FIC’s recent commercial banking projects have focused on emphasizing increased selling over other tasks. The rationale for this is that senior management wants to see increased growth from a middle market or corporate banking group in which loan growth numbers and returns are often flat. One reason for a lack of growth: bankers are often so focused on credit and administration that, in the words of one banker, “Selling is what I do after everything else.”

Even with senior management support, making a commercial banking unit into a selling machine is no easy task. Frequently, many “barnacles” weigh down a sales effort and cause significant internal discussion and infighting. Without resolving these issues, any “renewal” effort in the commercial bank will post limited results rather than strong organic growth.

Senior management running the commercial bank need to recognize and resolve issues related to: rightsizing, wallet share, and “discipline” versus “flexibility.”

Rightsizing: Put accounts where they belong. Early in our analysis of a commercial banking unit, we review the makeup of the current portfolio. We always find that a substantial number (sometimes more than half) of the middle market accounts can be better served by other areas of the bank.

Typically, most of these are small accounts, often with limited potential. There are at least three reasons to shift these accounts to the small business unit:

1. Greater efficiency and thus profitability from handling small accounts in a “factory” environment
2. The freeing up of a substantial percentage of the middle market banker’s time, allowing him/her to focus on higher value accounts
3. In many cases, smaller accounts are largely ignored by the middle market RM. Shifting them to a more appropriate channel can result in increased attention and profitability

The logic behind account transferring is strong. It makes sense both economically and from a customer perspective. Nonetheless, many RMs offer strong resistance to this shift. In the worst case, their resistance is just about job preservation and avoiding an increased sales focus. I will never forget one senior banker with a now-acquired bank who reacted to our portfolio analysis by saying, “If I move those accounts to small business, what will my bankers do?”

However, banker reluctance is often propelled by a desire to ensure that transferring the account does not hurt the customer relationship. This is where the small business group must demonstrate that it has the capabilities to handle not just the micro account but also the larger small business.

Wallet share: Think deeply. Commercial banking groups are refocusing to increase selling. However, one pushback we often hear comes from middle market team leaders and RMs who believe that their local potential is limited.

While we aim for future growth, they say, “We already have 45 percent market share.” What they really mean is that a company such as Greenwich Research has determined that 45 percent of those interviewed use the bank for one or more products. There is nothing wrong with the survey approach or results posted by Greenwich or others; the problem is in the interpretation of those numbers.

If bankers believe that only limited upside exists for cross-sale or further market penetration, they will not have much enthusiasm for operating in an environment in which they are increasingly viewed as sales people with sales growth goals.

Management has to help its bankers to see market potential in a more holistic way. Because of training and preference, many bankers think of commercial loans and (sometimes) deposits as the core of their job. Senior management should work to quantify the cross-sell opportunity for them. The wallet share potential for a commercial customer expands dramatically when areas like treasury management, wealth management, employee banking, and capital markets are included in the product mix.

Going through that analytical exercise and, then, conducting a similar drill-down for each major account uncovers that opportunity. In some cases, we have seen the RMs’ light bulb ignite when they better understand the upside and believe that the bank has positioned itself to capture greater share.
 
Discipline versus flexibility: Pick discipline. Every process has to provide some degree of flexibility. This allows a bank to respond quickly and intelligently to specific customer requirements and business opportunities.

However, our concern is that with increased “ flexibility” also comes increased wiggle room, allowing bankers to avoid making the changes that a new process requires. In most cases, a well-designed process minimizes the need for exceptions and flexibility. In our view, the less “flexibility” the better. Too many exceptions indicate either a poor process or a management team lacking conviction in the new approach it has created.
 
Concluding Thought.  The best players are addressing issues like the above. They operate with both the analytic rigor and force of will required to introduce some fundamental and high impact changes. Changing your approach to commercial banking without shifting accounts, expanding the definition of the customer’s wallet, and operating consistently across your footprint results in limited impact and limited growth.