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BirdsEye View

one solution to the cross-sell problem

 Cross-sell has been many banks’ mantra for years, along with building customer relationships and share-of-wallet.  Dick Kovacevitch, Wells Fargo’s previous CEO, led the cross-sell charge with clear goals for relationships per household and share of wallet, stating that he wanted 100% of every customer’s business.  Countless others have followed in his footsteps, yet the goal remains elusive for most.

In past articles we talked about the sales culture and daily execution as one path to the cross-sell goal.  Another is breaking down the silos.

In our on-going quest for better numbers, finer customer profitability information and line-of-business profitability, we have inadvertently helped erect even more silos across our banks. As financial management and measurement sophistication improve, bottom-line focus by line-of-business, department and even branch becomes sharper.  As units strive to optimize their performance, the whole becomes less than the sum of the parts, and silo walls grow even higher.  Individual units end up doing well and maximizing their bonus, while others falter and the overall enterprise isn’t optimized. Two possible losers in this scenario are the customer and the shareholder.

Our business is really about the customer, not about the product or the line of business.  Those institutions that elect to be in the business of developing comprehensive solutions to customers’ financial needs have a leg up in the marketplace and the Street because they are on the path to break down unnecessary separation.  Defining success as 100% of the customer’s business is a good point of departure.  That, culturally, is the necessary first step (but not the entire solution) toward exceeding cross-sell goals. 

An important second step is tying different business lines’ success to making the whole greater than the sum of the parts.  Specifically, changing incentives to include RECIPROCAL referral expectations.  Many institutions currently expect referrals from the retail bank to other parts of their business, most notably commercial banking and wealth management.  However, such expectations are often one-sided, and the ramifications for not meeting them are much more serious on the retail side.  A good banker might not make their bonus if they missed their referral goals to other parts of the bank, but a star commercial banker is unlikely to be in that position even if they made no referrals to other bank businesses, particularly retail. 

Reciprocity is important to send an organization-wide message across business lines that cross-selling and bringing the entire business to bear for every customer is non-negotiable.  In addition, including corporate-level performance in bonus calculations helps.  For example, tying everyone’s bonus to a minimum ROE level helps focus everyone’s attention on the same goal:  taking care of customers and maximizing shareholder value.  While outstanding performers can still make a major part of their bonus, senior management and others are tied at the hip to each other’s success.

Cross-goals aren’t typically common, but they should be.  Reporting cross-referral results monthly by business and by geography, for everyone to see, is a huge motivator in and of itself.  In addition, several strategic initiatives can be dedicated to build the cross-sell system-wide, starting by looking at each household (commercial, retail, whatever) as the premier bank asset.  Leveraging that asset is the most important goal at all customer touch points.  The result will inevitably involve growing relationship-per-household all across the network and improved earnings consistency typically follows.

In recent years, some banks have resorted to client service teams as the best way to break down the silos and fully serve their customers.  This works particularly well with the commercial customer base, where teams comprised of commercial bankers, wealth management experts, Treasury Management officers and insurance executives visit customers to develop comprehensive solutions to their needs.  Banks who have selected this path realize that the enemy is the internal competition we created, not the competition outside.  They have built customer focus through cross-goaling and naming deepening share of wallet as the definition of success. 

Banks are not organized well to fully meet customer needs; instead, they are often organized to make their own life more convenient, and they rarely take a look at themselves from the customer’s perspective, asking the question:  how easy is it to do business with us?  Changing the underlying structure to make the bank more customer-centric is a major and costly undertaking.  It is possible to make meaningful strides toward that end by instituting a culture change instead.

The balance between individual contribution and corporate success is not easy to strike, but those who do so effectively create win-win combinations for all:  customer, shareholder and banker.