Stop transferring bankers

For years, India’s banks have built marketing campaigns reinforcing customer service as a key differentiator. But they have continued to lag the large global banks in customer service.

While there are many factors affecting this important attribute, a key reason is that our banks continue to cling to an age old management practice from the days of the Raj: routinely transfer managers to a different banking center, generally in a different city or town, without regard to how such moves may affect customer service.

The arguments for defending this medieval practice are many. Bank officials may get too cushy with customers and engage in corruption. Transfers are an efficient performance management tool to reward “good” employees with choice locations whereas officials with below average performance can be “punished” by being transferred to undesirable outposts. Startup branches in remote locations could never get off the ground unless experienced managers and staff from established branches are moved there to begin operations.

Old habits

But in India’s modern banking system, these traditional defences no longer hold merit. NEFT platforms, mobile banking and ATMs, available on a 24x7 basis, have dramatically reduced the need for customers to go to a branch. As India slowly moves to a more cashless economy, foot traffic into bank branches ought to fall further even as automated transaction volumes tend to go higher and higher.

So why would anyone want to go to a bank then? Other than people with time on their hands and old-timers who relish a visit to a local branch, most people make a trip only when a genuine problem exists for which there is no simple solution online. Such customers seek quick and real solutions and in many cases, the issues are unique to an individual customer. An official who knows the customer well can be a huge asset because the manager not only has access to what the computer screen says but also the benefit of insights, history and context that are specific to that customer. In other words, KYC — or Know Your Customer, in banking parlance — is literally what such exchanges rely on.

The worst slap in the face a customer gets these days is when he walks into a branch and is told that the banker with whom he has assiduously cultivated a relationship for nearly three years has been transferred to a different location. The customer now has to educate the new banker about himself and the history of his case.

It is not that bank employees enjoy being transferred. Employees who decide to leave families behind in their native towns and set up second homes in distant cities suffer enormous personal consequences. The entire burden of the commute falls on them, generally male, while the remaining members of the family have to face long periods of divided living and separation.

And for the banks, there are the huge administrative expenses of the transfer lifecycle. Hundreds of crores of rupees are spent on this process. These funds could be better used to lower banking fees, enhance bank reserves or improve bank profits.

Be modern

Beginning in 2017, India’s banks must adopt two bold policies to improve customer service.

First, eliminate the employee transfer madness and offer to return employees working away from their home locations a chance to return home. The goodwill that this creates among bank employees can be a powerful motivator to help improve customer relations. Transfers must be limited to special cases, such as lending a particular employee’s expertise for a brief period to solve a distant branch’s problems. This would bring the concept of the “account manager” - long used in direct sales and the brokerage business - to everyday bank employees.

Second, banks should institutionalize a radically new performance management system in which customer service is rated higher than all other attributes. Have you ever received a call from a bank manager about how a particular employee solved a particularly difficult problem?

Because of such a glaring omission in the appraisal process, bank employees have little incentive to please a customer other than do so out of the goodness of their hearts. It is only when a customer can vote on the level of service received from individual employees when employees have strong incentives to excel.

India’s economy is going through major structural changes in money, banking and taxes. The time to innovate and guide customers through all these changes is now. We must stop treating civilian employees like military officers and put an end to needless transfers.