Value meals for bankers

Twenty-six years of the author's banking experience, as well as comments from a recent Senior Lender Panel discussion conducted by the Eastern North Carolina RMA Chapter, are behind this article on success in adding value.

The ability to add value differentiates account officers from product pushers, resourceful staff employees from order processors, and leadership from common management.

In the fast food industry; "You want fries with that?" is considered adding value. But its a one-way street benefiting the seller. By design, the emphasis is on rapid delivery of product and increasing unit sales; never mind that fries may not be good for you.

In the financial industry, adding value is more involved--when done correctly. While the sales and cross-sales of bank products are important, the depth of any banking relationship is ultimately defined by the value added to the customer as bankers meet their customers' banking needs. Rapid delivery is not tantamount to success--rushing to a credit decision is generally not a sound banking practice.

Add Out or Add In: Two Scenarios

Consider two scenarios involving the same borrowing need. Our customer, Joe Broke, is running short of cash to meet an upcoming payroll for his business. In the first scenario, Joe approaches Banker Bob, who responds by increasing an already loaded line of credit to provide the needed cash. Joe's need is met in a short period of time, and Joe is pleased. In the second scenario, Banker Betty meets with Joe to review the request and Joe's business financial information. During their conversation, she learns that Joe had purchased some much-needed equipment with the existing line of credit. As a result, liquidity was strained and the line of credit is no longer available for a legitimate time of need. Betty's response is to establish a term loan secured by the equipment, thus freeing up funding availability under the line of credit and appropriately correcting some obvious distortions with the business balance sheet. Again, Joe is happy.

Joe had his borrowing need met under both scenarios. (Interestingly, both bankers received incentive credits for funding loans.) However, there is a difference between borrowing needs and banking needs. It is clear that Betty's approach met Joe's banking needs through an understanding of his business financial information and a long-term solution, which earns Joe's respect. Bob's approach was limited, serving only to further distort Joe's balance sheet and possibly compound his subsequent borrowing needs.

The distinction between employees whose depth of understanding and insight provide the best alternatives for a given customer's needs and employees who take and process orders is that the former group knows that the product du jour may not be the best solution. It's the distinction between relationship banking and commodity banking. In a banking relationship, the customer recognizes value added through the service and products provided, and will ultimately gravitate back to that source. Needs are met with an understanding of the business that leads to long-term fixes, and input is solicited and valued. With commodity banking, needs may be met, but the lack of understanding, limited availability of resources and input, and possible compounding of issues will leave the account officer vulnerable to competitors who can provide true added value.

Senior Lenders Corroborate

The Eastern North Carolina RMA Chapter conducted a senior lender panel discussion in early December 2001, featuring Doug Riddle, SVP and relationship manager for Wachovia Bank in Raleigh and Durham, North Carolina; David Weaver, SVP and city executive for Branch Bank and Trust Company in Raleigh, North Carolina; and Judy Stevenson, SVP and senior lender for North State Bank in Raleigh. These panelists provided insights derived from community bank to mega-bank perspectives.

The consensus of the panelists, regardless of institution size, was that the essential ingredients of successful bankers are sound credit skills coupled with communication and sales skills. They valued seasoned credit officers who are good on their feet, can earn and maintain respect, and become a trusted advisor for their customer or prospect. In short, the most efficient and successful employees add value through a combination of technical skills, product knowledge, and salesmanship. And as with a three-legged stool, all three attributes are needed to maintain balance and function. A fourth component, experience, allows the banker to blend the three attributes appropriately to meet changing market and competitive realities.

The panelists acknowledged an industry shift in emphasis from sales to credit, which coincides with the recent economic slowdown and recognizes the need for a balance of all skills. Those account officers who do not have established credit skills or who are otherwise unable to ask thoughtful or penetrating questions of their borrowers are soon exposed and less effective in their roles.

The concept of added value applies to staff and line employees alike. Customers, internal and external, recognize added value and gravitate toward that source. The degree of an employee's ability to add value can be seen by how often that employee is consulted for advice, guidance, input, and decisions. Any manager who adds value in relationships with others will be sought out for guidance and input and thus be viewed as a leader. Indeed, General Colin Powell's second tenet of leadership states, "The day soldiers stop bringing you their problems is the day you have stopped leading them. They have either lost confidence that you can help them or have concluded that you do not care. Either case is a failure of a relationship." Real leaders, says Powell, "make themselves accessible and available. They show concern for the efforts and challenges faced by underlings-even as they demand high standards. Accordingly, they are more likely to create an environment where problem analysis replaces blame." In essence, a manager's ability to add value to subordinates determines his or her degree of leadership.

So, regardless of position or rank, employees' ability to add value defines them, their relationships, and their status as leaders. RMA helps instill some of the attributes defined in this article through its membership meetings, seminars, training sessions, round tables, schools, and panel discussions. As cited in the scenarios at the beginning of this article and reinforced in the senior lender panel discussion, the concept, and practice, of adding value is easily recognized by the customer or prospect, by internal associates, and by subordinates and peers. It's adding value that serves to fortify all of these relationships.

Bell can be contacted by e-mail at david.bell@firstcitizens.com

[C] 2002 by RMA. Bell is a senior vice president and senior credit officer for First Citizens Bank in Raleigh, North Carolina, and is currently chairman oldie Eastern North Carolina Chapter of RMA--The Risk Management Association.

COPYRIGHT 2002 The Risk Management Association
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