Banking

Global structures for trusted advice are hard

Written by Chris Skinner

Chris Skinner on how to provide great service to global clients, and the business culture of rewards structures.

I was reflecting on something recently that’s endemic to banks and technology providers: how do you provide great service to global clients? The issue is that most companies are split into three structures: product, process and customer.

  • Product is the back office manufacturer.
  • Process is the middle office focused on operational excellence.
  • Customer is the relationship experience at the front-end.

I’ve blogged before that these are all being disrupted by technology from cloud and data analytics in the back office manufacturing, to APIs and real-time processing in the middle office, to apps and the whole structure of the user experience (UX) in the front office. Yet, those blogs were about technology structures, and I was actually thinking about organizational structures and people. In particular, I wondered how best to service a global client when you need product specialization, process excellence and customer relationship management (back, middle and front office).

Life in a matrix (cartoon). Image courtesy of Global Integration.

Image courtesy of Global Integration.

What tends to happen in most banks and vendors is that they put into play an orchestrator at the front-end who’s responsible for the overall customer relationship. The orchestrator has to be intimate with all of their client’s needs and operations. Products are only relevant if the customer is interested in them, so they bring in product specialists only when needed. Meanwhile, operational people are purely in place to keep the lights on. This sounds like a simple approach used by many, but the problem arises about how you incentivize people in this model.

Typically, the front-end customer relationship person is incentivized by revenue optimization. In other words, they are a salesperson rather than a customer relationship person. This immediately causes issues, as the salesperson will focus on getting as many product people through the door as possible. The product people get pissed off with the customer relationship person, as they don’t get the same commission and incentive structures. Equally, issues arise because global customers often need contact in every country of operation, so how do you incentivize the customer relationship person in Baku to behave in a cohesive way with the global account manager in New York? If the product person or local customer person creates an opportunity, who gets the reward? How do you identify the correct person who created the opportunity?

Good service and reward structure

These are fundamental questions that few have answered well. I’ve been close to many companies where their rewards and incentives structures work against each other; that the product person hates the customer relationship manager who doesn’t trust any of the local country representatives, and all work against each other and against the customer’s interests.

Hence, when we talk about trusted advisers and putting the customer’s needs first, it rarely happens. After all, the needs of the representative come first, and that’s based on the rewards structures. What gets measured gets done, and what gets measured and rewarded gets done first. This is why organizational structures and their reward mechanisms are so key, and we’ve seen many ways in which this has been done wrong (think PPI and mortgage sales). So, how do you do it right?

There is no simple or single answer, as the reward and organizational structures will vary by company and operation, but a general view is that the front-end customer relationship person should be focused on the client’s needs, hence are rewarded by customer satisfaction rather than sales. The product person is rewarded for sales, but can only sell if they work effectively with the customer relationship person, while the operational person is rewarded through Management By Objectives (MBOs) and has no sales focus.

I’m not sure if that’s right, so I would be interested in other views of what works and doesn’t. Please let me know.

– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. You can read the original article here. Image: Freepik

About the author

Chris Skinner

Chris Skinner is an independent commentator on the financial markets through the Finanser, and chair of the European networking forum the Financial Services Club, which he founded in 2004. He is an author of numerous books covering everything from European regulations in banking through to the credit crisis, to the future of banking.

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