The former CEO of UMB Bank and newly minted author assesses modern leadership challenges, recent developments in U.S. banking, and how compromised values can threaten entire organizations.
Q: Your new book, Taking Stock, views your leadership in financial services through the prism of personal and professional challenge and growth. What inspired you to become an author?
“If you aspire to lead, you must adhere to the principles you hold true, remaining acutely aware of how they influence those around you and the core identity of the organization you represent.” — Peter de Silva, author and former CEO of UMB Bank
A: I wrote this book for current and aspiring leaders who want to hear real-world, practical lessons from someone who has been on the leadership front lines for more than 35 years. If you invest the time and energy to consider the ideas in this book, you’ll walk away with important lessons about the true nature of leadership, including a set of leadership principles you and others can easily understand and put to work.
Q: Looking back to your own early steps into corporate leadership, how has the task of organizational leadership today been complicated by economic, regulatory, tech or societal factors?
A: There are several factors that make the task of being a leader more complicated today than in the past. The pace of change has rapidly accelerated, driven largely by rapid advancements in technology. From Chat GPT, machine learning and artificial intelligence, to cyber security, the internet of things (IOT), and nanotechnology, these rapid advancements are having extraordinary implications on the face of business and leadership. Today’s leaders must consider the moral and ethical implications of these powerful new technologies even as they consider their business impacts. It is not possible to be a successful leader in these times without considering the effects of technology not only on the business, but on humanity.
Q: And on the demographic side?
A: Rapidly changing workforce demographics are causing leaders to reassess both the composition of their work force along with how to attract, develop and retain top talent. The composition of a company’s work force needs to be representative of the composition of the communities a company serves. It is more important than ever that organizations take a very deliberate and thoughtful approach to building a workforce that will serve their constituents well.
Q: COVID introduced certain challenges, too, did it not?
A: Out of necessity, the COVID pandemic has made remote work a part of the culture of “work.” Never before had leaders been forced to wrestle with how to build and instill purpose, and culture, and develop strong working relationships with a fully or partially remote work force. Entire new leadership practices had to be developed on the fly. It will take some time for leaders to adjust to this new reality and to inculcate new practices into their leadership approach and style.
Q: What role does regulation play?
A: The pace and sweep of regulation has made it more difficult to plan for the long term. When you are not sure if the rules of the road are set, or about to change, it makes it more difficult to make long-term strategic decisions. Companies are more willing to deploy capital when there is stability in rulemaking and in the laws that govern their actions. Leaders are asked to make key decisions today in the face of more uncertainty than in the past.
Q: So you have all these business-side inputs, but they aren’t occurring in silos.
A: Leaders today need to be concerned not only with what happens within their company, but what is occurring in society at large. The large push for ESG accountability is a good example. Whether you agree with the concept or not, you can’t ignore it. Today’s enlightened leader needs to consider the views of all stakeholders before making critical decisions.
Q: What’s the bright side of all this?
A: Today’s leaders have an array of tools, technologies, processes, and contemporary leadership thought at their disposal. These are distinct advantages over prior generations of leaders. When I was first coming into the business world, we used fax machines to transmit data, there were no cell phones, no Internet. The IBM XT computer, and early generation two-way pagers had just been created. The tools that leaders have access to today enable them to make much more fact-based and informed decisions than was true in the past.
Q: What are the practical impacts of that for leaders?
A: All of this has accelerated the speed of decision-making and improved the overall quality of decision making. That said, decisions are still made by people, not machines. The machines can churn out the data and turn it into usable information, but it is the leader with their unique knowledge and wisdom and understanding that must in the final analysis make the decision. Great leaders assimilate the quantitative data and combine that with the relevant qualitative considerations to make good decisions.
Q: You dedicate a full chapter to the theme of an emerging crisis in leadership, one driven by expediency, unrealistic performance expectations and personal aspiration. Can you elaborate?
A: We live in a fast-paced world in which patience is considered more of a character flaw than a virtue. Leaders engage in real-time communication and quick decision-making just to keep pace. The business landscape is littered with examples of people and organizations striving for expediency. The desire for it can compromise a leader’s ethical framework to achieve short-term outcomes.
Q: What about unrealistic expectations?
A: The push for expediency and short-term profits can lead to relentless pressure to perform. In performance-oriented cultures, leaders are naturally tempted to take outsized risks. Their jobs and remuneration depend on it. This expectation of superior performance at any cost was a contributing factor to the 2008 financial crisis.
Q: And the role of personal aspiration?
A: When kept in perspective, personal aspirations are healthy; when those aspirations get out of hand, they can challenge a person’s moral compass. Again, in the run-up to the 2008 crisis, while plenty of leaders at all levels knew that certain loans seemed too good to be true were, in fact, not good for the borrower, their aspirations may have driven them to ignore the voice of their conscience. They might have reasoned that there are no laws—rules—against these types of loans.
Q: So it sounds like values matter—but so does sticking to them.
A: If you aspire to lead, you must adhere to the principles you hold true, remaining acutely aware of how they influence those around you and the core identity of the organization you represent. The betterment—or downfall—of your business, your community, and our society is at stake.
Q: Switching gears to current banking trends: Do you see systemic issues that go far beyond the failures of Silicon Valley and Signature, or has that virus largely been contained?
A: The fall of Silicon Valley Bank and Signature Bank seem largely isolated at this juncture. They both had unique features to their business models which created unique risks. They also both chose to knowingly take on interest-rate risk by purchasing long-term bonds to boost short-term earnings. They could have and should have known the risks they were taking. That’s not to suggest that the Federal Reserve’s aggressive interest-rate hikes over the past year have not put strain on other banks, especially in the smaller and mid-sized group because it most certainly has. It remains a bit unclear what the future holds for these banks. In the near term, falling interest rates would help these institutions by limiting the losses in their long-term securities book. The one thing is almost certain is that for good or for bad, more regulation is on the way.
Q: Where does the challenge of managing imprudent behavior leave regulators?
A: The broader question I think, is how do we maintain a safe, healthy, vibrant banking system in the United States? One that contributes to economic growth and stability without becoming the fuel for financial and economic uncertainty every decade or so. While regulation is essential in this regard, it is also important to ensure that the people who lead our banking system possess the character, judgment, and willpower to push back when they see excesses building. To resist the temptation of a few extra basis points of yield by taking imprudent risks that might imperil their bank or worse yet, the entire system. To take a long-term approach when Wall Street measures success quarter to quarter. In the end, as it often does, it comes down to having leaders who put the good of the country and system ahead of their own success. That is what it will take to stabilize a system that is inherently unstable today.
Q: So much in the way of recent regulation was aimed at large national banks, but a lot of the burden has fallen on community banks. Should smaller banks be worried about forthcoming changes following SVB/Signature?
A: Post the 2008 financial crisis, a myriad new rules and laws were promulgated with the goal of maintaining a healthy and safe banking system. While the Dodd-Frank legislation was the most noteworthy, there were many other regulations put in place by federal and state bank regulators. While there was some attempt in Dodd-Frank to distinguish between the large systemically significant banks and the smaller regional and local banks that did not play a meaningful part in the crisis, there were still many burdensome regulations imposed on the smaller institutions.
Q: Do you think we’ll see more regulatory action?
A: The recent rapid unraveling of Silicon Valley Bank and Signature Bank will cause yet another examination of what needs to change in our banking system. Let’s hope that the regulators have the wisdom this time to look at where the real systemic risk is coming from. Let’s just say that it is not coming from America’s community banks. Community banks remain the lifeblood of their communities and regions. Without them, communities will wither and die. Community banks need to be held up as the shining light that they are. They are certainly not part of the problem, but they are part of the solution.