In the continuation of our conversation with Ed Wehmer, President and CEO of Wintrust Financial Corporation, we talked about the kind of culture Ed built in the early days of the company that people could buy into. However, no matter what best-laid plans you have, the real challenge may occur when outside forces and even growth threaten to change that culture. We dove into this topic deeper in this part of my chat with this Leader With Courage.
Value Drivers: During our conversation, you were describing the kind of community bank culture you’ve worked hard to build here at Wintrust over the last couple of decades. It sounds like you’ve done a terrific job of empowering people to live an entrepreneurial life and present ideas they’re passionate about. But what threatens a culture like yours along the way? Growth? Outside forces?
Ed Wehmer: I’ll tell you one of the biggest problems we face in regard to maintaining a culture: Financial regulators and regulations that are trying to essentially make us…not us. It eats away at the personal service side of things. Yet we still have to find a way to keep our “common person” touch, give good personal service and make it easy for the customer to do business with us.
It used to be that a handshake and a rapport went a long way toward getting a deal done, even though of course paperwork was required. The regulations as they stand have changed all that. Still, we’re determined not to let that change the way we do business.
I’m curious – you mentioned that the culture means everything here at Wintrust. But how long does it take for someone to adjust to the more entrepreneurial feel here?
Let’s put it this way. You’re going to discover if you’re a fit with us fairly quickly. Most people who come into our environment do click with us fast. Others love the sound of working in an entrepreneurial environment but find they need more time to adjust to it in practice. They come in and they’ll be surprised by how they can “get their hands dirty” in a lot of things – and how it isn’t always a case of one person having a set of responsibilities that he or she can never venture beyond.
Of course, with that freedom, I assume there’s a good balance of accountability as well.
Definitely. You have to do what you say you're going to do – and I think our people really enjoy that. One of them will say, “Ed, I’ve got an idea. I’d like to start a factoring company.” Obviously they have to provide more than that, so I’ll say, “OK. Put a business plan together, tell me how you're going to staff it, what the capital needs are, give me five years' worth of projections and let’s talk about where it can go from here.”
As we’re talking about culture, part of the accountability within that culture is the underwriting standards and profitability models that we’ve never changed. We may change a loan policy for new lines of business but we certainly don’t say, “Well, the market’s headed in this direction so we’ll get more liberal or more conservative.” That’s where you get into trouble. You don’t change what you’re doing to fit the times.
One of your toughest times came in 2006. Your stock was trading at an all-time high and you were growing phenomenally. But then you decided to pump the brakes in order to push out some bad assets and raise capital. How did you get through that?
I caught all sorts of grief from all sides. At the time, our stock went from $60 a share to $42 a share. People were whispering, “Wehmer doesn’t know what he’s doing and his model doesn’t work anymore.” I had to explain my position to our board, even though they were antsy about it and asked, “Are you sure you’re doing the right thing?”
Fortunately, in the fourth quarter of ’08, we were well prepared, put the pedal to the metal and bought more failed banks than anybody in the country. We also did a number of dislocated asset deals that got us through. All in all, we had record years during that time when everybody else was in the red. That set us up for where we are today.
I’ve seen something similar in bad times, whether it was in consumer packaged goods or when I was working with accounting firms. They would want to pull back on advertising during the recession. At least one smart company I worked for said, "No, we're not pulling back. That’s the time to pick up market share at a much lower cost!"
If you’re a healthy company, you take what the market's going to give you. You don’t need to stretch, overpay and generally do anything stupid. The market will come around and there'll be opportunities. You just have to be disciplined.
Another problem that leaders have is they stick with an existing under-performing team member too long. Have you had that experience where you've held on to them too long or do you have a pretty good sense of when to cut your losses?
Yes. Everybody has that. My problem is, especially with some of the people we had early on, I was almost too loyal. When you start something from scratch and somebody comes aboard for that, you feel like you owe them. After all, they’re the ones betting on you and taking a risk, so you stick with them. Unfortunately, sometimes, you can stick with them too long.
I will say a major part of our culture is that we don’t standardize certain positions to the point of where only one person can do this or that. If you surround a person with a good team and ensure they’re not polluting it or bringing it down, you can stick with someone a little bit longer to see if they turn around. In the end, even though I’ve occasionally hung on to someone too long, it didn’t hurt us much because the overall team around that individual was strong enough.
Wintrust started in an 1,100 square foot room with 11 people. Now you have 4,400 people. Besides maintaining the culture that you do, how do you maintain a growth trajectory?
One of the things you have to do as you grow: Reinvent yourself every couple of years. In other words, we start over by looking at where we’re going and we’re not afraid to change.
On a related note, that involves investing in your business. Some companies are afraid to do that because it will hurt their bottom line to continually invest in their business. But if you're a growth company, you have to invest in your business. If you don't grow, you probably can stay stagnant for a while, but a growth company has to change all the time.
And to that point, it seems that you aren't going to remain relevant forever if you stick with the status quo. This idea of reinventing yourself is one way to ensure you always stay relevant and that you're constantly learning. That's a hallmark of a Leader With Courage.
Without a doubt. Our number one rule is to leave your ego at the door. If you're the smartest guy in the world…what are you doing working here?
In the final part of our Leaders With Courage conversation with Ed Wehmer, we’ll discuss what a leader needs to ensure he or she still has the right people aboard the ship years after starting the company – and how managers can take a stronger role in that evaluation process too.
How prepared are you for change that’s both visible and the kind you can’t foresee? There’s only one way to find out. Take our Leaders With Courage Self-Assessment and you’ll find where your strengths and areas for improvement are as part of a baseline of 26 attributes of leadership. This provides you a great foundation to engage in a 360 Assessment with your team and with our help at Value Drivers.