In the last several weeks there is increased scrutiny among consumers about the manner in which they are being treated. From poor customer service to ridiculous fees customers are up in arms. Just recently I had a vendor tell me that we were to have a conference call at a particular day and time. I cancelled appointments to be ready for the call, then… no call!
I subsequently waited for two weeks. Guess what? There has been no call. In another incident I had a local vendor call me to ask my advice on business development. We spoke at length and then I agreed to mystery shop the business. Two weeks later I arrived with my entire family. Not once did he come to introduce himself, no once did he ensure my family was doing fine and not once did he seek to find if I were happy with service. This is in the management field emotional intelligence principle centered leadership, situational and transformational leadership but no one teaches asinine leadership!
To carry forward Bank of America CEO Brian Moynihan was speaking to Wall Street about recent fee hikes from the bank. Moynihan stated, “the $5 fee debit card fee is justified because the bank “has a right to make a profit” True the bank like any other business has a right to be profitable but the bank like ALL business has a fiduciary responsibility to acquire and retain clients. Peter Drucker spoke about this in 1954. But do company’s listen… we will get back to that.
The airline business is not profitable so they request that consumers pay for bags, drinks, ice, straws, cups, air etc. This is interesting considering that Southwest does not charge for this incidental fees and their campaign is “we would rather keep a customer then charge for bags.” Hmm they have it right.
The big automobile makers continually increase fees for automobiles. The average car price today approximately $27,000. There is no value, the brands have taken a massive hit and this fee is the base of the automobile and then luxury items are required. After all who does not want air conditioning and electric windows? However, Mercedes has been in business for years and its C class automobile continues to be 27,000 with all amenities and with the full allure of a luxury auto brand.
My point in all of this is that Moynihan and all domestic business has better take a good look at customers and focus on them. Customers have choses, are smarter and will not continually stand for the rote crap dished out by managers that continually do stupid things. If Moynihan wants to make a profit perhaps he should look within. The bank’s recent history is rift with bonehead moves such as in 1997, BankAmerica lent D. E. Shaw & Co., a large hedge fund, $1.4 billion so that the hedge fund would run various businesses for the bank. However, D.E. Shaw suffered significant loss after the 1998 Russia bond default. Then On January 11, 2008, Bank of America announced they would buy Countrywide Financial for $4.1 billion. Yet it was reported that the FBI was investigating Countrywide for possible fraud relating to home loans and mortgages. And the CEO Mozillo who has yet to be convicted still works there. Then On September 14, 2008, Bank of America announced its intentions to purchase Merrill Lynch & Co., Inc. in an all-stock deal worth approximately $50 billion. Yet at the time Merrill Lynch was bleeding an estimated $8 billion per quarter based on the wonderful leadership of E. Stanley O’Neal. Since when does stupidity lead to profits?
If profits are what the bank requires here are three pieces of advice that are provided for free not five dollars, first shed non profitable and debt. The bank’s strategy needs change and keeping bleeding divisions that drain cash don’t help. Countrywide continues to struggle, Merrill is hit with volatile trading and investors are running – kill them. Second, close branches. According to research there are 5,900 banking centers. When was the last time you saw a line at the bank similar to the Apple store. Retail centers cost money in salaries, utilities, insurance, rent etc. Consumer demand has driven the bank to more ATM’s and online management. This alone will save millions.
Third, have executives take the same brash move that Iacocca did back in the 1970’s – pay your way to performance. Reduce liabilities and take one for the team. There is talk about raising profits, there is talk about killing customers and there is talk of terminating thousands of employees but not once has there been a statement of compensation change.
Banks like airlines, autos and every other business whose strategy and purpose is off better look within before they begin to shed their most vital asset. BOA lacks discipline and seems very intent on blaming others for their issues. In the age of innovation banks like any other business need to stop the stupidity and become more creative for customers. Customers are the heart and soul of business and stupid decisions are its cataclysm.
© 2011. Drew Stevens PhD. All rights reserved.
