5 Metrics of Small Business Banking
By Charles B. Wendel
For maximum management impact, focus on these.
Recent years have seen an explosion in the amount and quality of data and information available to senior management. If anything, top management has too much information available to it rather than too little. Information overload has often resulted in confusion and obfuscation rather than creating clarity about priorities and next steps.
Our experience with top small business banks indicates that only a handful of measures, some “traditional” and some overlooked, demand focus. Evaluating these metrics enables managers to concentrate on the highest impact areas.
1. NUMBER OF SALES CALLS. Although obvious, this is a metric that many banks ignore. Our analysis, as well as analyses conducted by clients, demonstrates that the more calls (either in person or by phone) made on small businesses, the more success banks have with this segment. As a result, managers need to enforce high calling goals. They also need to eliminate the non-sales-oriented activities that keep bankers away from customers, such as administrative and customer service tasks.
2. WALLET SHARE. A banking client once told us that he was already selling all that there was to sell to his commercial customers. However, he defined his product set very narrowly. It did not include wealth management, investments or retirement products. Instead, he focused exclusively on selling loans and cash management.
We find that the best banks are broadening their definition of wallet share potential to include both personal and commercial business. Moreover, they are actively developing product packages and calling plans to gain more wallet share.
3. ACCOUNT PLANNING. Most bankers lack a rigorous process either for determining the number of annual calls appropriate for a customer/target or for setting product sales priorities. They rely on instinct rather than follow a consistent process, and they often fall short in effectiveness.
Managers should consider these questions in determining the thoroughness of an organization’s sales approach:
- Does the small business group operate with a consistent and simple (one-pager) account-planning process across the bank?
- Does the planning process incorporate personal as well as business needs?
- Does each banker’s incentive compensation include an account planning component?
- Does account planning include the branch banker?
4. LINKAGE WITH THE BRANCH. All the research we have either completed or reviewed points to the importance of the branch in selling to and retaining the small business customer. Most small business owners select their business bank based upon branch location, and they look to branches for their servicing needs. Yet, we see cases in which the branch and small business groups appear at loggerheads, each protective of their turf and defensive about their role with business customers.
Top management must break down whatever barriers exist. One tactic is to make the two groups’ performance co-dependent. Metrics of value include the number of referrals from the branch to small business, as well as referrals back to the branch from small business. Management cannot leave cooperation between these two groups up to the goodwill or personalities of the individuals involved; it needs to be institutionalized across the bank.
5.TIME TO ADDRESS GAPS. We would like to see one additional metric — that captures the amount of time between the identification of a performance gap in one of the four areas above and management action to address it. Unfortunately, no such metric exists; frankly, most senior managers are uncomfortable being held to a metric of that type. Still, banks can achieve benefits across the four metrics mentioned above with forceful management action.
Mr. Wendel is president of Financial Institutions Consulting in New York, a management-consulting firm that focuses on developing growth strategies for banks in the small business and middle market segments.