Product management has played a part at major banks for 10 to 15 years, in both the retail and wholesale businesses. But after all these years, some product management groups still face organizational and operational problems that interfere with their ability to contribute optimally to business development.
In too many instances, banks have lived with the situation instead of getting to the root of the problem. It is time for banks that are having problems to take a step back, diagnose the causes, and take action.
To settle for anything less than optimum performance is too costly-and it's not necessary. Multistate banks have become incredibly big businesses, and, not surprisingly, product lines have also become incredibly large.
Such large product line businesses require and demand continuing management attention, and thus the product manager role becomes increasingly important.
As background, it may be useful to define product management and the role of the product manager.
The product management approach recognizes that in today's complex and competitive market, it is simply not feasible for business unit management to give sufficient attention to each product and product category in a long product line. Appointing a product manager for each major product or product category transfers an important part of management responsibility to the product line level.
The product manager is expected to know more about his business and the market for the product line than anyone else in the bank. He or she is involved in all aspects of the business but puts special focus on the market and customers. Product managers work with and through other functions. They are not a law unto themselves. They keep the head of the business unit informed on significant issues affecting the business line and on the business' progress.
In too many institutions, product managers cannot function this way. They spend too much time on tasks and projects and not enough on market and business analysis or on developing strategies to move the business ahead. They may be over-involved in the routine aspects of product development and in giving sales support. They may not be keeping an eye on the ball- understanding the market and thinking creatively and strategically about how to build business.
Many product management organizations lack enough people to meet their day-to-day work load. By the time the product manager finishes putting out fires and dealing with operational matters, there is no time left to consider strategic issues.
There may be a lack of understanding in the organization of the product manager's true role. They may be thought of primarily as product development and sales support people. In consequence, they cannot optimize their contribution to the business.
Finally, because of the hectic pace of business, management often has devoted limited time to training product managers and developing an operating process that will let them be effective. All these factors have combined, over the years, to inhibit development of the function.
As the banking industry continues to consolidate, banks must optimize the performance of the product management function.
As banks merge-and as product line businesses become larger and more complex-the strategy development and planning and coordination role of the function becomes increasingly important. It plays a leading role in developing common products across all territories and in managing these products.
In major banks, especially multistate organizations, product line businesses have significant size, and they affect many customers.
Such businesses need continuing, strong management.
Product management is the function in the bank that is best organized to do the homework and analysis to understand the market and the customer and to relate product development and product line marketing strategies to market knowledge and business realities, that is, profits.
Product management performance affects many parts of the business- retail, treasury management, security services, trust and investment, trade finance, credit cards, mortgages, etc. Product line considerations affect nearly every function in the bank.
In sum, product management is a relatively small function of the bank in terms of the people involved but is a critical function in terms of focus on the market and developing and carrying out strategy.
In the beginning, product management was established in many banks on what might be termed a trial and error basis. Consequently, mistakes were made in setting up the organization and in establishing operating philosophy.
The residual effects of this are still felt.
For product management to be fully successful, there must be strong senior management commitment to the concept and agreement on a number of organizational operational principles. Here are some of the most important:
Senior management must thoroughly understand the concept of product management, its application to the bank's business, and its potential benefits.
Product management responsibilities and the role of the product manager must be properly defined and clearly understood by the product manager and by others in the business.
The product management function should report to the head of the business unit, who has a general management view of the business and the authority to make decisions and resolve issues that may arise between functions.
Strong people with analytical skills who can think strategically should be placed in product management posts.
Staffing the product management function must be commensurate with the amount of work to be done.
The operating process needed for effective product management must be established, and adherence to the process should be supported by senior management.
Product managers and those who supervise them must be trained to meet the broad responsibilities that go with the job.
If a bank has had product managers for a number of years and is not satisfied with their contribution, then it makes sense to review the organization and operation of the function in light of the above factors.
This will enable management to come up with long-term solutions to put the organization on the right track. The alternative is to treat the symptoms, not the causes, and to address the same problems again next year and beyond. Mr. Wichman is principal of William Wichman Associates Inc., a product and market management services firm in Cincinnati.
