Following its record settlement with the US Consumer Financial Protection Bureau over allegations of misselling last year, Well Fargo went on to announce large-scale changes to how it pays branch employees (paywall).
On top of increasing base pay and reducing variable compensation, the firm announced it was eliminating individual sales goals in lieu of rewarding sales team performance based on measures like customer relationship growth, product use, and client experience.
Wells Fargo also announced it would enhance its sales oversight processes to identify problem areas before they become systemic. These are all changes that bring it into line with leading practice across the industry, according to CEB analysis.
In fact, many executives in CEB’s networks of retail bankers say they are taking a similar look at their own incentive structures. But while most have expressed confidence that their firms will emerge from the increased regulatory – and consumer – scrutiny largely unscathed, they still face the thorny problem of how to now grow their retail banking business.
Time to Get on the Front Foot
Finding new growth is a problem because the steps that most banks and credit unions have taken to align sales processes with customers’ interests are, by and large, defensive — they are meant more to protect the bank from risk and staff abuses, rather than to advance the well-being of the customer.
But there is an opportunity to do more than just mitigate risk during the sales process. Rather than playing defense, executives should start to build the foundation of a sales strategy that is both valuable to the customer and brings in long-term revenue for the bank. Three steps will help
Explain how customer outcomes and bank results work together: Firms that clearly articulate the positive value created by helping customers reach their desired financial outcomes — and how this value translates into deeper relationships and more revenue for the bank — are more likely to see their staff act in a way that provides long-term value to customers.
When staff understand the positive outcome they are working towards, they can orient their sales and service activities around helping customers with what they actually need, rather than just filling product gaps.
Ensure your sales process helps customers’ financial health, not just identifies or meets a product need: Firms that coach sales staff on the “matchmaker sale” — fitting product offers to possible products that customers are not yet paying for — risk slipping into “product push” mode rather than actually supporting customers’ financial health.
Instead, firms should design a sales process that tangibly supports their customer value model. This means equipping staff with actionable steps they can take during their sales conversations to improve a customer’s financial situation, while also driving positive outcomes for the bank.
For example, leading firms ensure their CRM platform presents customer data in a way that provides a more robust picture of their financial health, and train staff to ask open-ended questions and provide recommendations to help customers complete steps that will take them toward their goals.
Align incentive structures with drivers of long-term value: Incentives certainly play a role in a successful frontline sales strategy, but only insofar as they reinforce alignment with customer interests during the sales process. Industry research and the recent headlines indicate that short-term sales goals are short-sighted at best, and harmful at worst.
While it may be too early to make definitive recommendations, sales teams both inside and outside the financial services industry are shifting away from solely focusing on individual production goals toward rewarding employees for their ability to foster longer-term relationships with customers — additions ways to measure this often include assessments of relationship strength, measurements of staff competencies and behaviors, and/or results of customer satisfaction surveys.