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Follow Us"The more my customer sees me, the better the
relationship," says Bob Stark. "I've never brought in a piece of new business
sitting at my desk." But in 1993, Chase RMs were spending as much as one-third of
their time at their desks-mired in administrative activities like tracking down customer
information from legacy mainframe systems and funnelling it into tables and spreadsheets.
That is the time that could have been spent cultivating prospects and selling new products
to existing customers-and generating revenue for the bank.
What's more, even when they did spend time with customers,
Chase's RMs weren't equipped with the knowledge they needed to ensure that both the
customer and the bank were benefiting from the relationship. Information about the bank's
products, its policies and about the accounts themselves was scattered and unreliable,
making it impossible for relationship managers to properly identify and assess the options
available to their customers. Exacerbating this lack of knowledge, the data in the bank's
legacy systems was organized by product and transaction, not by relationship. This meant
that RMs had to make decisions without a big-picture assessment of the bottomline impact
for the bank.
Today, RMs in Chase's Middle Market Banking Group use a
Relationship Management System (RMS) that combines their knowledge about their
customers-loan history, deposits, investments, and so forth-with bank policies and product
knowledge. The system then presents this information in a variety of views, providing RMs
with instant snapshots of a relationship and enabling them to make educated decisions that
benefit the bank's bottomline. At the same time, they are able to provide better service
to their customers, which in turn fosters even stronger relationships.
Building on strength
The Chase Manhattan Corporation is the largest bank in the US, with more than $300 billion
in assets and quarterly net income approaching $1 billion. The bank's Middle Market
Banking Group is the dominant player in its market, providing a wide range of financial
products and services including cash management, international trade, leasing, financing,
401(k) retirement plans, employee health insurance, money management services, investment
banking and credit. Its 650 RMs each manage 30 to 60 relationships in the 'middle
market'-organizations with sales ranging from $3 million to $500 million. A 'relationship'
is defined as either a company or a person who owns one or more companies. One
relationship may include many individuals. The RMs are responsible for maintaining current
relationships and bringing in new business.
Chase has long been a technology leader in the banking
industry, with numerous ongoing IT projects designed to improve its productivity and
efficiency. But in 1993, Frank Lourenso, Middle Market's Group Executive and Executive
Vice President, concluded that his group could better use technology to learn how
different customer relationships contributed to the bank's profitability. That was
important because although Chase was the market leader, and its business profitable, the
bank was actually losing money on some customers.
To understand the profitability of customers, Chase needed
to understand all aspects of the relationship. Thus, Lourenso explains, while the bank
might have been making a profit on a loan, for instance, it might at the same time have
been losing money on other aspects of the relationship. In some cases, he adds, the bank
was providing extra services and accommodating special requests, without charging a fee.
In other cases, a customer might have been overpaying-buying services that the customer
didn't actually use. But without a complete picture of each relationship, RMs couldn't
make sure that their customers were getting a good value from Chase, while ensuring that
the bank earned a fair profit.
Chase's Relationship Management System
The RMS gives them that picture, in the context of the bank's services. Accessed through a
desktop icon, the system extracts timely information about each relationship from the
bank's legacy databases, which reside on heterogeneous systems (CICS, IMS, DB2, NT,
SQLServer, Oracle, and Sun Solaris) and composes a customized view which it displays on a
personal computer. Electronic links to the bank's other computers allow users to quickly
retrieve information about products and services that are relevant to a given
relationship.
RMS was developed with a number of software tools,
including Visual Basic, Visual C++ and Lotus Notes. Notes serves two purposes. First,
users request updates to data from a variety of underlying systems using Notes-based 'Data
Quality Initiator' forms, accessed through a button within RMS. The workflow features of
Notes ensure that all the right people sign off on a change before it is reflected in the
mainframe systems and that all sign-off and status logs are synchronized.
Second, a variety of Notes databases allow users to share
their knowledge, discuss issues, and query subject matter experts as needed. When users
show marked interest in a given topic, an expert may consolidate the discussion and
distribute a memo clarifying the issues, facilitating the renewal and evolution of the
knowledge.
Much of the data in RMS had actually been available to the
RMs all along, distributed monthly in 12" thick hard copy reports, culled from
mainframe computers. But the volume of data was overwhelming, and it instantly went out of
date. In some cases, the RMs were able to retrieve more timely data online through a
variety of systems, but navigating the mainframes without any filter on the data was
difficult and time consuming. Worse, each system was maintained separately, resulting in
conflicting customer data.
To manipulate the data, the RMs had to manually input it
into spreadsheets. And even then, each RM compiled figures differently, so senior
management couldn't get a picture of the business as a whole. Says Stark, "I remember
doing my first spreadsheet, in 1984. I spent an entire weekend on it at home, going
through reams of paper and making some sense of the data. In the end, I handed my
spreadsheet to my manager and he said, `this is really nice, but I have nothing to measure
it against'."
Today, using RMS, relationship managers and other Middle
Market employees can scan customer portfolios on-screen. The system tailors the view to
the issues at hand, and focuses the information in the context of relationship
profitability. This allows users to quickly spot a troubled relationship and negotiate
higher fees, for instance, or offer a discount to a customer that is generating
considerable revenue for the bank. Lori Littell Pape, a team leader who manages groups of
RMs, is currently bidding on lock boxes for a large customer that uses Chase as its
primary bank, but also has relationships with other banks. Since Pape knows that the
overall relationship is so profitable, she is prepared to price the service very
aggressively.
RMS also enables RMs to be more proactive in the ways they
serve their clients. Says Stark: "If I see on my report that a customer has a large
cash balance, I can call and describe our money management offerings. In many cases, the
customer doesn't even know we provide that service."
In addition, RMS allows Lourenso and other senior managers
to find information about clients themselves, without consulting an RM. Pape notes,
"Before we had the system, if a senior manager had scheduled a meeting with a
customer, we'd typically get a call asking for a memo about the customer's balances, the
active loans and other components of contribution. Now, we don't have to provide that
information; managers can get it themselves, saving us a lot of time."
That's even more valuable in a crisis. "Previously, if
senior managers saw a big number change-say, a dip in deposit balances, fees or
contribution-the effect would ripple through every team, as the team leaders tried to find
out what had happened," says Denise Thomas, a VP and Team Leader. "Today, it can
be resolved with a click of a button. This means that everybody can stay focused on what
they're supposed to be doing-booking loans, selling products and helping customers make
decisions." In fact, certain types of information requests come up frequently enough
that standardized Notes-based forms have been built into the system, designed to respond
to these requests.
Moreover, everyone is now looking at the same data. In the
past, senior managers reviewed profitability information produced by the bank's Financial
Management Reporting system, while RMs analyzed customer information from the bank's
Customer and Product Reporting system. Due to policy differences, the data didn't always
agree, confusing RMs and forcing them to spend time reconciling the numbers. With RMS, all
levels within the Middle Market hierarchy, from Lourenso down, only review data from the
Customer and Product Reporting system, accessed via RMS.
And when relationship managers leave the firm, their
relationship knowledge no longer walks out the door. According to Stark, "As soon as
someone leaves, I can use RMS to figure out who the most profitable customers are in an
instant, and schedule visits with them that day."
Creating an effective KM system
To make sure that the information in RMS would be relevant and up-to-date, Chase developed
the system according to a strict set of principles. These included:
- RMS would use only one source for each data element; that source would
always be the primary source. Thus, RMS eliminated inconsistencies.
- Whenever possible, RMS would use existing corporate information.
- Relationship managers would be responsible for making sure that the
information in RMS is correct.
- Line officers would be closely involved in designing the information
infrastructure.
- RMS would encourage sharing of knowledge throughout Middle Market and
throughout the corporation. (This was critical because it is the quality of knowledge
shared by users that ultimately determines the success of a KM system.)
This last principle had a strong cultural element. To
succeed, Chase had to break the knowledge-is-power paradigm and provide easy access to the
underlying information. The group's old information systems were laden with so many
controls that maintaining security was a major cost in running the systems themselves,
according to John McFadden, a VP in Middle Market's IT group. The result?
"Information was so well protected, people didn't use it. We discussed the issue of
information sharing at great length. The Bank's information owners ultimately came to the
conclusion that the value of sharing exceeded the value of restricting access. As a
byproduct we also created better access to what had previously been fiefdoms of
knowledge."
Bottom-up design, top-down support
This cultural shift was strongly reinforced by Lourenso's staunch support to RMS. But
while Lourenso drove the project, he was adamant that line employees drive the design of
the system. If RMS didn't meet their needs, he reasoned, RMs wouldn't use it.
The first step was to identify the most effective RMs from
a customer perspective. A 1993 study by Barlow Research Associates, an industry
consultancy, identified the six top-performing RMs and analyzed their work practices and
experience. It turned out that all six had come up through the ranks of the bank, so they
had personal contacts in every department, which made them particularly effective at
navigating the bank's wealth of data and expertise without the benefit of technology.
According to Lois Leatherman, VP (Market Research), they maintained files of their own
contacts-people they could call to help resolve issues for customers. "We wanted to
design a system that would emulate that ability to find answers through personal
connections."
Based on conversations with the six, Chase developed a
prototype of RMS, using input from these high performers about which decisions were key to
their jobs and what knowledge they needed to support those decisions. The intent was not
to create a system that would put every piece of information at the user's fingertips, but
to offer RMs a tool that would give them the knowledge they needed to make better
decisions. To ensure continued advancement of the knowledge in the system, Chase then
convened a more formal RM advisory board-a 60-member organization that evaluates proposed
enhancements.
Other groups in the bank also participated in the
development of RMS, contributing their expertise as appropriate. People from risk
management, for instance, lent knowledge about global exposure. And input from the finance
division was the key, given that profitability information is the cornerstone of RMS.
Return on investment
Although it's been in place just over a year, RMS has nearly broken even already, with
significant cost savings and revenue increases directly attributable to the system. In its
first 18 months of operation, the system delivered at least $11 million in increased
revenues and reduced costs, on a total investment of $12 million. This figure is based on
conservative estimates of RMS's contribution to real revenue growth and real cost
reduction. According to Chase, about 10-20% of its incremental revenues and 40% of its
incremental cost reductions can be attributed to RMS.
In addition, RMS delivers numerous benefits that are
difficult to measure on the short term, but which should generate significant returns over
time. These include:
they can happen, Chase will realize savings-likely to amount in the millions-over the long
run as bad debts decrease.
BETTER DATA: Because it draws from one source, and because RMs are held
strictly accountable for keeping their customer data accurate, RMS
improves the consistency and quality of data used by Middle Market
employees.
BETTER SERVICE: According to Stark, "We have 500 opportunities a day
to make or break a relationship." RMS boosts the odds that those opportunities will
work to the bank's advantage. For instance, when a customer complained about trouble with
one of his vendors, the relationship manager searched RMS and quickly discovered that the
vendor was a Chase customer too. Says Pape, "In less than a second, we had that
customer's RM on the phone and we helped work out the problem very quickly.
A major portion of the financial gains can be attributed to
productivity increases. Because they no longer waste time wading through hard copy
reports, RMs can spend more time in the field. Consequently, they can handle more
relationships. Revenues per RM are increasing, while the total number of RMs has
decreased. Says Thomas, "We're supposed to be out with customers all day, and now,
for the most part, we are. I can be out of the office all day and use Notes databases to
communicate." In addition, since people at all levels of the hierarchy use RMS, much
of the time that was wasted requesting and reporting information has been eliminated.
Chase is also saving money by making better use of staff
resources. RMS helped Chase senior management clearly identify the composition of the
bank's customer portfolio, segment the portfolio in meaningful ways, and tailor service
offerings and levels to each segment's specific needs. For instance, a large number of the
bank's relationships are non-borrowers, who require more operational servicing and
comprise the lower segment of the portfolio in terms of profitability. A typical RM,
trained in credit, doesn't spend much time on these relationships because the potential
incremental opportunities are small.
To properly serve these customers, Chase created a business
service unit dedicated to this market, staffed primarily with service assistants. Says
Lourenso, "Many of these customers' requests can be handled by an entry-level person
instead of more experienced and expensive RMs who should be concentrating on more complex
relationships."
RMS also gives customer service employees a way to
prioritize calls. Says Pape, "If six people are on hold, and one is the # 1
relationship, the service person knows which call to take first. Before, our service
people couldn't have known that a given customer was generating so much money."
Finally, RMS has enabled the bank to actually decrease its
training budget. Because the system provides RMs with an intuitive front end to a variety
of corporate 'legacy' information systems, they no longer need to be trained on the bank's
numerous mainframe systems.
Despite these impressive gains, the numbers don't yet
reflect the true potential returns of RMS. With the most significant up-front investments
in technology and development out of the way, RMS will generate even better returns in the
future. In fact, Chase projects additional revenue growth and cost reductions in the
amount of $17 million over the next two years, with only $8 million of additional
investment.
The future of RMS
Based on feedback from users, Chase is continuing to upgrade RMS, to further improve
productivity and service. One of the major goals of the system was to free RMs from their
offices so they could spend more time with clients. An enhancement planned for 1997 will
further that objective by providing remote access to RMS from laptops.
In addition, by adding even more specific product
information to the system, RMs will be able to more readily identify 'cross-selling'
opportunities. For example, by having more cash management and investment product details
available online, RMs will be better able to spot opportunities to sell these products
into existing relationships.
And according to Stark, staying in touch is what his job is
all about. "At the end of the day, what am I trying to achieve? I want to be with my
customer. When my customer sees me more, the relationship is better, and transactions can
be consummated in meetings. That's the greatest return on our investment."