A recent study by Booz Allen Hamilton Striving for growth: Best practices in retail banking sales and service channels revealed that the majority of banks are failing to fully meet customer needs and maximize sales channel performance. This comprehensive study, which used customer research and mystery shopping assessed 100 banks across 17 countries including 12 banks in the GCC, looked at what customers want from their banks, how banks are performing and best practices to drive profitable growth.
The study revealed that, globally, customers still prefer banking in branches despite the trend towards online — 63% choose to use a branch for purchasing current and savings account products and 54% choose their branch to purchase mortgages. The situation in the GCC is very close to that of the global average. However, despite the importance of the branch channel to customers, many banks in the region under-perform and have yet to get the basics right. GCC banks scored on average 20% less than the global average. As the competitive intensity increases in the region and banks have to deal with a more heterogeneous customer base in terms of age, wealth levels and cultural background, addressing shortfalls in sales effectiveness in the branch will become a crucial source of differentiation.
So how can sales effectiveness be improved? Our work with domestic champions that continue to win year in year out shows that success can be attributed to the mastery of the five following levers:
• Customer information and insight: Branches need to leverage customer insights more and provide tailored service to target customer segments.
• Sales management: Sales staff should be supported by a sales pipeline and have access to the right level of MIS to measure performance.
• Processes and tools: Sales processes should be simplified and staff should have access to systems that support a single customer view.
• Capacity and deployment: Staffing levels need to reflect the customer mix and sufficient time should be allowed for sales related activities. Capacity planning needs to be proactive to cope with peaks in demand.
• Roles and capability: Branch staff require clear roles and responsibilities backed up by effective HR processes and appropriate performance management systems.
In the Middle East there is still a way a go. For starters, many banks lack accurate and complete data on their customers to support the development of customer insights. Often the most fundamental data is missing. Sales management activities also tend to be more reactive in nature and driven around promotions as opposed to being approached in a systematic fashion. Furthermore, few banks have managed to deploy the systems and processes to enable a single customer view across multiple channels. Finally, many customer sales representatives viewed themselves primarily as providers of service and not responsible for sales. For example, in one of our clients, the customer sales representatives spent 41% of their time on service-related activities and only 9% of their time on sales-related activities.
On top of the above capabilities, many banks continue to overlook the performance impact of successful branch managers. That’s a big oversight because exceptional branch managers can have a disproportionate impact on a branch’s performance. In a recent Booz Allen Hamilton analysis of more than 4,000 bank branches, just 5 to 10 percent of branch managers demonstrated consistent top quartile performance over a sustained period. But those branch managers delivered three times the growth of their local competitors. On a three-year net present value basis, an exceptional branch manager is worth between $500,000 and $1 million to his or her bank.
All the signs are that the same picture holds true for for the Middle Eastern banking sector.
Why has this situation arisen? The results of our study suggests the following:
• Management often does not know or agree on who their top branch managers are.
• Sources of exceptional performance are not often adequately explained and thus rarely replicated. Training is often focused on developing basic skills, rather than competencies required to generate top performance.
• The symmetry between branch manager competencies and branch requirements is not always explicitly understood and managed.
• One size does not fit all — top performers harbor different aspirations and need to be cultivated differently
What are the traits shared by top performing branch managers? They are proud of their bank, their branch and their employees. They are creative in coming up with new ways to drive business. They are driven to succeed and motivated by their branch’s success, not just their salary and bonus packages. They are confident in their ability to meet their goals and they typically hold an integrated view of all the aspects of their business — sales, service, people and the core operations.
Just as important, however, are the differences among successful branch managers. Interviews conducted in conjunction with the Booz Allen Hamilton study found that they perceive themselves, accurately or not, to be variants around two themes: “town mayors,” who identify more strongly with their branches and their communities than with the overall organization, strive to maximize their branch’s performance and their communities’ ability to prosper and have few ambitions to move beyond their current position, or as “find the next challenge” types, competitive about their role within the bank as a whole and desirous of moving to larger branches as a way to take on positions of greater importance within the organization.
Understanding these differences in both ambition and talent offers banks the opportunity to manage the career paths of their top performing branch managers more effectively, getting the most out of those high performers and make sure they put the right manger in the right branch. Given that the attrition rate among branch mangers industry-wide is between 20 and 30 percent every year, rigorous, thoughtful career planning is essential to the retention and continued success of the best branch managers. But that must be coordinated with new approaches to every aspect of human resources processes relating to the branch manger, including recruitment, training and performance assessment. This will be a particularly tough challenge in the Middle East given the shortage of skilled resources and the relatively low standards that prevail in many human resources departments.
Taking an objective approach to managing sales managers will work in any retail sector, or any business for that matter. For banks, it will produce a significantly better return on the investment they make on their branch managers — but it will work only if high performers are given the tools, the goals, and the incentives to maintain their pace. On that note it is worth it for retail bankers to ponder the following five questions:
• What is the state of the key levers required to enable successful sales activities?
• Do you know how to find and assess your best people?
• Do you have the right people in the right branches?
• Can you successfully attract the best from your competition and retain them?
• Do you have the infrastructure to support and develop great branch managers?
Peter Vayanos is a Vice President and Partner with the Financial Services Practice of Booz Allen Hamilton, based in the Beirut office.
Peter Jenkins is a Vice President and Partner with the Financial Services Practice of Booz Allen Hamilton, based in the Dubai office.