A Place for Centralization, and Centralization in its Place

Over the last few years, centralization has been a major topic at banks, particularly as it pertains to branches. This is usually an effort to centralize operational tasks to be more efficient and focus branch employees on sales. It typically involves the creation or expansion of a central operations function, funded by a reduced branch head count.

Now, nobody likes efficiency more than I do, and I don’t want to start swimming against a strong current, but I have begun to wonder – have we maybe gone just a little bit too far with this idea?

Here’s what I mean. Lately I have spent a lot of time in branches looking at processes that once seemed pretty simple but that strike me as more complicated now that they have been “centralized and streamlined.” Some very basic examples – change of address, name change, CD renewals. Instead of actually doing the work, the platform employee fills out a form (manually) and sends it down to a centralized employee to process. (If the form is filled out wrong, by the way, it gets returned for correction.)

I’m not sure this is always better, either for the customer or the bank. Work should only be centralized where it makes the most sense, and there are three questions banks should ask to ensure that it does.

Will centralization measurably improve productivity, i.e., are there fewer total people required at branches and in the back office because of the centralization effort and do things happen faster, or better? There should be some objective benchmark against which centralization is measured.

• Rule: If nothing improves by centralizing, don’t do it!

Absent improved productivity, the second question is: have branch people really used the freed-up time to sell? Truthfully, how many of your branch employees spend eight full hours a day selling, with no time to process work? Forty hours a week? Really? Are you sure? No fingers crossed?

• Rules: If filling out an instruction form for ops takes as long as doing the work, do the work! Also, never pass customers off – it just ticks them off.

(Be honest – we get ticked off when people do it to us.)
The third question that has to be asked: Is work being done centrally because branches aren’t trained well enough to do it? This is the “they will just screw it up if we let them do it” reasoning. To me, this is the worst possible logic. These people are our lead sales force, our customer contacts, and the key to bank growth strategies, but they can’t be trusted to use processing systems correctly? Come on. Previous experience at NASA is not required to use bank systems.

• Rule: If it costs an equal amount to reengineer as it does to train, train! If people do things wrong, don’t reengineer – hold them accountable!

There are great reasons to centralize, and great benefits can be realized if centralization is done correctly. Just remember, though – somebody has to prove why centralization is better, not the other way around. Then it works. -tr