Executive Summary: For small business banking leaders, the same old issues continue to resurface. Determining a path and then consistently executing needs to become the priority.

 

 

In the last two weeks I have spoken at three conferences related to small business and the middle market (SME). In each case, themes that have been discussed for ten years or more resurfaced, including:

 

* How to design the SME banker’s role and responsibilities
* The degree to which activities should be centralized or decentralized
* The need for cross-selling to the business owner
* How SME bankers should focus on selling wealth management
* How SME bankers should focus on selling leasing and equipment finance
* How to get branch bankers to sell small business products

 

The list could go on. All of the above issues are legitimate, but they have all been known and discussed by several generations of bankers. Why are we still discussing the fundamentals rather than concentrating on execution?

 

The positive reason is that the industry continues to question itself and evolve. Appropriately, people are searching for better approaches and improved performance. Further, circumstances change and approaches that were appropriate for one economic environment may not be for another.

 

However, some of the questions are so fundamental that the need to focus on them seems unnecessary. For example, (specific exceptions aside) no one can seriously question the economic value of capturing a company’s commercial business, the owner’s business, and the employees’ business. Gaining a greater share of the available household banking revenues can double or triple per account profitability.

 

So, why is not every bank giving this a high priority?

 

1. Internal accounting systems. In many cases, internal accounting encourages silos and a narrow vision of the client. I remember a senior executive at a top five bank telling me that it was great for the bank if one of his RMs sold another group’s product to a customer, but it did him no personal good at all. Revenues were not captured on his P&L. Further, it took his bankers’ time away from selling products that were captured on his P&L.

 

2. Compensation systems. As has been known for ages, you need to pay people to do what you want them to do. Banks are remarkably dense on this point. Want to sell deposits? Change compensation. Want to get cross-sell going? Change compensation. Etc.

 

3. Comfort zone. Bankers who have sales-oriented DNA focus on selling, similarly for those with a bias toward customer service or credit. Further, RMs are bombarded by multiple business areas trying to persuade them to sell their products to customers. Merchant services, wealth management, trust services, cash management are just a few of the groups trying to influence the RM. Oftentimes, bankers do not understand the myriad of available products or how they will benefit their customer.

 

4. Bad team leaders. Much time is spent at conferences talking about the individual banker; however, relatively little emphasis is placed on the team leader, the first ring of management. This is an area in which banks need to increase their focus. Team leaders often fail to lead, instruct, push, mold, or demand performance from those who supposedly report to them. They “don’t get it” and, therefore, neither will their RMs.

 

5. The wrong people as RMs. Even in this environment, senior bankers are failing to aggressively improve staff. What a missed opportunity! In the good times, management sometimes resists exiting mediocre performers because they are concerned that the market will make them difficult to replace. Cowardly, but somewhat understandable. In this market, when bankers are very available, the excuse we have most often heard is that once bad bankers are exited, corporate hiring constraints may not allow for a replacement. They would rather keep the poor performer versus risking having no one in the spot. Clearly, that situation can be discussed with senior management and HR and resolved.

 

6. Product complexity. Banks offer too many products, confusing both the salespeople and the end customer. As part of a program to increase wallet share with the SME Household, management needs to rethink and simplify product offerings. Product management and marketing need to focus more on positioning and segmentation rather than new products.

 

7. The Will to Manage. This phrase served as the title of a book by Marvin Bower, the man who, in effect, created McKinsey & Co. Many managers lack the will to manage, meaning the willingness to make decisions, determine a direction, and live with the consequences. Organizing to sell to the Household rather than to silos will disturb some internal groups and “break some eggs.” Leading bankers demonstrate a willingness to do so.

 

Final Thought
My concern is that the banking conferences of 2019 will feature the same topics as listed above. However, the top banks will not be attending those conferences. Instead, they will be executing and distancing themselves from the pack that seems to run in circles rather than ahead.