Our last newsletter discussed a phenomenon that we see impacting commercial banking, wealth management, and other areas within banks: account misalignment. Account misalignment occurs when bankers spend significant time managing accounts outside the stated focus of their business unit. This may include the middle market banker whose portfolio has a large percentage of small business accounts, the small business banker handling micro-companies, or the upper-end wealth manager whose personal clients fail to meet his group’s “official” investment thresholds.
As we mentioned last time, account misalignment appears to be more the rule than the exception within banks and occurs for one or more of several reasons, including bank areas not trusting each other’s capabilities, the individual bankers’ comfort with current activities, and the lack of a growth path for bankers. By this we mean that, if proper alignment occurs, the issue then arises concerning what bankers will do with their freed up time. This leads to bankers’ concern that, for them, the risks of realigning accounts are often greater than the current misalignment.
Tactics for Realigning Accounts
What steps can management take to properly align accounts? Short of management dictate, our experience suggests that there are several key tactics/action areas that management can exploit in order to promote the optimal alignment of accounts with internal resources: “transition teaming,” enhanced sales support, incentive payments, and account planning. These approaches emphasize “the carrot over the stick,” but the stick always remains an option, although often not part of a bank’s culture.
Transition Teaming. Many bankers express strong resistance to shifting accounts, even misaligned ones, away from them to a different support area. They will point out the likelihood of customer disruption and also emphasize the relationship nature of the customer’s links with the bank, stressing that moving the customer threatens that linkage. Underscoring this concern is lack of confidence in the ability of another area of the bank to handle “their” customers as professionally and effectively as they have done. Now, of course, this is probably a self-serving red herring, but nonetheless it represents a roadblock that bankers will promote, since it encourages the status quo.
Management can demand that accounts be migrated or, alternatively, leave current accounts where they are and focus on properly aligning new accounts. Another option involves moving misaligned accounts to a transition group that, in the near term, may operate as a sub-segment of the unit being realigned. In other words, small customers who are part of a middle market or wealth management group can be shifted to a specialized team focusing on lower-end names that still reports into that group. This shift frees up the banker’s time to focus on higher potential customers and prospects and should also reduce the bank’s cost to serve smaller accounts. The expectation should be that over time (no more than six-to-eighteen months) the entire small account portfolio will be shifted over to the appropriate bank unit. At the same time, senior management will establish and fiercely enforce account cutoff standards for new accounts.
Enhanced Sales Support. Despite the increased emphasis on selling and bank investment in sales tools, many bankers still do not know how to sell effectively. That is one reason why many bankers cling both to whatever accounts they have in their portfolio and to account maintenance. The more sales support a bank provides, the more likely bankers will increase their sales comfort levels.
By support, we mean activities that make it as easy as possible for the banker to diagnose current customers for additional opportunities, find new targets, make an initial contact, and set sales priorities. Support can include a strong sales manager and/or a small support staff to conduct research and set up initial calls. Basically, bankers needs to believe that they will be able to do more with their time by giving up accounts than by keeping them.
Incentive Compensation. The bankers should also believe that they can make more money by shifting low value accounts to others. Here, both the carrot and the stick can play a role. Management can eliminate revenue credits for small accounts while providing increased compensation benefits related to priority activities. For example, several years ago, one lender focusing on multi-million dollar loans was being pushed by its bankers to offer relatively small facilities. Management agreed to do so but, at the same time, provided no compensation related to these transactions; therefore, small loans were granted only on an exception basis.
Account Planning. Many bankers appear to value the number of accounts they manage rather than the quality of those accounts. They appear more comfortable managing a large number of accounts rather than selling in depth to a smaller number. However, it is to the bank’s benefit (and the bankers’ as well) that key accounts be fully exploited by emphasizing multi-product sales. Again, despite the investment of time and dollars, most bankers fail to consistently apply basic account planning techniques. This inconsistency often follows a lack of senior management commitment to account planning and an unwillingness on their part to insist on a uniform marketing process across their bank.
Concluding Thought
Notice that the above suggestions are hardly innovative or paradigm shifting. Frankly, most are concepts that have been discussed for years. Management willpower and commitment to execution may be the most critical elements involved in creating optimal account alignment. Without those elements, many bankers will nod politely at management’s initiatives and then continue to operate as they always have, believing they are acting in the bank’s best interest but, in fact, often putting their own interest before that of the bank and their customers.