Some fascinating insights into the the strategy of Bank of America. A national franchise, vs state by state. This is s consequential statement given that Bank of America have a similar number of customers as the population of UK – 55 million customers.
McGee: We’ve been running this business, consumer and small business, as a national business for about five years now. The decision that we faced at the time was whether to become a national franchise or, like most of the other large banks, run it market by market, state by state, etc.
Source: BAI Online | Banking Strategies | September/October 2006 | Investing in the Franchise
To Bank of America, strategic clarity is “making a difference for customers” by providing a consistent level of service and responsiveness across the company’s vast coast-to-coast franchise
The quotes just get better and better ….
We also made the decision to run a more integrated business. We’re different from almost anybody you’d compare us to in that our distribution channels — banking centers, online services, call centers, mortgage sales force, etc. — really work with the product groups in an integrated fashion, with the customer in the center. Most of our competitors run those businesses as silos — the card business is run as a silo, the mortgage business, etc. We’ve run a very integrated model for a long time, and that’s also helped us prioritize against the things that mattered for customers and for our teammates.
And this quote is as memorable as any … again remembering how big they are:
Q: How do you reduce complexity on the frontlines? You’ve got so many products, so many different divisions and services. Do you tell your branch people to focus on just a few?
McGee: We have tended to focus on a few products that we think are the most important for customers and drivers of growth. That doesn’t mean that associates don’t do other things. But it’s easier when you give them a context for what’s important for the customers and what’s important for the shareholders.
It wasn’t always popular at the beginning to do that because some associates might have been focused on other things. But, all of us have learned that if you can prioritize and simplify, the entire boat rises. If you try to be everything to everybody, then no one does well.
The ability to develop a laser like focus down to every front line employee, is a strategic advantage.
Q: Who is that single point of accountability?
McGee: We have five people who run our almost 6,000 stores, and four of the five are responsible for the high growth markets and the fifth the community markets, wherever they may be across America. Under each of them are region executives, the people the product groups are really accountable to—to get the right product, the right process and have that mutual accountability.
Five people – 6,000 branches (stores) – wow! I know banks in with 1,000 branches, and 15 – 20 people responsible, without counting the SVP’s, VP’s, directors, & senior managers who also are involved.
Finally the positive aspect of dynamic tension:
Q: So, the dynamic tension comes in the discussion and give-and-take between the product groups and the regional executives?
McGee: Well, it’s not at all dissimilar to the classic retail market. You take any retailer and they interact with product manufacturers who want shelf space. The retailer has an accountability to put the product in the right space and sell it. But the retailer will hold the manufacturer accountable if the product does not deliver to the specs ordered and at the price point.
We are very much emulating that dynamic tension. It’s very different from having a head of cards who is only thinking about his or her bottom line. We have an integrated team that really has the new and existing customer as the focal point. So in our company, you have to be very good at running your business or area discipline, but you have to be equally good at balancing that with what’s the best thing for our customers in our enterprise.
That’s why you’ve seen a lot of innovation coming from us in the last couple of years, such as Keep the Change, Mortgage Rewards, Business 24/7 and Safe Send. Take Keep the Change, for example. The reason we were able to do that is, first of all, we spend a lot of time talking to customers. One of the things Six Sigma has taught us is to be very disciplined about the voice of the customer.
Relevance to Bankwatch:
The article is worth reading. Its a standard bearer for how to organise, and implement across a (very) large organisation. You are probably smaller than Bank of America, so no excuses.
Generating Customer Delight Across a National Franchise
BY KENNETH CLINE
Liam McGee, Bank of America’s top retail executive, seeks competitive differentiation by combining leading market share with responsiveness to local markets—and customers.
| SYNOPSIS | In an interview, Liam McGee, president of global consumer and small business banking, discusses how Bank of America Corp. bases its national franchise on delivering a consistent level of service and being responsive to local markets. Key to success are the distribution channels and product groups working together in local markets to produce customer solutions. McGee credits the “dynamic tension” generated by this process for innovative programs such as Keep the Change and Business 24/7.
As president of global consumer and small business banking at $1.4 trillion–asset Bank of America Corp., Liam E. McGee runs the largest retail bank in the country, with 5,742 branches and 110,000 employees. Aware that large organizations can easily become encumbered with excessive bureaucracy, McGee has a laser-like focus on local responsiveness and customer service.
To Bank of America, strategic clarity is “making a difference for customers” by providing a consistent level of service and responsiveness across the company’s vast coast-to-coast franchise. As McGee explains in the following interview, thousands of branches in markets as diverse as Los Angeles and New York could not be administered effectively if all important decisions were made centrally in the bank’s headquarters in Charlotte, N.C.
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Acknowledging this, McGee has built a system where distribution channels and product groups in the various regions develop their strategies in a climate of give-and-take, or what he calls “dynamic tension.” This approach, McGee points out, has spawned several innovative programs, such as Bank of America’s “Keep the Change” promotion, where customers earn savings on their debit card usage.
Ultimately, McGee’s goal is to use Bank of America’s size as a competitive differentiator in a business where customer service and local relationships are so important. “When you have leading market share and you operate appropriately in local markets, you have a fairly compelling advantage,” McGee says.
Q: BAI’s upcoming Retail Delivery Conference & Expo focuses on strategic clarity, management innovation and customer service—all themes the banking industry can use to escape “commoditisation.” Let’s start with strategic clarity. What does that mean for you at Bank of America? How do you think about strategic clarity for such a large business?
McGee: We’ve been running this business, consumer and small business, as a national business for about five years now. The decision that we faced at the time was whether to become a national franchise or, like most of the other large banks, run it market by market, state by state, etc.
We decided that we would run it as a national franchise to create a consistent, recognizable brand for customers and for our own teammates. Although we have more to do, we’ve largely accomplished that.
Part of that process was simplifying. We are big, with virtually every capability that you could want in financial services. But that diversity can be a challenge if you don’t simplify for your teammates and customers.
So, over the five-year period, we’ve been zeroing in on a few things, the things that make a difference for customers, things that are material financial levers for the business. That’s where a lot of our success has been: a national franchise approach, simplifying the business and having an appropriate amount of consistency.
We also made the decision to run a more integrated business. We’re different from almost anybody you’d compare us to in that our distribution channels — banking centers, online services, call centers, mortgage sales force, etc. — really work with the product groups in an integrated fashion, with the customer in the center. Most of our competitors run those businesses as silos — the card business is run as a silo, the mortgage business, etc. We’ve run a very integrated model for a long time, and that’s also helped us prioritize against the things that mattered for customers and for our teammates.
Q: What are those things that mattered?
McGee: In its simplest form, we’re in the business of acquiring and retaining as many customers as we can. We are very much about market share. Our strategy is to grow the number of new customers that do business with us and to build relationships with those new and existing customers.
It doesn’t have to be more complicated than that. We’ve been very consistent over the past five years, and I suspect it will largely be our strategy five years from now. What could be more important than to have more consumers and businesses to do business with and to build quality relationships with? That ought to be profitable for us and ought to be profitable for customers in ways that make a difference for them. We give them solutions to their life challenges, whether it’s to buy a home, start a business, send that first child to college or take care of an aging parent.
We’re very much about customers. That’s our strategy.
Q: How do you reduce complexity on the frontlines? You’ve got so many products, so many different divisions and services. Do you tell your branch people to focus on just a few?
McGee: We have tended to focus on a few products that we think are the most important for customers and drivers of growth. That doesn’t mean that associates don’t do other things. But it’s easier when you give them a context for what’s important for the customers and what’s important for the shareholders.
It wasn’t always popular at the beginning to do that because some associates might have been focused on other things. But, all of us have learned that if you can prioritize and simplify, the entire boat rises. If you try to be everything to everybody, then no one does well.
Q: How is that focus determined, centrally in Charlotte or by market?
McGee: Some products may differ by market. We run our business against what we call our “high growth markets” and our “community markets,” the latter being more rural with primarily small bank competition. In high growth markets like Los Angeles, New York, Washington, D.C., or Houston, we really are looking underneath the averages; we don’t manage by averages, we get beneath averages and look at the components.
So, if you look at greater Los Angeles, 60%-plus of the households do business with us. That’s a remarkable penetration. In New York, where we have not been doing business as long, we have under a 25% household penetration.
Looking at these two extremes, our strategy in greater New York is about acquiring and keeping customer households. In Los Angeles, while we certainly want to continue to grow households, it’s really about deepening relationships through credit—mortgages, for example. In conjunction with the relative importance of real estate equity in a consumer’s life, that makes a lot of sense.
The next phase of our growth and maturity is to leverage the strengths and advantages of who we are, which is having a leading market share in virtually every product. We have size, scale and efficiency, but we also want to operate appropriately in local markets. We’ve made progress there. When you have both leading market share and operate appropriately in local markets, you have a fairly compelling advantage.
Q: How do you construct your retail operation so that you can be responsive to local markets and still stay integrated?
McGee: There are two parts to that. One, being very integrated causes dynamic tension between the product groups and the distribution groups. The product groups are re-sponsible for listening to the voice of the customer and the voice of the associate wherever they are — e-commerce, banking centers, local markets, etc.—and build a product with the best features, with the ease of sale and the appropriate balance. The distribution channels are accountable for throughput. So, the two hold each other accountable.
Two, we have leaders who are responsible for local markets. For example, we have a leader who is responsible for the greater Los Angeles area and a leader who is responsible for Dallas. Those people run the banking centers and the channels in those areas. So, the head of card and of mortgage is accountable to the head of Los Angeles for getting the right products into that market.
We are constantly working on creating that mutual accountability. In the past year, we’ve really formalized a single point of accountability in each market.
Q: Who is that single point of accountability?
McGee: We have five people who run our almost 6,000 stores, and four of the five are responsible for the high growth markets and the fifth the community markets, wherever they may be across America. Under each of them are region executives, the people the product groups are really accountable to—to get the right product, the right process and have that mutual accountability.
Q: So, the dynamic tension comes in the discussion and give-and-take between the product groups and the regional executives?
McGee: Well, it’s not at all dissimilar to the classic retail market. You take any retailer and they interact with product manufacturers who want shelf space. The retailer has an accountability to put the product in the right space and sell it. But the retailer will hold the manufacturer accountable if the product does not deliver to the specs ordered and at the price point.
We are very much emulating that dynamic tension. It’s very different from having a head of cards who is only thinking about his or her bottom line. We have an integrated team that really has the new and existing customer as the focal point. So in our company, you have to be very good at running your business or area discipline, but you have to be equally good at balancing that with what’s the best thing for our customers in our enterprise.
That’s why you’ve seen a lot of innovation coming from us in the last couple of years, such as Keep the Change, Mortgage Rewards, Business 24/7 and Safe Send. Take Keep the Change, for example. The reason we were able to do that is, first of all, we spend a lot of time talking to customers. One of the things Six Sigma has taught us is to be very disciplined about the voice of the customer.
In this instance, we heard from moms in particular that they wanted to save. They didn’t know how to do it on a regular basis. Out of that and other feedback came the sense that the debit card, the checking account and savings can intersect. But, if we ran the company in a siloed mindset, somebody would have to give up revenue. Since we look at aggregate customer profitability, we understood that one business is going to have to pay to match the savings, but we make so much more from increased debit usage and increased balances in checking and savings that it more than offsets the expense.
So, that’s an example of the integrated model in action. (For more on Keep the Change, see “Keeping —and Aggregating — the Change” in the March 1, 2006, issue of BAI’s Banking Strategies Retail Delivery Insights at www.bai.org/nl/v1/n13/articles/V1_N13_01.asp).
People think of innovation sometimes as incredible new technology, and there are elements of innovation like that. The i-Pod, for example, was an innovation of a break-through method, and we will seek those out. But innovation can take another form, which is to take things that you already have, listen to the customer and combine them in an innovative way that is responsive to a customer issue.
Business 24/7 was exactly the same thing. The voice of the small business owner—mostly home-based businesses with two, three or four employees—said doing payroll consumed too much time and caused frustration and errors. To make a long story short, we combined capabilities we had and brought in some we didn’t and produced an innovative product.
In banking, perhaps the greatest innovation is combining things you already have in ways that can help the customer.
Q: How have you used innovative techniques to reduce employee turnover? BAI research shows that has a huge impact on employee engagement and preparedness.
McGee: We have had fairly significant improvement. Without giving away too many secrets, I would say it’s another example of really looking at an end-to-end process. Companies have tended to look at turnover and tried to fix this or that. We took a step back and said, let’s look at associate stability and satisfaction.
So, we re-invented our end-to-end associate process, beginning with identifying a need for a job to recruiting, all the way to the end. And the results are quite good. There is a definite correlation between that and many other business measures.
There’s a fine line in a business of our size. On one hand, you’re pressing for results, but on the other hand, you have to calibrate that against the capacity of our teammates. If associates have two or three other things that are coming at them, when is the right time to roll out something new?
It’s my ultimate responsibility, and I take it very seriously, to ensure that we have a culture and leadership methods to create an environment where our teammates can reach all their dreams and ambitions. If you do that, other things take care of themselves.
Q: Customer delight has become an industry buzz word lately and, in fact, is another theme of BAI’s Retail Delivery Conference. How do you approach that issue? How do you make the customer experience the best that you can make it?
McGee: The most fundamental difference is that the integration I described is around the customer. We have been obsessed with customer delight. We don’t like to use the term “customer service,” we use the term “customer delight.” That is our aspiration: to delight customers, to wow customers.
In that regard, again, we don’t measure averages; we only measure the percentage of customers that we delight, who give us a nine or 10 on a scale of one to 10. Banks, including us, four or five years ago, spent a lot of time managing average customer service scores. There was a lot of patting on the back.
What we’ve learned, and what we’re committed to, is that customers you truly delight have a distinguishing experience. They don’t leave you, and that’s been a big part of our growth. It hasn’t just been sales performance, it’s been dramatically improved retention rates.
We have brought some behaviors into our stores that people tend to notice. We expect our managers to manage their stores from the lobby. In most of our stores when you walk in, you’ll see the manager not only greeting customers but experiencing the store as the customer does, so they can adjust to current conditions.
We have done some good work but we need to do more around looking at fundamental core processes. Not how we’re organized, but how the customer experiences us, eliminating errors and hand-offs. Service is more than just, am I friendly to you when you walk in the store? It’s also, does the ATM work? If you want to take $200 out, do you get it, or does it swallow your card? When you go online, can it do what you want? All those things are fundamental parts.
Q: Weren’t you influenced by Disney’s approach to customer service?
McGee: We studied a lot of companies and some of our teammates did talk about Disney. I think the most fundamental thing we got from Disney was the concept of “on-stage/off-stage.” There are certain things we prefer to be done off-stage, whether it’s telemarketing, completing reports, etc. In our new banking centers, we actually build off-stage space. If you go into one of our new stores, you will notice that no one is assigned a desk. There are universal sales stations, so people are up talking to customers. Your personal space would be off-stage.
But we studied other companies as well. It was almost totally from non-financial services where we got our best ideas.
Q: On that score, a lot of bankers talk about emulating Starbucks. But is that realistic, since Starbucks sells almost an entertainment-type product? Banking, by contrast, usually involves basic transactions.
McGee: That’s a fair pushback. We have many retail attributes, with our size and our traffic. The difference, of course, is when you walk in, there are no shelves or physical products. Many times, our customers are going in to transact, as opposed to buying a latte.
But like a retailer, we would like to convert a higher percentage of that traffic we get into building relationships. We manage our business around that concept. We measure same store sales, for example.
We have what a lot of retailers would die for, including Starbucks, which is a lot of traffic. And a high percentage of those customers are going to buy what we sell in some reasonable period of time. Our job is to convert as many of those existing customers into deeper relationships.
Q: How do you, as an individual, oversee so many departments, so many people—110,000 in your retail area—most of whom you will never meet personally?
McGee: First of all, I have the privilege of having great teammates. I think any leader’s responsibility is to surround himself or herself with the best team. The business does not revolve around me; it is very much about the teammates, whether they are people who directly report to me, or those out in the marketplace.
The person who is managing Los Angeles cannot wait, and I would not want them to wait, for day-to-day direction from someone in Charlotte on what to do in one of our most important markets. We have strong leaders who have the self-confidence, are proactive by nature, and can do that within the parameters of our culture, our values and the franchise we’re trying to build.
We have become, under CEO Ken Lewis’ leadership, one cohesive culture. Our very diverse teammates feel the same, and believe in the same things, if they’re on the West Coast, the East Coast, the Southwest or the Northeast, and that cohesive consistent culture is very important.
I’m blessed to have the job that I do because it’s about people. It’s not about checking accounts, it’s not about mortgages, it’s about people. When we make a mortgage, we may have helped an immigrant buy the American dream. You open a savings account, and you may be helping somebody send their first child ever to a university. Our company is helping families fulfill their dreams, and I take that very seriously.
Q: Looking ahead to the next year or so, there’s a general consensus that retail banking is going to be tougher as customers flee to higher interest rate products. Do you see some clouds on the horizon and are you concerned?
McGee:There’s no question that growth rates will be less than they are now. I would say that size, scale and efficiency are going to be far more important in the next couple of years than they have been in the prior few years. There will be much more price competition and consumers will be better shoppers. So, we’re all going to have to be a lot better.
We plan to be more innovative in the ways that I discussed with you earlier, and some players will rely only on price. Competing solely on price will be problematic for those who are not particularly efficient.
Mr. Cline is senior editor of BAI’s Banking Strategies.
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