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Directors' Compass
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HUMAN CAPITAL AND THE POWER OF "WE" - USING CUSTOMERS TO SUCCEED For several years we have used the Director's Compass to guide the conversation on bank leadership and the strategic priorities that are required to achieve premier performing bank status. This month we are going to delve deeper into the importance of partnerships within the successful bank. When we refer to partners we mean those groups that touch your bank including the shareholders, employees, customers, regulators, directors, vendors and community. The difficulty for banks is that each of your partners has different priorities, different interests, and different requirements. A truly successful bank strategy is one that balances the interest of all its partners and has the buy-in and commitment from all its partners. As we explained in last month's Human Capital section, implementing strategic change can easily be derailed by not focusing enough on the people impacted by the change. The same can be said of strategic plans. Too often we see bank strategies that only focus on the interests of the shareholders and the bank director. Some have focused only on satisfying the regulators. Too often these strategies fail and have serious financial consequences. Over the years we have seen that the successful bank strategies are the ones that have the engagement and support of all its partners. Banking is not an “I” enterprise. No matter how great a banker or director you are as an individual, if you aren’t building the Human Capital within your bank, the chances of being a premier performing bank are greatly diminished. You need other board members and bank leaders to help to envision the strategic priorities of the bank. You need your employees to be motivated, engaged, and the frontline face of the bank. You need your customers to value you as a strategic partner instead of just a service provider. You need your community to see you long term supporter of the community and its businesses. A premier performing bank is a “WE” enterprise. From our experience, the concepts of Human Capital and Partnerships have been the topic of discussion for boards and management for years. However, talking the talk and walking the walk are two different things. Over the past decade the banks that we have identified as truly premier performing are the banks that have embodied the concepts of Partnerships and Human Capital. By focusing on their Human Capital these premier performing banks strengthened and grew their financial capital. Last month we focused on the importance of staff and how to resource and uplift this important partner for your bank. We have long stated that the staff is the most valuable asset of your bank. When we discussed staff issues we focused on the concept of CECAR: Compensation, Expectation, Communication, Appreciation and Respect. This month we will focus on your customers. In the most basic relationship with your customer you are seen as a service provider. You provide financial services to your customer, and the customer’s only concern is whether or not the services are a benefit. In today’s world there are a number of banks that will provide those services, so the customer has a choice. The fact that the bank benefits from the relationship is not of primary importance to the customer. However, if you have formed partnership relationships with your customers, than you are no longer “just another bank service provider.” A partnership with your customers allows you to create value together. It means that your customers see the value in your success, and are willing to work with you in order to achieve it, just like you are working with them to achieve their success. Today’s customers do not care so much about a product or service. They care more about the “quality of the experience” that the company helps them to enjoy. Companies now have to see the experience through the eyes of customers and find ways to make those experiences as memorable as possible. Think about the difference between Taco Bell and a Morton’s Steakhouse. There is obviously a difference in the quality of the food (ie. The product) that they are providing. But the different cost of ingredients does not account for the different prices. Morton’s is selling you an experience, of which your steak is only 1 small portion. As a customer, you are willing to pay the significantly higher prices because you value the experience of fine dining. To guide our discussion on the power of partnerships with customers, we will be using the book “The Power of We –Succeeding Through Partnerships” by Jonathan M. Tisch, John Wiley & Sons, Inc. This should not be a new book to many of you, because we have been a strong believer in the partnering concepts detailed by Tisch. Within the book, there are three important factors in treating customers as partners: communicating from the bottom up, focusing on the customer experience, and linking with customer communities. We’ll discuss each of these components and see how they apply to a bank. Communicating From The Bottom Up The first priority is that business leaders must recognize that today’s customers aren’t content to be merely a passive target of advertising or marketing campaigns. Instead of being a target, customers are now often the sources of the “buzz” surrounding a business. Look at the impact of Twitter on branding and marketing. A free tweet from a celebrity is a lot more effective at generating interest than paying that celebrity for an official endorsement. The same goes within the banking world. The most effective sales people for your bank are your customers. If your customers see you as a strategic partner in their success, then they will be championing you to the market, because they are invested in your success. The first step in creating that partnership with your customers is to really know who your customers are. Most boards and management have traditionally operated under the premise that more customers equal more success. This is a dangerous mindset, because there are many different types of customers. You need to ensure that your customers are ones that will support your vision of long term success. Otherwise, the customer will hinder your success. Within the major banks we are seeing a lot of culling of customers. The majors are redefining their customer base, and narrowing the criteria for selection. It is imperative that your board and leadership team ensure that you understand your customers, understand what your vision of success requires from customers, and can differentiate between the customers that can support your vision and those that will hinder it. Why would you waste your financial and Human Capital on customers that will hinder your vision of success? It is a waste of resources. Bringing in the right kind of customers could result in a long term cash flow and continued growth from referrals and enhance satisfaction from employees whose daily jobs are improved when they can deal with appreciative customers. Attracting the wrong customers will result in costly returns, a diminished company reputation and disillusioned employees. Some suggestions are as follows: * Analyze the list of your long term loyal customers in terms of what products or promotional campaigns attracted them to your bank in the first place; * Profitable die hard customers are attracted by referrals and not advertising, they invest in referral programs and communication networks; * Be cautious targeting young customers – their frequents moves and changes in life situations make them unlikely long term profitable customers; * Avoid marketing to customers with historic patterns of frequent switches in their banking relationships; * Get an understanding of who your ideal customer is and then ask them questions and interact; and * Brainstorm with your customers as what is important; what makes the difference; and how you can build on that relationship going forward. Too many bankers think they know what their customers want. In reality, bankers often are often just transferring their own opinions onto the customer. The truly smart banker does not assume they know what the customer wants. The truly smart banker asks the customer questions. Find out what is important to them and their business. Learn how your future plans can intertwine and support your customer’s future plans. These are critical steps in making them a partner in your bank and showing the investment in Human Capital. Focusing On The Customer Experience A great exercise that I recommend for all bank leaders is to act as a customer to your bank. Start by asking the questing, “How often do I experience my organization the same way as a customer does?” For most of you it will be a rare occurrence. We recommend that this becomes part of your routine as a bank leader. Visit your organization’s website; call the help desk; visit a retail location where your products are sold; or ask for service at a typical outlet. You may be amazed to learn what a typical customer experiences and you’ll certainly discover ways your organization can improve its operations in the future. One of the critical elements of a strong customer experience is customer trust. How do you develop and sustain a sense of trust with customers at your bank? Following are some suggestions that may allow your bank to become a better entity and to strengthen its position with your customers: * Meet every commitment 100% of the time; * Be on time for every appointment and each commitment - deliver on every promise made; * Arrive at meetings with customers with accurate, timely, and relevant answers; * Anticipate questions and be prepared to answer them in as much depth as is necessary; * Promise a lot but deliver more, but be certain that your promises set high expectations; * Admit your errors, don’t dodge responsibility, and don’t blame others; * Never let customers be blindsided – alert them about issues
that will affect them; * Stay in touch – don’t let your customer feel that they are being taken for granted or are not of interest to your bank; and * Be available and accessible – not just 9 to 5! Linking With Customer Communities Tisch emphasizes that today, more and more companies are recognizing the existence of customer communities (a group of customers, who identify with one another, have shared ideas and feelings and want to help shape their relationship with your business). Partnering with customers includes facilitating the creation of customer communities and making those communities part of your marketing system. The important question is: Who are the customer communities that affect your bank? For a lot of banks, it’s professionals such as doctors, attorneys, CPAs and financial planners. A question a board and management should ask is: How does your bank partner with its most important customers? What do you do to set yourself apart? Start by listing those communities that affect your company. Some may already exist in the formal sense but some may be simply a loose knit group of individuals who have little in common other than their affiliation with your bank or company. Figure out ways in which you can open two-way communication with the customer communities and invite them to work with you. With their input you will discover ways of improving your operations to benefit everyone concerned. We’ve seen banks benefit from their work with financial planners, CPAs, and attorneys. By addressing their needs within their community, you have in essence hired them as your sales representatives. They will be touting your bank within the rest of their community. In our strategic planning retreats we emphasize how important it is to build a relationship with the customers and being highly valued within your customer base. The most profitable customers of your bank are coveted by every other bank, and if possible they will steal that customer away. These customer invasions go on every day. Treating customers like partners makes them locked into your bank and less vulnerable to being picked off by competitors. We emphasize the following factors on how we can be number one with our customers: * Maintain a life long relationship with profitable customers; * Maximize the products and services to each customer to maximize revenue through cross selling – the more hooks you have into a customer the less likely they will leave; * Attend to all financial needs of the customer; * Become a partner in the customer’s success – take a vested interest in their success; * Outperform expectations; * Be the customer’s first choice; * Maintain reputation and credentials; and * Don’t be small minded! Think beyond the features and benefits to the applications on how you can make it work for the customers. Competition in the banking environment is fierce! Loans are not growing even though money is available; deposits are available but at what cost and how long? And those banks that don’t have a lock on their customers will be not around for the long term and their exit will be depressing related to value. Buyers do not pay premiums for transaction banks – they pay premiums for relationship banks! Building an effective partnership with a customer allows a board and management to have choices in the direction of their bank going forward. Next month we will discuss being a good neighbor and dealing with the regulatory agencies in building the partnership. We encourage you to read Tisch’s book and to look at all of the partners in a different light. Building the Human Capital within our partners will be essential for surviving. We need to work together to achieve “Premier Performance.” Going it alone will not cut it. Gary Steven Findley, Editor URL: http://www.Findley-Reports.com/compass.html E-Mail info@Findley-Reports.com
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