MRKT 513- This case is designed for the study of leadership and organizational change

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TRANSFORMATION FROM WITHIN: THE CDBG CASE
Scott Johnson, Northeastern State University
David Kern, Northeastern State University
Katie Haight, Northeastern State University
Ryan Haight, Northeastern State University
CASE DESCRIPTION
This case is designed for the study of leadership and organizational change within a unit
of a larger organization. As such it provides an important learning experience for students who
are already managers or who aspire to that level of responsibility. The primary learning
opportunities address building a vision at the unit level, restructuring for success, overcoming
resistance to change internally and across other units of a larger corporation, building support
with powerful sponsors, and the importance of communication and persistence where authority
is limited. The case has a difficulty level appropriate for undergraduate seniors and graduate
students, and is designed for courses addressing organizational change, leading change, and
leading teams. It can be covered in a one hour class. Preparation for the case is expected to
require 3-4 hours.
CASE SYNOPSIS
The case begins with the recognition by a senior vice-president that the inadequacies of a
seemingly insignificant compliance unit could jeopardize the overall growth strategy of BOKF, a
large regional bank holding company. Paula Bryant-Ellis agrees to take on the transformation
of the CRA department into a modern Community Development Banking Group (CDBG) that
will contribute to the overall strategy of BOKF, the parent banking company. The case covers
the first two years of significant organizational change, with emphasis on creating a vision,
restructuring the organization, and shared leadership at the unit level. For the first three
months, Bryant-Ellis is learning the existing, inefficient and archaic process while she studies
benchmark banking groups to crystallize a vision for the future and an initial direction for the
group. Early in this process, she brings new leadership into the unit. The case chronicles the
new leadership team’s approach to transforming the basic functions of the group, while
concurrently managing the old processes until the new ones are operable. The challenge is
complicated by substantial resistance to change by executives in powerful operating divisions
affected by the compliance responsibilities of the CDBG. Communication and collaboration
across organizational silos and the role of powerful sponsors are key elements of the
transformation. The case ends with a summary of “early wins” for the unit, and a list of
challenges its leaders will face over the next few years.

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INTRODUCTION
Steve Bradshaw, Senior EVP of BOK Financial Corporation, was concerned about the
performance of the CRA Department, which had recently been assigned to him. The department
was named after the Community Reinvestment Act (CRA), a federal regulation that encouraged
banks to promote development in low-to-moderate income (LMI) communities through lending
and investment programs. The bank had received “satisfactory” ratings over the past few years
in CRA performance evaluations; however, government regulators were increasingly critical
about antiquated processes, the lack of required policies and procedures, and the absence of
initiative in addressing needed improvements. Failure to receive satisfactory ratings could
jeopardize the growth strategies of the holding company. In effect, the performance of a single
compliance-oriented department could hinder strategic action by BOK Financial Corporation
(BOKF) and its subsidiaries1.
The Board CRA committee, whose members included the chairman of the board and the
CEO, met quarterly to review the status of compliance in this area, an indication of the strategic
issues involved. As a member of this committee, Steve Bradshaw had observed two additional
concerns. The CRA Department was not profitable, and had not met BOK Financial
Corporation’s expectations in serving the community. He had seen enough of the problems to
know that the current approach was not working, and that little change could be expected under
the existing structure.
Steve acted quickly in addressing the leadership of the department. The new leader
would have to be a self-starter and work with minimal direction. Due to the poor reputation of
the department and the necessity of building cooperation with the business units, a candidate
would have to understand the bank’s internal culture, work across organizations and interact with
senior executives. The idea of bringing in a compliance expert from the outside was discarded
quickly. There were no obvious internal candidates. Paula Bryant-Ellis, although no longer with
bank, fit the requirements of the position. She had worked in the high pressure lending activity,
which operated under Steve Bradshaw’s direction. Paula also had gained experience in another
bank and had recently been working as an executive in an organization focused on community
development projects. Steve believed that Paula had the background, initiative and interpersonal aptitude that would be needed.
Paula Bryant-Ellis began her career in the accounting field before building a successful
career in lending at BOK Financial Corporation and at another Oklahoma bank. In 2003, Paula
had accepted a call to serve the community as a key player with Community Action Project of
Tulsa. Her work in the community was rewarding, but she realized that she missed the “action”
and intensity of her previous positions. The call from Steve Bradshaw was a surprise, but was
intriguing. It combined the challenge of banking operations with the positives associated with
contributing to the local community. The downside was that the CRA Department had a poor
reputation in the bank, and was focused on compliance, which was not Paula’s strength. But
Steve was convincing, emphasizing the significant potential for growth, and promising a great
deal of latitude. The opportunity was compelling. Paula agreed to accept the challenge.

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THE CRA DEPARTMENT
The department had been created years earlier to deal with federal regulations of the
Community Reinvestment Act (the acronym CRA was originally selected as the name of the
department). Compliance is necessary for regulated banks if they wished to expand their
businesses (e.g., acquisitions, branches and ATM). Banks are required to follow processes
directed by CRA regulations, and provide loans and investment services to low-to-moderate
income communities. Banks are required to document their compliance and periodically present
their results in an examination of each bank subsidiary. The examinations involve performance
evaluations of a broad range of lending and investment activities. These activities can be
originated either by a community development group such as the CRA Department, or by
business units within a bank. Consequently, examinations require coordination across multiple
units. The responsibility for completing the reporting and providing documentation had been
assigned to the CRA Department at BOK Financial Corporation. An effective approach should
have included strong written procedures, experienced lending officers, and coordinated systems
for reporting. This was not the case.
At the beginning of 2004, the department was only meeting the minimum requirements of
the regulations. Policies and procedures within the department were deficient or did not exist.
There was no interface with the bank’s loan systems. This led to a manual process of reporting
and documentation.
Loans were originated by CRA personnel with little underwriting
experience and an inadequate understanding of credit policies and procedures. Lending
decisions were often made on an ad hoc basis. The result was a significant portfolio of negative
return loans. Other business units also originated loans that should have been subject to
examination, but often were not recognized as such by CRA personnel. There had been no
attempt to correct or even document procedures and performance. No meaningful effort had
been made to improve efficiency.
The department itself was a loosely organized collection of 19 people spread across five
locations with the head office in Tulsa. The department focused on compliance reporting, ad hoc
loan origination, and critiques of business unit practices. Attempts by CRA personnel to address
compliance deficiencies in the business units were frequently presented negatively, accompanied
by threats of examination failure, which ultimately led to an atmosphere of resentment and
mistrust. The complaints of CRA Department personnel generally fell on deaf ears. It was no
surprise that the CRA Department garnered little respect, and even less cooperation from the
business units of the bank. Although the bank subsidiaries had managed to receive “satisfactory”
performance evaluation ratings in previous examinations, there were warning signs that multiple
problems in CRA compliance could lead to unsatisfactory ratings. Unsatisfactory ratings could
restrict expansion plans of the parent company and its subsidiaries.
As importantly, the inefficient processes and lack of profitability ran counter to BOK
Financial Corporation’s commitment to excellence. The corporation’s strategic plans embraced
excellence in all operations with full support from the executive team. The CRA Department
was out of step by considering satisfactory “good enough”. There were no plans for
improvement. The department did little to actively contribute to the growth and sustainability of
low-and-moderate income communities. With acquisition and expansion essential to the overall
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strategic plan, the potential failure in the CRA compliance activity developed into a strategic
issue. It was in this environment that Steve Bradshaw made his decision to revamp the
department.
BUILDING THE FOUNDATION
One of Paula Bryant-Ellis’ priorities in August 2004 was to meet with executives and
business line leaders in order to understand their view of the CRA Department and the potential
for cooperation in the future. This would prove to be valuable in a number of ways. The
meetings increased awareness that the area was important to executive management, that there
was new leadership, and that cooperation would be necessary. These sessions would begin a
pattern of communication and consultation with key individuals at the executive level in various
bank groups and divisions who could provide support in overcoming resistance and facilitate
necessary improvements in communication and cooperation. Another early priority was to
successfully complete examinations in two bank subsidiaries, which would also contribute to a
third priority – to gain an understanding of the regulations and the capabilities of the existing
staff.
The first three months involved long, frustrating hours working with local CRA
personnel in preparing for examinations that would begin in the fall of 2004 for the Albuquerque
and Arkansas bank subsidiaries. It would involve full immersion in coordinating the antiquated
processes employed by CRA personnel, and in learning the compliance end of the business. The
days were spent manually collecting and recording data, fighting fires, and trying to make some
sense of the department. CRA Department personnel would make copies of documents and
summarize on spread sheets, sometimes even by hand. The extent of the problem was driven
home by a series of communications from one of the examiners who severely criticized obvious
deficiencies in process and implementation. Problems in coordination and initiative within the
department were typified by the lack of integration with Credit Services’ recent upgrade of the
bank loan system. No attempt had been made to integrate CRA activities into the upgraded
system by either department. It was obvious that this was the wrong way to run a business.
Without a background or experience in the compliance elements of the regulations, Paula
worked nights reading the regulations in detail, and reviewing performance evaluations of other
banks that had received “outstanding” ratings. These documents provided a view of what it
would take to become a high performing community development group. Excellence could only
be achieved with a comprehensive approach, incorporating strong compliance processes and
meaningful community development lending, investing and services activities. It was clear that
the most successful banks developed profitable lending and investment strategies, effective
service programs for the community, and strong compliance systems and processes.
The late night study sessions laid the groundwork for an outline that would be refined and
enhanced by input from key players in the restructured group. The plan ultimately addressed
four key thrusts: 1) establish a new direction; 2) build an effective group; 3) automate the arcane
manual review process; and 4) create a culture of collaboration with business units. The reader
should note, however, the word “ultimately” in the previous sentence. Developing the plan was
a process that began with the broad, initial vision, which would gain clarity over time, and
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evolve as the new leadership team learned the ropes and began to solve the problems. It was a
messy process, interrupted by the necessity of fighting the daily fires, but informed by study,
analysis and open discussions among the new team members.
THE VISION AND INITIAL STEPS
Developing the overall direction was an important first step; however, building a
comprehensive approach would involve a complex, evolutionary learning process that would
take several years to produce significant results. The next step was to create a vision of what this
group would ultimately accomplish. That vision would not allow continuing to operate as a cost
center; nor could it accept merely “satisfactory” performance ratings. The vision focused on:
• becoming a positive force in supporting people and businesses in LMI communities;
• being recognized through the achievement of outstanding performance evaluation
ratings, and
• contributing to the growth and profitability of BOK Financial Corporation.
It would take the addition of experienced colleagues and several years before this vision would
be fully developed into a formal plan. The initial plan was not documented as such, but one that
involved a mix of doing and planning on the run. Formal processes and planning documents
would have to come later.
An essential early action in setting and communicating a new direction was to change the
status and scope of the department. The CRA Department would become the Community
Banking Development Group (CDBG). This name was chosen in a deliberate process that
included all people in the department. The change redefined and expanded the intent and
purpose of the group. The broad charge was to make CDBG an organization that fully
represented the mission, vision and values of the bank, and its commitment to excellence. The
change in name and status acted as a clear statement to those within the group. Externally, the
new name and elevation to group status would represent both a highly visible statement of new
direction, and a more powerful voice in cross-functional interactions. CDBG would be led by a
senior vice-president, providing more effective access to leaders in larger, more powerful
divisions and groups within the bank. This “higher” apparent status would also be important in
providing position recognition when working with each of the leaders in bank subsidiaries and
business units.
The leadership team’s work in the trenches and their study of successful community
development organizations in other states provided an initial level of clarity to what “excellence”
would mean. Three initial priorities emerged:
• achieve outstanding performance evaluation ratings, which would require substantial
automation of the process and support from various business line partners;
• serve the low-to-moderate income communities more effectively and,
• aggressively build a loan and investment portfolio that would not sacrifice credit
quality, have impact in the community as well as provide profitability for the
organization.

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This plan would require the transformation of the internal group, while the leadership
team continued to manage ongoing examinations. Unfortunately, the current staff had neither
the skills, nor the structure to operationalize the vision. It was essential to add new leadership in
each major area of responsibility, and to develop a core group of professionals in Tulsa. The
new leadership team would multiply Paula’s efforts and expand upon the initial ideas for the
group.
BUILDING THE TEAM
The CRA Department had 19 employees spread over five locations with only a few in
Tulsa. There was a void in leadership and little organizational structure. Every employee
reported directly to the department manager, but much of the work was directed by the office
manager. The skill set of most employees focused on clerical activities and manual preparation
of reports. The current loan portfolio was unprofitable. There was little aptitude for investments
and loans, which was essential in building a strong community development organization. There
was no impetus for automation, which was typical of banks achieving “outstanding”
performance evaluations. Other business units (e.g., Business Banking and Mortgage groups)
considered the CRA Department a minor irritant, and did not welcome changes in their
processes. People within the department were entrenched, and questioned the need for
improvement. It was evident that minor adjustments would not suffice. The change would have
to be dramatic, involving a different skill set, new leadership and a culture that embraced
excellence and continuous improvement. The process started with the recruitment of two
experienced managers who would drive the investment and compliance priorities.
Angela (AJ) McKean joined CDBG as Investment Manager in November 2004. She
brought a wealth of knowledge and experience in loans and investments both in banking and in
community development. The fact that she had worked for Bank of Oklahoma for seven years
contributed to her credibility with the business units. Her most recent position as executive
director of the Tulsa Industry Authority provided insight into the community. Angela’s input
provided an important second perspective to critical early decisions for the group. Angela also
started to develop opportunities in the investment arena, working with outside experts and across
units within the holding company and its subsidiaries. Her expertise and experience within the
bank and the community further enhanced the image of CDBG.
In this time frame, Cassandra Burroughs was promoted from within the bank to
Compliance Manager for CDBG. With seven years experience as a commercial loan officer,
Cassandra contributed a strong banking background, but had little knowledge of systems and
compliance. Her ability to grasp new concepts, hard work and driven personality would be
essential to overhauling the manual processes. Hers would be a key area where automation was
essential. The automation initiative would provide strong impetus for improving multiple
procedures and performance evaluation processes involved in CRA examinations.
As
importantly, Cassandra eagerly sought the challenge with a high level of energy and
commitment.
By the end of 2005, it had become increasingly apparent that lending operations
represented an important opportunity to support compliance activities and transform a seriously
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under-performing loan portfolio, and that it would need new leadership. In January 2006, Gail
Banham joined the team to restructure the loan activity, and to make the changes necessary to
develop a strong loan portfolio. Gail’s background in commercial lending and in credit
administration brought critical knowledge to the group. Gail recognized the lack of lending
expertise in the group and began to build her team. Carl Shields was hired for the Texas bank
subsidiary. Carl had twenty years experience in commercial, small business and community
development lending. Lisa Albers, who had extensive experience in Bank of Oklahoma
commercial real-estate, also joined the lending unit. The overall lending knowledge and
capability of the Community Development Group was substantially enhanced.
The issues of focus and structure were also tackled. Most of the new managers would be
located in Tulsa, encouraging the existing staff to develop new skills, while adding experienced
personnel where necessary. There was a shift from a loosely organized collection of individuals
in multiple locations to a strong central group that would begin the process of building
collaboration with the business units. The restructuring of the Community Development
Banking Group was completed with an overall reduction of two positions, providing salary
allocations to add experienced managers. The enhancement in human capability provided the
resources needed for the group to tackle existing problems, automate systems, serve newly
acquired subsidiaries and begin building profitable loan and investment portfolios.
OVERCOMING EXTERNAL RESISTANCE
Much of the initial effort was directed toward building a competent group with capable
leaders; however, resistance to change from larger, more powerful organizations within the bank
presented greater challenges. The business units continued to view CDBG as another version of
the old CRA Department. CRA compliance was not their problem. This attitude was a major
impediment for the CDBG leadership team, which could only be successful by working with
business units and bank subsidiaries. How could a small organization with a poor reputation
initiate improvements and change with large units whose key people did not share their vision
and objectives? How do you lead a team to make sweeping improvements and develop new
approaches and products, while operating an archaic process during the conversion?
Paula Bryant-Ellis made key decisions early that would allow her to focus effectively on
cross-organizational collaboration. The group had acquired experienced leaders who developed
detailed plans and executed them in concert with the overall vision. That vision and overall plan
was clearly and continuously communicated to upper management and leaders in business units
and bank subsidiaries. Steve Bradshaw acted as a powerful sponsor for CDBG, providing
support and assistance at critical times in the process. Steve’s support was particularly important
in assisting Paula in building alliances with key players in business units.
Developing collaborative relationships involved a consistent approach. Paula and her key
team leaders would identify an issue or opportunity. In each area, the appropriate manager
would research issues and problems, develop initial ideas for solutions, and review with Paula
prior to preparing reports or setting up meetings. Concurrently, CDBG unit managers would
meet with business unit peers to establish a level of common understanding and begin building
ongoing working relationships. The communication program operated at multiple levels. At the
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initial meetings with business unit leaders, Paula provided support to CDBG unit managers to
encourage broad agreement on the issues and the options for improvement. These sessions
would be followed with multiple meetings and contacts involving the unit managers and their
peers in the business units. The process appears to be straightforward, but it frequently involved
multiple iterations, starts and stops, personality issues, and, occasionally, failure to move
forward. It was often frustratingly slow and difficult. In some cases, this influencing approach
worked reasonably well. In other situations, this approach was not enough to assure compliance
or collaboration.
Members of the CDBG leadership team also visited key managers in the bank
subsidiaries to build communications essential for a collaborative relationship. Paula would
address “how we will work with you and how we operate in your market.” Unit managers would
follow-up with multiple contacts. Previous successes and ongoing collaborative efforts would be
discussed as examples of effective practices....