Should we focus on the ends to improve the means or focus on the means to improve the ends?
On Monday I spent a couple of hours at IESE in a research seminar where Harvard Professor Julie Battiliana presented her research on professional and organisational identity in two Bolivian commercial microfinance institutions.
BancoSol and Banco los Andes were both created in the early nineties in order to provide financial services to a large group of people that had never had access to banking services before. They both target urban and rural poor who have no fungible collateral and need to borrow amounts under $1,000 to improve their incomes.
When these organisations were started, they both faced an important foundational question: Who do we hire? Who can sell our loans, evaluate customer capacity to repay, define terms, approve loans and (most challenging) collect on loans in arrears?
BancoSol: Hiring Talent
BancoSol took a strategy of hiring existing talent – they hired existing loan officers from commercial banks alongside social workers from existing NGOs. The bankers would bring financial expertise and the social workers would bring the right attitudes towards the mission to assist poor who had no previous access to bank finance. The employee induction and early training focussed around mission and values. The CEO would regularly remind staff that they were doing “the most important work in Bolivia”.
Banco los Andes: Build Strong Systems
Banco los Andes bank took a very different strategy – they hired new graduates direct from college and put them through extensive process training. The focus of the training was on following a strict process.
A loan officer in commercial microfinance is a tough job – it requires the ability to be “caring but firm”. A typical day in the life of a Bolivian microfinance loan officer would be as follows:
- Morning – (marketing) spend time in local markets making contact with stall keepers and traders
- Afternoon – (sales) visit specific people in their place of work or home
- Late afternoon – (collections) visit customers whose loans were in arrears
- Evening – (review, approve) in the office preparing and approving paperwork
One of these organisations became a great success and its company policies and procedures have become the basis for most of the world’s commercial microfinance organisations today. The other had to make major structural changes and was stuck with intractable group identity conflicts.
Which Strategy Succeeded?
Banco los Andes with its strategy of hiring new graduates and training them intensively in operations was the success. The intense focus on quality of execution allowed a pride and shared identity to arise in the staff of Banco los Andes.
BancoSol never reconciled the bankers and the social workers and had two groups who identified more with “banker” or “social worker” than BancoSol. The bankers thought the social workers were unprofessional “idiots” who didn’t understand commercial reality. The social workers thought the bankers lacked an ability to deal with customers as people.
My reflections as I sat and listened to this discussion about tension in organisations, professional vs organisational identity was that it is excellence in our work that allows true meaning and shared purpose to arise. It is not enough as a leader to give nice speeches about mission and vision – there must be a relentless unwillingness to accept anything less than excellent execution. It is not enough to sit in the tower and think, there must be a systematic getting out into the world and ensuring that processes are correct, quality is high and people are being held accountable for their goals.