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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.
In fact, the merging and purging
frenzy of the mid-1990s is driven by
the realization that the banking in-
dustry-that highly regulated,
slow-paced, comfortable world that I
first entered 20 years ago-is dying.
Instead, we bankers find ourselves
in the midst of a highly competitive
struggle with a host of nonregulated
competitors, attempting to sell, in an
efficient, cost-effective manner, a
large array of traditional and non-
traditional financial services.
This transformation, some would
say "right sizing," of the industry has
not been an easy process for bankers.
David Ginzl is director of credit policy at
Barnett Banks, Jacksonville, Florida.
ment consultants, an apparently
ubiquitous species with an endless
supply of creative approaches and
trendy solutions. If they have not yet
descended on your institution, refer to
the Fall 1995 issue of the Commercial
Lending Review, which had an entire
section entitled "Focus on Reengi-
neering." Each article was written by
management consultants, filled with
consultant jargon-"instituting a
sales culture," increasing "share of
wallet," "off-loading low-value tasks,"
developing a "customer-based organi-
zation design." Until several years
ago, I would have asked, "What are
they saying? Who talks like that?"
Nowadays, however, such vocabu-
lary is creeping into everyday
communication. What does all of this
consultant-speak mean?
Books
The Forgettable Mission Statement
[T]he forgettable mission state-
ment is not unusual; many corporate
statements of purpose obscure rather
than clarify the organizational frame
either because they include such gener-
ic words that little real meaning is
conveyed, or because they use so many
words that the meaning gets lost in the
verbiage. Consider the first of these two
problems-the use of one-size-fits-all,
generic "foof-ball" phrases. The appar-
ent preference for vacuous, empty
words is so pervasive that one guide-
book on writing mission statements
even suggests that companies use sen-
tences like: "We are committed to
providing unequaled quality." Judging
from the mission statements I see,
quite a few companies have followed
similar instructions, resulting in fer-
vent commitments to "creating value"
and "being the best," without defining
the goals beyond these inter-galactic
statements or setting any boundaries
for how they will be achieved. In con-
trast, listen to the words in Ben &
Jerry's mission statement: "To make,
distribute and sell the finest quality all-
natural ice cream and related products
in a wide variety of innovative flavors
made from Vermont dairy products."
Or this one for McDonald's: "To satisfy
the world's appetite for good food, well
served, at a price people can afford."
"Unequaled quality" is just empty calo-
ries compared with these two.
The second problem, too many
words, can also obscure the message.
Some companies seem to think
of their mission statements as ex-
panding suitcases: they just keep
cramming stuff in until, once packed,
these intellectual bags are too heavy
to lift. The result: mission statements
with so many words, all carefully ne-
gotiated and crafted by a committee,
that few people can cut through all
the ink to figure out the main mes-
sage. Such mission statements often
do provide strength and perspective
to some portion of the organization
(and almost always to the people who
drafted the statement). For most,
however, without some sort of suc-
cinct summary, the document
becomes just part of the background
buzz-more blah-blah-blah from the
executive suite.
Mission statements that pass the
"content" check use words that convey
real meanings to the people inside the
organization, delivering a central mes-
sage or set of messages. The
Ritz-Carlton hotel chain does this by
telling its employees that they are
"ladies and gentlemen, serving ladies
and gentlemen." When Sigi Brauer was
general manager of the Boston Ritz-
Carlton, he would explain to new
members of the Ritz staff that the idea
of "serving ladies and gentlemen"
means a Ritz employee says "May I
help you?" rather than "Whaddaya
want?" and that the idea of "ladies and
gentlemen serving ladies and gentle-
men" means that a Ritz employee is not
a servant, but a valued staff member.
From Fad Surfing in the Boardroom: Re-
claiming the Courage to Manage in the
Age of Instant Answers by Eileen C.
Shapiro (Addison-Wesley Publishing
Company, 1995).

Hilarious, True-to-Life Look
at Management Crazes
Check out Eileen C. Shapiro's Fad
Surfing in the Boardroom: Reclaim-
ing the Courage to Manage in the Age
of Instant Answers (Addison-Wesley
Publishing Company, 1995, $22.00,
(617) 944-3700), if for no other rea-
son than its glossary of terms. It is
hilarious. Beneath the obvious hu-
mor in the "Fad Surfer's Dictionary,"
all of us will recognize a large
amount of reality.
Shapiro is a consultant. A Har-
vard MBA, she worked with
McKinsey & Company and is now
president of her own management
consulting firm. Throughout Fad
Surfing in the Boardroom, she pokes
fun at consultants, while taking a
critical look at the various manage-
ment techniques that they promote.
As Shapiro points out, there are
numerous management techniques
from which business executives can
choose in the fad-surfing (see glos-
sary on page 93) world of today:
To review just a few of the op-
tions: you can, if you wish,
flatten your pyramid, become a
horizontal organization, and
eliminate hierarchy from your
company. You can empower
your people, open your environ-
ment, and transform your
culture. You can listen to your
customers, create a customer-fo-
cused organization, and commit
to total customer satisfaction.
You can do the "vision thing,"
write a mission statement, and
put together a strategic plan.
You can improve continuously,
shift your paradigms, and be-
come a learning organization.
Commercial Lending Review
You can devote yourself and
your company to total quality
management. Or you can re-
engineer your corporation, with
the intent, in the words of the
original reengineers, of creating
a "business revolution."
Management often
operates on
"autopilot,"choosing a
certain management
technique ... without a
clear understandingof
all of the unintentional
consequences and
negative side effects
that may result.
While each of these tools may
have value to an organization, none,
by itself, is a panacea. The danger, in
Shapiro's view, is that management
often operates on "autopilot," choos-
ing a certain management technique,
or hiring a consultant who makes the
choice, without a clear understand-
ing of all of the unintentional
consequences and negative side ef-
fects that may result. Each of these
management tools can cause "organi-
zational havoc," especially when they
are "applied blindly across a busi-
ness, without attention to where they
might be useful, why, with what oth-
er techniques they are being
combined, and how, if at all, they
should be modified to meet the needs
of the company."
Beyond Humor, Insights
into Business Strategies
Shapiro scrutinizes each of these
management techniques in separate
chapters. She illustrates her insights
Books
Excerpts from "The Fad Surfer's
Dictionary of Business Basics"
Accountability-A characteristic of
which everyone else in the organization
needs far more. Not to be confused with
Authority, which is what I need more of.
Authority-A characteristic of which I
need more if I am to do my job properly.
Not to be confused with Accountability,
which is what everyone else in the orga-
nization needs far more of.
Corporate culture--: The way we do
things around here, our combination of
shared values and group norms. 2: An
excuse for not making desperately
needed changes in the way a company
conducts its business.
Fad surfing-The practice of riding
the crest of the latest management
panacea and then paddling out again
just in time to ride the next one; always
absorbing for managers and lucrative
for consultants; frequently disastrous
for organizations.
Mission statement-i: A short, specif-
ic statement of purpose, intended to
serve as a loose musical score that moti-
vates everyone to play the same tune
without strict supervision. 2: Frequent-
ly, an assertion of undying commitment
to some amalgam of "total quality,"
"low-cost producer," "empowered
workforce," "excellence," "continuous
improvement," and other bizbuz shibbo-
leths that, although written for a
specific organization, is equally applica-
ble to an aircraft manufacturer, a
software development finn, a communi-
ty hospital, a department store chain, or
the local dry cleaner. 3: In some compa-
nies, a talisman, hung in public spaces,
to ward off evil spirits.
Pro forma-i: Financial projections.
2: A genre of fiction, composed primari-
ly of numbers.
Reengineering-i: The process of
taking a comprehensive, -clean slate"
approach to an organization's work
flows in order to achieve dramatic im-
provements in costs, time, and
effectiveness; also known as "business
process reengineering," "core process
redesign," "horizontal organization,"
and "process innovation." 2: In verb
form, as in "to reengineer," an all-pur-
pose word commonly used to describe
virtually any cost-cutting or reorgani-
zation effort. 3: The Consultants' Full
Employment Act.
Strategic plan-i: A set of analyses,
packaged in accordance with corporate
requirements, that is undertaken in or-
der to justify a campaign already under
way or a budget about to be submitted.
2: (alt.) A set of analyses, packaged in
accordance with corporate require-
ments, that nonetheless bears little or
no resemblance to the real strategy be-
ing followed (but that, once printed and
bound, can, in a pinch, be used as a
doorstop or bookend).
Vision-What Moses experienced
when he wandered for too long in the
desert; coordinated and persistent hal-
lucinations characteristic of dementia
or paranoid schizophrenia.
Voice mail system-Combined with
downsizing and just the right motiva-
tion, a way to ensure that people
inside a company will never have to
talk with customers or other bother-
some human beings.

and words of caution with examples
from the business world. Some of her
more insightful examples, however,
come from a fascination with Greek
mythology. Imagine Hercules as a
business consultant faced with the
seemingly impossible task of clean-
ing, in one day, the stables of King
Augeas. In solving this problem,
Hercules became "the first reengi-
neer." Despite his apparent success
in this endeavor, there are often
unanticipated consequences caused
by massive revolutionary process
changes ("...even though the ancient
myths don't tell us what happened to
the Greek ecosystem after Hercules
redirected the two rivers through the
Augean cattle yard, it seems reason-
able to assume that there were some
unintended side effects"). Perhaps
more evolutionary process changes
may suffice to solve specific problems
or to redirect certain organizations,
as opposed to the massive disruption
(and greater risks!) involved with
revolutionary reengineering.
Shapiro also uses personal expe-
riences, ranging from being served a
dead cockroach at an exclusive
restaurant to dealing with smashed
buttons and indifferent service at
her local dry cleaner. Learn about
her husband's "Sock System" and
Commercial Lending Review
what happened when the sock man-
ufacturer reduced, in an apparent
cost-cutting measure, the fabric
reinforcement in the heels. In
Shapiro's analysis, the company had
failed to factor into the cost-
savings analysis the customer per-
spective of the product benefits
being purchased. In evaluating cost-
cutting alternatives, the company
had not understood the important
difference between "productive"
costs and "non-productive" costs.
There are countless other anec-
dotes and management lessons. As
you read each of the chapters, you
will alternately laugh and cringe,
the latter when you recognize your
own company.
Managers, Not Consultants,
Should Be Making
Management Decisions
Fad Surfing in the Boardroom com-
bines wit with insight, and it has an
important message for business ex-
ecutives. Consultants have valuable
insights and may recommend man-
agement techniques that can
improve your organization. But the
job of management is yours, not
theirs. Independent judgment and
analysis, and ultimate accountabili-
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