Sovereign Bancorp Chairman, President and CEO Jay Sidhu is proving the old adage wrong in his company, you can, in fact, have your cake and eat it, too.
Sovereign, one of the largest U.S. thrifts, is showing how a business can have the clout of an industry giant and still appeal to employees and customers on a personal level.
By just about any measure, Sovereign is a business titan. The company finished 2005 with more than $3.5 billion in sales and 10,000 employees. Its more than 650 bank branches are concentrated largely between Boston and Philadelphia, one of the most populous regions of the country.
Since 1990, Sovereign has made nearly 30 acquisitions, and since 2004, its net income has jumped 49 percent and its earnings per share has jumped 30 percent.
On the exterior, Sovereign is a glass-and-steel corporate behemoth. On the interior, Sidhu says Sovereign is still composed of the people who run it, and it’s the human touch that keeps employees loyal and keeps customers coming back.
At its heart, Sidhu says staying small is all about appealing to employees and customers on an emotional level. If customers and employees feel the company’s top executives are taking a personal interest in them and their money, the chance of those people remaining loyal increases.
“First of all, you have to understand and anticipate the needs of the team members and the needs of the customers,” Sidhu says. “Then, listen very, very carefully, and make sure that we are always putting them and their needs ahead of the company’s so there is true connection.”
In Sovereign’s company values, team members outrank even the customers. It’s not that Sovereign is devaluing the importance of customers, because as with any business, customers are Sovereign’s lifeblood. But without involved, engaged employees, Sovereign will never reach customers, making the company’s team its vehicle to customer satisfaction and, consequently, customer retention.
Every team employee at Sovereign is encouraged to develop a professional development plan, outlining goals for the next 12 to 24 months to keep team members and management on the same page from year to year.
The burden of reaching the goals isn’t just on the team member , Sidhu says. Managers must also work with employees to help them achieve their goals.
“We make a commitment that we will help them succeed at their plan,” he says. “It’s our philosophy that if we truly help people improve themselves, they will give back. There will be an emotional connection, an engagement, and it’s win-win a win for the team members and a win for the company.”
Valuing and engaging employees begins a trickle-down effect that finds its way to the customers, and then on to the company’s shareholders.
“If you treat the team members right, they will treat the customers right, and if the customers and team members are taken care of, the shareholders will always win,” Sidhu says.
One of the largest hurdles any business has to overcome when trying to stay connected with customers is bureaucracy.
Sidhu calls bureaucracy a “disease that afflicts large businesses.” When a corporation becomes so large that branches and departments have trouble communicating with each other and with customers, it can become a major problem.
Sidhu says communication is the weed killer of bureaucracy. If a company keeps its employees and customers in the know, the odds of a bureaucratic snarl slowing business and upsetting customers goes down.
But keeping lines of communication open is a full-time job when a company grows to the size of Sovereign.
“You need to have a weed killer, I call it bureaucracy killer, in your hand all the time, because as soon as you as you spray on one, the next weed is coming up,” he says. “The bureaucracy keeps coming up and getting in the way. As basic as it is, it’s effort.
“That’s why there is no substitute for face-to-face communication, listening to the people and letting the leaders set the examples of living our values.”
Sovereign tries to solve the bureaucracy problem by involving all levels of management.
“In our company, we call it ‘DRASTIC,’ which stands for ‘Dumb Rules And Stupid Things Irritating Customers,’” he says. “I, myself, encourage every leader in the company that when dumb rules get in the way, bring it to my attention, and I’m going to help you to get to the customer. The customers should never suffer because of bureaucracy.”
To make sure that doesn’t happen, Sidhu gives out his e-mail address, office number, cell number, even his home number, to employees so that problems can be quickly addressed.
“But we have thousands of leaders in the company trying to make sure nobody has to call me,” he says.
Dealing with growth
Each time Sovereign acquires a new branch is an opportunity to gain the trust and respect of a new set of customers. It is also an opportunity to scare them away, into the open arms of the competition.
Growth has both positive and negative aspects, Sidhu says, and Sovereign attempts to overcome the negative by creating a comfort zone for customers.
“Change creates stress, and change creates anxiety,” he says. “When you are acquiring a bank, the bank needs changes, and some of the products change. That creates anxiety and stress for the customers.”
Sovereign has two approaches to creating comfort among the customers in a newly acquired bank. First, it makes every change gradual. Second, it tries to retain as many employees as possible in the acquisition.
“We really do it very slowly, inform the customers about all the details, what’s going on, that it’s going to be transparent for them, and at the same time, do everything possible not to change the faces the customers are familiar with,” Sidhu says. “We had one or two instances where we did not do the acquisition integration well, and we lost business. Other times, we’ve done it well enough where we’ve actually gained business.”
A successful integration is vital, Sidhu says, because if team members are comfortable with change, customers probably will be, too.
“It’s all about communication and training, all about product knowledge, giving team members mentors and coaches,” he says “We listen to them, talk about our values and principles. It’s not rocket science. It’s doing the fundamentals again and again.”
Having a vision
To lead a company through the complex world of mergers and acquisitions, employee relations and bureaucratic red tape, Sidhu says a CEO needs a strong vision, one that won’t waver in the face of failure or discouragement.
“You’ve got to have a dream,” he says. “Then you’ve got to have clear goals and clear guiding principles.”
In 20 years as a CEO, Sidhu’s leadership principles have been tested time and time again.
He became the CEO of Sovereign in 1986, when it was called Penn Savings. Over the years, he has piloted the company renamed Sovereign shortly after Sidhu became CEO through ups that included a 2001 move from the Nasdaq to the NYSE, and downs that included a 1993 attempt by Fred Jaindl, then-chairman of the board, to sell the company.
Sidhu vehemently opposed the sale, eventually filing a lawsuit in federal court to stop it, according to the 2004 book, “The Legend of Sovereign Bancorp.” The suit was later settled out of court, and the company was not sold.
Sidhu says business is “common sense made difficult.” CEOs have to see through all the challenges presented to them and never lose their grip on the pragmatic principles that helped them get where they are.
“It’s the common sense people forget,” he says. “It’s basic human values. The same principles that apply to a successful family also apply to a successful soccer team, or a successful bank.”
To succeed, Sidhu says a CEO needs three traits: technological skills, emotional intelligence and passion.
Technological skills are highly valued in the modern, computer-centered world of business. But a CEO’s jobs isn’t based on staring at a computer screen all day, he says. Emotional intelligence involves an ability to listen and relate to people, gaining their trust and respect. Passion is the intense interest in your job, what fuels a CEO’s fire even when adversity strikes.
“It is very difficult to find people that have all three legs to that stool,” he says. “But if you have computer skills, emotional intelligence and you add passion to that, it’s unbelievable.”
But all the traits and skills in the world won’t matter if a CEO doesn’t deal with people in a straightforward manner.
“I just can’t stand when people are not straightforward and not trustworthy,” Sidhu says. “In a business environment, it’s all about authenticity. In banking, we are a people business, and it’s the people that make the biggest difference.”
HOW TO REACH: Sovereign Bancorp, www.sovereignbank.com