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IN SEARCH OF THE X FACTORTo the Editor:I enjoyed reading about the work force commission (“Can The Work Force Be …


To the Editor:

I enjoyed reading about the work force commission (“Can The Work Force Be Repaired?” July/August 1990), and I believe that the issues surrounding a competitive work force underpin the S&L crisis.

Wrongdoing, as an explanation for S&L failures, sells newspapers. The demise of many thrifts and other financial institutions in recent years, however, has less to do with the misappropriation of depositors’ funds than with a key administrative omission.

Thrifts that bolted, when deregulation made all manner of business development possible, woefully neglected human capital. If there is a single common thread to the plight of failed thrifts, it is the wholesale failure of these institutions to attract, nurture or otherwise develop requisite talent and expertise.

Pressure from abroad has amply demonstrated that a competitive industry must also sport a competitive work force. In a heavily regulated environment, as long as thrifts stuck to their knitting, they did not need to be overly concerned about their ability to compete with commercial and investment bankers. But in a rapidly changing, deregulated environment, staffing became an increasingly risky proposition.

In addition to training and recruitment inadequacies, many failed thrifts, according to the regulators who folded them up, were distinguished by an arid intellectual culture, which translated into employees who showed little initiative and whose short-sighted preprogramming precluded the possibility of their identifying opportunities or of dealing with eventualities without unduly tying up the hands of senior management. This was a fatal management oversight, leading to stagnation in a world that rewards failure to adapt to change with extinction.

In a recent evaluation of the factors contributing to the failure of national banks, the Office of the Comptroller of the Currency found that while external economic conditions were a significant cause of problems in more than one third of the banks evaluated, all but 7 percent of the failed and problem banks also had significant internal problems relating to management. The study concludes that the chief executive officer is the single most important determinant of the success or failure of a bank. Fully 63 percent of the failed banks were managed by CEOs that “clearly lacked the capability, experience, or integrity necessary to make their banks successful.”

More frequently than not, successful management is characterized by resilient ego. Such management rarely perceives idea generation from the ranks as threatening or as diffusing implementation of management directives. For, in reality, a thinking employee base is better equipped to adapt those same directives to the real world and to confer upon them better “fit.”

Henry Kravis observed that the X Factor in business-that ingredient that makes one institution more competitive than another, though both are comparably poised and matched in a given marketis the ability to make employees think like owners. People do their best work when they are working for more than a paycheck. Such employees are constantly trawling for linkages between the external environment and their jobs, looking for ways for their institution to improve, innovate, and otherwise compete.

What goes into the generation of new ideas is a puzzle which, like the ingredients of elixir, we would bottle if we could. One thing is certain: Human thought processes thrive on information. Moreover, an information-friendly environment is one we can create.

The importance of information gathering to the formulation of any number of strategies critical to the savings industry, ranging from lending to investments and retail, cannot be adequately underscored. A constant flow of information is necessary to test the soundness of liability strategy. A capacity for systematic information collection and analysis can mean the difference between strategies shaped to anticipate and strategies that merely react to changing market conditions.

Sensationalist press accounts notwithstanding, the X Factor for the savings industry comprises both integrity and ingenuity. Neither just happens. We need to make them happen.

Noel V. Lateef

Executive Vice President

and Director of Administration

The Bowery Savings Bank

New York, N. Y.


To the Editor:

The notion that George Brown’s idea of afternoon tea would leave a purist aghast (“CEOs Meet Earl Grey,” July/August 1990) has left us rather aghast ourselves.

Had Amiad Josef Finkelthal, the author of this article bothered with basics-simple things-like talking directly with Mr. Brown about his views, a very different lead would have emerged.

We realize that this is a feature piece, but misleading information about Jardine’s corporate image is something we cannot take lightly. Your author has taken a specific post-merger practice designed to strengthen employee relationships at one of our branch offices and imposed it as Mr. Brown’s companywide ethic.

You can imagine the likely discrediting effect this has on your magazine when those who know of Mr. Brown and the U.S. operations of Jardine Insurance Brokers read this article and know it is untrue.

We hope you will take future measures to safeguard against such a disservice to your magazine and companies like ours.

Stephanie Davis

Jardine Insurance Brokers

San Francisco, Cal.

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