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(originally published by Booz & Company)


Retail Banking’s Secret Weapon

Some branch managers have the basic skills to succeed in their current position, but they may not be capable of managing a larger branch or possess the depth of product knowledge to do so — whatever their ambitions. Some lack the confidence to manage several branch managers, as they would have to in a larger venue, whereas others have stronger management abilities and the skills to understand complex products, including commercial banking, that are required to handle more lucrative clients. Some stick to their branches, whereas others look at the bigger picture, understanding their region and more general financial-services trends.

Understanding these differences in both ambition and talent offers banks an opportunity to manage the career paths of their top-performing branch managers more effectively, getting the most out of those high performers and making sure they put the right manager in the right branch.

Highly skilled town mayor managers, on the one hand, typically don’t want to move to new branches, so augmenting their value to the overall organization should involve training them to act as mentors to younger managers. High-performing but less skilled town mayors, on the other hand, should be provided with the tools to keep on performing well. Talented next challenge types should be groomed for their next job at a larger branch, while the expectations of less-talented but no less ambitious managers need to be managed, and even if they can’t be moved up, they should be rewarded for their ongoing success and continuity.

Given that the attrition rate among branch managers industry-wide is between 20 percent and 30 percent every year, rigorous, thoughtful career planning is essential to the retention and continued success of the best branch managers. But that must be coordinated with new approaches to every aspect of human resources processes relating to the branch manager, including recruitment, training, and performance assessment.

Recruitment, whether in-house or from outside the bank, has long been an ad hoc, primarily qualitative process with no clear method or goal in mind. Hiring managers, for instance, are typically responsible for different regions, and their hiring policies aren’t consistent from region to region. Hiring decisions should indeed be optimized locally, but the criteria need to be expressed explicitly. And managers of the top branches in every region should be tracked and contacted, with the goal of keeping them “warm,” in human resources lingo, in case an opening turns up.

The training of branch managers is another industry-wide blind spot, and getting the best out of people remains a challenge. Current systems have not been designed to help managers succeed — it’s not culturally important, and few banks have allocated resources to the problem. Yet industry benchmarking has demonstrated that determined training efforts can make a difference in terms of both retention and performance, and anecdotal evidence suggests that well-trained branch managers produce significantly higher customer-service and customer-satisfaction scores.

Performance assessment also remains a problem. Our study of bank branches shows that senior managers rarely agree about their performance criteria, or about assessments of individual branch managers. Consistency varies from region to region, and one result is that managers are placed where they don’t want to go or where they will struggle to succeed. Assessing performance must be made more objective, with consistent, clearly defined criteria and goals that are more closely tied to financial metrics.

Taking an objective approach to managing the managers will work in any retail sector, or any business at all, for that matter. For banks, it will produce a significantly better return on the investment that they make in their branch managers. But it will work only if high performers are given the tools, the goals, and the incentives to maintain their impressive pace.

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  1. Alan Gemes, Fabienne Konik, and Caroline Moss, “Striving for Growth: Best Practices in Retail Banking Sales and Service Channels,” Booz Allen Hamilton white paper, June 2007: An overview of the many challenges facing the retail banking industry. PDF download.
  2. Paul Kocourek, Aditya Bhasin, and Paul Hyde, “A Better Way to Make Branch Banking Pay,” strategy+business enews, 2/24/2004: For today’s consumer banks, reinventing local branches as a hub to attract and retain customers is essential to profit and growth. Click here.
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