Built to Flip - Where Do You Come Down?

The happy fact is, we were right not to sell. E-Loan has grown, and our IPO valued the company at four times the offer that Intuit had made a year earlier. What if things hadn't gone so well? I would not have been disappointed. We would have had other alternatives. Besides, I worry a bit about success: When you achieve success too quickly, you may end up losing it just as fast.

Joe Kennedy

I joined E-Loan because I thought, "Hey, there's a good business opportunity here." But I also signed on because, when I met Janina and Chris, I sensed that their vision went beyond just making a quick hit. They had values and principles, and they had a dream about what the company could be. They could have sold out to Intuit and become fantastically wealthy, but they opted to take another path. They had an opportunity to "build to flip," but they made a conscious decision to build a company instead.

Last summer, we decided to spend some time thinking through what we mean by "building a company." We have a great business model. But if we're going to become a great, enduring company, we need to develop an internal capacity to foster new insights and then to act on those insights -- over and over again.

So, to help ourselves sort through those issues, six of us spent a day with Jim Collins at his management lab in Boulder, Colorado. We came away with several lessons. Above all, we learned that we need to be smart when it comes to speed. The Internet is fundamentally about moving fast, and speed (as Jim would say) is part of our DNA. But if we're ever going to be the company that we dream of becoming, we have to learn to be both extremely fast (when that's the right thing to be) and relatively slow (when that's the right thing to be).

We're good at being fast. We can go into a room and make a decision -- even a big decision -- in three minutes or less. But that's not the right approach when it comes to developing our core corporate values. That process requires more reflection: It should lead to a deeply thought-out consensus among members of our leadership team. And once we've defined our core values, we need to communicate them to hundreds of people throughout our organization. All of that takes time.

There are two other essential activities that take time: developing an organization and developing a brand. Those activities are parallel and interdependent: Leadership is about teaching an organization what you stand for; brand building is about teaching millions of consumers what you stand for. Leadership and brand building require time, consistency, and constancy.

The relationship between those two activities is critical to the issue of sustainability. There is a virtuous cycle in which enthusiastic employees help create enthusiastic customers, and vice versa. It's almost impossible for customers to feel enthusiastic about an experience with a company if the people delivering that experience aren't themselves enthusiastic. And the more enthusiastic a company's customers are, the more enthusiastic its service-team members will be about what they're doing.

But that virtuous cycle depends on a foundation of systems and processes. We want to revolutionize what it's like to get a loan, and that means building a carefully planned, high-performance organization. If we develop great systems and great processes, then we'll end up with a great organization. If we have a great organization, then we'll be able to deliver great service. If we deliver great service, then we'll create a great, enduring brand. And a great, enduring brand is what will separate E-Loan from the hundreds of other mortgage brokers that are entering the online market. Sure, speed matters: Whenever we see an opportunity to improve our Web site, we want to capitalize on that opportunity in two weeks or less. But we are also developing an organization -- and again, that takes time, consistency, and constancy.

Recently, we had a half-day management retreat where we focused on issues related to sustainability. We talked about our hiring processes: How can we hire people who not only have the skills that we need but also fit the values that we espouse? We talked about compensation: Everyone in the company already has options. But is there another bonus program that might help align the way that we reward people? And we talked about communication: As we grow, how do we keep everybody informed about where we're going? How do we make sure that we get good feedback?

That's a very full plate. What makes sustainability powerful also makes it rather hard to achieve. It requires discipline and passion. You can't hold a half-day meeting, figure it all out, and then put it in a box. You have to work at it every day.

Contact Janina Pawlowski (janina@eloan.com) and Joe Kennedy (joek@eloan.com) by email.