A TRIP We Should All Take

The author's company, LRN, embarks on a journey toward transparency that Mellon Bank Corp. and the rock band Radiohead have already taken

By Dov Seidman

At first glance, money management giant Mellon Bank Corp. (now the Bank of New York Mellon (BK)), the British alternative rock band Radiohead, and my company, LRN, would appear to have little in common. But we've all been on a TRIP. (TRIP is an acronym to articulate how Trust enables Risk, which propels Innovation and ultimately leads to Progress.) Mellon charted a course to right itself in the wake of the 1987 stock market crash; Radiohead ushered in a new revenue model in a time of declining record sales; and my own organization is on a transformational journey that involves a substantial restructuring of our business.

After a humble start in 1869 in Pittsburgh, Mellon Bank became a powerful and prosperous industry leader in wealth management for millions of investors. But by 1987, it was facing its first loss in nearly 120 years. The bank's stock price slipped, and Frank Cahouet was brought in as the new CEO.

Cahouet knew he had to make big changes quickly to save the ailing bank. His strategy was clear enough: publicly create a "bad" subsidiary bank to take on and sell Mellon's "toxic" assets, allowing the rest of the institution to rebuild and move forward. But it was his approach that really paid dividends: He relied on trust—in the form of an insistence on complete transparency—to help the bank truly rebound.

A Push for Transparency

Cahouet made sure that no one was kept in the dark about the restructuring. The management team held extensive meetings with staff to explain exactly what it was doing and why, every step of the way. And Cahouet gave his word to employees who transferred to the new bank that they would have jobs with Mellon after the assets were liquidated.

The push for transparency extended to all employees and spread throughout the organization, according to the bank's former general counsel, Michael Bleier, now a partner in the law firm of Reed Smith. "[Cahouet] even told me once that if I ever saw him doing something wrong… to take it to the board of directors," Bleier recalls.

Several years ago, the popular band Radiohead self-released its seventh studio album, In Rainbows, online, breaking with the traditional practice of releasing its music on CD and through a major record label. In an even bolder move, Radiohead let its fans decide how much to pay for a digital copy of the album.

A Difficult Decision

Some people heralded the move as a publicity stunt. However, in the end, it was Radiohead who had the last laugh, witnessing the transformational power of trust. According to recent media reports, Radiohead has generated more revenue from this one album than it has from all of its previous albums.

TRIP is also a journey that my own company, LRN, has been on. The decision to write about a particular aspect of this TRIP has not been an easy one. In fact, in spite of regularly writing about the need to transform from 20th century modes of leadership—from command-and-control, divide-and-conquer, "my way or the highway" to modes that are more relevant and effective in a more transparent and connected world—I paused at the thought of sharing intimate details about the goings-on at my own company. Perhaps it is a founder's instinct to keep things "within the family." After all, I am the CEO of a private company with no requirements to disclose information.

However, I hope that by sharing this story and by openly talking about how we are seeking to extend trust as a strategy, others might find the strength to do the same. Together, we can use trust as the engine to get our economy back on track.

Realigning Resources

Today, LRN is in the midst of a restructuring, and we are putting our faith in TRIP like never before. Unlike the Mellon example, our restructuring is not a result of an economic hardship or deviation in our business strategy or principles.

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