In recent years, banks have benefited from a set of positive circumstances that are quickly disappearing, including: a surging refi mortgage market, the ability to fund long-term portfolio investments with lower-cost short-term funds, and an uncertain economic environment pulling deposits into the bank.

 

Today, refi activity is down (see Washington Mutual), banks with high degrees of mismatching have put their existence in jeopardy (see New York Community Bank), and rising interest rates and a more positive economic outlook are likely to draw funds out of banks and into brokerage or higher-yielding accounts.

 

With many of the wheels that have been propelling the bank profitability train falling off or, at best, wobbling, senior bank managers have increased their focus on generating “organic” growth from their portfolio of customers and prospects. Unfortunately, we find too often that many of these banks lack a sales culture, over the years having failed to take the steps to develop one. Some of these banks do not “get” what a sales culture requires; others know what it requires and, basically, are uncomfortable with or unwilling to make the changes necessary to encourage a sales culture.

 

Of course, not all banks lack a sales culture; but for every Wachovia, Wells Fargo, Citizens, Fifth Third, or Citibank, there are a thousand other banks that fail to understand that, unless they become sales organizations, their prospects for growth and even survivability are poor.

 

Impediments to selling

Several factors have combined to prevent the development of a sales culture at banks.

 

Senior management and many employees grew up in an era in which “selling” was viewed as unnecessary or even looked down upon. A number of years ago, an executive from the pre-First Union Wachovia Bank told me that they would eliminate a commercial banking relationship manager job candidate who evidenced a strong sales, as opposed to credit, orientation.

 

Similarly, many banks fail to understand and exploit the internal best practices that exist in areas like mortgage banking. Instead, some dismiss the achievements of those salespeople as being tied to luck or a good market, as opposed to sales skills that can transcend a product area.

 

However, resistance does not come from senior management alone. In many cases, it is the line banker who puts up barriers to spending more time selling, highlighting the need to be involved in the credit process or personally handling account management. These bankers either do not want to sell more, see little upside for themselves in doing so, or lack the knowledge/diagnostic ability required to succeed in a more sales-intensive role.

 

Bankers are defining the sales opportunity too narrowly. Few small business or commercial bankers define their potential wallet to include not only the financial services needs of the business, but also the needs of the owner and employees.

 

We have heard managers say they have high share in a market and express complacency about their success. However, their definition of share is often limited to one product, such as loans. Do they have all the deposits? Do they have the owner’s personal deposit and loan business? Are they handling the owner’s private banking needs? Do they have the employees’ accounts? When you include these areas, the size of the potential opportunity can double or more, opening up a wide range of cross-sell opportunities.

 

Incentives fail to support a strong sales effort. To this day, many banks put caps on incentive compensation. Since incentive payments are usually based upon performance, capping incentives only serves to cap performance as well.

 

Banks are uncomfortable with individual sales stars. At many banks, if you rock the boat, you are thrown overboard. Too often, one’s ability to fit into a bank’s culture takes precedence over performance as a career factor. Good sales people are different from the traditional banker.

 

As an example of incentives and allowing some to star, consider the story of a commercial finance sales person. One November, we were having dinner late at night. He was sitting on the edge of his chair, excitedly rocking back and forth, telling me how he was blowing through his sales goals and how much money he was going to make that year. The more he sold, the more he made. I have met thousands of commercial bankers, yet have never seen this level of enthusiasm and, yes, greed.

 

Banks lack sufficient sales-oriented career tracks. At banks, good salespersons are promoted to non-sales jobs. Instead, banks need to establish highly attractive career paths that follow the model of brokerage firms rather than banks. Most successful Merrill Lynch consultants do not want to be managers because they make too much money from their portfolio of clients to take a corporate job. And, often, they do not have the qualities required for management. Conversely, banks remove many of their top sales people and put them on a management track.

 

Customers value consistency in their financial services relationships. If banks are to have any chance at becoming the “Trusted Advisor,” branch managers and small business and commercial bankers have to remain in their positions for many years. Instead, banks often view those positions as stepping-stones to other positions. We see long-term sales forces existing in specific product areas, such as leasing, mortgages, and SBA lending; sales-based career paths need to exist across the bank. With a tenured professional sales force should also come knowledge of products, customers, and markets.
 

Banks have no choice but to become selling machines

Success in solutions-based selling will differentiate the winners from the mediocre. We believe that senior management has no choice but to uncover and remove the impediments to building an aggressive new and cross-sales culture.

 

We provide our perspective on some of the actions required to do so in our next newsletter.