BID® Daily Newsletter
Apr 4, 2008

BID® Daily Newsletter

Apr 4, 2008

GOAL SETTING


Director Mel Brooks had a management technique that he loved. He hated handling problem employees so he designed a technique to compensate. He would hire a "production coordinator," have them show up to the first on-set meeting 15min late and then fire them in front of all the workers. The fired employee knew this ahead of time, so no big deal. Brooks, however, guaranteed that he had 100% on-time attendance for the rest of his production.
When we talk to bankers across the country, we often ask "what are your goals this quarter?" More often than not the employee doesn't know or they talk in generalities about "bringing in more business" or increasing "customer service." Last week, a client bank on the East Coast posted a 25% drop in their cost of funds from their benchmark. We had to ask why and expected to hear about a new product or branch. Instead, the banker told us management had set specific goals for the first time in the bank's history.
Their goal was this - reduce funding costs by 20bp relative to 1-month LIBOR during the quarter. To do that, the management ream broke the goal into 5 sub-goals and each was assigned to a particular manager. For example, loan relationship officers were tasked with and given incentives to increase DDA and money market balances with a program focused on taking 100% of their loan customers in January and offering them a VIP-type business bundle (checking, MMDA, debit, credit, etc). Branch staff had to call 100% of their accounts in Jan and Feb with an offer to waive fees if the customer could bring over $5k of new balances from another institution.
In each case, goals were specific, quantifiable, manageable and time specific. Employees were not only told what their goals were, but how their goals connected to their department and to the bank. We tested this and sure enough, the 3 sample employees that we spoke to not only knew their goals, but could tell us the percentage complete in achievement (most ended up achieving over 100%) and how their performance impacted bank operating income. This tying of goals was important, as it supporting a positive feedback loop and employees could see how their performance was affecting the bank's bottom line.
Before offering a high deposit rate, trying a new advertising campaign or designing a new product bundle, make sure you have squeezed all you can out of your staff. Clear direction can be a powerful tool and setting, monitoring and rewarding based on specific goals can prove productive.
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