UK Banks Need Tighter Sales force Scrutiny To Avoid Downturn Profit Crunch
March 5th, 2008
Callidus Software Inc. (NASDAQ: CALD), the leader in Sales Performance Management (SPM), warned that UK banks will struggle to keep track of sales profitability during the economic slowdown due to unwieldy sales force management.
Optimising the sales force and sales channel is critical during a downturn.
However, many UK banks have not yet put in place rigorous sales performance management practices.
As financial services customers react to headlines regarding deteriorating business performance by major financial services providers and seek high quality credit and investment products, the performance of banks’ sales forces has come into sharp focus for senior management and shareholders.
Additionally many banks are missing out on increasing market share by not incentivising their sales forces to target weaker competitors buffeted by the credit crunch.
Based on its experience in the sector, Callidus Software believes that banks are particularly exposed to unpredictable sales due to increased competition, potential falls in consumer confidence and typically highly complex analysis and commission structures.
While major sales issues are typically straightforward to identify, the high volume and range of product sales undertaken, from mortgages and savings products to insurance and current accounts, means that UK banks are susceptible to profits ‘leaking’ through a lack of visibility of minor issues.
Putting in place overly complex or unclear compensation structures risks the sales force and sales channels becoming demotivated and hence underperforming, particularly during a downturn when competition is far tougher.
Taking a long-term view, banks also need to ensure that their sales performance management is optimised to enable competitive advantage to be gained when economic conditions improve.
The company has identified these top five issues that cripple sales performance for UK banks:
- Lack of focus: selling low margin rather than higher margin products, as in a downturn, the easier, high-volume sell can become more attractive
- Lack of control: Keeping track on products sold through multiple sales channels (such as telephone, web and branch networks) and particularly which channels are best suited to individual products can be difficult without systems that provide full visibility
- Lack of compliance: the banking sector has become much more legislated, such as through the FSA’s Treating Customers Fairly initiative, but “desperation selling” can lead to non-compliance in selling procedures
- Lack of thought when designing commission structures: salespeople incentivised by poorly thought out incentive plans push higher margin or inappropriate products that do not best match customers’ needs
- Lack of clarity: Sales order entry systems that make commissions complex or cumbersome to administer. As a result, salespeople can be prone to taking the easier path if internal systems are a barrier to selling certain products
"The worst time for profitability to be slipping through your fingers is at a time when margins are incredibly hard to come by in the first place, particularly when market turbulence means customers are looking around,” said Bill Schuh, vice president for Europe at Callidus Software."
Sales performance management is vital for gaining a tight grip on profit predictability in a downturn.
We see that banks are particularly exposed but they also stand to make big gains if they manage sales force performance properly.
Banks need to increase scrutiny now to aid profit management in the short term, but also ensure they are have their businesses lined up for success for when the economy begins to look brighter.”
Callidus Software provides on-premise and on-demand sales performance management software.
The technology enables closer management of incentive compensation, tracking of actual sales versus planned sales and more effective product administration across both direct and broker/adviser sales channels.
This ensures that corporate objectives are aligned with sales execution.Continues Schuh: "UK banks have a lot of challenges on their plates at the moment.
Luckily, sales performance management can be tackled very effectively, because today’s technology can automate much of the process.
Banks that do not address the issue are also at risk of higher sales force churn and will fall behind, as their competitors increasingly apply these best practices.”
Entry Filed under: FINWIRE®
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