Loan officers have long been viewed as the cornerstone to client relationships within the commercial banking segment. With intimate knowledge of their client’s business, officers fully understand “the credit.” While these credit qualities were once paramount, they have become table stakes in favor of a different skill set: business development.
This new emphasis is being driven by two predominant industry trends. The low interest rate environment caused a compression of interest rate margins and profitability. Also, continuous market pressure from bank and non-bank competitors for improved financial performance has triggered the need to grow, particularly through new customer acquisition. To meet this emerging financial challenge, banks have evolved loan officer responsibilities by adding business development and targeted sales goals, oftentimes without necessary support, coaching, or skill-building.
This increasing demand for organic growth has evolved the role of the loan officer into a relationship manager (RM). But limited bandwidth coupled with under-developed sales skills leave many RMs unable to complete both portfolio and business development responsibilities—and sales goals continue to lag.
Loan officers face a push and pull of responsibilities. They historically focused on portfolio management responsibilities, writing credit memorandums, and performing site inspections, all while staying current with banking and industry trends. Proactive business development was a secondary focus.
The modern RM model asks far more. RMs must maintain a day-to-day focus on the risk management tasks within their portfolios, while carrying out newly assigned sales responsibilities and meeting challenging sales-related performance goals. RMs also are charged with cross-selling the entire suite of the bank’s products and services, well beyond loans and deposit products. These competing priorities have led to challenges with internal role clarity and sub-par performance.
Banks seeking to improve sales effectiveness within their RM role must consider how they define the loan officer or RM role. We recommend assembling a cross-functional team familiar with the end-to-end credit lifecycle. This team should be intimately familiar with RM-related tasks and could realign RM responsibilities to other roles within the credit lifecycle. An approach could include organizing a “middle office” of dedicated portfolio managers and personnel who support most credit activities associated with their RMs, creating capacity and significant opportunity for improved RM sales effectiveness.
We believe the bank’s organizational structure and optimal assignment of roles and responsibilities is key to enabling RMs’ delivery of improved financial results. Clearly assigning a subset of RM responsibilities to other roles can create capacity and free up RMs to boost sales effectiveness.