Money in the bank Featured

8:00pm EDT October 26, 2008

When TFS Financial Corp., the holding company for Third Federal Savings & Loan Association of Cleveland, had a magician perform as part of its 70th anniversary celebration this year, the performer pulled Marc Stefanski aside and asked this chairman, president and CEO if he could speak with him. While he wasn’t sure what the magician was about to say, Stefanski obliged.

“You and this organization get it,” the man told him. “I’ve done hundreds of these things annually, and nobody gets it. The CEO, a lot of times, doesn’t show up, the people who contract me to come in are in marketing or PR, and they don’t even bother to show up. It’s never the directors or top management there or directly involved. If they do show up, it’s a token appearance, and they go on to something else that’s more important.”

What followed touched Stefanski even more.

“You’re directly involved,” the magician said. “You give things away. You tell people how much you care about them. You can’t imagine what I’ve seen out there. You can’t imagine how far it goes. This is just amazing to see and watch and be a part of.”

What the magician saw was a culture70 years in the making, based on values that Stefanski’s parents believed in when they started the company.

“It comes from the top down,” Stefanski says. “If the leader is focused on one thing but tells all the associates to do something a different way to create this culture out there, it will never happen. The leader has to be visible, has to live the values, has to be the keeper of the values.”

And that’s exactly what Stefanski does. Each year, you’ll see him up on stage with other associates playing in a company rock band in front of employees. This past summer, he paid a visit to a Euclid branch to meet a 103-year-old customer who wanted to meet him because she thought he seemed like a nice guy.

By reinforcing the values in different facets throughout the years, Stefanski has-been able to not only earn the respect of his employees, but that respect has translated into the company having $10.28 billion in total assets and $538 million in interest income last year, up from $8.42 billion and$414 million in 2003 respectively. The key to creating a culture and team that “gets it,” as the magician put it, is first establishing values, communicating those to the organization and having people who embody them. You also need to commit to those same people and involve them along the way.

“My strategy has always been putting people first and strategy second,” he says. “I’ve always believed that if we can do that ... we can be very successful because this is people business. This is not about money. It’s about people and taking care of their money and putting people first.”

Establish your values

You have to make sure that you first identify what is important to your organization. For Third Federal, the four most important values are love, trust, respect and a commitment to excellence.

While some may say that love, trust and respect are soft and don’t belong in a business setting, Stefanski would suggest otherwise.

“The bottom line is, it comes down to relationships,” he says. “How good of father were you? How good of a mother were you? How good of a son or daughter were you? Friend were you? Associate were you working the job?

“That’s the single most important thing. Nobody is going to care how much money you made at the end. Nobody’s going to care what kind of job title you held. Nobody’s going to care how many touch-downs did you make. They’re going to say, ‘What kind of person was he?’”

While the softer values are important in creating a nurturing culture, you then have to balance those to make sure you can still compete.

“Commitment to excellence is actually our balance to all the softer values,” he says. “Without a commitment to excellence, you can’t have No. 1 or No. 2 market share. You can’t be the best you can be or accomplish the goals you want to accomplish.”

Some people may feel that the commitment to excellence is the most important value of the four, but you have to take a look at the bigger picture of your organization.

“I compare making money for a corporation like a human being breathing air,” Stefanski says. “A human being needs to breathe air, but that isn’t your sole existence to breathe air. It’s the same thing for a corporation. A corporation needs to make money, but its purpose isn’t necessarily to make money.”

You also have to realize that while you decide on something, everyone may not fall in line. You just have to be willing to take steps to reaching where you want to go and continuously reinforce it.

“It takes total discipline to those values,” he says. “Values end up being the foundation for the culture.”

Communicate the values

Fifteen years ago, Stefanski was shocked into a new initiative. He was leading senior leadership team associates through a year of meetings focusing on the company. Atone point, he reminded everyone that everything they’re talking about or doing is based on the company’s values. Upon saying that, a man who had been with Third Federal for 30 years raised his hand and asked what the values were.

“I was shocked,” Stefanski says. “I learned from that incident about 15 years ago that you can’t emphasize and talk about the value system enough.”

Ever since that revelation, Stefanski has been on a mission to make sure that the values are known and practiced throughout his organization in various ways. He immediately changed his leadership approach.

“We bounced around from different books and philosophies and business approaches,” he says. “We did a lot of things and never really equated it back to our values.”

Stefanski felt like he hit a brick wall, and he realized he needed to emphasize the values more in everything he did.

“Anything and everything we present, we have to go back to our value system and show how it links back to that,” he says.

Stefanski has also made values a centerpiece of conversation with his executives to ensure they keep getting the word out. He holds off-site meetings with his top10 management people about once a quarter, and at these meetings, they talk about how they can improve the company and the communication of the values. He says he realized that it wasn’t anything he could do quickly and that he would have to work on it over time.

“The Japanese have a great way of going about it — a little bit at a time, constant improvement and all of a sudden you’re king of the hill,” Stefanski says.

In doing so, you have to be consistent.“ Once you’ve found the words that you want to use and the values of it, it’s important to keep the message consistent,” he says.

Now whenever he talks, he’s mentioning the values, including in videos that are made for the company.

“It ends up being almost a replay, but you’d be shocked and surprised how many people are saying, ‘Oh, that’s new and different. I’ve never heard that before,’” he says. “The message can’t be said enough by the top person, by the CEO or the chairman of the board.”

This repetition is important though. “Talk about those all day long because people forget,” he says. “People forget. If leaders are focused on shareholders, for example, or building the company’s worth in the stock market, that will show up, and everyone in the organization won’t be able to create that culture of togetherness or teamwork on their own. It just won’t happen.”

Hold people accountable

Even if your company has values, they won’t thrive if you don’t have the right people in your organization. Stefanski says there are four types of people out there. First are the A-players.

“Those are people who understand and get the values, and they’re good producers,” he says. “They’re hard workers. They understand their job. They accomplish a lot.”

Then there are those that are the B-players, who have the values but aren’t as good at their job. These are people you can work with.

“Give them more training,” Stefanski says. “Give them more support, give them more love, give them whatever to be more successful.”

At the very bottom are the D-players. “The D-players don’t have the values, and they don’t understand what’s going on,” Stefanski says. “They’re easy to not have work here.”

But in between the B’s and D’s are the C’s, which are a bit trickier because they don’t have the values but are really good at theirjobs.

“The folks that are C-players, they can’t last in the organization because they’re just running over people to get their work done,” Stefanski says. “They’re running over people maybe to feather their own cap.”

When it comes to your C-players who are good at the job, you have to sit them down and talk to them. For example, Stefanski has had to sit down with even some of his top-level people before.

“It’s not unusual for us to sit down with someone and say, ‘Look, you’ve accomplished a lot, but on the other hand, you didn’t do it with a whole lot of respect, or you took all the credit, and you shouldn’t have taken all the credit. That’s not how we operate here,’” he says.

Many times, they’ll try to point out their accomplishments some more, but Stefanski will go on to explain that he’s more concerned with people having genuine concern for their fellow co-workers and treating each other with respect than he is with the results themselves.

“We’re talking about the trust that’s built up,” he says. “You can’t build up trust if you’re taking all the credit. You can’t build up respect if you’re taking all the credit. It just doesn’t happen. Those people either they try and they can change, or they can’t, and most of them can’t.”

When you have a situation like that with a C-player, give them a chance to change.

“If their behavior doesn’t change and their attitude toward an associate doesn’t change and they’re still trying to hog all the credit and they say, ‘OK, I can do that,’ and they go back and do the same thing they were always doing, it becomes obvious,” Stefanski says.

He says, again, this is why it’s so important for leaders to live the values so they’re not being hypocritical when reviewing an employee against the values. He’s learned this firsthand with his five kids.

“Boy, I can tell them things till I’m blue in the face, but if I do something a certain way, then they’re doing it,” he says. “People will do what you do, not what you say.”

Commit to your employees

Stefanski once saw a bumper sticker that read, “Love is commitment.” With love as one of Third Federal’s values, Stefanski points out that love isn’t what most people think it is.

“Love can be a lot of things, but without commitment, you don’t have anything,” he says. “Ask anyone who’s been married along time.”

Stefanski’s commitment runs so deep that he doesn’t partake in extracurricular activities like sitting on boards, spending time on the golf course or belonging to a country club. Instead, he spends time with his family and encourages his employees to leave at5 o’clock so they can do the same.

“It’s total commitment to my family and this organization, in that order,” he says.

Even within his commitment to Third Federal, there’s also the rank and file to think about.

“You need to put people first, strategy second,” he says. “In this case, I’m even suggesting that you put your associate first, you put your customers first, and the shareholders follow after.”

While a lot of companies tend to focus on bringing results to their shareholders — whomever that may be, depending if it’s a public or private company — Stefanski recognizes the importance of focusing on his employees.

“I think we’ve seen many examples along the way where the companies and industries have put shareholders first and investment back into the company second,” he says. “Most of those companies are either out of business or currently have financial trouble or you name it — there are major, major issues.”

For example, he says to look at the American automakers. In the 1960s and’70s, they gave a lot of their money back to their shareholders and didn’t reinvest back in their plants.

“They didn’t reinvest back in their people,” Stefanski says. “The result today is that the Japanese are winning the war because they’re going to outsell GM.”

Instead of taking a short-term approach and padding his shareholders’ wallets, Stefanski looks toward the future.

“There’s not a shareholder that would agree with that, but again, if you don’t have a business, how can you give back to the shareholder?” he says. “If the shareholder is in it for the short term, this isn’t a good place to invest money because we’re in it for the long term.”

When it comes to how much stock and other bonuses employees receive, Stefanski rewards the most-tenured employees as opposed to the highest-ranking ones.

“All the consultants said, ‘You can’t do this,’ but we said, ‘Who has built this company?’” he says. “Who deserves those perks and deserves the recognition? These folks have a much more difficult job than I do.”

Rewarding tenure has kept Third Federal’s turnover around 7 percent in an industry where 20 percent or more is common and helps ensure employees will stick around for the long haul.

“We’re building a company to last,” Stefanski says. “In order to last, you have to develop this culture that’s almost cult-like in that it’s radically different than most organizations. It’s easy for Wall Street to

slice and dice up many organizations because they all look the same. A company like ours is a foreign object to them — the reason being we’re in it for the long term, not the quarter-to-quarter thing. We’re in it for 50 quarters down the road.”

Trust your people

One day Stefanski had an idea to weed out smoking on the Third Federal campus. Unlike some companies, he wasn’t trying to fire people who smoked, but he wanted to work to discourage it. Instead of creating a plan himself, he had others figure it out.

“I said, ‘We should be able to do this,’” he says. “That was my input, and what they came up with, I thought it was brilliant.”

His employees came up with an incentive program where if one succeeded in quitting, he or she would receive $1,000. Additionally, employees have also helped develop wellness and green initiatives across the organization.

“The bottom line is we accomplish a lot because we get people involved, and we get people involved in the early stages, not just in execution,” Stefanski says. “We want people to be part of the creative part and come up with a meaningful program.”

He says it’s important that as a leader, you keep your opinions to yourself when employees are developing ideas.

“It’s certainly a team effort, and my input is minimal,” he says. “My job is to basically create the vision and be the keeper of the values and grease the skids along the way if someone runs into a stone wall and make sure they can be successful on the job and the program can be successful but not that I should get credit or I should be the leader and get in every picture. I love to have the associates a part of it.”

He says that if accomplishing huge results is important to you, then you need to have a team working on things instead of yourself.

“If you run a race and if you race one person four times around the track or you race four people as a team, the team will win 100percent of the time,” Stefanski says. “More synergy can be created if you put a team together to brainstorm the how to implement these kinds of things around the organization.”

While some may not see the benefit of a values-based leadership style and culture, there are clear reasons for Third Federal.

“If you keep doing this stuff, it can be very beneficial, and it can work,” Stefanski says. “We treat our associates well, and we have fun at work, but the expectations are that they’re going to treat the customer well. I think that if people feel good about themselves, and they have a career, and they feel good about their family ... that pays dividends 10 times over. People are much nicer to customers, and they’re more engaged with the customer, and people appreciate that. There is method to the madness. We’re not just giving the bank away. We want people to be happy on the job so they’re happy treating customer the way they want to be treated.”

And so far, Stefanski feels like he and his people are doing a good job it.

“We’re creating a foundation for the next generation of Stefanskis with the hope that they’re smart enough to realize this isn’t too bad and to look back and realize that what was created was a good thing,” Stefanski says. “I hope, and I think, my parents and all the founding people are looking down on us now and saying, ‘I think you did a good job.’”

HOW TO REACH: TFS Financial Corp., (800) 844-7333 or