Bill Cooper’s Way

Bill Cooper’s Way

The story of a pugnacious, working-class kid from Detroit who long ago made TCF a household name, but is reinventing it again today.

At first glance, any comparison of the late Steve Jobs, guru of Apple (and Pixar) and Bill Cooper, TCF Financial Corporation’s longtime and legendary chairman and CEO, is about as implausible as it gets. Jobs, a product of the Bay Area counterculture, built an empire by marketing the design of revolutionary consumer products as an attribute that made its users special. Cooper, from Detroit, the rusting epicenter of traditional manufacturing, built an empire by making modest but shrewdly focused changes to an industry as old as time itself, scaling up from street-level connections to lower-to-middle income consumers.

But Apple and TCF are, for all intents and purposes, the creation of the two men with whom they are most identified. Each has been alternately described as a visionary and a tyrant. Both have proven themselves extraordinarily adroit at seeing voids in the marketplace where others didn’t.

Each devoted his professional life to his company, demanding performance from employees, delivering solid-to-extraordinary value to shareholders, taking a guerrilla warfare–like attitude toward obstacles and competitors, and never wasting much time in self-satisfied contentment.

Both grew up far from privilege, buffeted by personal and family challenges. Both exercised unique forms of leadership, and styles outside industry norms, but both were unequivocally successful. Both also left their companies, but ultimately returned, needing to reinvent the respective business models.

In Cooper, we have a routinely outspoken, larger-than-life character in an industry that generally prefers sedate-and-circumspect. Cooper, now 67 and in the final year of his current contract as TCF’s boss, achieved no small part of his credibility by taking the fight to whatever forces stood as obstacles, while maintaining a top management team remarkably in synch with his strategies and tactics.

Cooper joined TCF (as CEO of TCF National) in 1985 and retired from the bank in 2005, remaining on the bank’s board. He returned to the CEO’s chair in 2008. He works out of a handsome but not sprawling, dark wood-trimmed office in downtown Wayzata. On a recent afternoon he looked out and noted a multimillion-dollar road project that, as I was meant to understand it, served to improve traffic flow to the city-owned liquor store, thereby providing yet another example of government using taxpayer money to apply an unfair advantage over privately owned competitors.

Such a comment is classic Cooper. The self-made man perpetually prepared for, if not locked in, battle with conniving public officials.

 “Vince Lombardi,” Cooper says, “was an asshole. But the guys who played for him loved him. Why? Because he won! They knew he was an asshole. But their attitude was, ‘He’s our asshole.’ ”

There is caricature to the public perception of Cooper. That Lombardi business pretty well describes it. And while it’s very likely that Cooper is a more modulated and relaxed character when there’s no money on the table, it comes as a surprise that one can have a rambling chat and find a thoroughly interesting, good-humored guy. A bona fide character. In the parlance of personality politics, “Coop” is someone you wouldn’t mind having a beer with.

Much is made of his days working part-time as a cop while going to college at Wayne State in Michigan. Talking with Cooper is a lot like talking with a wily beat cop. Tilted back in one chair, his legs up on another, he’s sizing you up, searching for the holes in your game. He’s scanning the perimeter as he exchanges jokes and opinions about the news and characters of the neighborhood. The game is on, and it is entertaining.

“You do have to get used to Bill,” says Neil Brown, TCF’s president and chief risk officer, with a chuckle. “He can be very intimidating. I tell people, ‘If you’re not prepared for a meeting with Bill, postpone it. Otherwise he will eat you up like sausage. He has a pretty big bark when he needs to.
“But he has told me more than once, ‘Neil, don’t worry. I’ll never be mad at you more than an hour.’ ”

It is a fair question whether his style of unabashed rhetoric has been essential to both his and his bank’s success. Since TCF is an entity of his design—he transformed it from the foundering savings and loan that was Twin City Federal—and Cooper remains its single largest shareholder, you can argue no alternative has ever really been tested.

The TCF board, Director Ted Bigos explains, is comfortable with Cooper: “So many people back off in the face of a fight. Bill doesn’t. . . . Bill’s a stand-up guy who has the respect of the industry, even the big players. I was with him at a banking function in New York and it was impressive watching how others treated him.”

Director Ralph Strangis notes that “Bill is actually a very good listener. He calls quite often just to run ideas by me. But he listens to everyone. He is very good at looking at people and assessing their skills and where they’re coming from. He reads people quite well. With Bill, you don’t have to worry about a lot of nuanced sentences, if you know what I mean. But because that’s the way he is, some people miss the fact that he’s very creative, very smart, and very innovative. Bill knows his business.”

Joe Witt, CEO of the 400-member Minnesota Bankers Association, notes that Cooper/TCF’s mid-’80s “Joe Lunchbucket” strategy of making banking more accessible to middle class customers—free checking, branches in supermarkets—revolutionized the industry in these parts.

Few dispute any of that. Despite its currently depressed stock price, off roughly 64 percent (as of February 7) from its pre-recession high, TCF Financial continues to ring up an enviable run of quarterly profits: 68 in a row at the most recent count.

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Bill Frels, chairman and CEO of the investment firm Mairs and Power, is a long-time TCF shareholder. He notes that TCF was (along with US Bancorp) one of only a handful of national banks to avoid a quarterly loss and large write-downs during the subprime mortgage crisis of 2008. He isn’t bothered by the stock price struggles: “TCF is a very solid bank,” Frels says. “We have no worries about them. Bill and his board make consistently good decisions. They resisted the subprime mess and kept their eye on their core business, servicing middle class customers. That’s the sort of thing you look for.”

A New Set of Problems

With TCF’s earnings picture deteriorating due to the loss of much of its fee-based income (see Durbin Amendment sidebar, page 31), Cooper announced a reshuffling of upper management last fall, along with several strategic moves designed to address pressure from national banks.

Changes include TCF’s expansion of its equipment financing business and a move into used-auto financing, a market Cooper used to dismiss as a “commodity” game. “Times have changed,” he shrugs.

The inventory financing business has grown rapidly since it launched in late 2008 when TCF Inventory Finance struck a deal to finance Toro’s lawn and garden inventory. In 2010, TCF began financing Arctic Cat products in Canada, marking its foray into the power sports industry.

Last month, TCF expanded its presence in the marine industry, becoming the exclusive floorplan financier for Bombardier Recreational Products, which include the Sea-Doo brand. TCF also recently entered the recreational vehicle industry, becoming the preferred lender for Jayco’s three RV divisions (Jayco, Starcraft, and Entegra Coach).

Inventory financing totaled $469 million in 2009, $792 million in 2010, and $828 million as of September 2011. The company expects to grow the business by as much as $600 million in 2012.

“We are playing a little Moneyball,” is how Cooper describes the strategy, which he said would likely take three years to bear fruit. “We reinvented the bank again. For the third time. We used to be a geographic organization. We can’t do that anymore. Our biggest competitors do everything nationally. We have to adjust our approach.”
After resisting the lure of large-scale expansion for years, Cooper is not optimistic about the mortality of similarly sized regional banks who do not play more of a national game.

Significantly, TCF’s “reinvention” is not accompanied by an executive bloodletting. Instead, a quartet of longtime upper management officers recently played a game of musical chairs, moving into new sets of responsibilities. Cooper and Barry Winslow—who moved from running TCF’s risk management to vice chair of corporate development—have been in each other’s orbit for 33 years. Winslow came from Ohio, served in Vietnam, and worked his way through grad school. No one among TCF’s “third floor” team at its Wayzata headquarters carries a blue-blood family pedigree.

Cooper On Managing

Cooper takes shots from critics, who usually ask not to be identified, for running an insular shop that allows in very little fresh or contradictory opinion. The counterview, says Winslow, is that, “Bill is constantly preaching the importance of a meritocracy, and that anyone from anywhere within the company can work their way up.”

“One of the things I believe about business schools,” says Cooper, “is that they teach people the wrong things. They teach your how to compute the present value of things with data you can never get, and that there’s an answer for everything and there’s a science.

“There are leadership things that can be taught. But in my opinion, what happens is you have these tendencies when you get there and you learn more in business school. But the things they do not teach are, ‘How to make decisions with insufficient information,’ [because] you’re going to have to a lot of the time.

“I could also add, ‘How to incent people.’ They don’t teach that either. But I can tell you, people do not work for money. People work to win.” Bill Cooper is a competitor, first and foremost, and surrounds himself with those similarly motivated.

Neil Brown, who grew up a middle-class kid from Fargo and fell in with TCF in 1986 as Cooper was taking the newly minted Twin City Financial public, adds, “I know what people say, but I think it’s good for business both internally and externally. It does speak to a culture of loyalty.” He jokes, “I tell people—‘no one leaves here unless it’s to retire or die.’ ” Winslow and Brown both acknowledge Cooper is a demanding boss, and not everyone who is hired makes it past year one. Those who do, though, are not subject to management churn for churn’s sake.

“Almost everyone here,” says Cooper, speaking of his top executives, “has been here for a long time. We’re almost never going outside to get a top-level person from another bank. In fact, I can’t think of a time we’ve done that.

“I have a general theory about people,” continues Cooper, “which applies to almost all of us. I call it ‘the Sum Zero.’ What that means is that when people are really good at some things, they’re really bad at other things. It goes together. It’s part of your personality and skill sets. There are also people who are just evenly mediocre at everything. So what you want to do when you’re in my position is recruit people who are really good at what you want them to do, while recognizing that most likely they’re going to have weaknesses on some other side.

“Then, you bend the organization around the people, and not the people around the organization. So if you got someone who is terrific at marketing, but can’t manage anyone, you set the company up in a way that those failings don’t impact either the employee or the company much.

“A common misconception of management is that you can fix what people are bad at. You send them over to some school.” He waves his hand, “Waste of time. The better way to look at it is that people can get real good at what they’re really good at.”
The Wages of Struggle

Part of the hardscrabble Cooper history is his status as “the dumb kid” in his third-grade class, unable to read, being given special attention by the Dickensian-named Mrs. Hope. There’s a fairly obvious and direct line from that story to his interest in charter schools today, with their heavily lower-class enrollment. The story advances through the death of his father when he was 14, his mother working multiple jobs to support the family, and, most frequently mentioned of all, his term as a Detroit cop while working his way through Wayne State.

Another mantra of Cooper’s is, “Every successful person I know got some help from someone, most commonly a teacher.” In that vein, he rarely fails to mention George Pearson, a childless Ohio banker who “took me under his wing” and, as Cooper tells it, “taught me how to tie a tie. No more clip-ons. How to put a napkin on my lap when I ate, and to get rid of the white socks.” He credits Pearson for convincing him he had a mind suited to banking.

(Cooper is divorced and father to seven kids. He preferred not to discuss details of his family life with TCB.)

Community service, or “charity work” as Cooper bluntly describes it, is another unquantifiable facet of effective leadership, of which Cooper is quite proud. He has connected TCF to the “back to basics” credo of Friends of Education (originally Friends of Ascension, a North Minneapolis Catholic school). In the jargon of the realm, TCF currently “sponsors” 16 (of the 149) charter schools around the state, most in low-income areas. It is one of only six such sponsors in Minnesota.

Cooper’s political views and bigfoot business influence rankled some in 2010 when he launched a second charter organization, Student Achievement. But Eugene Piccolo, executive director of the Minnesota Association of Charter Schools, describes Friends’ involvement as “solid,” and the student performance of its schools “quite good. They’re very diligent with their oversight and accountability.

“Cooper does have some very clear views on education,” says Piccolo. “He is not entirely happy with the role of the federal government in public education. He is a strong believer in classical education and the core curriculum.”

Cooper believes “if you’ve been lucky enough to be successful,” you have an obligation to not just step up, but speak out. “If we don’t stand up for our beliefs, we’re in a world of shit. Those who have been lucky enough to be successful ought to do what they can to protect the system that allows others to do it. Because, you know, most wealthy people started out poor. They didn’t all come from rich families. But of course, if we’re talking politics, I also think it’s unfortunate we now have a professional political class. It used to be people got elected, served their two or four years, and came home. It used be good that way. Now, hell, it’s the best job they’ll ever have and they don’t want to leave.”

Cooper’s admiration for Steve Jobs extends to the Apple guru’s decidedly old-school devotion to the development and long-term health of the company, a stark contrast to financial “players” building a company while privately calculating their take from an IPO.

Unconditional devotion of time and energy is another thing employees and shareholders follow more closely than mere words, even blunt, “nuance-free” words. A guy who makes it clear that he regards the company as his legacy is someone who inspires trust in ways the average transient manager can only imagine.

TCF Vs. The Fed

Very few CEOs—very few—sue their regulators, as Cooper and TCF did in 2011, taking on the Federal Reserve over its move to drastically reduce debit card swipe fees. It was a quixotic battle, one the vast majority of his peers slunk away from. “Most of my colleagues in the business basically said, ’Hey, let me hold your coat while you go in there.’” In the end, TCF’s revenue off the fees took a serious hit. Officially, TCF lost. But Cooper insists the fight was worth it.

“We didn’t win,” he admits, “but we got something out of it. We came out of it better than we were going in.” He says the fight cost “probably a couple million. But, hell, the Durbin Amendment reduced our revenue by $55 million. Fifty-five! We took a leadership role on that one because it was just plain wrong. It was a huge part of our business. Across the country, Durbin cost banks $12 billion, at a time when bank stocks have been hammered and are struggling to recapitalize.”

In broad terms the Durbin Amendment, attached at the last minute to the Dodd-Frank Financial Reform bill (a direct response to the 2008 Wall Street meltdown), cut 80 percent off the swipe fees banks charge retailers to cover the cost of what amounts to a short term loan. (Cooper insists Sen. Durbin was “bought off” by major retailers, like Wal-Mart.) As Cooper sees it, he had no choice. The company ox was taking a goring, and given the current marketplace and intensifying competition with industry leviathans, he had to gird for battle. His shareholders and employees expected it of him.

The irony was that TCF was going to take on a fight over new regulations stemming from Wall Street’s subprime meltdown. Derivatives were a game Cooper and TCF had assiduously avoided. (Proof, says Cooper, that the smartest deals are often the ones you don’t make.) Having to take a kicking for something they were smart enough to stay away from only added bitterness to the battle.

The decision to fight the Fed (an entity Cooper regards as a proxy for big-government congressional partisans and Democrats like Durbin and Barney Frank) presented no end of potential for expensive regulatory retailiation. But Cooper plunged on with the support of his board.

“The thing about leading a company,” says Cooper, “is that it doesn’t matter what you say. Employees . . . watch what you do. If you steal, they steal. If you behave unethically, they’ll be unethical. If you show respect, they’ll be respectful. They watch very closely the culture at the top.

“And in this fight with the Fed, our people expected us to fight. And when we did, they were proud of it. They told me so. They’d come up and tell me. I mean,” he laughs, “how many banks sue their regulator, right? But sure, there were concerns.”

Prominent local attorney and dealmaker Ralph Strangis, a TCF board member for more than 20 years, understood the peril quite well. But as one of Cooper’s closest confidants and advisors, he saw both the stakes at play and Cooper’s resolve.

“This wasn’t just Bill getting mad,” Strangis says. “He doesn’t operate that way. The suit was very well thought out. We had a lot of heavyweight input on it.”

Ted Bigos, the prominent local apartment-complex owner and manager, is Cooper’s neighbor on Lake Minnetonka. He’s been a customer of TCF “for 40 years” and a board member for the past 12. “The suit was expensive and time consuming. We knew that going in. But Bill’s attitude was, ’This is wrong and we’ve got to do something about it, even if it means the government bites us in the ass.’”

In the end, pressure from Cooper and the banking industry resulted in a Durbin Amendment that had far less bite and left retailers griping they’d made little progress on swipe fees.  Cooper & The GOP

Bill Cooper’s idea of leadership involves stepping up and into the fray outside of the day job. It’s no surprise that a banker would align himself with conservative Republican politics, but becoming chair of the state party, as Cooper did in the late ‘90s, was a further bridge by any measure.

Like Twin City Federal, the state GOP was not in good shape when Cooper arrived, and he is widely credited with getting the party’s finances into the black (as contrasted with its current state), as well as ramrodding the creation of a fully developed database of GOP voters and donors. His stature and taskmaster capabilities were considered invaluable to the party’s resurgence in 2002.

Although Cooper disagreed with Ron Eibensteiner, who succeeded him as party chair, over the merits of Brian Sullivan versus Tim Pawlenty as the 2002 gubernatorial candidate, Eibensteiner says, “Bill did very well in those two years. He took on the party’s operational problems, hired more competent people to run the office, paid off debts, raised money that made the party solvent and respectable for new donors. Not having to slog through all that organizational chaos made my job over the following six years a lot easier.”

Eibensteiner believes that while Cooper’s effectiveness had a lot to do with his skills in basic nuts-and-bolts organization and his Rolodex of well-heeled friends, there is also the fact that Cooper actually did the work.

“You know how it is,” says Eibensteiner. “You constantly hear Minnesota business people bitching about the tax climate here, regulations and whatever. But that’s all they do, bitch. Maybe they give some money. But most of them don’t do anything about it. Bill’s not like that. He believes you have to step up, and he proves he means it by doing it.”

Cooper’s uncosseted, middle-class upbringing, making steady progress from young man through adult life by virtue of his diligence, energy, and guile, would make for a good campaign narrative. Cooper has credibility when he talks of how the best things in life are the ones you earn with your own hands.

Interestingly, former Gov. Arne Carlson, for whom Cooper played a vital role as finance chairman in Carlson’s spur-of-the-moment, post-Jon Grunseth campaign of 1990, thinks Cooper ought to take his outspoken activism back into politics, preferring his brand of no-nonsense right-wing pragmatism to the windmill-tilting eccentrics who make up so much of the current party.

“Bill’s a great American story,” says Carlson. “He’s like an Ayn Rand hero. He’s like the architect in The Fountainhead [Howard Roark]. Bill’s a good person to have on your team.” He laughs sardonically: “Because you sure as hell don’t want him on the other team.”

A vocal critic of the GOP’s drift to the fringe, Carlson adds, “The party as it is currently constituted is pretty appalling. So I don’t know what the reception to someone like Bill might be. But I think he should take the next step and get in the arena. A lot of successful businesspeople can’t take the heat. Bill can. He’s tough. But we need people like him in there.” (Cooper maintains he has no interest in elective office.)