Treating customers fairly at the coalface
Changing the face of your organisation
September 2007
Larger and more complex organisations have often discovered that there is a huge gulf between senior managers’ vision for treating customers fairly and the range of behaviours displayed by customer-facing staff.
Irrespective of the size of the firm, senior managers have needed to invest significant resources and their own time to support and deliver necessary change.
The Financial Services Authority has also recognised these challenges, which contributed in part to its decision to push back deadlines for firms to demonstrate that they have fully embraced TCF. The firms that have made the greatest strides towards embedding TCF across all aspects of their business, and especially on the front line, are those that have embraced the need for a clearly defined TCF vision. This is often aligned with other customer-oriented initiatives and supported by consistent and regular communication across all aspects and levels of the organisation.
Organisations that try to embed TCF by adopting a purely operational approach without considering the scale of the cultural change that might be required will find their efforts falling short of the FSA’s expectations and their own commercial needs. Firms that achieve the most in terms of their front-line TCF programme are those that have adopted an approach that begins with a TCF-focused process analysis supported by behavioural assessments and change. To unlock the strategic benefits, both front and back office operations, i.e., product distribution and product servicing, must be subject to tactical,
TCF-led change.
Huntswood’s established method for frontline TCF analysis incorporates a three-stage review, but this is not something that can be conducted in isolation. To be effective, the business must have established some fundamental TCF requirements for its frontline operations. Without these, the baseline cannot be established and the programme will not make sense to those who need to change their behaviour. Firstly, the organisation needs to have established its own fairness definition, which applies across its business distribution and servicing operations and embraces the promise made by its brand.
This should support the delivery of the FSA’s consumer objectives through needs-based selling and set appropriate and realistic product and service expectations post-sale.
Needs-based selling will meet the FSA’s suitability criteria (or appropriate information sharing and eligibility criteria for non-advised sales) and ensure that customer needs and preferences are heard and understood.
One important aspect of supporting needs-based sales is ensuring an appropriate remuneration strategy and structure is in place.
Once the firm has its definition of fairness tailored to its type of business, it is then possible to conduct a review of front-line operations to identify and assess customer fairness touch points, establish a prioritised approach to risk mitigation and behavioural change, and remove the wasteful or nonprofitable activities this exercise will identify.
This is the baseline measure from which all progress can then be monitored and reported. There are two main benefits from taking this approach. It will provide a consistent and robust framework to establish fairness across product distribution and servicing, and deliver changes which should enhance the customer experience and commercial value through high quality, low cost processes. It should also provide hard evidence regarding the FSA’s consumer outcomes, while the increase in operational efficiency will help to drive a more profitable, sustainable business to support continued backing for TCF.
The question of identifying inappropriate and, most importantly, non-profitable behaviour is important, but often not recognised. Unsuitable behaviour is often motivated by long-standing reward structures which actually make it financially beneficial for staff to behave contra to the TCF vision, or to sell products which bring no benefit to the customers who buy them. Firms must link TCF to business benefits to demonstrate the longer term advantages.
As with any change process, successful implementation requires a holistic approach, senior managers’ involvement, an effective communications strategy and focused training.
Businesses are also investing in IT to facilitate the production of TCF-focused management information, which can require a significant lead time. Too often firms are looking at the significant cost and resource of fully implementing such an extensive programme, when their existing indicators suggest that their customers are broadly happy with the service they receive. It is only those that can understand the bigger picture that appreciate that the regulatory dividend available from a successful TCF approach is a small part of the overall benefits to be gained. The business must drive this change from regulatory and commercial perspectives to understand and maximise the principles-based regulation dividend.
In terms of the shop window, deep-rooted cultures and behaviours are the most significant challenges to implementation, but these problems do not always lie in the front line. Even where a firm has implemented revised processes, behavioural scoring and reward structures to support a more focused TCF approach to dealing with customers, these can easily be undermined by conflicting messages or challenges from senior managers.
Front-line staff are unlikely to change their behaviour following a programme to support better selling to customers’ needs if senior managers then seek to push a particular product or volume target. Senior managers may complain that sales staff have failed to meet targets, which are often not amended to reflect the new TCF vision. Usually, senior managers’ immediate response is to use shortterm incentives to encourage staff to achieve the original targets — this is hardly a TCF approach.
Senior managers will need to provide their front-line staff with the right tools to treat their customers fairly and capture the information that can demonstrate this to be the case; this will take time. Traditional monitoring and control models may provide the evidence, but they will not support the necessary behavioural change, especially if the problems lie higher up the organisation. Senior managers need to examine their own goals and behaviours, including their own reward structures, to ensure that a good TCF vision and expectations are understood and embedded at board level before a successful cascade can happen through the rest of the business. Once that has happened it will be possible for managersto trust individual employees to use their judgement on what TCF means in their personal dealings with customers.
Front-line staff and middle managers are often quick to understand and demonstrate a willingness to embrace TCF once the corporate vision has been explained to them. Any delay by senior managers to support the vision with appropriate reward and performance management structures will, however, quickly undermine this willingness and introduce confusion. TCF has to be understood and led from the top of the organisation. Senior managers cannot expect to tell the front line what to do with regard to TCF and expect it to happen. Unfortunately, there are too many firms where managers believe they can.
Stuart Freebody
Senior Consultant
Huntswood