American National Bank and Trust has taken an entrepreneurial approach to its commercial lending operation by turning its back office operation into a front-line profit center. The $6 billion-asset subsidiary of First Chicago Corp. is the market leader for middlemarket commercial banking in the greater Chicago area. Its portfolio has been growing steadily for several years, and currently stands at $4 billion.
American National specializes in making commercial loans to corporate customers whose annum sales range from $5 million to $150 million.
'"We have taken an unusual approach to our operations," said Joseph Bohne, vice president for credit services. "It occurred to us that the changes being made in technology required us to change our focus and whole orientation of what it means to be an operation area.
"For the most part, operation areas are defined as groups which focus on production and control issues," he continued. "We decided that the key element that was missing from our definition was the customer."
Mr. Bohne found that the back-office option did not have the customer in mind as it conducted business, and therefore customer service did not always reach management's expectations.
"We did not know what the customers looked like, who they were, or anything about them or their business," he said. "The people in the front room dealt with the customers and the people in the back office handled the processing." Management realized that because technology changes so rapidly, the responsibilities of loan officers and the role of back-office workers had to change in order for the bank to retain its competitive advantage.
"There is more to banking today than selling credit products," said Mr. Bohne. "In order to compete, bankers need to be able to talk technology as wen as use it effectively."
American National' s management found a need to make its back-office operation a "willing partner' in the bank' s overall commercial loan operation.
"We needed to be bring the back-office people up to speed in order to communicate with customers and provide effective solutions to operational problems," Mr. Bohne said. "Our operations unit needed to change to realize it had a stake in maintaining and sustaining business.
"For years, I don' t think the traditional operations professional had the awareness of the impomnt role they play in creating success for the bank," he continued.
American National has taken the credit operations group, wiped off the word operations from the offices and created a group of teams which meet face to face with customers.
The area has been turned into a department which provides services to customers and fellow bankers.
"The job of our operation people is to maintain success of our customer relationships they come in the door," Mr. Bohne said. "To that, you need to have more than technical backgrounds and our people have it,"
As part of the transformation, American National installed a new commercial lending system from Automated Financial Systems Inc./Littlewood, Shain & Co., Exton, Pa.
American National installed the firm's Level III commercial lending and mortgage lending system to handle its operation.
The staff now has the ability to handle on-line inquiries, reporting, and analysis as well as calculate interest, fees, rebates, and late charges.
"The system is very functionally rich compared to what we were previously using," Mr. Bohne said. "We are able to handle inquiries on-line and answer questions much faster than our other system.
"These functions have forced us to change how we work and allowed us to deliver better service," he continued.
Robert Rosserde, a partner at Ernst & Young in New York, said the idea of moving the back office to the front line of the operation is a growing trend in the industry.
"Over the next 18 months to two years, banks will be doing this more and more," he said. "Historically, the technology was not there to handle the functions, but now the tools are in place and the people can do all sorts of things instantaneously which previously took hours or even days to complete."
As part of the reengineering effort, Mr. Bohne has split his staff into teams of four and charged them with an entrepreneurial charter.
"Our teams work with loan officers to structure loans, bookings, and service plans," he said. "They also meet with customers independently to review and improve loan services."
Each of the teams are tracked as individual profit centers and receive credit for loans to customers and absorbing allocated costs. "We are a customer-intimate organization; our focus is to put together packages which meet customers' needs," said Mr. Bohne. "We don't try to force them into a production-fine approach to business."
Some of the things the bank is doing as pan of its team approach are quite rare.
Earlier this year, one of the operations teams hosted a customer event to discuss quality measures and what improvements needed to be made to service the customers better.
"Our people met with the customers over lunch to discuss the jugular of the operation," said Mr. Bohne. "In some cases, it was the operations people without the relationship manager -- allowing us to get to the heart of the matter by meeting face to face?"
The bank also invites customers in for lunch on a monthly basis to see how they are doing and what is going on in the their business.
"We want to know where the customers' business is going so that we can be responsive and figure out what we need to do to meet their needs," Mr. Bohne said "A customer recently came in and asked for changes to a specific function and we were able to do it rather quickly, without going through the traditional method of go'mg through a banker."
Mr. Bohne looks at the relationship between the operations people, the bankers, and the customers as a ladder. The more rungs he can put on, the stronger the relationship with the customers becomes.
"If we get a lot of operations specialists talking with their counterparts at a customer location, our relationship will only get stronger," he said. "It is a given that operations people know more about operations than loan officers -- which allows us to get this done quicker." Along with the changing role of the operations people came a change in the characteristics of the staff.
Three years ago, 15% ofthe employees in the operation had college degrees -- now over more than 60% have them.
"I have had to change our ability to deliver the services, and as pan of that I had to upgrade the staff," Mr. Bohne said. "We have brought in people who have a business focus and not just a production mind focus."
Mr. Bohne said management is delighted with what is going on and views the transformation as adding to the strength of the institution. "We have created a situation where people realize they can turn their customers over to us and not worry about being embarrassed or losing the account," said Mr. Bohne. "These people can deliver solutions, and management realizes it."