Executive summary. Banks continue to struggle with how to actively engage branches in selling to small businesses. Typically, management focuses on one or two discrete areas (for example, training and incentives) in the hope they will improve sales performance. However, these areas often provide only limited and often short-term impact. Most banks fail to face up to the several (we think eight) interlinked factors that drive branch sales success; hence, they generate inconsistent and mediocre results from their branches.
Branch Selling: The Eight-Step Solution
In our last newsletter, we discussed the first four of FIC’s eight-step process to increase branch sales. Click here to read our earlier newsletter on steps one to four. This edition focuses on steps five to eight.
- Evaluate the current status – How are the branches performing today? What are the staff’s current sales capabilities?
- Assess implications of capabilities review – Given its starting point, what are the bank’s personnel needs?
- Review ongoing roles and responsibilities – How should the branch and the branch manager’s activities be changed?
- Restructure the product set – What should the branch sell?
- Agree on priority segments – Who should the branch sell to?
- Institute a sales process – How can the bank establish a standardized and consistent sales process?
- Establish metrics – How should the branch be judged?
- Determine incentives – How should the branch be paid for selling?
* Step Five: Agree on priority segments – Who should the branch sell to? Senior management can simplify the branch sales process by making and communicating decisions about the types of customer it wishes to emphasize and, conversely, downplay or ignore. Priority segments go hand in hand with the product issues discussed last time. Segment decisions should occur before or at the same time as determination of priority products and the creation of product packages.
Segments have to be simple and easy to identify. This means the focus needs to be on industries (for example, doctors or contractors), demographic groups (e.g., women or Hispanics), products (e.g., SBA lending), or life cycle (e.g., start-up or pre-retirement). Segments can cut across more than one of these areas but still should be focused and consistent across markets to the extent possible. Segment selection includes analysis of a bank’s current customer set, local market opportunities, and specific competitive dynamics.
* Step Six: Institute and stick with a sales process. Despite the number of sales consultants offering their services as well as the dollars already spent in this area by many banks, branch sales practices are neither standardized nor consistent. Why? In many cases, inconsistency in the branch results from inconsistency in the sales management process. Too often, supervisors of branch bankers fail to follow through to ensure that a strong focus exists on sales. In turn, the branch managers fail to police themselves or their people. We know of many cases in which branch goals have been set and then allowed to slip within a few months.
Alternatively, one of our clients begins each week with a Monday morning call program aimed at his SME bankers. In turn, his bankers are expected to do the same with the branch managers they mentor and manage. These meetings set up expectations for the week ahead and assess recent results. Bankers and branch managers who are not performing also receive off line one-on-one counseling. While there is more to this initiative than what we are describing here, it entails a very hands-on process that is based on objective data.
Most banks have instituted a “good enough” sales process. Sticking with it, analyzing its output, and managing its implications represent the challenge.
* Step Seven: Establish metrics. Branch metrics need to be tied to profitability, not just volume. For example, deposits, not loans, drive small business profitability; therefore at many banks deposits need to be overweighed as a goal, particularly in light of the funding challenges at some banks.
Branch management should revisit the portfolio of metrics that it sets for the branch. Competing internal bank groups (SME and Private Banking, among them) can result in branches being given metrics that are both too numerous and too complex. Simplicity and consistency work best. Metrics will also change slightly from one year to another as priorities change or as earlier initiatives pay off.
In the current environment, branches should consider assigning explicit goals tied to net new deposit generation, both from small businesses and from affluent targets.
* Step Eight: Determine incentives. Incentives may need to differ for branch staff versus management. Lower level staff is usually best motivated by a straightforward program that provides cash for each unit of a product sold or referred. Volume goals can work with this level of employee because their product focus is being directed by branch management (we hope). Payments should be quarterly or even better, monthly.
Concluding Comment
Our eight-step process requires focus on execution, senior level commitment to act on the implications of the program, and intensity of effort. Frankly, focus, commitment, and intensity are not core attributes at many banks. Nonetheless, we have seen evidence of branch sales excellence from individual banks in areas as diverse as the U.S., Africa, and Asia. The banks that develop, execute, and enforce the interconnected process described here have consistently outperformed their rivals in the past and, we expect, will even more dramatically outperform them in the future.
Too many managers go for the half measure rather than the more substantial changes necessary to create branch success. That approach has not worked up to now and will not work going forward. The only difference between the past and the present is that the stakes are increasing as the banking environment becomes more unsettled.