Unless you’ve had your head in the sand or your ears plugged recently, you’re likely aware of the coverage CBC has been providing on the concerns and complaints they’ve received from frontline employees and managers of TD Bank. It started with a few employees and managers complaining about the undue pressure and threats to job security they felt if they didn’t hit what seemed to be unrealistic targets to sell products and services to customers, regardless of whether or not those customers needed (or could afford) them. I understand there is now a class-action suit filed against TD Bank, blaming them for a quick decline in stock value as a result of the negative publicity they’ve received over these complaints.
Turns out, as I suspected, this is the tip of a banking iceberg. As of this morning, I heard that over a thousand emails have been received by CBC from employees and customers of all five major banks. The cat is out of the bag. Or, was it ever in the bag in the first place?
Here’s what I think’s happening. Virtually every financial institution wants to increase the number of products each customer has, as well as capture a larger “share of wallet” (a common growth-focused term used in most financial institutions). This is quite understandable, as having more products and services with any financial institution:
- makes it more difficult or complex to shift from one financial institution to another;
- hopefully increases customer loyalty (and therefore lifetime value to the organization); and
- increases revenue per customer for the financial institution (and ultimately share value for those financial institutions who have shareholders to be accountable to).
There is no question that skinny margins make it more challenging for banks to make money for their shareholders. Yes, there are other ways they do that beyond their retail banking operations; however, let’s stick with retail banking for now.
I hope most customers believe they should pay something to have access to financial products and services. However, paying for something they don’t need or want is a different issue. I don’t happen to believe that any bank has a stated policy to sell as much as possible to whomever they can, regardless of whether or not that product or service is needed. Nevertheless, that behaviour sometimes results when the primary metrics used to manage performance are strictly financial. Anyone that is on a commission or incentive compensation is pretty quick to figure out how to maximize their income potential. That applies to frontline employees and to virtually all levels of management.
Within most modern financial institutions there is room for judgment regarding how individual managers support corporate culture, deliver sales targets, etc. As long as one stays within the law and stated corporate practices, there are many ways to “skin the cat”:
- Some managers rule with an iron fist and feel that threatening or brow beating employees is the way to generate performance . . . by focusing predominantly on achieving sales quotas. This style has been clearly alluded to in the initial complaints against TD Bank. Some of those managers can be found in most organizations–it is certainty not restricted to TD.
- Others take more of a coaching approach and do what they can to help their staff improve performance to build individual capability.
- Some feel that fostering a competitive environment amongst staff is the way to grow the business. Not a particularly healthy or sustainable approach from what I can see . . .
- And others feel that creating a sense of “we’re all in this together, let’s help each other succeed” is a better way to go/grow.
What are some ways to avoid the spotlight the banks are currently caught in?
- Shift the priority of metrics. If customer satisfaction is given more weight than products per member or share of wallet, presumably frontline employees will focus much more on offering products and services that clearly benefit their customers. As a credit union member, I find my credit union often points out ways I can reduce my service fees, reduce debt through consolidation, shift to a more beneficial package of services, etc. They seem totally focused on serving my interests and needs, rather than simply selling something to meet a quota. Perhaps this is easier for them because they don’t have to keep demanding shareholders happy . . . hmmm. The outcome may be the same for them and me in terms of the products and services I purchase; however, the clear intent is to serve first and foremost—which I appreciate and tell others about.
- Ensure performance feedback goes up and down throughout the organization. If all employees are truly valued and you want them working in ways that enhance the company’s reputation as well as its financial performance, implement performance management systems that are well thought out.
- If you primarily measure performance based on hitting financial targets, you will drive frontline behavior that hits those targets—short, quick transaction focused conversations. If you put more emphasis on measuring member satisfaction, you will get conversations based on identifying member needs and finding ways to address them.
- Measuring interaction time with each customer (whether in person or online) may be an appropriate metric—it generally equates to efficiency. But is it more important to have a short interaction that is efficient, or a good one that is effective for increasing customer satisfaction? Both are important, but which is most important?
- So, think through the desirable consequences and anticipate the potentially undesirable consequences of the metrics you use to manage performance—from the perspective of your employees and customers!
- Use the right metrics at the right level of the organization. One of my clients had branch targets for their wealth management offerings. However, a decision was made to manage those metrics at the branch management level, rather than distributing them down to individual wealth managers. Why? Because they wanted their wealth managers focusing on doing what was right for their customers without the distracting pressure of hitting targets. Branch managers were expected to be accountable to the senior management team for achieving the desired wealth management business growth-that’s good business practice. However, they then focused on (a) being a buffer to their wealth managers from the pressure of corporate targets, and (b) coaching them on how to improve their individual and collective performance in serving the best interests of their clients–which also served the best interests of the organization in the long term.
Well, that’s the way I see it, anyhow!
David Gouthro, CSP