Banks need to team effectively in order to be successful. This seems so basic that it does not need to be mentioned. However, most banks, even small ones, continue to operate with fortress like silos that undercut customer service and reduce teaming. Unless top management, too often slow to take charge and mediocre in seeing plans through, shows leadership in this area, banks will continue to lose out on potential revenue and miss multiple client opportunities.
Examples include:
– Relationship managers who focus almost exclusively on administrative and credit issues rather than handing them off to support staff assigned to take on those responsibilities. The result: these bankers who keep too much too close to their vests have little to no time for cross selling or prospect marketing. In some cases they are avoiding a team-based approach in order not to have to get out from behind their desks and sell. Result: lost revenues.
– RMs who choose not to engage in the cross-sell process, operating as if the clients are theirs rather than the bank’s. Result: poor wallet share and retention.
– Product people who create products without engaging line bankers in the process, often introducing products that are too many in number or too complex for easy sale. Result: poor linkage between what the client wants and the bank offers.
– Internal compliance personnel who often seem to take delight in slowing down business decisions or killing opportunities, citing rules and regulations as barriers rather than trying to work around or through them to overcome roadblocks. Result: frustration and internal paralysis.
– Compensation that encourages individual effort rather than team performance. Result: misalignment of rewards with optimal actions.
Commercial banks need to emphasize teaming across virtually every area of the bank. The old days of the RM as the Cerberus at the gates, maintaining control over client access needs to be long gone. So too should be the view that the RM can design his own job. Again, management has to take control, set firm direction, and lead.
How should teaming work?
* Team-based client management. Years ago, the RM did it all: originated the business, underwrote the loan, monitored the transaction, maintained the relationship, handled administrative activities, and, on occasion, sold additional products to the customer.
More productive banks now follow a different approach. RMs no longer have credit authority, although they may be a sponsor of a loan transaction. Operations officers, sometimes called portfolio managers, focus on maintaining the current portfolio, conducting credit reviews and providing leverage to several RMs. Administrative assistants serve as full team members, interacting with end customers concerning standard service issues. Credit analysts may also be assigned to assist the RM in writing up credit memos.
All this support allows and in fact demands that the RM spend more time selling to the current customer and prospecting for new business. It permits one of the bank’s most expensive resources to focus on revenue generation, where he should be focusing. When bankers resist, management must insist that RMs lay off certain tasks on other personnel. Unfortunately, even with these added levels of support, we have often seen little productivity gain due to poor management of the transition process and an attitude by RMs that “this too shall pass.”
* Account planning. To be effective at sales, the RM must operate with an account plan, in effect a checklist capturing what opportunities he intends to pursue and with whom in a company. The plan needs to be created with the active input of other groups within the bank; it is a team-based exercise. Once developed the team, with the RM as leader, takes responsibility for executing on the plan, determining how best to work together to achieve the stated goals. The team assesses success regularly during the year, adjusting its actions as circumstances require.
When clients tell us that they are already doing account planning, it is difficult not to roll our eyes. “We’re already doing this,” is one of the biggest lies that bankers tell themselves and serves as an excuse for actions that would be difficult to achieve but have real impact. Any good sales person develops an account planning process; too often bankers operate reactively and/or do not follow through rather than creating opportunities for themselves and their clients.
* Performance-based compensation. Too much of an RMs comp remains salary based instead of depending on yearly results. This can lead to a sense of entitlement by the banker and an insufficient emphasis on sales. Compare the compensation program for most leasing companies with banks. The leasing sales person may have a small draw but makes his compensation based upon yearly numbers; obviously that focuses him on building a new book of business rather than managing an old book. While this degree of variability may be inappropriate for a banker who continues to oversee an existing portfolio, a significant percentage of total compensation should be tied to revenue and profit growth.
* Cross-sell culture. Banks cannot afford to allow “lone rangers” to operate in their banks. We have even seen instances of bankers defying their manager’s requests to refocus their activities on areas like cross sell and get away with it. The best commercial banks have developed a culture that encourages cross sell, one in which in has become second nature and permeates the bank. And they do not allow themselves to become self-satisfied with past success. This approach starts at the top of the house.
Recently, I came across a January 11, 1991 speech that Dick Kovacevich made to his Norwest commercial bankers in which he said, “I think market forces are such that a stand-alone loan relationship is doomed to be unprofitable… it should be viewed as the means to the ultimate end, which is 100% of the business, not the end itself.”
If that was true 23 years ago, it is even truer today. Forming a team approach to bring the whole bank to the customer provides the road to sustainable profit and relationship building.