No one will dispute that sales is an integral part of banking today. But to survive and prosper, banks must do more than simply hire good sales people; they must motivate all their employees.
Money is a great motivator. At Barnett Technologies Inc., for example, management has been able to boost productivity by 15% or more among clerks assigned the tedious task of entering the dollar amounts on checks as the items move through check-processing equipment.
The operations arm of Barnett Banks Inc., Jacksonville, Fla., was one of the first in the country to convert its check-processing operations to image technology. Instead of actually moving paper checks through high- speed reader-sorter equipment, the paper is converted to digitized images and processed in a computerized environment.
The information keyed in to Barnett's check-processing system, a high-speed imaging system developed by Unisys Corp., is critical to the accurate processing of payments. With an estimated 93 million items passing through the system monthly, speed is also important.
But W. Allen Brown, director of operations and support systems, noted that a speedy data entry clerk who makes too many mistakes saves the bank nothing, since errors ultimately must be corrected by someone else.
"Speed without quality doesn't do me any good," he said; "it just transfers the problem to another area."
Barnett developed an incentive pay plan for its check shop that rewards data entry clerks according to how many checks they encode, but the plan also takes account of how many checks couldn't be read and therefore had to be passed on to balancing clerks or had been keyed inaccurately.
Sophisticated reporting capabilities built into the Unisys imaging system help the bank keep track of productivity, Mr. Brown said. "A program like this," he said, "can't be subjective."
The result for employees, said Mr. Brown, has been a notable increase in pay. Some people added as much as 25% to their base salaries by accumulating fractions of a penny for each check encoded.
For Barnett, the program yielded substantial increases in throughput. The work load per person was roughly 2,300 items an hour when the program was adopted three years ago but now tops 3,000 items an hour.
"The fastest operator I had was doing 4,000 items an hour," until he took another job in the bank, said Mr. Brown.
What Barnett has done in its check shop is not unusual. Incentive pay plans have been a staple of check processing since the 1970s, noted Richard Poje, a partner in Treasury Strategies Inc. "But they are like incentive plans in any other area of business: You get what you pay for," he said. "The incentive will only work if the bank's objectives are carefully considered and the incentive promotes behavior which achieves those objectives."
John Cochran, chief executive of FirstMerit Corp., Akron, Ohio, agreed. "Incentives are highly motivating; they will change behavior. But you have to make sure that the behavior" being encouraged is desirable.
FirstMerit, which provides incentive compensation plans for key executives and managers as well as for front-line sales employees, wants to cut costs, enhance revenues, and improve productivity through these programs.
Mr. Cochran said the programs, begun in January 1995, have helped boost the bottom line at the $5.5 billion-asset bank company. Earnings per share rose from 98 cents at midyear 1995 to $1.17 at midyear 1996, while the company's return on equity rose from 11.5% to 14.5%. FirstMerit operates more than 130 branches throughout northeastern Ohio.
"We've asked our employees to manage these things with some intensity," said Mr. Cochran, a former president of Norwest Corp.'s highly profitable Nebraska affiliate. "We won their interest and their hearts in these matters based on our incentive rewards."
About 25% of FirstMerit employees earn incentives, Mr. Cochran estimated. The payments are tied to growth in deposits and loans at the branch level, as well as to revenue growth from banking and nonbanking products. An employee's base salary can be boosted by 15% to 25%, he said.
The performance of individual employees, branches, and the banking affiliates is measured weekly using sophisticated software tools, Mr. Cochran explained. Incentives are paid quarterly. Employee and operating unit performance measures take into account factors such as fee income generation, deposit growth, service quality, and cross marketing success.
"It's a highly effective program in changing behavior when tied to a good coaching program," explained Mr. Cochran.
Anat Bird, chief operating officer of Roosevelt Financial Group, St. Louis, is an active coach in her institution's incentive pay plan, calling branches daily to quiz employees on the day's sales efforts.
"It's working here because management takes it very seriously," she said of Roosevelt's plan.
Less than a year into the program, Ms. Bird said, Roosevelt employees are selling more than ever.
"We sell every week more phone banking clients than we used to sell in six months," she said. In addition, the bank has doubled productivity in its mortgage lending area, increased consumer loan productivity fourfold, and increased its checking account base by 30%. Whereas the typical customer service representative averaged 2.89 sales a day in December 1995, by September the same employee was averaging more than 10 sales a day, according to Ms. Bird.
The formula for success is simple: Break down everything into bite- size pieces, she said. Employees are asked to set sales goals each day and for periods within the day. "We even have goals for productivity between 9 a.m. and 11 a.m.," she said.
For their part, managers are urged to set productivity goals and customer retention goals, and to compete for top honors for their units. "The competitive spirit is good, particularly when you work in teams," said Ms. Bird. "They want to win."
At Roosevelt, front-line sales people get monthly incentive bonuses; managers get quarterly incentive payments. The parameters of the incentive program are changed quarterly, Ms. Bird said.
While added pay is an important way to motivate sales, the promise of money, by itself, is not enough, said Ms. Bird. Employees must understand that the future of their jobs depends upon their meeting sales objectives.
"They have to know that working and selling is a nonnegotiable part of the job," explained Ms. Bird. "In our case, if they do not meet the minimum performance expectations, they do not keep their jobs." No one at Roosevelt has been fired for failing to meet performance objectives, she said.
Allen Mounts, an Old National Bancorp vice president, agreed that employees need more than the promise of additional money to prod sales. But at Old National, a $5 billion-asset company based in Evansville, Ind., there is no threat of dismissal. Employees, said Mr. Mounts, want goals. That's what makes the job challenging, he suggested.
Customer service representatives are paid a fee for each account sold. An employee can add upward of $150 a month to his or her base pay through effective cross-selling, Mr. Mounts said.
The challenge to bank management, he said, is to work with employees to meet objectives. And, he noted, a successful incentive program can take time to develop.
Experts agreed that commitment must be communicated to employees. A management that fails to communicate its goals throughout the organization will risk missing the mark with its incentive pay program. That's why Roosevelt's Ms. Bird finds it necessary to probe branch employees continually about their marketing pitches - and why Mr. Mounts routinely hits the road to stir up interest in the holding company's incentive program among executives at its 25 affiliate banks.
"It's important to communicate to the affiliate CEOs that the program is important," he said, "why it's important and what they can do to move the program along. Sometimes the success of a program doesn't turn on the payment itself; it's the process."
Ms. Murphy is a regular contributor to Management Strategies.