The best places to start with sales productivity enhancements are at the market extremes, both low- and high-traffic, where capacity misalignment is the greatest.
As retail banks move into 2013, they face continuing challenges in growing revenues while further reducing costs, raising serious questions about sales productivity. There is substantial pressure for immediate improvement, driven by the combination of soft demand, compressed margins and shifting customer preferences for remote channels.
Between 2005 and 2011, we estimate that there has been a more than 50% decline in average new revenues generated by each sales representative. There are many factors that need to be addressed to deal with this challenge, such as refining a distinctive value proposition and improving the ability to sell through direct channels. But an overlooked and immediate opportunity is the allocation of staff and skills across the network.
In short, staffing models and job classifications are out of date in the new world of overall lower sales volume and sharp inconsistencies in local market potential. Significant volume and productivity gains are possible through addressing this situation.
The local market problem is one of extremes. At one end, growing numbers of rural and low-traffic markets no longer can justify the sort of standard full-staffed branch that was rolled out by the thousands in prior years. At the other end, dense and high-traffic mar- kets have become even more of a sales battleground, but with branches that are often insufficiently staffed to tap the full potential of the local market.
We find that management teams have tended to ignore or delay action on sales staffing questions, hoping for a major market bounce that never comes. They put off needed branch network reviews and then try to take sweeping actions at the very last minute. Even then, they cling to rigid staffing models, trying to further tighten obsolete system-wide approaches rather than reformulating for a changed market.
The better approach is to stop using branch network averages to make critical sales staffing decisions and instead take a market-driven approach to sales productivity, harnessing innovation and local responsiveness to selectively reduce costs and boost revenues. This change will require a restructuring of branch roles, activities and technology. The best place to start is at the market extremes, both thin and high- traffic, because that is where capacity misalignment is the greatest (Figure 1).
Low-traffic branches have been particularly hurt by two major forces that are driving a rethink of sales staffing. One factor is the diminished value of deposits, reflecting the low-rate environment of a slow-growth economy. The other factor is customer migration to remote channels and electronic payments, which is steadily eroding branch foot traffic and lobby transactions — and thus sales opportunities.
The 50% decline in average new revenues generated by each sales representative has forced banks to focus on improving their “return on sales force” investment. Meanwhile, we estimate that U.S. branches face at least a 25% further decline in branch foot traffic over the next three to five years, reflecting further customer online migration.
The consequence of the continuing trends in customer online migration is that the typical regional bank will soon see at least a third of its branch network operating at depressed transaction levels (fewer than 5,000 per month). And this type of hollowing out will eventually spread to over half of many branch networks in just a few years.
This trend is directly colliding with rigid staffing models that specify a minimum headcount in all locations. While roughly a third of branches are at immediate risk of becoming starved for customer traffic, many have already reached what are believed to be irreducible minimum staffing levels, both on the teller and platform sides, with resulting productivity levels that are unacceptable. The typical minimum staff for a small branch is a branch manager; two full-time tellers; one or two part-time tellers; and one platform sales FTE — often too much capacity nowadays.
For a branch with 5,000 transactions and 40 sales per month, each teller is processing around 10 transactions per hour, and the manager and sales representative each are conduct- ing roughly one new sales presentation per day. In many cases the market opportunity is limited, so there is little chance the branch could “sell” its way out of the productivity predicament.Yet small branches are often profitable, so closures may be unwise.
A major part of the answer is to create “universal bankers” on a fairly massive scale, so that a reduced number of multi-skilled staffers can flow among various job categories to efficiently serve customers. Banks have already had some success with this approach in supermarket branches, which attempt to provide the fullest possible service with a thin staff. Beyond this proof of concept, retail executives need to gain conviction that this approach will work in traditional branches.
Under the universal banker job design, branch staff receives extensive cross-training on products, services and even basic counter transactions. This can be combined with a broader use of part-time employees to cover peak volumes. As part of this migration, the role of the branch manager also needs to be redefined. For a viable low-traffic staffing model, branch managers need to become player/coaches. Our studies show superior sales productivity for banks that have made such transitions.
Two additional productivity variables are technology and hours of operation. There are further opportunities to streamline counter transactions, for example through cash automation. And advancing customer self-service technologies will continue to free up additional staff time for high-value sales and service. There also may be opportunities to judiciously trim the hours of operation in some locales.
Our field studies show superior sales and service productivity when these actions are properly implemented, with no loss of controls or customer service.
While the universal banker is inevitably the answer for sub-scale branches, we find that staffing models often do not allocate enough resources to the high- volume, high-potential branches. This reflects the backward-looking staffing logic (based on average historical net- work volume) that remains embedded in most staffing models today.
It is generally the case that in high-potential markets, sales productivity already may be high, and adding more staff would appear to hurt productivity. Yet the local market may have fuller potential than what the branch is configured to tap. The beauty of judicious sales staff expansion in such circumstances is that it allows the bank to gain market share without adding more physical outlets.
To make accurate decisions, banks need to understand local factors such as market density; con- sumer and small business demand; and competitive positioning. Once a robust, forward-looking market analysis for all of the locales within the network is done, it then becomes clear where some of the high-traffic branches within the network actually need more sales staff, not fewer.
In the initial stage, such expansions should be conducted through tightly monitored pilot tests. For many banks, such field tests present an opportunity to apply all of the institution’s best sales practices in one place. The goal is not to see if simply dropping in new bodies will create lift, but rather to see if the bank can gather its proactive sales energy, skills and tools to take advantage of additional sales resources.
To take full advantage of select staff expansions in high-potential markets, progressive banks are using a variety of companion tac- tics. These include extending branch hours; staging seminars and special events to drive foot traffic; instilling relationship-deepening activities into job roles; setting new sales targets and performance incentives; establishing disciplined outbound calling activities and targets; and making expanded use of appointment banking.
The Flaw Of Standardization
The historic driver of branch staffing and formats was the need for standardization. Standardized distribution is inherently easier to manage and thus it was thought that standard formats and staffing was the path to network efficiency. Indeed, when deposits were in demand, the simplicity of standardization more than paid off in terms of efficiency of management.
In today’s changed market, however, this approach has left many banks over-weighted in sales staffing for rural and low-traffic branches and underweighted for high-potential outlets. By addressing both extremes, the bank is effectively redeploying sales resources where they will do the most good within the overall network. In an increasingly narrow-margin business, this precision approach will yield far better results than further attempts at across-the-board tightening.
Darryl Demos is a Managing Director in the Boston office and Dale Johnson is a Principal in the Chicago office of Novantas, Inc., a management consultancy based in New York City.