Increasingly sophisticated management techniques have raised organizational walls that need to be broken down for effective cross-selling.
The quest for better data on customer and line-of-business profitability has inadvertently helped build corporate silos. Bottom-line focus by line of business, department, and even branch has become sharper. As units strive to optimize their performance, the whole becomes less than the sum of the parts.
Customers and shareholders can be the losers.
Defining success as 100% of the customer's business is the first step toward exceeding cross-sell goals. An important second step is making one line's success dependent on that of others.
That means adding incentives for reciprocal referrals.
Many banks one-sidedly expect the retail bank to make referrals to other parts of the business - most notably to commercial banking and wealth management - but not vice versa. Good retail bankers might miss their bonuses if they fall short of referral goals; star commercial bankers are unlikely to miss theirs even if they make no referrals to retail.
It is also helpful to include the entire corporation's performance in bonus calculations. For example, tying everyone's bonus to a minimum return on equity - say 15% - helps focus everyone's attention on the same goal.)
At Norwest (now Wells Fargo), where I used to work, cross-selling goals were common. They were reported monthly, by business and by geography, for all to see. This led to outstanding relationship-per-household results all across the network and great earnings consistency.
In recent years, some banks have used client service teams to break down silos. This works particularly well with commercial customers; teams of commercial bankers, wealth management experts, and insurance executives visit customers to develop comprehensive solutions to their needs.
Banks that have taken this path realize that the enemy is not external competition but internal compartmentalization.
