Operational leadership is an area that is rightly being acknowledged as one of the most important
drivers of profitability in retail banking today.
Operational Leadership in Retail Banking argues that it is potentially more critical than that.
Apart from higher capital constraints, Basel III has introduced maximum leverage ratios and stringent liquidity requirements. A quick analysis of the Return on Equity (ROE) for retail banks shows that operational leadership is in fact the last frontier for profitability.
By this we mean that bank managers must harness the intellectual capital of the organisation and deliver an unmatched customer experience. This is the resource-based view of a retail bank which postulates that the bank's sole competitive advantage is differentiated human capital coupled with lean and customer-centric processes.
Cost/income ratio is a consequence and not a direct objective
While retail bankers view the cost/income ratio as the holy grail of profitability metrics, we emphasise that operational leadership is intended to increase the proportion of customers who are promoters of the bank. The cost/income ratio should never be an objective.
"Service guarantees: delivering on customer expectations will be the name of the game"
Bart Schlatmann, COO, ING Domestic Bank, Netherlands.
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