Asset Based Lending
Chief Investment Officer
Commercial Loan Automation
remember old commerce bank?
Commerce Bank, Vernon Hill’s retail bank creation, was a paradigm-changer in our industry. A few years post its acquisition, a look back can better isolate the best practices we can consider adopting.
1. Crystal-clear business model. Commerce Bank had an extraordinarily tangible culture and brand identity. Every little detail in its hundreds of branches was managed with much forethought, some say micro-managed. As a result, the company developed raving fans among both employees and Customers (Commerce management required to always capitalize the C in Customer, even for internal only communications), whose loyalty persisted long past the acquisitions, and even past the change from the brand’s red color to TD’s green. Simple and clear brand message, supported through extensive training that tugged at the employees’ heart strings, created an actionable brand despite teller turnover of 100%+. Now THAT’S an accomplishment!
Takeaway: Know what you stand for. Make it simple. Inculcate in employees from Day One. Pay attention to the details.
2. Focus on customer experience: WOW: Team WOW, Wow Committee, WOW Awards. Dovetailing on the culture was the desired customer experience, which tied directly to the employee experience. Commerce was a very tightly run bank, no doubt about that, but it was also FUN. Management set out to wow its Customers, yet service parameters did not resemble what we typically espouse in community banking. The mandate was to take every opportunity to “surprise & delight” the Customer The Customer was at the center of the value proposition, and every employee understood that. The first training new hires went through was a two-day culture session. Executive management staffed a Department of their best employees dedicated full-time to creating the WOW experience for Customers and employees, which culminated in the famed Radio City Music Hall awards and celebration. Management didn’t just talk about the desired experience. It lived it and demanded it, a bit like Disney does, from its employees. Reinforcement came from multiple sources, but not through incentives or high deposit rates. It was much more about spirit than money.
Takeaway: If you value culture show it in multiple ways and reinforce constantly with both positive and negative incentives. Money is an excellent motivator, but heart might trump money if you can engage it.
3. Be truly local. I’ll never forget the opening of Commerce Bank’s branch in Chinatown, NYC. Like the bank’s other branches it had a fantastic location, but it was also across the street from a huge HSBC branch. Note that HSBC is a Chinese bank… On opening day Commerce offered an unusual gift: rice cookers, not the George Foreman Grill or a tool-bench. Instead of the normal 1-time $5,000 raffle, they changed to 3 $888 raffles, a lucky number in the Chinese culture. The lines to open account started stretching around the block. The bank bussed in 100+ Employees from Mt. Laurel to hold umbrellas for those new Customers standing outside in the rain, rented extra space across the street with additional desks to accommodate the flood of new Customers. It was an amazing experience. And the secret? Rice cookers? Somehow, through this simple gift (and a staff that, to a person, spoke Chinese), the bank connected with its marketplace. And don’t forget about the 24/7 call center located in Mt. Laurel and staffed by local residents.
Takeaway: Local works, but it doesn’t always mean what we traditionally think it means…
4. This is war. Commerce offered bounties for hiring key employees from the competition, bringing over major customers and, most importantly, forcing the closure of a competing branch. Every employee of the victorious branch participated in a $5,000 bounty once their competition closed their doors. Doesn’t sound very gentlemanly and bank-like, I know, but for a woman from Israel this makes great sense. This wasn’t about the money or the bounty. It was about an achievable goal that stood in front of a team and was within their reach. It reminds me more of my son’s football games than banking.
Takeaway: Single focus and a common enemy are both strong motivators.
5. Geography rules. Commerce was a line-of-business bank, but the power truly resided in the geography. One testimonial to that is the fact that most of the regional presidents are still with TD. Central production and local delivery is a winning combination, and Hill figured that out. In addition to regional executives the bank had field marketing managers and other more local support to help execute the vision that originated from HQ. Those folks ensured that merchandising, community development and other activities were consistent with the corporate vision, and also provided feedback from the field to improve the connection with HQ in Mt. Holly, NJ.
Takeaway: Matrix organizations can work if the lines of demarcation are clearly laid out.
6. Perfecting the core of the value proposition. Commerce played the convenience card to the Nth degree. That was their differentiator, and it was near impossible to duplicate by the competition, since it was evident in every facet of the operation. Management continued to enhance the convenience perception and did not compromise on it even when the stakes were high (e.g. the location and size of the New York City branches). They didn’t just rent coin cashing machines and drop them into the branches. They had them designed both mechanically and cosmetically to Commerce standards and made them their own.
Takeaway: You can create a sustainable competitive advantage by sticking to your brand promise and flawlessly executing it.
7. Detail counts. Commerce had a long check-list of items that were checked every day at every branch before opening. It copied the fast food store model well, including the micro-management of the details to minimize the role of individual decision making at the lowest levels. The apparent result was consistent customer experience across branches and the entire network. The other side of the coin was disengaged employees where micro-management became a burden.
Takeaway: Detail is important. We often don’t pay enough attention to detail to effectively execute strategies. At the same time, mind-numbing detail leads to a dummied-down workforce and unmanageable turnover.
8. Major investment in training. Commerce truly invested in training. Some say it overinvested, including the waterfall in its training center… The training wisely focused on the brand and the feelings evoked by it, not on mechanical behaviors (a-la Starbucks during its hey-day). Employees were taught how to be vibrant, fun, energized, happy etc. Once training was over, these expectations were reinforced in the field (something that doesn’t always happen in our own shops), leading to a customer experience that often met the brand promise.
Takeaway: Functionality is a necessary, but NOT sufficient, condition. Focusing on what we want our customers to feel when they enter our branches, and then reinforcing constantly when trainees get back in the field, are the secret to success.
9. Unique compensation system. I’m a firm believer in incentives. They are very effective in changing behavior when they are clear and easily understood by employees. Commerce did not have a high variable component to compensation. Instead, it offered high base and low incentives. This makes sense when you consider the expectations from the customer contact people, but I still have trouble with it. How do you motivate people to do what matters if you don’t pay them to do it? Commerce found a way, through its training, clear brand identity, and the churn-and-burn of their front-line employees…
10. Public Perception or Core Operating Model. Commerce Management quickly realized that Retail deposit growth could only grow them so far. So without adjusting the brand they presented and reinforced with the public, “America’s Most Convenient Bank”, they aggressively moved into Commercial loans and deposits, cash management & insurance. They establish core competencies and lead market shares for Healthcare & Governments. This wasn’t anything they advertised, but these areas grew to become significant contributors to their success (and ultimately downfall…).
Takeaway: Never stop thinking about reinventing or at least evolving your model. Just don’t sacrifice your core principles.
For the record, this is not an ode to Commerce Bank. There were many things wrong with the bank, especially as it grew larger. One glaring flaw was playing the convenience card in a place that didn’t value convenience as much as price (Florida). Another was the cost of high turnover. Yet another was the persistent ethical issues the bank faced, both for its leadership personally and for its accounting and deposit allocation practices. At the same time, let’s give credit where it’s due. Commerce had many positive aspects to its business model that can be lifted out by any bank and effectively put into practice. Let’s not throw the baby out with the bathwater!