From our financial industry partner Marsh Communications’ experience and extensive work with community bank clients, it is quite apparent that employees are making a key impact on market share and profitability. Recent studies of the banking market support our view, showing banks with motivated employees outperform their peers across a wide range of financial and customer preference metrics including revenue growth, ROE and EPS.
Surveys by PeopleMetrics Inc. (Engagement Strategies’ preferred research partner), demonstrate that in all financial metrics analyzed, financial institutions with high customer engagement outperform the industry average. Conversely, institutions with low customer engagement are more likely to underperform the industry average.
The average annual Return on Equity (ROE) rate for retail banks with high customer engagement is 4 percent above the industry average, while low-performing institutions yield, on average, a ROE that is 1 percent below the industry average. In addition, the annual revenue growth for high-performing retail banks is 6 percent above the industry average, while the average for low-performers is 11 percent below the industry standard.
Most importantly, the studies show that customer engagement is largely driven by the degree to which employees are engaged. Engaged employees go above and beyond to meet customers’ needs and ensure customers have a consistent, positive experience, which impacts overall customer engagement — and profitability.
Indeed, PeopleMetrics conducted another survey of customers of a single banking company that owned several branches that had an active employee engagement program and other branches that did not. Customers consistently scored the branches with high engagement as substantially better, despite all other factors (products, services, etc.) being equal. Customers rated overall service, whether or not they would consider the bank for a next loan or deposit, and whether they felt the bank was better than other financial institutions.
So how do you get your employees more engaged? In our experience, effectively changing employee behavior must begin by empirically identifying employee attitudes towards several important factors, from compensation to career advancement opportunities to what they think is expected of them. You also can survey customer opinions about service, brand image, etc.
These surveys often identify issues that previously were unknown to management, and they enable the company to address the specific roadblocks that hinder employee performance. Such insight cannot be gained from simply conducting a subjective message development session with top executives.
Once you have that data, you can begin to develop specific programs that close gaps in employee performance and attitudes. This can range from executive and internal communications programs to leadership development and strategic change management initiatives. The data also gives you a benchmark to which you can measure progress, identifying which programs are most effective and which, if any, are underperforming.
Suffice to say, bank employees have a significant impact on the performance, brand identity, public perception and ultimately the profitability of their institution. In a market of low loan demand, high competition for deposits and low interest rates, employees are the key to gaining a competitive advantage.