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Help Me Understand: Loan Closing Rant

By Jack Hubbard, Chief Experience Officer

The following is a true and tragic tale.The following scenario happens every day in American banking.

The client, client’s CPA perhaps and representatives from the bank gather around a table to consummate a transaction.

Help me understand: if this is the beginning of a new relationship or an expansion of a current partnership, why do we still call it a “Loan Closing” and how could it become more engaging?

I always have to be clear at the outset (here’s the disclaimer for traditional lenders who think I want to turn their banks into Monty Python episodes). We’re talking about a legal transaction here that must be executed with total professionalism. “Closing” sounds so final, though. Closing a door keeps people out. Near as I can tell you want to keep the door open to let more opportunities in. So how about we call this a “Loan Celebration”?

Think of it. You worked very hard to get the prospect to even see you in the first place. You had to ask a couple of times for the financial statements and then hope that underwriting had time to fit this deal into the queue. You waited with anticipation for your approval and once you received it, you had to go back and sell the terms to the prospect. When you get all of that accomplished, you and your prospect have great cause for celebration. So why not formalize the process? Heck, I think your prospect/client, the CPA and your own team would find a Loan Celebration a most refreshing experience–one worthy of improved JD Power scores!

Here are a couple of suggestions to make your Loan Celebration one that will delight the client. Complete your transaction and all necessary paperwork, then:

Next time you gather around that table to consummate a loan (you can do it with deposits and cash management situations too!), why not do some celebrating? It’s the closing with that open door feel.

Feature Article: The 12 Habits of High Performers (Part Two)

By Ron Buck, Chairman & CEO, Solonis Center for Excellence

Introduction
This is the second in a three-part series of articles that unveils ‘The Habits of High Performers’ and how they continually balance, align and reinvent these habits through a careful combination of insight and action.

Four years ago, the Solonis Center for Excellence began an unprecedented research study to empirically determine the key ingredients of high performance at the retail branch. Our findings include the best practices of the highest performing branches and how best-of-breed performers balance customer and operational priorities while consistently outperforming their peers in deposit growth, loan growth and profitability.

Having worked with thousands of executives and branch managers, we have long understood the special characteristics that enable organizations and branches to outperform their peers. But we wanted the quantitative research that correlates high performance directly to ‘The Habits of High Performers’. This ongoing research allows us to learn from the high performers and to apply what we discover to other organizations. Thus far, our professionals have studied more than 1,000 branches, including 300 that meet our criteria as high performers. This groundbreaking research provides national benchmarks for over 80 sales key performance indicators and unprecedented insights into the habits that make branches outperform their peers. The results are very clear–high performance is definable, quantifiable and achievable.

How Do We Conduct Our Research?
We use a three-phase performance benchmarking methodology. Each participating branch has incorporated a sales tracking and measurement infrastructure that is monitored in real time. The sales tracking and measurement infrastructure provides reports and scorecards to executives, branch managers and employees. The scorecards include over 80 key performance indicators.

Today, we have narrowed our research to 300 branches that are our highest performers. Our research has defined the first ever national benchmarks for branch sales performance and has exposed ‘The Habits of High Performers’ (using Stephen R. Covey’s definition of habits). These habits are related to coaching, training, incentives and sales processes. Additionally, we have learned that the highest performers continually balance, align and renew variations of these habits through a careful combination of insight and action.

National Benchmarks
To remain competitive in the retail banking market, financial institutions need business intelligence and decision support in the form of performance benchmarking. Performance benchmarking provides a thorough understanding of how individual branches and channels compare to other peer group branches and channels throughout the country. The following key performance indicators (KPIs) are measured and score-carded at all 300 branches:

The following chart displays four selected key performance indicators. The chart shows the dramatic gap between the highest performers and average performers. The highest branch performers average 55.6 referrals per teller per month which net 98.6 new products sold per month as a result of a teller’s referral activity. The median branch performers average 32.5 referrals per teller per month which net 32.1 new products sold. The average branch performers average 10.2 referrals per teller per month which net only 4 new products sold.

Recommended Minimum Performance Levels
Based on our research we recommend a minimum branch performance level of: 1) 20 quality referrals per teller per month, 2) a win/loss ratio of 65.0%, 3) 1.5 products per referral and 4) a 90-day retention rate of 93.0%. This minimum performance level will net 18 new products sold each month. An organization with 100 tellers will create 2,000 new opportunities per month (1,800 net new products sold) if all the tellers participate at slightly above the median level.

Our definition of “high performance” is the enduring or sustained growth and outperforming of “peers” across economic cycles, industry cycles and leadership cycles. Some branches can perform in the short-term due to favorable pricing, market conditions, product promotions or an incentive program. The Solonis 300SM highest branch performers have sustained continuous deposit and loan growth over four years. The secret to this performance is directly related to their frontline habits (best practices) related to sales processes, alignment, coaching, training and incentives.

The following chart illustrates the performance of the Solonis 300SM. (Each decile represents 30 branches.) All 300 branches perform above the national average in all three areas. New opportunity growth, management and retention are the key performance indicators that all high performers use to manage frontline sales.

The Solonis 300SM highest performers create about 7.5% more new opportunities each quarter (35.5% annually). New opportunities come as the result of referrals, life events, prospecting and Onboarding activities. The highest performers don’t wait for customers to walk through the front door. The Solonis 300SM median performers create about 21.2% more new opportunities annually compared to just 6.1% for the national average. These data illustrate a dramatic gap between the highest performers and the national average.

The Solonis 300SM highest performers outperform the national average across the board while they constantly improve, renew and re-align their sales processes, coaching programs and incentive programs. These activities drive a 21.6% average annual improvement in win/loss ratio, 20.1% average annual improvement in products/opportunities and 10.9% average annual improvement in 90-day retention rate. The national average performers show no sustained growth in any of the three areas despite millions invested in software and training.

The following chart shows how all 300 branches compare in absolute terms and growth. The left illustration shows a normalized score (highest performers = 100) that is computed in absolute terms. The right illustration shows a normalized score (highest performers = 100) that is computed in growth terms.

Left Illustration: Relative Absolute Deposit and Loans
[# New Opportunities] X [Win/Loss] X [Products/Opportunity] X [90-Day Retention Rate]

Right Illustration: Relative Deposit and Loan Growth
[New Opportunity Growth] X [W/L Growth] X [P/O Growth] X [90-Day Retention Growth]

The Solonis 300SM branches use these data to make course corrections by making comparisons and studying the habits of the highest performers (best practices). Additionally, The Solonis 300SM branches continually balance, align and renew variations of these habits through a careful combination of insight and action.
Making Course Corrections

By using actual branch data, clients can make critical comparisons enabling them to understand not only how their performance compares to 300 other branches, but why and specifically how to make course corrections that improve overall performance.

This ‘n That: Blogging with Charles Green

At the various banking schools and conferences at which we are privileged to present, we make the strong suggestion that while there was once a place for consultative selling, the trust-focused approach is the next plateau. Sometimes sales professionals are challenged with the nuances of each. Who better than Charles Green to clarify those nuances? Below is a blog he authored earlier this month and we’ve reprinted it with his permission. To subscribe to Charlie’s amazing forum, go to www.trustedadvisor.com.

The Limits of Needs-Based Selling and Consultative Selling

By Charles H. Green

These are popular concepts in today's sales world:

Both approaches ask questions to define buyer needs so that the seller can alter or position the product to address those needs, thereby raising the value to the customer and the likelihood of closing the sale.

This may sound stunningly obvious and commonsensical. To that extent, it’s a tribute to the triumph over the old product-focused approach of convincing people they needed whatever it was you had to sell.

(At the same time, sounding obvious doesn’t mean it gets practiced all the time or even usually. Product-based selling is far from dead!) The mainstream view among sales practitioners is that needs-based selling and consultative selling represent the state of the art, the high road, professionalism in selling.

But it’s just not true.

Reading the consultative or needs-based books, websites or training programs, you’ll find two beliefs—implicit or explicit—that limit the value of these approaches to selling. Those beliefs are:

Their primary intent is to close the sale

A secondary intent is to qualify prospects

Those may sound obvious and benign as well, but look at it from the customer's side. Together, those two beliefs mean that if you’re paying attention to me as a customer, it’s only for as long as you think this transaction will result in a sale for you.

That means:

While you’re definitely in it for you, you’re only in it for me if it
bodes well for you

AND

While you’re willing to talk about my needs, you’re not willing to
do so unless you see a sale close at hand

Either way, it certainly appears you don’t have my interests very much at heart.

There is another way. It’s called Trust-Based Selling®. It says focus on buyer needs so that you can better articulate them and get them met. Period.

You don’t focus on their needs because it’ll get you the sale–you do it so you can help them better articulate their needs and get them met. Period.

You don’t focus on buyer needs in order to screen out buyers who don’t need what you have to sell. You do it so you can help them better articulate those needs and get them met. Period.

The key difference lies in liberating sales from the transaction. Trust flourishes only when the quid and the quo have some blue sky between them. Screening at the transaction level screams “I only care about your wallet”. Trust-based sales screens at the strategic customer selection level, not the tactical transaction level.

For needs-based or consultative selling to become trust-based, you need to migrate away from the tight leash of the transaction. Loosen up. Get free of the “pay me now or I quit doing this consulting” mentality.

Trust-based selling says, “If you consistently do the right thing by your customer, then when your customer needs what you’re selling, you’ll get the first call. And you’ll therefore make more money.”

The highest profit comes when you make profit a byproduct–not a goal–of a truly customer-centric sales process.

Unscientific Survey: Business Banking 2008

One year ago, many readers took part in our unscientific survey about issues they faced in Business Banking. We would like to know some things about your Business Banking environment today and where it might be headed in 2008. Click on the link below and you’ll be whisked to a short questionnaire which is quick and easy to complete.

Results highlights will be featured in the December Conversation Signposts but those of you that complete the survey will receive a full report including charts, commentary and suggestions.

http://www.smhtechnologies.com/surveys/busbank/busbank.htm

Register for Conversation Signposts

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http://www.stmeyerandhubbard.com/signup.html

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