Lee Smith : The Gray Area Podcast : Ep 144

Yeah, no, well first of all, thank you very much for having me. I'm excited to be on this podcast. Going all the way back, and you can probably tell from my accent I'm not from the US. I was born in Birmingham, England. I always talk about Peaky Blinders, so for those that are familiar with Peaky Blinders, that is set in Birmingham, England, which is about a hundred miles north of London. Very blue collar, so it has a lot of similarities with Detroit in terms of being a manufacturing hub. That's where the Industrial Revolution started. That's where I was born. My old man was a fireman, so raised in a very blue collar family. I love sports. I was a big soccer fan, or football fan. I'm a West Bromwich Albion fan for those that are wondering. Unfortunately we're in the Championship, which is below the Premier League, but we're trying to get back to the Premier League. I think growing up, the things that really influenced me, obviously my parents, and I've got a strong work ethic first and foremost. From the age of 11 I've always worked, and I'll be 49 later this year. I remember when I was 11 and I wanted something, my dad said, 'Look, if you want it, then you've got to work, you've got to earn money, and then you can buy it yourself.' So from age 11 I got a paper round four mornings a week. I'd get up at six o'clock, work the paper round, then go to school. As I got older, it moved from a paper round to stacking shelves in a supermarket when I was 16, 17, 18. Even when I was at university, I would come home during the holidays and work in a packing shed for a friend's dad and get paid two pounds fifty an hour. But that's what you did. You were introduced to that strong work ethic, and if you wanted something, you earned the money and then you could go and buy it. You didn't have to ask or rely on anybody else. I think that is a fundamental skill that I learned. The other thing I did, I've always been a big sports fan and played soccer when I was a kid, a teenager, and at university. This is the next lesson that I really learned a lot from. I remember when I first started playing football, soccer, I just loved the game, playing with my buddies. As I got into my middle teens and later teams, it was really more about, 'Oh, did I have a good game? Did I score a goal?' That's how you reflected on the game. I remember after I moved to university, I was at Loughborough University, which is in the East Midlands, a big sporting university. That's kind of another story. The only reason I wanted to go there wasn't because of the degree, which I'll get on to later and actually shaped where I am today. I just wanted to kick a ball around. I just wanted to play football. I was hoping Manchester United were going to sign me. I wanted to be David Beckham before David Beckham. Unfortunately I didn't have the talent of David Beckham, but I played at university. In my final year I was captain of the football team, and that's when I started to really appreciate teamwork and things not just being about you but about everybody else. What I mean by that is when you're the captain of a team, now it's about how did the team do? Did we win? Did we lose? How did we play as a team? It's not about you. It's how did the team do? The other thing that taught me, which was an invaluable life lesson, is that's how you started to figure out everyone has a different personality and everybody is motivated differently. I'll give you an example. I played in midfield and there was a guy next to me whose nickname was Banger, and he only responded if you were screaming at him every single minute of the game. Even if he was having a great game, you still had to be on him because if you weren't, his standards would drop. So you just stay on him, on him, on him. We had a kid who played on the wing, Irish kid Fergal, the most skillful player on the team, a real difference maker. But if you shouted at him, he would go into his shell, wouldn't want the ball, and you would lose him for the game. What I learned was you just needed to go and put your arm around him, tell him you love him, keep encouraging him. I would stop the other players from screaming even if they were frustrated with him. That's when I really started to appreciate how you manage people, the importance of teamwork, and the importance of knowing that everybody's different and everyone brings something different to the team. You need that. If you were all the same, it's not going to work. That was another big life experience for me.

Yeah, and I will fast forward now to my work life. I can count on one hand the people that have really made a difference in my life from a career and work point of view. I'll go back to after college, university. I'm an accountant. I worked at Ernst & Young, and there was a partner there, William Tacon. He just believed in me. When I say he believed in me, he would read me out. There were many times when we were working on a project and I would do something, and he would call me into his office and we would go at it. But having played sports, I realized don't be defensive. Listen to the feedback. It's making you better. You've got to be humble and appreciate that here's a guy who's got 25 years on me, he's got the experience, and he's doing this to make me better. He's not trying to be awkward or funny or negative. He's trying to make me better. I learned a tremendous amount from William. He showed me skills that I still use today. Because he believed in me, it was he that made the move from the UK to the US, New York, happen. He went out of his way to speak with the highest people in the UK and the US at Ernst & Young to facilitate that. He has undoubtedly had a big influence on my life, and I respect what he did. He believed in me, and it's about believing in people, being a good mentor, and sharing your knowledge and experiences with them so they can be better. That's what William did.

No doubt about it. I mean, I knew he had my back. That's how I lead today. I have got my team's back, but that doesn't mean we can't challenge each other. That doesn't mean that if we have a disagreement, we can't get into a room and hash it out. But once we get out of that room, we're all on the same page. When we're together externally, we're united and we defend each other and we look after each other. As a leader today, my role is to make sure that my team have the tools and the platform to be as successful as they can possibly be. I want them to tell me what they need, and I will support them. I'll run through brick walls to make it happen for them.

Right. And that is how you unlock value. You look for those areas of conflict or areas other people will dismiss or won't want to look into because it is going to be aggravation. People don't want to deal with conflict typically. But if you can find that out and you're comfortable, that's where you unlock value. You've reminded me, bringing sport and business together, my favorite business book is Moneyball. What I love about that is it talks about thinking differently to achieve success. Everybody's familiar with the story. You've got the New York Yankees who had all the money in the world, would buy all the superstars, and you had the Oakland A's and Billy Beane whose payroll was a fraction of the Yankees. But they used data metrics to re-look how you assess a player and the game of baseball. They bought in players that fit that model and were very successful, very competitive. The reason I like that from a business point of view is anyone can apply Moneyball. We do it at Flagstar, which is where I work now, because we don't have the money that a JP Morgan Chase or a Wells or a Bank of America has. So we've got to think a little differently. But if you're prepared to think outside the box, think more creatively, you can still be competitive. If you're thinking creatively, that's how you move boundaries. You'll find that others ultimately will latch on to what you're doing, like they have with the Oakland A's. Now everybody, even the Yankees despite having all the money, they still use data. The other thing that proved is with a great team, it's not just putting the best athletes that you can buy together. If the chemistry doesn't work and you don't have the right leadership, it's going to fail, one thousand percent.

Yeah, there's no doubt about it. I think sometimes big organizations can be constrained because they're too rigid. There's too much protocol, too much process, red tape and bureaucracy everywhere. We always say, you talk about the customer, we always say make the customer experience your point of difference. Go the extra mile and do whatever you need to do to make the customer happy because if the customer has a good experience, they're going to keep coming back to you. It's like you go to a restaurant and you pay a premium but you have a great experience, you'll keep going back to that restaurant. The other thing that we preach and really believe is good customer experience isn't just to external customers. It's how we treat each other internally. If you treat each other with respect and you get an email, respond to it. It doesn't mean you have to have an answer, but just acknowledge, 'Hey, got your email, I'm looking at it, just give me two days, I'll be back to you.' So people know that you received it. It teaches that respect. If you've got that sort of level of service internally, it permeates externally and it starts to build trust. I'm a big believer it doesn't matter whether it's a personal relationship or a business relationship. If you don't have trust, you don't have anything. But if you've got the service and you've got the trust, now you're seen as a valued business advisor and people seek out your opinion. They want you to have a seat at the table, and it doesn't get more powerful than that. I think that is then combined with accountability. We believe in Jim Collins' Good to Great. That book says if you put the right people in the right seat on the bus, good things will happen. You don't have to micromanage good people because good people make good decisions. You give them the tools and the platform to be as successful as they can be. You empower them to make decisions. You give them the authority to make decisions. If you've got that great service, trust, good people who want to be accountable, you've got something very powerful.

No doubt about it. Going back to Good to Great, level five leadership, level five leadership means no egos. If the team is successful, you give all the credit to the team. If it goes wrong, as the leader you take full and absolute responsibility. When something doesn't work out, the last thought you should have is, 'Oh, negatively, who are we going to blame?' The first thought should be, 'Okay, what could I do better as the leader to stop this from happening again? What am I going to change about what I did to ensure that we are successful going forward?' I think people are too quick in this day and age. If something doesn't quite work out, they want to point fingers. You shouldn't do that. You've got to take accountability yourself first and foremost and ask yourself before looking externally, 'What could I have done differently? Where could I be stronger, better?' That's where you start.

Yeah, no problem at all. I think there's a couple of things. First of all, we touched on this earlier. I obviously made the move from the UK to the US, and then I'll talk about some other moves that happened during my career to get me to where I am today. A couple of things that I think are important: you never know who you're going to meet on any given day. One day you can meet someone out of the blue who can open doors and make things happen for you. That's what I'm going to describe in a minute. So be the best you can be every day because you never know who's paying attention and watching you and what they can make happen. Given where I am today, it isn't something that you wake up one morning as a kid and say, 'Oh, I'm going to be the president of mortgage of Flagstar.' It's a sequence of events that happens, but when you break it down, it's because along the way I've met just three or four people who have opened doors for me. In some situations, the people that I met I didn't know them that long. But be the best you can every day and bring your A game because you just never know who's watching. I was at Ernst & Young in the US now, in the restructuring group. I was 28. I moved to the US in 2002 from the UK. I was in the restructuring group because, just as a sidebar, I found when I was in audit it bored the hell out of me after six months. I remember thinking, 'I gotta get out of here.' With audit, you're always looking back. I didn't feel you're looking forward, you're not creating value. I had to stay in audit for three years to get the accounting qualification, so I sucked it up, did my three years, and then I moved to Ernst & Young's restructuring and insolvency area. Now you're dealing with sick companies. You're going into companies that are about to fail or have failed, and you've got to take them through a Chapter 11 type process and try to rehabilitate them. It's almost like being a doctor but for companies versus people. You learn a lot in those situations because you get parachuted into real problematic situations. Companies failing, people are going to lose their jobs, the company can't pay its bills, you've got creditors, vendors, people aren't very happy with you. These situations are stressful, and you've got to move quickly and decisively to figure them out. I learned a lot about dealing with high pressure situations. It's a bit like sport. You've got a big fight, that's a high pressure situation. You've got to be able to control your thoughts, be controlled mentally, know what your plan is, and stick to it even though things are going to come up that try to throw you off track. Unexpected things happen, but you've got to stay true to the game plan and have belief in what you're doing. That's something else I learned. Then when I was at Ernst & Young, I met a guy at a company called Zolfo Cooper who hired me. They were a restructuring and turnaround shop in New York. I moved over there and was having a great time at Zolfo Cooper. I was there about five years. Then I was working on a home builder in Florida, and a private equity fund tried to buy this home builder that I was working on. I remember the day they came in. I'm sat there as the advisor because I'm with Zolfo Cooper, and you've got the management team, and the private equity fund comes in. They had four or five hours and they just asked questions of the management team. I remember the management team couldn't answer many of the questions. I'm sat at the end of the table as the advisor, so I'm just answering the questions when there was silence because I was as familiar with the numbers, the model, what was going on. I didn't think very much of it. Then a couple of months later, that private equity fund called me and said, 'Can we talk to you?' We went and spoke to them, and they said, 'Look, we would like you to come and join us. We need someone with your skill sets internally here because we buy distressed companies, but we're deal guys. We need someone who can go in and work with the management to put the turnaround plan together before we sell it.' Coming back to what I was saying earlier, I had no idea that day in Florida that this meeting was going to have such an influence on my life. The private equity company was MatlinPatterson. They subsequently reached out, and I joined them as the operating partner in 2010. I was working for MatlinPatterson for a couple of years on all sorts of different companies all over the world. One was in Argentina, one they had in Texas, in Philadelphia, they had an airline company in Atlanta. I was loving it. Then they said in 2012, 'We need you to get involved in this bank that we owned called Flagstar, based in Michigan.' I said sure, and I started coming out to the bank early 2012. What was apparent very early on is the leadership at that point were not engaged with the organization. They weren't visible. There was really no strategy. There was nothing that was being communicated to the entire workforce. People really didn't know, 'What are we trying to accomplish here? What's the strategy? What's the game plan that people could get behind?' There were also a lot of problems with the regulators. I remember relaying this to the principals of MatlinPatterson. This was a big investment for those guys, and there was a little bit of denial. I think they would admit that. Then you fast forward to the summer of 2012, and the main regulator served the company with a consent order. That's when it was obvious that we've got to make some changes here. So we did. Towards the end of that summer, we changed the management team. We put an interim CEO in, and I was continuing to stay involved in the organization. I started working very closely with a guy called Sandro DiNello. He was in charge of all the bank branches of Flagstar. We subsequently made him the president, not the CEO, the president. While Sandro and I were working together for six or seven months at the end of 2012, beginning of 2013, it was obvious that Sandro should be the permanent CEO. In April of 2013, we told Sandro that he was going to be the permanent CEO. When we did, he said, 'Why don't you come on board as the CFO?' Because he and I had been working together very closely. So there is another person who I can absolutely count on one of my fingers who has been incredibly influential in where I am today. I was living in New York at the time with my girlfriend. We had a one-year-old, a baby that was just about to turn one. A thousand square foot apartment, plastic stuff everywhere, you couldn't move. We were looking to get out of the city. So now it was, 'Let's move to Michigan.' We moved to Michigan and took on the role as the CFO at the same time Sandro was CEO. The two of us then embarked on the turnaround of Flagstar. I cannot speak highly enough of Sandro. What I've learned from him, he's almost like a father figure to me. Again, someone who has just been inspirational, and not just to me. I think if you ask anybody at Flagstar, they would all speak incredibly highly of Sandro and how he treats people.

A couple of things that I would say. We talked about being your best every day because you never know who you're going to meet and what doors they can open for you. But when those opportunities arise, do not be afraid to take them. For example, when I was at Ernst & Young in the UK and they came to me and said, 'Hey, we need to develop closer links with Ernst & Young in the US from a restructuring point of view. We need someone to go over there for 18 months on a secondment. Do you want to do it?' It took me less than a second to say yes. Most people, the second they're presented with that, fear, doubt, change, they fear change 100%, and they shut down. They go, 'Let me talk to my wife or girlfriend, let me think about it,' and then they follow back up and say, 'Ah, no.' Where does that come from? Because that's not normally the reaction.

I think it probably comes from being inquisitive. I want to learn more. I want to push myself. I've always been fascinated with traveling. I've been fortunate enough to have done a lot of traveling. My natural reaction is always my first reaction is to say yes, not no. It's not to look for excuses. It's to look for reasons to be able to do it. I think it's the same with any simple job offering because it might be in another part of the country. People can always look for excuses to say, 'Oh, I don't want to do that because it's going to affect my routine, let me check with my boyfriend, girlfriend, partner, family.' You can always find excuses not to do something. But once you turn something down, that opportunity is lost forever. If you take that opportunity, you have no idea how it's going to shape the rest of your life and other people that you're then going to meet as a result of it. It's a little bit like fate. I would advise people when something is presented to you, take it. Because even if you go somewhere and you don't like it, the worst case you can always go back. But once you say no to something, that door is closed forever.

Yeah, I think it goes back to my family, really. They just taught me real core values. Be respectful. Be the best you possibly can be. Don't do things half-heartedly. Be kind. Always do the right thing. Something I always say, because people will say, 'Oh, how'd you sleep at night with all this going on?' I sleep very well at night because I know at the end of each day I've done the right thing. I've been the best I can possibly be, and I've given it my all. I've got a great team, and I'm doing everything I can to support the team. If you do that, you can sleep well at night. People respond to that. If you just do good and want to be good and you're kind and respectful and you appreciate others, good things are going to happen. That is the foundation of it. I wouldn't say the confidence is really more experiences through life. Being in sporting situations where the chips are against you, being in business situations where you get parachuted into a company that's failing and underperforming, you've got to move quickly. You actually get to a point where you're very comfortable dealing with whatever the situation is. It's almost like, 'Okay, we got this. This is what we need to do. This is how we're going to divide and conquer. We're going to put a plan together. We're going to do this, we're going to do that.' It's not so much confidence. It's more you just feel confident that we're going to handle this situation. It doesn't matter what you throw at us, throw at me, we're going to be able to deal with it and handle it. Don't sweat the small stuff. If you're prepared and thoughtful and you've got a great team around you, you'll be able to accomplish anything.

It can be different things in terms of macro. You can always have macro events that create issues. But if you're looking for a common theme around culture, then yes, there is. I think what you have seen most often is leadership with too much ego. They think that they walk on water. They don't operate as a team. They don't listen to their team. They just push down. When I think about some of the values at Flagstar, the service, the trust, the accountability, and having good people, it's all predicated on teamwork. You'll hear a lot of people talk about teamwork. What I, and this is obviously coming from sport and playing football or soccer when I was younger, but teamwork to me is about collaboration. It's working together collaboratively and helping each other because we're stronger together. If you've got a team that's working well together, or you've got a team of individuals, the cohesive team is going to beat the team of individuals every day. I'm a big believer in communication. Communication isn't just top down. Communication is bottom up and across an organization. If you're sharing knowledge, we're all better off for it. I mentioned earlier I want to make sure the team has the tools and the platform to be as successful as they can be. You've got to tell me what you need, what isn't working. Whenever I go and have meetings with the team, the first question I ask is, 'I don't need you to tell me what's going well. Tell me what ticks you off. What can we be doing better?' Because that's how you're going to make the organization better. I don't need to know what's going well. Tell me what ticks you off because that's what we need to fix. The final part of the teamwork is transparency. Anyone should be able to talk to anybody about anything on any day at any time. I remember going back to Sandro and myself. If he came into my office and said, 'Hey, I'm gonna go and sit in on one of your direct reports' team meetings,' I would say, 'That's fantastic. They're going to love it.' But it's amazing how many companies today still have these silos. People are very protective of what they're managing, and they're afraid for hierarchy to come into that. You shouldn't have that. You should be totally confident and transparent in your team and everything that you're doing. The door should always be open. If you've got that collaboration, communication flowing in all directions, and transparency, that's very powerful.

Exactly. I have always said titles do not interest me. I am not worried about that. We're all in this together. Whatever we all need to do to make sure that we're successful, we will do. We're all rowing in the same direction. I've never been interested. You can call me anything you like. I don't care because I just want to make sure as a team, as a collective, we win. If we're not winning, to your point, what have we learned and what do we need to do to get ourselves in a position to win?

It's undoubtedly a lack of training and a lack of experience. One size does not fit all. You cannot, if the only style you've got is to threaten and bully, you're not going to last long. By the way, you're not going to have a team for long because those people are not going to respect that style of leadership and they're going to leave. It comes down to knowing the personalities of your team. Everyone's personality is different, so everybody is motivated in a different way. That's the whole sport analogy as well. The other thing that I think people don't realize when they're in a leadership position is 99.9% of people enjoy learning new things. It's exciting to learn how to solve a problem, learn a new language, learn a new skill set. If you're able to show people, 'Hey, I know we've always done things this way, but what about if we do things this way? Maybe it's a little more efficient. Maybe we can have a better customer experience. Maybe we can shorten the time frame of delivery to the customer.' Once you start to show people things, then I think people are much more open. It's about how you treat people with respect. It's not one size fits all. Coming back to sport, I think Nick Saban mentioned maybe only two times a year can he go into the dressing room at halftime at Alabama and scream at them because he said otherwise it just won't have an impact. He can only maybe get away with that twice a season and hope that it makes a difference. If he's doing that more than twice, he's lost them.

There's no doubt about it. Also, take an athlete or someone in business. If you are just saying, 'You've got to get better, you've got to get better,' but you don't show them how, then they're just going to keep doing the same thing. It's the definition of insanity, doing the same thing but expecting a different result. If you then show them, 'Hey, maybe think about doing it this way,' and you're with them every step of the way the first two or three times, then it's a harmony. People are like, 'Oh, I get it now. Now I can apply.' It's the same in sport, in fighting. 'Hey, you're using this technique, but what about if you change it up and do this?' It's only when people are shown and then they're like, 'Oh, I get it,' and they enjoy learning something new. They appreciate the difference. It starts to snowball. But if you're just screaming at someone but offering no advice, no encouragement, and not showing them the way, the result is never going to change. To be honest, it's not even their failure at that point. It's you, 100%.