2

The Simultaneous Solve

FOR HIGHER-AMBITION CEOS, the work of economic and social value creation involves a set of core management disciplines—developing strategy, managing performance, building a shared culture, and personally leading their people—but the CEOs do not approach the tasks associated with these disciplines sequentially or in isolation. Rather, they practice these disciplines in a mutually reinforcing way to achieve a “simultaneous solve.” That is, they develop and execute against an integrated agenda that allows them to deliver superior economic and social value simultaneously.

Peter Sands, CEO of Standard Chartered Bank (SCB), told us about a rather unusual and especially telling example of the simultaneous solve in action. One morning in the fall of 2006, Sands, who had recently been appointed CEO of SCB, stepped on stage to address the annual gathering of the bank’s top four hundred executives. As he settled behind the podium, he looked out over his audience. Although the men and women represented all the geographic areas where SCB does business, the majority of them hailed from countries in Asia, Africa, and the Middle East.

Sands, a former McKinsey & Company director, had joined the bank in 2002 as chief financial officer and, not surprisingly, was primarily known as a numbers guy. But, instead of launching into a discussion of performance results and financial targets, as his audience might have expected, Sands flashed up on the screen a picture of a young girl and a young boy on a swing in Singapore. “I think this girl was my first girlfriend,” he said and paused. The audience cocked its collective head. What was he up to? Where was the data? Who was this person? “The picture was taken when I was two years old,” Sands said, after a moment. “My family lived in Singapore, and the girl on the left in the photo was my nanny’s daughter.”

Sands’s surprising introduction made a lasting impression on his audience. “I dithered a long time before doing it, because this is not stuff that I’m comfortable talking about,” Sands told Nathaniel Foote and Tobias Fredberg during a conversation in SCB’s London offices. But Sands was trying to make a very specific point about himself and the bank with this gesture. Just as SCB has a much stronger presence in Asia than it does in the West, and just as the majority of the senior executives in the audience were from Asian countries, Sands, too, thinks of himself as having Asian roots. Both his parents were born in Southeast Asia, and Sands, spent much of his boyhood there, looked after by the Malay nanny whose daughter was in the picture he had shown to his audience of managers. His intention, therefore, was not only to reveal a bit about his background, but to reveal very specifically how his personal identity and the bank’s identity had similar resonances.

“I’m very, very glad I did that,” Sands told us when we first met with him, in April 2007, just six months into his new role as CEO. He continued, “As quite a private person, I found it daunting to open up in that way. But I was totally convinced that I had to get people to understand that in an organic organization, an organization that isn’t just driven by the rules and formal lines of communication, you have to bring the whole person into the equation.”

For the previous five years, Sands had played a supporting role to Mervyn Davies, his predecessor as CEO. “Mervyn set a very clear tone. He’s a fantastic people person, an obsessive communicator, and paid special attention to the cultural side of this place,” Sands explained. “I was very conscious in taking on the leadership mantle from him that I needed to continue building on the things he had been so effective at, but to find my own way to do it.”

Sands felt his initial move had to send a message: at a meeting convened specifically to talk about the creation of financial value, he therefore deliberately chose to begin by addressing the human and cultural dimension.

Sands and other higher-ambition leaders see business performance and the health of the organization as inextricably linked. They pursue a simultaneous solve that will deliver superior outcomes to all key stakeholders, including employees, shareholders, customers, suppliers, and the communities they serve. And they recognize the demands that places on their own leadership for creating a level of connection and trust with each of these constituencies, which depends on their own capacity to bring their whole person into the equation.

In this chapter, we will use the story of SCB to provide an integrated view of how all these dimensions connect in action. We will show how higher-ambition leaders like Sands deliver superior economic and social value by simultaneously solving the challenges of developing business strategy, delivering performance, nurturing the organization’s culture, and providing the individual and collective leadership required. We will then explore each of those elements in subsequent chapters.

The “Banana Skin” Bank

In 2010, Sands was heading a very successful international bank. In less than a decade, from late 2001, when Davies took over as CEO, to 2010, SCB’s assets and profits had grown fourfold. The bank was positioned in attractive, high-growth markets in Asia, Africa, and the Middle East. It had become the favored employer for some of the most talented people in the financial industry and had helped restore the sight of more than 2.5 million blind or partially sighted people around the world (more on that later). What’s more, it had weathered the 2008 to 2009 financial crisis more successfully than virtually all its peers, without relying on any emergency government or central bank funding, for reasons that have to do with the distinctive, higher-ambition approach Davies and Sands had pursued over the previous six years.

In 2002, however, when Sands joined SCB, few people could believe the bank had such potential. SCB had long been a midtier player that struggled to compete with the world’s largest financial institutions, a perennial takeover target, an inconsistent financial performer, and a company that even its own employees viewed as average. “We were definitely a mediocre bank,” Sands told us. “Our own people thought so.” Many outsiders agreed. The bank had gotten into enough scrapes and near-death experiences over the years that the press sometimes referred to SCB as the “banana skin” bank because it always seemed to be slipping up. The bank had narrowly avoided a takeover by Lloyds Bank in 1986, suffered heavy losses at the end of the eighties, been badly hit by a stockbroking scandal in India in 1991, and survived another takeover attempt by Barclays in 1998.

In 1998, under the leadership of a new CEO, Rana Talwar, the bank embarked on a strategy of growth through acquisition, which made some sense because that is exactly how the bank had historically been built. After its founding in 1853 as the Chartered Bank, the firm had meandered and merged its way into markets throughout southern and eastern Asia, Africa, and the Gulf. It had only become Standard Chartered Bank in 1969, when the Chartered Bank merged with the Standard Bank of South Africa, which itself had grown through acquisition, notably of the Bank of West Africa Limited, which had branches in Nigeria, Ghana, Sierra Leone, and Gambia.

From 1998 to 2000, Talwar, in collaboration with then-chairman Sir Patrick Gillam, stepped up the acquisition activity. The bank purchased the non-Swiss trade finance business of UBS, the Thai retail bank Nakornthon, the Metropole Bank in Lebanon, and, in 2000, acquired the India-based Grindlays unit of ANZ Banking Group for $1.3 billion. By 2002, SCB could boast that it was the largest foreign-owned bank in India (by virtue of the Grindlays acquisition), was among the top-three biggest financial institutions in China, operated hundreds of branches in South Korea and throughout Indonesia, and maintained a presence in dozens of markets from the Falkland Islands to Botswana to Nepal.

The acquisitions bulked up the bank, built its assets, and extended its reach. For the five years prior to Sands’s arrival, the bank had increased its total assets from $77 billion in 1997 to $107 billion in 2001. The number of customer accounts had risen, too, during the same period, from just over 45 million to almost 68 million. But growth on so many fronts also brought increasing debate and conflict over direction. “There was a feeling of organizational drift,” Sands told us. “No sense of a top team. If you talked with people around the group, you would get a very different take on the priorities. There was a lot of politics at the top. There were a lot of cynical people at the bank.”

Profits and earnings told a disappointing story. Operating profits had been up and down during that five-year period, as had earnings per share, and were on a downward slide in 2002. “We were known as the ‘jam tomorrow’ bank,” Sands said—always promising better results down the road, but never quite delivering.

Another factor added to the sense of malaise: while SCB had been not quite managing to deliver, Citigroup and HSBC had been building huge, well-oiled banking machines that were rolling across the world. HSBC, in 2001, had net revenue of $26 billion compared to SCB’s $4.5 billion, $700 billion in total assets compared to SCB’s $107 billion, and posted an operating profit of over $11 billion, while SCB had earned just over $1 billion. Citigroup was also a far larger and more successful financial institution than SCB. Citigroup was formed from the merger of Citicorp and Travelers Group in 1998, and it registered net revenue of almost $84 billion in 2002 and employed almost ten times as many people as did SCB: 259,000 to 29,000. In 2002, SCB’s fifty-one countries looked rather meager in comparison to HSBC, which had operations in eighty countries, and Citi, with branches in over one hundred. It seemed only too likely that one of these two giants of international banking would finally finish the job that Lloyds Bank and Barclays had failed to get done earlier: swallow up the smaller player, assimilate its operations, and take down the Standard Chartered signs on its branches around the world.

In 2001, the board dismissed Talwar and replaced him with Mervyn Davies. Davies, in turn, reached out to Sands, who had been consulting with SCB for several years, to join as finance director. Sands had recently been promoted to director at McKinsey & Company, the management consultancy. “Very few people leave at that point,” Sands told us. Why would they? A McKinsey director looks forward to a relatively clear career path that involves engagement and influence with the leading companies of the world, and considerable reputation, wealth, and business leadership. “But I thought that, rather than getting even better at making violins as a craftsman at McKinsey, this was an opportunity to have a completely new adventure,” said Sands.

Like all the higher-ambition CEOs in our sample, Sands was able to sense the potential of SCB and to genuinely believe it could be realized. “I had a sense of Standard Chartered as being an institution that had great promise,” Sands said. “But it had not quite worked out the formula for delivering on that promise. I also thought that the leadership team—Mervyn and the others on the board—was a group of people who could actually unlock its potential. And there are very few opportunities you get in life to walk into a situation like that.”

In essence, Sands saw an opportunity to achieve his own personal higher ambitions. As Sands explained to us, “Fundamentally, what drives me is to shape the organization simultaneously to be very effective in terms of performance, a great place to work, and something that is actually a force for good.”

Turn Over Every Rock

The task for the new leadership team was clear. Davies convened an emergency session with the bank’s top 250 managers and asked Sands to present on strategy. Sands put it bluntly: “I said, ‘The strategy is very simple. We’ve just got to perform. That’s all our strategy is. We have no other strategy.’” Sands stressed the precariousness of the bank’s position. “If we didn’t sort it out, we would get taken over,” he told us.

Clearly, the bank had to do better at creating financial value. To reinforce the message, Davies and Sands had the bank’s managers hear their shareholders’ perspectives directly. “We got analysts and investors to talk to the top three hundred or four hundred people,” Sands recalled. “The investors were seriously pissed off. Part of the problem was nobody had actually been listening to what they were complaining about.” In addition to the languishing share price, the investors were not happy with the bank’s inefficient capital structure. “We were bleeding money,” Sands said, “and nobody had really paid attention to it.”

“Mervyn and I were very clear on what we had to do first,” Sands told us. “It was costs, risk, the basics of the P&L, revenue, sorting out the capital structure.” Davies and Sands reviewed every country and operation in the portfolio in terms of risk, revenue, and potential. “It was turn over every rock and sort out stuff,” Sands said.

One of their early moves was to cut back on the use of outside consultants. Sands had to personally approve every consulting contract with a value of $25,000 or more (small potatoes by the standards of a major international consulting firm). This was noteworthy not only because of Sands’s background with McKinsey, but also because of what it said about how the bank was to be managed. For a management team that had long relied on consultants, the cutback sent the message: from now on, we make our own decisions about who we are and what we’re going to do.

Davies and Sands also sought to reset expectations about performance. They reviewed every one of the top one hundred managers: about thirty left the bank, voluntarily or involuntarily. It was not a purge, exactly, but a significant and unmistakable signal that they were setting a new standard.

The management pair also reviewed the entire portfolio of the bank’s holdings and businesses. As they studied what they had, the patchwork of businesses made less and less sense to them, and they set about defining, focusing, and paring the portfolio, a process that took about a year to complete. When the two were done, SCB had eliminated its underperforming assets and businesses and focused on markets that were already profitable or where they believed they could become profitable. It was clear that SCB was no longer a global emerging-markets bank, but instead focused on three geographies: Asia, Africa, and the Middle East. These were areas where the bank had institutional history, deep local knowledge, and strong relationships—meaningful sources of competitive advantage—that, fortuitously, also included the fastest-growing parts of the world.

Develop a Strong/Strong Organizing Model

So far, the actions of SCB might seem like scenes from a pretty typical turnaround story. Pare back to the profitable assets, raise performance expectations, weed out nonperformers. What Sands emphasized next, however, is interesting, and opens a window onto the approach of higher-ambition leaders. He described a strategy that was based on a strong/strong approach to combining global scale with deep local knowledge that competitors would find hard to match. He also talked about the culture and people strategies that would enable that organizational model to be successful. He stressed the importance of making explicit commitments to all the key stakeholders. And he described the value of putting it all in a simple document to communicate across the entire bank and externally, so that everyone could understand it and be held accountable, from the leadership team down, for living up to their commitments.

“We weren’t through the woods yet, because there was a big bankruptcy crisis in Hong Kong, so we were under pretty interesting performance pressure at the time,” Sands said. “But we could see that the fundamentals were getting there. And we thought, ‘Well, we’d better work out what we want to be when we grow up.’ So we decided to do some work on a strategic vision. I’ve spent a huge amount of time on it, working with Mervyn in particular, but also the team as a whole.” In addition to the management team, they also held focus groups and shared drafts with a broader range of managers. The final draft became known as “Leading the Way.”

The document started with a bold aspiration: to be the best international bank. It then defined three key aspects of SCB’s strategic approach. The first derived from the asset review: that SCB would focus on attractive, growing markets where it could leverage its relationships and expertise. The second was that the bank would win in those markets by combining global capability with deep local knowledge to outperform competitors. The third aspect—which sought to avoid the trap that SCB had fallen into during the previous five years—was that SCB would maintain management discipline, balancing the pursuit of growth with firm control of costs.

Combining strong global capability with strong local knowledge has long been considered the holy grail of international banking, so SCB was hardly original in this regard. However, neither of the bank’s two larger competitors, HSBC and Citi, had been able to achieve this. “HSBC has traditionally had strong country CEOs and weak global lines of business,” Sands explained. Citi, by contrast, has been known for building strong lines of business across all geographies, but with relatively weak country leaders.

“We decided we wanted a model in which both roles are strong,” Sands said. The leadership team wanted to foster debate and to even encourage “friction between the CEOs and business heads.” Unlike its big competitors, SCB did not want to compromise by settling for either of the weak/strong solutions. “We didn’t want to be in a situation where we’re always doing something that is nearly as good as HSBC or Citi,” Sands said. “That’s not the aspiration.” The aspiration was to be the best international bank.

To achieve the strong/strong organizational model, Davies and Sands embarked on a process of restructuring. From the agglomeration of country operations, they streamlined the organization into two businesses: wholesale and consumer. They organized the geographies into two regions—Asia, and Middle East/Africa/the West. “And then we have six or seven functions, which are organized on a global basis. There was quite a lot of work involved in putting that model into place,” Sands told us, “because it wasn’t as clean as that.”

At the country level, Davies and Sands upgraded the role of the CEOs, giving them more autonomy and decision-making power, particularly over two important dimensions of the business: governance and country relationships. This increase in authority enabled the CEOs to deal directly with an important group of stakeholders, the local regulators, and generally play a much more active role in the development of local capital markets and credit bureaus. In such dealings, representatives of large international banks often seek to find ambiguities and opportunities in the local regulations that they can manipulate or exploit for the bank’s gain. SCB did not take this approach. Instead, SCB’s strategy was to become a “trusted insider.” “We try to play a very responsible role,” Sands observed. If the regulators view the country CEOs as financial carpetbaggers, “that does have a price, in terms of the way governments and regulators will look at you when you try to do things in their markets.”

Even as Davies and Sands were building the role of the country CEOs, they also worked to strengthen the bank’s business lines across geographies. To do so, they needed their people to reach out and find opportunities to conduct more business across country borders and boundaries. To encourage such behavior, SCB’s Wholesale Banking division instituted a new, unusual incentive. The leader of the local wholesale business would receive credit for any business that his locally based customer booked, even if the booking was made in a different geographic area.

So, while the CEO of SCB Korea would be worrying primarily about the overall profitability of his country operation, Sands explained, “the Wholesale Banking guy will be managing the global relationship with a client like Samsung. We don’t want him to worry about whether deals are done domestically with a client or internationally.” This meant that the SCB business manager could take a less parochial view and leverage SCB’s greatest competitive advantage for its customers. “Big local banks can do stuff locally,” Sands explained. “What they can’t do is all the international stuff, which we can do incredibly well.”

The result is that the bank’s management can focus on trade investment corridors and the important players that operate within them. “We probably know as much as anybody knows about China’s relationship with Africa,” Sands said, “because we’ve been involved in many of the major deals between China and Africa.” Very few banks have the ability to serve both ends of these complex investment corridors. “We’ve spent a lot of time focusing on those and working out how to pull the team together to serve them,” he said. That ability to bring to bear local knowledge all along an international investment line is a clear point of differentiation for SCB.

But the strong global/strong local organizing model, although strategically attractive, is not as simple to implement as it may sound. Sands argued for the benefits of tension and even conflict between country and global business lines, but there are some places where conflict can be problematic, one of which is the balance sheet. “This is the place where the two businesses have to come together, and the country perspective is important,” Sands told us. “Even if you have two businesses in a country, you only have one balance sheet.” A review of the country operations showed that there was much dysfunctional behavior in reconciling the balance sheet and not enough expertise within the local country operations to manage the process. So SCB created a new corporate entity, a balance-sheet review team, that would visit the country operations—particularly the smaller ones—and essentially show them “this is how you should be doing it.”

While introducing a corporate perspective helped reduce some of the conflict, the balance-sheet review team still had to approach the work with sensitivity to the local ways of managing disagreement. “What would count as robust discussion in an American company might be unacceptable here,” Sands said. “You could have the same substantive discussion, but you’ve got to do it in a way that is culturally sensitive. You can’t have people losing face.”

Establishing and maintaining short lines of communication helped the bank manage the complexities and tensions of implementing the strong global business/strong local geography model. “The feel of being a fairly small company helped,” Sands explained, “because it helped people to get on the phone and talk to each other and work out how to quickly turn around a deal.”

Top management modeled the culture of direct communications. While most banks are notorious for elaborate hierarchies and formal chains of command, Sands told us, “Mervyn catalyzed a culture of direct communications. I get e-mails from individuals all around the bank all the time, on all sorts of topics. I can have a substantive e-mail dialogue with somebody four or five levels down in one of the businesses, and nobody feels threatened by that. That would never have happened before.”

Similarly, leadership set an example for productively managing conflict. At the meetings of the group management committee, for example, “real debates happen,” Sands said. “There is lots of disagreement and discussion. We all respect each other. Once we make decisions, we get on with it. You can’t tell the organization to work in a certain way and then not do it from the top.”

Dramatically Raise the Stakes of the Game

In 2004, with substantially improved performance, a well-articulated international insider strategy, and the distinctive strong/strong organizing model taking shape, Davies and Sands did what higher-ambition leaders do when they feel that the company is ready: they find some way to dramatically raise the stakes of the game, to take the company to a whole new level. “We were coming off the back of very, very strong underlying performance,” Sands said. “The organization was working pretty well. And we’ve got a very good board whose attitude has tended to be that you’ve got to be bold. If you just stand still and tread water, you will get taken out. But as long as you continue to perform, that’s not going to happen.” The two started to think about what the next step might be, what the “next level” could look like.

They caught a glimpse of the future when an important opportunity arose toward the end of that year: a controlling stake in Korea First Bank (KFB) became available for acquisition in the fall of 2004. KFB was a major player in South Korea, with an overall 6 percent share of the market, 10 percent of the total number of bank branches, and 8 percent of Korea’s mortgage market.

HSBC made a $3.1 billion bid to purchase KFB, and the bank, along with the market, expected the deal would be closed by the end of December. But SCB was quietly mobilizing its forces. Its long history in South Korea put the bank in good stead. “One of the things we’ve learned is about laying foundations in countries,” Sands explained, and SCB had laid its foundations in Korea well. “We had had a wholesale banking operation there since the sixties. We launched a consumer banking operation to learn about the consumer bank. We actually bought a stake in another bank. Having done all that, having built relationships with the regulators, by the time we got to what was then Korea First Bank, we knew exactly what questions to ask.”

SCB’s strong global business/strong local geography model, use of direct communications, and open leadership style were also key. The streamlined organization with a clear geographic focus (Asia, Africa, and the Middle East) and two businesses (Wholesale and Consumer Banking) enabled Davies and Sands to keep well informed and to move rapidly. “We could work very, very quickly on due diligence. And we took some very specific risks as well, in due diligence. My understanding,” Sands told us, “is that HSBC found it more difficult to take those risks, because those decisions were getting pushed up and down.”

On Christmas Eve 2004, Davies and Sands made an eleventh hour move. They decided that KFB was worth more and upped the offer to $3.3 billion. The money markets were closed through January 14. But Davies and Sands had to prove that SCB had the money to do the deal, which, in fact, it did not. Nor could they go to the markets to get assurances that the money would be available when the markets reopened in January. Davies and Sands decided to personally guarantee the funds. “Effectively, we did a deal to do a deal,” Sands explained, “and then we announced the deal on January 11, and when the markets were open again, we raised the money. Mervyn and I would have had to have gone if we didn’t do the deal by January 14.” Just as they pledged, Davies and Sands were able to raise the money they needed for the purchase by issuing $2 billion in new shares and drawing on other available funds.

The acquisition marked an important turning point for SCB. “Up until that point, I think a lot of external people wondered whether we were really a player,” Sands said. “Then we suddenly stole Korea First from under HSBC’s nose. We did a $3.3 billion acquisition, three times as big as anything we’d ever done before. And that changed the external mind-set around Standard Chartered. There’s no doubt that The City [of London] community, investors, our competitors started looking at us differently. And that had a huge impact on our organization, because we realized that we were serious about taking on these much, much bigger organizations.”

The boldness of the KFB acquisition actually increased the imperative for SCB to continue to raise its game. The bank was still a midtier player, well positioned in the world’s most attractive markets, and would rapidly become a tantalizing takeover target if it stumbled. “We’re constantly trying to step up the pace of the organization,” Sands emphasized, “the pace at which we make decisions, the pace at which we implement, the pace at which we grow. If we can’t simplify the way we do things, there will be too much drag on the organization.”

In particular, Davies and Sands sought to move even further away from the centralized decision making that had characterized their first two years. “We acknowledged the fact that we pulled everything into the center and micromanaged,” Sands said. “Now we’re trying to push it back out again.”

Sands came to see the recruitment and development of talent as fundamental to this effort and to further strengthening both sides of the strong/strong model. In the process, he had to revise the assumptions he had long operated under at McKinsey. “As a consultant, you tend to be working on finding the right answer and how you go about doing it,” he told us. “What I’ve increasingly realized is that’s completely useless if you don’t have the people.” Now Sands sees business problems quite differently. “With any business issue, about 10 percent of the problem is working out what to do about it. The next 25 percent is working out how to do that. The remaining 65 percent of the problem is working out who is going to do it,” he said.

“The thing I’m most concerned about,” Sands told us, “is building leadership capacity.” As a consequence, Sands has paid a great deal of attention to attracting, educating, and managing talent across the organization, such as relaunching SCB’s international MBA program. The focus started when Sands was working with Davies. For example, they developed an unusual initiative specifically designed to attract people with talents and expertise who might not show up through the conventional recruiting channels. They created Project Istanbul (which actually has nothing to do with the country of Turkey or its capital city) to bring in “young Turks”—that is, bold, bright talents who had not been part of the banking world.

“We made a curious proposition to these people,” Sands said. “Mervyn and I would interview them, and we’d say, ‘We’re going to pay you less than you have been paid or could get paid, and we don’t know what job you’re going to do, but join us, because you’ll love it here.’ And this seemed to work quite well, rather to our surprise.” Sands laughed. “It hasn’t been huge in numbers. But actually, in terms of an injection of ambitious, smart, different mind-set people, it was extraordinarily valuable.”

Just as important as recruitment, of course, is the development of people already in place. “It’s often about unlocking people you’ve got,” Sands said. “Working out how to put them in a different place, or help them build on strengths they’ve got that they haven’t quite realized how to use.”

Movement also strengthens collaboration. “We move people across the dimensions, because when you’re an international organization, making your matrix work well is critical. We take a lot of risks in moving people out of functional silos,” Sands told us. “We appointed a head of legal and compliance who at one point ran the credit card business. He was not a lawyer, he was not a compliance expert, but he understood our business. And we put a CEO in China who actually had run the organizational learning group. She was not a career banker at all. The more you can get people to work in different dimensions of the matrix, the less ‘siloed’ they become.”

Movement and the resultant networking, in turn, underpin a culture where knowledge sharing and collaboration can become a norm. “We expect professionals to make a contribution to the institution, as well as to their own area of responsibility,” Sands said. “We designate ‘global products’ and push those across geographies. And we offer incentives for pulling in other people’s ideas, as well as for propagating their own ideas.”

Reinforce the Cultural Glue

For a numbers guy and a banker, a former financially focused consultant and a zealot for performance, Sands spent a lot of time talking with us about a rather unexpected topic: how much fun he has in his position as CEO, and how much fun the bank’s employees, in general, derive from their work. Much of that fun seems to come from a genuine enjoyment they take in each other and their relationships. “People get passionate about this organization,” Sands said. “The cultural side of this place is very special. This is one of Mervyn’s great achievements and legacies. Mervyn found ways of unleashing, reinforcing, fueling the cultural glue and excitement of the place.”

“We are extraordinarily diverse,” Sands said. “And all of us enjoy the diversity of the organization.” It has taken a lot of time and work, and many initiatives and activities, to reach the point where diversity is seen as a source of strength and even delight, rather than a cause of disconnection and tension. Much of the success comes from understanding the differences in cultures and accepting the practices and traditions of each. This comes down to things that may seem simple, but have symbolic cultural value. For example, Sands has his sober, low-key London office regularly inspected by feng shui consultants to make sure that the right positive energy flows. The bank celebrates Diwali, the Indian festival of lights, as well as the Chinese New Year. It is careful about scheduling meetings or events on Friday, because Friday is part of the Islamic weekend, and has been offering Islamic banking (a major issue because the Koran forbids the payment or collection of interest on loans) since 1993.

“We do a lot of things to celebrate our cultural diversity,” Sands said. “For example, the ‘Dance Idol’ competition.”

“The what?” Nathaniel asked. Sands seemed pleased to have caused his interviewers some bemusement.

“Dance Idol,” he repeated, and explained that the bank challenged those in the country organizations to form dance teams, with a minimum of four and a maximum of thirty people each. The teams had to devise a dance that was related in some way to SCB’s strategy, surely one of the more intriguing assignments that any choreographer might face. Competitions were held in various locations around the world and proved wildly popular. A hundred dance teams entered from India alone. “It was about letting people understand each other a little bit and celebrate each other’s culture,” Sands said.

Much of the success of celebrating and leveraging diversity at SCB stems from the ability to read, understand, and accept cultural differences. You have to be “conscious of the way people are approaching problems and thinking about them, and their way of articulating things, and knowing what’s not being said,” Sands told Nathaniel and Tobias. “A very classic Asian thing to do, if they disagree with you, is to defer the problem and then disagree with you later. So what you need to do is tease out the disagreement there and then. We have many different cultures within Africa. You shouldn’t work on the assumption that you immediately understand exactly what is being meant by what people say. You need to work a little harder in the communication in the conversations. The underlying respect and way you treat people are incredibly important.”

Some people, according to Sands, are not able to catch or embrace the differences: “We hired one person, a very nice guy, but it just didn’t seem to work. It wasn’t because he was nasty. He just couldn’t read the room, which meant he was constantly getting into misunderstandings with his teams and his peers. And we couldn’t work out how to help him crack it.”

SCB’s creative approaches to cultural integration are not just fun but a source of competitive advantage, because they help the bank gain the fullest possible value from its acquisitions. When the bank acquired additional operations in Pakistan and Taiwan (in each case, as the first international bank the national regulator trusted enough to allow to make a local acquisition), it conducted a “welcome week” across the entire organization with a series of events focused on Pakistan and Taiwan. “We wanted every country in the group to know what it was that we had bought, and why, and also to do some sort of celebration, based on food or clothing or something to do with the cultures. They weren’t new countries to us, but we’ve increased their importance,” said Sands.

The bank also dispatched ambassadors from these countries to operations throughout the world. Sixty Taiwanese employees visited thirty countries to conduct events with bank staff and with members of the local business communities. In addition to teaching the other countries about Taiwan, the Taiwanese learned a great deal about the bank. Sands explained, “The idea was that these people would go back to Taiwan and talk about what they’d learned from Uganda, or what it’s like there. But actually the meta-message is all about the family. It’s all about the organization they’ve become part of.”

According to Sands, the process of building a shared sense of community—even across diversity—is critical “because a lot of what happens when you grow is you end up building semi-independent entities that aren’t actually part of the same seamless whole.” Sands spoke of the evolution in his own thinking: “I came from the numerical, analytical side of consulting. But I spend a huge amount of my time now worrying about culture, because I want to make sure that, as we grow and evolve, we don’t lose what’s made us special.” For example, once a month Sands does a “thematic call” with a specific group within the bank. “It will be partly me talking, but it will partly be structured questions, too. People will have submitted questions, we’ll get them on the live line, they’ll ask me questions,” he explained. One call took place on International Women’s Day with four hundred up-and-coming women across the group. “Ten of them were on live lines asking me questions about what we were doing about flexible working and particular issues around international mobility for women,” said Sands. He did another call for the fiftieth anniversary of Ghana’s independence and one for the anniversary of the acquisition of the Korea First Bank.

The “Seeing Is Believing” Initiative

Another reinforcement for the cultural glue is the involvement of SCB employees in their communities through various social and charitable activities. “There’s a very strong community aspect here,” Sands said. But when he first joined the bank, the community activities were highly localized and personalized. “We were doing all this community stuff all over the place, and it was all subscale,” he said.

Just as it refocused its business portfolio, SCB refocused its corporate charitable-giving activities. In 2003, Davies launched a corporate-wide initiative, “Seeing Is Believing,” as a way to celebrate the one hundred-fiftieth anniversary of the bank. “We thought it would be nice to save the sight of one person for every staff member,” Sands told us. “We had twenty-eight thousand people in the organization, so we thought we’d raise enough money to save the sight of twenty-eight thousand people.”

To pursue this goal, SCB created Seeing Is Believing in partnership with the International Association for the Prevention of Blindness. Its mission is to provide eye-care access to people around the world and, in particular, to alleviate the problems associated with preventable or reversible blindness.

The project was a success from the start. With fund-raising support from SCB staff in its first year, Seeing Is Believing successfully raised $1.6 million to fund fifty-six thousand sight restorations, twice its goal. “We overdelivered,” said Sands. “We thought, well, that’s very interesting. Let’s go for a million people over three years. Our target was to do it by World Sight Day, October 2007. We hit that. We’ve now said, 1 million is a good thing, but the problem is still very big. There are 45 million blind people in the world, 36 million of whom don’t need to be. Let’s go for 10 million, because then you’re actually making a real impact on the problem.” By the end of 2009, SCB had restored the sight of over 2.5 million people across its markets.

SCB has raised a great deal of money for its partner organizations; it has also put its human assets to work on the problem, particularly its skilled bankers. Sands told us that the donation of operations expertise is just as important as donating money or advising on how to raise money. “The issue with doing philanthropic work was helping the NGOs have the capability to deliver the services in the markets in a scalable fashion,” Sands told us. “Our guys locally have gotten involved in helping with the financial management and providing support to the NGOs, particularly in places like Africa and Bangladesh.”

Sands noted that the Seeing Is Believing program has been good not just for the world and the people who have been helped, but also for SCB. The program has unleashed huge amounts of energy and has created a model that he uses to raise managers’ aspirations. He explained, “We went from having a lot of subscale, well-meaning initiatives to doing something that really makes a difference. By concentrating resources, being focused, and being ambitious, we can do the same in our businesses.” It has also reinforced the sense of community across the bank. “People in Sierra Leone did a sponsored walk that raised, in the scheme of things, not a huge amount of money,” Sands said. “But it’s the idea that the people in Sierra Leone are raising money for eyesight in Bangladesh.”

Weathering the Financial Crisis: Standing by SCB’s Clients

In 2008 and 2009, the collapse of the world’s financial markets subjected leading financial institutions to unprecedented levels of stress. SCB’s largest competitor, Citibank, teetered on the brink, with its share price plunging from a high of over $50 per share in 2007 to under $1 in early 2009. But SCB came through with flying colors, outperforming its peers, and posting an unbroken record of income and profit growth throughout the crisis, without any reliance on emergency government or central bank funding.

“Part of our success,” Sands explained, “was our geographic focus, and the way we ran our business model in terms of the amount of liquidity we have, the amount of capital we have, and the way we think about risk.” But major reasons for SCB’s success were also the distinctive organizational and leadership approaches that Davies and Sands had pursued over the previous six years.

In reflecting on what had carried them through unscathed, Sands named four key points: “First is that we have a very clear strategy and we stuck to it. Everybody understood it, and we were very, very focused.” This was in marked contrast to the institutions that got into the deepest trouble. “If you look at what went wrong with a lot of banks,” Sands pointed out, “it was on the periphery of strategy; it was where people were doing things that were a little bit offbeat.”

Second, Sands continued, “it is deep within the culture of the bank to focus on the basics—the operational detail, the granularity of what we do in managing capital, liquidity, and risks, control of costs.” Sands connected this to the bank’s distinctive approaches to talent: “We call it ‘swooping and soaring.’ If you’re a leader in the bank, you have to be able to swoop down to the six-inch level. You have to be able to crawl over the documentation of certain sorts of contracts, or the operational procedures and key control standards of certain types of activities. But you also need to be able to soar, which is to provide your team with the broader context so they understand how what they’re doing fits into the broader picture, of either the bank strategy or the macro context.” During the crisis, this expectation meant that senior people got deeply involved in the detail of what was going on and how to resolve it. “I don’t think you would find that was true at all the other banks,” Sands commented.

Third, Sands told us, “we stayed open for business.” That is, the bank continued lending. Many of SCB’s bankers saw the crisis as a huge opportunity to win new clients, given that most other banks had stopped making new loans. But Sands and the bank’s senior leaders decided differently. “We decided we didn’t want to take on new clients,” Sands told us. “This ran counter to what many people thought within the bank and created tension in the organization.” But Sands and his team stood firm. “We basically said, ‘No, we’re going to focus all our capital, liquidity, and resources on supporting our existing clients.’”

Sands characterized that decision as a moment of truth: “We didn’t have limitless capital. We didn’t want to diffuse that across whatever we thought was the best idea or what could bring in a new client. We wanted it very, very focused on our existing client base.”

The decision sent a powerful message to SCB’s clients about the bank’s commitment to them. “Our view,” Sands explained, “is that clients have very long memories, and how you work with them during a crisis is what they will remember.” The commitment has paid off in deeper client relationships. “The prize for us,” Sands told us, “from a strategic point of view, was building deeper relationships with our clients, as opposed to trying to win more new clients. And that is exactly what we’ve done.” Sands referred to the financial data as a proxy for the depth of the relationships. “If you compare 2008, 2009, and 2010, the number of clients with whom we made more than $5 million and the number of clients with whom we made more than $10 million both grew markedly.”

The fourth reason for SCB’s success during hard financial times, according to Sands, was the strength of the bank’s values and culture. “Every team involved in banking came under huge pressure when the crisis hit. There were lots of fires breaking out all over the place, and it was a real test of the way an organization works,” he said. The way the bank responded revealed deep cultural strengths. “Bad news traveled fast. People were very quick to make sure that we knew what was going on and where things were getting difficult.” In addition, Sands noted, “People did the right thing for the bank. They realized that, in an environment like that, the important thing was that you didn’t think about your particular business unit, or your particular part. You had to do the right thing for the bank, the right thing for the client.” There was also an enormous amount of collaboration. “Virtual teams were springing up all over the place, dealing with this or that particular issue,” said Sands.

Sands believed that this was very different from the way other banks operated through the downturn: “If you talk to people about the way other organizations were operating at the time, you hear about dysfunctional teams, people protecting their own area, frictions. It’s just the way organizations performed under acute, acute stress and information overload. These were incredibly intense periods of time.”

These cultural distinctions translated into operational advantages. “Often you have a lot of decisions that are being made around the deployment of capital or resources, which look very different from different perspectives,” said Sands. What differentiates performance, he explained, is “the ability to stop and say, ‘Hang on, this looks obvious from my perspective, but maybe I should talk to someone else and see whether it really works that way if looked at from a bigger-picture point of view.’” The bias to explore other perspectives must, of course, be coupled with the intention and ability to act quickly on what is learned. “That requires a very flexible communications and decision-making environment,” he said. Formalized consultation and decision-making processes can act as impediments to speedy action.

Conclusion

SCB has created impressive economic value under the leadership of Davies and Sands. Profit before taxes, for example, grew from $1.3 billion in 2002, to $3.2 billion in 2006, and $5.2 billion in 2009. The bank expanded from twenty-nine thousand employees in 2002 to more than seventy-seven thousand employees in 2009.

How did SCB go from a mediocre, “banana skin” bank to one that not only survived the crisis but turned it to its advantage? How did Sands build on the foundations laid by Davies to unlock the promise and the potential that they both saw in SCB? Perhaps we should return to the story that opened this chapter—of Sands starting a corporate meeting with a picture of his childhood nanny’s daughter. Why was it so important to him to present such a personal portrait of himself to his audience? What had he learned about leadership, about the culture, and about his own ambitions in the years since he had first served the company as a numbers-oriented consultant?

SCB achieved success in large part by focusing on social value as well as economic value. Sands came to understand that the quality of relationships and a diverse culture were key to SCB’s ability to attract and retain distinctive talent. In turn, the capacity to work across cultures and boundaries and to engage conflict productively underpinned SCB’s ability to create strong global lines of business, support strong country CEOs, and pursue a strategy that enabled customers to work the trade corridors between geographic areas where the competition may have had a physical presence but had less ability to collaborate than did SCB.

With this strong/strong organizing model, the bank achieved a best-of-both strategy of global capability and deep local knowledge. Dramatic improvements in financial performance coupled with bold strategic moves like the Korea First acquisition bolstered the belief that SCB had a winning team and strengthened pride and the sense of a shared community. Initiatives such as Seeing Is Believing increased employee commitment and the feeling of companywide purpose, while also improving the bank’s reputation and credibility in the communities in which it operates. Commitment to existing customers during the financial crisis deepened relationships, built trust, and contributed to greater bank profitability.

We found that higher-ambition leaders like Sands have an intuitive ability to achieve this kind of simultaneous solve—the unique alignment among strategy, organization, and culture that most powerfully delivers superior economic and social value. Having focused in this chapter on the interconnections among these dimensions, in part II we will explore in more detail each of the disciplines—strategy, performance, community, and leadership—that constitute the distinctive work of higher-ambition leaders.