However, with a few notable exceptions, commercial bank efforts to increase revenue through the sale of capital markets and corporate finance products to the middle market consumers have not been able to meet expectations. This is despite huge investments in the capabilities of investment banking in product training, as well as corporate finance-related training that has kept finance professors incorporate schools busy for decades. What is the reason? What are the options for sales team leaders and managers of the market to do?
Two Key Factors Reduced the Growth Rates for Capital Markets Capabilities
Although the reasons behind under-performance differ from bank to bank, there are two common concepts. First, the marketing strategies. It was apparent that the “service” organization (i.e., capital market group), as well as the salesforce in the field, were not compatible. The two groups had distinct goals and had different compensation plans. Many salespeople considered the investment bankers arrogant and even transactional. The investment bankers viewed relationship managers to be naive and outdated. This meant that both groups were unable to come together to devise efficient marketing strategies or share the information both groups required to take full advantage of opportunities.
The second, sales process. Sales managers at banks took the view that “RMs are already talking to these companies. They can cross-sell or refer opportunities for capital markets.” Sales managers didn’t think that customers buy capital market services like they do typical bank items. Loans and other bank products have been sold through a “features/benefits/price” conversation. Capital market products and services are to be sold as “professional services,” where concepts and professionalism are the most important factors.
What are the steps needed to reduce the gap? Although there has been a lot of progress made, the most crucial aspects are:
1. Better definition of the market strategy and sales processes.
2. A new way of training
3. More targeted sales management and
4. Recognition and compensation system that, at a minimum, doesn’t distract salespeople away from their work.
Better Definition of Market Strategy and Sales Processes
Market strategy, especially choosing a target for each capability in the capital markets, is crucial. Managers and specialists need to be able to agree on “what a qualified prospect looks like” for every capital market’s products or services. These definitions should be precisely such as: “Manufacturing companies with sales > $50 million who meet criteria for Bbb debt ratings and that are interest-rate sensitive.” RMS should be aware of these requirements for every opportunity they’re expected. These rules allow RMs to plan their sales strategies and to anticipate future business efficiently. They also help reduce the amount that is “noise in the system” from opportunities that do not merit attention from the bank’s limited investment resources.
A clear sales process definition can help increase the number of opportunities that are identified and help reduce the amount of effort on sales processes. Field sales teams and product specialists need to define (for every product or service):
Steps in the sales process (from beginning conversations, through the process of establishing through the final stage of execution) each plays a role in the selling process.
The handoff point (as from specialist to RM, and back).
Information needs for every specific service (what information RM or specialist transmits over to each).
Standardized responses to inquiries as well as lead times for presentation as well as other support for sales activities.
These definitions offer a structure to allow RMs and other specialists to effectively collaborate with each one of them, knowing what can expect from one another and how to work together.
New Approach to Training and Sharing Information
To meet the needs of customers to meet client expectations, bank training should ensure that bank training prepares RMs to fulfill their roles in the sales process (which vary by product or ability). Based on RMs’ roles in the process of opportunity finding and selling, the product training and sales training must be altered.
It’s not something that’s new. For instance, in 1998, when discussing Merrill Lynch’s first attempts to create more mergers and acquisition advisory businesses, Fortune magazine reported: “[Clientswere looking for bankers well-informed about their field and full of innovative ideas…That was a major issue to Merrill’s M&A bankers that are generalists… A lot of bankers didn’t have enough knowledge about the various industries to give engaging talks …” (Fortune magazine 27 April 1998 page 138). Information from Greenwich Associates and other firms indicate that today’s clients want the same quality from commercial and investment bankers, who are seeking to provide an even more strategic approach to capital markets as well as corporate finance services.
As with Merrill, the bankers need to make specific decisions regarding how they’re organized, in addition to how the bankers will meet the expectations of clients of advisors. The same principle applies to small – and middle-market as well as big corporate banks. If you’re providing M&A guidance, Treasury Services, mutual funds, or financing for debt, the product training needs to change to “customer training” to focus on:
CEO, owner, or CFO concerns and issues.
The issues that banks’ capabilities can solve.
Questions that help RMs evaluate a customer’s objectives and situation and make a decision on which capabilities of the investment bank are best suited and what benefits will accrue to the client.
Answers to customer-related questions include:
What is this doing (explained in terms that normal people would be able to comprehend)?
What are the benefits of this approach for companies similar to ours?
What alternatives are there?
Who has this been done for?
How much will it cost, and how much time will it be?
Training for sales should be shifted to an approach to professional services where the value is from the knowledge of team members, that the RM is one of them. Customers want advice from those who have traveled on specific paths before. They want experts who have either a position or view regarding market conditions and other aspects. Training in sales should enable RMs to investigate the subject thoroughly and provide their opinions. RMS should be excellent representatives of the knowledge that comes from professionals in capital markets.
It starts with a deep acquaintance with the customers. The majority of the time, RMs know their customers very well on a transactional basis, that is, specific requirements that the client has chosen to deal with. They generally do not know their customers enough to spot opportunities or provide the need for capital markets services. Key missing ingredients include:
Goals, strategies, policies, as well as market position (which serve as the basis for identifying proactive opportunities).
Strategies and concepts that are “entering discussions” and have not yet reached the “take action” yet “take action” stage.
Variables (such as the price of commodities) pose a risk to the business of the customer.
The sales training needs to help the RMs to present the capabilities of the capital markets department and to begin defining sales processes. Most often, this includes the ability to explain “success stories” that demonstrate the capabilities and market knowledge.
Make sure that your RMs are reading and receiving the information they’ll have to share in sales calls as well as conversations during meals:
Capital market activity (rates players, rates deal structures, and more.) and current trends/opportunities.
Current information regarding the internal processes, participants, and techniques.
More Focused Sales Management
Sales managers (from the line-of-business manager and sales leader) have to decide on which teams they are going to “play the game.” Since all the product providers in the banking industry are in competition for the sales force’s mind-share, Sales managers have to establish a plan and prioritize to ensure that salesforce focus. With the fundamental direction and expectations in place, there are a variety of key objectives for sales managers to consider:
First Priority: Field Coaching
Go out into the field to watch calls and coach…even if you don’t have the time. Sales management coaching techniques drive sales performance. If you are looking to find opportunities in corporate finance and capital markets, it is essential to spend more time and attention that you give to them via your questions as well as your work in the field. This is especially true when you wish for RMs to go beyond detect opportunities and then throw them off the fence. If you wish them to probe in-depth to discover the financial rewards and the pain that can be sold to investors in financial markets, corporate and capital market finance to investors, then you need to be in the room alongside them and need to show the process.
Help RMs in identifying customer concerns and provide concepts by asking them questions regarding customers’ plans and strategies and encouraging them to anticipate their needs and develop ideas. The most important rule is that you get what you ask for. If you inquire about customer ideas or plans, you’ll receive many of these. If you inquire questions about loan renewals or other administrative issues, that’s what you’ll receive.
Utilize any information you have on internal processes, products, and stories of success to train and guide the RMs. In order to be comfortable speaking to executives or business owners, they must master the language and stories. Make use of sales meetings and periods in the vehicle, in the air, and call for questions such as: “How do you describe our private placement capabilities?”
Second Priority: Planning and Review
Develop practical explanations of the sales procedure and measurements to help you identify the areas where RMs are involved within the sales process. You must be able to tell an RM, “To be successful in your territory with capital markets, you need to identify 50 opportunities, make 30 idea presentations, submit 20 proposals, and close 15 deals with an average fee of $X”. This is a result of tracking and researching RM activities to be able to understand what your market is and what the rules are.
Help the RMs to prioritize their accounts – which ones are eligible for “financial advisor” treatment, which are in line with the profiles of companies that can benefit from specific corporate finance and capital markets services.
Make sure you have the 1-year business plan for your territory and account-based plans of the 5 top to 10 customers as well as 5-10 potential customers. The plan will (1) aid in focusing the time of the RM on accounts that are likely to produce and (2) assist the RM to think about the goals of customers’ policies, strategies, and issues.
Check progress towards goals through:
Business review sessions every month with RMs to discuss their short-term action items and business forecasts.
Review of accounts every quarter is a chance to review their business plans for the year and the entire account plan. What’s the current situation compared to what we’d anticipated, why, and what are we able to do to bridge the gap?
A Supportive Recognition and Compensation Plan
The most basic test we use can be described as “Do no harm.” Recognition, as well as compensation programs, are generally complicated due to the wide variety of services and products offered for sale and the effect on the bank’s balance report and its earnings statement. Separate recognition and incentive plans. This plan for recognition should be in place to drive sales-generating activities. The compensation plan must be in place to help sales performance. However, we have “no harm” guidelines include:
Establish a system of instant and obvious recognition to be given based on the high-quality accomplishment of tasks that involve financial markets; corporate finance opportunities identified, proposals made to the company, etc. It is important to encourage and acknowledge the efforts that ultimately result in the desired results. Make notepads, notes from peers during team meetings, distribution of excellent proposals to members of the team, as well as other strategies that draw attention to both the work accomplished and the manner in which it was accomplished.
Create incentive compensation programs that provide RMs for generating capital market and corporate finance revenues. To shift RM focus on specific capabilities, you can make certain revenues count more in plans than the other kinds of revenue. (Example Private fee for placement could be $1.25 for each dollar spent, whereas loans commitment fees could be counted as 80 cents per $1 or fee). DO NOT conduct sales contests that are based on the product’s revenue (numbers of installation or sales per product). These approaches do not align with what is known as the “advisory” approach needed to market and sell capital markets as well as financial services for corporate clients (and other products offered by banks too).
Create incentives to retain accounts. This is a way to compensate an RM for the risk and time involved with accounts that are valuable but are not, in a particular year, huge revenue generators.
Compensation and recognition programs must acknowledge that RMs need to invest time in build their knowledge, skills, and trust in their customers’ requirements as well as the services they offer. The plans should recognize the amount of time RMs spend with their clients and learn greater information about their customers than what they need to acquire in marketing ZBA account, loan, and corporate trust products. The plans need to recognize the risk RMs have to take when they sell these services. The risk to their compensation as well as sales production is greater for corporate finance and capital markets capabilities than for conventional loans and operations-oriented products.
Coaching for sales management improves sales performance. To increase the sales of capital market and corporate financial products and services to optimal levels:
Define sales strategies and market procedures for each product, including the roles specific to each product and transfer details that are applicable to RMs or specialists.
Increase the emphasis on the importance of “customer and industry” training. It is essential that RMs get a steady supply of the information (about discounts, rates, as well as market activities) that they require when talking to customers.
Pay attention to sales management and focus on the tasks that result in the results you desire (high sales of capital markets and corporate finance products). Planning and coaching in the field are two of the top priorities.