We started working in the small business space over ten years ago. I remember a conversation from that time with a Fleet Bank small business executive who was bemoaning how difficult it was to work with the branches and to get them focused on and committed to selling and servicing small business customers.

 

In the last week, I have had two conversations with bankers concerning the same topic and expressing the same frustration. At their banks, the branches are not well aligned with the small business effort and, having tried various approaches, the bankers are not sure what to do about it. While these banks are in different parts of the country and they operate at different ends of the size scale, the branch situation they face remains similar.

 

Natural Linkages Between the Branch and Small Business.

Objectively, branches should be strong supporters of the small business effort and focus on getting as much of that business as they can. Why?

 

• Small business drives a substantial portion of branch revenues and profits. At some banks that focus on small business, this segment generates 30 percent or more of branch revenues due to deposit balances.

 

• Linkage to the owner is high. When you add in the employer and employee accounts, the 30 percent number can increase to more than 50 percent.

 

• Branches get more impact for their effort. Simply stated, the average small business account exceeds the average consumer account in size and value. Yet, some retail bankers continue to dive for cover when small business owners enters the branch, wanting to avoid them.

 

• Defensively, protecting the small business customer is critical. Even if the branch has limited enthusiasm for the business customer, the bankers should still be working to hold onto the ones they have for all the reasons listed above and more. Smart competitors want these customers and are working to take them.

Logic Does Not Rule.

 

We think the above begins to make a strong case for the close involvement of branches in pursuing and retaining small businesses. So, then, why do many branch heads and managers fail to focus on capturing this business?

 

• Poor communications between small business and the branch. By poor communications, we mean that the small business group has not done a sufficient job of explaining the value of this customer set to the branch. In addition, it has not provided the branch with a simplified offer that is as easy to sell as any consumer product. It is in this tactical area that the excellent players have really differentiated themselves. Simple account opening, simple loan apps all encourage cooperation.

 

• Lack of senior management commitment. As a consultant, one of the phenomena that most surprises me is how often senior managers do not want to make decisions and do not want to tell their direct reports what to do. Many lack the will to manage and lead yet manage and lead is what they are supposed to do. In many cases, senior management needs to set priorities for the branch system rather than letting inconsistency reign. Unfortunately, consistency and discipline are not strong points at many banks.

 

• Inadequate compensation. Just about every product area and specialized group within the commercial bank wants to use the branch for sales and service. The inelegant metaphor I use is that the branch is like a sausage. Management keeps trying to stuff more into it; at some point overload occurs and, at most banks, it has already occurred. One way to internally distinguish the small business group from others is to make sure that the incentives that it offers to the branch are highly attractive.

 

• Internal organizational conflicts. Ideally, the small business group and the branch would report into the same head. That said, we have seen virtually every organizational model succeed …and fail, depending upon the people running it. No matter the structure, the small business group cannot force the branch to team up. That has to come from the branch people themselves and their view of what is in their self-interest.

Solutions?

 

The logic for branch/small business cooperation is strong but, in reality, the level of cooperation is frequently weak. What can small business leadership do?

 

1. Make the economic case. If the small business group has not provided the branch with a clear economic case for focusing on small businesses, it needs to do so immediately. Otherwise, why should the branch or senior management be interested? One client project we conducted involved our developing an analysis for the head of small business to present internally, in order to sell the attractiveness of his area to senior colleagues in the branch and elsewhere. This was part of a program he developed that eventually, after much effort, put small business in the forefront of that bank’s focus. Want growth and high returns? Sell to small businesses.

 

1. Simplify products. Are the small business products easy for branch personnel to understand and sell? Really? That belief needs to be tested and will often lead to changes in product design and marketing, both for internal and external consumption.

 

1. Outline targets. Does the branch know what a good small business target is? In other words, have you communicated straightforward segmentation schemes to them? Basically, being a branch friendly resource is a critical factor in winning.

 

Going Forward.

 

The list of proactive steps that small business groups must take extends well beyond the above. In addition, in some cases, small business leaders must continue to persuade their internal constituencies to sign on to the small business effort with as much persistence and enthusiasm as they apply to the external customer. The branch can serve as the small business group’s biggest advocate or as an additional weight against which it must struggle. Despite the frustrations that may exist from time to time, the payment more than justifies any investment required to cultivate the branch.