Executive Summary: Reader response to our last newsletter’s focus on the challenges that banks face in selling underscores that no easy solutions are likely, particularly without banks changing their hiring policies.
Our last newsletter elicited more comments than any other for several years. Bankers and consultants alike are both concerned about the lack of selling that occurs within banks and largely befuddled about what to do about it. While we cannot include all the comments, I wanted to highlight and comment on several of the most incisive thoughts provided by readers.
Comment: “All too often banks organize around product silos. This makes for easy communication, but unless there is effective communication across the lines, which is hardly ever the case, these silos lose focus on what the customers really want.”
This writer continued: “Banks like to hire graduates with impressive educational resumes. They teach them how to be bankers and then try to train them to be sales people. Why? The best sales people are not necessarily the best educated, they tend to be people who can empathize with customers and for whom communication comes naturally.”
Years ago, bankers at the old (pre-First Union) Wachovia told me that if an applicant for a relationship manager position appeared too sales oriented, that person was rejected as inappropriate for a job many considered more cerebral than sales. Further, the bank discouraged credit officers from playing any role in the sales process or even meeting the client, seemingly out of fear that the banker would “go native” and lose his credit focus. To this day, many senior bankers know they need salespeople but really do not appreciate or like them. They are viewed as a bit unseemly by some bankers, even though their bank’s very existence depends upon them.
Comment: “No one [at a bank] wants to be sales. They all want to be marketing…no one wants to be execution.”
Supporting this view, at a recent overseas bank meeting, one banker mentioned that he did not think that banks could attract true business developers. But, as another writer commented: “I like the idea of hiring salespeople to sell. It’s smart! But banks often fail on this basic step.”
These comments all support the view that banks are often hiring the wrong person, in effect hoping that the square peg fits into the round hold. One or two may, but it takes a lot of reshaping and effort for this to occur. Doesn’t it simply make more sense to hire people with a sale aptitude even if they do not know banking? One of the above writers also mentioned that an Australian bank hires former SME owners to sell to that segment: “40% of their team now consists of sales people who have subsequently been trained to be bankers and it’s paying dividends in spades in terms of market share.”
Comment: “The LOB structure incents the LOB owner to do ONLY what is in his/her best interest, not what is in the best interest of the company much less the client.”
Without intending to, a now retired banker from Bank of America provided a great example of this phenomenon. He told me that it was great for the bank that his people were incented to sell products outside of his area (such as Trust). However, he received no compensation for those sales and those efforts took sales time away from areas that generated compensation for him personally. In this case, silo-based compensation undercut a multi-pronged sales effort, since he discouraged efforts that took bankers outside of his profit area.
One of the major challenges at many banks centers on the difficulty of introducing meaningful changes to established compensation policies. Everyone has a view concerning how compensation should be structured and any change effort is often undercut by a senior management group that is fundamentally uncomfortable with an emphasis on true pay for performance, even though that is exactly what would attract strong sales types.
Comment: “Nothing will change in banking until we are functionally organized – eliminating the LOB concept, calling it ‘Sales’ and assigning responsibility for hitting sales numbers.”
This reader felt that, in particular, smaller banks should eliminate lines-of-businesses and focus on going to the customer with a sales person supported by a team focused on administration and other function. This is an intriguing and creative alternative to current approaches.
Certainly smaller banks need to sell multiple products (both personal and small business-related) if they are to limit attrition and maximize relationship revenues. Even at community banks, hand-off between units is often inadequate, resulting in lost opportunities. In contrast, larger banks must rely on corporate culture and cross-sell incentives to increase wallet share penetration; in most cases that approach generates mediocre results.
One mid-way point toward functionalization is, as I suggested last week, to appoint a Chief Sales Officer to oversee sales processes and effectiveness across the bank. However, this role is hardly a panacea, and I could cite banks in which this role has been very successful and others in which it has failed. In cases where it does work, the CSO can play a large role in coaching lagging players, celebrating winners, and upgrading staff.
Comment: “The industry has not done a good job at developing people who manage, never mind lead…Unwittingly, managers still see themselves in a ‘depository’ [passive] business, for example, rather than an ‘education and growth’ business. People are STARVING for financial help. Banks aren’t providing it. SO, their customers mercilessly reduce bank margins!”
Tough words, but words that accurately reflect the present situation at many banks. Bank executives often define the role of their banks too narrowly and, thereby, lose business to brokers, investment firms, and other financial advisors. What this writer also points out is the tremendous opportunity open to banks that go beyond the passive mindset to become active partners with their customers.
Concluding Thought
Bookstores have shelves filled with books detailing how to achieve sales success. Business magazines never run out of new sales approaches to hawk. But, unfortunately, no silver bullet exists that leads to sales success. Culture change takes time and a great deal of attention. However, failing to achieve that changes yields only mediocre sales success and high levels of variability in performance across the sales staff.