How many times have you been given some news and reacted badly; triggering a sudden or violent reaction, not gaining an understanding or getting the full message?
In finance, most bad news revolves around loans – the words that most clients don’t want to hear from their Banker include;
- …there’s a problem….
These are of course simple words – nothing more, but we tend to attribute lots of meaning to them and often far more than the actual message intended. Equally the shorter the message, the less context comes with it – so our minds “fill in the gaps”.
An fuller example may help.
“Hi John, I’m calling about your loan application, unfortunately is has been declined as its outside policy”
It’s simple, clear and a line that I only recently heard. Some would say that it is so clear that it’s the perfect delivery of this message. I disagree.
It will come as no shock that this conversation ended soon after, with the client clearly not happy and I could see that the Banker had not enjoyed the discussion either.
Breaking this down, the foundation message is clear – the loan application has not been approved. Remember – the only acceptable outcome in the client’s eyes is getting the loan approved – nothing else is going to meet their needs.
So now consider how it was delivered.
- This is bad news and it was delivered by phone. Where a face to face is possible – then take it, as it provides for a multi-dimensional conversation. You have the ability to read the other person’s body language, understand their physical environment along with anything else which may be happening around them. You also have the ability to ensure that you have their full attention, whilst also having the ability to use physical aid (drawings, graphs etc) to assist in explaining the news. A phone call is naturally more limited in all of these aspects.
- Consider how the message was framed. As it was delivered, it’s very final – the loan application was declined due to policy. The reality is that in the bulk of cases, it’s simply the terms and conditions proposed in the application which have been declined, not the business or person – albeit that is normally how the news is received. It is taken as a personal rejection.
- Off the back of how this was framed and the emotive reaction from the client, this conversation really never progressed to the detail of why it was declined. This is the most critical component of the call, the “why“. Merely stating that it is outside policy does nothing but fuel the fire as what the client normally hears is that they don’t measure up to the acceptable lending standards.
- From an experienced Bankers viewpoint, I don’t like the term “unfortunately“, as this suggests to me a lack of accountability on behalf the Banker for the decision that has been reached. If a loan is declined and the Banker disagrees, then I would expect that this is a discussion that would be held internally before it is advised to client.
- So what can be done? Due to how this news was delivered, the “what now” part of the conversation never actually occurred.
Now let’s consider an alternative approach.
A face to face discussion is called to discuss the current loan application.
“John, as you are aware we have submitted your loan application for approval. We have been in discussion with our credit team and have not been able to gain their support to approve the deal due to elements within our credit policy. More specifically, the requested term and repayment structure have been deemed to be outside of our policy guidelines. What this means is that for this application to be considered further, we will need to revise both of these areas. [Being face to face would enable the Banker to show comparison repayment schedules so that they could understand what this really means]”
Once again the foundation message is that the loan has not been approved, however;
- Face to face means that the Banker has the opportunity to deliver the message more appropriately.
- The framing of the message is different, in that it is clear that the loan application (and not person) does not align with credit policy.
- More specific explanation of what does not align is provided, along with what this actually means in real terms to the client.
- An alternative is at least tabled for discussion as a way of progressing this.
- As the Banker has taken the effort to meet with the client to deliver the news, explain the detail and table an option, this suggests genuine commitment to the situation.
This situation is perhaps a bit simplistic; however the fundamental points still apply with even the most complex of loan situations – and for that matter, a wider range of communications. I have applied the simple steps of 1. face to face, 2. frame the current position, 3. explain the detail and 4. offer solutions – all the way allowing interaction from the client, to deliver a range of “bad” news across personnel, sales, operations and risk arenas.
Experience has shown that considerable time goes into the compilation of “the message” to get the words just right. My recommendation is that equal if not more time is put into the delivery (when, where, how, who, tone etc), as without the appropriate delivery, the chances of landing a negative message successfully – start at low and only go down from there.