Making Your Branches More Productive: Opportunities and Potholes

Even in the face of growing customer use of self-service channels such as Internet banking and the telephone, and despite the “branches are obsolete” sentiment voiced during the dot.com boom, financial institutions are making a bigger bet on branches than ever. In fact, according to FDIC statistics, 10,700 new bank branches opened between 2004 and 2006—an increase of 14%. Even when you consider that many of those might be smaller in-store locations, this represents a significant outlay of people and capital. To support these investments, these institutions have invested millions of dollars in new systems, sales training, marketing support, and other initiatives aimed at growing core deposits and relationships.

Yet, despite all of this investment in training and technology, financial services providers must face up to one uncomfortable reality: branch productivity has not improved in this same timeframe. Cornerstone regularly surveys banks regarding branch activities, staff counts, and volumes. Here is some of the information we gathered during our 2005 survey of mid-size banks:

  1. Banks, on average, open 45 new deposit accounts per branch platform (new accounts) employee. It was the same in 2003.
  2. Those same platform employees service and support 2,650 open accounts. In 2003, it was 2,850.
  3. Branch managers spend more time every year on administrative tasks—reports to administration, audit activities, meetings, etc. (Note that this does not include management duties, just administrative). These activities consume 11% of branch manager time among our survey respondents. In 2003, it was 3%. In fact, that manager spends as much time on administrative tasks as he/she spends outside the branch making sales calls and participating in community activities.
  4. On average, branches close 100 accounts for every 120 they open. Even at the higher performing banks we surveyed, the number was 100 closed accounts for every 150 opened. This represents a high degree of account “churn.”

Clearly, these numbers do not reflect the vision of the sales and service culture most financial services providers have. There was, several years ago, an effort at most banks to centralize work from branches to the back office in an effort to get them more time for sales activities. The expected result would have been that the numbers shown above would improve. In fact, wouldn’t one of the first results of an improved sales culture with centralization of work be that the number of accounts opened and serviced per branch employee would increase?

In an era of compressing margins that cannot be offset solely by fee income programs, financial services providers need to take a hard look at what is causing flat branch productivity and get serious about improving it. Here is a starter list of things you can do to jump-start this process.

  1. Recognize that the “relationships” branches manage with their customers have changed substantially in the last 5 years. Consider this. For every 100 times a customer visits a branch, that customer also performs:
    • 49 telephone calls to an IVR or call center
    • 41 log-ins to an Internet banking system
    • 63 ATM transactions
    • 18 loan applications through a non-branch channel
    This means that a customer will touch their financial services provider 170 times outside the branch for every 100 times they go into a branch. This is a 180 degree change from 2003. If the branch is truly going to be the face of your institution to your customer and manage the overall relationship, the information and knowledge they need will also have to change.
  2. Get serious about payment systems training. Any sales trainer will tell you that good training skills must be backed by strong product/service knowledge that gives the branch employee credibility. How well do your branch employees really understand the electronic channels and tools your customers use? Can they help a customer who walks into the branch due to a problem with Internet banking? Do they understand what the customer goes through when disputing a debit transaction? Can they explain with authority what actually happens when a customer uses bill pay? How many of your employees can explain the difference between PIN and signature debit? The truth is that lack of this knowledge is having a very negative impact on productivity. The number of back office staff branch employees need to contact or calls they need to make or questions they need to ask is taking too much time right now.
  3. Get the right information into the branch bankers’ hands. One of the key productivity issues branch employees face is that they spend too much time obtaining basic customer information in account opening/servicing encounters. For example:
    • Many employees cannot see all customer relationships in a single view—particularly when that customer has deposit accounts, investments, insurance, or specialty loan products serviced on different systems., All too often, branch employees either have no idea that the relationships exist or have no access to the various systems (with multiple sign-ons) to get it. This is not only a service issue; it’s a waste of time.
    • Many systems do not show combined personal and business relationships.
    • Most branch employees have no idea if the customer has applied for a loan or a new deposit account on the bank’s Web site. If asked a question, they burn far too much time finding out what the customer did.
    • Branch employees usually have little access to information regarding any payment or other open disputes a customer might have with the institution. Again, if asked, they take too long just finding out specifics–time that could be spent helping the customer.
  4. Centralize BSA and fraud work to the maximum extent. Financial services providers can’t be blamed for the regulatory burden of the Bank Secrecy Act (BSA), fraud analysis, and aggregation, but there is no question that these activities have negatively impacted branch and back office productivity. Financial services providers can help their front lines by automating any reporting tellers need to produce and centralizing the research, investigations, and transaction aggregation that is required. Too often, branch employees are spending time on activities that can be done elsewhere.
  5. Simplify and automate sales reporting. One of the most common complaints branch employees have is the amount of time they spend reporting sales activities, usually via paper-based systems. In our surveys, only 14% of banks reported that they had automated sales tracking and reporting. The next generation of branch systems must allow for activity to be automatically tracked, reported, and combined for all branches. One additional issue that must be addressed is the fact that many branches are required to fill out multiple sales reports: one for the branch manager, one for the sales manager, and one for administration. If this is the case in your institution, getting to one sales report that everybody uses is an easy first step.
  6. Reduce account churn. Opening 120 accounts to keep 20 is too much work for too little a benefit. Much of this churn may be attributed to free checking/OD privilege programs where a high percentage of closed accounts is a standard byproduct. However, financial services providers need to take a harder look at why so many accounts are being closed. Would it be more productive to focus on keeping accounts rather than replacing them?
  7. Take a hard look at redundant data input and processing. The act of opening an account can involve funding the account, creating a name/address record, ordering checks, ordering cards, signing the customer up for Internet banking and bill pay, getting them an O/D line of credit, and starting a loan application based on a cross-sell. How many times do your branch employees have to enter the customer’s name, tax ID, or other information to get this done? How many systems do they have to sign on to with different IDs and passwords? How many forms do they have to print? You might be surprised at how redundant routine work can be at the front line. If your answer to any of the above is much more than “one,” it’s time to go back and design systems from the branch employee’s point of view.

The truth is that there is no single “big bang” solution to making branches more productive. Rather, it is a discipline and a series of efforts that can collectively reduce the workload for the front line and get them where you really want them: spending more time talking to your customers. And, at the end of the day, is there anything better than that?

Terence Roche is a principal with Cornerstone Advisors, Inc., a Scottsdale, Arizona-based consulting firm specializing in best practices banking, strategic and technology assessment, and planning. Plan to attend his presentation, "The Branch Experience," at the Seattle Bank's 2007 Management Conference to be held on May 23 and 24 in Seattle. Register online today to attend!