Reengineering and cost cutting are no longer the current fad. The name of the game in banking today is revenue.
Analysts seek revenue growth through new businesses and more profitable ways of doing existing business. As you consider your profit- enhancement opportunities, here are some suggestions:
Develop reliable customer and cost information. A 5% improvement in the retention of top customers yields more bottom-line impact in many banks than a 10% across- the-board cost reduction. It's also easier on morale and much more valuable over the long term.
Realign your customer base. The greatest opportunity for revenue enhancement is knowing more about your customers, increasing your share of wallet of the better ones, and converting some unprofitable customers to profitable ones by cross-selling. To do that, expand the product line. Today a broad menu of financial services is available for bank distribution. Take advantage of it!
Establish audacious and clear goals. Although goals should not be "Mission: Impossible," they must be lofty enough to inspire the troops and generate pride once achieved.
Involve line people in goal development. They execute the plan and know better where many customer-related opportunities lie.
Track your results. Without inspection, your endeavor will be just one more corporate initiative that has reached oblivion.
To identify revenue-enhancement opportunities, examine how you purchase goods and services. You will be surprised what renegotiations with vendors and a forced bid process for all major goods and services will do to your bottom line. I recommend requiring three bids for every service to be outsourced, as well as ongoing "refresher" bids. Execute on a couple of major contracts and you will see where the opportunities lie. The vendor world is more competitive than ever.
Let your back office realign itself, but under a process expert's watchful eye. Ultimately, the people who do things know best how to streamline. But in-house functions believe in self-preservation and protect their performance, even if outsourcing may be a better option. Periodically taking a fresh look at basic production processes should be an integral part of management.
Finally, examine your legal structure. The key here is simplicity. The more complex a structure is, the more costly it is. In some banks, it can amount to as much as 5% to 10% of total noninterest expense.
As you proceed in this process, here are some tips for your consideration:
*Maintain an objective, independent perspective. Detach yourself from the politics and think as a shareholder.
*Make a business case. It doesn't matter who sponsors the idea. The only question is: Does it make business sense?
*Use line people to develop ideas and manage the process.
*Overcommunicate, especially with senior managers. They need to know and be involved in the decisions.
*Avoid unruly committees. No meetings with more than 15 people.
*Don't rely on anecdotes or intuition. Facts rule!
At times of unprecedented change, business as usual is not an option. Revenue enhancement will be achieved through continuous improvement and never-ending questioning: Why are we doing things this way? How can we get better? And where do our best opportunities lie?
Ms. Bird is senior vice president of strategic initiatives and Indiana/Ohio at Norwest Corp., Minneapolis.