How Umpqua Bank grew into a standout: a new book examines the factors that enabled this Oregon-based financial institution to rise more than a decade ago from a small, modestly profitable community bank into a dynamic, successful 'high-performance organization.'.

• Author: De Waal, Andre
• Position: What Makes a High Performance Organization: Five Factors of Competitive Advantage that Apply Worldwide - Excerpt

Editor's Note: What is a high-performance organization (HPO)? And, would it make sense for your bank to aspire to become one?

An HPO is defined as one that achieves financial and nonfinancial results that are exceedingly better than those of its peer group over a period of five years or more. The organization does this by focusing in a disciplined way on what really, matters to it.

This definition comes from the HPO Center USA, Concord, Mass. This group is part of a worldwide organization that blends scientific research with practical applications with respect to the study of high-performance organizations, regardless of whether they are in the business, nonprofit or government realms.

What are the benefits of being an HPO? According to research gathered by the Center, HPOs have revenue growth from 4 percent to 16 percent higher than their peers; profitability 14 percent to 44 percent better; and return on assets (ROA) 1 percent to 12 percent higher. In addition, several studies indicate that HPOs generally have higher customer satisfaction, customer loyalty, employee satisfaction, and product and service quality. Such organizations also have fewer complaints, more innovative products and services and a better reputation than their peers, according to the HPO Center.

In a new book about HPOs by Dr. Andre de Waal entitled, "What Makes a High Performance Organization: Five Validated Factors of Competitive Advantage that Apply Worldwide," Dr. de Waal, who is one of the founders of the HPO Center, provides case studies of 11 HPOs from different industries and different nations, including such well-known organizations as Microsoft, SABMiller, Unilever and KLM Royal Dutch Airlines.

The one U.S. financial institution that was included in the study is Umpqua Bank, Roseburg, Ore.

Here is an excerpt from the book's profile of this bank.

IN THE PACIFIC NORTHWEST OF THE UNITED STATES there is a mid-sized bank that is extremely successful and which has hardly been affected by the financial crisis. Umpqua Bank was established in 1953 in Oregon by six people who worked at that time in the logging industry. For decades the bank, then called National Bank of Oregon, was a little-known small financial institution with moderate profitability. This changed when in the 1990s Ray Davis was appointed as CEO. Under his inspired leadership, Umpqua Bank transformed into a company with almost $12 billion of assets, 186 branches in several states, high profitability and large market share, extremely loyal employees, and a product portfolio formula that has won several awards.

How did Davis accomplish this turnaround? Fortunately, he has not kept his approach a secret as Davis has described it in his stimulating book titled "Leading to Growth." A striking fact in the story of Umpqua Bank is that the bank's strategy is unique in the sector: The bank considers itself a retail business rather than a financial services provider. That is why its branches are fitted out as if they are stores and its employees are sent on "training missions" to large successful American retail trading companies and hotel chains such as the Ritz-Carlton to learn how to behave in a customer friendly way with clients. Everything within Umpqua Bank (processes, products, reward systems, training courses) is aimed at executing this unique strategy as best as one can.

Initially, Davis was laughed at by his peers because of his deviant approach, but later...