Sales and Credit Staffs Should Work Together

In the late 1980s, many banks marketing to companies were focusing on loan growth. A bank's star performer was the person who could generate the most risk assets.

The economy seemed strong, asset values were still rising, and asset growth seemed the right goal for banks -- and, in some cases, for their customers.

Many banks downplayed the role of credit.

In one bank, the lenders sat on the "power" floor with senior executives while the credit staff sat in the basement, cut off from lenders by space and prestige.

When lenders wanted to get a deal done, senior lenders often used their pull with senior bank management to overcome any protests, typically mild, from the beaten-down credit staff.

Not surprisingly, this bank no longer exists.

Credit Officers Ascendant

Today the pendulum has swung far to the other side. Relationship managers have been focusing on putting their portfolios in order and have put the brakes on marketing. Deals that would have sailed through two or three years ago face multiple hurdles.

As this change has occurred, the previously overshadowed credit officer has become much more important and powerful.

Some customers and prospects, used to more attention and access to more credit, are confused and annoyed by the apparent flip-flop. Relationship managers often lack direction. Faced with more credit scrutiny, they are writing memos to the file on credit and documentation issues, rather than credit memos for new business.

At the best banks, shifts from a selling to a credit emphasis (and then, presumably, back again as the economy improves) do not occur.

Managements at those banks believe, correctly, that a sales culture and a credit culture are complementary, not in conflict.

Encouraging a mix of cultures is part of a superior bank's strategy for gaining market leadership and achieving a sustainable competitive advantage.

Attaining the Right Mix

One bank is now emphasizing very strong credit standards while at the same time requiring a rigorous calling schedule for account officers. Why? There are four key reasons:

* Banks should want to see as many deals as possible so that they can be selective rather than have slim pickings.

* Being constantly out in the market provides valuable insight into competitors' activities and approaches.

* Good deals and relationships exist in every economic climate. Marketing when others are not provides an opportunity to gain quality market share.

* Even if a loan transaction is impossible because of credit reasons, the call might lead to other opportunities.

Since linking sales and credit can be helpful, how can management encourage its account and credit officers to adopt this approach?

One basic step is to bring credit officers into the sales process. In one instance, credit officers join the relationship manager on client calls as soon as a loan opportunity begins to emerge.

Set Up a Team Effort

Well before a relationship manager takes the time to write a credit proposal, the credit officer has reviewed the target's financials, met with management, and developed an initial perspective on the target's bankability. This requires that relationship managers "share" their client. In fact, both the relationship manager and the client benefit from this.

Another important part of success involves training. The best banks train account and credit officers with the same degree of rigor. Therefore, both groups tend to look at credit from an overall bank perspective, rather than as sales or credit people.

When this type of approach becomes second nature, it results in higher-quality loan portfolios and less of a need to pull back from the market.

Senior management must play an integral part in this process, sending the right messages and reinforcing the view that a stable sales and credit culture is a corporate goal.

Making the effort to unify sales and credit offers a substantial payoff both internally and extenally.

Within the bank it leads to greater cooperation and focus of effort as well as, potentially, improved productivity and credit quality. With customers and targets, it places the bank well above the most of its market competitors.

Mr. Wendel is a vice president of Temple, Barker & Sloane Inc., New York, a management consulting firm.

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