Commencement Address
Robert H. Smith School of Business
University of Maryland
William A. Longbrake
December 19, 2004
Thank you Dean Frank.
Proud parents, friends, guests, faculty … this is a very special day for you and
also for me. We are here to celebrate the achievements of those who are
graduating.
To the graduates, congratulations! You have reached a seminal point in your
lives. Today marks the successful culmination of a great deal of hard work. But
it also marks the beginning of the next chapter of your lives.
You are graduating from one of the world’s leading business schools. The Smith
School has prepared you well to face whatever challenges await you. Someday
in the future you, like I have today, will return and experience the emotions that
are coursing through me now – emotions of thankfulness for how my Smith
School experience was instrumental in launching a successful career, emotions
of pride in how the Smith School continues to ascend to even greater heights of
excellence, and emotions of respect for the Smith School’s commitment to
change – for the better – the lives of thousands of students and the communities
in which we live and work.
My Smith School experience began in 1969 as a faculty member and a Doctor of
Business Administration student. It was truly a tumultuous time. My first year of
teaching culminated in the spring of 1970 with Viet Nam War riots that led to the
national guard occupying the campus and the cancellation of final examinations.
Times certainly have changed since then. But, in their own way these events
were a significant part, not just of my experience here, but of a broad-based
educational experience that also included rigorous study and learning how to
teach others. All of this prepared me well for what was to come.
For most of you, your lives will take twists and turns that you can hardly imagine
today. Seek out a wide variety of experiences and learn from each of them.
They will prepare you to deal with the unexpected. They will prepare you to take
on enormous challenges. And, they will give you the ability to become
successful and remarkable leaders.
I have had several careers since I graduated from the University of Maryland. I
have been a research financial economist and authored esoteric academic
journal articles. I have been a speech writer. I have been a regulator and policy
analyst in the field of banking and advisor first to the Chairman of the FDIC and
later to the Comptroller of the Currency, helping to shape many of the laws that
transformed banking from a highly regulated, tradition-bound industry to the
flexible, highly profitable, world-class institutions that are the foundation of
America’s economic success today.
Along the way I met a lawyer by the name of Lou Pepper who was counsel to a
small mutual savings bank in Seattle Washington. One day during the summer
of 1981 Lou called me to tell me he’d just been made CEO of the bank. He told
me that the bank was in serious financial difficulty, which as a regulator I already
knew. “Bill,” he said, “I’m just a lawyer, I don’t know anything about how to run a
bank. Can you help me out?” I was young enough and brash enough to reply:
“Of course! I’ll do whatever I can.” I had my Smith School Doctor of Business
Administration degree and I knew about the regulatory and political side of
banking. I thought I was well prepared to be Lou’s advisor. It was only much
later that I realized that there is a lot more to being a successful banker. So, I
spent a few days in August of 1981 in Seattle helping Lou get his arms around
things and then a year later moved to Seattle with my young family as Executive
Vice President for Finance and CFO.
When I joined Washington Mutual in 1982 it had $2.5 billion in assets and 36
offices in Washington State. It was losing $5 million a month before tax refunds
and had $106 million in capital. Today Washington Mutual is the sixth largest
banking company in the United States with $290 billion in assets and nearly
3,000 offices nationwide. How did a nearly failing company in a tradition-bound
industry succeed, while so many others failed or were acquired. In this story
there are some lessons I would like to share with you.
Lou Pepper’s charge from the board of directors was to save the Bank or sell it.
He proceeded simultaneously on two fronts. First, he cut costs, cut staff, and, in
short, did whatever he deemed necessary to survive. This was not pleasant
work; indeed, it was negative and messy. But importantly, he simultaneously
imagined the future, and even as he struggled to save the Bank, he slowly laid
the foundation that ultimately enabled us to realize his vision.
Lou Pepper's vision was to remake Washington Mutual into a consumer bank.
There were two elements to his vision. The first had to do with the consumer
financial products and services to be offered by the Bank. Mr. Pepper's vision
was for the Bank not just to be a place where consumers could save money or
get a home loan. It was to be a place where a consumer could go to satisfy most
all of his/her financial needs.
The second element of the vision involved the means of delivering these
consumer financial services and products. Mr. Pepper realized that to be a
successful consumer bank, the Bank had to provide amazing customer service
– satisfied customers return and bring others. Banks historically had followed a
"sit and serve" approach to delivery. Employees waited for customers to come in
and then served them. Mr. Pepper knew that achievement of his vision required
employees to reach out to consumers – to "go and sell" rather than "sit and
serve".
What happened and what did we learn?
First, we learned that the vision was right. But, we also learned that our focus
was not crisp enough. We got carried away with the first element of providing
diversified financial services. We naively believed that: "If you have it, they will
come" – well, they didn't. We also grossly underestimated the operational
difficulties and cultural barriers to change. And, it took us a while to understand
the consequences of a broadly based diversified financial services approach.
Thus, the second lesson was the realization that we needed to tighten the focus
of our vision. Failure to do this had resulted in fragmentation of effort and over
time led to degradation in performance.
A third lesson was that we needed to keep things simple – that there really is
wisdom in the KISS (keep it simple stupid) principle. While it is important to be
clever and to embrace innovative ideas, it is also important to avoid complexity –
to keep it simple. Complicated ideas are hard to implement. The troops have
difficulty handling multiple assignments. Errors increase. Employees tend to
focus on one thing at a time; they have difficulty making sophisticated judgments.
The fourth lesson involved learning just how difficult it is to get people to change
behaviors. As I said, the second element of the Consumer Banking vision was
changing to a "go and sell" culture that would focus on satisfying our customers'
financial needs. We knew that change is difficult. But resistance was greater
than we expected. It turned out that retraining was not fully adequate by itself.
We found that we needed people with different skills. And, we learned that we
needed to reinforce employee selection and training with targeted incentive
programs.
In short, we created a new culture. We developed and published 5 values:
• Respect - for every employee and customer.
• Team work - work together.
• Ethical - absolute honesty guides all actions.
• Excellence - strive to do the best possible.
•
Innovation - constantly seek ways to improve everything.
The final lesson was that we had to pay as much, if not more, attention to the
details of execution as we did to formulating a focused strategy. Exceptional
execution starts with smart, well-trained people. It requires an environment that
empowers them to act and to do the right thing. It requires teamwork, not
hierarchical structures replete with bureaucracy and barriers to communication.
Everyone has to understand the business strategy. Everyone has to understand
both the short – and long-term objectives. Management must be precise in
articulating priorities. Walls and silos need to be knocked down. Finally, we
discovered that there simply is no such thing as too much communication for
successful execution of a focused strategy.
The beauty of these lessons is that they are not complicated. They are based on
common sense. Kerry Killinger, Lou’s successor and our current CEO, adopted
these lessons, rearticulated them as a set of principles and made them the
foundation of our successful transformation from a small Washington State
company to the nationally recognized company that we have become today:
• Have a crisp tightly focused business strategy.
• Keep it simple; limit the number of activities.
• Formulate a deliberate change strategy.
• Pay attention to details. The payoff is in the execution.
• Measure everything. "You can't manage what you don't measure."
Measures are powerful motivators when linked to the internal system
of rewards. But because they are powerful motivators, be careful that
the measures are creating the behaviors you want.
Remember these simple principles and you will avoid a lot of grief in your
careers.
Let me conclude with some personal advice – advice that Lou Pepper shared
with me long ago and that has guided me throughout my career.
•
Take your job seriously but never yourself.
Ambition driven by ego has destroyed countless promising careers. It is tough to
keep your ego in check. Human beings need to be valued and recognized.
Remember the importance of that need as you deal with others. Take your job
seriously – work hard – ambition is essential, but don’t wear your ego on your
sleeve. And, never forget! Those who you lead and work with are just as
important, if not more important, to your success.
•
Never lose your uncertainty. Certainty is the enemy of reason. And,
absolute certainty is the death of reason.
Certainty will blind you. You’ll miss important information. Your curiosity should
know no bounds. Listen carefully to critics and to contrarians. The truth can be
found through fearless and continual sifting of information and by questioning
everything. This is harder to do than you might imagine. Human beings are
social creatures. We need to belong. And part of belonging is being agreeable
and going along with consensus thinking. Consensus thinking often leads to
mediocrity or just flat out wrong decisions.
Don’t be afraid to act on your convictions once thoughtfully reached. But
tomorrow is a new day and things change. And, tomorrow you should reexamine your convictions and make sure they still hold up. If there is one thing
that consistently distinguishes successful people from also-rans, it’s that despite
having a view, even a strongly held one, they are always open to new information
and insist on being intellectually flexible.
Once again, congratulations to all of you. And, may your lives be successful,
rewarding and fulfilling.