GONZO READER NOTE: We recently received a leaked memo from the new Retail Executive at Van de Lay Bank & Trust and think it’s timely given our industry’s reaction to a world where Wells Fargo meets Elizabeth Warren.
Van de Lay Bank &Trust
September 30, 2016
TO: Retail Banking Team Members
FROM: Harry Foresight, EVP Retail Banking
RE: Van de Lay’s Retail Strategy
Allow me to introduce myself. My name is Harry “Hank” Foresight, and I started my new role last week as the Executive Vice President of Retail Banking for Van de Lay Bank & Trust. I know you all join me in wishing your former boss, Dirk Dreamforce, all the best in his future career endeavors. I know Dirk has great interests in innovation labs, life coaching and competitive yoga, so I know he will remain a busy man.Let me start by being completely transparent with my team. I joined this bank at a time when retail banking is facing a huge identity crisis. The scandal at Wells Fargo this past month has certainly put a cloud over our business, but I believe Wells is just another symptom of our industry trying to operate an obsolete business model. For the past two decades, Dirk and his outside sales trainer, Zippy Roth, have pushed the “Never Accept No” mantra in our supposedly client-centric sales culture. When I arrived, I observed elements of this culture including the daily sales huddle, the customer profile form, the Top 10 call sheets, the teller sales scripts and the SalesNow! branch scorecard that one employee confidentially referred to as the “performance matrix from hell.”
Despite all this hoopla and pressure, the cold facts show that the bank’s branch-new-account and loan-production-per-branch and per-employee have declined consistently in the past decade. While this team has sweated nervously on a sales treadmill, the world has changed, the consumer has changed, and every aspect of delivery and marketing has changed.
Here’s my overall conclusion: the sales culture at Van de Lay Bank is mostly stupid. We will be blowing it up and starting a new retail strategy that makes sense for the new world we live in. Frankly, I’m very sorry the great team I’ve met across this bank in my first week has been forced to waste so much time on a misguided idea. Instead of sales on steroids, customers simply want their bank to be straight with them and get things done for them without the typical pomp and B.S. that seem to have invaded the financial services industry. As one CEO in the industry recently said to me, they want “smart people with good hearts who know how to execute.”
If we aren’t going to have a sales culture in the future, what will we have? I’m not a fan of buzzwords but I would say we’re going to build a “Smart Culture.” I recently read a cool book from Ron Shevlin at Cornerstone Advisors called Smarter Bank. It proposes that banks will compete more in the future on helping customers with their own financial performance than on the traditional aspects of price and geographic convenience. I am confident that if we focus like crazy on building knowledge and making it easy to respond to customers, we can create win-win opportunities for the bank and its customers. We don’t have to gain earnings per share on our customers’ backs.
Starting tomorrow, October 1, I will begin leading a new Retail strategy at Van de Lay. There are six components of this new strategy.
1: Money and People Will Be Redirected to the Future of Our Business
My initial review of Van de Lay’s financial and operating information shows that 73% of all delivery channel costs are concentrated in our 50 branches. Meanwhile, I see an urgent need to improve our marketing capability with digital, analytics and the need to address a positively archaic call center.
Within the next two years, I plan to close roughly 20 percent or 10 of our branches and redirect this money to urgent delivery channel investments for the future. Once transition costs are absorbed, the $9 million of run-rate operating expense is going to be focused on major upgrades to digital banking, a major Web site overhaul, a digital marketing system, a new call center system, and staff adds in digital, analytics and outbound contact center advisors. We will lower our cost per transaction in the branches by 30 percent while we create the best digital storefront and contact center of any bank in our marketplace.
2: Processes Stink and We Will Improve Them NOW
We all live in a world of Amazon Prime, Apple devices and Uber car rides. How ironic then to see the awful way we handle key customer “moments of truth” such as opening a checking account, originating a consumer or mortgage loan, renewing a CD online or doing basic stuff like an address or ownership change.
There is a defeatist feeling that “compliance makes us do this” throughout the bank. This stops today. I am setting a goal that we will fix a “Moment of Truth” process each 90 days and within three years we will have a dozen key areas of our customer experience overhauled top to bottom. I have asked one of our top branch managers to lead this effort in a SWAT team with a project manager, a business analyst and a compliance analyst. These folks will sit together on the seventh floor, day in and day out, working on experience improvement.
3: Our Gritty Knowledge Will Be Our Advantage
There is nothing more annoying to customers in retail banking that half-knowledgeable people pushing sales. I ordered the “Next Best Product” alerts at the teller line shut down by I.T. this morning. I hate that crap. Today I will start allocating all sales training dollars from Zippy Roth and all the gift card and Igloo cooler giveaway money to build a formal credit and product training/certification program at Van de Lay that will be the hardest thing you’ve ever been through.
We will have the smartest bankers on the street in our market. Every banker will know loans and payment products like an expert and we will pound continuous training into our team like no other bank of our size has EVER done.
4: We Will Walk the Data Talk
Our poor branch people are getting email Excel file lead lists to make outbound calls and a clunky tracking system to track referrals. Meanwhile, we are using an old MCIF built when I was in graduate school. I have met with our CIO and we both agree that a grand CRM vision is not the answer right now. However, we have agreed to mutually fund a replacement of the MCIF with a version 1.0 of CRM that will simply be focused on customer relationship data, contact management and lead management.
Our data focus will initially be on big wins in improving penetration for our credit cards, mortgages and wealth management for small business owners. From there we will evolve and become more sophisticated, but first we kill the spreadsheets!
5: Everyone Will Be a Digital Banker
Going forward, we will kill the flawed assumption that people want to come exclusively to branches to have meaningful conversations. The truth is all customers will take the easiest route to need fulfillment as long as they are comfortable with how to fulfill the request. So our customer engagement strategy will be digital – period. It may be through a mobile phone, through an email from a private banker, an outbound business banker with a tablet, or a chat in the contact center.
No matter what the interaction, we will be loaded with organized content, contextual Web landing pages and e-signature approvals every step of the way. The branch is NOT where our customers come to see us. The branch is a place where bankers engage digitally as much as physically and rest up before heading out in the market to meet new customers.
6: Value Contribution Will Replace Widget Scorecards and Metrics
Our bank will not be killing all incentive plans because of Wells Fargo’s greed and idiocy. I personally have no ethical issue with performance-based compensation around production when it’s done right and uses common sense. I want to kill our current “matrix of hell” scorecard and replace it with a well-designed plan around value creation. I will be working with our HR and Finance groups in the next three months to be ready in January to roll out a plan that pays employees incentives based upon the estimated Economic Value Added or EVA of each product at different size tiers.
Our performance compensation will be based upon development of EVA with harsh penalties and disqualifications for any risk or compliance issues. We will encourage our bankers to build a book of business over time, and they will share in that value creation. We will no longer terrorize our people with daily sales pressure. Our smart, digital bankers will figure it out if they want to succeed in our culture.
In terms of executive-level metrics, we are dumping the monthly branch profitability reports. Our sales-per-banker-per-day metric is history. Instead, we will be playing for the long term with metrics around the following:
- Delivery System Production – We will track our volumes and EVA production across all channels and by banker and team. Importantly, I hope to triple the volume of retail revenue creation through our digital and contact center channel over the next five years.
- Delivery Cost – We will be tracking measures that ensure we are managing our overall delivery costs, including cost-per-transaction and cost-per-loan. These metrics will help guide our capital and operating expense reallocation and help us afford new strategic investments.
- Experience and Usage – We will be obsessed not only with our Net Promoter, Referral and Retention scores but also with the critical insights we will gain by driving a serious “voice of the customer” culture. To that end, we will keep a map of our 18 Customer Moments of Truth across all channels with a Red/Yellow/Green status and key improvement activities we are focusing on in each major process.
- Value Creation – We will replace widgets with the concept of risk-adjusted returns on capital and relationship revenue development. A simple initial metric will be revenue-per-customer. There are so many win-win opportunities with our customers that can drive this metric higher it’s insane, and I know just the smart digital bankers who can do it!
Retail bankers are at a crossroads, and only those who face reality as it is and relentlessly work to create value in new ways have a shot at the future. You can throw Zippy Roth’s 300-page sales playbook away. It’s time to modernize our delivery, get smart, go digital and have fun as banking professionals again.
Author’s note: A shout out to Mike Rechin, CEO of First Merchants Bank in Muncie, Ind., for saying the wonderful phrase, “Smart people with good hearts who know how to execute.”
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