SME Banking Conversations: John Mark Williams (Institute of Leadership & Management)


With this ninth episode of SME Banking Conversations with Olena Gryniuk, we are continuing the series of inspiring interviews on SME Banking, digital transformation, and people making innovations happen in the industry!

The recording of the ninth episode took place in Prague (The Czech Republic). Olena Gryniuk – CEE Director at SME Banking Club, speaks to John Mark Williams – CEO of The Institute of Leadership & Management)

Listen to this conversation on our SoundCloud channel:


Olena Gryniuk: John, I would like to start this interview with my question about you. Now you are CEO of the Institute of Leadership & Management in London, and previously you were head of the Agile Consortium in the UK. And also, you have a background in Santander UK and SME Banking actually. Please tell our viewers about you.

 John Mark Williams: Okay. Well, I suppose from an SME banking perspective, my career started several years ago in stockbroking. I spent about six years in stockbroking and corporate finance. And that was, I think really the first place that I began to learn about business and how the business worked. After I spent those years in stockbroking, I went to live overseas for a while in the Middle East and the Far East for quite some time. I had my own company in the Far East for a while and I spent quite a lot of time supporting other businesses in the Far East and the Middle East, and that was, I suppose, a deeper education in how the business worked, not just my own business, which I learned about, and also how it related to other businesses developing. And then I spent several years helping companies to do business internationally. And that sort of added a third layer, which was about how to do international business and how other people approach international business. So, when I moved into running professional bodies, I, first of all, joined the Agile Business Consortium as the chief exec there and then moved on to the Institute of Leadership & Management. And interestingly, both of those added not so much another layer to my understanding, almost a wrapper, so that I could begin to understand well, clearly the way that businesses, particularly SMEs, do business, is like this. Actually, agility can add another dimension to the way in which they do business. And then, of course, something that I picked up quite early on in my career, the importance of leadership and the way leadership is delivered within SMEs makes a tremendous difference to their prospects for success or otherwise. So that’s a quick run through my career journey.

OG: SMEs are very agile compared to corporates, right?

JMW: Yeah, there’s a sort of obvious reason for that, which is of course that SMEs live much closer to breakeven cases. I remember having a conversation with the chairman of a very large corporate, a car company in Europe, and we were talking about their success or otherwise in Europe. And he said we have in the last year just made our first profit in Europe for ten years. And I thought, how could an SME ever even think I could go for ten years without making a profit? So, the difference between SMEs and large corporates, even quite large SMEs, which might be turning over 15-20 million, the difference between them and a large corporate is so big that it’s very difficult for corporates to grasp at all.

OG: Yesterday at our conference you said a very interesting and game-changing thought, I would say, the sentence that to do SME banking, you should be rather an SME than a banker. Let’s develop this topic because we were talking with you also previously about this gap between SMEs and bankers or understanding how real SME business happening by the bankers.

JMW: And this understanding gap and understanding gap is an academic concept that goes back about 25 years or more possibly. It’s so important in SMB banking because banking, first of all, is not just a process, it’s actually a foundation for all other businesses because without finance it’s very difficult for a business to achieve anything at all. So, banking plays a particular role in the life of a business. Banking plays an even more important role in the life of SMEs because, as I mentioned before, SMEs can’t afford to go ten years without making a profit and they need to be able to manage finance in particular ways. So, the understanding gap between a large corporate, a bank, and its SME clients becomes crucially important. To bridge that gap, understanding gap, there needs to be obviously an understanding. And one of the things that I believe is that it’s almost impossible for somebody who has never been in an SME, let alone run an SME, to really grasp how it works, and for a banker, an SME banker, who is in a very large corporate is trained as a banker. And that’s right, because, of course, they work for banks, they need to be trained as bankers. However, if their clients are SMEs, then actually the understanding gap exists and exists largely. And my quite provocative statement is, and I think I sincerely believe this, that SME bankers, to be successful, need to be first SMEs and not bankers. So, when it comes to how do we make the transition to SME bankers who can be effective with SMs, the question then arises, do we retrain the bankers that we’ve already got?

OG: Is it possible at all?

JMW: Yeah. Is it possible to do one? And I suspect it may not be. And that’s not the fault of SME bankers. They were recruited with certain competencies and characteristics and capabilities to do banking. Yeah, indeed. And some of them many years ago actually. Yeah. And they were recruited as bankers, and they have performed successfully as bankers. However, the success that banks now need to see or want to see with SMEs requires those bankers to think differently about how their clients’ work.

OG: How banks can do this, what is the way out?

JMW: There are, I suppose, two routes. One of the retraining and sounds very straightforward. It’s not, of course, because it’s not just the functions of SME banking that need to change. Because actually they could be changed quite easily just by changing the rules. So, one of them is retraining, the other one is recruiting different people. If we think about the first one first, the retraining, the challenge with that is this idea that what makes up the understanding gap is the mindset. And that’s a big difference.

OG: Is it to possible to change?

JMW: I’m not sure it is. As I said unless somebody has worked in an SME, run an SME, or owned an SME, perhaps, it’s very difficult to appreciate the things which differentiate a bank from an SME and I think that you know, there are a couple of things. One of them is time, the sense of time that you and I have talked about before about the fact that actually, SMEs can’t wait two or three months to be paid. You know, because actually they live not necessarily from hand-to-mouth, but they need to be paid.

OG: Quick payments, real-time, quick credit decisions…

JMW: Absolutely. And what is interesting is that the technology is there for that to have.

You know, there’s no technical barrier to that being done at all. The barriers are in the mindset of the bank. And interestingly, I think those barriers are at several levels. The SME bankers themselves who are challenged because it’s not because they don’t want to help their clients. Of course, they do. They are required by the bank to perform in a particular way. They have PNL accounts that they have to fulfill. They need to do certain things. They are targeted and they are rewarded based on how they fulfill the expectations of the bank, which is set by the mindset of the people at the top of the bank who are not running an SME. They’re running up a corporate that’s worth billions. So, it’s very difficult for any SME banker to actually do what their SME clients need because they may well not then perform the way the bank wants them to. So that’s the retraining needs to be done at a number of levels and particularly actually at the top of the bank in order for the people at the top of the bank to give permission for those people who are dealing with SMEs to deal with them in the right way. So there will be all sorts of changes in the reward structure of banks and stuff like that. The other way to maybe change the situation is this idea about who banks recruit.

OG: How to recruit? Because, you know, it’s really difficult. Nobody wants to work in the bank these days.

JMW: Well, yeah, it’s interesting. Banks are not notably preferred employers except for people who want to earn money because, of course, traders in banks will often end up quite a lot of money. And I can understand that because there’s nothing wrong with wanting to earn some money. And a bank is a good vehicle for doing that for many people. However, banks do have a reputation for being quite not harsh but unforgiving employers. You can either do the business or not and if you can’t do the business, then understandably the bank, which has shareholders and has profit targets, probably will not hang on to that person. One of the things interestingly is one of the things that I did when I was with Santander for about four years, I think, I worked with Santander, and I set up and run the Breakthrough program.

OG: Yes. Let’s talk about this

JMW: Yeah. The Breakthrough was really, really interesting because the idea behind it was that, of course, banks provide financial support to companies, that’s why they exist in the SME context.

OG: Not always actually they provide as we see the last two years banks were restricted in that as well. I mean access to SME finance is still challenging.

JMW: Yes, indeed. So, in theory, at least, banks provide finance for SMEs. However, finance is not the only thing that SMEs need in order to be successful. And I have a model where there are all five core functions in a business: strategy, marketing, operations, people, and finance. So, if we allow in theory, the bank already provides the finance, if the SME needs the other four things to be done successfully in order to prosper, can the bank help them in those other four areas? Strategy marketing, operations, and people? And the answer is yes. So, we did with Breakthrough in Santander. We just set up a little team and one of the reasons banks don’t do this sort of thing is because they’re specialists in finance. Exactly. They also because they’re banks, they know everybody, you know, banks know all sorts of businesses and people in all sorts of areas. So, if an SME needs help in marketing, the bank doesn’t need to say, we can’t help you with that, we do finance. They can say we know people who do marketing, we can connect you. And that was the principle behind Breakthrough. And it was quite it was very successful in one way in particular, which is that it demonstrated to the SMEs with whom we worked over those four years.

OG: You worked with scale-ups within this program, right?

JMW: Yes, exactly right. And a lot of a lot of businesses. We did a number of events with 300, 350 businesses would come and listen to what we had to say. And what made the difference was that the businesses, the SMEs began to realize this particular bank was wanting to understand how they worked, to be a real partner. Yeah, to bridge that understanding gap, to enable them to work effectively. And that word partner that you just mentioned, was the way that we presented Breakthrough. And it’s not actually that difficult as a concept. It’s difficult for banks to do and it was very difficult for Santander to do this costs money, and this is the key.

OG: This is difficult for banks to do. You know what I hear now from the banks and here in Central Europe, one of the main stoppers of not implementing beyond banking services for SMEs is actually the lack of knowledge inside the organization. So, there is no specialist in the bank knowing how to offer e-invoicing, accounting, and other non-financial services for SMEs to support their businesses. Yeah, and this is one of the stoppers. So, it is really difficult from the financial point of view, but also this knowledge point of view.

JMW: That’s absolutely right. And if we think that those beyond banking services are difficult for the bank to source from specialists and experts within the bank because actually specialists and experts are outside, we think about non-banking services and marketing or HR, or strategy, those are even more difficult for the bank to access. And the only way that I guess it could be done was for Santander brought somebody like me in that had a network of connections that were not banking, that were associated with all of those other functions. And it does cost money because that team didn’t have a PNL, and it didn’t generate revenue directly for the bank. The aim of that team was to create a relationship with SMEs that would enable them to come to the bank, voluntarily because they saw the bank as being willing to understand. There’s no reason why any of the banks should not do that other than cost and costs.

OG: Was it a big team?

JMW: It wasn’t a big team. There were I think six of us in the end in total, at the largest point they were about six of us. And the most interesting thing about the whole exercise I think really was back to this idea of mindset and that the team’s job was not just to connect with lots of asset meetings and to bring them in and let them see what the bank could do. It was also actually to connect people in the bank with the SMEs to try and shift some of the mindset within the SME bankers. And we were moderately successful, I’d say, in that. Okay. And I wouldn’t say more than that because it’s always very difficult until the bank says, okay, we will reward you, SME Banker differently because you’re working with SMEs. It’s different for that banker to actually behave in any way other than as they normally do. So, I would be really, I’d be really keen to see other banks think about how do we provide certainly beyond banking services like factoring, etc. or how do we connect the SMEs with these, and then how do we connect SMEs with other things? One of the examples was say, in marketing, we took a group of SMEs along to see one of the world’s best brand management companies and they did a day-long masterclass for 20-25 SMEs, which those SMEs could never have afforded from this global brand. And then the SMEs went away with a brand management plan devised with this global company, which they couldn’t otherwise have had them. And that was great because that was the bank, which is a global business, talking to another global business and saying, how can we help smaller companies. We can give them a day-long workshop on the brand management plan. And of course, it costs the brand management company almost nothing to do that. It’s a day of somebody’s time and the SMEs get something unique that they could not have got. So that’s the sort of simplicity of action and activity that can be taken, but it requires a mindset that actually seems to be valuable to them.

OG: Do you think that now, and especially during these last two years, when the SME environment has changed a lot, all the business environment has changed both for the banks and SMEs, does it require new skills for SME bankers and maybe for the SME banking leaders?

JMW: Yes. And for the SMEs. And I think that’s the driver of the need for new skills in SME bankers and the leadership within SME banking is the fact that SMEs themselves have changed so much over the course of the last two or three years.

OG: Maybe they’re changing quicker than the bankers.

JMW: Without a doubt. So, one of the things that the pandemic did for us was that it made it immediately evident what is important and what is not, what adds value and what does not. And it actually highlighted the agility that SMEs have or not because some of them were not able to cope with it. So, SMEs that coped well, have learned to be more agile than they ever were because they were forced to be so. As a result, the pressure on SME bankers to think in a more agile way has increased and we may or may not have seen that produce a change in behavior, in some banks, it has, and in some, it certainly hasn’t. The key again is to think about these layers in the bank, and it’s at the leadership level where the difference needs to be made. And I have to say my experience of leadership in corporates generally is that agility is well-regarded and often thought about a lot and not too often practiced. There are relatively few companies which were not born agile, many of them web-based companies and things like this, which might be enormous companies: Amazon, Google, and people like this, they were born agile, but very few companies that were not born agile that have achieved agility in their thinking. And I certainly don’t see much in the way of agility yet from the leadership in SME banking. And it’s partly, maybe it’s partly because SME banking is not yet thought of as a thing within banking. We know retail exists. Business banking, which is smaller and medium-sized businesses, and then corporate. Well, actually business banking is in many banks is seen as a different version of retail without understanding that it’s not the same. SME banking encompasses those people who are running a business and who want to grow that business, not just have a bank account, they want to grow the business. Actually, that’s not retail banking, it’s banking, a particular type of banking where the bank needs to back to mindset, needs to understand the ambitions and aspirations of the business and think about how do we partner with that business to achieve them. It’s a shame that SME banking is not thought of as almost a career path within banking. That’s what I would really like to see.

OG: Who, on your opinion, can we call a successful SME banker? What does it mean to be successful in SME banking and whether it is the same as to be innovative in SME banking?

JMW: I think the characteristics of someone who could be a successful SME banker. The first one is that they are a banker. Okay. And I know I said earlier they should be SMEs, not bankers. But actually, they do need to know a little bit about banking. They need to know much more about being an SME. Okay. And of course, our existing cohort of SME bankers are actually not in that place yet. So existing successful SME banker would be an SME banker who thinks, how do I how do I understand a bit more about this SME? How do I partner with them to achieve their ambitions, not just the bank’s? That’s the starting point for existing SME bankers. I actually think they will be surprised and will surprise themselves with just how interesting it is when you start to understand how an SME works and just how easily the bank can help them by connecting them with the right people. So successful SME banker from the existing cohort moves from banking towards SME. Successful SME banker in the future starts with SME and, as I said earlier, then learns about banking. Because I think it’s and I’m sure there are bankers out there who will disagree with this. I don’t think banking is a very complicated or difficult function. The competitive advantage that banks used to have before fintechs and a number of services, was made up of three things. They had a customer service operation, they had risk assessment and they had the transactional ability. So, in theory, nobody needs to give that money to a bank because if I trust you, then I could give you all my money and say, please look after that. For me. However, the transactional ability needs to be done through a regulated organization, so then you would lose a competitive advantage against the banks. So, banks have allowed that competitive advantage to be disrupted somewhat, partly customer service I mentioned. You know, banks don’t have a great reputation, most of them for customer service. And I’m talking about SME banking in particular here. Risk assessment. Again, the reputation is a bit tarnished because it takes far too long to assess an SME for a loan. Usually, the need for the loan has actually passed by the time the SME gets the nod for it. It also can cost money because if the bank has to do due diligence, then the SME will often have to pay for that and would usually have to pay for that. And then the transactional ability. Well, actually lots of people can transact the financial transaction now, not just the banks. So, there are lots of things which have gone away from banks in terms of their competitive advantage. I think really. I’m not sure where they go from here without a willingness to attract and recruit SMEs into banking or individuals who understand SMEs into banking and then train them in banking. I think the future is a big challenge for banks in the SME field because sooner or later those fintechs who are increasingly successful in the retail banking sphere and already doing things for businesses, and particularly those non-banking services you mentioned factoring and things like this, they will start to creep further and further into the role that banks have been playing.

OG: And until the regulators.

JMW: Well, until as it is, this is classic disruption. This is a classic disruptive model. And I think interestingly, one of the things somebody said to me once when we were talking about the future of banking, and they said the only reason, the only thing that keeps banks alive is regulators. And I thought about it, and I thought, actually, yeah, because if there were no regulators, then competition would be absolute and there would be an awful lot of people doing things that banks currently do.

Regulators are protecting banks for good reason because the regulations are there to protect us as customers. However, there is a question mark over whether or not regulators ought to allow other organizations into that.

OG: John, what is your inspiration to do a better job?

JMW: Or what a good question. I think it sounds in a way, it sounds almost foolish, but it’s my inspiration is actually I’d like to help people do a better job of what they do. Not least because it’s enormously pleasing and gratifying when you see somebody achieve something, particularly if they thought they couldn’t do it, you see them achieve it. And the pleasure that they get from that, I get it too. And I think that’s what keeps me going really, especially because, you know, from an SME banking perspective, SMEs struggle. I know, I’ve been in SME, and I run an SME right now, and actually to do whatever we can to help SMEs succeed in that struggle is what keeps me going.

OG: I’m very inspired by this conversation with you, John. Thank you very much for this.

JMW: It’s my great, great pleasure. Thank you very much indeed, Olena, for the opportunity to talk.


SME Banking Club thanks John Mark Williams for participating in our project and sharing his experience with the audience!


Watch the conversation below: