Chances are that most of you don’t want to learn anything
from Wall Street CEO’s who have ‘destroyed’ America with the ‘big bonuses’, but
dig deeper, and you’ll realize that there’s method to Jamie’s madness on the
street and there’s a good reason why he’s one of the most respected as well.
Here’s some lessons drawn from his latest memo:
- It’s a big responsibility to be a big bank, and our communities are better off if we do it right"We cannot be a fair-weather friend. Clients, communities and countries want to know that we are going to be there particularly when times are tough. Greece, Ireland, Italy, Portugal and Spain got into trouble, we decided to stay the course. Exposures are primarily loans to businesses and sovereign nations. Even if the worst outcome occurs, we believe that we still made the right decision by being there for our clients. We hope to be doing business in these countries for decades to come.
This is absolutely true when it comes to loyalty. Its important to be there for the client when things are good, but its even more important to be there for the client when things are bad. If you're the kind who says 'screw you' when things go sour, you won't last very long. Things can get personal in business and they usually do.
- Quality profits, not quarterly profits“If we wanted to increase this quarter’s or next quarter’s profits, we could – and we could do it easily. How? By cutting marketing expenses by $500 million or eliminating another $500 million of investments in technology, training or systems upgrades. We also could add another $1 billion to our profits by increasing our interest rate exposure or credit risk. But this is not the way to build a healthy and vibrant company for the future or to produce what we would call 'quality profits'."
I couldn’t agree more with this
statement, companies constantly chase short term objectives to provide
guideance to street estimates(ironically, JP morgan researches other financial
institutions as well, and shuns them for poor performance, but that’s a story
for another day).
Companies that are publicly listed need to move away from this and need to think of the long term. Besides, earnings management rarely provides more than 1cent per share increase in quarterly EPS and at a huge cost, according to HBR Research(Dec, 2011 issue).
Companies that are publicly listed need to move away from this and need to think of the long term. Besides, earnings management rarely provides more than 1cent per share increase in quarterly EPS and at a huge cost, according to HBR Research(Dec, 2011 issue).
- All revenue isn’t good, all expenses aren’t bad“Low-quality revenue is easy to produce, particularly in financial services. Poorly underwritten loans represent income today and losses tomorrow. And an efficiently run company is not the result of indiscriminate cost cutting.”
An excellent point made, long
term strategic thinking needs investment ( expenditure) in things for the
future; technology, people, and operational improvements are critical. Jamie takes it further and goes on to talk
about how we must avoid wasteful expenditure, and not all expenditure.
- Focusing more on customer complaints“Every week, and sometimes every morning, the senior managers in our consumer businesses listen to or read customer complaints to get to the root of problems and to identify options to solve them. These issues are discussed, and the follow-up and feed-back are shared with the broader customer support teams.We know every company makes mistakes. But if you don’t acknowledge mistakes, it’s unlikely you can fix them.”
This is an incredible feat to achieve and also a must do. To really understand how to strategize properly, one must understand what it is to execute and take feedback from the front lines and from customers, the people that actually matter.
- As Albert Einstein said, “In theory, theory and practice are the
same. In practice, they are not.”
Jamie's disagreement with some of the regulatory reform can be summarized with the above statement. He mentions that he doesn't disagree with the intent, but with the specifications of some of the rules. He pins the government to have made rules that are theoretically apt and will promote transparency, but the mere complexity forces them to be inefficient in practice and will prevent capital markets from 'fueling the great American economic machine from small businesses to large’. - On Civic
Engagement and Lobbying“Not only is petitioning the
government a constitutional right, we have a responsibility as part
of our firm’s mission to be actively engaged in the political process in
the communities and countries where we operate.Contrary to what you might hear,
our input, as often as not,
is at the request of government officials who want to draw upon the expertise
of our executives who work in the markets every day”
This one is a lot harder to believe, but its true. Every industry, be it public / non-profit / private has the right to fight for what it believes is right. Jamie's perseverance to help the government understand why they need to change policies and regulatory measures (for good or for bad, i'll leave that for you to decide) is truly motivating.
I think that there's something that all of us can learn from Jamie and his legacy. For more lessons, read his entire memo.
