In the current challenging economic climate, with financial institution retail branch transactions falling (40.2%) and payroll costs rising (76.1%) over the past two decades, credit union CFOs will be searching even harder in 2013 for ways to improve their bottom lines.
One of the best ways for CUs to control branch costs is through proactive collection and analysis of fundamental metrics, followed by action based on the information. CFOs evidently realize this-in Deloitte's recent CFO Signals survey, 54% of CFOs in financial organizations said their top challenge was providing metrics, information and tools for business decisions-up from 43% who listed this as the top challenge in the fourth quarter of 2011.
In my professional experience many CFOs and their staffs struggle specifically with being either uncertain what type of data would most benefit them or unable to recognize the signs that better information is needed.
As CEO of a company that collects and analyzes millions of transactions on a monthly basis from different financial institutions across North America, I have seen CUs improve their bottom lines by acting on business intelligence relating to two core metrics: teller transaction statistics and lobby representative performance data.
Both of these data sources provide insight into the ability of branches and their staffs to efficiently use payroll hours-a direct expense-in the pursuit of transaction processing, customer relations, cross selling and other activities inextricably linked to branch incomes.
Two Key Signs
Following are two key ways for CFOs and other senior level management to determine if there is underutilized business intelligence information in their institutions.
1. Branch full-time employee (FTE) numbers are staying the same or increasing over time.
Industry statistics indicate that branch transaction volumes have declined by 40.2% over the past two decades. Compared to five, 10 and 20 years ago, fewer FTEs are required today to handle this significant drop in transaction volume. If FTE counts are staying the same or increasing in any branch without a validated increase in transaction volumes at that particular location, industry averages suggest the branch has staffing inefficiencies and/or performance problems.
In these situations, collection and analysis of teller-specific performance data enables institutions to measure transaction volumes per teller-a far more important metric than overall transaction volumes. Such data helps identify branches that are inefficiently staffed or overstaffed-and in general are not effectively utilizing the teller resource.
2. Branch management cannot quantify the performance of lobby service staff in terms of new business.
Extensive research has proven that when account-holders purchase three or more products/services from a financial institution, they are much more likely to remain loyal. Branches that are not accurately tracking lobby staff sales and service activities cannot effectively reward the top performers and retrain or reposition the underachievers. As a result, they are losing money, period. Better collection and analysis of lobby performance data enables branches to incorporate many metrics, including cross-sell ratios, into employee performance reviews and subsequent coaching that will encourage dynamic salesmanship.
Obtaining the Data and Putting It to Work
There are numerous ways to collect these metrics, although my experience indicates CUs that implement an automated, technology-based solution generally reap the greatest rewards. These are often branded as workforce optimization (WFO) solutions, because they measure workforce productivity and analyze it with the goal of improving output.
This type of initiative can offer deep insight into the benefits such a program would provide, whether or not the CU chooses that particular vendor. At the minimum, sample metrics can give management a validation verifying their current WFO system's strength.
When decisions are supported with reliable business intelligence, CFOs often see immediate results. For example, if an institution has FTE teller positions currently open, the data provided by enhanced reporting and analysis might indicate the positions should be eliminated rather than filled. Closing these requisitions would allow staff budget to be reallocated to more fruitful projects-and in many cases covers the cost of utilizing a specialized WFO analysis firm.
More importantly over the long term, I have seen CUs achieve as much as a 45% increase in productivity from WFO-related efforts, while at the same time enjoying a labor-expense decrease of 20% or more (see Figure 2).
At the management level, collecting and analyzing workforce metrics enables CFOs to hold branch management accountable for staffing decisions (and offer suitable rewards for goal attainment) and encourage creation of incentive pay and other productivity bonus programs for tellers and lobby staff. The end result is an even bigger improvement to the bottom line.
W. Michael Scott is president and CEO of Financial Management Solutions, Inc. (FMSI), a provider of easy-to-use, yet sophisticated, business intelligence and performance management systems. For info: www.fmsi.com or call (877) 887-3022.