Two truths are surfacing as banks adopt total quality management, total customer focus, or similar processes designed to put them on the cutting edge of service and profitability.
First, these processes could work. Second, confusion is currently overtaking the perceived benefits.
Motivated by the best of intentions, banks are adopting these new philosophies and changing their cultures. Their implementation, however, is mired in clouded terminology and resultant misconceptions.
We have found:
* Quality is being defined from the viewpoint of a banker rather than the strategically valued customer.
* When customers play a role in defining quality, they may not necessarily be the ones strategically valued. Or if they are, they are likely being surveyed too infrequently.
* The focus of internal bank teams may be on improving workflows, without customer input on what constitutes quality.
* Quality is frequently viewed as the single, final achievement, rather than a process of making the best better.
* While productivity may be seen as a viable assessment for operations or retail bank functions, it's not being embraced by commercial bankers.
* Productivity is viewed as a single dimension related to streamlining operations or containing costs.
These misconceptions have evolved as overeager or enthusiastic bankers try to find a quick solution without sufficient forethought. In their haste to capitalize on the benefits of TQM and similar processes, bankers frequently begin with poorly defined terms.
Know Your Terms
For example, standards, measurements and goals - each distinctly different - may be considered one and the same. And too often, performance and productivity are assumed to be synonymous. Not true in either case.
Standards, measurements, and goals are not only distinctive, they also differ in importance for professional bank teams. Borrowing the baseball analogy from "Productive Bankers and Profitable Bankers: The Grand Slam of Banking," let's examine banking.
Like baseball's public rulebook, banking standards must set forth clear, publicly known criteria, such as how a call is defined, when a product is considered sold, and who sold it.
Goals Provide Accountability
Like baseball's home runs, earned-run averages, and errors, banking's measurements must also assess achievement against set standards for each Position.
The starting pitcher in baseball receives a different assignment than a relief pitcher. There are also specific goals for batters depending on their order at the plate. Individual bankers, too, must have separate and specific goals.
These goals depend on the individual, the portfolio, the branch, or the market. The goals, in fact, provide the accountability so bankers will know if their strategy for success is being accomplished.
A recent approach has been to use national surveys that select a single number as the bank's benchmark. The number might be dollars outstanding or number accounts per portfolio, for example.
When Confusion Abounds
Today's trend that uses single numbers as benchmarks abandons clearly defined standards, eliminates measurement based on achieving those standards and ignores accountability. The result: more and even greater confusion.
Confusion also abounds when bankers evaluate productivity and performance as though they were the same.
Successful bankers know that productivity and performance are not synonymous. They know that productivity is individual achievement, such as a baseball player's batting average.
Hitting the Game-Winning Run
And they know that performance is the individual's contribution toward achieving the team plan. Hitting the game-winning run, for example, represents performance.
Productivity, then, is determined by dividing quality output by quality input. And the quality in each is defined by the customer. Another view is to assess productivity against the bank's resources that were used to gain the strategically valued business.
Sometimes, bank executives incorrectly limit productivity's scope by only relating it to streamlining and cost-cutting. Keep in mind: It's possible to have quality without productivity. But it's not possible to have productivity without quality.
Separating productivity from quality can backfire only too easily. It can happen when incentive programs attempt to boost productivity, and the number of calls made becomes the standard of measurement. When any call counts, quality is lost. The result? Incentives can undercut TQM and productivity!
The use of trial balloons is another field error often ignored when assessing a bank's quality process. Allowing trial balloons to be brought before a credit committee violates two quality principles.
First, they ignore quality by sidestepping the bank's credit policy. Or else they provide incomplete credit analysis.
Second, the experience lowers the quality the prospect perceives. Bank resources - input - are expended with no chance of quality output. Thus, no productivity is achieved.
Leveraging Productive Time
Trial balloons are eliminated by developing and using a professional loan-request package. A tool of this type educates potential customers and builds quality relationships with prospective customers and the community. Moreover, it also leverages the banker's time.
Despite the cautions and examples cited, the value of TQM, total customer focus, and similar processes should not be discounted. These models are potentially viable.
Their best utilization, however, encompasses a balanced combination of:
* Involvement of strategically valued customers.
* Clear definitions of terms and standards.
* Use of appropriate tools, such as a loan-request package.
* Recognition by bank management of the multiple dimensions that contribute to success. Removing the confusion that surrounds TQM and similar philosophies is critical for banks striving to achieve quality and success today and as they look 25 years into the future.
Ms. Myers is president of Dearborn Business Group Ltd., West Lafayette, Ind., and author of the recent book, "Productive Bankers and Profitable Banks: The Grand Slam of Banking," and the new cassettes, "Productive Bankers Achieving the Three P's."