Bank executives could benefit by following the example of New York's former mayor Ed Koch, who used to travel around the city asking his constituents, "How am I doing?"

Besides shareholders, bank management must satisfy two important constituencies -- customers and employees. Understanding each is crucial to an institution's success.

In recent years, financial services companies of all types -- banks, brokerage houses, and insurance companies -- have begun to use surveys as a practical, quick, and inexpensive technique to understand and communicate better with customers as well as employees.

Much has been written about the ideals of corporate excellence, seamless service, employee empowerment, and total quality management. For bank managers, these vague and somewhat trendy notions are nothing more than ideals to aspire to. Little wonder that so few bank TQM programs have had any meaningful impact.

Just Asking

For banks, getting a handle on "quality" can be accomplished in a far simpler way -- through surveys. In essence, most New Age management fads are really about listening -- to customers (for the market perspective) and to employees (for the organizational view).

And a growing number of bank executives are discovering that the most effective way to find out what these constituents think and feel is to do the obvious: ask them.

At the heart of nearly every modern management fad are the ideas of being "customer focused" and "client driven." Every day, banks serve thousands of clients, both individual and corporate.

Wouldn't it be nice if we, as management, could climb inside their heads to see what they see and how they feel about us? This is exactly what a client audit does.

A client audit is a written survey inviting a representative group of the bank's active clients to provide honest and direct feedback about the institution -- its image, products, services, fees, people, etc. Most customer surveys yield a response rate of 20% to 33%.

Furthermore, when asked, a high percentage of respondents voluntarily identify themselves, providing the bank with what is essentially an open invitation to follow up with a telephone call or personal visit.

There are two good reasons to conduct a client audit. First, it gives clients the impression that (as the bank's advertising probably says) you really do care about them and are listening. Research on the use of client surveys suggests that financial services clients appreciate being asked their opinions.

In addition, the client survey provides the bank with objective, credible, market-based information. Such data are extremely useful in planning and marketing. As one bank executive recently observed, "Clients don't lie -- and perception is reality."

Customer 'Reality Check'

Conducting a periodic customer "reality check" should become part of every bank's planning and marketing program. Although many bankers believe they already know what their customers think, they can't be sure unless they ask.

The current business environment is too competitive for bankers to be speculating on customer expectations. Don't guess; find out the facts and build a strategic plan that truly is driven by customer service.

Typically, bank customer surveys attempt to answer the following questions:

* What image do customers have of our bank? When they think of our bank, what images come to mind?

* What do customers like most about doing business with us? What aspects of doing business with us do they like the least?

* What other banks or financial services providers do our clients use? To what extent are our customers aware of the full range of products and services we offer? How many customers are using other banks for products and services we offer?

* How do customers rate us in terms of service quality, responsiveness, and administrative support? Are there aspects of our telephone, operations, or clerical support services that we could improve?

* Bottom line, how well have we performed for our customers? To what extent have we met their expectations? If asked to do so, how many of our active customers would recommend us to others?

The best client surveys are those that bank officers and customer contact personnel have had a hand in designing. Not only does this ensure that the survey reflects the true character of the bank, it also instills an element of "buy in" which is essential to acting on the results.

To ensure objectivity, customer surveys should always come from the bank's executive office and not from the customer's branch or account manager.

Strong Internal Culture

According to a recent Fortune poll, nearly 60% of the CEOs of America's 20 largest compaines conduct regular surveys of their employees; 93% say these surveys are "helpful" in developing better employee relations and boosting morale.

One characteristic shared by all "excellent" companies is a strong, positive internal culture in which employees are "empowered" through delegation of authority and participation in decision-making.

The product of this attitude is an enviroment in which employees at all levels feel positive about the organization and are motivated to contribute to its success.

Unfortunately, in many banks, the Pogo adage too often applies: "We have met the enemy, and he is us." The success of some banks is hindered more by their own internal organization than by external competition.

In recent years, as many banks struggled with asset quality issues, management focused on internal issues -- policies and controls -- and not on external issues such as customer service and marketing.

Employee Audit

As managers, how can you be sure that the organizational culture in your bank is healthy? Short of personally interviewing everybody, the best way is to conduct a confidential, anonymous, written survey.

Employees, too, appreciate the attention, as manifested in the typical 85% to 90% response rate.

The audits for banks usually attempt to answer the following questions:

* How well do employees understand the bank's strategy? To what extent do they feel the bank is on the right track? How confident are they about the bank's future? How would they rate the quality of leadership in the bank?

* How is morale? What are the issues or factors that both help -- and hurt -- morale? Is morale trending up or down?

* How do employees feel about the bank's products and services? To what extent do employees feel that the bank's clients get good value for the fees charged?

* Do employees have a clear understanding of the organizational structure and lines of authority? How do employees rate the level of efficiency and productivity in the organization?

* Do employees feel fairly treated by the organization in terms of performance and expectations and rewards? Do employees understand what is expected of them? Do employees feel sufficiently responsible -- and accountable?

* How would employees rate the bank's technology? What suggestions would they offer for improving customer service or achieving cost savings through technology?

* How well do employees think they work as a team? How clear is communication across functional lines or between different levels of the organization?

The biggest impediment to employee surveys is the bank CEO who, fearful of the answers he might get, decides it's simply better not to ask. But, if organizational problems do exist, a survey affords the opportunity to identify and address them.

In fact, conducting an employee survey is far less risky for senior management than not identifying organizational problems and allowing them to fester.

Through the remainder of the decade, banks will have to compete more intensively, not only with each other but also with securities firms, insurance companies, and mutual fund providers.

For banks to be winners, they will have to be more sensitive -- and more responsive -- to both customers and employees. A simple survey may be a good place to start.

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