This document contains the Mission of Arcadian Bank and our Culture Statement, which details how we will attract, retain, and develop the people necessary to fulfill that Mission. This is not intended to be a comprehensive Strategic Plan, but if we follow these principles faithfully, achieving any strategic initiatives laid out by Leadership and the Board will be attainable because we have the right team in place with the perspective necessary to achieve success.
Culture is an intangible thing, some aspects of which can be developed and reinforced by Leadership, with others arising organically through interactions among the entire staff. The Culture Committee is to consist of staff members specifically chosen to not include the CEO and President. By not including senior executives, this group can serve as a conduit for monitoring the health of our culture free from the power dynamics, and the resulting incomplete information that may possibly exist if the CEO or President were directly involved. The member’s role is to serve as Guardians of the Culture. The focus of the Culture Committee is to promote, maintain, and improve Arcadian Bank’s culture among all employees.
Our Culture will continue to evolve over time and we must continually refresh and reframe these aspects. This is a living document that is expected to have frequent revisions. Nobody is expected to memorize it all and we must continually review this to keep it fresh in our mind. The hope is that during difficult situations, we can pull out this document for some guidance on how to proceed.
To improve the lives of our employees, customers, shareholders, and community members.
To enhance the Bank’s capital and impact through a combination of organic and acquired growth while sustaining long-term profitability. The growth and profitability will allow the
Bank to remain competitive and independent by growing the book value of the company.
How do we achieve this Mission and Strategic Plan?
Through our Culture, which focuses on helping us achieve excellence.
Values That We Value
High Performance
Pay Top of Market
Employee Freedom & Responsibility
Leaders Provide Context, Not Control
Growth & Development
Embrace Change
Many companies have nice sounding value statements displayed in the lobby. The actual company values, however, are shown by who gets rewarded, promoted, or let go. Actual company values are the behaviors and skills that are valued in fellow employees.
At Arcadian Bank, we particularly value the following nine behaviors and skills in our colleagues, meaning we hire and promote people who demonstrate these nine.
Judgment
Communication
Impact
Curiosity
Innovation
Courage
Passion
Integrity
Selflessness
A great workplace is stunning colleagues. A great workplace is not expensive coffee, lush benefits, catered lunches, grand parties, or nice offices. We do some of these things, but only if they are efficient at attracting and retaining stunning colleagues. Arcadian Bank leaders hire and develop thoughtfully, so we have stars in every position. We do not have a limited number of positions. The more talent we have, the more we can accomplish, so our people assist each other all the time. Internal “cut-throat” or “sink or swim” behavior is rare and not tolerated.
Some companies tolerate brilliant jerks. For us, the cost to effective teamwork and our culture is too high. Diverse styles are fine, as long as a person embodies the 9 values above.
Loyalty is important here and is good as a stabilizer. People who have been stars for us and hit a bad patch get a near term pass because we think they are likely to become stars for us again. We want the same: if Arcadian Bank hits a temporary bad patch, we want people to stick with us. But unlimited loyalty to a failing organization, or to an ineffective employee, is not what we are about.
We strive for perfection, but do not expect it. Failure is an inevitable result of trying new things. We should celebrate failure because we know the best way to evolve is through the pain of failure.
The amount of hard work is not relevant. We don’t measure people by how many hours they work or how much they are in the office. We do care about accomplishing great work. Sustained B-level performance, despite “A for effort”, is not sufficient. Sustained A-level performance, even with minimal effort, is rewarded with more responsibility and great pay. In order to achieve such performance, employees know their individual strengths and how/where to best utilize them. They are also able to recognize when they are not the best suited person for a task.
As a result of living our culture, we hire a lot of talented, motivated people. For those people, accomplishing great things is an amazing feeling, but can lead to burnout if not managed. Work/Life balance is critically important to maintaining our high performance culture. See the Employee Handbook for some amenities we offer than can help in this area.
During certain times, the balance may shift a bit more towards Work. Examples include a core system conversion, implementing PPP, Ag renewal season, low mortgage rates triggering a refinance boom, acquisition/expansion, or other such short term events. However, if conditions like that appear to have no end in sight, we need to act. A few warnings signs are as follows:
If we realize that Work/Life balance is off, first, we should ask ourselves, “What am I doing that I should not be doing?” Eliminate unnecessary busy work that adds little value. Next, we can look at ways to shift responsibilities to others who aren’t so overloaded. We all want to contribute at a high level, but poor Work/Life balance for some makes everyone anxious. Those who are overworking feel resentment towards those who are not, and those who do maintain a good balance feel pressure to sacrifice family time or mental health to keep up with their coworkers. If the first two interventions do not work, or are not quite sufficient, then we need to hire more people. Additional talented and motivated employees lighten the load for everyone around them.
Work/Life balance is a challenging issue because everyone’s definition will be different. Proper balance is ultimately your responsibility and can vary based on time of year, life stage, family needs, and numerous other factors. However, others in the organization may intervene to pull you back if too many warning signs show up.
Our high performance culture is not right for everyone. Many people love our culture and stay a long time. They thrive on excellence, candor, and change. For some people, this culture can be demanding and intimidating. Being surrounded by talented, high performing coworkers is stressful if one does not perform up to that level. For those who fit in this culture, they won’t even notice that fact because they are too busy accomplishing great things.
Paying top of market is core to high performance culture. One outstanding employee gets more done and costs less than two adequate employees. We aspire to have only outstanding employees.
Three Tests for Top of Market for a Person
Bad Compensation Practices
When Top of Market Compensation is done right, we will rarely counter with higher compensation when someone is voluntarily leaving because we have already moved compensation to our max for that person. Employees will feel they are getting paid well relative to their other options in the market.
The traditional model means a good prior year earns a raise, independent of market. The problem is employees can get materially under- or over-paid relative to the market, over time. When materially under-paid, employees switch firms to take advantage of market-based pay on hiring. When materially over-paid, employees are trapped in the bank. They can’t get a similar paying position elsewhere, even if we are not a good fit. Consistent market-based pay is a better model.
Efficiency
We don’t want employees to feel competitive with each other
Our goal is to increase employee freedom as we grow, rather than limit it, and to continue to attract and nourish innovative people, so we have better chance of sustained success.
Most companies curtail freedom as they get bigger. Why do most companies curtail freedom and become bureaucratic as they grow? Growth increases complexity. Growth also often shrinks talent density. Chaos and errors spike. The business has become too complex to run informally, so procedures emerge to stop the chaos. We will start to hear “It wasn’t in the procedures, so I didn’t think it had to get done.” Employees shift to auto-pilot by following step-by-step instructions and sometimes don’t even know why they have to do a particular step in the instructions. This tells us that efficiency has trumped flexibility. That shift can bring seductively strong near-term results.
Then the market shifts…
It seems like there are three options, none of which are ideal:
But there’s a 4th option, which is the road we endeavor to take…
Avoid chaos as you grow by hiring ever more high performance people rather than with more rules. Then you can continue to mostly run informally with self-discipline and avoid chaos. The “run informally” part is what enables and attracts creativity. Some degree of systems and procedures are needed in order to learn your job and for the bank to function. With that, people are given the tools to do their job but are empowered with the freedom to find the best ways to do it. They have the freedom to make a big impact.
Freedom is not absolute, and not all rules and processes are bad.
Two Types of Necessary Rules
In addition, sometimes long-term simplicity is achieved only through bursts of complexity to rework current systems.
Summary of Freedom & Responsibility:
The best leaders figure out how to get great outcomes by setting the appropriate context and building a foundation of trust, rather than by trying to control their people. High performance people will do better work if they understand the context, so we want our leaders to provide the insight and understanding to enable sound decisions.
Context (embrace)
Control (avoid)
Employees are encouraged to go to / collaborate with other members of their department before going to their supervisor and to go to their supervisor before going to another member of the Leadership Team.
Employees are encouraged to make decisions in a way that is best for the organization without always seeking leadership’s approval first.
Leadership is encouraged to support employees’ decisions and not overrule them unless there is a clear danger to the organization.
Leaders: When you are tempted to “control” your people, ask yourself what context you could set instead. Are you articulate and inspiring enough about goals and strategies?
Exceptions to “Context, not Control”
We develop people by giving them the opportunity to develop themselves, by surrounding them with stunning colleagues, and by giving them big challenges to work on. Mediocre colleagues or unchallenging work is what kills progress of a person’s skills. In addition, our goal is to develop colleagues who can learn and adapt quickly. For this reason, we try to keep formalized, documented training processes to a minimum. We seek to give new employees the tools necessary to become effective as quickly as possible, while also understanding that some degree of struggle is healthy in growth and development.
Our definitions of growth and development are as follows:
We want people to manage their own career and not rely solely on the Bank for “planning” their careers. Your economic security is based on your skills and reputation. We try hard to consistently provide opportunities to grow both of those by surrounding you with great talent, in addition to the following:
For those interested in supervising other employees, there are three necessary conditions for leading a team:
Every position and title is important in the bank, and the growth of the bank depends on the growth and development of all staff.
At Arcadian Bank, we believe that the world will continue to change, so we must explore the possibilities rather than try to control the probabilities. What do we need to do to make this company something that can be handed off to the next generation of leaders? To stop trying because we are satisfied with past success will not be tolerated. There is always something on which we can improve or some product that we can introduce to better meet our customers’ needs.
If we are true to the other aspects of our culture, success will happen naturally. Success is a byproduct of living our culture, not the end goal of our organization. When we experience that success, it is tempting to coast. Why change anything when everything is going so well?
That kind of thinking leaves us vulnerable to Symmetric Inertia – nobody changes until everybody changes so nobody changes. When an organization is successful, it can start to believe that its position is unassailable and defending that position becomes job number one. After sustained periods of success, leadership teams often require overwhelming evidence that the organization must change. They fall victim to the illusion of personal control. Victims of this illusion believe their success is solely due to talent and hard work. They ignore the role that luck played in past success. If they wait too long, change becomes wrenching and difficult. Kodak invented the digital camera, but its film business was so profitable, that it ignored the new technology for too long and was ultimately killed by it. Blockbuster dominated video rentals, earning huge profits mostly due to late fees charged to forgetful customers. Netflix upended the business model and ultimately killed off Blockbuster with its streaming service. History is rife with other examples such as this.
The End of History Illusion is when the organization says “we have found the recipe, our potential for further growth is limited, we have seen it all, we know it all, we have arrived”. It is by far the most dangerous illusion which can befall an organization because it is the culmination of Symmetric Inertia and the Illusion of Personal Control running rampant. This illusion arises out of the difficulty we have imagining a future that is much different from today. While we celebrate on top of the mountain, we do not know what innovation will arise to show us that what we thought was the top is merely base camp on the larger mountain we could not see before.
How do we avoid these fates? By embracing change so that even if we think we are number one, we behave as if we are number two. The price of inaction is greater than the cost of a mistake.
At Arcadian Bank, we do not wait for there to be overwhelming evidence that we need to change. We require overwhelming evidence that things should stay the same. This is a natural extension of never accepting “Because that is how we have always done it.” Current process, procedure, strategy, and culture must always prove that it is the best available option today. It may be so now, but that does not have to be forever. Tradition is just peer pressure from dead people. IT systems change, regulatory expectations change, customer demands change, and countless other aspects of our business change constantly. Any one of those can make our current system obsolete.
Continually asking ourselves “Is this task really necessary?” and if so, “Can this task be done better?” will lead to a liberating reduction in busy work and free up valuable time to work on larger goals.
An important aspect of managing change is transparency. During times of great change, employees become fearful about how the change will affect them. Keeping employees involved in the change process through transparent decision making can help allay those fears. Leadership will try to keep informed those most directly affected, but we must all realize that perfect information sharing is impossible. People miss meetings, don’t carefully read emails, or sometimes forget parts of a conversation that took place a few months ago. These can all lead to employees feeling “out of the loop” but we must all operate under the assumption that this is unintentional and can be easily rectified by a conversation with someone on the Leadership Committee. Leadership has a responsibility to communicate in as many forms as possible as clearly as possible, while employees have a responsibility to seek information if they ever feel that the communication from Leadership is lacking.
We do not change just for the sake of change, but our bias should always be toward adapting bit by bit to the constantly changing environment. This will help us avoid the wrenching, difficult change and to continue improving our culture for the next generation of leaders.
As stated in the introduction, our goal with this document is to help us attract, retain, and develop the people necessary to fulfill the bank’s Mission. Sometimes we hire people who do not meet these goals, or they once did but the needs of the bank have changed. We manage this process with the Keeper Test. The foundation of that test is the following question that leaders must ask themselves:
Which of your direct reports, if they told you today they were leaving for another job, would elicit a feeling of relief?
When answering this question, it is helpful to place employees in the following four broad categories.
Those in category 2 or 3 should be made aware of that fact and the reasons why. These are difficult conversations for both employees and managers, but are critical to our long-term success. If a path to quickly resolve the issue cannot be found, then the employee should be sent on their way to pursue other opportunities, with a generous severance package.
There are many gradients of the categories above and some employees may fall into one today and another tomorrow. The important thing is not rating employees, but in using this framework to stimulate honest discussion.
When deciding whether to have one of those tough conversations, if we ever think to ourselves, “I should have dealt with this a long time ago”, that doesn’t mean wait longer.
Employees in category 1 should also know. Appreciation for their high level of ability and positive attitude needs to be communicated regularly. As an employee, if you are ever unsure into which category you currently reside, ask your supervisor.
This process may sound harsh to some. However, what is truly harsh is forcing all the other employees and customers to work with someone who is grumpy and rude, or someone who has to be managed around because they cannot be trusted to do tasks correctly. That is not fair to the rest of the staff or customers. Additionally, the positive impact on our culture and performance are drastic once we replace those people with more category 1 employees.
The Keeper Test may cause some fear within the organization. The antidote to that fear is transparency. Employees and managers need to communicate openly about which category they fall into.
Transparency also extends to the community at large. When we do part ways with someone, questions inevitably arise. Below is a script you can use for those situations.
I cannot discuss details of a particular employee’s departure. What I can say is that we have a Culture Document, which is available on our website if you are interested in reading it, that describes how we attract, retain, and develop the people necessary to accomplish the bank’s mission. As part of that Culture Document, we employ a Keeper Test which sometimes results in parting ways with employees who are not the right fit to accomplish our mission. We pay them a generous severance and wish them well in their future endeavors.
These seven aspects of our culture, and the Keeper Test, are a set of highly demanding expectations that are impossible to accomplish all of the time. However, with these ideals, we have something to help us reorient if we get off track.
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