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

March 12, 2008

TODAY'S TOPIC: BANKS AND SELLING: CLUELESS
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By Charles B. Wendel

Executive Summary: Despite enormous investments of time and money, commercial banks continue to be woefully inadequate at selling. Quick fixes fail time and time again. Management needs to be willing to reconsider some fundamentals if it is to turnaround a situation that shows no sign of improving.

It is truly remarkable how bad banks are at the basics of selling. Bank management has spent untold millions of dollars for training, incentives, team building, and much more related to building a sales culture. Yet, sales practices at most banks are abysmal.

Example One: Commerce Bank of New Jersey

At a local minor league hockey game, Commerce had a display advertising the bank and giving away free items such as tissue packets with Commerce logos. Its promo was the opposite of hard sell. The bankers did not ask people to open accounts on the spot. In fact, they did not have the forms for account opening with them. When someone asked to open an account, forms had to be obtained from "the truck." In addition, the person opening the account was told by the Commerce person who apparently was the most senior, "It's not my event," meaning she was not responsible.

I have often praised Commerce in the past, but this incident shows how hard it is even for good banks to avoid providing a poor sales experience.

Example Two: HSBC's Fifth Avenue Branch

Apparently trying to draw people to a new branch, HSBC featured couples doing gymnastics in its branch's window. Yes, people did stop, probably trying to figure out what these people were doing in a bank's window. Was anyone outside the branch providing merchandise or trying to draw people to actually enter the bank and transact business? No.

Example Three: Branch Opening in Connecticut

Offhand, I cannot remember the name of this branch, although if we were to search through the kitchen drawers at home we would find its name on a clip used to close bags of chips. We were given that clip and a Frisbee at this bank's store opening event. They even served hot dogs. However, no one was serving new account openings or other revenue generating opportunities. Mercifully for this bank's shareholders, it was acquired.

Example Four: Chase Bank

While I have told this story before, it merits repeating. FIC was contacted by its then business bankers, asking if we wanted a line of credit. When I agreed, I told the banker to contact our accountant to obtain any necessary financial information. Weeks later when I spoke with him, I asked about the status of the line. He said he had never been able to link up with the accountant and "then the promotion ended." He meant the promotion incenting him to generate loan volume. Clearly, he had no interest in client needs versus his own.

Unfortunately, we could continue to recount sales horror stories. Further, none of the banks mentioned above should feel that its practices are any worse than its industry peers.

Why is the state of sales in banking so dismal? Why is the rate of progress at most banks minimal or nonexistent?

Most banks go for the quick fix rather than the integrated changes that are required for sales success. The quick fix involves some training or special promotion. And, while it often does have some near term and temporary impact, people soon go back to their old ways. Initiatives like the special loan promotion noted above can result in clients being ill-served.

At least five factors drive the non-sales culture at most banks.

1. Incentives are out of whack. Few banks put enough emphasis on sales incentives as a key element in a banker's compensation. Salary needs to decline as a percentage of total compensation. More "at risk" compensation should increase a sales focus.
2. Job responsibilities are confusing and in conflict with one another. Typically, sales and service personnel are very different people with varied skills and preferences. However, banks expect the servicer to sell and the seller to service, ignoring those differences. Until banks better designate sales and service specialists, sales will suffer.
3. Products are too complex. Bankers simply do not understand the products that they are expected to sell. Management continues to overlook this basic problem, believing that training has addressed this issue; too often, it has not. Product managers need to consider reducing the number of products they offer (80/20 rule as the guide) and focus on communicating internally to their sales staffs. Both sales persons and clients would welcome product simplification. However, today, the tendency is in the other direction.
4. Hiring practices need to be changed. As we look at the sales issue from various angles and with the benefit of many clients from around the world, we keep coming back to one issue. Banks hire the wrong people for sales jobs. A banker's view of an aggressive sales effort and an aggressive salesperson's view of an aggressive sales effort differ significantly.
5. Senior management really doesn't get sales. Most senior banks did not operate as salespeople earlier in their careers. Yes, they may have been commercial bankers, but they were never truly salespeople themselves. Therefore, many fail to appreciate what great selling really is; their expectations are too low and their bankers perform to those expectations. Alternatively, they have high expectations but fail to create the circumstances necessary for great selling.

Concluding Thought

Bad sales stories are all too easy to uncover. The question is what can banks do to turn this around. One starting point may be to appoint a Chief Sales Officer (CSO). The CSO's job should be to focus on how to improve the sales effort within the bank and recommend specific actions to create an effective sales culture. The CSO should report to the COO to ensure that the position has clout and access to top decision makers. But, the CSO is just one part of the puzzle and insufficient unless the bank also addresses incentives, job definitions, hiring practices, and similar issues.

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QUOTE OF THE WEEK

"Expecting me to sell to prospects is like putting a square peg into a round hole."

-- Bank Relationship Manager

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ABOUT US

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
324 Silver Spring Road
Ridgefield, Connecticut 06877
Telephone: 203-431-8330

Email: SME_Newsletter@ficinc.com
URL: http://www.ficinc.com
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