For all that has been written about branches succumbing to the digital onslaught, it seems clear that banks will be clinging to the majority of their street corner outlets for some time to come. But it would be a big mistake to cling to antiquated branch management practices as well, particularly with regard to the all-important sales staff.
Essential in generating revenues yet costly to deploy, branch sales representatives have seen wave after wave of system-wide initiatives to encourage their productivity, including stringent staff count targets per branch and the rigid imposition of sales goals. Yet, Novantas research indicates that fully one fourth of the typical branch network salesforce does not generate breakeven returns, relative to the cost to deploy.
A major hang-up in addressing the situation is that many banks still love their cookie-cutter management tools. In vast multi-regional networks with hundreds or thousands of outlets, results are loaded into corporate spreadsheets that pivot on system-wide averages, driving homogenous projections and goals that become the Law of the Land.
This collides with the reality that sales and profitability dynamics differ sharply among major branch categories. Among units best with customer acquisition, for example, more than 60% of sales come from new-to-bank customers, compared with 25% for branches best with cross-sell to current customers.
Instead of ignoring such differences, the new-form staff management approach seeks to capitalize on them by tailoring branch sales skill emphasis and staff count according to opportunity. This entails detailed projections of local sales dynamics, which are also used to support a new generation of market-informed performance targets. Leaders base their decisions on markets and customers, not spreadsheet averages based on operating results.
Differing Sales Dynamics
Typically there are major categories of outlets in a branch network, and each branch archetype captures value differently and provides different levels of return. Mapping these differences is a crucial first step in correcting sales underperformance:
Acquisition branches. Based on our review of more than 10,000 branches nationally, nearly a fourth of all branches derive more than 60% of sales from new-to-bank customers (less than 90 days’ tenure). These units attract lots of new checking customers, but staff-adjusted sales profitability is lower as reps build the book of business.
For management, this translates into a sales staffing emphasis on driving further acquisition while minimizing new customer churn. Given that acquisition branches will skew towards relatively simple, lower value products, there is more leeway to deploy reps with more basic skills. They can do a good job yet are less expensive, better supporting the economics of acquisition-focused branches.
Cross-sell branches. Representing nearly a fifth of the total, cross-sell branches distantly lag in new customer acquisition but lead the pack in cross-sell with current relationships. These outlets have the highest sales productivity, as measured by sales per full-time-equivalent employee (FTE) per branch, and also the highest staff-adjusted sales profitability, reflecting superior results in generating high-value account originations.
High cross-sell branches benefit most from the deployment of higher skilled, highly active sales staff. Along with mining the current customer portfolio for cross-sell, seasoned reps can drive the outreach to acquire high-value customers as well.
Cross-sell branches better justify the investment in more experienced staff having a deeper understanding of complex products, both in terms of meeting customer needs and also in terms of potential returns generated by successful cross-sell. High cross-sell branches can also benefit from the assignment of specialized sales personnel (e.g., wealth, small business, mortgages) to deepen product competency in the branch. These skilled sales representatives have a priority need for effective customer analytics and lead qualification/generation tools, supported by a strategy for targeted relationship expansion.
Mixed branches. The remainder of branches – more than 55% of the total – are closer to an even split in sales coming from new-to-bank customers versus cross-sell with current relationships. The mixed branch archetype comes closest to the traditional “cookie cutter” view of branch banking and, at least in the short term, requires the least change. This allows a strong focus on the more bifurcated acquisition and cross-sell branches, where the opportunity for specialized sales staffing is greatest because of the customer mix.
The urgency to improve sales productivity, branch staff deployment and sales target calibration has steadily risen in recent years, with no end in sight. Even with firming consumer demand in a recovering economy, the branch will be walking tightrope economics given the steady encroachment of web and mobile banking.
Thus the performance influence exerted by differing branch sales dynamics will only grow in importance. Many management teams will have three priorities in augmenting branch staff management in 2015: anchoring decisions in market dynamics; revising sales targets to better reflect local opportunity; and aligning sales staffing models with sales targets and productivity benchmarks.
Market reconnaissance. The bank needs to be able to look across the markets within its network footprint and understand the shape and scope of opportunity in each. In some instances network scale will exert a pronounced influence on market share. In other instances trade area dynamics and customer demographics will matter most. Many banks are losing significant opportunity by under-nourishing high potential markets while over-investing scarce sales and marketing resources in less promising locales.
Goals and incentives. Uniform sales goals and incentives do not work well in a setting of high variability among local markets. In high-potential markets representatives wind up coasting, while in weak markets they face futility because the bar is set too high. Goals should be driven by market opportunity per-product set, independent of legacy staffing decisions. Banks will also need to get comfortable with variable incentive structures based on the return that can be generated by the sales teams in different locales.
Staffing models. The time has come to base staffing decisions on local market opportunity, not only for sales reps but also for the full branch staff. Along with considering “acquisition” vs. “cross-sell” sales dynamics, this includes innovations such as cross-trained “universal bankers” and the selective use of specialized sales talent.
Market-driven branch staff management is not just an interesting idea for retail banking’s extended “off-season” following the recession, but rather a foundational concept for future competition.
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