Good to Great Memo

To: John Doe, CEO

From: Jane Doe, Associate

RE: Organizational Behavior Discussion

Steve,

I recently read a book written by Jim Collins called "Good to Great" which has helped me realize that Republic Bank is a "great" company as opposed to just "good". I believe this for many reasons, and one cannot ignore our recent recognition as the #1 best performing bank in the country (Bank Director Magazine, 2011). I would like to take a few minutes to discuss the things that I think we do great, and how we've managed to steer clear of the worst enemy of being great... being good. I would also like to offer a suggestion on changes that I believe we need to make in order to maintain greatness. In the proceeding paragraphs I will explain why I think we are a great company, and offer a suggestion on how to stay there. I will apply takeaways from the reading of Good to Great, a applicable article from the Harvard Business Review, and the textbook that we use in my Organizational Behavior class (Organizational Behavior - Core Concepts by Angelo Kinicki). As you read on, I would like for you to gather your thoughts about Republic Bank, determine whether or not we have reached "greatness", and if not, what steps are needed for us to get there. There are many factors to consider, for example our effectiveness on being able to adapt to the external forces that are constantly changing our industry. Let's get together and have a discussion over lunch as soon as you can.

First and foremost, I came to a realization when we lost our founder earlier this year. I noticed that despite the company's loss, the company did not suffer through a "crisis of change" like some other companies experience when there is a change of leadership. I recall the greatness concept of "Clock Building, Not Time Telling" in Good to Great. This concept advises leaders to build an organization that can adapt through multiple generations of leaders; the exact opposite of being built around a single great leader. How did Mr. Doe and Republic Bank accomplish this? I believe that we did so by creating a clear mission at the very beginning, and staying true to it even as times changed. Early last decade, it was all too easy for banks to dive into the sub-prime mortgage market to earn fast profits, despite the idea being outside of the norm for most banks. We stayed true to our mission of steady, long term growth by continuing to only make loans of high credit quality (i.e. lower risk). While our earnings reports showed lower profits relative to our peers, this kind of patience has paid us dividends today. Other banks are scrambling to adapt to the post-crisis and have to allocate precious resources to recover bad loans. In the end, our steady approach proved to be best for the long term, and customers have found more comfort in having a financial institution that consistently makes safer decisions.

Republic Bank has also done an excellent job in recruiting the right talent to serve as its management team. Every manager has shared the same understanding that we can be the best community bank in the country. This is what Jim Collins calls "The Hedgehog Concept", a concept that says a company should focus on one big thing, as opposed to having "foxes" who have a more broad knowledge of everything. Collins explains that the successful development of a hedgehog concept depends on the intersection of three circles, shown below in Figure 1 (Collins, 96).

Figure 1 - Jim Collin's Three Circles (Hedgehog Concept)

Republic determined early on that we could be the best community bank there is, and have indeed proven to ourselves that we are the best in the country. Ironically, the Hedgehog Concept is not something that we have always embraced. It is something that we learned along the way. When Republic attempted to start a new division known as "Republic Finance" we attempted to diversify revenue streams by doing something that was outside of what we were truly known for, which was being a great community banking partner, not an investment advisor. In other words, we "let the fox out". I think we made the right decision in discontinuing that service as early on as we did, after being unable to compete with other companies who WERE known for that service. By refocusing our goals and applying them back to our original mission, we quickly rebounded and have since regained momentum. The Hedgehog Concept has helped us thrive.

Another interesting point is the flywheel concept that Collins discusses in his book. This concept explains that companies do not have a single defining moment or revolutionary event that makes them all of a sudden great companies, but experience a culmination of years doing the little things right. Companies start off slowly pushing the "flywheel", gradually gaining momentum over a period of years until the wheel is moving so fast that it more or less becomes self-sustaining (Collins, 165). Republic Bank has experienced this phenomenon through the building of its lending function. We started with residential 1st mortgages and didn't move on to include other products such as home equity loans until we were well accomplished in the 1st mortgage arena. This holds true to most