Cultural Imperative

By John R. Engen

While there are different training tactics for customer relationship management, a commitment to cultural change is clearly essential.

Over the past decade, U.S. banks have spent billions of dollars on technologies related to customer relationship management, an information-driven approach to serving and selling customers, with generally disappointing results. While there are many culprits, experts agree that one key failing has been poor preparation and training of employees.

At its core, CRM seeks to leverage information to present a unified institutional face to customers. By segmenting customers into discrete groups and differentiating services, banks hope to boost both retention and sales. It's a compelling theory, but everything hinges on how well the bank representative interacts with the customer, and this is where poor training becomes evident.

Roughly 20% of the typical bank's CRM budget goes for training costs. Given the relative ineffectiveness of most bank CRM programs, much of this money appears to be misspent. "If the goal is to be more customer-centric, but the key interaction is fumbled because of a lack of training, then every dollar you've spent on technology and branding is for naught," says Kathleen Khirallah, a Los Angeles-based consultant with Needham, Mass.-based TowerGroup Inc.

Part of the answer is to improve execution. Banks with long track records in CRM, as well as outside experts, agree that good training is a long-term, ongoing process. It begins before implementation, by instilling in employees a basic understanding of the objectives of a customer-centric strategy and their role in it. After buy-in has been achieved, training programs must focus on a host of specific skills that revolve around using the technology, and the information it delivers, to improve customer service.

Some banks favor intensive classroom sessions and coaching to prepare employees for handling customers. Others prefer a simplified process, where much of the decision-making authority is housed in the technology itself. All agree, however, that treating CRM simply as a technology solution is short-sighted.

From a larger perspective, true CRM success relies on the ability of managers and employees to grasp and execute a starkly different way of doing business. It's a cultural shift for most institutions, something easily stated but often terribly difficult to pull off. Companies that fail to address the challenge with solid training and attitudinal reorientation risk seeing their efforts continue to flounder.

Change Management

Art Sinensky, a financial services partner with Accenture in New York, estimates about 40% of CRM implementations have failed to achieve significant results. Others peg the figure even higher. What's gone wrong?

Many institutions seized upon CRM as a technological magic bullet for solving problems of customer retention and consultative selling. As the discipline has matured, however, many now recognize that orchestrating the myriad of organizational changes required to create a customer-centric company is more important than the technology itself.

Full-blown CRM is an elaborate structure that combines new technologies and business processes. The technologies include data warehouses that collect and store in-depth customer information; analytical tools for segmenting customers into discrete groups for marketing purposes; and decisioning tools that tell front-line employees how to handle that data. The business processes involve ascertaining and then meeting customer needs, as opposed to pushing product, which often constitutes a shift in corporate culture.

Accenture's Sinensky cites call-center reps who, under CRM, see their role expand from passively executing transactions to a deeper level of customer service and sales. The new roles can demand improved speaking skills, the ability to respond to e-mail and other requests in a proactive manner and other expertise. "They suddenly have to understand how to evaluate the customer based on the information provided by the system, and then be able to prompt the customer and articulate solutions," Sinensky says.

The "help" provided by new CRM tools can sometimes add to the confusion. Reps at many institutions, for instance, receive "sales opportunity" screens, with prompts and suggestions of products that the customer might need, based on demographic and usage information. The reps are expected to incorporate that information into the discussion.

At Royal Bank of Canada, for example, tellers and platform bankers are directed to "literally turn the PC monitor toward the customer and have a dialogue with them," says Ted Brewer, the Toronto-based company's vice president of CRM and information management. "They point to things on the screen and use them as a basis for conversation."

All of this represents a major shift from the passive, order-taking stance that front-line bankers have traditionally taken with customers. Deploying the CRM technology will not produce the desired results unless the institutional culture is first prepared for the change. "If you want to use CRM to boost sales, first you need a sales culture," says Martin Cohen, a principal with Cohen Brown Management Group in Los Angeles. "Trying to automate a non-sales culture is throwing money down the drain."

CRM projects, therefore, tend to run aground when employees merely pay lip service to — or fail to grasp — the new cultural imperatives, and continue business as usual. That's why effective training can make or break a project. Kevin Kraft, a vice president and CRM practice leader for Cap Gemini Ernst & Young in Chicago, says a properly-focused training program can cost as little as 10% of the total CRM budget and go a long way toward ensuring success. Yet he sees many bank CRM efforts dogged by poor training, which can hike overall costs by as much as half, with a disproportionate share being devoted to education.

Building Trust

One problem is that most banks have cut back on their training efforts in general during the past 15 years, says TowerGroup's Khirallah. To control costs, they turned to computer-based training — much of it focused on rules and regulations — which does not seem to enhance many of the subtle personal skills demanded by CRM. Furthermore, while vendors typically offer training on how to use a given technology, such efforts rarely touch on the relationship skills demanded by many forms of CRM, let alone an individual bank's own business strategies.

CRM training works best when it is done proactively. It should begin at the earliest stages of strategy implementation, incorporating substantial employee feedback and then tweaking the strategy to meet employee needs and gain their buy-in. Training should then include virtually everyone in the organization, including back-office staffers, middle managers and customer reps.

Building trust and confidence is important, and there's agreement that real training authority is best housed in business lines, where the strategy is crafted and executed, not by a human resources team. Cap Gemini's Kraft recently worked with a credit-card bank that transformed a respected field representative into its CRM training coordinator. "That person had empathy with his peers and was able to inspire trust," he says.

Beyond those broad principles, specific educational techniques vary widely between banks. Institutions can use some combination of classroom instruction for initial sales and technology training; off-site retreats or training centers to address core themes; and hands-on learning with coaches built around real-life examples of CRM in action.

Consultant Cohen is a big believer in using the "critical mass" of a large classroom to reinforce lessons and provide role-playing scenarios. His firm typically recommends that all employees go through at least two days of such training, led by a respected business line manager, focusing on various selling skills and how to use information and apply new business processes.

Wells Fargo launched a CRM initiative in its Los Angeles region last year that began with top managers assessing the key processes and opportunities in their day-to-day interactions with customers and employees. Using those insights, an implementation team then devised specific training regimes, with input from employees and an outside consultant. Managers attended classroom sessions where they were re-taught key skills, such as how to examine local markets and formulate goals and plans, with customer-centricity and profits in mind.

"We taught them how to shop the competition and identify opportunities in their local markets," says Betty Rengifo Tucker, Wells Fargo's Los Angeles business strategy manager. She compares the effort to an executive masters program, complete with loads of "homework" and thesis-sized plans that dissected those markets. "They'd learn the theory, go out and implement it, and then come back and talk about how it went."

Meanwhile, front-line employees received classroom training in areas such as new business processes, how to use CRM technology, and how to use information to sell products. This is important, Tucker says, because her region is attempting to change its entire culture. "If you toss a new piece of technology to the front office without explaining the rationale behind it, it won't be used effectively," she says.

Tucker says double-blind control group tests showed the Los Angeles project churned out significantly higher product sales across the board, and had a profitability rate that was more than double the control group. "The training created a roadmap for people to follow," Tucker explains. "They felt more empowered and were less likely to fail."

Training Lite

Not all institutions rely so heavily on classroom instruction. U.S. Bancorp consciously structured its CRM effort, known in-house as a "relationship management system," or RMS, to minimize the training challenge by requiring less interpretation and thinking from front-office employees.

At USB, the typical front-line representative has access to two screens of customer information. The first, known as a "customer-strategy screen," is loaded with data about the individual client. The second screen focuses on marketing opportunities, highlighting products that the system has determined might be potential sales.

While front-line bankers receive some actionable information, they are rarely expected to interpret it. Rather, the information comes in the form of specific suggestions forwarded from the system. That simplifies training.

Richard Martino, a senior vice president and manager of USB's marketing information research group, says employees need a "basic understanding of how the system works," but shouldn't have to devote a lot of time delving into the minutiae. "Our focus is on engendering confidence that the system will make the right recommendation."

As a result, USB's classroom training has been reduced to a simple three-hour introductory class for managers. These sessions, usually held at local training centers, begin with Martino or one of his lieutenants providing an overview of the system — how it works, what components are being weighed to assess customers and how customers are segmented.

That is followed by a hands-on demonstration by a trainer, who comes from the retail bank, on how to use the screens. Finally, a branch or call-center manager, familiar with the system, talks about the benefits he or she has experienced.

Of course, front-line employees receive other training, on business processes and rules, for example, and how to find sales leads. But because RMS has become an integral part of the company's core operation, this instruction is simply part of the basic educational offering, not a separate effort.

More intensive classroom training goes to executives responsible for behind-the-scenes strategy. One course, dubbed "RMS 101," teaches the basics of plotting strategy under CRM. A second program, "RMS 205," focuses on how to apply the system to sales campaigns and other marketing efforts.

Such learning is often supplemented by written materials and online educational programs that offer case studies and the opportunity for employees to review and learn at their own pace.

Managerial Role

Regardless of their views on classroom teaching, CRM experts agree that coaching is the key component of the training process. Since much of CRM is about altering the culture to put customers first, managers must understand that traditional metrics, such as product sales, are now secondary to overall corporate profits and creating a better customer experience.

Getting employees to "unlearn" old patterns is best done through example and hand-holding. Many organizations have adopted what's known as a "train-the-trainer" approach. Under this philosophy, managers with high employee credibility are taught how to make presentations and coach workers to help them achieve their own organization-related goals. "If line managers can't coach what you want to achieve, then the line reps will quickly slip back to their old ways of doing things," Cohen says.

The idea is that practical, real-life experience can best communicate the key changes required by CRM. That means managers must alter the metrics they use to measure success. In some organizations, for example, product managers now find themselves answering to segment leaders, meaning an old-style focus on the amount of product sold no longer suffices.

Other mindset changes are required, too. At USB, RMS produces sales leads based on demographic and other information. At first, product managers would get upset when their requests for prospects came up short of what their sales campaign mailing budgets allowed. "They'd say, 'I have a budget for 200,000 pieces to be mailed,' but we might produce sales leads totaling less than 15% of that number," Martino recalls. "It took a while for them to let go of the 'If I don't spend it, I'll lose it' mentality."

With time, Martino's team convinced product managers that repeat mailings to customers identified by the system as most likely to buy would result in less waste and higher sales ratios than an unfocused mass mailing. "They had to learn to trust that the models could do a better job of predicting who was likely to buy," he says.

Senior management's role in setting the table for this cultural learning cannot be minimized. Top executives must grasp the fundamentals of CRM thoroughly, and then champion its importance through the organization. They also must adjust incentive programs to ensure that the proper behaviors are encouraged.

"If you're measuring success in ways that are different from the past, then the incentive compensation structure has to reflect it," says Kimberly Collins, a research director for Gartner Group in Durham, N.C.

The road to CRM success is a long and arduous one and many factors come into play. But the odds for success are clearly improved if the journey begins with an effective training program.

Mr. Engen is a freelance writer based in Minneapolis.

Copyright © 2003 by Banking Strategies, published by BAI.

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