Trust is a powerful tool: Hard to build, but easy to lose.
That was the message from Steinthor Palsson, CEO of Landsbankinn, one of the largest banks in Iceland, during a presentation to Ivey students, staff, and faculty on March 28.
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Palsson discussed how he rebuilt the bank (formerly called Landsbanki), which failed during the 2008–2011 Icelandic financial crisis. Landsbankinn was established in 2008 by the Icelandic government out of the domestic operations of Landsbanki. Palsson became CEO of the bank in 2010 after previous CEOs tried and failed to lead the bank in a new direction.
“People were just waiting for someone to tell them what to do, but no one had a plan,” he said. “I surprised everyone. They saw I was ready to make a change because I had a plan.”
Recognizing that trust in banks had eroded as a result of the crisis, Palsson fought an uphill battle to regain the trust of Landsbankinn’s employees, customers, the Icelandic government, and the general public.
“You can lose trust immediately, but to win it back is a marathon,” he said. “You don’t win it back without being trustworthy and you don’t prove that overnight.”
A new team in a new direction
His plan included consulting with the bank’s employees to learn Landsbankinn’s strengths and weaknesses and involving them in the creation of a new strategy that positioned the bank as the public’s “financial partner”. It also involved communicating this strategy internally and externally. Communications included public meetings and newspaper advertisements that outlined Landsbankinn’s promises to customers, and updates on how these promises had been delivered.
Palsson also advertised every job at the bank so existing employees had to reapply for their positions. He said he needed to create a new team that was fully supportive of the bank’s new direction.
“To be sustainable we had to work on the culture and the mindset,” he said. “My message to employees was, ‘Don’t just listen to me, be part of a good solution’.”
Palsson also approached restructuring in a fresh way and wrote off large portions of outstanding loans. This differentiated Landsbankinn from other banks.
“Lending before was all about growth. Throwing money at companies and taking them over when they couldn’t pay it back. We stopped doing that,” he said. “We needed to prove that it wouldn’t be business as usual.”
His approach was successful. Today Landsbankinn is the largest financial institution in Iceland and has one-third of the market share for retail and corporate customers. Palsson attributes the success to his focus on creating an organization where people count and calling upon those people for creative ideas as well as input and arguments.
“Take care of the inside and the inside will take care of the outside,” he said.
