A new study cites high frontline employee turnover and the complexity of financial institutions' CRM programs as the primary culprits.
Posted Dec 9, 2004
CRM for most financial institutions starts with the frontline employee at the branch, but many banks are also finding that the process stops there, according to a study conducted by BAI Research, the research arm of professional financial services organization BAI, De La Rue Cash Systems, and Oracle. The study surveyed 500 banks, savings institutions, and credit unions (of all sizes), and included phone interviews with 38 executives from the nation's top 50 banks.
The relationship with customers begins at the point of an account opening, and most new accounts are opened in branches. Benchmarking conducted by BAI reveals that the average retail banking customer conducts two or three branch-based transactions a month. "Branches are arguably the most important retail delivery channel," says Paul McAdam, BAI managing director of research. "Financial services companies measure customer relationships through the branch, because sales and service there directly shape revenue potential.
"Frontline performance by employees in the branches and call centers performance is cited time and time again as the reason that many CRM programs [in financial institutions] haven't worked," McAdam says. "In many banks the complexity of the CRM programs outstripped the ability of the frontline staff to execute them."
Much of this problem, McAdam says, is high turnover among frontline staff. Seventy percent of survey correspondents cited high turnover as a major obstacle in building customer relationships.
At Bank of Amerca, for example, there will be some 30,000 new hires annually, but there will be some 43,000 leaving the bank. The difference is the number of jobs that won't be replaced. There's significant cost in training the new personnel, not just on all facets of banking, but also on factors related to customer relationships. Additionally, frontline staff has to focus on internal activities (such as counting, balancing, and paperwork), as well as serving the customer.
Other obstacles that create and maintain a gap between relationship-building strategies and frontline execution, according to survey respondents, include the amount of time needed for teller transaction activity, which leaves little time for relationship building, and too much pressure placed on frontline personnel to cross-sell.
There was a widespread difference in the responses of larger and smaller banks, according to McAdam, citing $25 million in assets as a dividing line between large and small. Seventy-eight percent of the larger banks cited frontline stress as the top reason for employee turnover. Stress was from factors including the pressure to cross-sell and compensation-related issues. Smaller banks, by contrast, cited lack of a career path and compensation issues as the main reasons for high frontline turnover. "Larger banks were better at providing a career path," McAdam says. Even so, the turnover rate at smaller institutions tended to be less than that of larger institutions, according to the survey.
One way to overcome the hurdles to relationship-building, according to McAdam, is to hire the right frontline people in the first place, and to properly use personnel with good relationship-building and sales skills. Among other ways to improve CRM efforts at financial institutions, according to panelists who spoke at a recent BAI industry conference, include enhancing sales skills, particularly with consultative sales abilities; installing and using better sales and performance tracking mechanisms; and making sure than front line responsibilities are clearly understood.
"Relationship management requires a long-term commitment," McAdam says. "While there are immediate opportunities to entrench a new relationship, service excellence and a dedication to needs yields long-term results...results that can often not be accelerated."
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