barret school of banking: october 2009
Proactive Relationship Sales: A Cultural Imperative
by jay toups
Wow, has community banking changed in the last five years. Has anyone noticed that branch traffic is down from 40% to 60%? If not, ask your proof department. What is that you say? You don’t have a proof department anymore. Of course not you have probably adopted branch capture.
Now the dilemma, if we no longer see the clients how will we sell to them? How will we keep the bank growing? We can not throw anymore resources at the marketing budget to drive new clients into the bank.
The answer is you must get proactive and you must get proactive 6 months ago. Community banks no longer have the option to sit on the sidelines and wait for clients to walk in the door. They must develop a “Proactive Relationship Sales Culture.”
The Profit Pie
So what do we need to do to build business and get a larger piece of the profit pie from our current and future clients? The answer is simple, but the solution requires commitment on the part of every member of your team, starting with you. The answer is to build a “Relationship Culture.”
Lets talk about why building a “Relationship Culture” will work for your bank. Some of the same reasons apply for building a “Relationship Culture” as you may have for building a “Sales Culture.”
- The average client uses over 16 financial products and services. Bank clients have on average has 2.3 of these products with their bank.
- Margins are shrinking.
- Competition is fierce, and making a profit is not getting easier.
- Your clients more than ever are turning to alternative sources such as the Internet and brokerage firms for their financial service needs.
- The average retention rate of a bank client is under eight years, and we know most people live 70 years.
- Most importantly: The more the big banks grow, the greater the opportunity grows for sharp community bankers to cherry pick the very best “relationships”. As a community banker, you have to love that!
What is a “Relationship Culture”?
All decisions should begin and end with the client in mind. This places the client at the center of all strategic and operational decisions.
O.K. you say, we do that. But do you really? I am not saying let the tail wag the dog. What I am saying is: The client is the bank. I have worked with many banks that make decisions based on saving a little money here and there, or doing what is simpler for their operations folks. This directly impacts how their clients are served.
In a Relationship Culture the CEO, Senior Management and Operations people are all focused on finding ways to:
- Improve service to the client;
- Provide better products and services; and
- Provide relationship management with the best available system and support to earn the best possible return.
Clients come to your community bank for one primary reason. It is because they hope you will know who they are, and as a result, give them the great service they desire and require. Placing the client at the center of all your decisions only makes this “relationship” better. In the long run your shareholders will be very happy with the positive growth for your company that building a Relationship Culture will produce.
In order for this to work you must have a process that includes:
- An “On Boarding” program for all new clients
- Consistent monthly or quarterly call program to current clients
- Organized “Warm Call” prospecting program
- Objective overview of all processes and changes
- Proactive look at compliance simplification
- Relationship Management input and feedback
- Senior Management mandate
- Constant internal communication
- Second review process after any new implementation
Clear Communication is Essential
The relationship building process is a process that involves every team member of the bank. Here is where your greatest cultural improvement challenge will take place. Clear communication of your objectives to your employees and to your customers is extremely important. You cannot be too redundant. You must create a clear vision in the minds of both groups and repeat it at every opportunity.
What is a relationship building process? This is a process that clearly understands that the client’s goals, needs and objectives are always paramount. Building the process means always looking for the best way to fill those clearly identified customer needs, even if it is not the most profitable, most immediate product available at the bank.
It is really pretty simple. Just remember that the client comes first! I am not saying do not make a profit. The bank must make a profit to stay in business. That is the end goal. We all want as big a part of the client profit pie as we can get. But we will not get our share of the profit pie if we do not ALWAYS put our clients in the product that best meets their needs. Again, in order for this to work you must have a process that includes:
- Clear Vision
- Defined Management process
- Proactive outreach to your current clients
- Proactive outreach to potential profitable prospects
- Defined process for understanding your client’s goals and needs
- A curriculum that continues to build the skills of your team
- Senior Management’s constant involvement
Summary
There are three primary keys to success in building your Proactive Relationship Sales Culture:
- The first is a commitment to make the client king wherever they go in your company; and to make sure your clients get only the best products and the best service they can find anywhere from every team member; and that your clients will be met only by people who are a part of this improved culture.
- The second is process. Building an ingrained cultural “process” that everyone adheres to can take your team well beyond what you believe to be their capabilities.
- A proactive outreach process that is mandated throughout the organization.
In the end, you will know you are successful, not just because your bank’s earnings are improving, or because your shareholders are happy with their dividends, but because you will meet your clients on the street and they will praise you and your bank for the successful “relationship” they have with you, your people and your bank!
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Are You Striving for Mediocrity?
By Jeff Judy
In the classroom, and in the boardroom, bankers and managers tell me about their dreams of being market leaders, top performers, setting and achieving the highest standards. Many of them take advantage of the summer to attend the seminars and banking school courses I teach because they believe they will learn ways to improve outcomes and best their rivals.
Participants with those kinds of goals get me excited about teaching practices that can put you at the front of your market. But so often, just as I feel I'm really making headway, sharing the most effective strategies and most powerful tactics, a participant will raise a hand and comment:
"We'd like to do that, but we have to match the competition."
Have you read your institution's strategic plan or mission statement lately? If so, did you find a lot of phrases like:
- "Perform in the middle of the pack"?
- "Find and implement the lowest standards"?
- "Outsource strategic thinking to competing financial services providers"?
I didn't think so.
Perhaps some people come to training just to "keep up with the Joneses," the competitors who are sending their employees to training. But others, as I mentioned at the top of this article, seem genuinely determined to excel in their own markets.
Then they remember the competition, and they lose their nerve.
Is "what the competition does" the ultimate driver of key decisions at your organization? If this is a guiding principle at your shop:
- Save a lot of time by eliminating the entire strategic planning process. Simply type up signs that say, "React to the Competition" and post them all over the place.
- When a customer comes to you with needs or desires for your products and services, impress them by saying you will give them exactly what they'll get from anybody else -- and not a bit more!
- When the least intelligent competitors dash out for the next 'get rich quick' scheme, make sure you're right on their heels. The herd mentality of following the competition has repeatedly led to near meltdowns for our industry, from lending to developing countries, from unrealistic agriculture lending, from commercial real estate foolery, and now from the housing and mortgage market. Get ready for the next fad, and its consequences.
- Count on being in the middle of the pack. If everyone is copying everyone else, you'll all muddle through to an average performance. You don't have to worry about being a leading performer or the best in your market anymore.
Does that list match the lofty ideals stated at the front of your annual report? More importantly, even if it doesn't match how you officially describe your institution, does it reflect how your institution actually works?
We are supposed to outgrow this kind of thinking. When you were a kid, you probably tried telling your parents "but everyone else has one" when you wanted something -- nowadays it's the first cell phone, or the latest iPod. Or you wanted to go someplace, do something, or stay out late and you told your mom and dad "everyone else does it."
Were they impressed? And looking back, who was right, you or your parents?
We're not your parents, but one of the things we try to do in the schools is to help people grow, to become wiser, to make better decisions. No one is suggesting that you shouldn't be aware of the competition. But a simple "match what they do" philosophy means you have outsourced key decisions to be made by the least competent players in your market.
If being average is what you want, if it feels safe and you don't dare try out an original idea, then go for it - as long as that's a conscious decision. If being the best in your market is what you want, then you'll have to break with the competition one way or another.
If being the best truly interests you, leverage everything you learned at the Barret School to set the standards in your marketplace. Apply your new knowledge and skills to make sure you are the "competition" that everyone else is watching.
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Why Your Bank Must Avoid the Path of Least Resistance: Practice 2010 Strategic and Financial-Scenario Planning Now
August has concluded and usually by now many executive leadership teams in the financial institution industry are settling in on their high-level business targets and strategic guidance for 2010. However, 2009 has been such a daily challenge for industry executives that it may seem easier to just hunker down, freeze business plans, and focus on surviving. For those institutions that are leaning toward inaction, now is the key time to model your financial scenarios and integrate your strategy. Although the thought of doing this may seem stressful, with some structure, it will be easier than you think and the rewards will be worthwhile.
The preferred approach to business management is to create a strategic plan with three to five strategies that guide the development of sales and operational plans. This plan is typically accompanied by a five-year financial projection which is built from the strategic plan assumptions. Then the annual planning targets are used to guide each year’s budget. For 2010, I would recommend starting with the financial scenarios and then selectively integrate strategic projects that can fit within the parameters of the financial picture.
Of course, in practice we see varying approaches to planning where a company may have a strategic plan but not a five-year projection, or maybe the reverse, a financial projection with no action items. Then for many, planning and financial forecasts are completed once a year, in the Fall, with no real long-term planning. Regardless of what category your bank falls into this year, I would highly recommend getting your financial scenarios modeled so that a couple of weeks from now you have a solid understanding of what balance sheet structures are necessary in various economic environments.
 The financial institutions that revised their forecasts in March and April with multiple scenarios already have a solid understanding of the 2010 challenge and have selected targeted strategic initiatives to improve their position over the next few years. For most institutions, a significant strategic opportunity exists as customers and talented employees are up for grabs.
Financial Institution Assumptions
There are primarily five drivers to earnings:
- 1) Loan and deposit volumes
- 2) Loan and deposit yields
- 3) Asset quality
- 4) Service charge or specific business line income
- 5) Staffing level and personnel expense.
The financial staff can focus on these five drivers and get a good handle on pre-tax income. Today, all of these drivers can vary significantly as institutions control growth and cut expenses to maintain or improve capital positions. New loan volume is carefully managed while deposits have grown. Margins have compressed, but some organizations will see increasing margins as their deposits re-price lower. If interest rates increase slowly in 2010, margins will increase, but a quick increase in rates usually creates challenges with the margin. Where will your margin be in December 2009? Service charge income continues to decline and may level off for some institutions while the mortgage business simply will not compare to recent history. Every institution struggles with asset quality since no one has experience with the levels of non-performing assets that continue to increase every day. When will the CRE shoe drop? Finally, across the board staff cuts, hiring freezes, bonus elimination, and reduced benefits cannot continue over the long-term. Does your organization have critical needs or shallow depth in key staff areas that are beginning to surface? How much investment is needed to shore up sales and operations and what technology investments could take the pressure off of lower staff levels? Finally, in today’s environment, fraud losses and increased FDIC assessments must be assumptions that are given attention.
The Forecast
Since the assumptions can vary widely, create two or three different targets for each driver. For the margin, some good data collection from your core systems and your ALCO process will allow the financial division to estimate a range of margin scenarios in a relatively short period of time.
 One word of caution, do not overanalyze or spend weeks trying to get this exact. The financial division should create a high-level model and worry only about the drivers so that executive management can understand the various earnings and capital results based on changes in product mix, margin, asset quality, fee income, and personnel expense.
Once the model is set, and a base case is created, running scenarios goes quickly. We recently finished a base case where the organization realized that their margin would improve 30 to 50 basis points and then we modeled 16 scenarios in two hours. From these scenarios, management can settle on a five-year financial scenario that provides the desired earnings, capital, and reserves that will best align to the institution’s strategic goals.
It is important that the model includes action-oriented metrics that go beyond earnings targets such as ROE, net margin, or net income. Proper metrics will be critical in communicating the business strategy and financial goals in terms that employees understand.
Once a five-year scenario is selected, the first year of that plan can serve as the target for the 2010 budget. But the key will be to keep the model fresh and conduct regular scenario-based forecasts, since all assumptions will or can change dramatically. With regular forecasting, the executive management team can then adjust business plans on the fly as warranted by the financial picture or economic conditions.
The Business Strategy
Some work on strategic planning can be conducted simultaneously as the financial scenarios are created. Executive management discussions on growth, profitability, capital, markets, lines of business, competitors and organizational strengths and weaknesses can yield a list of opportunities and challenges for the bank. The organization should also accumulate a listing of current projects and engage key managers and employees for an internal assessment of how the company is positioned regarding customers, products, and employees.
Through targeted meetings and discussions, key strategies and tactical projects can be identified that fit the current economic environment. At the executive level, a vision can be created that lays out priorities for 2010 and the next three to five years. The strategies or projects are likely to target manager and employee activities that can create momentum with customers, solve an operational issue, or automate workload for efficiency. These activities should align to the action-oriented metrics discussed previously.
The final step is to assess the strategic direction and prioritize the company’s 2010 goals and projects in a manner that will best complement the five-year financial scenario. Then, company-wide communication and employee goals can reinforce the most important initiatives for 2010 and help keep everyone on the same page.
The one certainty each year is that things will change. Regardless of what 2010 brings, the companies that conduct regular updates to financial forecasts and strategic projects will be positioned to make planned adjustments during the year versus replicating the reactionary environment in most banks during the last two years.
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37th Annual Graduate Session Recap
Between May 17-22, 193 students hailing from 14 different states attended classes, participated in case study discussions, and enjoyed the week’s social activities here at Christian Brothers University. For 37 years the Barret School of Banking has been a premier provider of excellence in education for bankers across the Mid-South, and this year’s 2009 Graduate residency session certainly lived up to that standard.
 The highlight of the week was the annual Lecture Series Event, which featured a talk on “Hallmarks of Great Leadership” by Sam Donaldson of ABC News.
We are now accepting applications for the 38th Annual Graduate School Session, May 23-28, 2010. Click here to register »
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And Finally ...
 Last year the Memphis Flyer published an extensive "best of" list with all that Memphis has to offer in food and drink. An excerpt follows with a link to the full article. It was enough to make us hungry for more!
Best of Food & Drink
Memphians are becoming more discerning diners. How do we know? In the past decade or so, as the number of ethnic-cuisine categories has grown, the number of readers who write in "gross" or "don't eat that" has shrunk.
One other aspect of the voting worth mentioning: "Best Barbecue" received the most votes of any category on this year's ballot. Priorities (and wet naps), right?
- Best Chef
- Best Burger
- Best Breakfast
- Best Romantic Restaurant
- Best Sunday Brunch
- Best Wine List
- Best Steak
- Best Barbecue
- Best Ribs
- Best Hot Wings
- Best Fried Chicken
- Best Cajun/Creole
- Best Mediterranean
- Best Dessert
- Best Italian
- Best Mexican
- Best Chinese
- Best Thai
- Best Vietnamese
- Best Japanese/Sushi
- Best Indian
- Best Home Cooking/Soul Food
- Best Vegetarian
- Best Tapas
- Best Seafood
- Best Pizza
- Best Deli
- Best Bargain Dining
- Best Service
- Best Waiter/ Waitress
- Best Kid-Friendly Restaurant
- Best Late-Night Dining
- Best Place for People-Watching
- Best Patio
- Best Place That Delivers
- Best Bakery
- Best Local Coffeehouse
- Best Restaurant
- Best New Restaurant
Full article here >
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