Feedback Loop

By Gregory J. Millman

When financial institutions solicit feedback from their employees, they need to make sure they act on some of those suggestions.

True or false? A happy employee is more likely to provide good customer service than an unhappy employee.

Almost everyone would agree, intuitively, that this sounds about right. There has been some quantitative research backing up the idea that high-performing organizations tend to be those that do a good job of cultivating their human capital and many bankers see evidence of that in their own organizations.

"The happier employees are, the better business we do," says Kim Moore, senior human resources business partner at Tulsa, Okla.-based BOK Financial Corp.

But what specifically makes employees happy or contented with their jobs? How much happiness is enough? And what kind of happiness? These are actually difficult questions to answer. Some say it's not enough that employees are content; they also have to be actively engaged, a distinction that raises a whole other set of questions.

In a practical sense, it's very difficult for companies, including financial institutions, to draw a direct link between various kinds of employee motivators and improved organizational performance. Do employees respond best to teamwork or to bonuses? What about other non-monetary rewards? What about training and leadership? The evidence is mixed.

Yet banks keep trying to figure out the link. An entire industry has sprung up around the effort to elicit employee feedback, be it through surveys, focus groups, suggestion boxes or more informal mechanisms. It has been estimated that 70% of U.S. companies survey their employees on an annual or biannual basis, all with an eye to improving organizational performance.

"In the retail banking context, the key goal is to get more deposits, with the point of customer interface being the front-line branch employee," says Jeffrey A. Schmidt, a consultant with Towers Perrin and principal in Third Path Management Research and Consulting Ltd., Chicago. "If we can prove that there is a relationship between the attitude and behavior of the branch employee and the customer's proclivity to make a deposit, then the question becomes: how do we manage the customer-facing employee to get the optimal level of productivity and engagement?"

The first step on that path is to make good use of the information gathered from employees. This is where the rubber meets the road. It does banks no good to spend time and resources gathering feedback from employees and then not act on any of that information.

That's why high-performance institutions such as Cherry Hill, N.J-based Commerce Bancorp have instituted a rule that employee suggestions must be responded to within 48 hours. Not all banks have such an ironclad rule, but most adhere to the principle that serious input deserves a serious response.

Cracking the Code

It's fashionable now for banks, like other businesses, to talk about the importance of human capital. It's a rare institution that doesn't at least try to sample employee opinion every few years and make some semblance of effort in the direction of a response. Some institutions even use employee feedback to determine the content and direction of training programs and other strategically important initiatives.

Behind all these efforts is a belief that employee satisfaction or commitment leads to improved bottom-line business performance. "The case has definitely been made," asserts Will Werhane, regional executive director for the Americas with International Survey Research, a human resources consultancy headquartered in Chicago. "We've now worked with well over two dozen financial services organizations where we've been able to show a clear relationship between employee satisfaction and higher levels of business performance."

Some of the independent research done in this area does seem to back up the linkage between customer employee attitudes and corporate performance. For example, a recent study by consulting firm Towers Perrin and Baruch Lev, a professor at New York University's Stern School of Business, showed a positive correlation between earnings growth and such intangible factors as providing employees with greater access to information about the company's strategic goals, establishing effective work teams and building the interpersonal skills that support collaborative work.

But bankers in the field often don't see a bottom-line impact. "Can we prove scientifically that employee satisfaction has a financial performance outcome? That is the code we've been trying to crack, and we haven't yet cracked it; there are too many variables in the equation," says a human resources executive at one major money center bank, speaking on condition of anonymity.

Many bankers take a middle approach — acknowledging that the link is not clear-cut, but willing to accept the logic behind it. "The difficulty is knowing which came first, the chicken or the egg," says Blair Pollard, senior manager of human resources strategy at Royal Bank of Canada in Toronto. "Does client satisfaction lead to employee satisfaction or vice versa? There's so much in play at any given time that it's difficult to quantify the return. But we honestly believe that you won't get good client satisfaction from a disengaged workforce."

To keep their workers from becoming disengaged, many banks have turned to surveys, the most popular tool for determining employee satisfaction. "The employee survey is probably the best way we get feedback," says Janet Parker, senior vice president of corporate public relations at AmSouth Bancorp in Birmingham, Ala. "People feel comfortable giving us an honest opinion. In the last two surveys we did, we had a 91% and a 93% participation rate."

AmSouth works hard to get those high participation rates, Parker adds, noting, "If a department head says that employees can't be absent from their desks that long, we say, 'Fine, we'll come to your department.' We take it seriously."

At PNC Financial Services Group, Pittsburgh, it's possible for employees to be surveyed twice a year, according to Kathleen D'Appolonia, vice president and manager of work/life and diversity programs. She says each line-of-business unit does its own annual survey to sound out employees on their attitudes to management, the work environment, whether they have the tools they need, their feelings about the company's reputation, and so forth. Meanwhile, an overall corporate survey asks a statistical sample of employees a series of questions designed to measure employee commitment.

Royal Bank likewise began with statistical samples but then, in 2003, sent out surveys to every employee in the bank. "This allows us to get information to the smallest units in the organization," Pollard says. "In the past, we could only develop reports for the big business groups. Now, if you have 10 people in a branch, you get a report on your results and you get an action plan. This year, we plan on enhancing that even more."

While surveys provide the predominant mechanism for eliciting employee feedback, there are other methods. Some banks, for example, still use the old-fashioned suggestion box, which also allows employees to contribute suggestions anonymously. Others go for a more direct approach.

To supplement its surveys, AmSouth collects feedback through focus groups. PNC, meanwhile, urges managers to have conversations with employees, sometimes prompting them by e-mail to do so. Commerce Bancorp, which shuns surveys altogether, also believes in direct conversations.

"We like to create enough face time with employees that we don't need the survey," says senior retail officer Linda Verba. "From a cultural perspective, you want to create a culture in which feedback is a good thing."

Senior executives at Commerce regularly visit the branches to encourage managers and employees to speak up.

Rule Killer

Having gone to all the trouble to solicit this employee feedback, banks naturally feel an obligation to make some use of it. Commerce Bancorp probably is the most dramatic example of this, with its policy of responding immediately to every employee suggestion, one way or another. "We have a program called 'kill-a-stupid-rule,'" Verba says. "We encourage employees to tell us when a rule got in their way and then we provide feedback within 48 hours. If they make a recommendation that we act on in any way, shape or form, then they earn money."

Commerce employees typically earn about $50 for every suggestion the company adopts. While that may not seem like a large amount, the company also makes sure the employee gets plenty of non-financial recognition. A squad known as the "WOW patrol" will actually descend on the employee's workplace with balloons and flowers and sing songs while handing the red-faced individual a check.

It's fair to say that Commerce Bank's program is unique — no one else sends "WOW patrols" to branches. But other banks do respond to employee concerns. PNC, for example, created some child care centers to help employees balance their personal and work lives. AmSouth changed its dental plan, enhanced its training program, expanded some business lines, and instituted a campaign to recognize every single employee.

BOK, in response to a 2001 survey, amended its dress code to allow somewhat more comfortable attire (optional panty hose, open-toed shoes, for example) during the steamy summer months. Other survey comments led BOK to develop a centralized Learning Management System, tasked with developing training programs that would help employees expand their career opportunities. "If somebody wants to go on to the next job, they know what courses they need to take to be considered for that post," Moore says.

This recognition that employee satisfaction isn't always determined by monetary rewards is echoed by Sharon Pappas, head of BAI's survey services, which worked with BOK on its surveys. "People want the opportunity to learn and grow," she says. "They want to be trained, they want the tools they need to do their job, and they want a sense of accomplishment, a feeling of being part of a larger team. Those things are important and if the employee has all that, then pay becomes something less important."

Surveys based on BAI's normative database of 80,000 bank employees shows that employees generally rate their institutions fairly favorably in terms of corporate reputation and their own roles within the company. The less favorable ratings tend to involve issues of teamwork and communication across departments.

For Royal Bank, employee satisfaction is rooted in "hard" business issues such as training rather than "soft" personal issues such as dress codes. "We don't ask whether you want to dress casually at work but rather how you feel about your own capability," Pollard says. "Do you get the training you need? What do you think of the performance evaluation system? Do you understand the goals? Are they well communicated and fair? Is your manager delivering what you need to succeed? In a lot of ways, it's like internal market research."

When a Royal Bank survey revealed that a series of mergers had left employees a bit fuzzy about the company's core values, the institution crafted a new set of values. A subsequent survey showed that these values were now crystal clear to everyone. When a survey revealed that employees felt that the company's leadership wasn't very visible, the bank took measures to put its leadership in front of the rank and file, and subsequent surveys gave top managers higher marks. "The surveys allow us to have some concrete evidence and make changes," Pollard says.

Institutions must also be prepared for the possibility that surveys can turn up surprising things. Surveys at Kansas City, Mo.-based UMB Financial Corp., for example, found a troubling disconnect between what employees believed customers wanted, and what customers actually said they wanted, according to senior vice president Tom Mathis. "In one of our surveys, our associates reported their belief that customers resented what we deem sales efforts, i.e., identifying what a customer may need and recommending some sort of product to meet that need. Concurrently, we did a customer survey where customers said, 'I want to know what you have to offer.' So the customer was saying one thing and our sales people perceived another."

UMB addressed the issue by refocusing its training program to ensure that employees avoided product-push techniques while engaging in more consultative approaches to selling.

As the UMB example suggests, employee feedback can have a tangible impact on the institution's performance, even if that improvement doesn't necessarily show up in a strict bottom-line analysis. For that reason, it's a sure bet that banks will continue exploring ways to solicit helpful input from their employees.

For more information about BAI's prescriptive employee survey process, which helps organizations understand the critical link between the perceptions of their workforce, customer loyalty and performance, see www.bai.org/bankstrates.

Mr. Millman is a freelance writer based in Green Brook, N.J.

Copyright © 2004 by Banking Strategies, published by BAI.

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