Increasing Revenue: The One Thing Senior Management Should Do

FINANCIAL INSTITUTIONS CONSULTING, INC.
http://www.ficinc.com/

February 22, 2006

TODAY'S TOPIC - INCREASING REVENUE: THE ONE THING SENIOR MANAGEMENT SHOULD DO
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By Charles B. Wendel

This is an unsettled economic environment for banks. Generating growth on the bottom line is tougher than ever; ironically, senior management seems to have too many, rather than too few, options from which to choose.

For example: Should management emphasize significantly reducing operating costs in light of tighter net interest margins? Should it cut staff (and to what degree), given reduced mortgage volume? Should branch openings be delayed in light of the reduced value of deposits (due to the close-to-inverted yield curve)? The list goes on, and each choice offers valid issues for consideration and action.

However, one action stands out above the others. It emphasizes growth over retraction and can encourage long-term cultural change versus short-term defensive thinking. What is it? Get sales people to sell.

Get sales people to sell. What do we mean by this? Many bankers who are in sales situations are doing many other things. Multiple examples of this exist:

Branch managers with sales responsibilities are, instead, oftentimes focusing a high percentage of their time on customer service and internal staff management issues.
Many middle market bankers spend 20-30% of their time selling (a pitifully low number), serving primarily as very expensive customer service staff. (We often cite the comment from one banker: "Selling is what I do after I do everything else.")
Even small business development officers (BDOs) who have no credit authority and are supposed to focus almost exclusively on sales fail to do so. At one client, the BDOs were spending about 40% of their time selling; they too had their sales productivity time reduced by non-sales distractions related to form filling and customer follow-up.
In another area, some wealth management officers cringe at the concept of "selling," considering it to be beneath their role as advisor and counselor. (They are wrong.)

Why don't the people who are in effect the front line sales people sell? This reveals an area in which senior management needs to step up to the plate. To begin with, too often the chief sales people at a bank (the branch manager, the BDO, the middle market banker, the wealth management officer) are not viewed as such either by themselves or by senior management. Rather than providing clarification and direction, job definitions are often a muddle. The branch manager is supposed to sell and oversee customer service and manage the branch staff and interact with the community and…and…. The middle market banker divides time between being the originator, underwriter, monitor, customer service head, and other tasks. Evaluate similar positions and it becomes evident that every lead sales person has a highly fragmented job focus.

Get sales people to sell. Refocusing a banker on sales can have a dramatic effect on the bottom line. At many banks, doubling the available sales time of a branch or small business banker or others is very achievable. How?

Clarify what you want people to do. Eliminate as much ambiguity as possible. Simplify job focus and shift tasks to lower-cost support personnel who specialize in operational issues. This is hardly a new idea, but the economic imperative driving this change is greater than ever.
Emphasize a team approach. It is not just the banker's client; it is the bank's client. Yet, many bankers hold onto customers too tightly, wanting to provide personal service to them when a lower-cost service specialist could perform as well. At the same time, senior management allows too many bankers to define their own jobs, resulting in both ambiguity and, too frequently, a de-emphasis on sales. Shifting non-sales tasks away from a banker to free up sales time is relatively easy to achieve; implementing these changes and avoiding slippage back to past habits seems to be the hard part of this change process.
Change banker incentives to support the changed job roles. Bankers will not sell more unless they are paid more for doing so. If management has shifted tasks away from bankers so that they can spend twice as much time selling, the bankers should have the opportunity to increase their sales incentive-linked pay by twice as much as well.
Change individual performance expectations to reflect the increased sales time. If the bank gives people more time to sell and supports this effort with an improved incentive structure, the bank should expect people to sell substantially more. Doubling the sales time may not lead to double the sales number (although I am not sure why not), but it can be close. Increased time for selling must translate into increased sales expectations.
Manage. In other words, follow-up with the bankers to make sure that the roadblocks to increased selling time have been removed and that they are selling. Many sales programs create an initial jolt in sales activity that soon dissipates. Management has to be involved on regular and consistent basis to ensure a continued emphasis on sales.

Get sales people to sell. Obvious, huh? But, despite that, the concept is often overlooked or poorly implemented by senior managers. This year banks need to gear up their sales energy to make their bottom lines. Spreads are reduced, the mortgage business is slower than in past years, loan provisions will increase for many banks, and competition remains fierce. Getting sales people to sell has never been as important as it is this year. And, as we see across many lines of business, those banks that "get it" and execute consistently will outdistance banks that under-exploit their primary sales people

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QUOTE OF THE WEEK

"We are going to struggle to make our numbers this year."

-- Senior executive, super-regional bank

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This edition of DIBC's semi-annual newsletter, The Strategist, leverages FIC's small business market research to demonstrate the increasing value of the small business sector to the profitability of EU banks. Davis International Banking Consultants (DIBC) is a London-based market research and consulting firm specializing in financial services.

Click this link to open the pdf.

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FIC is a strategy consulting firm addressing issues related to growth and profitability for financial services clients. We emphasize practical, bottom-line results for your company. For more information about our consulting services or if you have questions or comments, please e-mail info@ficinc.com.

Financial Institutions Consulting
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Telephone: 203-431-8330

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URL: http://www.ficinc.com
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