The Sales and Services Best Practices of High Performing Investment Programs

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1 The Sales and Services Best Practices of High Performing Investment Programs Douglas Berlon, Global Practice Leader The Gallup Organization

2 The Gallup Organization Research-Based Management Consulting and Education Firm Since ,000 associates in 40 countries Employee owned Leverage the latest advances in economics, psychology, sociology, and neuroscience Top Industries 1. Financial Services 2. Retail 3. Hospitality 4. Hospitals 2

3 Gallup - Selected Thought Leadership 3

4 The Gallup Path 4

5 What Real People are Really Thinking Gallup Poll Research

6 Gallup Poll: The Daily Update as of 10/20/08 Obama McCain 6

7 Gallup Poll: The Daily Update as of 10/20/08 Consumer Confidence Positive 5% +1 Negative 78% -1 Economic Conditions Positive 12% Negative 53% -2 Economic Outlook Positive 12% +1 Negative 84% -1 Standard of Living Positive 34% +1 Negative 47% -1 Job Market Hiring 32% Letting Go 19% -1 Personal Finance Worried 41% -1 Not Worried 59% +1 Well Being Thriving 44% +1 Struggling 52% -1 Mood Happiness 57% +12 Stress 6% -6 7

8 Gallup Poll: Americans Satisfaction results conducted October 10-12,

9 Gallup Poll: Annual Work and Education results conducted Aug. 7-10, 2008 % Positive, 2007 % Positive, 2008 Change in positive ratings Real Estate Industry Banking % Very/Somewhat Positive Banking Industry % Neutral % Very/Somewhat Negative Net Positive 2008 Aug Aug Aug Aug Aug Aug Aug Aug

10 Competitive Customer Engagement Scores Random competitive study (n=11,733) *CE 11 ratings of those who contacted listed institutions in the past six months about a checking account or savings account via one or more of the channels. 10

11 Competitive Customer Engagement Scores Random competitive study (n=11,733) *CE 11 ratings of those who contacted listed institutions in the past six months about a checking account or savings account via one or more of the channels. 11

12 The Gap Between Banks and the Customer If 42.2% of customers are satisfied overall, where are the variances? Treats me with respect % = 61.7% Likelihood to continue using the bank % = 61.5% Always teats me fairly % = 56.5% Always deliver on promise + 7.2% = 49.4% Likelihood to recommend the bank + 2.5% = 44.7% Can t imagine a world without 17.8% = 24.4% Likelihood to expand business 18.3% = 23.9% Copyright 2008 Gallup. Inc. All rights reserved. 12

13 The Emotional Economy

14 The Emotional Economy When it comes to customers, feelings are facts. Simon Cooper, President & COO, Ritz-Carlton Hotel Company LLC Daniel Kahneman, Nobel Prize Winner in Economics and Gallup Senior Scientist Traditional economic models for analyzing consumer behavior, employee motivation, and managerial models are driven by rational, predictable forces But more powerful are the irrational forces based in the emotions of human experience the real source of economic decisionmaking, brand loyalty, and employee and customer engagement 14

15 Satisfaction Is Not Enough: Three Kinds of Satisfaction Dissatisfied Rationally Satisfied Emotionally Satisfied Not at all satisfied Extremely satisfied Copyright 2008 Gallup. Inc. All rights reserved. 15

16 Satisfaction Is Not Enough Retail Banking 100 Surgeons Copyright 2008 Gallup. Inc. All rights reserved. 16

17 There Are Five Levels of Customer Engagement with a Brand Passion is found when a brand is perfectly suited for the customer. Passion is about being irreplaceable. Passion Can t imagine a world without Perfect company for people like me Pride results when a brand is a public expression of who you are or who you wish to be. Pride Treats me with respect Feel proud to be a customer Integrity is about doing the right thing. Mistakes happen in all companies, but the best companies turn them into opportunities. Integrity Fair resolution of any problems Always treats me fairly Confidence is typically the first step in the development of Emotional Attachment. Confidence Always delivers on promise Name I can always trust Rational Loyalty is the foundation of Customer Engagement. Rational Loyalty Overall Satisfaction Likelihood to Continue Likelihood to Recommend 17

18 What the BEST get from Customer Engagement 18

19 Customer Engagement Drives Financial Performance Per-Customer Contribution Indexed Performance (Average = 100) These differential performance levels are across different client/industries and represent average performance differentials (i.e., not limited to just financial services or retail banking). 19

20 Customer Engagement and Share of Assets Share of Investible Assets Average (46.2) 20

21 What Is Customer Engagement Worth? High Net Worth Fully Engaged high net worth customers grew their profit at a significantly higher percentage rate than any other group. Notes: Median values; N=1,892 clients with 5 quarters of data Copyright 2008 Gallup. Inc. All rights reserved. 21

22 The OTHER side of the customer equation the EMPLOYEE 22

23 What does Employee Disengagement look like? Copyright 2008 Gallup. Inc. All rights reserved. 23

24 What does Employee Disengagement look like? Copyright 2008 Gallup. Inc. All rights reserved. 24

25 Financial Advisors Assets Under Management by Talent Level 25

26 Higher Rated Investment Brokers Sell More Securities Average performance or Investment Reps within each rating group with at least 12 months of "can-sell" experience. 26

27 HumanSigma Quadrants Optimized 70% boost 240% boost % boost 27

28 Gallup s Affluent Banking Competitive Study

29 Initially, the Treasury Bailout Appears to Have Marginally Increased Affluent Consumer Confidence in U.S. Banks Fannie/Freddie Bailout All Financial Institutions and Banks 5-day rolling averages Treasury Bailout Proposed White House Meeting Bailout House Vote Fails Senate Passes Bailout House Passes /President Signs Bailout 29

30 How Much Confidence Do You Have in U.S. Financial Institutions or Banks? (Customers with More Than $100,000) 30

31 How Much Confidence Do You Have in U.S. Financial Institutions or Banks? (Customers with More Than $100,000) Affluent Consumer Confidence in ALL Financial Institutions Affluent Consumer Confidence in PRIMARY Financial Institutions 31

32 Percent Having A Great Deal or Quite A Lot of Confidence in U.S. Financial Institutions or Banks 32

33 Percent Having A Great Deal or Quite A Lot of Confidence in U.S. Financial Institutions or Banks 33

34 Affluent Consumer Intentions to Decrease Money in Bank Consumers Having $100,000 or More of Investable Assets 34

35 Affluent Consumer Intentions to Decrease Money in Bank Consumers Having $100,000 or More of Investable Assets 35

36 Differences in Customer Needs and Bank Focus Source: Synergistics Research Corp. Base of 803 total respondents. 36

37 Valuable advice from my bank? Less than a third of those receiving advice from their primary institutions found it very valuable Source: Synergistics Research Corp. Base = 719 that addressed wealth management needs, and rate needs important. 37

38 Valuable advice from my bank and still switch? In that group that value wealth management, over 1/5 said they could see themselves switching providers Source: Synergistics Research Corp. Base = 533 that value wealth management services with main provider 38

39 Six Best Practice Principles for Getting Traction 39

40 Six Best Practice Principles for Getting Traction 1. Design a simple, easy-to-understand program 2. Measure and report at the team and individual levels 3. Create and cascade accountability 4. Deploy continuous training, communication, and inspiration 5. Create actionability and timely coaching 6. Provide incentives for improved performance Copyright 2008 Gallup. Inc. All rights reserved. 40

41 Principle 1: Design a simple and easy to understand program The program s success lies in the hands of front-line managers; keep it simple. An effective program is simplistic at the core, recognizing that managers have little time, and many objectives. All collateral items should be designed with the users in mind, focused precisely on the critical leverage points and desired behaviors. Simplicity means agility, with managers quickly able to interpret their results, determine action steps, and align their teams. 41

42 Principle 2: Measure and report at the team and individual level Local-level variance must be managed to improve performance. The greatest variance in performance is found at the local level. Engagement is built (or destroyed) at every interaction; local nuances become important in reducing variability across the organization. A frequent progress report enables managers to evaluate efforts, re-commit to actions, or to course-correct. When possible, individual level reporting should be considered, as it augments a manager s ability to effectively coach each team member. Frequency (of Brokers) % Fully Engaged 42

43 Principle 3: Create and cascade accountability All levels of management are needed to build a culture of engagement. The best programs are not front-line focused; rather they are fully inclusive of all levels of management. Senior leaders must remove barriers at an enterprise level. Front-line leaders must be empowered to affect engagement and to lead their teams daily on the key behaviors. Mid-level leaders are needed to make the key linkage between strategy and tactics, and must mentor and develop front-line managers. Higher The Cascading Model Goal Branch Manager Executive Team Area Manager Teller Lower 43

44 Principle 4: Deploy continuous training, communication and inspiration Keeping it fresh is key. Building a culture of engagement means fighting the status quo. A cadence of communication, workshops, job aids, and support materials ensure managers stay fresh. In times of change, a constant flow of communication helps employees believe in the future. The senior-leader communication stream provides clarity. A feedback loop from the front-line up creates a real-world understanding for senior leaders. Best practice sharing among all managers paints a picture of what is possible. 44

45 Principle 5: Create actionability and timely coaching Creating a sense of urgency on the customer and employee experience is a key success factor in getting traction. Managers must coach and mentor front-line employees as close to the action as possible, and as often as possible. Local empowerment allows each office to optimize its performance; each office/broker improvement drives the organization to higher levels. 45

46 Principle 6: Provide incentives for improved performance Relentless accountability is the ultimate management tool. Employees focus on what is incented. Creating the right performance metrics for each level in the organization ensures appropriate attention is paid. Metrics are important, but so are behaviors that lead to metrics. Executives Managers Front-line Group Performance Team Performance Financial & Operational Financial & Operational Employee Employee CE 11 Employee CE 11 Financial & Operational CE 11 Individual and Team Performance 46

47 What can you do today Assessment is just the start Using metrics is just beginning of the path to reaping the rewards from more engaged customers. Asking the right questions is critical for identifying and quantifying the issues, but improvement requires both local-level transactional and enterprise-wide transformational interventions. Focus on the total customer experience You must focus on what is important to manage and hard to copy. When it comes to your customers, it means nearly everything is involved. Making a great product is not enough. A low price and a great location are not enough. There must be consistency among all the various ways in which your customers interact with you. It must link to business outcomes Customer engagement is not just about how customers feel. It is the best way to measure and affect how they behave, ultimately paying off in increased revenue. While rationally satisfied customers behave no differently than customers who are dissatisfied, empirical results from a large and growing number of case studies show that emotionally satisfied customers buy more products, spend more for those products, return more often, and stay longer. 47

48 Appendix

49 Gallup s Affluent Banking Competitive Study Points Gallup s findings, based on 5-day rolling averages, include: At the time of the Fannie Mae/Freddie Mac Bailout (9/7), 40% of affluent consumers said they had a great deal or quite a lot of confidence in the nation s banks and 16% said they had very little a positive GAP of 24%. Confidence levels seemed largely unaffected until concerns began to surface about Lehman (9/11) when the positive GAP began to shrink. At the time of the Lehman bankruptcy (9/15) and the AIG Bailout, 35% of consumers were expressing a great deal or a lot of confidence in banks and 22% were expressing very little a smaller positive GAP of 13%. By the time of the Treasury Bailout proposal (9/21), this positive GAP had disappeared with only 26% expressing a great deal or quite a lot of confidence and 27% very little a negative GAP of 1%. 49

50 Gallup s Affluent Banking Competitive Study Points Gallup s findings, based on 5-day rolling averages (continued): By the time of the White House Meeting on the Treasury Bailout (9/25), only 25% of affluent consumers said they had a great deal/lot of confidence in the nation s banks while 30% said they had very little a negative GAP of 5%. The negative GAP in affluent consumer confidence seemed to be closing just prior (9/28) to the House voting down the proposed Treasury Bailout, but following that vote (9/30) the negative GAP returned with only 24% expressing a great deal/lot of confidence and 30% expressing very little a negative GAP of 6%. The negative GAP began to close with the Senate s approval of the Treasury proposal (10/01) and continued to do so following signing of the bill (10/03). 50

51 Gallup s Affluent Banking Competitive Study Points Gallup s findings, based on 5-day rolling averages (continued): By Sunday night following passage of the rescue legislation (10/5), the GAP had disappeared once more with both measures at 28% suggesting the new legislation has had at least a marginal benefit in terms of increasing affluent consumer confidence. Obviously, the hope is that this improvement in affluent consumer confidence will continue to improve. As of Monday (10/6), the trend remained unclear -- but daily surveying results suggest that it may not be the case. 51

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