- 04 August, 2005 10:11
Approaching downtown Charlotte, N.C., from the airport, one can't help noticing the Bank of America Stadium, home of the NFL's Carolina Panthers. Even on its home turf, Wachovia operates in the prominent shadow of its larger rival, a regular reminder of at least one alternative its customers have for their banking needs.
Forgive Wachovia's executive team, then, if they're inclined to break out in a collective sweat over the topic of customer defections. It was just six years ago when customer satisfaction at the bank -- then called First Union -- hit rock-bottom. Customer attrition rates reached 20 percent in the first quarter of 1999. Not only were customers switching at record rates but employees were also running for the exits. Turnover among bank tellers hit a high of 49 percent in 1999.
The merger with Wachovia was still two years away, but the company was already feeling the pain of a succession of corporate marriages. The 2001 Wachovia acquisition (in which First Union wisely adopted the name of its smaller acquiree) only increased the pressure to ruthlessly and rapidly cut costs. "We were trying to get expenses out of the operations quickly to make the deal profitable," says Jim Garrity, who was First Union's CMO before assuming the same role at Wachovia post-merger.
Fanning the flames was the company's historical obsession with selling, to the near exclusion of everything else. "We were watching the front door to capture new customers, but we were hemorrhaging customers out the back door because of inattention," says Ken Thompson, Wachovia's CEO (and First Union's former president). "You can't sell enough product to make up for the revenue lost from customer attrition."
With a looming crisis on their hands, Thompson and his new management team made a bold play to reverse the company's customer attrition rate -- from the inside out. They committed $100 million toward increasing frontline staff and pledged additional resources to training and developing branch employees, who would become the fulcrum for the bank's customer-service makeover. And they did so largely without a net. "We didn't do an ROI [calculation] on that spending; it was a leap of faith," says Thompson. "But we knew it was required for the survival of our company."
The funny thing is, it worked.
Internal branding is designed to instill employees with a company's brand vision and provide them with the tools to translate that vision to the customer. Garrity had been reading up on the trend at the time of the First Union-Wachovia merger, and he realized that First Union, in part because of its many acquisitions, had fallen well-short on this front.
"Previously, if you had asked any First Union or Wachovia employee what our brand was about, you probably would have heard some vague idea about the logo or our advertising," says Garrity. Making over the customer experience, then, would first require buy-in of the strategic brand vision by all Wachovia employees. "We would reinforce the brand message internally, and then [employees] would express it externally," he says.
To help determine what the new vision, values and resulting brand image would be -- and to gain a better understanding of the culture of both companies -- the management team commissioned an online culture survey in the summer of 2001 for legacy Wachovia and First Union employees. About half of the approximately 90,000 staffers responded, answering questions about what they liked and didn't like about their respective institutions and the values that they wanted the culture of the merged company to exemplify. The survey signaled that all employees would have a say in shaping the attitudes and behaviors that defined the new Wachovia brand. "That made the values real for employees," says Thompson. "These are things that we talk about daily and use to make decisions."
Thompson admits that he used to roll his eyes when people would talk about abstract concepts such as culture. "That was something that academics wanted you to have, but what did it have to do with running a financial services company?" he says. He's since come around to the benefit of clearly identifying and communicating a common objective to two merging companies. "If employees don't understand the new company's vision, you won't have any chance of achieving it," he says.
The internal communication was just the beginning of Wachovia's customer service makeover. The frontline staff had to take the new vision and make it concrete for customers in the branches and the call center. That required a major investment in staffing and training. Despite the pressing need to cut costs, Thompson gulped hard and pledged US$100 million to beef up the company's teller staff.
"In difficult times, we had tightened our belts and cut staff in a lot of different areas," says Gwynne Whitley, Wachovia's executive vice president and director of customer service excellence. "But we realized that we could not have the appropriate satisfaction levels without adding that staff back." The $100 million translated into approximately one additional teller per branch. "That's probably paid back almost six times the expense in terms of the increased revenue," she says.
With the additional staffing and newly defined brand image, vision and values in hand, the management team set about embedding the message across the company. "For every line of business, we went in and said, How do we operationalize our brand attributes?" says Whitley. A team of senior executives and managers representing front- and back-office areas -- dubbed the SWAT Team -- created a series of "I will" statements. Each employee receives a wallet card listing the company's values, brand promise and the "I will" statements.
The critical next step was to translate those attitudes into specific actions, and then reinforce those actions with a formal training and coaching process. "Defining the behaviors is a really powerful part of the system," says Whitley. "We needed to define what makes customer satisfaction practicable."
For example, if customer surveys indicate that employees in a particular branch aren't being affable, "you can't just go to the front line and say they need to be more friendly," says Maggie Norris, Wachovia's wholesale customer experience director. "You need to break it down into specific behaviors."
Some of these efforts may sound rudimentary, but surprisingly, few companies get it right. Also, Wachovia's frontline staff had traditionally focused almost exclusively on selling to customers, not servicing them. Sometimes, as Wachovia discovered, it's best to back up and address the fundamentals.
The company implemented training modules on effectively communicating with customers. For example, what do you say to a customer who bristles at being asked for identification? Instead of, "Our procedure manual says..." -- a depersonalizing, potentially alienating statement -- employees are taught to use a more humanizing statement such as, "We just want to prevent any fraud on your account." Training also addresses how to diffuse an angry customer. "We practice soft skills, such as listening and being attentive," says Norris. "Rather than saying something like, 'I can't do that,' we instead ask the customer, 'What can I do to make you happy?'"
To support the formal training, managers also engage in coaching sessions to help employees with their customer interactions, working with them on the specific behaviors that drive the attitudes: greeting customers with enthusiasm, for example, or making eye contact. Regular critiques enable employees to comment on their own performances and give managers an opportunity for further coaching.
Norris and Kelly McSwain-Campbell, senior vice president and director of customer satisfaction research, also worked with human resources to make employees' service goals part of their incentive structures. In the wholesale division, incentive payouts are tied to a team-level score; in retail, they're based on scores for the financial center in which that employee works. McSwain-Campbell says that such incentives foster teamwork. And it's a far cry from previous sales-laden incentive plans.
Employees can track their own progress through individual scorecards built into Wachovia's CRM system. The scorecards include metrics on financial performance and customer acquisition as well as individual or team performance on customer service and turnover. "It's like a dashboard, with all your metrics right in front of you," says Norris.
This is the first year that a customer satisfaction component has been included in the wholesale group's incentive plans, and Norris has already noticed a difference in employees' interest in the system. "When you start affecting people's pay, they start asking a lot more questions," she says.
The programs have helped Wachovia take a big bite out of its turnover rate at the front lines. Annual teller turnover, which had reached nearly 50 percent in 1999, has dropped to less than 30 percent for the past two years, slightly better than the industry average. The company has seen similar improvements in turnover rates for its call center, online and wholesale division staffs.
As Thompson and Garrity had predicted, the company's frontline efforts are having the desired effects: As turnover has decreased, customer satisfaction has been ticking upward. The company's customer satisfaction ratings, measured using a combination of internal elements and external elements such as the University of Michigan Customer Satisfaction Index, jumped half a percentage point from the first quarter of 1999 to the same period in 2000 and have continued to increase steadily. Customer attrition rates, meanwhile, have fallen from 20 percent to 11 percent.
With attrition decreasing, Wachovia's team has shifted its emphasis from increasing satisfaction to building a deeper level of customer loyalty. "A customer can be satisfied today, yet leave you tomorrow," says McSwain-Campbell. "Loyal customers give you a break if a problem occurs, and they hang in there with you in the not-so-good times."
Attaining that higher-order goal means refining the measurement and coaching processes to reflect more complex behaviors. "We're measuring attributes that have a higher correlation to loyalty," says Norris. Surveys now ask , for example, if customers are receiving "unmatched service and advice," which is challenging to translate into employee behaviors. And Norris admits that "it's something we're still working on."
The management team is also extending its customer service education process to back-office personnel. Although support and operations staff may not have direct customer contact, their work indirectly affects customer satisfaction. "We've learned on the wholesale side that we can't ignore the credit department," says Norris, "because often that's how we begin the relationship with a business customer. We need to have the credit folks, the products team and the operational groups engaged in the program too."
The crisis that Wachovia faced in 1999 seems to have passed. Its stock has increased an average 21.5 percent annually since 2001. Net income has risen from $1.6 billion in 2001 to $5.2 billion in 2004, and it has beaten the Bank Sector Index three out of the past four years. The company's focus now is on instituting a continuous process for improvement.
"The challenge is, how do we link multiple channels together to ensure there's consistency, whether customers are online, interacting with the call center or visiting a branch in person?" says Norris. "We're just beginning to ask those questions."
For Thompson, the turnaround was a lesson in the value of both employee and customer loyalty. "Now we understand that shareholder value derives from having high employee engagement and outstanding customer service," he says. "When you do those things right, shareholder return will follow."