Let’s talk compensation … and customer service.
20 Wednesday Jan 2010
You know what I find frustrating? From today’s Wall Street Journal:
And now, for what you’ve all been waiting for: Morgan Stanley’s compensation totals:
Sure, the bank’s swing to a fourth-quarter profit of $617 million gets all the headlines, but here at Deal Journal, our eyes naturally seek out the compensation line on that profit & loss statement. There we find that the bank’s 2009 salaries and bonuses totaled $14.4 billion. That is a 30% increase from 2008.
Compensation came to 62% of net revenue, this in a year when Morgan Stanley reported a loss for the year. In 2008, amid the worst of the global financial crisis, the $12.3 billion in compensation was 59.7% of revenue, and in the boom year of 2007, its $16.6 billion in bonuses totaled 49.7% of revenue.
It is official. Morgan Stanley completely missed the trading boat in 2009.
In the first half of the year, the securities firm dialed down its proprietary trading risk, while rivals such as Goldman Sachs Group were logging huge profits with debt and equities trades.
Heading into the third quarter, Morgan Stanley said it would “gradually increase its risk” and hired 350 new traders.
But by the fourth quarter, much of the market volatility that traders feasted on for much of 2009 had subsided. In addition, credit spreads narrowed. The result: Trading revenue at most banks, including J.P. Morgan Chase and Citigroup, fell sharply at the end of the year.
Even though Morgan Stanley had significantly upped its risk in the fourth quarter – (the firm’s Value at Risk rose to $132 million from $118 million in the third quarter) – the move came too late. The firm’s trading revenue fell more than analysts had expected.
Still, the firm’s compensation for 2009 suggests that the year was nothing but a smashing success.
Morgan is handing its employees $14.4 billion in salaries, bonuses and benefits, which total 62% of the firm’s overall revenue for the year. That is a higher percentage than Goldman’s 49% projected compensation ratio. (Morgan Stanley says its compensation ratio is skewed because of a temporary accounting issue that hurts its revenue. Without it, the comp ratio would be under 50%.)
Now let me tell you what the worst part is for me … the worst part is that I didn’t get to see a single rotten stinkin’ penny of these massive bonuses, or even a basic cost-of-living adjustment; nor did many of my colleagues. Yes, I’m glad I have a good job, which actually does pay pretty well, and has good benefits; while many people I know are in a much worse situation.
So what happened? As is typical in the industry, the vast majority of compensation goes to the people who need it the least, whereas the people on the frontline who need it the most get very little or nothing at all.
Yes, I believe in paying people for performance, but c’mon … if it weren’t for the frontline people in what are ostensibly “cost-centers” (because we don’t generate revenue for the firm) taking care of clients and their financial advisors, a lot of those revenue generating clients wouldn’t stick around.
Generally, about 15% of customers switch service providers because they find a better product … but 65% switch because of either a lack of individual attention (about 20%) or poor quality customer service (about 45%).
Richard C. Whiteley, in his book The Customer-Driven Company: Moving from Talk to Action writes:
Managers must show employees that the company’s number-one job is to serve its customers—and that they, the employees, are the key to the entire system.
He also writes:
Too many companies measure what’s easily measurable, rather than what will help the customer. Productivity-oriented monitoring, for instance, can easily discourage, rather than promote, good performance. Evaluating telephone operators primarily by the number of calls they handle encourages rushed (and therefore poor) handling of calls. Many telephone operators hang up the phone in the middle of their sentence:
‘Have a good d…’
because they’re trying to achieve productivity norms.
Now, to me, part of providing quality handling of phone calls is logging the call fully and completely … and when managers ding their employees for spending too much time off the phone entering a call log entry instead of taking the next call in queue, they are reinforcing the productivity-oriented attitude, rather than a quality-oriented attitude.
As far as I’m concerned, every record of customer contact should contain the following information:
- Who (i.e. name and account number) called?
- When did they call?
- What department did they call?
- Why did they call?
- How was the call resolved?
Any log missing this information is incomplete, and thus does not provide a clear picture to the next representative to speak to the caller about what has happened in the past. If it takes 90 seconds to type this up (using complete sentences and proper grammar if at all possible) rather than 20 seconds, then so be it. More information is better.
Some people get it … unfortunately, many more don’t.