THE POWER OF JUDGMENT IN INVESTMENT BANKING

The power to arrive at a wise decision, or judgment, is crucial, especially in investment banking, which is much more than just a numbers game. Refining one’s judgment is imperative for both individual advancement and the overall success of the firm. Judgment is part science, part art, often influenced by personal inclinations, making it challenging to fully grasp. Despite being a nuanced and iterative process, clients (like me) primarily remember the outcomes of an investment banker’s judgment, emphasizing its pivotal role in shaping perceptions and outcomes.

Here are several strategies to enhance the ability to improve one’s judgment:

☐ Leverage past experiences. Past experiences provide valuable insights and help us move beyond relying solely on theoretical reasoning.

☐ Assess the likelihood of outcomes. After reaching a specific conclusion, it’s crucial to question its likelihood by asking, “Is this likely?” If the outcome seems unlikely, it doesn’t necessarily invalidate your judgment. It does, however, warrant thorough scrutiny to ensure accuracy.

☐ Consider alternative options. There is usually more than one way to serve the client; a given set of facts and circumstances can lead to different conclusions. Therefore, it’s essential to evaluate your judgment against various options before committing to one.

☐ Use time and planning. When you anticipate the need to make well-informed decisions ahead of time, you can allocate sufficient time for thoughtful consideration. The outcome? Better judgments.

☐ Develop the ability to recognize valuable judgment opportunities. Seek out opportunities to exercise judgment. Given that judgment improves with practice, it’s crucial to hone the skill (sensitivity) of identifying valuable judgment opportunities; they frequently arise during discussions with clients and colleagues.

☐ Prioritize effectively. A critical aspect of judgment entails distinguishing between what is significant (signal) and what is not (noise). Further refinement lies in the ability to prioritize the elements being considered based on their importance.

☐ Ground judgments in facts. The strength of your judgment grows in tandem with the depth of factual understanding. Embrace all available facts — especially those that may challenge initial assumptions — to provide optimal solutions for clients.

☐ Regularly exercise judgment. Similar to any other skill, judgment improves through consistent practice and application. Cultivating good judgment is a continuous process of thought and action.

☐ Seek feedback. Testing your judgment with trusted colleagues (or even clients) can reveal opportunities for improvement. Every outstanding professional enjoys the challenge of assessing judgments.

Judgment is crucial to the prosperity of an investment bank, influencing the quality of work, client relationships, individual bankers’ effectiveness, firm dynamics, and overall professional fulfillment.

RELIABILITY, CLIENTS, AND INVESTMENT BANKS

Reliability — the ability to perform the firm’s ‘promise to clients’ accurately, consistently, and timely — is the backbone of true professionalism. Every individual contributes to the firm’s reliability since more than one employee becomes involved in the product/service delivery process.

There is an uncompromising relationship between reliability and quality. Reliability is to quality what a key is to a locked door: indispensable. When an investment bank makes mistakes regularly, when it doesn’t keep its promises, clients lose confidence in the bank’s ability to do what it promises dependably, timely, and accurately. A lack of reliability means ‘game over’.

Clients frequently habituate (get used to) certain levels of service such that they are unaware of their true expectations regarding the service of the bank. Clients are more likely to habituate when the bank’s product/service delivery is highly reliable. It’s a tricky psychological process because violations of habituated expectations can provoke dramatic client reactions. For an investment bank, it is (very) important to identify the habituated expectations of clients of whom they may be unaware. In-depth client research delivers the answers.

Investment banks are supposed to be reliable; they are supposed to provide the product or service they promise to provide. The opportunity to go beyond what is expected by the client is dangerous. Exceeding the expectations of clients usually requires the element of surprise. Most clients, however, dislike surprises. Predictability is key. Predictability touches the very essence of what clients expect. The intangibility of the products/services of investment banks heightens clients’ sensitivity to predictability. However, defining predictability in the context of specific client work is no easy feat.

Closely related to reliability is the delivery of ‘minimal’ quality, a threshold quality level. Clients demand (at least) ‘minimal’ (baseline) quality, so an investment bank needs to know what ‘minimal’ quality means for each client (again, no easy feat). Each client has a different opinion about this threshold quality level. Performing below this quality level means damaging the corporate reputation of the investment bank. Clients are (very) disappointed if investment banks perform below their threshold quality level.

Reliability seems like a straightforward concept: you are either reliable or not. However, in practice, it becomes more complex because reliability can mean different things to different people. It hinges on client perception — on their reflection of the specific experience (the performance). That said, ‘habituation’, ‘predictability’, and ‘threshold quality levels’ turn reliability into an even more elusive and complex business issue.

WHAT DO GLOBAL LEADERS THINK OF GCC BANKS?

Over 3,000 C-suite executives and senior managers from Fortune Global 500 and Forbes Global 2000 companies — many of them clients of GCC banks — participated in an ongoing multi-year study exploring the corporate reputations of leading GCC wholesale banks (i.e., banks providing corporate, investment, and commercial/SME banking services in the GCC region). The research uncovered a wealth of data, including numerous candid quotes from participants, offering a unique window into how global leaders view GCC banks.

The following quotes offer a glimpse into the perspectives — both representative and illustrative — of these influential decision-makers:

— “We really appreciate banks like QNB, SAB, First Abu Dhabi Bank, and Emirates NBD — they are ambitious, well-connected, and maintain a strong professional work ethic.”

— “Reputations matter, and the best local GCC banks are highly trustworthy. Although I’ve been with J.P. Morgan Chase and Deutsche Bank since the mid-1990s, having a strong local partner in the GCC is essential — and these banks have consistently exceeded my expectations.”

— “A local bank must understand our company and our needs, know a few things about our industry, competitors, challenges, and financing strategies. Most importantly, it must have an in-depth understanding of who we are — our driving forces and ambitions. And you know what? Banks like Saudi National Bank, Al Rajhi Bank, NBK, and Emirates NBD — not the usual global names — top our list of preferred partners in Saudi Arabia, Kuwait, and the UAE.”

— “The key to successfully working with a GCC bank is being an exceptional listener.”

— “GCC banks are driven to make and close deals, regardless of compensation. They thrive on competition, and we truly appreciate their energetic, client-focused approach.”

— “While legal safeguards are important, we believe that genuine cooperation is the cornerstone of effective and successful relationships with banks, especially across the GCC. GCC banks are highly receptive to this point of view.”

— “In the Gulf region, success is often linked to the success of others, and GCC banks are very aware of this dynamic.”

— “We’re not just choosing between banks; we’re choosing among national champions, which is key in the Gulf region.”

— “No matter how good you are as an American, European, or Asian bank, the local competition always outlasts you.”

— “Complex financial markets, like those in the GCC, underscore the value of maintaining relationships with multiple local banks.”

— “The likelihood of choosing a particular wholesale bank as our principal bank depends on many factors, but the bank’s ‘birthplace’ plays a decisive role.”

— “As a successful US firm, we face what could be called the ‘paradox of success’. We’re in a new environment full of opportunities, but our traditional Western approach is holding us back. What we truly need is the guidance of local banks.”

For further details and insights, visit https://pieterklaasjagersma.com/reports.

WINNING THE WHOLESALE BANKING GAME IN THE GCC

The GCC wholesale banking market is complex yet attractive. However, non-local wholesale banks often struggle to compete with established players like QNB, Saudi National Bank, Al Rajhi Bank, National Bank of Kuwait, SAB, First Abu Dhabi Bank, and Emirates NBD due to limited local connections and market understanding. The following list, based on a recently completed extensive field study on the corporate reputations of GCC banks, outlines 10 key rules for success in wholesale banking within the GCC region (in no particular order):

1. Master the intangibles. In the GCC, much of banking excellence is in the delivery.

2. Know who really knows clients — clients. If you want to understand what GCC clients expect, ask them directly. Personal engagement matters more than secondhand insights.

3. Client satisfaction starts with needs and the prioritization of needs, not with expectations. Clients are people first and clients second. True understanding comes from recognizing their fundamental needs, not just their expectations.

4. Failing to prioritize needs means losing clients. Banking isn’t about satisfying expectations; it’s about addressing pressing needs — but in the right order.

5. Recognize GCC clients’ need for esteem. Making clients feel competent, offering them choices, taking responsibility for problems, finding solutions to problems, and acting compassionately — this is the name of the game in the GCC.

6. Ban advertising — deliver. Advertisements create client expectations that (often) cannot be met. Let service excellence speak for itself.

7. Manage via culture, not control. Direct supervision doesn’t work in an industry built on trust, nuance, and seamless service. Employee behavior should be guided through values expressed by the bank’s routines and behaviors. Empower employees at every level.

8. Fairness builds trust. Make sure services, procedures established, and the way the bank deals with clients interpersonally leaves them feeling justly treated — trust starts with fairness. Never forget: trust and understanding mean different things to different people. Overcommunicate. Proactively involving clients helps.

9. Never lose sight of the bank’s core role — fostering the client’s business. A bank’s real value lies in helping clients grow, always through the lens of their needs and priorities.

10. Hire for attitude, not just skill. Mediocre staff quality is an expensive way for a (foreign) bank to save money, especially in GCC countries. Hire the right attitudes. The best hiring strategy? Watch how people behave. Do employees truly understand the intricate cultural sensitivities across the GCC?

In the GCC, you need to do many little (significant) things, not just a few big things. Client involvement is key, persistence crucial.

THE NATIONALITY FACTOR IN INVESTMENT BANKING

During an ongoing multi-year in-depth research study on excellent wholesale banks — i.e., corporate, investment, and commercial (SME) banks — C-level executives and senior managers of Fortune Global 500 and Forbes Global 2000 companies demonstrated a strong nationalistic bias, frequently nominating banks from their own countries (or regions).

With regard to investment banks, American executives and senior managers nominated Goldman Sachs, Morgan Stanley, J.P. Morgan, or a boutique bank like Evercore or Centerview. The Swiss turn to UBS. For Germans, Deutsche Bank reigned supreme. The French frequently thought of BNP Paribas, Société Générale, and Natixis; Italians tend to nominate UniCredit, IMI Corporate & Investment Banking (a division of Intesa Sanpaolo), and Mediobanca (three pillars of Italian capitalism), and Japanese C-suite executives and senior managers praised Nomura and financial supermarkets like MUFG and Mizuho.

Of the nominated investment banks, Goldman Sachs, Morgan Stanley, and J.P. Morgan were the most frequently mentioned (the top 3). The elite is definitely American. At the same time, across Asia, research participants think most highly of large financial conglomerates — usually with integrated corporate & investment bank (‘CIB’) divisions — that have diversified business models. Asian executives and senior managers also prefer diversified universal banks (e.g., J.P. Morgan, UBS, HSBC, Deutsche Bank, and Barclays). Many Europeans favored universal banks and the U.S. ‘big five’ (Goldman, Morgan Stanley, J.P. Morgan, Bank of America, and Citi). From a business development perspective, U.S. boutique banks like Evercore, Centerview, Moelis & Company, PWP, and PJT Partners have ample opportunities to expand their client base outside the U.S., particularly in Europe and Asia.

Few European and Asian niche players (non-U.S. boutique banks) are ever nominated outside their home countries, confirming the nationalistic bias of C-suite executives and senior managers. Some investment banks actively seek to downplay their national heritage in order to minimize their ‘liability of foreignness’ (the strategy of several Japanese financial conglomerates, for example, Mizuho acquiring Greenhill). By contrast, some investment banks, such as UBS, Santander, and leading French banks, embrace their national identity rather than downplaying it. Leading banks recognize the importance of strong local ties in mitigating perceived foreignness. Their approach typically involves recruiting local staff (senior and junior) and actively participating in local community initiatives.

For more details, visit pieterklaasjagersma.com/decoding-goldman-sachs.

THE 'BIG DATA' TRAP — EMBRACE SMART ANALYTICS

The focus on ‘big data’ is often misplaced, as it can be both costly and unnecessary for many organizations. Instead, organizations should focus on three ‘small data’ rules: the ‘Rule of 30’, the ‘Rule of Proportions’, and the ‘Rule of Common Sense’.

In general, a sample size of 30 is viewed as large enough to be statistically significant for almost all data sets. But while 30 will result in relevant statistical results for comparison between groups, different actual group population sizes will necessitate adjustments in order to obtain representative results for the entire population. This adjustment can be done in two ways. The sample can be adjusted such that group sample sizes are based on actual population proportions. A second adjustment method is to use 30 as the sample size of each population, but to weight sample size results based on the actual proportion of the population.

The Rule of Common Sense is by far the most important ‘small data’ rule. Given the complexity that could arise in ensuring perfect ‘big data’ analysis, it is important to temper the science of statistical ‘big data’ analysis with common sense, the most important asset of a human being. Given the subjective nature of most databases, organizations will not benefit substantially from maximizing precision through ‘big data’ analysis.

‘Small data’ beats ‘big data’ most days of the week.

THE GOLDMAN SACHS PLAYBOOK — BEYOND THE BOTTOM LINE

I am a major shareholder in Goldman Sachs. Why do I invest in Goldman? What separates Goldman Sachs from the rest? Three words: Strong. Enduring. Principles. My investment in Goldman Sachs revolves around the firm’s rock-solid business principles.

Principles — codified experiences — are the standards that govern everything we do. They strongly impact daily practices and deliver a compass for actions taken and decisions to be made in an uncertain environment that is characterized by much dynamism. Principles can be seen as the nervous system of the firm. They provide energy to walk the talk. And under today's challenging circumstances, it is the intangibles that count most toward ensuring enduring success.

When the environment and business grow more and more complex, structure, rules, procedures, and systems become progressively less effective as a device for unifying a firm or ensuring smooth teamwork (crucial in investment banking). Implementing the right principles — not just lip service platitudes — makes a firm great. Enter: Goldman Sachs. In my book ‘On Becoming Extraordinary — Decoding Goldman Sachs and other Star Professional Service Firms’, I argue — backed by extensive field research — that professional service firms will be more successful when held together with this powerful glue.

‘Star’ or elite professional service firms have a powerful identity owing to their strong principles. Such a set of principles ensures that they all march to the same drummer; it creates high levels of loyalty and motivation, and provides the firm with structure and controls, without the need for too many formal rules and stifling procedures.

Adherence to sound principles is the hallmark of outstanding management — as an investor, you need to dig deep into this ‘soft’ topic with ‘hard’ P&L consequences. Unsound principles erode client trust and, in the long run, undermine a firm’s reputation and morale. And although principles are the building blocks of star firms, they are not the proverbial magic silver bullet. How they are used determines the results and makes a difference. Ultimately, that makes a respected professional service firm prestigious.

The interesting thing about principles is that there is really nothing all that unique about them. In fact, they are universal and timeless. However, firms like Goldman Sachs are masters in applying them rigorously, consistently, and coherently. Principles need decisions followed by actions; otherwise, they are merely conceptual, looking great on paper or a tablet or smartphone screen. There is nothing revolutionary about getting into shape. If there is a magic formula, then that is it. Doing it, that is what matters. For more details on the effectiveness of Goldman’s business principles, visit www.pieterklaasjagersma.com/decoding-goldman-sachs.

HOW TO DEVELOP STAR PERFORMERS

What does it take to be a great professional? Answer: training, both on-the-job and off-the-job. Let’s focus on off-the-job training.

While conducting a research study on the practices of elite professional service firms, which involved interviews with numerous client executives and senior professionals, I compiled a summary of their training practices and distilled them into the following actionable training tips:

☐ Replace the classic lecture system with integrative and interactive sessions, each containing specific learning objectives that are interwoven throughout the training program. Reduce pure lectures to the bare minimum.

☐ Conduct regular training sessions at least 3-4 times a year. Most need to run for 2 to 4 days.

☐ Use advanced technology, digital simulation, and cameras. Computer/digital simulation exercises help people run through an actual client project, presenting different situations and posing implications with consequences based on participant reactions. Cameras allow participants to see themselves in action and hear the opinions and reactions of others. Cameras also allow a faculty member to serve as a facilitator, an expert who runs the exercises, as opposed to being a lecturer.

☐ Focus on interpersonal skills development. Try to help professionals become better communicators, whether this involves interviewing people or just sitting down and talking with them. If you are not good at this as a professional, you will not succeed. Trainers can teach people how to think about who they will be talking to and what approach to use by giving them feedback on content, rapport, and body language.

☐ Use off-the-shelf modules that take a comprehensive approach to a specific subject, with 80% of the time devoted to exercises. The modular approach permits you to build from one module to the next, with continuing themes and threads throughout. In this respect, a training program becomes like a continuous stream, with each module reflecting a different work aspect.

☐ Intermingle. Intermingling allows young professionals to obtain direct feedback on their skills from senior participants, while senior people can practice their coaching and management techniques.

☐ Participants do not learn from books. They learn by doing. What firms need to teach is awareness. Role-playing helps.

☐ Use robust, relevant case studies. Case studies should reflect real-world client engagements, capturing all the complexities professionals will encounter. Choose industries that are engaging yet accessible, ensuring participants can focus on execution rather than grappling with excessive background knowledge.

☐ Use excellent trainers. A trainer needs to be a teacher, coach, mentor, and buddy all rolled into one. This sounds like motherhood and apple pie — it isn’t.

For more details, please visit www.pieterklaasjagersma.com/on-becoming-extraordinary.

THE POWER OF PRESENCE IN GULF BANKING

In a world where intangible assets increasingly replace physical assets in generating economic value, competition for reputation has become a significant driving force. However, in today’s Gulf banking sector, establishing a strong reputation requires more than merely being a ‘good’ bank. To be regarded as a ‘great’ bank in the Gulf region — countries participating in the Gulf Cooperation Council (GCC) — ‘familiarity’ per se is crucial.

Top-rated Gulf wholesale banks — those engaged in corporate, investment, and commercial (SME) banking — openly share information and engage effectively with stakeholders, recognizing familiarity as a key strategic asset. While some Gulf banks still avoid publicity and communicate only minimally or when under pressure, the leading GCC banks welcome open communication. This transparency fosters credibility and trust, ultimately securing support and advocacy from clients, shareholders, and other stakeholders.

Media channels profoundly influence the visibility of Gulf banks. They interpret, amplify, and shape news stories through commentaries that affect how potential clients — like C-level executives and senior managers of renowned global companies — perceive GCC banks.

Among the local Gulf banks nominated as "best wholesale banks" by over 3,000 C-suite executives and senior managers from Fortune Global 500 and Forbes Global 2000 companies, QNB, SNB, First Abu Dhabi Bank, Emirates NBD, Saudi Awwal Bank, and National Bank of Kuwait received the most nominations. In contrast, well-known wholesale banks from the US, EU, and Asia received significantly fewer.

The research study suggests that American and European wholesale banks, in particular, face considerable challenges due to their strong association with Western market capitalism. This can be a disadvantage in the culturally distinct Gulf region. Projecting a traditional American or European wholesale banking ethos often does not resonate in Gulf countries, where financial assets are readily available, and Islamic wholesale banking — a highly successful practice in its own right — is not viewed as an ‘exotic deviation’.

Bank reputations are built on strong top-of-mind awareness. Familiarity and visibility are closely linked to reputation. While some highly regarded Gulf banks may not be the most visible, this is the exception rather than the rule. For more details, please visit www.pieterklaasjagersma.com/reports.

SHARPENING THE EDGE — THE COMPETENCIES THAT MATTER IN INVESTMENT BANKING

Competence means possessing the required skills, including client knowledge to excel in a given context. According to the global ‘Cracking the Code of Excellence’ study, the five most important skills that C-level executives and senior managers of Fortune Global 500 and Forbes Global 2000 companies look for in investment banks are:

☐ Technical skills. Technical skills are the specific, practical skills and knowledge required to perform certain tasks.

☐ Interpersonal skills. Building, maintaining, and leveraging relationships with clients and various ‘significant others’ is vital. Competence in this area includes skills like empathy, teamwork, conflict resolution, and networking.

☐ Problem-solving skills. Competence involves the capability to analyze complex and changing situations and develop effective solutions. Critical thinking, creativity, and collaborative and decision-making skills play a significant role in problem-solving.

☐ Ethical skills. Upholding ethical principles, adhering to industry norms and regulations, and maintaining professional integrity are essential components of competence, particularly in investment banking.

☐ Cultural and diversity awareness. In today’s globalized inclusive world, the ability to work effectively in diverse multi- and microcultural environments, respecting and understanding different cultural norms and perspectives, is essential.

Clients dislike rhetoric not backed by the right actions. The right behavior, not talk, is competence. Competence also involves showing respect for the client and being a friendly provider of products and services. Competence is the beginning, the middle, and the end of an effective client relationship.

However, it takes more than competent people to win a client’s business. The behavior of employees should be guided by the right — collaborative — values, norms, and routines. Values trump value. What clients quite often experience is ‘cultural schizophrenia’ — investment bank management verbally (and publicly) declares it wants one kind of culture (a collaborative culture), but creates routines and behaviors, including (financial) incentive systems, that send a clear message to their employees supporting a different kind of culture (a competitive one).

PS. This post, like many other recent and upcoming posts on corporate, investment, and commercial (SME) banking, is based on the research series ‘Cracking the Code of Excellence’. ‘Cracking the Code of Excellence’ explores the reputations of corporate, investment, and commercial banks across the Middle East, Europe, the Americas, Asia, Africa, and Oceania, seen through the lens of a large dataset of C-suite executives and senior managers from Fortune Global 500 and Forbes Global 2000 companies. Part one of this series, a study on the corporate reputations of the best wholesale banks in the Gulf region, has just been published. For more details, visit www.pieterklaasjagersma.com/reports.

THE ART OF LETTING GO IN WHOLESALE BANKING — SAYING GOODBYE TO CLIENTS

Managing relationships between banks and their business clients requires a thoughtful, strategic approach. Simply retaining or rejecting clients based on profitability oversimplifies a complex and crucial decision. Instead, banks must weigh various factors and explore compromise options.

Terminating client relationships may be driven by declining profitability (using metrics like ‘client lifetime value’ — CLV — and ‘client referral value’ — CRV), reduced employee morale from dealing with challenging clients, or shifts in markets — including their potential — or business strategies. Some banks drop certain clients to correct past strategic errors, usually errors made by senior executives who have left the bank.

Having said that, client divestment carries significant risks, including:

1. Competitor advantage. Divested clients may take their business to rivals.

2. Legal and reputational risks. Terminating relationships can lead to disruptive ‘high-profile’ lawsuits or a reputation as a ‘difficult’ bank with ‘difficult’ bankers.

3. Erosion of remaining client trust. High-value, important clients might question their own security with the bank. ‘How predictable and trustworthy is X?’

Before cutting ties, banks should ask:

1. Why is the client unprofitable? Profitability metrics alone don’t tell the full story. Unprofitable clients might simply lack awareness of available products and services. A strategic assessment is crucial to understanding the root causes.

2. Can the bank still provide mutually beneficial products/services? Some clients may need guidance on leveraging bank products effectively. ‘Educating’ clients not only improves relationships but can also ease transitions if the relationship ends. Exploring additional offerings tailored to their needs can also unlock hidden value.

3. Can the relationship be revitalized? Options include adjusting payment models, altering relationship management strategies, or transitioning clients to peers (external partners). Peers or specialized partners may have cost structures better suited to serving specific clients. Alternatively, larger peers may take on clients beyond a smaller bank’s capacity, creating mutually beneficial partnerships. Such a ‘client migration strategy’ demonstrates extra effort on the bank’s part, mitigating client dissatisfaction and (even) fostering goodwill (in the industry).

If efforts to restructure or add value prove futile, termination might be necessary. Banks should frame the decision as mutually beneficial, helping clients see the potential advantages. However, the process must be handled with great care — the potential risks are real — to avoid reputational harm or client backlash.

For more details, please visit www.pieterklaasjagersma.com/on-becoming-extraordinary.

WHEN STARS COLLIDE — BALANCING STAR BANKS WITH STAR BANKERS

A few years ago, Harvard's Boris Groysberg conducted a study of 1,052 ‘star stock analysts’ from 78 US investment banks between 1988 and 1996. Defined as analysts ranked among the industry’s best by Institutional Investor magazine, stars were recognized for their superior performance and perceived as invaluable assets. However, his findings revealed surprising outcomes when stars switched employers:

☐ Decline in individual performance. Stars’ performance dropped sharply after moving to a new bank, with 46% performing poorly within the first year. Their output declined by an average of 20% and showed no significant recovery even five years later.

☐ Team disruption. The presence of an outlier can lead to interpersonal conflicts, communication breakdowns, and overall demoralization. Teams experienced prolonged declines in performance due to these disruptions.

☐ Negative impact on valuation. While star hires generate positive headlines, they tend to erode shareholder value. Groysberg found that announcements of individual star hires led to a 0.74% decline in stock prices, costing banks an average of $24 million per hire (star).

Banks (and star bankers) often underestimate how much a star banker’s success depends on their prior organization’s assets. Key factors include:

☐ Corporate routines and systems. Team-based research processes, investment committees, and technology play critical roles in supporting star performance.

☐ Managerial support. Managers allocate resources, direct priorities, and provide mentorship essential for stars to thrive. In Groysberg’s study, stars often credited their success to their supervisors’ guidance.

☐ Reputation. The bank’s name, resources, and networks amplify individual performance by allowing stars to focus on high-value tasks.

☐ Informal networks. Star bankers often underestimate the importance of internal relationships and trust-building. Successful integration across the bank requires fostering cross-functional collaborations to unlock synergies.

☐ Collegial inspiration. Stars rely on talented colleagues for inspiration, coaching, and support. As Goldman Sachs’s John Whitehead famously emphasized, “At Goldman Sachs, we never say I.”

Groysberg’s study highlights that hiring stars is rarely an effective growth strategy. European and Asian banks attempting to enter the U.S. market by poaching top analysts repeatedly failed, incurring substantial losses before retreating. Instead of recruiting (external) stars, investment banks should focus on cultivating talent internally. Homegrown stars typically outperform imported ones and demonstrate greater loyalty, recognizing that their success depends on their firm’s capabilities. By nurturing internal competencies and providing robust support systems, investment banks can retain top talent and create sustainable value. For more details, visit https://pieterklaasjagersma.com/on-becoming-extraordinary.

THE POWER OF WORDS IN HIGH-STAKES ENVIRONMENTS

In Isabel Allende’s ‘Two Words’, Belisa Crepusculario makes a living selling words. Her fate changes when a colonel with presidential ambitions kidnaps her to craft a speech powerful enough to sway the masses and defeat his rivals. Her gift for capturing emotions, aspirations, and dreams makes her indispensable.

Allende’s story delves into the profound impact of storytelling, the transformative power of words. Leadership is definitely not only about authority and strategy. While the colonel may possess those assets, it is his ability to articulate this ‘package’ within an effective narrative that defines his leadership in the eyes of his followers. The Holy Trinity? Will, skill, and ... thrill.

Lacking the ability to influence motivation (‘thrill’) and, consequently, behavior, a leader is merely a manager focused on daily ‘ticking-the-boxes’ tasks. A powerful story that resonates with followers and intrinsically motivates them is particularly relevant in high-stakes environments like investment banking, where leadership involves navigating uncertainty and stress, inspiring teams, and communicating complex ideas to diverse clients and various other stakeholders.

The most impactful stories, often ‘stories from the trenches’ or ‘warzone stories,’ resonate with followers because they offer guiding business principles that capture their feelings and emotions. Think of figures like John Mack of Morgan Stanley, John Whitehead of Goldman Sachs, or André Meyer of Lazard. They were (‘are’, Mack is still alive) revered wordsmiths.

A well-crafted story, adorned with metaphors, unique experiences, and anecdotes, has the power to transform dry and abstract figures — for example, numerical data — into a vivid picture. Most people, including investment bankers, perceive numbers as incomplete, at the very least. While the financial metrics of an M&A deal are crucial, the narrative surrounding it determines its success (How will the combined entity serve its customers better?)

A well-told story can inspire confidence, foster resilience, and create a sense of shared purpose. During the 2008/2009 financial crisis, leaders like Jamie Dimon of JP Morgan and Lloyd Blankfein of Goldman Sachs used storytelling to navigate their organizations through unprecedented challenges. By framing their decisions within a broader narrative of resilience and renewal, they were able to inspire their teams and restore confidence among clients and investors.

Despite the analytical nature of the investment banking business, important decisions made by leaders are usually rooted in an underlying story. Much like Allende’s ‘Two Words’, effective stories lubricate the wheels of an investment bank’s leadership-followership engine. Allende’s ‘Two Words’ is a masterful exploration of the intersection between narrative and leadership in a complex, high-stakes environment.

BEYOND LEADERSHIP — HARNESSING THE STRENGTH OF FOLLOWERSHIP

General MacArthur once said, “A general is just as good or just as bad as the troops under his command make him.” Sure, but there are thousands of books on leadership, very few on followership. Business magazines focus relentlessly on the attributes of successful leadership. The ideal seems to be a world in which everyone is a leader yet who would be left for them to be leading? However, there are exceptions to this ‘rule’. The following books were instrumental in shaping my understanding of the ‘leadership-followership’ dynamic.

In 1992, Robert Kelley wrote ‘The Power of Followership’. He ended up with five followership styles: [1] alienated followers (think critically and independently but do not willingly participate in the groups of which they are members); [2] passive followers (do not think critically and do not actively participate; they let their leaders do their thinking for them); [3] conformist followers (do participate in their groups and organizations but are content simply to take orders); [4] exemplary followers (are nearly perfect, they perform well across the board); [5] pragmatic followers (play both sides of the fence, ranking in the middle in terms of independent thinking and level of activity).

In 1995, Ira Chalef wrote ‘The Courageous Follower’. He classified followers according to the degree to which they supported leaders and the degree to which they challenged them. In 2008, Barbara Kellerman published ‘Followership: How Followers Are Creating Change and Changing Leaders’. She categorizes followers as [1] isolates (they do not care about their organizations, passively support the status quo, and impede improvement and slow change); [2] bystanders (observe but do not really participate, they consciously choose to fly under the radar); [3] participants (care enough to invest time or money, they try to make an impact); [4] activists (feel strongly one way or another about their leaders and organizations, and they act accordingly; they are eager, engaged, and energetic), and [5] diehards (they — deeply devoted to their leaders — are prepared to go down for their cause; they may also be strongly motivated to oust their leaders by any means necessary). Kellerman categorizes followers according to where they fall along a continuum that ranges from ‘feeling and doing absolutely nothing’ to ‘being passionately committed and deeply involved’.

Understanding the characteristics and nature of followers is crucial, and given their greater number, no easy task. Early in my career at McKinsey, many decades ago, I learned a valuable lesson from the senior partners. They not only recognized the importance of their followers but also actively developed their leadership skills by working with a diverse range of juniors with cutting-edge ideas. Outstanding followers are key. Nothing beats a smooth-running ‘leadership-followership’ engine.

REPUTATION — QNB'S NOT-SO-SECRET STRATEGIC EDGE

Today, reputation is no longer one challenge among many; it has become ‘the’ challenge, especially in Gulf (GCC) banking. QNB’s continued success hinges on cultivating a distinctive reputation that maximizes stakeholder value. Apart from dozens of other insights, this was one of the key takeaways from a multi-year study analyzing the perceptions of over 3,000 C-suite executives and senior managers from Fortune Global 500 and Forbes Global 2000 companies. The study examined the best wholesale banks in the Gulf region — those providing corporate, investment, and commercial (SME) banking services. QNB emerged as one of the most highly regarded wholesale banks in the GCC, topping the list of leading regional wholesale banks.

In today’s increasingly competitive Gulf banking landscape, the ultimate goal is to build a reputation that is hard to imitate, distinguishing a bank from its peers in the eyes of clients and other stakeholders, including potential employees. A bank’s corporate reputation should be anchored in six factors:

1. An excellent client strategy that fuels both client satisfaction and loyalty while adopting a ‘client-driving’ approach rather than a ‘client-driven’ one, focusing on proactively shaping client needs, priorities, and expectations.

2. An external engagement strategy that prioritizes ongoing, mutually beneficial, and superior interactions with all key stakeholders — from clients to communities.

3. A competitive edge that enhances the bank’s distinctiveness in essential business dimensions compared to local peers (in this case, Saudi National Bank, National Bank of Kuwait, First Abu Dhabi Bank, Emirates NBD, Al Rajhi Bank, KFH, and so forth) and global rivals (e.g., non-Gulf banks and financial conglomerates like UBS, J.P. Morgan, MUFG, Deutsche Bank, etc.) — resulting in uniqueness, first and foremost, in the eyes of business clients.

4. A talent and leadership development strategy that promotes empowerment, fosters a collaborative mindset within the bank and builds a smooth-running ‘leadership-followership’ engine.

5. An innovative climate within the bank that encourages the development — systematically — of new products and services, strengthening relationships with business clients.

6. A business model designed to enhance the bank’s [1] client responsiveness, [2] organizational agility and resilience, [3] clarity and transparency of product/service offerings, [4] reliability, consistency, and predictability as a business partner, and [5] alignment with evolving market dynamics (e.g., geopolitical, regulatory, and many other impactful changes).

By focusing on these six factors, banks can improve and revitalize key aspects of their management, thereby securing their standing as premier wholesale banks. In today’s Gulf banking arena, reputation isn’t just one facet of the game — it ‘is’ the game. For more details, please visit www.pieterklaasjagersma.com/reports/qnb.

QNB — PRINCIPLES OF ENDURING SUCCESS IN GULF BANKING

Legendary investor Warren Buffett once said to a group of managers of Salomon Brothers in the aftermath of the trading scandal that shook the investment bank in 1991: “If you lose dollars for the firm by bad decisions, I will be very understanding. If you lose reputation for the firm, I will be ruthless.” (Source: J. Fuerbringer, New York Times, August 27, 1991).

Given the choice between a well-regarded professional and someone unknown, most of us prefer to do business with the one who has earned a strong reputation. However, even a strong reputation has a shelf life, and in today’s fast-changing world, it can fade quickly. Reputation — built on admiration, excellence, and status — is like water, always flowing somewhere. As a business asset, it is definable, measurable, and — most importantly — always improvable.

With this in mind, a new study set out to identify the most respected wholesale banks operating in the Gulf region. The goal was to create the equivalent of a Pulitzer Prize for wholesale banking. Good name (reputation) is to strong performance as chicken is to egg. It’s not always clear which begets which, but it’s hard to have one without the other. A bank’s success ultimately hinges on its ability to uphold a strong reputation. In essence, business clients rent the reputations of their banks.

To come up with the definitive list of elite Gulf banks, over 3,000 C-level executives and senior managers from Fortune Global 500 and Forbes Global 2000 companies nominated their top three Gulf banks — banks operating in the GCC countries (both local and foreign banks). Banks were rated on six key success factors: [1] client focus, [2] external engagement, [3] competitiveness, [4] quality of leadership and employees, [5] innovativeness, and [6] business model efficiency and effectiveness (for example, the bank’s agility, resilience, client responsiveness, and reliability).

The study, independently conducted, aimed to identify the practices most respected by C-level executives and senior managers. It focused exclusively on wholesale (B2B) banking — i.e., corporate, investment, and commercial (SME) banking. Since C-level executives and senior managers are among the most knowledgeable people in business, their verdict yields the true ‘A list’. It’s hard to imagine a more critical judge. Hence, ‘QNB — Principles of Enduring Success in Gulf Banking’ is the definitive report card on QNB’s reputation, as seen through the eyes of this influential group of decision-makers.

The report, ‘QNB — Principles of Enduring Success in Gulf Banking’, is the first of its kind, focusing exclusively on QNB. It provides practical and actionable insights that will be invaluable to QNB, its competitors, analysts, investors/shareholders, and other stakeholders. For more details on the dataset, methodology, and report contents, visit www.pieterklaasjagersma.com/reports/qnb.

MOTIVATING THE REST BY CHALLENGING THE BEST

Jet aircraft pilots know that a certain deadly combination of airspeed, glide angle, and throttle is a recipe for a crash landing. When they’re in this position, just a little more power brings down the nose and accelerates their rate of descent. The pilot’s position is called ‘behind the (power) curve’ because a marginal increase in power does not create the expected uplifting effect.

A number of companies these days find themselves somehow ‘behind the power curve’. Short-term operating results are not adequate, neither is long-term competitive position. More pressure on people does not improve the company’s performance, instead, the rate of descent accelerates. Interestingly, in that case, companies usually focus on mediocre performers and attempt to bring them up to a certain acceptable level.

Companies should take a different approach. The best individual performers are generally the most strongly motivated. Singling them out should reinforce their efforts to excel and motivate others to aim for excellence, too. Pick out the stars and incite them to achieve even greater things. Set challenging improvement goals for ‘great’ performers. Even ‘good’ performers are inspired by the improvement goals of the best of the best, and their results will also improve. Whatever the response, it must be selective and more than incremental. Pouring on a little more power won’t work.

Group (company) productivity can best be improved not by striving to bring the mediocre players up to speed but by pushing the best to raise their standards of excellence. Enter: mentoring — a highly effective motivator. As a young and ambitious Ph.D. student and already a serious equity trader, I was in awe when I met some of my mentors, Nobel laureates like MIT’s Bob Solow and Princeton’s John Nash. There’s nothing quite like meeting and being challenged by ‘living libraries’. Education is good, but development is better. It’s like putting wings on a B-52.

Apart from mentoring, three other factors influence the productivity of the company’s main assets — the best of the best — and, consequently, the rest:

1. Always challenge the status quo. Any company that does not continuously and systematically challenge long-held assumptions and opinions about its people — often ‘sacred cows’ — is probably missing an opportunity to improve asset productivity.

2. A clear definition of what ‘extraordinary professionals’ truly are. Without a clear statement that spells out excellent people, chances are good that the company’s main assets will be underutilized.

3. A strong linkage between the company’s strategies and clients' strategies. It is always difficult to ensure high asset utilization if the linkage is weak. Alignment between the company’s core skills — essentially, the talent of people — and the needs, priorities, and expectations of clients is crucial.

For more details, visit https://lnkd.in/eZ9ySjpd.

GULF BANKING ISN'T A 'NUMBERS GAME'

Banks depend on their reputation to stay in business. Reputation is also very much bound by regional influences and differences, as I discovered during a one-of-a-kind study on the corporate reputations of wholesale banks in the Gulf (GCC) region. A bank's ‘emotional appeal’ is a key driver of its reputation, as emotions significantly shape people’s behavior, especially their decisions and actions (e.g., ‘word of mouth’). Banks perceived as ‘liked’, ‘trusted’, ‘respected’, or ‘admired’ — all emotional qualities — tend to achieve higher reputational ratings.

This emotional appeal is shaped by several factors, including [1] perceptions of the bank’s client-focused approach (as opposed to a purely bank-driven one), [2] its distinctiveness (in delivering desired qualities), [3] the competence, empathy, and friendliness of its staff (at all levels), and [4] its transparency and external engagement (i.e., being open, interactive, and receptive to external input).

Business clients — executives and senior managers of companies — emotionally support banks they view as fair and responsible toward clients, employees, and other stakeholders like regulators and communities. In my study about excellence in Gulf (GCC) banking, I noticed that banks are evaluated on more than financial metrics alone; nonfinancial behaviors play a critical role in shaping clients’ perceptions of excellence.

Local GCC champions such as SNB, QNB, First Abu Dhabi Bank/FAB, National Bank of Kuwait, Al Rajhi Bank, Emirates NBD, Riyad Bank, SAB, and Kuwait Finance House excel at fostering authentic emotional connections with foreign businesses. Consequently, foreign companies often choose to partner with these local leaders in the GCC rather than with globally recognized giants from the West or East (e.g., UBS, Deutsche Bank, J.P. Morgan, MUFG, etc.).

While (Gulf) banking may appear to be a rational, data-driven industry, client emotions play a crucial role in decision-making, particularly in answering questions like, “Do we truly want a relationship with this bank in the Gulf region?”

Interestingly, emotional appeal as a strategic business concept holds significantly greater importance in the Gulf region compared to other parts of the world (my empirical GCC study was part of a series of studies about the corporate reputations of wholesale banks in different parts of the world).

The Gulf region is a hard nut to crack for Western and Asian banks. 3,000+ C-suite executives and senior managers of Fortune Global 500 and Forbes Global 2000 companies fully agree: a large majority of them nominated GCC banks as ‘best bank to do business with’ in the Gulf region. The flip side? A cascade of opportunities for Western and Asian banks. Having said that, wholesale banking — corporate, investment, and commercial (SME) banking — in the Gulf region certainly isn’t a ‘numbers game’.

THE GCC REIMAGINED — ELEVATING REGIONAL REPUTATIONS

Many foreign executives typically navigate the complexity of the Gulf region armed with straightforward clichés and stereotypes — these form the backdrop of their opinions and decisions. For non-Gulf executives, developing balanced, well-informed views about the Gulf region poses a significant challenge, as highlighted by many participants in a multi-year study on the corporate reputations of banks operating in the Gulf (i.e., the GCC countries). Judging a book by its cover frequently leads to misconceptions.

However, encouraging foreign businesses to move beyond simple clichés and stereotypes is a major issue for an entire region. Even highly educated non-Gulf business leaders often struggle to understand the rich complexity that lies behind these prejudices. Interestingly, this — partly — explains why they prefer engaging with local GCC banks rather than globally renowned names from the West or East. A field study involving over 3,000 executives and senior managers from Fortune Global 500 and Forbes Global 2000 companies revealed that an impressive 92% favored partnering with local champions such as QNB, SNB, First Abu Dhabi Bank, Emirates NBD, SAB, KFH, Al Rajhi Bank, and the National Bank of Kuwait/NBK.

The reputation of these local champions serves as a shortcut to informed business (investment) decisions. While foreign executives and managers may not fully comprehend the intricacies of the region, local financial institutions with deep GCC roots help them mitigate risk.

The growth potential of the GCC is evident, said my research participants. This bodes well for the region, as countries like Saudi Arabia and Kuwait can position themselves for what they aspire to become rather than what they have been. Yet promoting oneself may not be the most effective way to earn admiration; it is often better when others sing your praises.

My research indicates that foreign businesses are impressed by the professional approach of the leading GCC banks, including specialized Islamic banks. The positive reputation of local premier banks is beneficial — they help offset occasional negative events that may seem inherent to the Gulf region. Patience and a shared mission are crucial for changing a region's reputation. Take Singapore as an example. The GCC represents the best opportunity for addressing this challenge.

The raw materials for an attractive ‘regional brand’ — a distinctive culture, abundant financial resources, a vast pool of untapped youth potential, and an excellent physical and digital infrastructure — are readily available, just waiting for the GCC to reconfigure them coherently and more effectively. My study on the corporate reputations of leading Gulf banks indicates that the Gulf region is on the right track.

INNOVATION IN INVESTMENT BANKING: ASKING THE QUESTIONS THAT MATTER

Investment bankers, especially in markets with cut-throat competition, dream of the product or service breakthrough that will help them break out of intense rivalry and live happily ever after, secure behind the barriers of first-mover and other advantages. Innovation in investment banking, however, is often unrewarded because it fails to provide an edge at all.

Irrelevant innovations in investment banking come in four varieties: [1] those aimed at markets without (enough) clients, [2] those that generate client value but not (enough) firm profits, [3] those that are too easily copied, and [4] those that can be better exploited by others who control more relevant capabilities.

☐ Markets without clients. In considering a potential new product or service idea (in a relationship-driven industry), it always pays to ask five obvious but frequently overlooked questions: [1] who are the true clients, [2] do they have a real incentive to hire/use us, [3] do they have the means to pay us, [4] inspire us (client development = people development), and [5] use us again (relationships need more than one transaction)?

☐ Client value without profits. Investment banks often assume that generating client value will automatically lead to profits. However, this assumption is flawed because revenue distribution along the total client experience is not always determined by the value created at each stage. Instead, it is often dictated by the relative bargaining power of the players involved. Making money through breakthrough innovations is inherently challenging. For this reason, any investment bank considering a potential new product or service should pause and carefully evaluate before committing significant time, energy/talent, and other assets to the investment.

☐ Fast-followers’ opportunity. In the dynamic world of investment banking, shielding innovations from imitation poses a significant challenge. Does leading the pack with a groundbreaking product or service truly pay off in a specific client niche? Or does the lion’s share of rewards go to the agile, smart, and fast follower?

☐ Lacking lasting advantage. When the next ‘newest new thing’ comes along, the bank’s management will do well to ask a ‘what if’ question or two. Assume the financial innovation succeeds and that peers soon catch up with the bank’s initial lead. Does it, or can it, control the key factors for success so that it can transform an innovative ‘blitzkrieg’ into a long-lasting advantage? If the answer is negative or doubtful, the risk of an ineffective innovation is almost certainly high.

Asking the right questions filters out irrelevant innovations and promotes the development of truly profitable, client-centric, and sustainable financial products and services.