Building the bank on total quality management.

With a solid foundation of service quality, success can be

Total quality management represents a formidable challenge for bank marketers seeking to understand what makes their bank shine in the eyes of their customers.

Is it plenty of parking spaces? An accurate statement? Convenient ATMs? A handshake at the door? Or, a sophisticated investment product?

As banks move from the realm of quality service into the domain of total quality management, they are asking themselves some serious questions about the way they do business. Their probing extends beyond sales and service to include the total management philosophy.

"Banks are opening up their definition of quality management and considering what their customers expect and experience, rather than just what the bank provides," says Diane Sauter, president of Strategic Solutions, Golden, Colo. "There are a lot of factors that go into total quality that the customer never sees, yet considers important, such as accuracy in processing or up time for ATMs."

Both internal and external procedures are being examined, measured and improved to deliver quality service that is consistent throughout the bank. Sometimes referred to as re-engineering or strategic management, total quality management programs empower employees to participate more in the decision process.

Consequently, if service quality is the nuts and bolts of an organization, then total quality management is the bricks and mortar giving the organizational structure vitality and strength. More encompassing than individual programs, total quality management is a change in behavior and attitude felt throughout the whole company. It's not just front-line employees who are being asked to bear the responsibility for delivering quality service, but back room employees also are being held accountable.

"In order to implement total quality management, you need to respect a cultural change in direction, set the strategy and give employees a chance to look at things differently," says Peter Kavanagh of Creative Realities, Boston. Total quality management is the umbrella, it's the big picture."

The Three Essential Components to TQM

Efforts to understand customers' perception of service and how it relates to total quality management has led some banks to reshape and redefine their organizations to be more responsive. In some cases, programs and services are expanding to embrace more of the customer's wishes and desires.

Determining what is desirable often means reorganizing around customer requirements. To do that, banks have to be prepared to ask their customers questions and listen to their customers, say consultants.

Sauter of Strategic Solutions says banks are actively going out into the marketplace and talking to both customers and noncustomers, asking them to describe quality service. The difference in these question and answer sessions is the way banks are approaching consumers. Sauter says consumers become more willing to provide feedback when they understand quality service is at stake. "Consumers are weary of market research," she explains. "It is a selling job to get customers to participate, but once they believe their input will impact procedure and will create change, they will be more willing to participate."

Robert Brown, managing partner with BANKTEAM, Phoenix, Ariz., says there are three critical components to total quality management programs: technological efficiencies, ongoing service quality measurement systems and the human element.

Technological efficiencies include policies and procedures, computer systems and any behind the scenes efforts that affect how quickly and efficiently the bank can service customers.

Service quality measurement systems consist of programs that provide feedback on the type of service being delivered. Two methods banks use are customer expectation surveys, which help establish sales and service quality direction, and frequent mystery shops to measure whether quality service is delivered.

These methods are not new, but the way they are being used is changing, says Brown. The customer expectation surveys can be written questionnaires or focus groups where customers are asked to not only define their expectations, but rank them in importance. Some mystery shops are conducted monthly, because managers know "what drives performance is feedback," he says. "Technologically, banks know every day how they do by whether they balance. In service quality, you need consistent feedback as well."

The human element component includes setting up service quality training for managers and employees on an ongoing basis. A growing trend is to have managers conduct one-on-one service quality training with their employees. The managers act as coaches and train employees where they work, instead of in a remote classroom. Brown says more banks have discovered that when all of their managers are involved as service quality trainers, the managers systematically become true coaches and solid mentors.

"Service quality empowerment begins by giving managers the resources to develop and train employees on a continuous basis," he says.

With the proper training, employees feel more confident to make decisions without guidance. Stronger relationships also develop between the employee and manager because they are working in a "hands on environment."

Centerbank Creates Employee Partnerships

Implementing a total quality management program is an ongoing process consisting of many different components. Banks that have begun such a journey say it is an intense learning process that spans a lifetime. "It is a process that works backwards to the absolute heart of the organization," says Bill Placke, president and chief operating officer at Centerbank, Waterbury, Conn.

Placke describes the effort as creating a high level partnership between those who provide internal service and those who deliver external service. "The support level of your back office is absolutely critical to the job you are doing at the front line," he says.

Using a Harvard University analogy on the service profit chain, Placke explains how total quality management works. "Internal service quality leads to employee satisfaction, which leads to employee retention," he says. "Employee retention leads to external quality service, which leads to customer satisfaction, which in turn leads to customer retention and greater profitability.

"There are six discrete pieces, all of which have to be inter-related with each other for this to work," he adds.

Understanding the importance of interdependency has helped Centerbank develop its total quality management program. Banks that only think of the customer when they begin a quality management program, are making a mistake, says Placke. "Only a limited number of people are at the front line of sales," he explains. "If they are not tended to extremely well by people who provide them service, they will tire quickly when providing customer service because they are hassled at the back end."

Centerbank has defined three ways to provide total quality service: provide a high level of employee training; understand what satisfies customers; and develop measurement systems that provide regular feedback. "Communication is a huge part of all of this," says Placke.

One strategy for developing highly trained employees begins at the hiring process by identifying people who believe delivering quality service is a key goal. Finding the right person leads to expanding the interviewing pool and taking more time in selecting new hires, asserts Placke.

Another key component for the training process is empowering employees to make on-the-spot decisions. Through nontraditional training, managers act as mentors for their employees. Branch managers coach the customer service representatives and tellers only after they have been coached by their supervisors. Everyone, including Placke, participates in the training. "It is a cascading approach and there are many benefits," he says.

For instance, training while on the job does not disrupt the flow of business. If any interpersonal problems arise within the staff, they are identified and handled immediately, says Placke. The interaction between boss and subordinate also improves, he says.

Another part of the coaching program includes videotaping participants while they role-play. In these sessions, employees learn how to ask customers leading questions to determine financial needs. Special attention is paid to voice tone, facial expressions, eye contact and attitude. "If someone approaches you with a dazzling smile, a great tone of voice and good eye contact, you can't resist," says Placke. "We're trying to develop a style in the service level and attitude we deliver."

A change in attitude can sometimes make all the difference in the world. The results at Centerbank are dramatic, according to Placke. He gets letters frequently from customers who notice the difference in employees. Customers write, "You wouldn't believe how attentive this person was. He made me feel like I was the only person in the bank."

Understanding what satisfies customers is an important component in delivering total quality service. Focus groups and questionnaires are all part of what Placke calls the basic research. Secondary research digs much deeper into customer behavior with the use of segmentation and predictive modeling.

By determining the net present value of its customers, Centerbank has been putting more emphasis on retention strategies. The premise for the strategies is that some segments of the customer base will be more profitable over time than others, based on the type and number of accounts and balances.

To illustrate the principle, Placke uses an analogy from Taco Bell. "If the net present value of the average customers over their lifetime at Taco Bell is $11,000, that presents a totally different picture than if you focus on the 59 cent taco they buy today," he explains. "The same holds true in banking. If you don't recognize that and set standards, you'll lose your high-end customers."

After a bank learns what really pleases its customers, then a measurement program needs to be developed to provide feedback regularly. Centerbank mystery shops both internal and external operations. Placke says shopper surveys are important because they give clues about how well the bank is doing.

An outside company shops customer contact employees, and the results are part of an overall grade employees receive on customer service. Their performance is then tied to a variable compensation program, which ties 25 percent of their pay to customer satisfaction. The bank began the program within the last months of 1994 and Placke says it is too early to determine how well it is working. "You can have an employee who has an excellent year in product sales, but who is totally burning up your customers," he says. "There is a lag time when this will show up. With pay for performance, you can't escape the results."

To provide consistent quality service, customer contact personnel need to receive quality service from the back office. The bank has just begun shopping operations personnel. Customer service employees are sent surveys asking them to rate the service they receive from the back office. In addition, Placke does some shopping himself either by walking into departments to check on operations or by telephoning. "Not everyone recognizes my voice, so I can test whether employees have the 'drop everything' attitude for me," he says. "That is the kind of commitment you have to have for your customers on a daily basis."

Management's role is also another important part in making total quality management succeed. "Employees have to believe you are as committed as they should be," he says.

In Trust Develops Behind-the-Scenes Team Spirit

The first impression is often the most lasting, but in banks that are committed to total quality management, creating the first impression begins long before the customer is first greeted in the lobby.

Total quality management at InTrust Bank, Wichita, Kan., involves every aspect of operations, not just when customers open accounts. "All employees, whether they have direct contact with a customer or not, share in the responsibility for quality service," says Traci Durham, marketing communications and service quality coordinator. That means everyone, from custodians who keep the grounds clean to processors who produce accurate statements, she says.

One premise behind total quality management at InTrust is that if the bank improves internally, it also will improve externally. Process Improvement Teams have been formed to improve procedures, eliminate rework and improve quality service for both employees and customers.

As quality service coordinator, Durham oversees the quality Service aspects of the bank's program. One of the goals is to develop quality standards consistent throughout the bank. Training and shopping surveys are ways to check if the objectives are achieved.

For instance, the retail and customer contact division are shopped in one program, while operational departments are shopped in another, The objective in the retail side is to measure the quality service delivered in the branches. Customer service representatives are evaluated on whether they are polite, greet customers promptly, have good eye contact, use the customer's name, offer a handshake, provide the most information possible, explain products in a confident and clear manner, cross-sell by encouraging customers to open accounts, inquire whether there is anything else they can help with, and thank the customer.

"We want our customers to know they are important and we are glad they are our customers," says Durham.

Sometimes in the drive for quality service, the basics can get lost. Durham says little things, from the moment a customer walks in the door, should be considered. "If someone is not at the right spot, escort them to where they need to be," she says. "If your job isn't making loans, don't say, 'We don't do loans,' but do direct the customer to the area or branch that does."

Internal operations are shopped by telephone. Employees are evaluated on whether they identify themselves and their department, transfer a call politely, provide adequate information and say thank you. "We're asking our employees to treat each other with the same courtesy we expect them to give to our customers," says Durham.

Everyone at the bank goes through standard telephone training. Durham says it is important everyone understands and conveys a consistent image throughout the bank. "You have to lay the groundwork and build on that," she says. "The courtesy we show toward each other establishes team-work that flows from inside the bank to the outside."

Colorado National Checks Service Quality One-on-One

Colorado National believes it's not enough to respond to complaints. The goal of this bank's total quality management program is to prevent the complaints from happening in the first place.

The bank started a quality assurance department in 1993. The mission is to learn how to deliver better service to customers by identifying what the bank does well, what it doesn't do well and to adopt strategies to improve service.

"We want to empower employees to take action so customers feel they are well served," says Linda Watson, quality assurance manager.

Before the program was implemented, service standards were established for all employees. Some of the details covered were how to answer the phone, what branches should look like, and how employees should conduct themselves.

Within Watson's department there are two quality assurance representatives whose role it is to be "the eyes and ears of service." They spend 75 percent of their time in the field visiting branches and evaluating service standards. They speak to branch managers about service concerns and also notice how long customers are waiting in line and how accounts are opened. "They can come in and look at a branch with a clean eye from the customer's perspective," says Watson.

The quality assurance representatives also act as quality service coaches. If a manager has a new employee, or one who hasn't caught on to procedures, the quality assurance rep can spend time with that employee. Watson says it is not uncommon for the reps to stand behind the teller line to answer questions from employees. The reps also conduct role-playing with employees, or can instruct managers on how to work on training exercises. Watson says the reps are an added reinforcement to the quality assurance initiative and serve as a resource for branch managers.

In addition, the bank has launched a structured measurement program every quarter where the actual service delivered is assessed. Two quarters of the year, mystery shopping by an outside vendor is conducted in the branches. During the other two quarters of the year, a "prime performance program" is underway. Customers are called after they visit a branch and asked to assess the service they received. "Every quarter we have measurement just to let us know objectively how well we are doing," says Watson.

Another check and balance is the complaint management system. The sole job of one employee is to answer and review customer complaints. Part of the process is to determine how to resolve the issues and examine how the problem affected customers.

The information is often used in training sessions. Watson says many of the examples used in skits or role-playing are real situations from mystery shops, surveys or complaints. "Many times the employees say, 'that's awful, that can't be true,'" she says. "Then I tell them it's not only true, it happened here. It really makes the light bulbs go on."

A major emphasis in the training at Colorado National is to teach employees to make decisions and resolve issues. Watson says the goal is to never say no to a customer, but to seek out resolutions. "If you can't solve an issue on the spot, don't create a hostile situation; you have the power to seek additional assistance," Watson says employees are told. "Managers are there to get involved."

Total Quality Management Attracts Renewed Attention

Whether it's re-examining procedures, redesigning a quality assurance program or re-vamping training programs, banks are paying more attention to total quality management. The drive toward better service is fueled by the understanding that happy employees and efficient operations lead to satisfied customers, which translates into improved profits.

Those who have launched total quality management programs say they have learned that all operations within the bank are inter-related and dependent on one another. Quality service is no longer the job of only the front-line employees, it is everyone's responsibility.