John Kanas and the new owners of BankUnited knew that they had a big task ahead of them. They had just spent $45 million of their own funds to buy a bank that was hemorrhaging money and had cost the Federal Deposit Insurance Corp. nearly $6 billion in losses.
“For maybe a year or more, the company was fighting all of the rumors about its demise,” says Kanas, the chairman, president and CEO of BankUnited, which employs 1,300 people today. “Its earnings were collapsing. People were guessing as to what was going to happen with the company. The morale of the employees was very low… so you can imagine that emotions were running at fever pitch.”
After a lengthy selection process, the bank bid had been awarded to a group of private equity firms led by Kanas, the former head of North Fork Bancorp and a veteran in the banking industry. The group had made it publicly clear that their intention was not to tear the bank apart, but with a new strategy and the right people, rebuild the failing institution. As they entered the bank the day after winning the bid, they were met with a rush of flashbulbs, newspaper reporters and what seemed like a small army of FDIC officials. It was time to get to work.
Communicate the strategy
Kanas and his investor team knew early on that they wanted to transition BankUnited from a wholesale, residential mortgage originator into a commercial bank. When you are undertaking a new strategy, it’s important to quickly let people know where they fit in or don’t fit in to mitigate uncertainty and get started down the new path.
“The first thing we did was immediately seek out those people that we knew we wanted to retain as partners, that we knew could play a very important role in the company in the future under its new structure and assure them that their jobs were safe, that they would in fact be retained and that we would be relying on them to help us in our partnership in the future,” Kanas says.
Months before winning the bid, Kanas’ group had used an extensive due diligence process to gain access to a number of the company’s employees and identify which ones would be helpful in executing their new strategy.
“It was an ongoing process, but we knew the day we walked in who some of those people were,” Kanas says. “So for two or three days, we did nothing but sit down and explain ourselves to those people so that they could buy into our strategy moving forward. I would say the week was largely dedicated to getting people comfortable with who we were and understanding where everyone stood.”
There are also employees who likely aren’t going to be relevant to your strategy. Managing the expectations of these people also needs to be a priority.
“So we very quickly reached out to those people and let them know that there wasn’t going to be a role for them,” Kanas says. “Then we explained to them what our severance policy would be for them, gave them time to adjust their personal lives and made it clear that we intended to move swiftly to do that.”
You need to be very transparent with employees to allay their fears during this initial transition period when tensions are likely to run high.
“It was important to sit down with the people who were left and say, ‘OK, look, this is an unpleasant business — identifying these people and then sort of paring down the ranks,’” Kanas says. “‘We want to do this very quickly but we also want to do it intelligently and not make mistakes. You’re going to have to bear with us for a few weeks.’ And when the process is over … we promised that we would then sit down and let the core of our employees know that we’re done with this. Those of you that have been selected to stay now have a job. Some of you will have a job for one or two years depending on what your function was in the bank and some of you we hope to retain for the rest of your career. We tried to get to those people quickly and let each one of them know where they fit in that spectrum.”
Kanas knew that Florida would be the perfect home to structure a commercial bank that could gear its success toward products and services for midmarket and small businesses. The next step was convincing people to buy in so they could go out and execute that strategy with enthusiasm.
“So first is get the right people on the bus,” Kanas says. “Second is get those people in a room and overcommunicate with them every day. Make it very, very clear what the strategy is and leave no room for misinterpretation that anyone could misunderstand where we were going, how we intended to get there and what we needed from them as a buy-in or commitment if they wanted a commitment back from the company.”
Kanas and many of the investors had successful backgrounds in business, particularly at North Fork, which had grown from $28 million in assets to one of the largest banks in America under Kanas’ leadership. Pointing to this past success, they diligently spent the first couple of months meeting with the retained employees one-on-one, with small groups or even up to 300 employees at a time, to talk about the new model and why it would work. They were also transparent about the fact that they had literally bought in to the turnaround strategy by committing their own money to buy the company.
“So it was important for our new partners and our new employees in Florida to understand that we were very, very serious about this,” Kanas says. “We’d put our family money into this and we intended to work hard along side of them to help them create the vision.”
To get buy-in for your vision, it also helps to give people goal-connected incentives. Offering stock in your company is one way to achieve that short term and long term. From the beginning, Kanas’ investment group was clear about its hopes to take the bank public but also let people know that whoever helped the company achieve that goal would share in its ownership.
“We did take it public earlier this year and we have about 120 people who are equity partners with me in the company who have major roles in the institution,” he says. “So they are not just employees. They’re owners. To the extent that we will be successful in the future, these people will be able to share in that success directly.”
As you move forward, you can then maintain employee buy-in by communicating your company’s progress on the strategy.
“It’s continuing to let people know that the company’s strength is building every day,” Kanas say. “The earnings stream of BankUnited is very strong so its book value is going up every day. So for those people who own part of it with me, the value of their investment is going up every day… and everybody knows that eventually people recognize the intrinsic value of a company over time. So I think that it’s not hard to keep our people encouraged because they’re so proud of the success that they’ve achieved on a quarter to quarter basis.”
Build your talent pool
In the end, the bank let go about 350 people. So in addition to retaining the key employees, the company needed to find and attract new employees who had the skills to execute its new strategy.
“We were looking for people who had extensive experience in the Florida market, who had existing customer relationships that we could attract to the bank and would help lead us to build a commercial bank,” Kanas says. “We said that we were going to start immediately mining the market for that talent.”
One way to attract talent is to share your vision in a way that communicates it simply and memorably.
“We actually coined in that first couple weeks the term ‘building Florida’s bank,’” Kanas says. “We said, ‘We think we can come here and take the skeleton of this company and build Florida’s bank on it, and you can be part of it.’”
To reach a national talent pool, the company also put out an advertisement in The Wall Street Journal and The Miami Herald.
“It said, ‘If you’re an unhappy Florida banker and you’d like a new home, call us. We’ll change your life,’” Kanas says. “We ran that both on the Internet and newspapers for 10 days and we got 7,000 applicants and 3,000 from New York alone and the rest from Florida.”
As they narrowed down the potential candidates, the company also looked for one, a successful track record and two, the right personality.
“We’ve had great success with hiring people outside of the industry, not bankers, who have come from other industries that require the kind of skills that we think are important in banking today, people who can sell, people who are confident in themselves, people who are engaging and like other people and communicate well,” Kanas says. “So we try to find those people and we find it’s much easier to teach them the technical side of banking than it is to try and change their personality.”
After going through half a room full of resumes, the company was able to hire roughly 250 people to come in and help retool the company.
“We knew that there was a level of frustration among people in Florida who were good bankers stuck in institutions that for one reason or another couldn’t go forward,” Kansas says. “Either they were handcuffed by regulators or handcuffed by inadequate capital positions or some combination of both. We invited them to bring their careers to us and it was overwhelmingly accepted.”
Instead of just trying to fill jobs, Kanas looks to hire people who can complement the company’s strategy, and then works them into it.
“We believe very strongly that the key to the success of any large company is embedded in its human talent,” Kanas says. “So unlike other banks that will go build a branch on the corner of Fifth and Main and then a month before it opens put an ad in the newspaper to try and find somebody to go manage it, we don’t do it that way.”
Instead, the growth strategy is to find the best of the best, get their buy-in and continue to build the company with talented people who can grow the business. For example, the company went ahead and hired a group of people in Orlando before it even had a branch in the market, using those employees to open two branches there more than a year later.
“So we build little energy centers all over the state around successful people who can come to understand our strategy, and we will do that anywhere in Florida,” Kanas says.
He says the key to building a strong company is also not trying to do it on a shoestring.
“We didn’t try to find bargain basement employees,” Kanas says. “We found people who were truly distinguished in their field, and we pulled them out of very good jobs at other banks. I guess that’s another way of saying it’s more expensive than you think it’s going to be. It’s more work than you think it’s going to be. But it’s also a lot more rewarding than you think it’s going to be if you succeed.”
Last January, BankUnited went public in one of the largest bank IPOs in U.S. history. Today it is one of the most capitalized banks in the country, with more than 90 branch locations and $11 billion in assets.
“This is a company that has a clear purpose and a laser-like vision that I believe that our employees understand,” Kanas says. “We’re growing organically at a rate that impresses even me. If you take the second quarter growth in loans and annualize it, we’re growing the commercial component of the bank at over 60 percent a year —and in Florida that’s really saying something. … So I guess the only similarity between the old company and this one is the name.”
How to reach: BankUnited, (877) 779-2265 or www.bankunited.com
1) Identify new business strategy and which people support it.
2) Get the buy-in of the people who are staying.
3) Build your talent pool to complement the strategy.
The Kanas File
Chairman, president and CEO
Born: South Hampton, New York
Education: Long Island University
How do you retain good people in this environment?
Because we’ve shared our vision with them and continued to share ad nauseum, we keep them excited about where the company’s going. And, of course, they can look over their shoulder at the tremendous success that we’ve had so far and know that they’re part of it. So there is a high level of enthusiasm and excitement in our bank. And frankly in the banking business today, it’s hard to find a place that’s growing and that breeds a level like this of enthusiasm any place else, certainly any place else in Florida if not the whole country.
Kanas’ turnaround takeaways:
- One of the things is don’t ever underestimate the complexity of the problem and realize that when you’re reshaping a company that’s had a failure, that there are probably a lot of other bad things that you’ll find out six months into it that you didn’t know when you took the first step. So always make the assumption that it’s going to be harder than it looks and be prepared to deal with that.
- These things are always much more work than you think that they’re going to be. For people who are going to take a challenge like this, it’s important to understand that you cannot do this halfway, that this is a total and complete immersion and it’s a total and complete commitment and you have to be committed with every bone in your body and every molecule in your brain to make it a success…Probably most people haven’t been as successful as they thought they would be because sometimes from the outside, a good management team, and I don’t mean me but the team, can make a job look easy, but it’s not.