Ideas You Can Bank On

by Vicki Martell

Most small banks and many mid-sized banks today have the good fortune of not being constrained by the effects of imprudent risk-taking that has tainted the top echelon of national banks. And the majority of small banks say they’re ready to take customers from the big, national lenders.

But the fact is, most small businesses are not looking for loans. The companies that are looking for credit tend to be financially weaker. The implication for business lenders is clear: the universe of prospective qualified small business borrowers is shrinking and competition for these customers is intense. And big institutions will not be vulnerable forever. They retain many advantages over small banks and some are already beginning to re-energize their marketing for small business customers, especially for non-credit services.

So what’s a smart banker to do? Here are three actions that are currently being taken by enlightened leaders of financial institutions of all sizes:

1. Enhance prospecting activities. Some best practices include developing consistent value statements, and using tools to expand and prioritize small business prospects and networks.
2. Develop more effective service and selling skills. The top performers enforce consistent sales behaviors and activities, including call planning and conducting face-to-face calls, to build new small business relationships – for both credit and non-credit products.
3. Sharpen credit skills and knowledge. Effective small business bankers are taking credit knowledge beyond just the underwriting group, ensuring that any personnel who have direct contact with small business customers are able to conduct confident discussions about credit needs and risks.

Whether yours is a large or small financial institution, the competitive front for small business banking is just opening up. Given these dynamics, it’s possible that we’ll see a significant displacement of small business relationships over the coming months and years. All of the evidence suggests a great urgency to take action – now.

Visit www.omega-performance.com to learn more.

by Vicki Martell

The American writer and humorist, Mark Twain, famously quipped that a banker is “someone who lends you an umbrella in fair weather and asks for it back when it begins to rain.” Well, we’re experiencing the worst financial weather in years, and business lenders have acted aggressively, and often legitimately, to reduce credit risks. The question now is who will provide rain protection for longtime and qualified business customers when many lenders are tightening credit standards?

Recently, a mid-sized regional bank gained the primary financial relationship of several businesses from a larger national institution. The reason? The business owners wanted a more stable relationship; they perceived that the large institution had changed its policies and practices, while their own businesses had not fundamentally changed.

The message seems to be that relationships truly matter. Here are some examples of best practices that Omega Performance is seeing among financial institutions:

• Top performing lenders and relationship managers create and use disciplined relationship plans, including identifying and constantly monitoring the institution’s highest priority relationships. Their action plans include anticipating and establishing scheduled follow-up calls to address the customer’s needs and opportunities, establishing target and milestone objectives, and scheduling a detailed call calendar. When combined with advanced skills, these practices create motivated and focused relationship managers who can help business customers change the shape of their performance curve.
• Highly effective relationship managers go above and beyond the norm in communicating with business customers. They focus on improving communication and responsiveness and demonstrate greater appreciation for their customers’ business.
• The institutions that are most likely to survive and succeed in today’s uncertain environment are focusing much more sharply on credit risks at the relationship level, and not just on overseeing credit risk at the institutional level. This is enabling them to identify potential problems early, when appropriate and constructive actions can be taken. It also allows them to selectively target opportunities to take high quality relationships away from competitors.

Organizations that ensure these practices are institutionalized and not the exception, have the greatest chance of success. There is and will continue to be increased competitive pressure. As one executive put it, “Keep the front door open, but close the back door. You have to prevent attrition of your best business relationships, and pro-actively try to gain new relationships.”

Visit our website to learn more: www.omega-performance.com

by Caroline Gray

Blended learning has a lot to offer. It has tools to assist in the critical areas of communicating the business’s culture, values and approach, systems and procedures training, product knowledge, embedding sales and service models, and assessing and remediating critical skills gaps. Take, for example:

• Podcasts—These can be used by key executives to communicate a business’s culture and values. They grab people’s attention and increase emotional engagement. They can be accessed from mobile devised on the way to work, or downloaded to the PC at the job.
• Text Messages—These can be pushed through “dashboards” at spaced intervals. These messages are critical reinforcers of a new organizational culture or direction.

These tools can be leveraged for organizational challenges, including:

• Simulation-based Systems and Process Training—Online templates enable a “show me / let me try / give me different levels of feedback.” Then “test me to confirm I can do it” types of templates make creation of this type of training fast and transferable to the job.
• Product Knowledge—When mergers occur, product knowledge is a particular challenge because of the different products, new sales models, and different levels of knowledge and skills within the two organizations. Online product mastery modules that teach product features and benefits, build fluency to enable effective customer communication, and then are reinforced with one-the-job coaching are another example of how blended learning can help organizations meet the hefty performance challenges.
• Assessing and Remediating Knowledge and Skill Gaps—Online advantages include the ability to link directly to applicable modules of instruction if a gap is surfaced; flexible access to the testing modules; immediate organizational intelligence about progress and scores; targeted, individualized training programs based on specific job competency requirements; and an ability to overcome geographical and language barriers.

Which one to choose depends on a number of factors, but all can be effective if well designed. Blended learning can be a key tool in helping organizations accomplish their business objectives in these challenging times.

by Cindi Campana

You can’t afford to work your pipeline only when it’s convenient. In fact, you need speed to performance in your pipeline management. One of the key, yet often overlooked, questions used to better pipeline results is, “Am I speaking to the right people—particularly the Decision Makers?”

Research reveals that a major reason sales people lose control during the sales cycle is because they have not adequately or appropriately identified the Decision Maker during their pre-call planning process. It is critical to get to the person who will have the final say in the decision.

In order to readily identify the Decision Maker or to confirm that you have already identified the Decision Maker (rather than an Influencer or a User), incorporate the following questions early in the questioning process and in your pre-call plans:

• What is the next stage in the evaluation process?
• How are decisions made in your organization?
• Who else needs to be involved in reaching a decision at this time?
• How do you suggest we get the necessary people involved at this stage of the evaluation process?

Now more than ever, pre-call planning and reaching the Decision Maker is important in order to shorten the sales cycle and increase the speed to revenue generation. The bottom line is this: if you are selling to someone who can not buy, you are wasting a great deal of time, money, and effort.

http://www.omega-performance.com/solutions/sales-service.asp

by Jan Abrams

It’s clear that the credit crisis was touched off by a series of events that began with risky mortgage lending. Borrowers defaulted, causing the increase in foreclosures, which in turn caused home values to fall, resulting in an even greater, continuing stream of foreclosures. Both the real estate and the corresponding mortgage-backed securities have been devalued and now lenders are struggling to collect on loans or foreclose on the properties. One of the major hurdles that the lenders face as they try to foreclose is one of their own making—poorly constructed, conflicting, or missing loan documentation.

According to the Real Estate Weekly News, Loan documentation audits conducted by You Walk Away, a company that specializes in helping borrowers who face foreclosure, found that 80% of their audits revealed major documentation errors, violations of lending regulations, predatory lending practices, or even mortgage fraud. The result? Borrowers are literally walking away from these loans without any penalty, leaving the lender to deal with the devalued collateral.

In another twist, many borrowers in foreclosure are insisting that the lender produce the original promissory note for the loan. In many cases, according a recent report in the Las Vegas Review-Journal, the original note has been lost because the loan has been sold, resold, or perhaps consolidated with other loans into a mortgage-backed security. While this tactic may not ultimately result in the mortgage being thrown out of court, it does serve the purpose of delaying the foreclosure and providing a window of opportunity for the borrower while increasing the costs to the lender.

So, what’s a lender to do? Certainly, correct and complete documentation has always been the goal, but this ideal has not always been met. Now is the time to revisit your documentation processes and quality checks to see whether you are at risk. Your loan documentation is being scrutinized more closely than ever before. The key, of course, is consistency and attention to detail. Does yours measure up?

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.