Service Quality in Treasury Management
A commitment to service quality, as measured by market share, industry surveys, and reputation, is characteristic of the most successful financial institutions in the market. Service-quality measurements take various forms: customer satisfaction surveys, bank-established service-level standards, individual customer scorecards, and third-party industry surveys. Regardless of how service quality is measured, banks that perform well and institutionalize the culture of service quality increase customer loyalty and revenues as well as competitive advantage.
There are profound differences between financial institutions that embrace service quality and those that do not. The culture of service quality is characterized by the incorporation of measurements (both quantitative and qualitative) for every type of interaction with the client. No new product is rolled out until the institution creates a set of appropriate quality measurements for that product. Service quality is seen as the responsibility of the entire organization, not simply a set of measurements that applies to the technology, operations, or client services units. Communications to clients, prospects and investors highlight service quality as a focus for the institution.
Banks that have adopted a culture of service quality are not afraid to label their quality standards with service level agreements (SLAs) and to share the results with corporate clients in the form of bank-generated scorecards. The banks know how their products and service functions measure up to their own internal quality standards on a weekly, if not daily, basis. At these institutions, surveys on industry quality and customer satisfaction are disseminated throughout the treasury management organization both as a vehicle for instilling pride in the positive results and, where needed, as a catalyst for setting even higher goals to meet or beat the scores of the competition. Continuous improvement is key to growing the business and enhancing existing client relationships.
In contrast, treasury management organizations that have failed to adopt a culture of service quality are apparently unaware of the adage, ‘if you can’t measure it, you can’t manage it’. Quality measurements in these organizations are an afterthought, often incorporated into processes only because a product’s poor quality resulted in client dissatisfaction or loss of business. To paraphrase a senior-level technology manager from one of these institutions: ‘We’re too busy putting out fires to worry about generating scorecards’. Quality measurements are not widely visible in some organizations unless there is a crisis. These institutions shy away from SLAs and client-developed scorecards. Because they receive lower scores on industry surveys, they must compete more often solely on the basis of price – that is, when they haven’t been excluded from a request for proposals (RFP) process altogether.
With corporate clients continuing to consolidate transactional services, such as treasury management into fewer banking relationships, the institutions that lag their counterparts in service quality are likely to see decreased market share and reduced profit margins. They are often relegated to the status of a second-tier provider of credit rather than significant provider of the full range of banking services, especially with the large corporate segment.
There are multiple sources of independent service-quality surveys for the treasury management industry. These survey firms generally make each bank’s detailed results available only to that bank and also provide some comparative data for peer banks. Corporate banking clients looking for new providers or re-evaluating their existing banking structure frequently ask the banks for copies of the reports generated by these organizations as part of the RFP process. Banks that receive lower grades may be eliminated from consideration because of the survey results.
At banks with a culture of service quality, the arrival of the annual survey results represents the beginning of an extensive process of internal distribution, analysis of the results, incorporation of the feedback and, in some cases, inclusion of the grades in marketing materials. Mellon Bank, for example, provides a full report of its own scores and a comparison with the mean scores of all banks surveyed for each category in a four-page marketing piece on its website.
Other institutions differ dramatically in their approach to publishing the results. Some do not distribute the information internally, even to individuals who have direct responsibility for the quality of the service being graded. Product managers, operations managers, and technology staff may not even be aware that such report cards exist. Rather than use the survey results as an opportunity to identify problems they need to address, these organizations put the industry scores in a desk drawer (or even in the trash).
Until recently, client-generated report cards for banks were rare and were produced by only the largest and most sophisticated corporate clients. While the fundamental purpose of these report cards is to ensure high-quality service from providers of banking services, they provide other benefits to the client (and some to the banks as well):
Approaches to client-generated report cards vary among banks. At the many institutions that have no centralized oversight or tracking of client-generated report cards, clients receive more attention from the team that is supporting them on a day-to-day basis and therefore may experience faster response to their individual issues. However, the results of the report card are not ‘institutionalized’ in a way that would result in an overall improvement in the service quality of the institution. In this environment, the effort required to participate in the periodic report card process is very labor intensive since the report card is designed by the client (often for multiple banks) and each bank must provide the information as specified by the client.
Banks that have adopted a culture of quality are successful in turning the request for bank report cards into an opportunity to improve partnerships with their clients and to showcase their best-in-class products and services. As part of the regular scorecard review, banks maintain a dialogue with clients about improving specific processes, which in some cases involves changing the way a client uses bank services rather than changing the process at a bank. Banks that perform well and institutionalize the report card process also benefit from additional revenues, customer loyalty, and an overall raising of the bar for service quality.
Whether for internal monitoring or as an input to bank-generated scorecards, measuring service quality for treasury management services at most institutions involves a great deal of manual effort. Even at the banks that have adopted a culture of service quality, the actual calculation and tracking of quality measurements requires extensive use of spreadsheets, calculators, and manual input to databases. This level of human intervention adds cost, operational risk, and even the potential for fraud to the process for measuring service quality.
Taken as a whole, the collection and the analysis of the large volumes of service-quality data for treasury management services today is cumbersome, expensive and, by definition, reactive. Bank executives regularly pore over pages of service-quality data (one top financial institution described a weekly operations quality meeting that requires executives to review and discuss a 120-page report). When major breakdowns in service-quality occur, some banks use alerts (e-mail or voice mail) to notify key business partners. Quality teams re-group to identify client impact and analyze root cause so that such incidents can be avoided in the future. But these actions are taken in response to a problem, often days or weeks after the initial incident.
Several leading banks have gone well beyond collecting and internally reporting measurements of treasury management service quality. Rather than wait for a client to ask for a scorecard, some industry heavyweights have invested in the capability to offer scorecards to selected clients based on the SLAs established by the bank. The proactive approach to score carding demonstrates the financial institution’s commitment to service quality, allows the bank to be in control of the categories for measurement, and provides a competitive edge over banks that cannot easily generate similar scorecards. One banking executive boasted that he regularly suggests to corporate clients that they ask their other banking providers to complete the same scorecard, knowing that complying with this request is likely to be very expensive for most banks.
To succeed in the large corporate treasury management services market, banks must continue to invest in practices that contribute to higher-quality service. With the business concentrated in a small number of institutions, simply meeting industry quality standards won’t be enough to differentiate a bank. This means building in (or layering on) technology that supports quality monitoring and quality improvement to operational processes. It means enhancing methods for collecting, alerting and managing service-quality measurements at the level of the business unit, market segment or portfolio and individual client. It means investing in tools to better track open client incidents, requests and investigations and to provide clients with direct access to that information.
Banks must also re-examine the traditional service-quality measurements and consider how to supplement them with new measurements that reflect the significance of the Internet channel as a client touch point. As financial institutions adopt a service-oriented architecture (SOA), they are better positioned to implement business activity monitoring (BAM) tools designed to monitor, analyze, report on, and ultimately improve on key business processes in real time. Such solutions also enable banks to establish client-specific business rules, especially useful for non-standard SLAs. This capability will become more critical as clients require more real-time information from their banks, migrate from paper to electronic payments, and demand faster error resolution and response times.
Stark differences exist between the banks that ‘get it’ and those that don’t when it comes to providing high quality in treasury management services. These differences are manifested in two facets of service quality: operational excellence and partnership with clients. The banks on the honor roll invest significant resources in monitoring and improving their operational processes and their client service operations. This investment contributes to their ability to get it right from a perspective of operational excellence. They also invest in hiring, training and retaining the best possible people to have face-to-face contact with their major corporate clients.
Most importantly, the banks that have embraced a culture of service quality create a dialogue with their clients to set expectations, forge agreements, review the actual results on a regular basis and take action to improve any aspects of product or service delivery that do not meet expectations.
As the intense competition among the providers of treasury management services continues, banks that can make the leap from evaluating quality measurements for the most recent week or month to implementing solutions that monitor critical business processes in real time will be the ones that receive top grades, no matter who is keeping score.
This article is based on TowerGroup research by Susan Feinberg.