Last time, I wrote about why most banks fail in selling to and servicing the small business space. Among the reasons:

 

• Lack of a differentiating customer offer.

 

• Leading with loans rather than assessing the customer’s needs.

 

• A mediocre (at best) sales effort.

 

• Internal silos that limit being able to increase a bank’s share of wallet (not just the business as a target but the employer and employees as well).

 

• Lack of senior management commitment to this space.

 

• An unrealistically short time frame for measuring success.

 

 

If the bank’s senior management does not understand, at least on a basic level, what is necessary for success with this segment, failure is likely, if not certain. We have seen many cases in which top management expresses public support of the small business customer. Given the need for positive PR and the push by regulatory agencies to serve this segment, almost every bank proclaims their interest in this space. But, words and deeds differ significantly.

 

A senior management that truly understands this segment and is willing to follow through on execution will do the following:

 

* Ensure that branch managers are, at a minimum, able to diagnose small business needs. Too often, small business is an afterthought to branch managers. For 10-20 percent of the branch network, it should be the branch’s number one emphasis.

 

* Encourage the head of small business to hire excellent salespersons. Small business cannot be a dumping ground for failed commercial bankers.

 

* Allow small business bankers to be paid at least as much as commercial bankers. Business banker compensation should be heavily weighted toward incentive payments based upon the profitability they generate. No caps on total compensation should exist.

 

* Encourage the questioning and revising of internal bank processes. Functions such as account opening, credit approval and underwriting, account monitoring all need to be reviewed. This is a business in which generating strong returns demands an increased reliance on technology both for decision making and processing.

 

* Senior management should push the small business head to articulate the characteristics that differentiate the group’s offer. Why should a customer switch to the bank? Price should not be the answer nor should service: commodity pricing is suicidal for most banks; excellent customer service is claimed by all banks. Good service and competitive pricing are not sufficient today. What could be effective differentiating factors?

 

• Industry expertise.

 

• Business product packages that increase wallet share and offer a discount to the customer.

 

• Packages aimed at the owner and the business.

 

• “Guaranteed” turnaround time on requests and inquiries. Decades ago, Wachovia operated with a Sundown rule whereby they communicated with customers/resolved issues within the same day.

 

• Banker consistency and experience.

 

• Small business branches/offices.

 

No single factor mentioned above will create a flood of business. Senior management needs to realize that small business is a game of inches of success and that execution will win out over all but the most unique niche strategy.

 

* Top management should create an environment for the small business bankers and branch managers that allow them to be in front of customers selling rather than behind their desks responding reactively to internal data requests. We are operating in an environment in which more paperwork is required of line officers. Beyond governmental regulations, internal compliance personnel can often be a barrier to sales, setting up more hurdles for bankers to jump over.

 

* While it may require up to two years to see the full impact of a renewed small business effort, senior management should establish specific signposts of success. When these interim goals are missed, management should act decisively to address emerging issues. For example, many banks will favor retraining existing bankers to fill small business slots rather than bringing in outside personnel. This bias may result from a paternalistic culture, concerns about the “fit” of outsiders into the bank, and/or fear that the bank will not be able to obtain/retain strong sales staff from other firms.

 

Frankly, our bias is in the opposite direction: trying to train people without a sales DNA to sell can be a waste of time and money; bankers from other firms can bring new approaches and play a key role in transitioning a bank to a sales culture; good hires can build the business more quickly. HR has to be tasked with screening and attracting employees who will make a good fit with the bank. However, banks should want to attract players who can change the culture in a positive way rather than simply continuing to work with current staff who fit into the existing culture.

 

* If necessary, senior management must insist that internal silos break down in the interest of what is best for the customer and the bank. The small business head should lead that effort by meeting with peers across the bank to explain the economic value of the small business customer to their groups. We assisted one senior banker in developing a presentation that profiled the small business customer and quantified the potential value of that customer to bankers in the branch, cash management, retirement services, insurance, and other areas.

 

Concluding thought.

The head of small business has the responsibility for making the segment a success. However, oftentimes he does not have control over some of the key elements required to transform the small business group, among them, compensation, hiring policies, cross-bank cooperation, and marketing. Top management’s support and involvement does not remove the pressure on the small business head; rather, it gives the business head a fighting chance to succeed and removes many of the landmines impeding success.