Magazine article The Journal of Lending & Credit Risk Management

Values as a Strategy

Magazine article The Journal of Lending & Credit Risk Management

Values as a Strategy

Article excerpt

One of the key ways a financial services company can differentiate itself in the decade ahead is by creating a distinctive style of doing business that attracts and holds customers. This requires organizing to create a special way of managing and doing business that drives the whole company, so that customers feel that doing business with the bank is something special. Some banks are doing this through technology-driven distribution systems. Still others are doing it by providing information and advice. And still others are emphasizing exceeding customer expectations in quality of service.

The core belief here is that regardless of what line of business the bank is in or what products are being sold, success is driven by enforcing a set of beliefs and values across the company as to "this is the way we do business." The theory is that values about how to do business and behave are as, if not more, important than the skills of a particular business. In this approach, it is corporate values - being a good place to work, being market driven, being astute in risk management - that are the core strategy and are superimposed on what businesses to be in - corporate banking, consumer banking, leasing, private banking, etc.

That attitude precedes success and can be applied to any line of business is not what banks usually think of as strategy. Traditional strategic decisions are about what businesses to be in, or out, of; or what businesses represent the best opportunities or best next marketplace trends or demands. That attitude and managerial behavior is itself a strategy eludes many bankers, even though their bank mission statements are replete with value statements about people, customers, ethics, and the like. And many banks have problems living their values as they execute their business strategies. So the question arises whether management style and corporate values can be a successful strategy for running a bank.

Values-Based Strategies

Surprisingly, there are numerous examples of highly successful industrial and financial services concerns in which values drive the company and are the guideposts for running the company's businesses. It's easiest to see this approach in retailing, where managers strive to use image and style to create customer loyalty.

Nordstrom service: "no questions asked."

Nordstrom has five values that drive it: quality; value; selection; service; and family/tradition. It manifests these values by finding the best products available, offering its products for the lowest reasonable price, and designing its own products based on customer input. As for service - it is famous for its "no questions asked" return policy. Its "sales-per-hour" method of performance reporting and rewards encourages staff to be service oriented, and employees are selected and trained to act entrepreneurially, with freedom to tailor service to a customer (go to his or her home or office, for example). Six fourth-generation Nordstrom family members currently serve as co-presidents, and there is a promote-from-within policy to reinforce the sense of family. These values are used to create a values strategy to "Offer exceptional selection of quality merchandise, always at a value. Serve the customer's needs first, and strive to make every shopping experience a good one." Its no-questions-asked return policy became legendary when a putative customer returned a set of automobile tires - a product Nordstrom never carried - and received a refund. The Nordstrom employee handbook has only one procedure: Use good judgment in all situations. There will be no additional rules.

3M has 6.

How about an industrial company? 3M has six strategic values:

* employee creativity;

* listening to customer needs;

* innovative culture;

* producing products that make life better for everyone;

* environmental responsibility; and

* community responsibility. …

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