An article in the American Banker dated September 11, 2018 offers compelling reasons for which banking institutions need to rethink their business strategy and product delivery in the aftermath of the 2009-banking crisis. A few points made include the need for being more nimble in the process of credit decisions, which requires a radical overhaul of the decision process, organizational structure, customer service, and employee pay.
We have been writing about these points for the past year in recognition that burdensome frailties have been built into the banking system as a protection against regulations, capital requirements, and another downturn in banking activity. This is a calculated mistake because it has created the slower monolith that is a corporate bureaucracy, which increased measures of self-protection while neglecting its main purpose.
For this reason we continue to emphasize the importance of implementing simple steps to gain an increase in loans, deposits and customer satisfaction, resulting in higher employee engagement. Some have suggested that the talent pool needs to be reconsidered and we stress a simple shift in approach will increase productivity Nothing replaces the human touch and while technology advances increase, as a delivery mechanism of convenience, it is only an adjunct to an overall relationship centered in human communication.
Here are some points to consider:
1. Survey the current pool of customers in your targeted discipline pool. (Commercial R/E, C&I Lending, Mortgage Lending, etc.) Determine your thresholds of acceptability and set in motion changes to increase customer satisfaction with the following five points.
2. Customers do not seek confusing cross messaging from multiple departments. Create a structure that positions a Relationship Manager (RM) to be the point of contact and to develop a financial service plan to strengthen the customer/bank relationship. The RM should be able to identify the needs of the customer in the course of a company visit.
3. Move authorities and measures closer to the front line. Give flexibility to RMs in pricing loans as a means of increasing ownership, accountability, and performances. Set targets for the overall yield of a portfolio but allow them to manage that process. Other managing elements include the resources of other disciplines within the bank. RMs should identify and solve issues through personal banking, trust, mortgage, and private banking solutions.
4. Shift resources close to the RM in order to respond quickly to customer requests. This incorporates loan approval processes, and other resources in order to make quicker decisions. This where the cultural and organizational shifts should take place. Keep in mind; time is at a premium for decision makers of a business and they are pressed to allocate their time according to what gives them the most return. RMs that respond first, to a client’s request, have a significantly higher conversion rate than late responders.
5. Increased employee engagement can be achieved in a manner consistent with delegated responsibilities. 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.
6. At the end of this process initiate another round of customer satisfaction surveys. The results will be as expected; increased customer satisfaction because of an increase in communication, speed of response, a central point of contact and a renewed partnership with the bank in the execution of a financial plan that supports the business.
In addition to these suggestions, others are offered in five other articles posted on LinkedIn at https://www.linkedin.com/in/larry-b-friis-mba-lnha-author-7474053a and which support the American Bankers contentions of a need for an overhaul of some banking practices. Relationship managers will behave with greater internal motivation to achieve or not to achieve measurable goals. Lasting behavioral changes are obtained because subjectivity is taken out of the equation and greater direction, ownership, and accountability are transferred to Relationship Managers
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 23. Larry can be reached at firstname.lastname@example.org