Branching Alive And Well. Success Often Is Not
For all that branching is a tried-and-true retail delivery strategy at credit unions, many still don't know how to do it right, according to one facilities expert.
"Branching is alive and well," said John Hyche, a principal with Level 5. "Statistics bear this out. From 1994 to 2003, the number of commercial banks decreased by 29%, but their branches increased by 15%."
But as branches evolve from the staid, vault-like facilities of yesteryear, credit unions are vulnerable to missing out as the rules of the game change.
"What we're seeing is a convenience store model emerging," Hyche told attendees of The Credit Union Journal's SEG & Business Development Conference. "Broader fields of membership mean weaker member affinity. Credit unions are struggling with how to convert indirect members to fuller participation, and as business accounts are coming on, competition is heating up."
When planning a branch strategy, credit unions must first understand why consumers choose one financial institution over another. The top two reasons: convenience and service.
"Your branch is your greatest point of member contact," he noted. "But your strategy is often driven by how limited your resources are."
That's why it's so important to get it right the first time by doing the proper research before building a branch.
"Look at the layers of information and try to peek down through them to develop a strategy," he advised. "Start with information about you-who we are, who we serve, how we serve, our vision."
Sometimes the best sources of this information are right in front of the credit union-and perhaps because of that, these sources are often ignored. "Ask your people what members are telling them. I can't tell you the number of times we have interviewed branch managers and head tellers and then, when we took that information back to the senior staff, they said, 'those people don't know what they're talking about.' Well, if they don't, then who does?"
Many credit unions work with design/build consulting firms that do much of the research for them, and that's a good step in the right direction, Hyche suggested, but make sure the firm offers a full analysis of all that research.
"Don't accept a data dump as an analysis," he recommended. "You need them to be able to answer 'What does all this information mean?' You have to look at qualitative data as well as quantitative data. Computers hate qualitative data because it's not easy to slice and dice, but you have to look at all of it and see if the qualitative data confirm the quantitative data."
A common problem when credit unions start looking at branching is ensuring that personal feelings and vested interests don't get in the way.
"Challenge the preconceived notions," Hyche encouraged. "It's hard when people live in a particular area and they think it's the best because they live there. Make sure board politics don't get in the way of your branch strategy."
Additionally, Hyche referred to a "sequence of opportunities," which refers to the order in which new branches are placed and why. Contrary to the adage that suggests taking on the most difficult first, branching should target the strongest opportunity first. Then the credit union can use that early success to boost subsequent efforts.
For those credit unions that already have branches out there, it's important for them to measure whether those existing outlets are working. The key, Hyche advised, is developing the metrics to make these determinations:
* Look at measurable aspects of the objectives
* Develop a reporting and tracking system
* Align training and incentives
Measure what matters: new members, new SEGs, new accounts, new balances, transactions, income and expense.
"Everyone has a CFO somewhere, and he wants to know what's in it for him," Hyche offered. "Look at the market area statistics and forecast what new branches will offer to the credit union. Then, do everything you can to hit those goals."