3 really valuable ways bank CEOs have for reaching a successful bank sale (Part 1)

You only sell the bank once.

How can you possibly prepare for that?

You are already feeling there are too many things to focus on that affect our results today.

You’re also thinking I can’t possibly afford to take time away from today to work on a one-time event that may take place at some point down the road?

I was fortunate.

Earlier in my career, I worked with investment bankers who pointed out the fact there are many things a business owner can be doing, and should be doing, years in advance of a sale.

Most business owners don't do those things though, they're too busy focusing on working IN the business. They aren't working ON the business.

It's not like selling a house.

You can't just put a fresh coat of paint on things, get the yard looking good, replace a few appliances, stage it, and get it sold.

When we started the bank, that previous experience gave me the understanding that we always needed to have the end in mind.

Understanding though, the "end" may not occur on my watch.

But, if you build with the “end” in mind, you will always be ready.

Preparing to sell is an "always" thing - even though it happens once.

Steady and predictable earnings consistency is the primary driver of a bank’s value.

The 3 drivers to steady and predictable earnings consistency are:

• People
• Procedures and Policy
• Leadership

People.

There has been a great deal of conversation in all industries – and the banking industry is no exception – on the topic of management succession.

Forgive me, but the fact we were going to have a management succession issue shouldn’t have been a surprise.

Birth rates should have made you aware of that 30 years ago.

Saying there isn’t anybody to hire is a convenient excuse.

The savvy banker doesn’t fall back on excuses.

The savvy banker has a different mindset.

No excuses.

The savvy banker studies and determines a better path forward.

Regardless of what the rest of the industry is doing, the savvy banker will do what it takes to find, recruit, hire, develop and retain the right people.

The savvy banker knows the right people are the key to the other two drivers of steady and predictable consistency in earnings – processes and leadership.

We looked at the issue of management succession in 2009.

We didn’t know when we might sell, didn’t even know if we would sell, ever.

But we did understand there were 70 million baby boomers, 60 million Gen-Xer’s, and 80 million millennials.

In 2011, we scrapped our old way of hiring – which was the old standard of putting out an ad, either in the paper or online. Then we crossed our fingers and hoped the right people would join us.

We got the same result as everybody else – we got job-hoppers.

Don’t get me wrong – I am not blaming job-hoppers – it was our fault.

We needed to change our mindset regarding hiring.

We needed to move hiring to the strategic asset status it was.

We needed to move from a “surplus” mindset to a “scarcity” mindset.

A “surplus” mindset is the norm – “There are plenty of people out there, we’ll just find one.”

A “scarcity” mindset is “We are looking for people who are not looking for a new job.”

A surplus candidate’s mindset is “Here is what I have (skills, experience, academics, competencies), what do I get (title, office, money, perks, authority)?"

A scarcity candidate’s mindset is “What am I going to do (what specific work, what kind of impact can I have on the organization to be successful, who will I be learning from, who is the team I will be working with), and what can I become (what new skills will I have that I will be able to put to use to have more of an impact over the long-term, what will this role do for my long-term career value)?"

We needed to change 100% of our operating procedure regarding hiring.

For each role we needed to ask, “What specifically do we want this person to do, what kind of training will they receive to do this (moving from being dependent on someone telling them how to do it, interdependent – doing it alongside of somebody, and being dependent – or able to do everything required on their own), and when did we expect them to be able to do the specific task independently."

Nobody we had ever worked for did that. Nobody ever built role profiles specific to the role they were hiring for.

It is really hard work.

But man, you really know what you are looking for after you have taken the time to go through that process, specifically, for each role.

We built role profiles and by knowing the roles, we could target the best people, we used evidence-based interviewing to talk with the candidates. Two very particular questions:

1) What, to date, has been your most significant accomplishment?

• What was your exact role?
• When did it take place?
• Walk me through the plan and the results.
• Give me some examples of some initiative for that accomplishment.
• Walk me through the biggest decision made.
• Who was on the team?
• What was the biggest challenge?
• Describe your supervisor’s style?
• Did your supervisor help or hinder? How?
• What was the biggest problem you faced?
• How did you overcome the problem?
• What would you have done differently if you could?
• How did you grow as a result of this?
• Were there any lessons learned?
• What is the biggest mistake you made?
• What was the environment like?
• What did you like most and least?
• What did you learn the most?
• What type of recognition did you receive?

The first question and the subsequent follow-up questions represent the candidate’s best examples of comparable past performance in relation to the actual role requirements.

The second question (below) uncovers another dimension of performance, including job-related problem-solving skills, decision making, creativity, planning, strategic and multi-functional thinking, and potential.

2) If you were to get this role, what would you need to know or do to ensure the task [pick a specific example task for the role profile] was handled successfully?

• What would you do first?
• How would you determine the resources you needed?
• Whose advice would you seek out?
• How would you determine the root cause?
• How would you prioritize the work?
• How would you compare the alternatives?
• How long do you think it would take and how would you figure this out?
• How would you conduct the cost-benefit evaluation of the alternatives available?
• What do you think the biggest challenges would be?
• How would you decide the best approach?
• What have you done that is the most similar to this task?

Action plan:

1. Audit your overall hiring systems and processes – are you getting the results desired?
   1. Are you operating from a surplus mindset or a scarcity mindset?
2. Audit your current talent – are you getting the results desired?
   1. Would a role profile help align expectations and produce better results, possibly for both parties?

There are zero hacks or tricks in this newsletter. Just proven tactics that help you choose the right path for your bank.

Your path will:

• Inform your strategic plan.
• Guide your annual business plan and budget.
• Clarify priorities.
• Define your message so it can be communicated with confidence.

This is how savvy bankers navigate.

They build smart and valuable banks and choose the best time to sell - serving the needs of the shareholders and the board.

I hope you found this short lesson helpful.

What are your thoughts?

I’ll see you next week.