Rethinking Productivity
By Steve Klinkerman
Customer-focused strategies can only succeed to the extent that the company also is employee-focused, both in recruiting and management.
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One of the essential challenges in business is striking the right balance between employee productivity and quality. The banking industry learned this the hard way in the 1990s, when the promised efficiency benefits of several major mergers were lost amid an exodus of valuable employees and customers.
With roughly 1.75 million employees, U.S. banks remain pressured to balance financial performance with customer requirements, especially in this era of slow growth and thin margins. Yet there is evidence of progress. In its most recent national survey of customer satisfaction, for example, the University of Michigan noted continued gains by major retail banks and said "perhaps...they have learned from past merger mistakes."
Progress involves more than just refraining from extremes, however, and that is why employee productivity and customer satisfaction need to be viewed in a different light. Instead of an arithmetical exercise that balances resources with revenues, customer-friendly productivity is more about improving performance. In the hands of the right people and within reasonable bounds, productivity and quality can both be improved.
Bank One Corp., for example, reportedly suffered a net loss of 300,000 checking accounts between 2000 and 2001, a time when it was struggling to overcome problems that had piled up during the previous decade of mergers. By upgrading the staff and practices associated with new accounts, the company reversed the trend and posted a net increase of 434,000 accounts in 2003.
To be sure, there are indications that senior executives understand the importance of staff selection and performance, and the implications for their own management and training obligations. For example, hiring practices, sales management and training respectively were cited as the top three drivers of retail financial sales success by the 160 respondents to a 2003 survey conducted by Omega Performance Corp., Charlotte, N.C. These priorities outranked considerations such as goals, convenience and products.
But how well are financial services companies acting on these priorities day-to-day? In the Omega survey, respondents judged their own effectiveness more than 25% lower than the assessed importance of all three top staff-related performance factors. This points to a continuing issue in retail banking, which is that techniques, processes and products still get more attention than front-line representatives who utilize those tools.
Indeed, even the University of Michigan researchers caution that banks should not make too much of recent improvements in customer satisfaction scores, noting that factors other than the quality of personal interaction could be at work. Consumer pleasure with improvements in transaction processing and Web-based capabilities, combined with low borrowing rates, could be masking staff-related service concerns, says professor Claes Fornell, who foresees "a more difficult situation" if interest rates rise.
If you accept that a given system is only as good as the people within it, then it follows that every major initiative in retail banking should be crafted and implemented with front-line staffing and execution in mind. The recruiting, licensing and training that has accompanied the rollout of investment and insurance products is encouraging, but general staff capabilities also must rise if institutions are to succeed with initiatives such as customer profiling, needs-based selling, segment-based marketing and product bundling, and expedited problem resolution.
In this light, customer-focused strategies can only succeed to the extent that the company also is employee-focused, not just in a rhetorical sense but in actual practice. This is one of the management breakthroughs that will be needed if retail banking is to reach new plateaus of productivity and profitable revenue growth.
Mr. Klinkerman is editor-in-chief of Banking Strategies.