Ideas You Can Bank On

by Mario Berard

It’s no secret—with a downward economy comes layoffs, cutbacks, and downsizing. While this provides critical relief to the bottom line in the short-term, research indicates that cutting back on your organization’s training function could impact your organization’s competitiveness in the long-term. But with the challenge comes opportunity—an opportunity to invest in the learning and development of your organization’s human capital. Therefore it is more important than ever that those organizations continue to invest in their employees’ learning and development. Affected by dramatic restructuring, staff reductions, new rules and regulations, changing technologies and shifting priorities, employees have never needed learning and development more critically than now. How can you keep your global competitive edge despite these inevitable challenges?

Several current trends in training have been prompted by the economic slump. Some of the current trends in L&D include:

• Increase in learning management system (LMS) integration
• Increase in custom content development outsourcing
• Increase in the use of external instructors and facilitators
• Decrease in online, self-study course implementation
• Increase in virtual classroom training
• Increase in coaching and peer mentoring focus and utilization
• Increase in informal learning such as wikis, blogs, and other easily accessible, open source methods, user-initiatied learning, social networks, employee knowledge centers, articles, videos, podcasts, and communities of practice
• Increase in rapid e-learning solutions

Though the economy is shifting, organizational learning and development remains an important factor in maintaining and increasing your bottom line. To keep your organization on the cutting edge, maintain and grow your L&D functions. Provide more training opportunities to boost your employees’ morale and increase your bottom line. Diversify your training delivery by blending formal and informal learning reaching learners when, where, and how they need the learning.

by Vicki Matell

For decades, the growth paradigm for commercial banking relationships has been driven by credit. But unfortunately, there’s some compelling evidence that C&I loans are not likely to drive growth for this sector in the near future. In the last two recessions, both of which were milder and shorter than the current one, it took at least five years to restore C&I lending to pre-recession levels. So how does a financial institution save and win new C&I relationships in a world where credit is no longer king? The answer should be apparent, but the execution could be tough.

First, non-credit products and services must take the lead in driving commercial relationship growth. A survey recently released by a global consulting firm specializing in financial services showed that treasury management was the single most important priority for middle market customer acquisition. Promoting treasury management, which includes commercial deposit and cash management services, actually makes a lot of sense – as businesses struggle to shepherd precious resources and get the most from every dollar. The challenging aspect is to ensure that all commercial relationship managers and client contact staff have a strong working knowledge of the institution’s non-credit products and services.

The second part of the answer is to broaden and deepen commercial selling skills and activities. Traditional silos still exist within many institutions between credit and non-credit groups. It’s clear that non-credit services could be sold more effectively if shared sales approaches and common protocols were followed. The same consulting firm that I just referred to expressed the opinion that “centralized processes would help in several areas, including targeting and lead generation, segment-tailored offers and systematic pricing.” The challenging aspect of this part is in developing a shared approach within an institution.

We’ve recently seen some signs that more and more banks are getting the message and are shifting their priorities. It is an issue that should be on the mind of every commercial banking executive today

by Cindi Campana

We all know that it’s vital to be able to articulate the products and services that an organization offers in order to successfully address customers’ needs, questions and challenges. Guessing at product information is not acceptable and keeps financial organizations from providing an exceptional customer experience.

So why is it allowed to happen? When asked, many senior managers tell us that they estimate their employees would score 60% or lower if given an assessment on the products and services offered by their organizations. Why is there a gap? Could it be that there is a scarcity of knowledge in an abundance of information?

Traditional product knowledge training helps employees become familiar with products. However, being familiar with the products is not enough to respond effectively when uncovering the total financial situation of a customer. To be efficient, employees must be equipped to recall product features and benefits in the context of customer needs and share product knowledge across the enterprise in order to allow the customer to view the organization as one. It is becoming obvious that knowledgeable sales people offer organizations a significant advantage over their competition!

There is a huge potential for improving product knowledge training, and as a result, bottom-line business objectives. Leveraging one or several of the instructional approaches available to help build product fluency would enable employees to present solutions quickly, correctly, and without hesitation.

The days in which corporations can expect their bankers to successfully fend for themselves by reading all the material they have access to are coming to an end. We refer to this as information overload. Companies moving closer to the world class customer experience are the ones that are finding ways to ensure fluency of product information is achieved. As a result bankers perform significantly better than their competitors and win the loyalty of the customer.

by Jan Abrams

In recent years, highly sophisticated credit scoring and decisioning systems helped to increase the efficiency of consumer credit decision-making. As a result, automated decision-making took center stage and judgmental lending went out of style—at least, for many consumer lenders. However, organizations that blend automated and judgmental systems in the credit-granting and credit-collections market have a leg up on organizations that stick with one approach only.

Why? Because all 700 FICO scores are not created equal. Instead, scores are based on a large number of variables. They can be affected by the consumer’s age, the types of credit in his/her file, and even the state or province in which s/he lives. Depending on scoring systems and debt ratios alone means, in the end, knowing less about your customer than you should.

Organizations that blend automated and judgmental decision making also do better on the collections side for several reasons. First, they use judgmental decisioning to price appropriately for the risk. Second, they understand their customers and keep in personal contact with the borrowers as default risk increases. They work directly with customers to collaborate on solutions to their payment problems, which gives customers incentive to pay.

Do you wish your customers would do the same? If so, you’re not alone! Consider restoring the human touch to your lending process. Remember, all 700 FICO scores are not created equal. By using a sound judgmental lending strategy to enhance your automated process, you can create a relationship with your customers that can weather even these hard economic times.

by Vicki Martell

No doubt, the credit crunch is affecting small businesses, which presents opportunities and challenges for financial institutions. With conventional bank financing more difficult to obtain (though several large institutions have pledged to lend more to small- and mid-sized businesses in 2010 than in 2009), small businesses are turning to alternative sources of financing, including through online communities, peer-to-peer lending, credit unions, factoring, and renegotiating their sales and purchase terms.

The opportunities for financial institutions fall in three areas:

1. Solidify existing quality relationships to prevent defections to other financial institutions during these difficult times. Prioritize small business customers based on the opportunity to maintain, expand, and enhance the loyalty of the relationship. Communicate assurance that your institution values their business by proactively reaching out to address their questions, concerns, and changing financial needs.
2. Develop new relationships by targeting selective, high quality prospects. Organize and manage your referral networks and prospects. In this uncertain time, financial firms need to be especially careful to screen out unqualified prospects. Combine selling skills with credit awareness and product knowledge to enhance prospecting and build high quality market share.
3. Identify potential credit problems and manage them proactively. Monitor risk warning signals and take early appropriate action to help minimize both market share losses and, worse, loan losses.

These strategies will ensure the survival of the “keystone” for your financial institution—small business relationships.

by Caroline Gray

Elearning can assist financial institutions today more than ever before. Since it came on the scene nearly 20 years ago, elearning has helped drive down training delivery costs and drive up organizational intelligence about human capital.

But what has really gained the attention of banks, medical schools, aerospace programs, and those responsible for teaching complex decision making tasks everywhere, is elearning’s unique capability to provide the right content and instructional approach by using diagnostic tools; to simulate complex on-the-job tasks and provide individualized feedback on performance—and its ability to cross time and distance barriers.

These capabilities, combined with a focus on the right content—such as being able to analyze cash flow and accurately predict loan repayment, and the ability to produce innovative solutions to address the current consumer and corporate lending environment, are what lenders need from their training partners.

Quality elearning can show the kind of business results needed to solve large problems. If your organization hasn’t already, you should consider addressing the skill and knowledge issues related to the lending crisis through effective elearning solutions.

by: Jan Abrams

The death of the small business loan has been greatly exaggerated. Nevertheless, we see an opportunity to engage small business customers to improve their understanding of the lending process, while lenders engage in a more conservative lending approach that will, in the end, benefit both the lender and the small business customer. That more conservative approach will also have to take into account the untimely demise of one form of collateral long favored by small business lenders—home equity in the business owner’s home.

Small businesses make up a huge market, and one that should not be abandoned by lenders. On the contrary, this is the time to return to the basics of commercial lending—a thorough evaluation of the financial statement, ratios, and cash flow available for repayment. It’s also time to focus on collateral other than home equity. Lenders looking for collateral for their small business loans may need to make the switch to more conventional business assets—accounts receivables, inventory, business equipment, and commercial real estate—or be willing to supplement home equity with other, more stable collateral.

The key to sales success and risk mitigation is to retrain our small business lenders to embrace a sound decision strategy that encompasses the same risk analysis used in commercial lending. While we’re at it, we also need to retrain our small business customers to prepare them for this more rigorous type of analysis. With this shift in approach to the small business loan, organizations will be able to meet both sales goals and risk management criteria

by: Vicki Martell

There is general agreement that the creation of new jobs is one of the key drivers of economic recovery. With high unemployment levels, consumer spending will likely remain sidelined, retarding economic growth. Of course, governments around the world are concerned and continue to implement programs to stimulate job growth. It turns out that financial institutions could have a critical role—and it’s a formula for winning by developing strong small business relationships.

First, the White House announced initiatives designed to spur lending to small businesses. According to the US Small Business Administration, small banks and businesses create between 60-80% of new jobs. The White House wants to increase caps on SBA loans and make it less expensive for banks who serve small business customers to access TARP funds. (http://www.suntimes.com/news/politics/obama/1843819,big-banks-small-business-obama-102409.article)

Second, J.D. Power and Associates released a report stating that highly satisfied small business customers can yield 20% more revenue for a financial institution than small businesses that are less satisfied. This confirms what Omega has observed and is potentially a very big win for financial institutions that are able to execute a successful small business strategy. (http://www.prnewswire.com/news-releases/jd-power-and-associates-reports-in-an-environment-of-tightened-credit-for-small-business-banking-customers-banks-that-foster-highly-satisfied-customers-may-yield-20-percent-more-revenue-64997087.html)

The moral of this is that after decades of streamlining and reinventing processes to become more cost-competitive, it turns out that relationships still matter.

by: Mario Berard

In these challenging times—when staffs are lean, consumers are wary, and the entire industry is under scrutiny—it’s critically important that employees perform effectively and optimally. Rather than eliminate training—the activity that’s going to guarantee an organization’s place in the market—financial services organization need to be strategic in their approach to training. Here are a few guidelines:

• First, organizations should be selective regarding the kind of training they provide. For example, training should be chosen based on its ability to develop skills and change behaviors. Often training addresses what need to happen in the workplace but does not offer the kind of experiential learning that shows how that looks.
• Second, organizations need to be creative in the way they deliver training, taking into account not only the cost for travel and expenses, but also the coverage required for employees to be taken away from their locations for days at a time. Blending several learning options often satisfies not only the need for cost effectiveness, but also satisfies the varying learning styles of employees.
• Third, organizations should ensure training success through coaching. At no time is this more important than immediately following training, when employees are motivated, concepts are clear, and application through skill practice and assessment has heightened confidence. Coaching at this critical time will ensure the ROI that justifies the training investment to which the organization has committed.
• Last, organizations that are lean cannot afford to lose remaining staff or the organizational knowledge they possess. Since there is a direct correlation between good training practices and reduced employee turnover, maintaining training protocol and frequency is critical to managing attrition.

So rather than eliminate training during difficult economic periods, organizations should be selective, creative, strategic, and diligent in their training and coaching efforts.

by: Vicki Martell

Presently, over 100 countries and a significant share of global Fortune 500 firms use IFRS. With the shift to IFRS in the US and Canada inevitable, what does this mean for Commercial Lenders? How will IFRS be a game-changer?

First and most obvious is the need to understand IFRS and the differences between it and GAAP to evaluate the impact of accounting differences. The good news is that there are many areas in which IFRS is substantially similar to GAAP. The bad news is that there are also areas with significant differences that could affect a lender’s evaluation of a borrower’s financial statement. IFRS is a principles-based approach (versus a rules-based approach with GAAP) and offers far fewer pages of guidance (2,000 versus 25,000 pages with GAAP).

More importantly, with principles-based accounting, lenders need to be sure they understand the business and the logic of the underlying business transactions rather than simply relying on quantitative analysis of the financial statements. Now more then ever, it’s important to be able to make good credit decisions independent of the accounting format used.