Royal Bank of Canada has put organizational muscle behind an effort to focus employees on customers, not products.
A reorganization completed late last year has broken down barriers between the retail bank's personal and commercial banking divisions and eliminated redundancies, said James T. Rager, vice chairman of Toronto-based Royal Bank.
Besides saving money, he said, the revamp has increased collaboration among marketers, salespeople, and product managers.
Before, "everyone had the spirit, but the organization got in the way," Mr. Rager said.
The handling of people who own small farms illustrates the benefits, he said. These are unprofitable customers for the commercial banking division, whose employees would probably would suggest lower-cost delivery channels, Mr. Rager said. But many small farms are owned by wealthy people who run them as hobbies - attractive prospects to a retail banker.
With the reorganization, retail and commercial bankers now work together on strategies for improving the customers' profitability, Mr. Rager said.
"A lot of business banking customers are potential retail customers," he said in an interview last week after a speech at an American Banker conference in Phoenix on retail delivery.
Product managers have been most affected by the realignment, Mr. Rager said. They must cooperate with salespeople and marketers to ensure that consumers get only appropriate product offers.
"It's a collaborative approach that's working," Mr. Rager said.
Trimming sales and marketing functions has reduced costs in the product group by 25%, he said. Those cuts are part of a program aimed at eliminating $400 million of costs. By next year, Royal Bank wants a 54% efficiency ratio in its personal and commercial banking divisions. The ratio has already been whittled down to 57%, from 63% in the quarter that ended Jan. 31, Mr. Rager said.
Royal Bank is working to make every customer relationship profitable. Only half are profitable now, but programs such as its retail banking package are intended to change that.
The flat-rate $9.50 a month package, which covers 50 transactions a month, was offered about a year ago to selected high-value customers and to those with potential high value. The bank says it has earned $21 million in new revenue from people who signed up for the package. The product has also increased the bank's ability to retain these high-value customers, because they now have more ties to Royal Bank.
In the past two years, Royal Bank has increased the number of profitable customers by almost 14%, Mr. Rager said. He added that improving profitability customer by customer is a long, tough process.
"You need the organization configured right, the silos need to come down, and you need to check the egos at the door," he said. "It's a multiyear change."