• Performance transparency

• Retention

• Referral management

• Prospect management

• Share of customer’s wallet

• ROA

I want to review our experience with each one of these elements.

* Performance transparency. For us, transparency has several aspects. First, management must clearly state what is expected of each salesperson and, ideally, the compensation plan supports those expectations. In addition, each salesperson must know how he/she is performing and have a clear idea concerning how that performance translates into compensation. Effective transparency requires increased objectivity (pay for performance) in the compensation structure and an increased emphasis on incentive compensation. In addition, comparative performance transparency is also critical.

Bankers should know how they are performing against their peers, both internally and externally. Those that are outperforming should be celebrated and the story of how they are succeeding communicated across the bank; those who are lagging behind should receive counseling and support, aimed at improving performance. Those who are chronic underperformers should be replaced. However, most banks never bother to communicate success effectively or carefully counsel laggards. Replacing poor performers is also a hit or miss affair; many poor performers seem to have tenure and are immune to being replaced, at most moving sideways to another position.

* Retention. Retention requires retaining strong performers within the bank. From the customer’s perspective, it requires retaining these employees in the same customer-facing positions, rather than having them promoted to another area. This is a major problem in the branch and small business arenas in which staff often turn over frequently. In particular, business bankers “graduate” to the middle market or other groups while branch managers may move to larger branches or the small business segment.

The Merrill Lynch or Smith Barney broker or the typical insurance broker retains his/her clients forever, or at least tries to. Banks need to institute a structure whereby bankers have an economic reason both to stay with the bank and with the client base they have built up. Retaining strong sales staff is closely interlinked with retaining strong clients.
 
* Referral management. Good salespeople get their business from referrals, not from cold calling. BCG states that “Wealth managers, on average, gain about three-quarters of their new clients through referrals.” A similar percentage is true for bankers, consultants, and most other professionals. But, how many banks have developed consistent and thorough approaches to referral cultivation? Bankers that are good at generating referrals need to teach their colleagues how to do the same. This occasionally happens on an ad hoc basis; we are suggesting that banks institute a referral management process, whereby referrals are tracked and rewarded whenever possible.

One successful bank we know has formed an advisory group comprised of local influencers. Referrers who generate a certain level of business are rewarded with a luxury trip. Do they need someone to pay for them to take a trip? No. But, they like the recognition and the networking that results from meeting other top referrers, who are also very well plugged into their regions. Referral management merits at least as much strategic thinking and tactical considerations as other marketing efforts.

* Prospect management. While BCG stresses prospect management in this essay, we think that it needs to receive less attention than the next topic, share of customer’s wallet. Smart bankers have finally come to realize that their incentives need to be geared to exploiting the current customer fully rather than achieving inch-deep results with more names. Obviously, if you are a new player in a geography, the approach needs to be different, but for most bankers focusing on current clients and selling more to them should take precedence.

* Share of customer’s wallet. I will never forget a senior middle market banker at a $100B+ client telling me that he had fully cross-sold his customers; there was nothing else to sell them. He was right, given his limited view of the bank’s product set (loans and cash management) and his limited understanding of the needs of his clients and the opportunities they afforded his bank. Unfortunately, like too many bankers, he operated with product blinders and with insufficient client knowledge. His customers loved him, but all too often they went to other financial services providers for their needs.

* ROA (Return on assets). To this day, many bankers continue to operate without a clear sense of client profit dynamics. This is frequently true of wealth management, middle market and small business banking and only somewhat less true of retail banking. Senior management has the clear responsibility to provide its bankers with profit metrics against which to manage. The technology and information is there; if the internal will does not exist, then, perhaps the Board needs to step in to make it happen.

Concluding Thought

Of course, the “elephant in the room” relates to leadership, both team leadership and top management leadership. Sales staff inconsistency results from inadequacy in the leadership’s focus and in its understanding of what creates a true sales culture, rather than a “bank sales culture.”