It is an undeniable fact that the human capital is the most critical for any organisation especially one in the service industry as a bank.
I had an interesting episode with my bank recently. I discovered that my son's account opened a few years ago was misspelled in their records due to a data entry error. When I tried to get this rectified, I was asked to fill up a new form. I asked them to check their records but was informed that the records were lost in the floods in 2005.
I escalated this issue to their head of service who deputed a junior officer to deal with me. She called me several times for routine information like account number, name of the officer I spoke to earlier etc. Yet there was no progress.
I then went to the bank and checked out in their system. There, I could see the scanned image of the original form which had the correct spelling. When the officer called me yet again for some minor detail, I told her that this info. is already available in the bank in the scanned image.
She had more questions for me like where did I see this, which branch, which desk etc. When I expressed my irritation with the delay and approach, she gave me a piece of her mind !! Rather than being apologetic, she seemed to be the one who was offended.
My bank later rectified the problem without any further communication with me, after I spoke to their head of service again. Yet, the whole incident left a bad taste and reduced my confidence and comfort with my bank.
A bank may have great technology, seamless systems, on line information etc. However, if it does not have the right people, it could end up losing clients. In my case, the operations staff were bureaucratic and not keen to find a solution. The customer service staff was not trained to look through the system and had an attitude problem too.
It is imperative for every bank to make sure that its staff are customer centric and sensitive. It is not enough for a bank to talk about service and it should also take steps to ensure this. Training and close supervision is critical. Every complaint and customer issue needs to be taken up earnestly to find a solution and fix the root problem. Every staff member who is found to be lackadaisical in approach needs to be retrained. If this is not bringing about a change in the attitude and performance, it is best to weed out such people.
In the long run, for a bank to survive and out-perform its peers, it needs to be filled with high quality people and the right culture in place. Any bank ignoring this key area will become unattractive for its customers.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
Thursday 28 October 2010
Friday 8 October 2010
Diversify risk
The last blog was about the importance of market share as well as product focus. We also saw how single product organisations like HDFC have done so well over the past few decades.
It is not true, however, that all single product companies will do well or have done well. In many ways, success depends on a variety of factors like vision, strong plan, processes, people, focus etc. Success also depends on the products chosen and how well the products do in the market place.
The housing sector, in India, has seen very few blips in its upward journey - thanks to the ever growing population and a growing economy. There have been a few 'corrections' in the past due to over-heating of the sector but overall the scenario has been good. As long as the organisation is conservative in its lending practices and not encouraged too much speculation, it is in a safe zone.
We are all aware that, in general, each sector has its cycle of ups and downs. When the going is good, every move that an organisation makes seems to be a winner. At the same time, when the cycle is down, a 'one-product-bank' soon finds itself in big time trouble.
Which brings us to the need for diversification of risk. Even though there are compelling reasons for product focus, the need to balance out the portfolio calls for a judicious mix of products which will help negate the effects of a bad cycle. The mix of products should be such that there is a support from one sector when there is a weakness in another.
Of course, when there is an overall weakness in the economy affecting most sectors, one can only fall back on the overall quality of the book in terms of selection and strong predictions / collection ability.
Each bank should analyse the source of its liabilities and assets to make sure that there is no over-dependence on any source. There should be a proper mix in terms of geography, sector etc. One thumb rule to be applied here is to be "mapped to market" - which means that the bank's sources would be similar to the demographic pattern of the market. For instances, if 80% of the savings accounts in the market comes from salaried individuals, the bank's pattern should match that. And within that if 10% comes from the IT sector, a similar pattern should be reflected in the bank. This rule does not apply if there are any emerging markets or new opportunities missed out by others.
Similarly, on the assets side also the mix of products and the sectors where the lending is done should be mapped to the market. When choosing product mix, attention should be paid to the mix between secured and unsecured assets. Within secured assets (which should normally form the bulk of any bank's assets), re-sale values and loan-to-value forms the bulk of the consideration. Ability to recover in the event of default either through collection or repossession is critical.
To summarise, product and market share focus is important for a bank to make best use of available band width of management and to avoid getting lost in a mire of products. Yet, diversification of risk is required to manage the inevitable market cycles.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
It is not true, however, that all single product companies will do well or have done well. In many ways, success depends on a variety of factors like vision, strong plan, processes, people, focus etc. Success also depends on the products chosen and how well the products do in the market place.
The housing sector, in India, has seen very few blips in its upward journey - thanks to the ever growing population and a growing economy. There have been a few 'corrections' in the past due to over-heating of the sector but overall the scenario has been good. As long as the organisation is conservative in its lending practices and not encouraged too much speculation, it is in a safe zone.
We are all aware that, in general, each sector has its cycle of ups and downs. When the going is good, every move that an organisation makes seems to be a winner. At the same time, when the cycle is down, a 'one-product-bank' soon finds itself in big time trouble.
Which brings us to the need for diversification of risk. Even though there are compelling reasons for product focus, the need to balance out the portfolio calls for a judicious mix of products which will help negate the effects of a bad cycle. The mix of products should be such that there is a support from one sector when there is a weakness in another.
Of course, when there is an overall weakness in the economy affecting most sectors, one can only fall back on the overall quality of the book in terms of selection and strong predictions / collection ability.
Each bank should analyse the source of its liabilities and assets to make sure that there is no over-dependence on any source. There should be a proper mix in terms of geography, sector etc. One thumb rule to be applied here is to be "mapped to market" - which means that the bank's sources would be similar to the demographic pattern of the market. For instances, if 80% of the savings accounts in the market comes from salaried individuals, the bank's pattern should match that. And within that if 10% comes from the IT sector, a similar pattern should be reflected in the bank. This rule does not apply if there are any emerging markets or new opportunities missed out by others.
Similarly, on the assets side also the mix of products and the sectors where the lending is done should be mapped to the market. When choosing product mix, attention should be paid to the mix between secured and unsecured assets. Within secured assets (which should normally form the bulk of any bank's assets), re-sale values and loan-to-value forms the bulk of the consideration. Ability to recover in the event of default either through collection or repossession is critical.
To summarise, product and market share focus is important for a bank to make best use of available band width of management and to avoid getting lost in a mire of products. Yet, diversification of risk is required to manage the inevitable market cycles.
I would love to hear your views on this blog. Please feel free to leave a comment on the blog or send me a mail at vish.sesh@gmail.com and I will quickly respond.
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