Schwab took his company from being a one-man startup to the world’s largest financial services firm in record-setting time. How? Early on, Schwab decided to establish a number of guiding principles that would allow him to make quick decisions. He believed that by following a strict process and adhering to strict requirements, he would be well-prepared ahead of time in order to act with lightening speed.
Schwab established nine guiding principles for his company, and checked every move against them before proceeding: 1) Is it fair and responsive to our customers?; 2) Does it respect our fellow employees?; 3) Are we striving relentlessly to improve what we do?; 4) Will it earn and be worthy of our customers’ trust?; 5) Will it reinvent the business?; 6) Will we own the technology?; 7) Does it leverage the brand to build trust?; 8) Will it create a spirit of innovation?; 9) We are willing to risk short-term revenue to do the right thing for our customers and ensure long-term success.
In the early 1990s, Schwab had a feeling that online trading was about to take off, and he wanted to get in on the action. Within just a few months of making that first realization, Schwab and his associates had already introduced to the market e.schwab, an online trading service. By sticking to his guiding principles, Schwab was able to make lightening-fast decisions and steer his company to the cutting-edge of the industry.
Initially, he offered both e.shwab, with a flat $29.95 fee per trade, and a regular online account, which charged 20 percent less. Staff and customers alike complained of the confusion between the dual pricing structures. Consulting Schwab’s guiding principles, management decided to merge the two programs and create a single pricing scheme. Although they estimated it would cost the company $125 million in the first year, there was no hesitation and the move was made quickly. After all, one of Schwab’s guiding principles was to put customer needs and long-term success over short-term revenue growth.
For Schwab, his nine guiding principles were the laws that governed all of his actions. They were to serve as the foundation upon which the company would judge its future steps. They were meant for more than show and symbolism; they were the measures by which Schwab management would evaluate their actions. In following those nine conditions, Schwab hoped his team would be able to respond faster than his competitors.
But, what is the value in acting fast, many questioned with regards to Schwab and his guiding principles. Are companies not supposed to take the time to thoroughly evaluate all of their options, their goals, their steps, before making any decisions?
For Schwab, acting hastily and acting quickly were two vastly different concepts. He wanted to build a fast company, one that could respond to changes in the market before they even happened, and to maintain its velocity throughout. He did not want his management team to be slowed down by bureaucratic red tape. Instead, he established a simple and practical nine-step litmus test that was to be used in evaluating the merits of an action. So, instead of having to go through a complex process in order to determine his company’s next step, he simply had to ask one question: does it meet our guiding principles?
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