense when we were talking about it in book club, and we said, "You know what? This does sort of apply to banking." Dallas, can you kind of explain how you can apply the lessons of Montgomery to, say, relationship managers?

Dallas Wells: Yeah. I think there's a lot of banks that are wrestling with some of these issues where I think this will be helpful. The biggest place that we see peer pressure, in general, being a useful thing is change management. Banks all over the world right now ... We're past the financial crisis. Financials have recovered. It feels like the regulatory winds have shifted, so essentially the trends are all positive for banks, and so a lot of them are saying, "Okay, it's finally time to invest in our business again." Rising interest rates help that a little bit, too. There's some money in the coffers. With that comes the moving of people's cheese. You're changing processes. You're changing tools out from under them.

Jim Young: Right.

Dallas Wells: Sometimes these very large, historically slow-moving organizations ... You have to get many people all of a sudden to stop what they're doing and do something else. Bankers, like all human beings when you get right down to it, we're kind of all junior high kids at heart. We want to do what the cool kids are doing. We don't want to be associated with the wrong crowds. Using peer pressure the right way is actually a really smart management tactic. The banks that we've seen be most successful in making big changes to processes or to technology, to culture, they use peer pressure to their advantage, even down to tactical things of ... I actually just had a conversation with a bank this morning.

They asked about incentive comp plans, and can't you use all this data that you guys have to pay lenders to get them to do something? The answer we always have is "absolutely!" There's lots of our clients that do that. We're happy to help with it, but there's a baby step in between that is a lot less effort and actually has, in many cases we've found, a bigger impact, which is you have the data. You have who's doing what, in terms of production. Next Loan Committee Meeting, put that ranking up on the wall. You don't have to point anybody out. You don't have to give special prizes. You don't have to make a big to-do about it. Those at the top of the list swell up with pride a little bit. Those at the bottom of the list get shamed, and they want to know, "What can I do to move up that list?"

Jim Young: You don't need to offer a Cadillac in that situation?

Dallas Wells: Correct. Everybody loves the pink Cadillac that you can earn, but the real power is, and what changes people's behavior is, "I don't want to be singled out for the wrong reasons. I do want to be singled out to be seen as" ... Everybody loves the ranking, right? They want the recognition that goes with that. That peer pressure is just as big, or in many cases a bigger motivator than ... Especially how most banks end up actually putting incentive comp plans in place, which is--guess what?--another really complicated spreadsheet, and you're measuring them on 15 different metrics, two of which they can control. The other ones are all bank related. If all goes well, the change in their pay is 3%.

Jim Young: Right.

Dallas Wells: It's not a meaningful number. That happens either quarterly, if they're lucky, more likely at the end of the year. Is that going to change day-to-day behavior or is, "Man, next week I have another committee meeting, and that list is going back up on the wall. What did I do this week that we're measuring?"

You can change what your measuring. It can be, yes, loan production if you want to do cross-selling of deposit accounts. Who sold the most of those? Who made the most cold calls? Simple little things, whatever behavior you want to measure. Bankers have this tendency, too, we want to measure it, and we'll maybe tell each individual how they did. Maybe it will be stored in sales force or something. Publicize. You use peer pressure to your advantage. Some of the folks on my team are probably listening to this, being, "Now I get what he's doing."

We track projects and who's working on what. We make that public. The number one goal is transparency, to see who's doing what. The number two goal is if you didn't do what you said you were going to do for six straight weeks, everybody sees that, right? I don't have to get onto anybody. They get onto themselves because, again, the peer pressure. They don't want to be seen as letting their coworkers down. Those basic tactical things, I think, can apply lots of ways in banking.

Jim Young: Yeah, and it's interesting getting to the habit part of that. You mentioned you can do all these things and get like a 2% bump in pay. It's one of those things, you will find people maybe not even consciously rebelling against, but subconsciously just not taking those steps because it's not ... They talk about the different steps that reward part of the habit. You do things, you have habits, because there is some reward in your brain that goes off, whatever it is. If the reward's not out there, you're not going to form that habit.

This is also a powerful thing that can go awry, as well. You can set up peer pressure and you can put out great rewards, and you can build a habit, but I'm sure there are instances in which, if you aren't setting up to do the right thing, then you're basically taking it again off the rails.

Dallas Wells: Yeah. The unfortunate issue that Wells Fargo had with their cross-selling stuff I think is probably the first example that jumps to a lot of people's minds. There's lots of others like that. I think through, or leading up to maybe, the financial crisis, those of us who were in banking, if we didn't see it at our own bank, we certainly saw it at the bank across the street, where there was this peer pressure to add volume, right? To grow for the sake of growth-

Jim Young: Exactly.

Dallas Wells: Because it was easy to do, and if you weren't doing it, you were doing something wrong. People stretched the limits. They'd see that all was well. They got paid for it. The bank did well because of it. We did that over and over again, and that's what creates a bubble, so there are certainly those possible downsides. Coming back just a little bit to the making it a habit, that's one of those things that we have to try to think about as a software company: getting adoption of our platform, but also the right kind of adoption.

Jim Young: Mm-hmm.

Dallas Wells: I'll give you an example of one of the ways we go about that. During the implementation ... When we sign a new client, we put together an implementation team. They configure the platform. They build the assumptions that go into there. They set up the data feeds that go in and out of the platform. They get everything set, and then we'll turn it on and we'll train all the end users, and you're off and running.

In the middle there, though, something relatively new that we've added is we used to wait until all was set, everything was right, and then we got the relationship managers in there to actually start using it. What we found was they felt like this thing was being imposed upon them, right? Once again, here's the finance and treasury and credit groups building a thing just for them, and then they force us to use it.

To solve that, and to take advantage of some peer pressure, we've started asking new clients to add your implementation team and say, "Look, you're going to hate this, because you're not going to want to pull people doing production off the production line."

Jim Young: Mm-hmm.

Dallas Wells: We want two or three of your most productive relationship managers, not necessarily the ones that are tech savvy that might be helpful, but the ones who just, when you measure the output, every quarter, every year, they're always at the top of the list, a couple of those. Number one, they get some voice in it, so it's not just being imposed upon them. Number two, though, you get the really powerful peer pressure incentive. Believe it or not, in the banking world, those relationship managers that are big producers, those are the cool kids.

Jim Young: Right. They're the influencers in that situation.

Dallas Wells: Exactly. If you roll out this new platform, and ... We saw this go awry sometimes in our early days, before we did this. That's why we started it. We would spend all this time and effort tweaking, adjusting, getting things just right. It looked great to all of us, and then we roll it out, and the two top producers say, "Pff! I'm not going to do that. I have an admin who will do that for me," or just, "No," like basically, "You can't make me. I mean it's not like you're going to fire me over not using software, because I generated 50% of the loan growth last year."

Once those two folks say they're not going to use it, you can't threaten everybody else enough to actually make it work. They're not going to form that habit. There's no reward in it for them. In fact, if they use it, they look like one of the non-producers who is just kind of following along. We incorporate, as early as we can, those big producers. We try to even get a skeptic on the team, somebody who just every time is going to kick dirt on the new thing because it works the way they do it now. Bring them on. Our job, then is to win them over and convince them that this is something valuable and get them to use it. When that works well, it's a really powerful thing. We walk into the training. The other relationship managers then start asking questions and instead of us or the finance team answering those questions, up stands one of the top-producing RMs and says, "I helped set this up. Here's why we did it this way. Here's why it works."

Jim Young: Yeah.

Dallas Wells: Those questions die off very fast then, and the adoption goes way up. Getting the right folks involved in your projects, making believers out of them ... It's high risk, high reward. In our case, if we blow that during the implementation and we lose them early, we're going to have a hard time getting everybody else on board, as well.

Jim Young: On the other hand, though, you could say you're just saving time.

Dallas Wells: Yeah.

Jim Young: You're reaching the point you would reach later on without doing that.

Dallas Wells: Exactly. Yeah, so it's those habits ... Again, this is an excellent book, and we'll link out to this book on Amazon. If you are a manager of people or if you in any way work with users of tools, if you work with users of even your Internet banking, something like that, there's a lot of really interesting stuff in this book, but that basic way that a habit gets created, which is there is a cue of some kind, and there is a reward at the end, and that reward has to be a real, tangible thing ... Our contention is that peer pressure and feeling good by being included as part of the right group can be that reward. Use that to your advantage.

Jim Young: Yeah, and we're talking, a lot of this, in context as software adoption, but we've all heard banks at some point say in answer to the question why are you doing it? The answer is something along the lines of "because we've always done it this way," or that sort of thing. That's part of what this book does. It gets you saying, "Okay, you know you have a habit. Now take a look at it, deconstruct it, and figure out why you have that habit." When you do that, that's when you can start to take it apart and reassemble it in a way, if it's not a good habit, to turn it into a positive one. It's obviously got tons of applications for your personal life. No doubt about it.

One other thing-

Dallas Wells: Yeah.

Jim Young: You mentioned about transparency, and I wanted to go back to something we talked about in Earn It, in which I think we used peer pressure--that terminology in there--because a big part of this is in order to set up that peer pressure, you have to ... I'm going to use it just in our world, in the world of pricing. You have to be willing to give up a little bit of control of information, right?

Dallas Wells: Yeah, that's a good point. This feeling from bankers actually surprises me, how deeply held this is.

Jim Young: Mm-hmm.

Dallas Wells: We have always built our platform on that idea of transparency, of let's share all the information that we can share on the bank side, so that your RMs go out well enabled to have conversations and negotiations with customers. They know exactly where the bank stands. They know where they are, relative to goals. They know why they're doing what they're doing, and they can have now a borrow-focused conversation, solve their problems in a way that works for the bank.

That requires, in our particular case ... Every piece of software you use is the same way. There's going to be some permissions. Can they edit these things? Can they view these things? Those are little check boxes. I completely understand why you don't check the "Can edit anything" right? You can only make edits and changes to your own stuff. We, by default, say, "Let everybody see everything." What's the harm in Jim, as a relationship manager, being able to see what deals Dallas, as a relationship manager, is working on? Maybe I learn something from how you structure a deal. Maybe I see how much you're producing this quarter, and there the peer pressure kicks in again, right?

Jim Young: Exactly.

Dallas Wells: There's lots of good things that come out of that. We still get, from almost every bank ... At least one person that's a part of that implementation team gets a little upset by how hard we push on that and says, "We don't want them seeing that stuff." There's like this inherent, built-in attempt to control and hide information, and I get why there needs to be controls about who has access to what, right? Coming from the banking world, that makes perfect sense, but that's not really what this is about, right?

Jim Young: Right.

Dallas Wells: We're talking about, "Can we see who's producing what and learn something from it and maybe even be incentivized by it a little bit?" It surprises me how hard people push back on that, when it's so much cheaper than building a new bonus plan and writing checks to incentivize the right kind of behavior, when all you have to do is let everybody see the behavior, and then point out the good behavior publicly. Maybe, occasionally, point out the bad behavior publicly. That is incredibly cheap and incredibly effective.

The banks that we see that are really, really outperforming right now, that have unusually high performance cultures, are very transparent. They all know what the other one's doing. They know who's carrying the load and who's not, and they really push each other, versus the ones that almost manage their bank out of fear. Part of that fear is, "Let's hide everything from everybody," because they're probably going to do something they shouldn't or maybe they'll see the pricing that we let somebody do on a different deal, and they're going to want to know why they can't do that pricing for their deal. Well, let them learn why you did that, so that they know when it's appropriate or not, instead of saying, "Just don't let them see it, and it'll be fine."

Jim Young: Right, yeah, and I was going to say, on the level of your peers, but also the overall bank strategy level of things, it gets into, "Why am I doing it this way?"

"Well, actually because we already have enough of this concentration, and we need this," or something along those lines. It's just, again, when you're forming those habits and that sort of thing, if you understand why you're doing something, you're much more likely to be able to reinforce that habit.

Dallas Wells: Yeah, and we're social creatures. We like to have a collective goal. It's fun for people to see. Yeah, it's nice if I book a loan that makes me, personally, look good, but if I also see that it made a big dent in the overall goal that the bank has, this big, strategic initiative to do, and I helped do my part and maybe a little more of that, there's good, positive feelings that come from that. We can share in the successes. We can also share in the times that it's not going so well, and we can look around and figure out how to actually make it work, instead of just basically forcing everybody to only see and live in their own little bubble. You lose all the good benefits of peer pressure.

I know it has some negative connotations, that peer pressure, getting you to smoke cigarettes when you're 13 years old, but that can be used as a powerful thing, those same inclinations of wanting to fit in, wanting to be accepted. If you make it clear what fitting in means, what being accepted means, which in this case is the right kinds of deals being successful, people will follow along. Those instincts are strong, even for--maybe especially for--adults.

Jim Young: Yeah. I'll close with just this quote from the book. "On a playground, peer pressure is dangerous. In adult life, it's how business gets done and communities self-organize." Again, the book is called "The Power of Habit." It's by Charles Duhigg, and it is definitely something you should read for your bank, but, again, I'd also recommend for your personal life.

That'll do it for us today. Thanks for listening. If you'd like to learn more, visit our Resource Page at explore.precisionlender.com. If you like what you've been hearing, make sure to subscribe to the feed in iTunes, SoundCloud, Google Play, or Stitcher. We love to get ratings and feedback on any of those platforms.

Thanks for listening. Until next time, this has been Jim Young and Dallas Wells, and you've been listening to The Purposeful Banker.