Ouch. At the obvious risk of turning away potential clients that are put off by vulgarism, we can’t hold punches. The marketing and communication strategies that one particular bank is implementing will go down in history as a text book example of a continuous, across-the board failure to be PROACTIVE and anticipatory about the impact of critical decisions.
1. Like every other bank, this one's rocket scientists, and MBA wearing, algorothimic geniuses somehow failed to anticipate the potential change in market environments, explaining their overweighted holdings in funky fixed income assets. And, before I continue, let me apologize to the rocket scientists at that bank who had presciently raised the unheeded warning flags directed to the former and current executive management. And, pardon me for saying so to the Chairman of this behemoth bank, but being in the same camp as Alan Greenspan insofar as pointing to the fuzzy nature of predictive science, isn’t a posture that anybody wants to embrace.
Here’s the point. Two weeks ago, the bank's marketing communications staff initiated a punch out program laying the ground work for across the board interest rates hikes in consumer and business credit cards. The ‘message’ was that the bank would be increasing borrowing on credit cards by 2%-3%.
Lo and and behold, I got my notification today. And what an eye-opener!
My interest rate was upped from 7% to 14.99% on two different cards, a whopping 100% increase in my interest rate, with an aggregate balance of $30,000, and a credit limit of $50,000..which was actually increased only two weeks ago, according to a special thank you email from the bank telling me what a great customer I am.
I’ve been a card holder for 20 years, and I have an 800+ credit score. I’ve never once missed a payment. Yet, I’m being asked to shore up the company's balance sheet, notwithstanding the fact that they’ve got access to hundreds of $billions of Fed money at a rate of 2%.
Raising my credit limit and two weeks later, doubling my interest rate smacks of predatory lending, but at least I'm smart enough to know that the borrowing ball is the wrong dance to be attending. And, we all know that as the litigation against banks and brokerages pick up, the line will be longer than the unemployment lines at GM.
OK. Shit happens. More important: anyone and everyone that takes on debt should understand there’s no free lunch. And so what if the country's top bank is getting a couple of hundred billion of bailout funding..(did the news report say $350 Billion??)from Uncle Sam and Uncle Hank (Paulson), and apparently, without any strings attached..i.e. without making sure that the bank actually makes money available to consumers and business borrowers to keep the wheels of capitalism turning.
Here’s the point i.e brand and marketing messages when a company is in crisis mode; so its a point that should be appreciated by a large majority of businesses, of all sizes.
1. Just like the gurus at the bank either failed to understand, or purposefully chose to ignore risk projections, the same morons are failing to understand that by increasing the cost of loan terms to their best customers, without having any programs in place to appease or address the tens of thousands of exceptions; those that have always paid on time and in full, they are destroying their brand faster than a speeding bullet.
I’m going to be one of those that says “not too big to fail”, and I’m going to tell my credit card issuing bank to take their credit balance and eat it. After all, my tax dollars, and most likely, my future social security entitlements are however indirectly, being used to bail this bank out today.
My guess is that no less than 50,000 of their several million customers will be doing the same over the next six months. That’s $1.25 billion in charge offs, another several billion in write downs i.e. projected interest income, and billions more lost in fees from those that stopped using the bank's brand credit card.
Now lets talk about a topic I raised several days ago; the impact on the brand when a company executes a layoff program as if they were an Appalachian abortionist. Again, I apologize if the phraseology is offensive.
The bank has announced unprecedented, across the board layoffs. Last week, as a professional courtesy, I emailed the six top HR managers at the bank and informed them of a great, and free webinar hosted by LeadershipIQ Guru Mark Murphy on the topic of how to manage layoffs with compassion, and without crushing the enterprise.
Those six individuals rec'd the email, but they were too busy firing people to pay attention to learn how to do it properly, and how to preserve whatever might be left, or so it seems.
How do I know this? In my communication with the 'customer service' staff and trying to understand how my rates could have literally doubled, the nice young girl on the phone broke down in tears and said she was "overwhelmed with hundreds of calls from people all asking why, when interest rates are going down, and the bank has been infused with how many tens of billions, could they be putting their best borrowers out in the rain?."
The young lady said "well the prime rate is going from six percent to nine percent this week, so we have to increase our rates.." The prime rate is actually at around 4%, so I could tell she wasn't particularly well-equipped to address my issue. So I switched the topic of conversation and told her that she might want to find another job before the house crumbles completely. She said she has "absolutely no idea whether she too will be losing her job at any moment." She told me that each of her coworkers had the same fear.
Not a great message to be sending to a customer, especially one with a blog that connects to tens of dozens of investment managers. It speaks volumes as to how poorly the bank's management is managing their staff and (not) communicating important messages. The brand means nothing without having the talent to support the value proposition. Mismanage the talent, and you mismanage the brand.
The remaining shareholders of this particular bank, and the remaining employees that have a managerial role should only hope that management realizes that they have no idea on how to manage a large infrastructure in a time of crisis, and that they need to bring in human talent experts; those that specialize in corporate crisis. If they don't understand these fundamental concepts, the entire management team should be fired, if not taken out and tarred and feathered.
The bank is apparently ignoring two of the most fundamental observations i.e. talent management, recently highlighted by LeadershipIQ's Mark Murphy in a very lively and live webinar that was attended by 1000 HR execs..I don't know if this partiuclar company's staff were too busy to attend, but they were invited, they just didn't show up. Perhaps they don't think they need any insight from an outside expert on this topic, or any other topic.
1. Don't Fire Talented Workers Just to Replace Them with Lower-Paid people. In fact, Citi IS firing high paid, top perfomers, and replacing them with untrained, low paid workers..except for those in the executive office of course. Those guys and gals are staying around to soak up their bonus allotments, which are 'contractually due to them', and now being subsidized courtesy of the billions they are receiving from me and you. Massive mistake.
2. Communicate the company's employment position and strategy crisply and clearly to all. Provide specific training to the managers delivering this message BEFORE the message is delivered. Have a clear message for those that remain.
If only based on the conversation I had on the phone with the customer service rep, is displaying a Total Failure to communicate to the remaining work force and give them a clear understanding of what their job security is.
Sure, nobody can really know for sure what tomorrow might bring, as the bank could simply close its doors tomorrow if the check from Uncle Sam bounces. But, the point is, when a customer service employee tells a customer that she has no idea about whether she will have a job tomorrow, that's not a good thing. The fact that she could not address my particular issue is completely beside the point.
3. Don't do stage-based layoff announcements. Do a full cleansing in one fell swoop. Stage-based layoffs, i.e. announcing a layoff in November, and holding back the January announcement about further layoffs is a recipe for disaster. So far this particular bank has announced three series of layoffs in the past eight months. The company's CEO says "our strategy hasn't changed."
OK, the business climate is changing on a day to day basis, so a company's ability to project out six months out, and consider the changes that might need to be made to workforce might be tough. Somehow, the bank's legion of rocket scientists, the ones that forecast five and ten years out on a variety of investment strategies, are unable to forecast how their own business will fare over the next six months. Will there be a 20%, 30%, 40% or 50% drop in earnings over the next 6 months to a year?. Apparently nobody has a clue.
So far, every single step that the executive leadership has taken suggests they are as out of touch with their own business as George W. was with the realities of foreign policy, and, as was his administration with respect to financial industry regulatory policy. And, so that we cross the aisle, shame on Barney Frank, and every other ill-educated Democrat that championed a mortgage for every voter, regardless of whether they could afford it.
As it turns out, this bank is far from learning its lesson on how to preserve brand integrity in times of crisis. Personally, I don’t care. I’m not a share holder, and I don’t necessarily embrace the same politics or culture as one of its largest shareholders, a Middle Eastern sheikh (actually a prince), even if he is widely acknowledged to be a smart guy, and even a very personable guy.
What’s a brand like this to do?? Here are few simple ideas, although they might be too simple for the complex minds at a global bank.
1. As quickly and easily as you’ve made rash decisions over the past months, leverage your internal resources and introduce a plan that helps your customers manage their outstanding debt. Don’t hit them over the head with a brick, especially after Bush and Co just approved a $25 billion+ infusion. You are almost drowning i new cash. How with a straight face (i.e. brand integrity) can you turn back your best customers?
2.Take a deep breadth. Yes, protect your outstanding receivables, but provide customers with a proactive step-by-step program that can help them FOR FREE, lower their outstanding debts. Ween them off debt, just like you weened them on to it. Its all about perception management.
Sounds stupid? Actually its brilliant. And this exact strategy has been used successfully in prior recessions by local banks in different parts of the country.
Just last week, I heard from a banker in Chicago soliciting our firm to help ‘message’ the same type of consumer credit counseling program that he successfully implemented back in the 1980’s, during an economic tailspin that turned the Midwest upside down. When he first created the program for his bank, the management was a bit leery about providing free debt counseling, and keeping the bank open at night and on weekends so that customers could come in for private counseling sessions. The program was a massive success. The number of loan delinquencies dropped by double digits, savings deposits increased, and new customers came into the bank.
This tailspin is a tsunami, and the sooner that the banks ‘get it’, and take PROACTIVE steps that not only protect their balance sheet, but their BRAND, and their good will, the greater the chances are that those financial institutions will survive
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