Improving the Commercial Lending Experience
Delivering “Best-in-Class” customer service to commercial clients is an often-expressed commitment in bank vision statements. So, why do so many banks find it difficult to deliver on that promise? Unless a consistent, across-the-board commitment to best-in-class service is held by everyone in the bank’s commercial lending group, including credit analysts, loan administrators, doc prep, processors, loan assistants and relationship managers, the goal can never be realized. Although it may seem obvious that internal groups need to support the front office in achieving this, there are a number of reasons why this is often not the case.
When regulators, in the wake of the recent financial crisis, increased pressure on banks to tighten up underwriting standards and compliance with both internal loan policy and regulatory requirements, most banks instituted a series of checklists to be completed throughout the process of delivering a commercial loan. Checklists, in and of themselves, are not bad tools. However, their application within the organization has become problematic in two primary ways:
First, to ensure zero exceptions, checkers are in a position to hold up the process if any checks are missing. Individuals in these roles often see themselves as “traffic cops” with the power to prevent loan officers from taking shortcuts. In addition, the checkers have checkers set up to check on them, further impeding not only the process but also the spirit of teamwork.
Second, the responsibility for ensuring there are no exceptions has been placed on back office personnel such as doc prep, processors and booking staff. Surveys conducted by our firm have shown that back office employees have little to no understanding of regulatory and loan policy requirements and regulations, yet these individuals have the power to stop a loan from being documented, funded or booked due to a missing item on a checklist.
Regardless of whether one believes checklists and “traffic cops” are necessary, the impact on customers is that their loans are delayed, additional requirements are placed on them, and commitments are missed, often for minor issues that have minimal regulatory or credit risk impact.
In order to make loan commitments, the front office must know that its team members will deliver their functions on a timely basis. Expected turnaround times must be established and underwriters, appraisal departments, doc prep, processors, booking and funding groups must all perform at their expected levels. However, in many institutions, service level agreements (SLAs) are neither well defined nor properly enforced. And when expectations are communicated, institutions often engage in a “blame game,” pointing a finger at the requesting department for its failure to provide all the requirements necessary to fulfill the request, for example, complaining that not all the boxes were checked or fields appropriately filled out. In other words, each department believes the other department is not doing what it should be doing, is trying to get away with shortcuts, and/or is not concerned about the welfare of the customer.
Without a well-structured, well-defined and enforced set of SLAs, a best-in-class customer experience cannot be realized. One issue to watch out for is inadequate tools. Beyond the use of dedicated specialized systems to analyze (or “spread”) client financial statements, create loan documents and service loans, the default tools used by the commercial team are Word, Excel and Outlook, which are leveraged by banks with varying levels of effectiveness and efficiency. These tools, however, are used as standalone disparate systems that require significant data re-entry. They do not provide needed levels of accountability, nor do they deliver the status visibility and issues to address what team members must have to manage commitments and deliver a customer experience that is truly best-in-class.
Game Plan Milestones
While there are clearly significant hurdles banks will face as they work to create a competitive best-in-class customer experience, there are a number of steps they can take that will help achieve this goal. Incorporating short, medium and long term goals not only makes development of the game plan more manageable, it establishes milestones against which to measure success along the way.
For the short term, develop a process improvement team that incorporates members from all the groups associated with the commercial lending process. As a team, set a goal to consistently deliver problem-free commercial loans within an aggressive but achievable time frame. Then, identify any barriers and define and agree upon service levels needed by each group to achieve that goal.
Upon close examination, most banks will discover significant redundancies and inefficiency in their use of Word, Excel and Outlook. For the medium term, work toward leveraging other bank-owned tools such as a workflow-enabled enterprise content management (ECM) solution instead of email to manage work. The ECM tool will provide better tracking and status visibility.
Finally, for the long term, select and install a commercial loan origination solution (CLOS) that provides strong workflow capabilities. The right CLOS will remove the need for checkers and checkers checking checkers and will provide real time management of SLAs and integrated sharing of data and loan status.
To consistently deliver a best-in-class customer experience is a lofty yet achievable goal. Few will achieve it unless the entire team behind the goal has both the commitment to providing such service to one another and the tools to manage and keep those commitments.
Mr. Pinckney is a senior director at Cornerstone Advisors, Inc., a Scottsdale, Ariz.-based consulting firm specializing in bank management, strategy and technology advisory services. He can be reached at [email protected].