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 Books
Who's in Charge Here?
Managers, Consultants, and
Management Fashions in
the 1990s
DAVID GINZL

The banking industry is changing But it has been a boon to manage-

and the pace of change accelerating. ment consultants, an apparently
In fact, the merging and purging ubiquitous species with an endless
frenzy of the mid-1990s is driven by supply of creative approaches and
the realization that the banking in- trendy solutions. If they have not yet
dustry-that highly regulated, descended on your institution, refer to
slow-paced, comfortable world that I the Fall 1995 issue of the Commercial
first entered 20 years ago-is dying. Lending Review, which had an entire
Instead, we bankers find ourselves section entitled "Focus on Reengi-
in the midst of a highly competitive neering." Each article was written by
struggle with a host of nonregulated management consultants, filled with
competitors, attempting to sell, in an consultant jargon-"instituting a
efficient, cost-effective manner, a sales culture," increasing "share of
large array of traditional and non- wallet," "off-loading low-value tasks,"
traditional financial services. developing a "customer-based organi-
This transformation, some would zation design." Until several years
say "right sizing," of the industry has ago, I would have asked, "What are
not been an easy process for bankers. they saying? Who talks like that?"
Nowadays, however, such vocabu-
lary is creeping into everyday
David Ginzl is director of credit policy at communication. What does all of this
Barnett Banks, Jacksonville, Florida. consultant-speak mean?
Books

The Forgettable Mission Statement

[T]he forgettable mission state- cramming stuff in until, once packed,
ment is not unusual; many corporate these intellectual bags are too heavy
statements of purpose obscure rather to lift. The result: mission statements
than clarify the organizational frame with so many words, all carefully ne-
either because they include such gener- gotiated and crafted by a committee,
ic words that little real meaning is that few people can cut through all
conveyed, or because they use so many the ink to figure out the main mes-
words that the meaning gets lost in the sage. Such mission statements often
verbiage. Consider the first of these two do provide strength and perspective
problems-the use of one-size-fits-all, to some portion of the organization
generic "foof-ball" phrases. The appar- (and almost always to the people who
ent preference for vacuous, empty drafted the statement). For most,
words is so pervasive that one guide- however, without some sort of suc-
book on writing mission statements cinct summary, the document
even suggests that companies use sen- becomes just part of the background
tences like: "We are committed to buzz-more blah-blah-blah from the
providing unequaled quality." Judging executive suite.
from the mission statements I see, Mission statements that pass the
quite a few companies have followed "content" check use words that convey
similar instructions, resulting in fer- real meanings to the people inside the
vent commitments to "creating value" organization, delivering a central mes-
and "being the best," without defining sage or set of messages. The
the goals beyond these inter-galactic Ritz-Carlton hotel chain does this by
statements or setting any boundaries telling its employees that they are
for how they will be achieved. In con- "ladies and gentlemen, serving ladies
trast, listen to the words in Ben & and gentlemen." When Sigi Brauer was
Jerry's mission statement: "To make, general manager of the Boston Ritz-
distribute and sell the finest quality all- Carlton, he would explain to new
natural ice cream and related products members of the Ritz staff that the idea
in a wide variety of innovative flavors of "serving ladies and gentlemen"
made from Vermont dairy products." means a Ritz employee says "May I
Or this one for McDonald's: "To satisfy help you?" rather than "Whaddaya
the world's appetite for good food, well want?" and that the idea of "ladies and
served, at a price people can afford." gentlemen serving ladies and gentle-
"Unequaled quality" is just empty calo- men" means that a Ritz employee is not
ries compared with these two. a servant, but a valued staff member.
The second problem, too many
words, can also obscure the message. From Fad Surfing in the Boardroom: Re-
claiming the Courage to Manage in the
Some companies seem to think Age of Instant Answers by Eileen C.
of their mission statements as ex- Shapiro (Addison-Wesley Publishing
panding suitcases: they just keep Company, 1995).
 Commercial Lending Review

Hilarious, True-to-Life Look You can devote yourself and

at Management Crazes your company to total quality
management. Or you can re-
Check out Eileen C. Shapiro's Fad engineer your corporation, with
Surfing in the Boardroom: Reclaim- the intent, in the words of the
ing the Courage to Manage in the Age
original reengineers, of creating
of Instant Answers (Addison-Wesley a "business revolution."
Publishing Company, 1995, $22.00,
(617) 944-3700), if for no other rea-
son than its glossary of terms. It is
Management often
hilarious. Beneath the obvious hu- operates on
mor in the "Fad Surfer's Dictionary," "autopilot,"choosing a
all of us will recognize a large certain management
amount of reality. technique ... without a
Shapiro is a consultant. A Har- clear understandingof
vard MBA, she worked with
McKinsey & Company and is now
all of the unintentional
president of her own management consequences and
consulting firm. Throughout Fad negative side effects
Surfing in the Boardroom, she pokes that may result.
fun at consultants, while taking a
critical look at the various manage- While each of these tools may
ment techniques that they promote. have value to an organization, none,
As Shapiro points out, there are by itself, is a panacea. The danger, in
numerous management techniques Shapiro's view, is that management
from which business executives can often operates on "autopilot," choos-
choose in the fad-surfing (see glos- ing a certain management technique,
sary on page 93) world of today: or hiring a consultant who makes the
choice, without a clear understand-
To review just a few of the op- ing of all of the unintentional
tions: you can, if you wish, consequences and negative side ef-
flatten your pyramid, become a fects that may result. Each of these
horizontal organization, and management tools can cause "organi-
eliminate hierarchy from your zational havoc," especially when they
company. You can empower are "applied blindly across a busi-
your people, open your environ- ness, without attention to where they
ment, and transform your might be useful, why, with what oth-
culture. You can listen to your er techniques they are being
customers, create a customer-fo- combined, and how, if at all, they
cused organization, and commit should be modified to meet the needs
to total customer satisfaction. of the company."
You can do the "vision thing,"
write a mission statement, and Beyond Humor, Insights
put together a strategic plan. into Business Strategies
You can improve continuously, Shapiro scrutinizes each of these
shift your paradigms, and be- management techniques in separate
come a learning organization. chapters. She illustrates her insights
Books

Excerpts from "The Fad Surfer's

Dictionary of Business Basics"
Accountability-A characteristic of Pro forma-i: Financial projections.
which everyone else in the organization 2: A genre of fiction, composed primari-
needs far more. Not to be confused with ly of numbers.
Authority, which is what I need more of. Reengineering-i: The process of
Authority-A characteristic of which I taking a comprehensive, -clean slate"
need more if I am to do my job properly. approach to an organization's work
Not to be confused with Accountability, flows in order to achieve dramatic im-
which is what everyone else in the orga- provements in costs, time, and
nization needs far more of. effectiveness; also known as "business
Corporate culture--: The way we do process reengineering," "core process
things around here, our combination of redesign," "horizontal organization,"
shared values and group norms. 2: An and "process innovation." 2: In verb
excuse for not making desperately form, as in "to reengineer," an all-pur-
needed changes in the way a company pose word commonly used to describe
conducts its business. virtually any cost-cutting or reorgani-
Fad surfing-The practice of riding zation effort. 3: The Consultants' Full
the crest of the latest management Employment Act.
panacea and then paddling out again Strategic plan-i: A set of analyses,
just in time to ride the next one; always packaged in accordance with corporate
absorbing for managers and lucrative requirements, that is undertaken in or-
for consultants; frequently disastrous der to justify a campaign already under
for organizations. way or a budget about to be submitted.
Mission statement-i: A short, specif- 2: (alt.) A set of analyses, packaged in
ic statement of purpose, intended to accordance with corporate require-
serve as a loose musical score that moti- ments, that nonetheless bears little or
vates everyone to play the same tune no resemblance to the real strategy be-
without strict supervision. 2: Frequent- ing followed (but that, once printed and
ly, an assertion of undying commitment bound, can, in a pinch, be used as a
to some amalgam of "total quality," doorstop or bookend).
"low-cost producer," "empowered Vision-What Moses experienced
workforce," "excellence," "continuous when he wandered for too long in the
improvement," and other bizbuz shibbo- desert; coordinated and persistent hal-
leths that, although written for a lucinations characteristic of dementia
specific organization, is equally applica- or paranoid schizophrenia.
ble to an aircraft manufacturer, a Voice mail system-Combined with
software development finn, a communi- downsizing and just the right motiva-
ty hospital, a department store chain, or tion, a way to ensure that people
the local dry cleaner. 3: In some compa- inside a company will never have to
nies, a talisman, hung in public spaces, talk with customers or other bother-
to ward off evil spirits. some human beings.
 Commercial Lending Review
and words of caution with examples what happened when the sock man-
from the business world. Some of her ufacturer reduced, in an apparent
more insightful examples, however, cost-cutting measure, the fabric
come from a fascination with Greek reinforcement in the heels. In
mythology. Imagine Hercules as a Shapiro's analysis, the company had
business consultant faced with the failed to factor into the cost-
seemingly impossible task of clean- savings analysis the customer per-
ing, in one day, the stables of King spective of the product benefits
Augeas. In solving this problem, being purchased. In evaluating cost-
Hercules became "the first reengi- cutting alternatives, the company
neer." Despite his apparent success had not understood the important
in this endeavor, there are often difference between "productive"
unanticipated consequences caused costs and "non-productive" costs.
by massive revolutionary process There are countless other anec-
changes ("...even though the ancient dotes and management lessons. As
myths don't tell us what happened to you read each of the chapters, you
the Greek ecosystem after Hercules will alternately laugh and cringe,
redirected the two rivers through the the latter when you recognize your
Augean cattle yard, it seems reason- own company.
able to assume that there were some
unintended side effects"). Perhaps Managers, Not Consultants,
more evolutionary process changes Should Be Making
may suffice to solve specific problems Management Decisions
or to redirect certain organizations, Fad Surfing in the Boardroom com-
as opposed to the massive disruption bines wit with insight, and it has an
(and greater risks!) involved with important message for business ex-
revolutionary reengineering. ecutives. Consultants have valuable
Shapiro also uses personal expe- insights and may recommend man-
riences, ranging from being served a agement techniques that can
dead cockroach at an exclusive improve your organization. But the
restaurant to dealing with smashed job of management is yours, not
buttons and indifferent service at theirs. Independent judgment and
her local dry cleaner. Learn about analysis, and ultimate accountabili-
her husband's "Sock System" and ty, rest with you!
Commercial
Lending Review
VOLUME 11, NUMBER 3 SUMMER 1996

STRUCTURING LOANS To DEVELOP CUSTOM AND

OFF-THE-SHELF SoFrWARE ............................................. 4

PRACTICAL PROBLEMS WITH

INTELLECTUAL PROPERTY AS CoLLATERAL .............................. 12

SEVEN CASH MANAGEMENT SOLUTIONS FOR

HEALTH CARE CompANEs ............................................. 20

TAKING SECURITIES AS COLLATERAL:

NEw ARTicLE 8 Of THE UCC ......................................... 28

PROTECTING AssETs DURING FoRZCLOSuRE:

COURT-ORDERED RECEIVERSHIP ...................................... 38

LENDER LiABirrY RELATED TO CREDIT INQUIRIES ..................... 48

HOLDING COMPANY LOANS: GAUGING THE DEBT-SERVICE RISK........ 69

DEPARTMENTS:

REGULATORY OUTLOOK ......... 78 ACCOUNTING ................... 88

LOAN OPERATIONS ............. 83

A PUBLICATION OF INSTITUTIONAL INVESTOR, INC.

Commercial
Lending Review
Everyday Ethics for Credit Inquiries
Have you heard the one about the bank that responded to a credit
inquiry, saying that its customer had a five-figure checking account bal-
ance? While this was technically true, the bank concealed the fact that the
five-figure balance had occurred on only one day and that the customer's
loans were current only because they had been renegotiated.
What about the bank that responded to a credit inquiry by stating that
deposits were coming into the customer's account and that none of the cus-
tomer's checks had ever been dishonored? One might interpret this
response to mean that there was a positive balance in the account. Not so.
Unfortunately, the bank did not disclose that it had been honoring the
customer's checks despite a large overdraft.
Such examples show that ethical and legal questions await the bank
responding to a seemingly simple credit inquiry. In "Lender Liability
Related to Credit Inquiries" (page 48), Sam Tenenbaum and Tracy Treger
describe legal theories of lender liability, discuss the cases underlying
these theories, and suggest ways for financial institutions to protect them-
selves when responding to credit inquiries.
"Sometimes refusal to disclose information is the best course of action
for a lender," they write. Lenders that do disclose information should
require that the inquirer specifically state its purpose in writing and limit
responses only to information acquired through direct transactions with
the customer, among other suggestions.
Of course, many banks that have incurred liability for their responses
to credit inquiries had policies for disclosing credit information-policies
that were ignored or subverted. John L. Casey, author of the forthcoming
book, Values Added (to be published by Kendall/Hunt Publishing Co.,
Dubuque, Iowa, later this year), compares credit inquiries to employment
references. In both situations, the person responding is tempted to go
beyond the formal information and add a personal endorsement.
It is important to limit this tendency. "The responding bank should
explain its benchmark policy of communication to the inquiring bank, for
example, 'I'm sorry the bank's policy only permits me to say such and
such,'" Casey says. Describing specifically the scope of your response
makes it possible for the inquirer to decide whether or not to investigate
independently.
For this and other ethical choices, Casey advises that you ask two
questions: What are the consequences to people who are relying on you?
What are your alternatives? These questions can help to demarcate the
line between right and wrong more clearly.

Claire Greene
Editor