NACUSO Member Spotlight on Capstone

John Dearing with his family in North Captiva, FL

John Dearing with his family in North Captiva, FL

Each month we highlight at least one NACUSO member by interviewing one of their top executives. It’s an opportunity to tell their story in a casual and fun way. This month we sat down with John Dearing, Partner & Managing Director of Capstone Strategic, Inc.

PART ONE: Life Story and Experiences

What’s your current position and can you give me a brief overview of what it is you do in your work?

In short, we are growth engineers and I’m a Partner and Managing Director at Capstone.

Capstone helps our clients develop and execute strategic, external growth plans – investments and acquisitions, partnerships and alliances. It is my responsibility to make sure our clients are happy. I oversee delivery of client engagements. One of our measures of success is if clients come back for more. We make sure we have the right team to be able to work with clients over long periods of time. We consider it an accomplishment to have worked with some of our clients for decades. In fact, we are proud to continue working with our first client from 1995.

What would you say most motivates you to do what you do? What are you most excited or passionate about?

I think that we work very, very hard to make sure we are aligned with the interest of our clients. 9 times out of 10 clients are staring into the crystal ball and not sure about their next chapter. They are grappling with uncertainty.

What motivates me is helping the client achieve their strategic goals. First we clearly define what they want to accomplish, whether it’s getting into a new area or adding a new product or service, or geographic expansion. Once we understand their vision, we develop a creative partnership that helps them get it over the goal line.

We help our clients execute their growth plan and act not only as a sounding board, but also as part of the execution team. In addition, we work with our clients to build their confidence about making decisions and use our process, tools and experience to increase their likelihood of success.

I also love the diversity of the people, organizations and industries I get to work with every day. I’ve had the opportunity to do something different every day for the past 20 years with one common theme – help organizations and people grow.

I want to hear the story of how you came to work with credit unions.

We didn’t start out working with credit unions, in fact we entered the market ten years after we were founded. We speak on proactive acquisitions and growth strategies at various conferences all over the U.S. In 2005, one of the largest CUSOs had just created a position for a head of strategy, who was tasked with building a plan for a successful acquisition program. He happened to attend one of our sessions. I’d like to say this was target marketing but it wasn’t.  After hearing about our approach to strategic M&A, we were invited to meet the CEO and we’re still working with them 11 years later.

Once we began working with leaders at the CUSO and they got to know us, they started referring us to others in the CU industry. In the early days, we also worked with a CUSO involved in cloud computing and technology.

The next chapter began when we met Guy Messick who was on one of the boards we were doing facilitation for and we, quite frankly, hit it off because we had a mutual Bucknell University connection. Guy took me under his wing as mentor in the credit union space and since then we’ve had the opportunity to do a lot of business and transactions together.

We’ve also been able to play a role in NACUSO’s entrepreneurial track. A lot of people share that bringing the outside perspective to the credit union world is beneficial. The experience from manufacturing, healthcare, energy and other industries is applicable to many of the challenges folks in credit unions experience.

Most recently, we have been more involved in speaking at CUES, CU Conferences and NACUSO, and our credit union practice has taken off from there.

Now if we can go even further back, where did you grow up and what was it like living there? Where did you go to school?

I grew up in small town USA – Cinnaminson, New Jersey. South Jersey is a very green part of NJ. When you think about the New Jersey suburbs around Manhattan, people forget that it is the Garden State. Growing up, we went to field trips in Philadelphia like the Liberty Bell and at Betsy Ross’ house, or blueberry bogs down towards the beach. I played baseball, soccer, track, and was in Scouts. For my Jersey friends out there, I lived off of Exit 4 on the Turnpike by the Cherry Hill water tower.

As I noted, I went to Bucknell for college in Lewisburg, PA, and had 4 great years there studying business, including accounting, and generally having fun with lots of social circles. After graduating in 1991, I went to work back in southern NJ for a trade association. We had hundreds of member companies throughout the state and 800 or so lives in the insurance program. I was the 21 year-old employee in charge of the self-insured insurance trust and the financial reports for 5 different entities. I had to learn fast, manage people and the associated problems and got thrown into a lot of different topics including third-party vendor relationships.

During my time at the association, most of what I did learn was that accounting was not for me. So I used graduate school as a transition and went to Georgetown and got my MBA.  As a bonus I met my wife in grad school. And in 1996, I stayed in Washington and joined Capstone.

Finally, can you share something interesting about you that would surprise our readers? It can be anything, a hobby, an adventure, sports, the most embarrassing thing that’s ever happened to you,

I look back at the various experiences and life changing events and it comes down to an amazing opportunity I had in 1990. I got to study abroad in Vienna, Austria during the Spring semester and consequently traveled throughout Europe and even visited Russia. The second one is having 3 kids under 12. Every minute outside of Capstone is coaching soccer, hosting my son’s baseball teams, driving them to and helping with practices. It’s very hectic but very, very rewarding.  As I see them grow, I’m proud. 

PART TWO: The Business Story

Tell me the story of how Capstone Strategic was created – the early days. Tell me about some of the memorable characters in the history, some that brought your story color, drama, comedy, conflict?

Capstone Logo BlueThe founder of Capstone, David Braun, established the business in the fall of 1995 and I joined in 1996 as the first key hire. David saw a need in the marketplace. Companies would hire consultants to build a strategic plan and then get a report in a big binder, which would promptly go on the shelf and not get used. Once it came time to execute the deal, companies would hire investment bank who are truly and solely transactional.    We saw that our core clients, those in the middle market, didn’t have resources or expertise to handle their M&A process and when they hired these outside experts to help them, the process was very disjointed. He saw an opportunity to bring all of those disciplines – both the strategy development and the deal execution coupled with pre-due diligence research – under one roof. That was the founding principle of Capstone.

Can you share some interesting or compelling stories of how your organization has helped credit unions, or CU members?

The first day on the job I worked on a project in poultry, specifically chicken processing. And the second day I worked for a chemical company. We believe our process is relevant to all industries from poultry to petrochemicals is what I used to say – and now to credit unions!

I break it down to 4 areas that we can make credit unions’ lives better. The first is clearly prioritization. Many credit union and CUSO leaders have told us that we have helped them put thoughts into a tool and objective way to prioritize with our process.  Put to paper what is really important to us when we make decisions. So now we can benchmark option 1 versus option 2 or option 3 and Capstone helps bring clarity to the path.

Number 2 is on the due diligence front. Our analyst team is calling folks in the marketplace to get real-time information. We have 100% confidence that no matter what project we are working on our clients always learn something new. We know who the competitors are, we know who the key players are, and we know the decision-making protocols. When we are able to ‘WOW’ a client with new information, that’s exciting.

The third one is the partnering effort, especially the work we have done with CUSOs. CUSOs are a great vehicle for credit unions to earn non-interest income and open new avenues of growth, especially with technologies or services where they haven’t played before. CUSOs can also open doors to adjacent markets. There are people that have a great product with infrastructure in place – a great way to leverage quality and member service that is already ingrained in the organizations can be harnessed to create growth. Why wouldn’t you want to leverage that expert capacity? So we go out and find who these people are in these adjacent markets that are a good fit.  Part of the value we bring to the table is pre-screening partners.

Last and something I personally spend quite a bit of mindshare on is objective, 3rd party view into the potential deal.  We work hard to understand the needs, wants, and desires of both partners in a potential partnership or investment or merger to make sure they are the right partners, and put together a deal that makes sense for both parties. Creative deal structuring is our forte.

PART THREE: Reflections and Lessons

If Capstone were to start all over again, would you do anything differently? Why and what would you do?

About 10 years ago we made a big decision to move from an hourly rate (similar to an attorney) to a fixed fee structure. We found that our clients, who we considered to be our partners, were reluctant to pick up the phone because they knew the clock was ticking. It’s not how we wanted to do business. We want to have those open dialogues and encourage our clients to ask the questions that keep them up at night. With this structure our clients can now comfortably contact us whenever they want without worrying

We have also learned over time to hold ourselves accountable and practice what we preach. We make fact-based decisions and spend time reviewing our own strategic plan and goals. We know that the clients we work with will help lead to our mutual success and that helps us stay focused.  We know we cannot be all things to all people.

Finally, when you think of the future for credit unions, what gives you hope and what makes you concerned?

What scares me is folks that do nothing. There is so much turbulence going on in the industry right now, especially with evolving technology. We keep hearing about the “Uberization” of FIs. I am concerned about the folks that are sitting on the sidelines watching and are not making decisions on how to change their business models. For example, how do you buddy up with the people that are moving to the next generation? How do you utilize CUSOs and leverage outside funding to grow the CUSOs and credit unions? One thing I didn’t like about accounting was you are always looking in the rear view mirror. While the past can be helpful, we’d rather focus on the future and help credit unions make good decisions.

Another thing we keep hearing about is regulatory concerns. Regulation is going to continue for decades and decades. It’s a given. You can’t control that, but you can control how you deploy your limited resources and how you respond to the environment. You cannot control the storm around you, but we can help you navigate through it.