Management excellence wins the retail banking wars

With many banks facing significant competitive and economic headwinds, it is critical that they act to optimize the performance of their retail businesses.

Running a successful retail banking business is, arguably, the hardest job in financial services.  The reason is straightforward: Retail banking is a highly complex and diverse business.

No other business line deals with the number and type of management challenges as retail – strategic, analytical, financial, operational, technological, risk management, regulatory compliance, facilities, marketing and, most importantly, people. Consequently, management effectiveness and excellence have always been critical elements in determining high-performing retail banking businesses.

The importance of management excellence has never been more important than it is today. The pace of change within the industry is accelerating, driven by significant shifts in consumer behavior and preferences, the continuing formation of technology-based competitors and the need to adapt to a new post-pandemic reality.

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While there are many components to an effective management model, in our view the most successful approaches include the following:

Highly focused planning: A comprehensive strategy for building an effective management model includes defining the role of the retail business, identifying where and how it will compete, focusing scarce resources on high-value opportunities and establishing clear performance metrics.

Clear definitions of success: Well-defined success criteria are essential components of all management systems.  However, they are particularly important to the retail organization because of the need to align a large, diverse and often geographically dispersed group of employees against a common set of principles and objectives.

Meaningful performance metrics: Managing performance effectively requires that defined success criteria be translated into metrics that can be measured, tracked and reported. The key is ensuring that the metrics used are meaningful to the area being measured and that they are aligned across the organization to minimize the risk of incenting the wrong types of behavior.

Accessible and actionable data: Most banks have plenty of data, but far fewer can convert that data into meaningful and actionable information.  From a management perspective, the best data is the kind that can be used throughout the organization in a broad array of functions, at different organizational levels and for a variety of purposes.

Rigorous talent management: Despite heavy technology investments over the past decade, retail banking remains very much a people business. Attracting and retaining high-performing talent, developing skills sets, and creating meaningful and appropriately compensated career paths are critical to driving effective management practices across the entire organization.

Fast and interactive feedback: In retail banking, the best and most timely source of information on what’s working and what’s not are the people who deal with processes, practices and customers on a daily basis. Successful management models develop the mechanisms and culture that solicit, accept and act upon input provided by frontline employees and managers.

Team-building that celebrates success: Running a retail banking organization is hard, but that doesn’t mean it can’t be fun. There are many creative ways to build and grow an enthusiastic and supportive culture that reinforces positive behavior and encourages cooperation. Retail is most often the “face” of the franchise and the brand – it can’t hurt if that face is smiling.

Creating and implementing an effective management system is, perhaps, the most important factor in determining the success or failure of most banks’ retail business lines.

With many banks now facing significant competitive and economic headwinds, it is critical that banks act to optimize the performance of their retail businesses. This means taking a hard look at current management practices, identifying specific improvement opportunities and quickly implementing program enhancements.

We suggest focusing on four key activities:

Assess current practices clearly and objectively: Use a detailed checklist incorporating either the elements outlined above or others to help document and evaluate the effectiveness of key components of the current management system.

Identify specific improvement opportunities Focus developmental initiatives on a few key components that aren’t working and reinforce those that are.

Develop training programs for management: Educate management personnel throughout the organization on core management processes and practices.

Install rigorous monitoring systems: Measure, monitor and report performance objectively, reliably and quickly.

Many elements contribute to a high-performing retail banking business – these include highly focused strategic and business planning, distinctive value propositions, and consistent and differentiated customer experience processes. And while these are all important, they are not sufficient. Ultimately, execution drives excellence and, importantly, management drives execution.

Rolland D. Johannsen is senior consulting associate at Capital Performance Group.