Motivation is often managed through external forces placed on individuals to create a desired behavior. This form of motivation is debated as to its effectiveness in creating sustainable and lasting achievement. Others suggest that internal motivation is the only real means by which people obtain desired results over long periods of time. What then is the best means to achieve lasting, viable, and consistent increases in individual performances?
McClelland gives us a clue when he wrote people need three things including power, affiliation and achievement or contribution. Other theorists have stated that relationships with a boss or mentor increase employee’s willingness to sacrifice, volunteer, and work more diligently. Personally, I have worked more efficiently and with greater ownership when I had relationships with my boss and with bank presidents.
While relationships are a motivator another is the issue of personal job ownership. For this reason moving authorities and measures closer to the front line becomes a way in which to increase ownership, accountability, and performances. Without going into the detail, The Ritz Carlton model of employee authorities serves as an example. This can be duplicated in the banking industry with objectives measures and the following serves as areas of consideration:
Portfolio yield: Allow more flexibility in pricing loans with the direct loan officers. Set targets for the overall yield of a portfolio but allow them to manage that process. One of the annual review measures is how the yield compares to the stated yield goal.
Growth: Establish portfolio growth goals and allow officers to manage their portfolio evolution without restriction to geographical boundaries. Officers should be free to develop relationships with referral sources wherever they are able. Necessarily, this means referrals may be scattered among a larger territory than originally determined. Pinning officers to defined areas restricts their ability to achieve at higher levels.
Fees: Determine fee goals of at least half of an officer’s salary. This keeps a focus on this important responsibility and offers flexibility when it comes to pricing a loan relationship. In some cases fees will be lower than expected in order to keep a relationship from moving to a competing organization. Conversely, higher fees may be exacted for newer relationships and reflective of risk.
Cross-sale: The cross sale of bank products is a way of deepening a relationship and advances other services within the bank. When four or more products are established, it is much more difficult for individuals and businesses to unravel a banking relationship. For this reason, a focus of any portfolio manager has to be how to maintain a relationship and the cross sale of bank products is paramount. In addition, it is noted that to replace a relationship has a cost in recruiting a new credit, processing, and approving the credit. Keeping credits is easier than finding new loans and bank product penetration provides prophylactic protections against portfolio diminution.
Delinquency: Relationship managers must own delinquent performances in their portfolio. A weighted measure higher than others ensures proper attentions to this attribute. This also serves as a checkpoint against override authorities compared to automated approval system portfolio delinquencies..
Compliance: A standard for compliance to regulations as measured through internal audits should be established. A measure not less than 93% creates a practice of consistent effort to maintain the requisite file documents. This measure also serves as an inducement for officers to practice compliance as part of a regular routine and to speak to their clients on a regular basis, for relationship purposes.
Customer satisfaction: A random sample of customers within a portfolio should be recipients of satisfaction surveys. The surveys can be administered on a semi-annual or annual basis. The purpose is to determine the customer’s perspective of their relationship with the bank as well as with their relationship manager. An acceptable measure should be not less than 85%. More information about the reasoning for this measure is available by contacting the author.
Portfolio growth: Each year growth goals are stated, agreed on, and measured. This growth is achieved organically, by referral and by management of loan approval processes. Organic growth and referral growth are self-explanatory. Managed growth by loan approval process essentially allows relationship managers to work within the loan approval authority. They should be able to exercise override authority of automated approval systems based on empirical and subjective measures. Justification should be provided. Ultimately, the use of the override authority should be measured against a like kind automated system and compared against delinquency, yield, and customer satisfaction. Caution to management not to reduce loan authorities for fear of override abuses. The issues will flush itself out and ownership of one’s responsibility provides greater reward to the bank.
Management can determine a weighted analysis of these eight objective measures. The various weights will serve as an indication of priority and emphasis. Relationship managers will behave with greater internal motivation to achieve or not to achieve measurable goals. Lasting behavioral changes are achieved because subjectivity is taken out of the equation and greater direction, ownership, and accountability are transferred to relationship and portfolio officers.
Larry Friis is the Principal of High-touch Leadership, an advisory services firm for the financial services industry. He has served on the Board of Directors of two financial institutions and is a professional speaker, a Doctoral Candidate, and an Adjunct Professor. He was a banker for more than 20 years and has developed a program for bankers called T to the Fifth Power (T5). Larry can be reached at firstname.lastname@example.org