Former student discusses success in the banking industry

Applies the critical success factor (CSF) approach to identify the appropriate CSFs underlying three types of strategy in the banking industry. The empirical results of this paper show that the various strategies adopted have a significant effect on factors determining success and that the mean importance of CSFs varies among the various strategies. The result of a factor analysis suggests four composite CSFs: bank operation management ability, developing bank trademarks ability, bank marketing ability, and financial market management ability. Further discussions and management implications are also presented.

What day-to-day actions make for a successful bank? We all define success differently, but in my view it requires a bank to satisfy all its stakeholders, namely, generate solid earnings and growth for investors, distinguish itself with customers, demonstrate franchise value and provide employees with a positive work environment. Consistency and sustainability are two hallmarks of success.

While leadership is always key, of greater interest to me are the practical ways in which a bank manages itself, both internally and in regard to its market focus. Several items pop up on the success checklist:

Multiple opportunities in the business “funnel.” The more at-bats, the more hits. That cliché, like so many others, captures a fundamental truth. Banks with the best track record see multiple transactions from clients and prospects, allowing them to be more picky in deal selection and pricing while retaining strong risk management controls.

Multiple opportunities in the business “funnel.” The more at bats, the more hits. That cliché, like so many others, captures a fundamental truth. Banks with the best track record see multiple transactions from clients and prospects, allowing them to be more picky in deal selection and pricing while retaining strong risk management controls. For example, one senior banker told me he wants to see a lot of loan deals in good times and bad, to avoid “reaching” to make quotas.

Banks naturally want to avoid garbage going into the opportunity funnel. However, market analytics today enable banks to focus on high-opportunity customers for cross sell and prospects for new account opportunities. Realistic targets based upon target need, the solutions the bank offers, the competitive environment and other factors serve as the first screen before a potential transaction goes into the funnel.

And opportunities do exist, although not always in the first area a banker pursues. When I hear bankers say that their markets offer few new business targets (a disappointing statement), my concern is that they are operating without a sales management process or are selling products rather than pursuing a relationship or a solution. Alternatively, but less likely, they may be right, in which case that bank might have too many relationship managers. (And by the way, many banks are overstaffed in this expensive and often under-productive job area.) Too few deal opportunities can result in bad pricing and bad risk management.

Once again, we seem to be entering a phase in which some banks, struggling for revenues, compromise on rate or, even worse, structure. Good banks avoid this situation by filling the funnel with reasonable opportunities that do not stretch risk management or pricing too far.