Can you be compliant and still grow sales?

Issues and implications

As the experience of one major bank illustrates (see box), it is not easy to balance compliance and commercial realities when implementing new regulations. But it is easy to lose sight of the customer along the way. The pressures are great and the stakes are high:

Product commoditisation increases and opportunities for differentiating your business decrease
Senior managers' personal liability and accountability increase
Major, costly changes to systems, processes and documentation are needed and timescales are often very tight
All staff and managers need to radically alter the way they interact with customers

In such circumstances it's easy to see how organisations can become frenzied. Compliance considerations can become overly dominant and customers forgotten in the rush with the result that:

Decision timescales are drawn out
Staff become indecisive in front of customers through fear of making mistakes
Customers become confused and buy less
Systems changes dominate everyone's time and thinking and are often delivered late

But in the real world of serving customers, the daily 'moments of truth' continue. However good the eventual IT systems and processes, T&C schemes, KFIs etc. staff and managers still win or lose the service and sales battles in the thousands of customer interactions they have each week. If new systems and processes are not developed using 'outsidein' thinking (with the customer experience balancing the demands of compliance) the business consequences can include:

Stagnant or falling revenues
Cumbersome, inefficient processes
Rising costs
Deteriorating customer satisfaction
Rising complaints

Losing balance and falling over

One large organisation recently found that sales of a key product had declined by 54% in a matter of months. Investigation revealed that regulatory pressures had distorted normal staffcustomer interactions. Customer-facing staff became so afraid of making mistakes that they avoided or diluted contact with customers rather than risk getting their knuckles rapped.

Where customer contact was truly unavoidable, staff would rather send customers away with an application form and a list of the required documents than engage in a 'risky' dialogue. When new account applications did get through more than 40% were rejected by quality control staff applying 'safety first' principles. At the same time more than 100 man years of extra checking and costs had been added to basic processes. Declining service levels, reduced sales and greatly inflated costs were certainly not what senior management had intended when they approved regulation implementation plans.

Thriving whilst complying

Building systems and processes that can achieve 100% compliance is crucial. The financial and reputational risks of not doing so are just too high. But maintaining the balance between compliance and commercial issues is just about as important. Setanta's recent experience suggests that there are four key stages, as illustrated in the graphic below.

Get the compliance strategy right. Making sure that the questions are addressed is, initially, more important than getting the answers right. And this is the prime responsibility of top management. They need to engage with the implications and not delegate them to compliance specialists. Major FSA documents such as CP 186 have over fifty important questions that managers need to tackle. Some of these go to the heart of the business's strategy and they affect all staff and managers. No plans to update or replace IT systems, change processes or modify products should be envisaged until these key questions are resolved.
Build compliant, customer oriented processes. Many of the problems that eventually undermine service and sales are born at this point. It is important to be bi-focal, working from the regulations out but also from the customer in. Too often compliance considerations rule supreme and detailed thinking about how staff and customers will interact is relegated to a distant second place. This happens because there is so much to do and everyone is fearful of the consequences of non-compliance. But smarter organisations can achieve competitive advantage by balancing the customer considerations through better customer-centric disciplines.
Focus on the customer experience. Customers are oblivious to new regulations and will still want their individual needs to be satisfied. Frontline staff need to be able to see, hear and deliver what customers want - from day one of the new world. To achieve this means marrying the compliance process with a choreographed customer experience (see Figure 1).
Practise and prove early. New sales processes and customer interactions need to be practised, tested and proven early. It's not necessary to wait until new computer systems are available. Indeed it's helpful to work ahead of, or in parallel to, systems development efforts. New systems are often delayed so that time for practising and building confidence around the new processes can be drastically reduced or even eliminated. It's all too easy to be 120% compliant but with declining customer satisfaction and sales. Businesses that end up in this position can lose time, sales and credibility and will need to correct the imbalance later.

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