Business Journal

Turning a Crisis Into an Opportunity

How a Thai bank picked up the pieces -- and moved to the front of the pack

The economic term "creative destruction" is like a Band-Aid. It sounds therapeutic, but it covers a great deal of trauma and pain. And "trauma and pain" certainly describes the results of the Asian financial crisis of 1997-1998: Untold numbers of companies and individuals went under, never to come back up.

I didn't know anything about banking when they hired me. Nothing except my own checking account.

On the other hand, the crisis did expose a number of poor business practices and left the field clear for innovation. Companies that used the crisis as a spur to improvement are better able to compete in a global market. One of them is Siam Commercial Bank (SCB).

Change program

The crisis wiped out many of the commercial banks in Thailand. Those that remained needed to solidify their financial standing and revive their brands. Competition to stand out was fierce because the crisis destabilized the banks' old standbys -- corporate banking was losing steam, many loans were in default, and investment banking was shaky. The smart banks noticed that retail customers were standing out in a suddenly clear field -- and began looking for ways to market to them.

But Thai banks had never put much effort into cultivating relationships with this unglamorous customer base. SCB was no different. Customers waited for 45 minutes on average to see a teller. Bank managers' offices were in the back of the bank, the most junior employees faced the customers, and it was a rare customer who spotted an employee with real authority. The bank had no clear product or service strategy to fuel growth, low levels of productivity, a limited branch network, and employees who were reliable but hardly engaged.

In 2001, SCB set out to change all that, figuring that customer service was the differentiator it had been looking for. The bank installed ATM machines throughout Thailand, especially in Bangkok. SCB upgraded its technology and improved efficiency. It started adding branches quickly, emphasizing the bank's progressive thinking through the branches' modern design. SCB focused on putting retail customers first, and it paid off: Total assets for the bank climbed 69,035,000,000 THB (2,116,202,510 USD) between 2002 and 2003.

SCB's response to the crisis was smart and effective, but the bank's best leadership move may have been its most questioned one -- it hired Kannikar Chalitaporn as the head of retail banking in January 2003. Chalitaporn learned the ropes of retail and management at Unilever Thai Trading Ltd., eventually becoming vice chairman and director of personal care products. That retail management experience, not banking knowledge, is what SCB so badly needed. So SCB hired Chalitaporn and gave her time to learn banking from top to bottom -- even though her initial understanding of the field was almost nil.

"I didn't know anything about banking when they hired me," says Chalitaporn. "Nothing except my own checking account." But SCB didn't necessarily want a banking expert when it went looking for the head of its retail banking group. The bank wanted someone to fix problems, and Chalitaporn's leadership style -- analytical, proactive, unsentimental -- was the best response to the bank's problems.

It only took three months for Chalitaporn to learn banking laws, SCB policies, and the culture of a historic, 9,000-employee bank. "Banking laws weren't the main thing [I needed to know]; it was the principles of management, of understanding customers, of leadership, and I knew them," says Chalitaporn. "I understand the supply chain." The supply chain, Chalitaporn quickly realized, was similar whether the supply was face lotion or mortgages -- and it was the problem she had to fix first.

Better, faster, stronger

Having examined the bank, she called in the top managers and told them that henceforth, their job was to make customer service part of the culture at every level. "I'm not paying your salary. The customer pays your salary," she told them.

That was the easy part. The rest was a shock: SCB would not be competing on price anymore because Chalitaporn takes a very dim view of such tactics. "It won't last, and it's all lost profit anyway," she says. "Anyone can cut prices; you don't need a brain to do that. What you should do is add value -- you should charge a premium for a valuable product." Nor would SCB add new products. Instead, it would be streamlining the ones it had. The revenue stream would have to come from the sales made by -- and the services provided by -- employees.

Branches would now be held accountable against key performance indicators, which would be announced at the beginning of the year, starting the following January. There would be an overall goal for the bank as a whole, but each branch would also be measured against its own past results. Area managers would no longer spend most of their time at the head office, and when they were at a branch, they would be at the least profitable branch instead of the most comfortable one. Branch managers who couldn't meet the new compliance and performance standards would be moved to other, less profitable branches. "Just shuffle a few. Others will get the message," says Chalitaporn.

This strategy sounds both ambitious and aggressive, and maybe it was -- but Chalitaporn didn't fire anyone, ever. Layoffs would have devastated the employees, run counter to the SCB culture -- whole families are employed at the bank -- and undermined all her efforts. But the fact that underperforming managers were moved instead of fired indicated that the old guard didn't have to move out of the way, and they could both learn from and teach fresh new talent. But Chalitaporn didn't expect SCB employees to reinvent their bank on their own. "If we succeed," she told them, "we succeed together. I'll be behind you every step of the way."


Chalitaporn needed a baseline against which to measure performance, and she needed help determining the best way to reach and keep customers and employees. So SCB implemented Gallup's customer and employee engagement assessments, the Q 12 and CE 11. (See "Feedback for Real" and "The Constant Customer" in the "See Also" area on this page.) This was, for Chalitaporn, an unusual move. "I don't like consultants," she says. In particular, what she doesn't like are needless complications, research that obscures more than it illuminates, and abstract measures that don't lead to better branch-level performance. "I like things simple. Complicated often wastes time," says Chalitaporn.

Successful branches created an example the slow ones could follow. They saw others being rewarded, and they wanted it too.

But the Gallup programs struck a nerve. The surveys are brief, they're designed to gauge emotional responses, and higher scores are directly related to higher levels of and larger increases in customer spending. They were relatively simple to implement. And they reflected a premise that Chalitaporn had based her career on -- management and customer service are manifestations of psychology, and psychological motivations matter to performance.

In 2003, Gallup implemented the surveys and established baseline performance results. Overall customer engagement for the bank was rather low -- below the 30 th percentile -- which meant the bank's customers were as engaged as the customers of about 30% of all the similar institutions Gallup has studied. Employee engagement was above the 10 th percentile, which was extremely low.

So Chalitaporn and the bank's board decided that to make SCB the bank of choice, they'd have to work fast to boost employee engagement while aiming for world-class customer engagement. Their goal? To reach the 90 th percentile in the Gallup retail banking customer engagement database by 2009. It was an audacious goal.

The results

At this point, one may wonder how Chalitaporn got away with it. She was new to the bank and banking, she was issuing commands to everyone from executives to tellers, and she was implementing expensive programs while rejecting potentially profitable product lines. Essentially, she was changing the bank's DNA wholesale.

So why didn't the bank revolt? "Once you get results, no one questions you," says Chalitaporn. "You have to get results, but they have to come fast." Chalitaporn got the board's implicit approval because she promised results immediately. Having the bank's senior directors behind her gave Chalitaporn the heft she needed to get the results.

And those results came fast, exceeding even Chalitaporn's high ambitions. The bank's customer engagement target was the 75 th percentile by 2006 and the 90 th by 2009. Instead, it shot past the 50 th percentile in 2004, the 75 th in 2005, and the 90 th in 2006 -- achieving the world-class level for customer engagement in banking in just three years, and three years early. In 2004, only two of SCB's branches were world-class; in 2006, 440 of them were.

Employee engagement increased just as fast. From the baseline measurement in 2004, engagement moved from just above the 10 th percentile to past the 40 th percentile in 2005 to nearly the 90 th percentile at the end of 2006. Not only did SCB beat its own aggressive deadline by three years, it exceeded it: employee engagement is now above the world-class level.

The jump between the 2005 and 2006 engagement scores is dramatic, and Chalitaporn says it reflects a sea change in management. "At first, some managers didn't like the changes and dragged their feet," Chalitaporn says. "But the successful branches created an example the slow ones could follow. They saw others being recognized and rewarded, and they wanted it too."

The most engaged branches had, predictably, the best profits too, but SCB as a whole outpaced its own financial hopes. Revenue grew 25% last year, and the target goes up 20% annually. Total assets for the bank increased 176,540,107,151 THB (5,410,958,071 USD) between 2005 and 2006. The bank is now third in assets and net profit and first in market capitalization in Thailand, and Thais are likelier to have an SCB credit card than any other kind.

Getting Results - Fast

Join the revolution

Chalitaporn's revolution was greenlighted because she promised results. But how did she deliver them so fast? "I told the employees the outcomes I wanted, I told them the deadline, and I let them figure out how to get there," she says. "That's all."

But that's hardly all: Near-overnight attainment of world-class performance required significant changes. One of the most effective structural changes was institutionalizing communication, but that too is kept simple. "We have to communicate to more than 9,000 employees. [Keeping it] simple makes it easier to communicate and keep the focus," says Chalitaporn. Area managers meet with her once a month to discuss the month's tasks. The area managers leave with a DVD of the agenda, then have one-day meetings with branch managers. Within a few days, every SCB employee has exactly the same information as everyone else.

From the very start, all employees received intensive training and coaching, and the best banks got the most coaching. The bank also invested heavily in new technology and streamlined processes and products. Individuals, however, were encouraged to meet defined outcomes, not follow prescribed steps, to create genuine emotional rapport with customers. Employees were encouraged to defy convention and copy each other's successful innovations -- a thing they were "too proud" to do before, says Chalitaporn.

Work teams met to discuss their employee and customer engagement results and figure out ways to improve them. The key performance indicators were kept top of mind for all employees. Top performers at every level were rewarded. By the time Chalitaporn was done implementing the changes that create engagement, the bank's DNA was almost entirely different.

Public party policy

Some changes were overt signals of subordination reversal -- part of Chalitaporn's simple psychology to increase the importance of the customer. For instance, like most banks, tellers had bowls of candy at their windows. Chalitaporn told the tellers to actually hand candy to children -- and their mothers. Back when lines were 45 minutes long, SCB maids offered glasses of water to waiting customers. Now, when a customer has to wait for something, the manager brings water.

Physical changes reinforced the prominence of the customer too. Branch managers were moved to the front of the store; mall locations were opened seven days a week; and in two-story branches, tellers were moved to the upper floor, encouraging customers to walk past the loan officers and their lucrative product lines to get to a teller desk. Meanwhile, more branches and ATMs were added -- SCB now has more of both than any other bank in Thailand.

Recognition and rewards were not part of the banking culture before the crisis, but SCB has made them a cornerstone of employee engagement. "You would be surprised at the value of small rewards," says Chalitaporn. "Small things add up and measure to more than you think they would." Small improvements merit small, SCB-logoed keepsakes, which are highly visible, as employees are permitted to put nothing on their desks except awards. Larger improvements are rewarded with coveted SCB jackets, and the best branches -- those with the highest financial and customer engagement scores -- are publicly lauded at the executive level.

That's nothing compared to the end-of-year celebration. The best performing teams in any product line are sent to Bangkok -- and that's everyone on the team, from the newest janitor to the branch manager. They are feted, fed, photographed, and thanked, profusely, in person and by the bank president, Chalitaporn, and the Chairman of the SCB board. And of course, they all go home with jackets.

Their party isn't always held at the main office, though. The 2004 party was held at a branch location -- one of SCB's worst branches. That branch's manager had refused categorically to participate in the revolution, but by 2005, having hosted a celebration in which his team couldn't join, that manager and his branch had reversed course and were among SCB's best.

Future plans

Most of SCB's branches have achieved either world-class customer engagement or world-class employee engagement, and many claim both. Chalitaporn's plan is to move all branches up to the highest echelons of engagement, which Gallup calls HumanSigma.

You would be surprised at the value of small rewards. Small things add up.

However, SCB's efforts to become the retail bank of choice in Thailand are about to get a lot harder. Other banks have noticed SCB's successes and are working toward customer engagement in their own retail banking divisions. Chalitaporn feels that SCB's performance won't be easily replicated, as SCB's changes are hard to copy, take time to establish, and largely involve the soft side of human interactions -- things that can't be implemented via executive memo.

Then, a few months ago, SCB implemented a change that the competition can never duplicate -- one that ensures that SCB's successful changes will become entrenched corporate values: The bank transferred Kannikar Chalitaporn from the retail banking group. She is now the president of Siam Commercial Bank.

Jennifer Robison is a Senior Editor of the Gallup Business Journal.
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