In this podcast, Dallas Wells and Jim Young review the high points of Chapter 10 of “Earn It,” which is titled “Get Your Lenders to Engage, Not Revolt.” We’ll review how to get your bank to embrace a culture of change and then, when that culture is in place – some specifics on how to train lenders and how to ensure adoption of the tool.
Jim Young: Hi. 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 Jim Young, and I’m sharing co-hosting duties today with Dallas Wells. Thanks for joining us.
Dallas and I are back again to talk about the book we’ve been co-writing along with PrecisionLender CEO, Carl Ryden. It’s called “Earn It: Building Your Bank’s Brand, One Relationship at a Time.” We’re releasing it in sections a month at a time. It’s all available at theearnitbook.com. Again, it’s theearnitbook.com.
This week, we’re going to discuss Chapter 10: Get your lenders to engage, not revolt.
Dallas, this is going to surprise you, but I’m going to borrow another sports term here to…
Dallas Wells: Yeah, big shock.
Jim Young: Yeah, shocker there, yeah. This chapter was a bit of a sleeper to me. When we were putting this thing together, putting together the Table of Contents, looked at Chapter 10 and shrugged my shoulders. We’ve gotten to the whole thing of your concepts of pricing and all this sort of stuff in terms of setting it up the bank and how to figure out the right pricing tool. Then, it’s like, okay, well now you got it set up, just make sure everybody uses it.
When you get into the meat of this chapter, where we talk about issues like training, user adoption, you start to get a sense, or at least I did, so you tell me if you felt the same way, of just how important this step is in the process of improving pricing at your bank.
Dallas Wells: Unfortunately, this is the stuff that does get glossed over a lot. It’s the basic day-to-day execution of all these plans and changes that you’ve put in place. At this point in the book, we’ve talked about the philosophy of how to approach pricing and culture change and the relationship building that comes as a result of that. We’ve talked about new systems. We’ve talked about new processes. We’ve talked about redoing some of the workflows in the whole lending process. You really have to come back and close the loop on all that stuff and make sure that the folks who actually are going to be doing those things get the message and do it consistently and are on board for all those changes. That’s what this chapter is really about is getting those end users, those folks that are doing the day-to-day loan production to buy into what you’re doing and to execute it the way that you intended. Lots of chances for missteps here. We’ve seen a bunch of them. That’s really what this chapter was about, was sharing some of those.
Jim Young: Any one of those missteps can be, and you sort of alluded to this, getting a little bit too far of everyone else. You’ve already embraced all these ideas. You’ve already stated this is the answer, but you have forgotten to bring everyone else along and help them understand it, which I think is part of why we started off Chapter 10 by backtracking a little bit. I remember asking you at the time when we were writing it saying, “Why are we discussing culture change again?” I felt like we already talked about that. Can you share again the rationale for revisiting that topic?
Dallas Wells: I think you started to answer it pretty well right there, which is that there’s a couple of different functions that happens here. The first one is the management group has to get together and decide, yes, we are going to make these changes, and we’re going to put the resources and dollars and time into making that happen.
The second part of that is really, there’s a whole bunch of work in between, and there’s a lot of time in between. A lot of times, the management group expects everyone else to be at the same place they are. Mentally, psychologically. Hey, we’re really invested in this. We spent months. We spent a ton of money getting everything changed and moved around and in place. Now we turn it on, and the lenders, the credit folks who are using it, they’re like, “What the heck is all this stuff? Nobody asked us about this.”
It is a culture change, top to bottom, in a lot of cases. It is a different way of thinking about how we put together deals, how we make decisions as a bank even. Shifting, in a lot of cases, where some of the work and where some of the decisions happen, therefore, where some of the power resides. That’s really the heart of the issue. You get to the people problems that you’re going to have to deal with. You can’t just say, we bought a piece of software. Problem solved. It’s much deeper than that. You have to actually get the humans to play nice, both with the new software and with each other, and make all the stuff work as it should.
Jim Young: You’re sort of touching on that, but it’s two levels of that culture change, but then within that, there’s the two levels. One is you can get people to say, okay, yeah. I get what you’re saying. We do need to change. We do need to innovate in these ways. Reality has a way, sometimes, of changing things. Sort of like the Mike Tyson line, everyone has a plan until they get punched in the mouth.
Dallas Wells: Exactly, yeah.
Jim Young: When that new tool is there and suddenly you have to change, really fundamentally change things, what are some of the tips that banks can use to keep from stumbling during that post-purchase phase?
Dallas Wells: We talked about it in terms of a post-purchase because we what we’ve been talking about is putting this ecosystem in place around pricing and around the decision making that’s involved with that. Really this is, any time you’re making a change inside of a bank and knowing the typical bank culture and where you’re coming from there, there’s a lot of technology changes that need to happen. There’s a lot of process changes that are happening in banks, so this is an approach that works for all those things.
The basics are, number one, it’s going to be a sales pitch. Whether you like it or not, you’re going to have to sell the change that you’re making. What we see is the bigger the organization, the more formal that selling process has to be. In some of the largest organizations, it’s an actual road show, where somebody owns this change, and they’re going around to the key executives that have to sign off on it and making their pitch. There’s all those preliminary discussions before there’s a final official vote and budgeting and all that lovely stuff that has to happen with a process like this. That means you have to sell that future state, right? It’s not just, hey, we want to buy this widget or we want to change this process around. It’s the why. What do we get out of it? What’s the future state that we see down the road? Then, how do we start putting in the little building blocks in order to get there? That future state has to be the starting point of, where are we headed with all this stuff.
The other part that is really critical, we’ve touched on it a little bit here, but you have to get user input early and often. When we’re talking about software, we actually say the end users have to have a seat at the table before you buy it, right? Don’t just throw this thing in their lap and say, “You’re welcome. We got you this awesome new tool.” Let them have a say in that. Let them see it, be a part of that decision process, and then be a part of setting it all up too. All right? If they’re going to be the ones using it on a day-to-day basis, make sure you have that perspective as you’re putting it all together.
Finally, the one last thing that I think is worth saying, we talk about it a lot on this podcast already probably, but clear ownership. Every project is going to need a champion. Everything that you’re buying, everything that you’re doing. It can’t be by committee. It can’t be this kind of nebulous, the bank is doing this. Somebody’s face has to be beside it. Their name has to be beside it. They’re responsible for making it go, because there will be inevitable hurdles to clear, curves in the road that you don’t see that you’re going to have to navigate. It takes somebody owning that thing and pushing it through those issues that crop up for this to really work.
Jim Young: Dallas, all of that makes sense to me, but I have to admit, I really don’t know why we then included a section about potential problems with training. Doesn’t everyone naturally love training?
Dallas Wells: Yeah, especially the software-type training that we’re talking about here. Everybody loves to get in a conference room and stare at a screen while somebody shows them where to point and click. If you’re thinking about this again as your sales pitch, this is your key moment, right? This is where you’re making the big reveal to all those end users. They’re usually just awful. That’s why that’s funny because everybody’s sat in those really training sessions where you, at best, don’t fall asleep. That’s kind of the expectation.
We felt like we had to talk about it again, we’re talking about pricing, but training in general needs a lot of work. Some of the key points were consistent things with those overall projects. The focus shouldn’t be where to point and click. Modern software is actually pretty easy to figure out or at least it should be. If it’s not, you bought the wrong thing. It’s pretty easy to figure out. What you should be selling instead and training on instead is the, what do we get out of this, what’s this do for me on my job? To refer to some of the other things we’ve been talking about, what’s the job that this offer’s doing for me? What did we hire this tool to do so that I can know what the end purpose is rather than just what happens when I click that particular submenu?
Jim Young: You get someone all the way to this point. Let me ask you this then. Have you ever come across a bank where they purchase, they’ve implemented, and they’ve trained, and then maybe they have that feeling like, hey, we have crossed the finish line, and then they wind up coming up a little bit short in the actual adoption phase?
Dallas Wells: The rollout of anything across an enterprise is it’s a long-term process, no matter how simple the change is. There is that temptation of, okay, we’ve trained it, we rolled it out, now I can cross that thing off my list, and I can go grab the next thing on the pile. You’re not really done. In any sort of enterprise change, what you’re effectively doing is riding with training wheels. Until everybody gets used to the new process, is comfortable with the new process, and you work out the bugs that you’re going to find, you really run the chance of, in those early days, losing momentum. People looking at it and saying, ugh, this is just another flavor of the day thing from the management group. It kind of stinks, so we’re going to wait it out, and they’ll move on to the next thing. They feel that way because that’s exactly what you’re doing when you cross this off. You have to follow through. You have to hold people accountable to doing it the new way. There will be resistance to change. There will be folks who struggle with the tool, no matter how simple.
In the chapter we talked about, one of our favorite user’s named Steve. You’ll have to read it to get that story, but I promise you that’s worth your time. You have to close the loop for all those people who are going to struggle, all the things that are going to be problematic. Taking away people’s old stuff and replacing it with something new, even if it’s better, those habits are hard to change. That’s really what that adoption phase is all about. Is making sure that those things happen, and that you fully make the transition before you take off the training wheels. Make sure that all is well. Then you can move on to the next thing.
Jim Young: One of the stories I have in there was again, if it’s not sports, I’m going to connect it to Seinfeld, but it was sort of the, you can get someone to use it, but there’s a difference between using it and using it. In this case, it was Morty getting this pocket organizer from Jerry and using it to calculate tips, which is like the most base level. I admit, I’m as guilty as anyone of getting software, figuring out how to navigate it to survive but not figuring out how to really, really use it to get value out of it.
The way to ensure that people go beyond that base level is to dangle a carrot out there. Again, incentives can be an area where things can go right, but also an area where things can go wrong.
Dallas Wells: I don’t think you have to look much farther than the headlines of the last couple months about banks and incentives and what can go wrong there. Even in the very best banks, it’s easy to get these things wrong. Then, you have these big issues that come out of that. We give several examples of incentives gone wrong and some of the unintended consequences that can happen there. This is really important. Especially when you’re talking about, let’s be realistic, pricing commercial loans. That is the area where you can completely derail the bank. This isn’t an embarrassing headline or maybe even the CEO loses his job. This is the bank fails if you get this wrong.
What tends to happen then is the banks over-engineer it because of that. Most of the incentive plans that we see, whether they’re tied directly to bonuses or it’s part of your year-end review, they are nightmarishly complicated. There’s 25 different metrics. You’re measuring them over different trailing times. You have to adjust for who took over which parts of whose portfolio. It becomes a tangled mess where at the end of the day, you’re not really measuring anything, because you don’t have anything that anybody can understand. They don’t know how today’s work that they’re doing is going to translate to that incentive.
You have to make it to where it’s simple enough to follow, but you also want to make sure that you’re not incentivizing the wrong things. If you only incentivize loan growth, guess what? You’re going to get loan growth, but at the sake of profitability, if you’re lucky. If you’re not so lucky, profitability and risk. That’s where you can really run into big problems.
We actually talk about boil it down to the one metric that really should drive you to the right decisions, which is a risk-adjusted net income number. How much income are you deriving from your business that you’re generating after you’ve adjusted for risk? Yes, you get some incentive for the volume there but only the right kind of volume. Keep it simple like that. Measure trends over time from that baseline number that you get. That should, in general, point you in the right direction.
Jim Young: All right. That’ll wrap it up for this episode. Thanks again for listening. A reminder, you can go to theearnitbook.com to read each section of the book as it’s released. You can also sign up with your email to have those new sections sent straight to your inbox each month. First 500 who sign up will receive a free copy of the final print version of the book when it’s released in the spring. Those details and more will be in the show notes for this episode, which you can always find at explore.precisionlender.com.
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Thanks again for tuning in. Until next time, this has been Jim Young and Dallas Wells, and you’ve been listening to The Purposeful Banker.