With all of the recent focus on online delivery, acquisitions, lending and ever-increasing regulations, there has been a lack of attention on the true efficiency of the retail branch network. We went through a booming growth period and then an unprecedented financial crisis, and now we see many banks with a retail footprint that is somewhat scattered and lacking a strong revenue-producing focus. Let’s face it; the branch network constitutes anywhere from 35% to 50% of a bank’s entire staff. The amount of resources invested and the potential savings and efficiency gains cannot be overlooked any longer with today’s mandate to improve shareholder value.
In addition, the economic landscape isn’t poised to change dramatically in the near term. Revenues are going to remain flat, and with the recent pledge by the Fed to keep interest rates low until 2014, margins are likely to continue shrinking. So, where do banks need to look to free up capital for future endeavors and ensure they are operating as lean as possible? That’s right – “don’t mess with me pork-chop” – the branch network.There are two key watch words to guide branch strategic reviews: staffing and efficiency. Staffing models themselves haven’t really changed since the release of Groundhog Day back in 1993. Yes, it’s been that long, and yes, we GonzoBankers are getting that old. Banks have developed some degree of discipline in determining the number of people needed to run a branch based on the days/hours open, transactions processed and accounts supported all while following a framework of specific policies and procedures. Best practice banks tend to use a blend of both peer benchmarks and internal measurements to guide these staffing models. Regardless of whether a bank has 100 branches or five branches, retail bankers owe it to their CEOs to provide detailed branch staffing models. There’s no excuse for not knowing at any given time how the branches should be staffed and how they are performing compared to that target.
As consolidation has occurred and branches have been added to the mix from acquisitions, policies and procedures have been blurred, along with the supervisory “chain of command.” Clear direction from management and enforcement of standardized policies and procedures that are consistent across the organization are imperative for efficiency. Banks simply cannot afford to allow pockets of the organization to operate in their “own little world” and not expect to feel the impact of this inefficiency in the back office.
In addition, the service provided to the branches is waning as the number of branches and branch staff outweighs the retail admin support staff. Is your organization out of shape? Banks typically have about 60 branch staff per retail admin FTE and about 10 branches supported per regional manager. Anyone outside this has likely experienced acquisition activities that created an imbalance therefore impeding the efficiency of the branches. Another indicator here of staff productivity is the ratio of part-time to full-time teller staff. A good measure should be about one quarter to one third of total teller staff allocated as part-time or seasonal help to allow for flexibility in scheduling and accommodating peak-time processing without having to staff full-time, which is obviously more expensive.
Once a bank knows where its staffing levels should be, it is likely to be faced with the question of “how do I do more with less?” In order to right-size its branch network, a bank must be able to realize the gains from some process efficiency efforts. In addition to the more strategic topics mentioned above, below are some steps at an operational level to ensure branches are being leveraged as efficiently as possible.
From Gonzo-land I’m sounding off. “I would love to stand here and talk to you, but I’m not going to,” I’m going to go “say a prayer and drink to world-peace.”
A Benchmarking and Best Practices Assessment from Cornerstone Advisors will help your institution develop a sound foundation for higher performance levels and future growth. Among the benefits:
Contact Cornerstone Advisors today to get on the path to disciplined growth and expansion.