Worcester Economic Club: Michael Daly

Well thank you very much everybody. I appreciate your having me tonight. Whether it's a beautiful New England day out there, it's great to be here at the beautiful College of the Holy Cross. I saw something in writing recently that said the College of the Holy Cross had been named the number one most beautiful campus in all the universities and colleges throughout Massachusetts. Now that was hard for me to believe because I've been through a bunch of them in the Boston area and beyond. And then I drove up here today and I drove around a little bit, and it was easy to see what they meant. Gorgeous place. And Worcester, I mean the energy in Worcester is beyond anything that you could talk about. The excitement here is building. Second largest city in New England. A Brookings Institute calls it one of the strongest performing areas in the country. Forbes magazine cites it as one of the top ten places to raise a family. Over two billion dollars worth of real estate investment, the City Square project. Significant momentum. Why wouldn't you want to be here? And if that isn't enough to get you here, I don't know who owns who either. Worcester owns you or you own Worcester, but it's great to be here.

I was born in Pittsfield, Massachusetts. That is Western Massachusetts. If you live in Springfield, that is Western Western Massachusetts. If you live in Worcester, that is Western Mass to the third power. If you live in Boston, thus I'm a hillbilly to most people in Eastern Massachusetts. I get it. It's okay. I'm proud of it actually. I was born and raised there, lived there 56 years. My wife the same, lived there her entire life. We've been married 30 years. Never left Pittsfield, never left the Berkshires, up until about two months ago when at our age we decided to move. And we up and moved to over Mass. So we're stretching the limits of what we think we can and can't do. But the Eastern Mass proposition to us was that good. Now it wasn't very good, stood. We talked a lot about this Columbia baloney when you were up here. I was a terrible student. I mean academically, I was probably the worst person you're ever gonna talk to. I could barely get into college when I was in high school. Westfield State College actually decided they'd take me, not because of my academic prowess but the hockey coach said this guy might be able to play. So he snuck me into college. He cut his JV program the following year. Fortuitous for me. I fell in love with a girl the first day I walked into that college auditorium, and she fell in love with me, and she yanked me through four years of school. And I got through. I didn't get through with honors, but I got through.

Now as I was working through college, I worked as a teller and I worked as a gravedigger. Now everybody knows it's a well-known fact that grave digging is a fundamentally sound profession and leads to great business success. When I finished school at Westfield, I went on to Bank Boston. And I took that strong pedigree, that big bad resume of mine with those barely graduating Westfield State and the grave-digging occupation to them. I worked there a year and a half and I said, 'You ought to put me in your management training program here because I got the stuff.' They looked at my resume and said, 'I don't think you do. As a matter of fact, your boss far from anything we want as we've seen in a long time. How'd you get here?' So they said no dice. I worked there another six months and I said, 'I got to go then.' So I went back to Pittsfield where I was born and raised, and I found a little bank called Berkshire County Savings Bank. Been around since the 1800s. Bank went public in 2000. I was not the CEO. I did not take the bank public. I was running commercial banking, running some retail banking, some operations. But they went public and they did what a lot of companies do in an IPO. They had a lot of money and they listened to Wall Street. Not always a good idea. And they just got the money out because Wall Street wanted to see a return. And so my workouts doubled in about a year and a half later. The board came to me and said, 'Would you have interest in running the company?' So I said yeah I would. And I put together a very detailed, long, big binding strategic plan on the back of a napkin. And it was a circle around Berkshire County in the Northeast. And it was simple. And it said, 'Look, a lot of the big big banks had bought up a lot of the medium and small banks. And if we could provide the same products as the big guys and still have intimacy with customers and communities, sounds like a winning hand, right?' So the board said that's a good idea, we should do that, and we'd like you to lead the company. And that was 15, 16 years ago. The truth is that wasn't my primary objective. It was a little plan and it probably was on one piece of paper. But my objectives at that time were to develop and change the culture of the company. And frankly, this would become my passion for the greater part of my life.

Now let's face it, we live in interesting times. Things have changed dramatically, more so in the past 20 years than probably in the past 70 years. We really do have a global economy. Geopolitical events really are causing volatility in everything we do every day. Technology has just changed us in ways we'll never go back to. Social media, I don't play on social media, but I'm told that if you have a family of five, you could basically know when each member of that family is going to go to the bathroom that afternoon. And the media has gone wild, right? People are at the extremes. Civility has been lost in ideology. It's no wonder people's behaviors have changed. It's relentless now. I say this whether you're an emerging region, whether you're an emerging company, whether you're talking about the overall as a whole, planning is going to be important. Strategic plans are going to be important. Execution of plans is going to be important. But plans change more frequently now than they've ever changed in our past. So what if your employees accepted that change was inevitable and they were always ready for it and they embraced it? That's why culture, in my view, is the secret sauce. And that's what I want to talk a little bit about today: culture. And if you're talking about culture, you got to talk about today's workforce, because today's workforce has really changed.

Now the first twelve years I was CEO, a man named Larry Bossidy was my chairman. Larry was the vice chair of GE, helped build GE with Jack Welch, and went on to become the chairman and CEO of Honeywell and AlliedSignal. A big guy. Now I got him on our board because I was working on a major initiative in the Pittsfield area and somebody said, 'Hey, that guy Bossidy, he's family owned a shoe store in Pittsfield.' So I called him, we got to know each other throughout this project. When I got my opportunity to be CEO, I called him up and I said, 'Larry, I'd like to do this. We got a lot of culture, I got some great ideas. Would you be on the board?' He looked me directly in the eyes, he always does, and he says, 'Yeah, yeah, I'll be your chairman. You can work for me for the next dozen years.' And I did, and I enjoyed every minute of it. And I learned more from that 12 years than I've learned at any other time in my life. But here's the message that I got out of that. Now I went to lunch with him and Welch years ago when I was just getting started. And Larry and Jack were very proud of the culture at GE. It was a command and control type culture, and that was the norm and it was okay, it was expected. They knew how to make money. And if you worked at GE, people wanted to hire you because you could squeeze the bottom line, baby. So they're in demand. And I was done with that lunch, Larry pulled me aside. And I don't know if he was kidding or he's being a little cynical, but he looked at me and he said, 'Mike, Jack and I couldn't do today what we did then. It's a different place.' He said, 'Everybody needs to be motivated.' I agree. Today people do think differently. And it's not just Millennials, okay? It's the entire workforce. I mean, for years we heard that the Japanese work ethic was what was causing us to fall behind in manufacturing, so we tried to emulate it. Now is that Columbia? I did go back after many years. I was in my 40s. I wanted to salt that little academic hole in my soul, and I went back. So I was much older than everybody else. And I heard young people at that time saying, 'Look, you got to commit yourself, you've got to work 18, 20 hours a day. If you get two hours sleep, that's enough.' Well, it's garbage. That doesn't work today. And it's not a work ethic thing. You know, I hear people all the time say, 'Well, you know, young people today, they don't have the same work ethic.' In a matter of fact, they may have a better work ethic. You just got a different set of priorities. And maybe those priorities are bad, maybe they're right. Technology, speed, information. There's no time to breathe. And we're living in information overload. Nobody's getting a break. And I believe a company culture has to understand that the shift has begun. The shift is in full gear. I think we have to understand the benefits of a mentally healthy workforce. Now I'm not being soft. There are people here that work for me and they would call me a lot of things, but they would never call me soft. But I'm realistic. Life was simpler 30, 40 years ago. I mean, I got on my banana bike every day in the summer and I drove down to the park two miles away. I was gone all day long, every day, all summer. My mother and father, they were having a good time. They didn't have to worry about me. I was free. That doesn't happen today. I mean, if people can get their kids' nose out of a Game Boy or a computer long enough, then they got to take them somewhere so they take a nap. This is a different world. I don't think we can label people lazy or not having the same work ethic because they don't think like we used to think before the world changed. We're seeing less separation of home and work, and we're seeing an increasing desire for this to be the case. It's not wrong. I mean, think of this: if you could get help balancing your home life and your work life, and you could perform better in both using tools that you learned from work, that's pretty powerful. It's about giving people energy, passion, and purpose.

My journey with culture began the first week on the job 15 years ago. I had a couple hundred employees back then. We got a couple thousand now. But back then we had a couple hundred employees and we were going through a system conversion and it was terrible. Anxiety was high. We did everything wrong. So I called an all-employee meeting. It was my first one. We've done 16 since. It was my first one. And I had them all together and I handed out Chicken Little books. Every single person got a Chicken Little book. And we talked about putting things in perspective. We knew this wasn't life or death. We weren't curing cancer. We weren't doing open-heart surgery. We were doing a conversion. We'd figure it out and we'd get better at it. And we talked about what was affecting people at home, outside the home, at work. What was important to them? We did focus groups and we interviewed hundreds of people. And you know what they said? By an overwhelming majority, this is what they said: 'I just want to get up in the morning and be excited. I want to get up in the morning and feel excited about something.' You know what? I think most of us do. So how do you do that? Well, there's thousands of ways that a company can motivate their employees. There's thousands of successful ways. But I know this: if you don't believe it passionately and live it, people see right through it. You got to be authentic with this stuff. Now for us, and it's only one way for us, it's about challenging people. Create a journey for them. Challenging people to become part of that journey. It sounds simple. It's anything but simple. It's hard. But I know this: people watch games from the bench, they get lethargic. You get them in a game, they get engaged. Their motors are running. Energy, passion, purpose. It's insight at that point. We tell all our employees, 'Get somebody else in the game.' It's rewarding to watch. But it means reconditioning the so-called norms.

Now we won't motivate today's workforce without purpose and without balance. At least we won't recruit the best people, I'm sure of that. And frankly, people shouldn't miss a kid's graduation. People shouldn't miss the big game. People shouldn't miss a friend's wedding. Not if they want to be successful in totality. You got to be there. I'm not used to seeing people in our company from time to time. They say, 'Yeah, I worked all day yesterday. Yeah, I missed an important game.' But so well, that's not my fault. That's not our fault. That's your fault. Now maybe it's our fault because we know about it and we should send you home. But you go to the game, and then you go home and you have dinner and you kiss your wife or your husband goodnight, and stay up two extra hours and use the technology that's available. FaceTime somebody. Get it done. Stretch at home. Now if they accept this challenge, they can do more for themselves than they ever thought, and they can do more for you and your company than you ever thought. I've learned that. But it takes a significant commitment, I believe, to develop and also to maintain a culture. Now in our case, that helped us to grow the company and we serve regions all over the country basically, so we had to have it. It helped us to get to some good times. More importantly, it helped us through some really tough times. Challenging people to be their best, not just at work but at home. To think about it, giving people tools at work to be a better father, better mother, better husband, better friend. You're not going home kicking the dog in the chops every night. There's something special about that. It's a powerful tool when people have energy and are not afraid to use their own judgment. Now if the culture says do the right thing, you usually know what it is. And if the policy's not right, I always say then don't follow it. Find a way to change it. You start following policies blindly, you're not thinking. There's no energy. Energy and purpose gives you the tools to do that. And if you're actually in the organizational family, not afraid to make decisions.

I always tell our people this story. I'm a Dunkin' Donuts guy. I'm not a Starbucks guy. And I went to the same Dunkin' Donuts years ago, and I would go to the same guy, a young guy. And I'd say to him, 'Give me a small black coffee.' The first time I had caught him a little slack. He said, 'You want cream and sugar on that?' I said, 'No, no, it won't be black if you put cream and sugar in it.' Next day I went by, I said, 'Give me a small black coffee.' 'What, cream and sugar?' 'No, it still won't be black if you put cream and sugar.' How we did this for days, maybe months. He never thought about anything other than what he thought he was supposed to say when he wasn't listening to me. But then I went to a second Dunkin' Donuts. I was fishing. It was seven o'clock at night. The doors were locked. Oh man, starving. A girl came running over, she opened the door. I said, 'No, that's all right.' She goes, 'No, no, come on in.' She says, 'We just closed a few minutes ago. You want a coffee?' I said, 'I was gonna get some.' She says, 'I'll make you one.' She made me a sandwich, gave me a coffee. Kidding me? Okay, where am I? Was that really in a Dunkin' Donuts? But I was so impressed, I immediately pulled out my business card and said, 'I'll hire you. You should work for us.' I don't know if she's working for us or if she's running a chain of Dunkin' Donuts somewhere. But you know, you get the difference. Give people the opportunity to think, they'll think. Press it down on them, tell them exactly what to say and do, and that's what they'll do. They won't think.

Now at its simplest, culture is how organizations do things. It's basically how people behave. In other words, shared beliefs and values lead to shared behaviors. Now I don't know if you've ever heard of Edgar Schein. Edgar Schein was an MIT professor. He produced several notable works on organizational culture, and he crafted and created a model in the 1980s. And they used that model to better define and understand organizational culture. Now it was not complicated, but it was in different parts. You almost peeled him back to get to it. And he said first, on the outside, you have artifacts. You have symbols that everybody can see. They include logos and dress codes and languages and structure processes. Examples: Apple, Target, Progressive. You can see them. For us, it's our X logo. Excitement. That excitement comes from employees. It's part of the brand. Casual dress. Playing rock music before every single meeting, no matter where it's being taken. And that came from one of my professors at Columbia. You know, people who went to class went to class and fell asleep. Not in this guy's class. You could hear his music coming out the door before every class. I walked in, music was blaring. I was feeling alive. He said, 'Yeah, that's what I do. I make you feel alive before I teach you so you'll listen.' As a great lesson for me. These things are all important. It's part of what we do. It's part of what we're telling people we do. Now the next layer down, Schein called espoused values. How we express our strategies, our philosophies, our objectives, and how we make those ideas and goals public. So for us again, it was simple. We took our eight values: respect, integrity, guts, having fun, teamwork. If you ever meet an employee, any of our 2,000 employees, and they cannot tell you what R.I.G.H.T. stands for, please email me because we've lost something. If they don't, respect, integrity, guts, having fun, teamwork. It's plastered everywhere. Top smart, authentic, devoted. It's ingrained in them. And in its basic sense, all I'm trying to do is get people to be nice. Be nice to each other. And finally, way deep down in the cultural organization, aren't the basic assumptions? Deeply embedded behaviors, unwritten rules that stem from experiences or perception of experiences. It's basically how the world works in any given organization. So you roll up Schein's model, you get a pretty good complete picture of organizational culture. Now what I didn't see in his model, I researched it deeply, what I didn't see was acceptance by most, acceptance by some. In my experience, it's acceptance by almost everyone. 80% doesn't do it. 70%, 90%, 85%. You're still leaving 15, 20, 30% of the people that don't get your culture. It'll rot your culture. So pure at 80 and you want to go to 90, you better be making sure you're shooting for a hundred. Because if you're at 80 and you got 20% that don't love your culture, it's going to 75. It's got to be everybody, virtually all. And those behaviors got to be defined and they got to be exemplified by leaders consistently across the company always, and then ultimately by every employee. I believe that culture is the most important thing to drive long-term results in any company. I think it's up to leaders to live it every day. Now I'm not alone in this by the way. Let me take a look at a number. The strong cultures recognized in recent years: Zappos. They're not too successful, right? They just sold to Amazon. Their motto: happy employees, happy customers. Let's go with the airline industry. Southwest. Is there another airline in the country that's profitable? Southwest is enabling, empowering employees. I mean, you've heard about the amount of planes telling those stupid jokes when the guy's driving and you're trying to sleep. It's empowering them though. It's not a stupid joke to them. Twitter. Chevron. Actually, Chevron emphasized safety and employee support and drove significant loyalty among their place. Now the data's not perfect. It's just not perfect. It's not granular. But if you look at the players in each industry and you look at who's doing well, especially in this environment, the data is there. You just got to look at it as a whole.

Now all this culture talk is nice, right? It's very sweet, isn't it? Why does it matter? Well, I'm gonna give three reasons why I think it matters. Number one: culture is stronger than strategy. Always will be. Culture can make or break a strategy. And culture's harder to copy. Culture takes years if you do it right. And in the competitive environment, somebody can copy what you do strategically, but they're never gonna copy your culture. They don't have 15 years, 20 years to put it together. Second: loyalty. People who are loyal to cultures, not loyal to strategies, not long term. And three: strong cultures create resiliency during tough times. I don't know about anybody here. We've had a pretty good run. There's some tough times coming at some point. They're coming back. We've all been through them one time or another. People come together for a culture, especially if they feel like they got to protect it. Now what management can't do: can't introduce strategies that clash with culture. I can't go into work tomorrow morning and send an email out to everybody and say, 'Hey, from now on it's 8:00 to 4:00 no matter what. Oh, by the way, put your suits on, shine your shoes, put your tie up, and no more rock music. And by the way, no more days off for going out and helping the community.' I can't do that. We took 15 years to create a culture, the values of work-life balance, creativity. I can't make a decision today, none of our leaders can, that's inconsistent because some investment banker or some consultant decided that's what we should do. There's another guy, James Heskett. He was a Harvard professor. Wrote a book in 2011 called 'The Culture Cycle.' I'm guessing this scholar was another guy who started as a gravedigger because a lot of us went on to be great scholars as well. He said this: he said half the difference in operational profits between organizations can be attributed to corporate culture. Half. I did his research. Did you make this up? He said engaged managers and employees lead to lower turnover and higher productivity. And he also said higher employee continuity leads to customer relationships, leads to better customer loyalty, lower marketing costs, and enhanced sales. I don't think he's thought about it. I believe this passionately. Had a writer from The Wall Street Journal call me last year. Said, 'I'd like to interview you about the culture in the company.' She'd heard about some of the wild things we do at some of our employee meetings and some of the things that we do that were all unusual. And she said, 'I'd really like to interview you about it.' I said, 'Okay, fine.' I went down to New York. We sat down, we talked. And she said, 'Can you give me a specific data point in either a product or division where culture is really driving that to a level that it wouldn't be without it?' Nope, I can't. And frankly, even the experts have a hard time with this. But help open your eyes. There's anecdotal evidence everywhere. And we just grew from the smallest, one of the smallest banks in Massachusetts, to now the largest bank headquartered in Massachusetts. We didn't do it through strategy. And our strategy looks a lot like some others. So I'd say this: if you're looking to develop a culture today, it's like critical to know it's not easy. It takes sacrifice, it takes commitment, maybe even some embarrassment. Now how many times I went down to Wall Street in the early days and I talked about 'America's most exciting bank' and Wall Street analysts looked at me with one eye and it's like, 'Where? How old are you, eight?' I mean, there's just nothing. It wasn't when I wasn't talking about a quarterly number. Anyone here for me? Now I do it on purpose now because now we've gotten to a place where when I go and I sit down, the first thing I say is, 'Were you guys the one here about the numbers, right? You want to hear about the culture?' 'Oh yeah.' Ten years ago you did. Ten years ago they thought we were fools. But we were trying to build something that could last for more than a quarter or two or three. Culture can't be built overnight. And it also can't be handed to you by consultants. They just can't. Culture needs to be believed in passionately by leadership, and it's got to be protected at all cost. How am I doing on time? Two minutes? Is there a couple more minutes?

Listen, I don't mean that this is all dictated to people. Subcultures exist and they grow in every organization, and they do in ours. But the values, the deep assumptions, those got to be protected. It's not just the symbols. It's the real diligence and the deep meaning stuff. Now the bigger the organization, I do think it's harder to maintain culture. I get it. Google, Facebook, they're considered cultural magnets of our time, struggled in recent years with identities. Disney found a way to keep it. But I do think a culture is easier to keep as you grow if it's a hundred percent. So if you've got a thousand employees and they all get it, and you hire 200 more, they'll help the other 200 get it. Let me finish with this. Three things: reinforcement of culture. Little things are big. I really didn't know this for a long time. It doesn't require much. Handwritten note to every new hire. Handwritten note to everybody that has a death in the family. 2,000 employees. It takes me a couple hours a week. You know what it means to those people? I hear from every single one of them at some point during the year. Small things mean big things. Years of service lunches, breakfasts. Stay in communication with employees. We still hold those big meetings. We do ten a year now. There are a lot of work, a lot of times I wonder if they're worth it, but I hear from people and they tell me they are. And in those meetings, we touch on performance. We spend the whole time on culture. Earnings will always be a result, not a cause. Second to last: the hiring process. I believe you get screened for culture because certain cultures aren't right for everybody. A lot of people wouldn't know our culture. They wouldn't want to be there. And I'd say this: I'll take a hungry person a couple levels down who can be inspired by a stretch culture and become an ambassador for us ten times over somebody who believes they've arrived, somebody who has all the answers. They can't grow. They're not gonna listen. It's not gonna help us. Humility and confidence are not mutually exclusive. I'll tell you the Irish story a different night. Culture has to supersede individuals for it to breathe and live. I think you got to make the hard decisions. I've got somebody that produces 120% with Adam. Will sit around a room that's it, guys. Produce at 120% but he's a jerk. He's a jerk. He's costing four people who were working at 80%. Got to get rid of him. Doesn't buy into the culture. Tough decision. By the way, if those four go from 80 to 100, do the math. Our productivity goes up without them. I've got to satisfy an analyst. Got to satisfy a shareholder. Yeah, we sometimes have to do things we don't want to do, those things. But if it screws with the culture, we don't do it. They're difficult decisions. I think you got to be committed to making them because at the end of the day, you got to protect the culture.

Let me conclude. If anybody here believes that this is as important as I do, you have to be willing to sacrifice. You have to be willing to take the punches. You have to fully commit. And you got to believe it with your heart and soul. If you do, the rewards are employee loyalty, motivation, retention. Those will trickle down to good customer experiences in a long-term healthy organization. Just one hillbilly's view on the secret sauce. I want to thank everybody here for putting up with me for the time that you did. We're excited to be part of the Worcester community, and we certainly look forward to growing our relationships with each and every one of you. Thank you.